Cover-All Technologies Inc. (NYSE MKT:COVR) today announced financial results for the quarter ended September 30, 2014.

"Professional and support services have exceeded our expectations and continue to positively influence revenues and earnings," said Manish Shah, CEO and President of Cover-All. "The record demand from our services business is coming from implementations of last year's license sales, as well as new IT services offerings and ongoing maintenance programs. Services revenues represented 93.0% of total sales and 84.7% of total gross margins in the 2014 nine month period, compared to 66.5% of total sales and 31.2% of total gross margins for the same period last year. We expect strong demand for professional and support services will continue for the remainder of 2014 and into 2015."

Mr. Shah continued, "I am pleased with our team's ability to enhance the company's profitability. Cash and cash equivalents at September 30, 2014 was $4.1 million, an 18.5% increase over our cash balance at June 30 and represents the highest balance since 2011. The improvement to our balance sheet provides us flexibility to invest in growth producing initiatives, and enhances our competitiveness with potential customers. While we are not thrilled by the lack of license revenues so far in 2014, we are optimistic that we will benefit from new licensing agreements in the coming quarters."

"Throughout the year, we have discussed the importance of mergers and acquisitions to enhance Cover-All's competitiveness in the marketplace and accelerate our growth. We continue to actively examine potential corporate actions to increase shareholder value, including a potential transformative opportunity that we expect to know the outcome by the end of the year. We are encouraged by the progress we are making to profitably grow the business and create shareholder value," concluded Mr. Shah.

FINANCIAL HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

Revenue
  • Total revenues for the nine months ended September 30, 2014 were $15.2 million compared to $15.9 million for the same period in 2013.
  • License revenue for the nine months ended September 30, 2014 was $1.1 million compared to $5.3 million for the same period in 2013.
  • Support Services revenue (which represents contracted continuing revenue) was $6.4 million for the nine months ended September 30, 2014 compared to $6.0 million in the same period in 2013.
  • Professional Services revenue for the nine months ended September 30, 2014 was $7.8 million compared to $4.6 million for the same period in 2013.

GAAP Profitability
  • Operating income for the nine months ended September 30, 2014 was $1.3 million compared to a loss of $(1.1) million in the comparable period in 2013.
  • Net income for the nine months ended September 30, 2014 was $927,000, or $0.03 per basic and diluted share, compared to a loss of $(1.4) million, or $(0.05) per basic and diluted share, in the same period of 2013.

Non-GAAP* Profitability
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP metric, for the nine months ended September 30, 2014 was $2.6 million, or $0.10 per basic and diluted share, compared to $2.7 million, or $0.10 per basic and diluted share, in the same period of 2013.

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014

Revenue
  • Total revenues for the three months ended September 30, 2014 were $5.0 million compared to $5.1 million for the same period in 2013.
  • License revenue for the three months ended September 30, 2014 was $34,000 compared to $1.0 million for the same period in 2013.
  • Support Services revenue (which represents contracted continuing revenue) was $2.1 million for the three months ended September 30, 2014 compared to $2.0 million for the same quarter last year.
  • Professional Services revenue for the three months ended September 30, 2014 was $2.8 million, compared to $2.0 million for the same quarter in 2013.

GAAP Profitability
  • Operating income for the three months ended September 30, 2014 was $301,000 compared to a loss of $(814,000) in the comparable period in 2013.
  • Net income for the three months ended September 30, 2014 was $165,000, or $0.01 per basic and diluted share, compared to a loss of $(916,000), or $(0.03) per basic and diluted share, in the same quarter of 2013.

Non-GAAP Profitability
  • EBITDA was $746,000, or $0.03 per basic and diluted share, for the three months ended September 30, 2014, compared to $456,000, or $0.02 per basic and diluted share, for the three months ended September 30, 2013.

Balance Sheet
  • As of September 30, 2014, the Company had $4.1 million in cash and cash equivalents and $1.6 million in accounts receivable.

WEBCAST AND CONFERENCE CALL INFORMATION

Management will conduct a live teleconference to discuss its 2014 third quarter financial results at 4:30 p.m. EST on Thursday, November 13, 2014. Anyone interested in participating should call 1-888-461-2024 if calling from the United States, or 1-719-457-2083 if dialing internationally. A replay will be available until November 27, 2014, which can be accessed by dialing 1-877-870-5176 within the United States and 1-858-384-5517 if dialing internationally. Please use passcode 5808700 to access the replay.

In addition, the call will be webcast and will be available on the Company's website at www.cover-all.com or by visiting http://public.viavid.com/index.php?id=111790.

FORWARD-LOOKING STATEMENTS

Statements in this press release, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks which may cause the Company's actual results in future periods to differ materially from expected results. Those risks include, among others, risks associated with increased competition, customer decisions, the successful completion of continuing development of new products, the successful negotiations, execution and implementation of anticipated new software contracts, the successful implementation of our acquisition strategies and our ability to complete or integrate acquisitions, the successful addition of personnel in the marketing and technical areas, our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits and other business factors beyond the Company's control. Those and other risks are described in the Company's filings with the Securities and Exchange Commission ("SEC") over the last 12 months, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 28, 2014, copies of which are available from the SEC or may be obtained upon request from the Company.

*ABOUT NON-GAAP FINANCIAL MEASURES

In evaluating its business, Cover-All considers and uses EBITDA as a supplemental measure of its operating performance. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The Company presents EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

The term EBITDA is not defined under U.S. generally accepted accounting principles ("GAAP") and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider EBITDA in isolation or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with GAAP. Among other things, EBITDA does not reflect the Company's actual cash expenditures. Other companies may calculate similar measures differently than Cover-All, limiting their usefulness as comparative tools. Cover-All compensates for these limitations by relying on its GAAP results and using EBITDA only supplementally.

ABOUT COVER-ALL TECHNOLOGIES INC.

Cover-All provides property and casualty insurance professionals a robust state-of-the-art, browser-based family of Policy, Business Intelligence, and Claims solutions designed to deliver products to market faster, enhance quality, ensure compliance, and reduce costs. With offices in Morristown, NJ and Honolulu, HI, Cover-All continues its tradition of developing technology solutions designed to revolutionize the way property and casualty insurance business is conducted.

Additional information is available online at www.cover-all.com .
       

Cover-All Technologies Inc. and Subsidiaries
 
CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)
 

Three months ended September 30,

Nine months ended September 30,
2014   2013 2014   2013
Revenues:

Licenses
$

33,517
$

1,028,474
$

1,067,714
$

5,348,322
Support Services 2,142,835 2,002,028 6,393,686 6,006,206
Professional Services   2,827,399   2,028,602     7,751,135   4,593,917  
Total Revenues   5,003,751   5,059,104     15,212,535   15,948,445  
Cost of Revenues:
Licenses 17,307 67,307
Support Services 1,479,127 1,565,818 4,628,570 5,879,782
Professional Services   1,297,932   883,174     3,618,994   2,325,940  
Total Cost of Revenues   2,777,059   2,466,299     8,247,564   8,273,029  
Direct Margin   2,226,692   2,592,805     6,964,971   7,675,416  
Operating Expenses:
Sales and Marketing 537,394 600,629 1,559,125 1,774,300
General and Administrative 737,168 492,364 2,226,662 1,558,325
Reorganization Costs

319,014 319,014
Amortization of Capitalized Software 372,638 1,186,659 1,117,914 3,459,783
Research and Development   278,637   807,856     802,226   1,633,611  
Total Operating Expenses   1,925,837   3,406,522     5,705,927   8,745,033  
Operating Income (Loss)   300,855   (813,717 )   1,259,044   (1,069,617 )
Other (Income) Expense:
Interest Expense 96,907 92,397 285,850 275,820
Interest Income
Other Income           (3,821 )
Total Other (Income) Expense   96,907   92,397     285,850   271,999  
Income (Loss) Before Income Taxes   203,948   (906,114 )   973,194   (1,341,616 )
Income Taxes   38,870   10,295     46,478   18,466  
 
Net Income (Loss) $ 165,078 $ (916,409 ) $ 926,716 $ (1,360,082 )
 
Basic Earnings (Loss) Per Common Share $ 0.01 $ (0.03 ) $ 0.03 $ (0.05 )
 
Diluted Earnings (Loss) Per Common Share $ 0.01 $ (0.03 ) $ 0.03 $ (0.05 )
 
Weighted Average Number of Common
Shares Outstanding for Basic Earnings
(Loss) Per Common Share   26,638,000   26,286,000     26,607,000   26,114,000  
 
Weighted Average Number of Common
Shares Outstanding for Diluted
Earnings (Loss) Per Common Share   26,638,000   26,286,000     26,607,000   26,114,000  
 
       
Cover-All Technologies Inc. and Subsidiaries
 
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
September 30,

2014
December 31,

2013
(Unaudited)
Assets:
Current Assets:
Cash and Cash Equivalents $ 4,134,793 $ 1,848,571

Accounts Receivable (Less Allowance for Doubtful Accounts of $25,000)
1,647,052 2,604,489
Prepaid Expenses 550,215 491,905
Deferred Tax Asset   850,500     850,500  
Total Current Assets 7,182,560 5,795,465
Property and Equipment - Net 536,262 708,590
Goodwill 1,039,114 1,039,114

Capitalized Software (Less Accumulated Amortization of $23,423,105

and $22,305,191 in 2014 and 2013, Respectively)
6,846,669 7,964,583

Customer Lists/Relationships (Less Accumulated Amortization of

$386,833 and $341,333 in 2014 and 2013, Respectively)
15,167 60,667
 

Deferred Tax Asset
2,674,928 2,674,928

Deferred Financing Costs (Net Amortization of $59,519 and $36,082

in 2014 and 2013, Respectively)
32,764 56,201
Other Assets   245,712     424,522  
 
Total Assets $ 18,573,176   $ 18,724,070  
 

Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,221,968 $ 1,059,238
Accrued Expenses 648,720 1,412,400
Deferred Charges 196,542 231,051
Short-Term Debt 1,789,606
Current Portion of Capital Lease 118,346 114,640
Unearned Revenue   2,200,927     2,997,455  
Total Current Liabilities   6,176,109     5,814,784  
Long Term Liabilities:
Long-Term Debt 1,639,109
Long-Term Portion of Capital Lease   263,911     353,139  
Total Long-Term Liabilities   263,911     1,992,248  
Total Liabilities   6,440,020     7,807,032  
Commitments and Contingencies        
Stockholders' Equity:

Common Stock, $.01 Par Value, Authorized 75,000,000 Shares;

26,638,477 and 26,402,227 Shares Issued and Outstanding in

2014 and 2013, Respectively
266,385 264,022
Additional Paid-In Capital 32,961,413 32,674,374
Accumulated Deficit   (21,094,642 )   (22,021,358 )
Total Stockholders' Equity   12,133,156     10,917,038  
Total Liabilities and Stockholders' Equity $ 18,573,176   $ 18,724,070  
 
       
Cover-All Technologies Inc. and Subsidiaries
 
RECONCILIATION of GAAP NET INCOME to EBITDA
(UNAUDITED)
 
Three months ended September 30, Nine months ended September 30,
2014   2013 2014   2013
 
Net Income (Loss) $ 165,078 $ (916,409 ) $ 926,716 $ (1,360,082 )
 
Interest Income (Expense), Net 96,907 92,397 285,849 275,820
Income Tax Expense 38,870 10,295 46,478 18,466
Depreciation 48,965 60,399 180,223 188,635
Amortization:
Amortization of Capitalized Software 372,638 1,186,659 1,117,914 3,459,784
Amortization of Customer Lists/Relationships 15,167 15,167 45,501 66,074
Amortization of Deferred Financing Costs   8,042   7,153     23,437   20,846  
Total Amortization   395,847   1,208,979     1,186,852   3,546,704  
 
EBITDA $ 745,667 $ 455,661   $ 2,626,118 $ 2,669,543  
 
EBITDA per Common Share:
Basic $ 0.03 $ 0.02   $ 0.10 $ 0.10  
Diluted $ 0.03 $ 0.02   $ 0.10 $ 0.10  

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