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Covisint Corporation Announces Fourth Quarter and Full-Year Fiscal 2015 Earnings Results

  • Fiscal Year 2015 subscription revenue of $66.3 million
  • Fiscal 2015 total revenue of $88.5 million
  • Year in Transition Successfully Completed
  • Transformed Services Business by Partnering with Seven Certified Services Partners
  • Reorganized Sales Force and Hired New Senior Vice President of Products and Marketing

DETROIT, May 20, 2015 (GLOBE NEWSWIRE) -- Covisint Corporation (Nasdaq:COVS), a leading cloud platform provider enabling the Internet of Things (IoT) and Identity Management (IdM) solutions, today announced financial results for the fourth quarter and full fiscal year ended March 31, 2015.

"Fiscal 2015 was a transformative year for Covisint. Over the past twelve months, we successfully transitioned to a fully independent enterprise-grade software company, made a number of strategically significant decisions in both our subscription and services businesses, and transformed our leadership and sales teams," said Covisint Chairman and CEO Sam Inman. "As we move forward in fiscal 2016, Covisint is well positioned to become the cloud platform of choice for IoT and identity-centric solutions. We are extremely excited about our position within the market and will work diligently with our strategic partners to deploy Covisint's solutions to help enterprises digitally transform how they do business with their customers and business partners."

For fiscal year 2016 the company will focus on four key initiatives:

  • Continue to build out our direct sales organization;
  • Refine and enhance our relationship with our current strategic partners, as well as work to develop and build our pipeline of potential strategic partners;
  • Improve our branding and product positioning in the market; and
  • Continue to enhance our platform to meet and lead market demand.

Fiscal 2015 Financial Results

  • Revenues: Subscription and support revenue decreased 1% year-over-year to $66.3 million. Services revenue decreased 27% year-over-year to $22.2 million. Total revenues decreased by 9% year-over-year to $88.5 million.
  • Gross Profit: GAAP gross profit was $22.1 million. GAAP gross margin was 25%. Non-GAAP gross profit was $37.8 million. Non-GAAP gross margin was 43%.
  • Earnings: GAAP diluted loss per share was ($1.01) compared to ($1.06) last year. Non-GAAP diluted loss per share was ($0.52) compared to ($0.50) in the prior year.

Fourth Quarter Fiscal 2015 Financial Results

  • Revenues: Subscription and support revenue increased 8% year-over-year to $18.4 million. Services revenue decreased 31% year-over-year to $5.1 million. Total revenues decreased by 4% year-over-year to $23.5 million.
  • Gross Profit: GAAP gross profit was $1.0 million. GAAP gross margin was 4%. GAAP results were negatively affected by an impairment of $8.3 million of previously capitalized software costs and $0.5 million of customer relationship intangibles associated with portions of our healthcare customer service offerings that we have exited. Non-GAAP gross profit was $11.0 million. Non-GAAP gross margin was 47%.
  • Earnings: GAAP diluted loss per share was ($0.32) compared to ($0.27) in the same quarter last year. Non-GAAP diluted loss per share was ($0.06) compared to ($0.17) in the same quarter last year.

Fourth Quarter Fiscal 2015 Business Highlights

In the fourth quarter, Covisint:

  • At CES 2015, announced that the Covisint platform is providing support for Hyundai's newly released Hyundai Blue Link smartwatch application. The application is the latest innovation in Hyundai's Blue Link telematics platform, which is secured and integrated by Covisint. With Blue Link, customers can remotely activate certain automotive functions, including remote start, as well as receive important vehicle information via their mobile devices, which now include smartwatches.
  • Announced that its chief security officer, David Miller, presented at the IBM InterConnect 2015 Conference and discussed how connectivity is achieved with one of the biggest items in the Internet of Things (IoT) – the vehicle.
  • Announced strategic relationship with Tech Mahindra focused on expanding IoT platform and digital transformation solutions for global enterprises. This initiative will provide Covisint a distinct advantage with alliances and customers. Covisint's cloud-based platform and Tech Mahindra's expertise in IoT and digital transformation will open up promising opportunities for both enterprises.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), Covisint monitors non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and adjusted EBITDA. Each of these financial measures excludes the impact of certain items (the impact of stock award compensation expense, the amortization and impairment of intangible assets and amounts incurred for capitalized internal software costs) and, therefore, has not been calculated in accordance with GAAP.

Covisint monitors these non-GAAP measures to evaluate its ongoing operational performance and enhance an overall understanding of its past financial performance. Covisint believes that these non-GAAP metrics help illustrate underlying trends in its business that could otherwise be masked by the effect of the income or expenses, as well as the related tax effects, that are excluded in non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and adjusted EBITDA. Furthermore, Covisint uses these measures to establish budgets and operational goals for managing its business and evaluating its performance. Covisint also believes that these non-GAAP measures provide additional tools for investors to use in comparing its recurring core business operating results over multiple periods against other companies in its industry.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating its business internally and as such has determined that it is important to provide this information to investors.

Conference Call and Webcast Information

Covisint management will hold a conference call at 5:00 p.m. (Eastern time) today to discuss these results. The U.S. toll free dial-in for the conference call is 1-877-407-4018, and the international dial-in number is 1-201-689-8471. No passcode is required. A live webcast of the conference call will also be available on the company's website at investors.covisint.com.

For those unable to participate in the conference call, a replay will be available after the conclusion of the earnings call on May 20, 2015, through May 27, 2015. The U.S. toll-free replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517. The replay passcode is 13607930.

About Covisint Corporation

Covisint provides an open, developer-friendly, enterprise-class cloud platform to facilitate the rapid development and deployment of Internet of Things (IoT), Identity Management (IdM), and B2B collaboration solutions. Our platform enables users to securely identify, authenticate and connect users, devices, applications and information, and has been successfully operating globally at enterprise scale for over 12 years. Today, the Covisint platform enables more than 3,000 organizations to connect with more than 212,000 business partners and customers, and supports more than $4 billion in ecommerce transactions annually.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding Covisint's future financial performance, market growth, the demand for Covisint's solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon Covisint's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Covisint's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Covisint's disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to attract new customers; the extent to which customers renew their contracts; the extent we are able to maintain pricing with our customers at renewal; the continued growth of the market for our solutions; the success of our channel partner and certified partner strategies; competition from current competitors and new market entrants; unpredictable macro-economic conditions; the loss of any of our key employees; the length of the sales for our solutions; and other risk and uncertainties. Further information on potential factors that could affect actual results is included in Covisint's reports filed with the SEC.

COVISINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
March 31, 2015 March 31, 2014
ASSETS
CURRENT ASSETS:
Cash $50,077 $49,536
Accounts receivable, net 15,348 21,838
Deferred tax asset, net 16 1,017
Due from parent and affiliates 2,813
Prepaid expenses 3,160 1,686
Other current assets 4,209 4,297
Total current assets 72,810 81,187
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 8,809 4,751
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET 10,646 23,040
OTHER:
Goodwill 25,385 25,385
Deferred costs 1,736 6,188
Deferred tax asset, net 1,528 131
Other assets 928 766
Total other assets 29,577 32,470
TOTAL ASSETS $121,842 $141,448
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $7,703 $3,893
Accrued commissions 3,286 1,640
Deferred revenue 18,029 16,606
Accrued expenses 3,344 3,752
Deferred tax liability, net 1,597
Total current liabilities 33,959 25,891
DEFERRED REVENUE 3,914 11,223
ACCRUED LIABILITIES AND OTHER 2,622 56
DEFERRED TAX LIABILITY, NET 2,668
Total liabilities 40,495 39,838
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common Stock
Additional paid-in capital 157,004 140,569
Retained deficit (75,633) (38,947)
Accumulated other comprehensive income (loss) (24) (12)
Total shareholders' equity 81,347 101,610
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $121,842 $141,448
COVISINT CORPORATION
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
THREE MONTHS
ENDED MARCH 31,
TWELVE MONTHS
ENDED MARCH 31,
2015 2014 2015 2014
REVENUE $23,457 $24,400 $88,534 $97,135
COST OF REVENUE 22,428 15,278 66,404 56,374
GROSS PROFIT 1,029 9,122 22,130 40,761
4% 37% 25% 42%
OPERATING EXPENSES:
Research and development 1,852 3,046 10,416 12,408
Sales and marketing 7,812 8,640 32,593 35,250
General and administrative 3,528 7,338 17,640 28,676
Total operating expenses 13,192 19,024 60,649 76,334
OPERATING LOSS (12,163) (9,902) (38,519) (35,573)
Other income 15 69
LOSS BEFORE INCOME TAX PROVISION (12,148) (9,902) (38,450) (35,573)
INCOME TAX PROVISION 33 26 112 85
NET LOSS ($12,181) ($9,928) ($38,562) ($35,658)
DILUTED EPS COMPUTATION
Numerator: Net loss ($12,181) ($9,928) ($38,562) ($35,658)
Denominator:
Weighted-average common shares outstanding 38,998 37,363 38,217 33,774
Dilutive effect of stock awards
Total shares 38,998 37,363 38,217 33,774
Diluted EPS ($0.32) ($0.27) ($1.01) ($1.06)
COVISINT CORPORATION
NON-GAAP COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
THREE MONTHS
ENDED
MARCH 31,
TWELVE MONTHS
ENDED MARCH 31,
2015 2014 2015 2014
REVENUE $23,457 $24,400 $88,534 $97,135
COST OF REVENUE 12,422 13,447 50,712 48,792
GROSS PROFIT 11,035 10,953 37,822 48,343
47% 45% 43% 50%
OPERATING EXPENSES:
Research and development 3,036 4,311 13,749 17,381
Sales and marketing 7,082 8,122 30,200 29,348
General and administrative 3,124 4,877 13,766 18,306
Total operating expenses 13,242 17,310 57,715 65,035
OPERATING LOSS (2,207) (6,357) (19,893) (16,692)
Other income 15 69
LOSS BEFORE INCOME TAX PROVISION (2,192) (6,357) (19,824) (16,692)
INCOME TAX PROVISION 33 26 112 85
NET LOSS ($2,225) ($6,383) ($19,936) ($16,777)
DILUTED EPS COMPUTATION
Numerator: Net loss ($2,225) ($6,383) ($19,936) ($16,777)
Denominator:
Weighted-average common shares outstanding 38,998 37,363 38,217 33,774
Dilutive effect of stock awards
Total shares 38,998 37,363 38,217 33,774
Diluted EPS ($0.06) ($0.17) ($0.52) ($0.50)
COVISINT CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(In Thousands, Except Per Share Data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Gross profit $1,029 $9,122 $22,130 $40,761
Gross profit % 4% 37% 25% 42%
Adjustments:
Stock compensation expense—cost of revenue 30 94 613 829
% of total revenue —% —% 1% 1%
Cost of revenue—amortization of capitalized software 9,976 1,737 15,079 6,753
% of total revenue 43% 7% 17% 7%
Adjusted gross profit $11,035 $10,953 $37,822 $48,343
Adjusted gross profit % 47% 44% 43% 50%
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Cost of revenue $22,428 $15,278 $66,404 $56,374
Adjustments:
Stock compensation expense 30 94 613 829
Cost of revenue - amortization of capitalized software 9,976 1,737 15,079 6,753
Cost of revenue, non-GAAP $12,422 $13,447 $50,712 $48,792
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Research and development $1,852 $3,046 $10,416 $12,408
Adjustments:
Capitalized internal software costs (1,210) (1,331) (3,508) (5,695)
Stock compensation expense 26 66 175 722
Research and development, non-GAAP $3,036 $4,311 $13,749 $17,381
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Sales and marketing $7,812 $8,640 $32,593 $35,250
Adjustments:
Stock compensation expense 201 441 1,570 5,594
Amortization of customer relationship agreements 529 77 823 308
Sales and marketing, non-GAAP $7,082 $8,122 $30,200 $29,348
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
General and administrative $3,528 $7,338 $17,640 $28,676
Adjustments:
Stock compensation expense 404 2,461 3,874 10,330
Amortization of trademarks 40
General and administrative, non-GAAP $3,124 $4,877 $13,766 $18,306
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Net loss ($12,181) ($9,928) ($38,562) ($35,658)
Adjustments:
Capitalized internal software costs (1,210) (1,331) (3,508) (5,695)
Stock compensation expense 661 3,062 6,232 17,475
Amortization of capitalized software and other intangibles 10,505 1,814 15,902 7,101
Net loss, non-GAAP ($2,225) ($6,383) ($19,936) ($16,777)
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
Diluted EPS ($0.32) ($0.27) ($1.01) ($1.06)
Adjustments:
Capitalized internal software costs (0.03) (0.04) (0.09) (0.17)
Stock compensation expense 0.02 0.08 0.16 0.52
Amortization of capitalized software and other intangibles 0.27 0.05 0.42 0.21
Diluted EPS, non-GAAP ($0.06) ($0.17) ($0.52) ($0.50)
COVISINT CORPORATION
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
TWELVE MONTHS ENDED
MARCH 31,
2015 2014 2015 2014
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) ($12,181) ($9,928) ($38,562) ($35,658)
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:
Depreciation and amortization 2,483 2,255 9,574 8,678
Capitalized software impairment 8,751 8,751
Deferred income taxes 19 (39) 11 4
Stock award compensation 661 3,062 6,232 17,475
Other 307 307
Net change in assets and liabilities, net of effects from currency fluctuations:
Accounts receivable (1,249) (2,846) 6,377 3,618
Other assets 593 1,523 3,306 3,414
Accounts payable and accrued expenses 6,379 1,919 6,484 1,543
Deferred revenue 5,524 (1,680) (5,610) (7,410)
Net cash provided by (used in) operating activities $11,287 ($5,734) ($3,130) ($8,336)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of:
Property and equipment (3,543) (1,605) (5,518) (3,541)
Capitalized software (1,211) (1,332) (3,509) (5,696)
Net cash used in investing activities ($4,754) ($2,937) ($9,027) ($9,237)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Cash payments from parent company 12,538 23,999 65,746
Cash payments to parent company (9,061) (13,879) (67,003)
Proceeds from initial public offering 68,448
Initial public offering costs (15) (1,412)
Net proceeds from exercise of stock awards 461 2,865 332
Net cash provided by financing activities $461 $3,462 $12,985 $66,111
EFFECT OF EXCHANGE RATE CHANGES ON CASH (242) (25) (287) 32
NET CHANGE IN CASH 6,752 (5,234) 541 48,570
CASH AT BEGINNING OF PERIOD 43,325 54,770 49,536 966
CASH AT END OF PERIOD $50,077 $49,536 $50,077 $49,536

CONTACT: Investor Relations Contact 866.319.7659 investors@covisint.com Media Contact Brad Schechter 248.483.2097 bschecht@covisint.com For Sales and Marketing Information Covisint Corporation, 26533 Evergreen Road, Suite 500, Southfield, MI 48076, (800) 229-4125 http://www.covisint.com

Source:Covisint