DETROIT, Feb. 04, 2016 (GLOBE NEWSWIRE) -- Covisint Corporation (Nasdaq:COVS), the leading Cloud Platform for building Identity and Access Management (IAM) and Internet of Things (IoT) solutions, today announced financial results for the third quarter of fiscal 2016, which ended December 31, 2015.

"While Covisint's total revenue for the quarter was in line with our expectations, we are disappointed with our results for subscription revenue. I remain confident that the steps we are taking are the right ones, however, results from the transition we embarked upon last year are taking longer to materialize," said Covisint Chairman and CEO, Sam Inman. "We continue to make excellent progress in other areas of the business. In particular, we have made much more progress in a shorter period of time than we expected in enhancing the Covisint Cloud platform. We are also pleased with the progress we have made in redefining our brand and positioning our company in the marketplace."

Third Quarter Fiscal 2016 Financial Highlights

Revenue
  • Total revenue was $19.2 million, a decrease of 12% compared to $21.8 million in the prior year period.
  • Subscription revenue was $15.3 million, a decrease of 3% compared to $15.7 million in the prior year period. Subscription revenue increased 9% excluding subscription revenue related to exited business.
  • Services revenue was $3.9 million, a decrease of 36% compared to $6.1 million in the prior year period. The decline is primarily attributable to the Company's stated strategy to shift this business to certified service partners.

Profitability
  • GAAP gross margin was 54%, compared to 54% in the prior fiscal quarter and 34% in the prior year period. 
  • Non-GAAP gross margin was 58%, compared to 59% in the prior fiscal quarter and 42% in the prior year period. 
  • GAAP net loss was $4.1 million or ($0.10) per diluted share, compared to net loss of $7.0 million or ($0.18) per diluted share in the prior year.
  • Non-GAAP net loss was $3.8 million or ($0.09) per diluted share, compared to net loss of $4.3 million or ($0.11) per diluted share in the prior year.

Balance Sheet
  • The Company had $37.6 million in cash, cash equivalents at December 31, 2015, compared with $41.7 million at September 30, 2015. 

Third Quarter Fiscal 2016 Business Highlights
  • Selected by a leading European Automotive OEM as their global standard for identity management. Through this new five-year, non-cancellable agreement, this customer will use Covisint's cloud identity management services as the core technology behind their digital transformation initiative, enabling faster and more secure information exchange across their ecosystem of over 100,000 people, systems and things.
  • Chief Security Officer, David Miller presented on securing the Internet of Things at Gartner Symposium/ITExpo. During the session titled "Simply Securing the IoT as Connectivity Complexity Continues to Mount," Miller discussed how leveraging a secure cloud platform unlocks the value of IoT for complex, connected product initiatives.
  • Spoke on securing the connection between the cloud and car at the Connected Mobility Summit. The session addressed the security and privacy challenges to be expected as vehicles become part of the Internet of Things. Additionally, visitors were able to see live demonstrations on how the Covisint platform has enabled Hyundai's Blue Link system in a Hyundai Sonata Eco.

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 net income (loss), non-GAAP net income (loss) per diluted share. 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 expenses that are excluded in non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share. 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 February 4, 2016, through February 11, 2016. 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 13628057.

About Covisint Corporation

Covisint is the leading Cloud Platform for building Identity and Internet of Things (IoT) applications, and enables the identification, authorization and connection of complex networks of people, processes, systems and things.

Covisint's open, developer-friendly, enterprise-class Cloud Platform facilitates the rapid development and deployment of the Internet of Things (IoT), Identity Management (IdM) and Connected Supply Chain solutions - enabling customers to securely identify, authenticate and connect users, devices, applications and information. Covisint has been successfully operating globally at enterprise scale for more than 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. Learn more at http://www.covisint.com/.

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 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

CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
  December 31, 2015   March 31, 2015
ASSETS      
CURRENT ASSETS:      
Cash $ 37,615       $ 50,077    
Accounts receivable, net   9,628         15,348    
Deferred tax asset, net   41         16    
Prepaid expenses   2,461         3,160    
Other current assets   1,866         4,209    
Total current assets   51,611         72,810    
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION   8,642         8,809    
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET   10,600         10,646    
OTHER:      
Goodwill   25,385         25,385    
Deferred costs   733         1,736    
Deferred tax asset, net   1,350         1,528    
Other assets   367         928    
Total other assets   27,835         29,577    
TOTAL ASSETS $ 98,688       $ 121,842    
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $ 5,038       $ 7,703    
Accrued commissions   2,814         3,286    
Deferred revenue   12,180         18,029    
Accrued expenses   2,154         3,344    
Deferred tax liability, net   1,495         1,597    
Total current liabilities   23,681         33,959    
DEFERRED REVENUE   1,642         3,914    
ACCRUED LIABILITIES AND OTHER   2,542         2,622    
Total liabilities   27,865         40,495    
COMMITMENTS AND CONTINGENCIES      
SHAREHOLDERS' EQUITY:      
Common Stock              
Additional paid-in capital   161,418         157,004    
Retained deficit   (90,417  )       (75,633  
Accumulated other comprehensive loss   (178  )       (24  )  
Total shareholders' equity   70,823         81,347    
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 98,688       $ 121,842    
                   

COVISINT CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited)
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
REVENUE $ 19,162       $ 21,755       $ 56,037       $ 65,077    
COST OF REVENUE   8,822         14,384         27,068         43,976    
GROSS PROFIT   10,340         7,371         28,969         21,101    
    54  %       34  %       52  %       32  %  
OPERATING EXPENSES:              
Research and development   3,100         2,865         9,890         8,564    
Sales and marketing   8,564         7,006         23,223         24,781    
General and administrative   2,699         4,455         10,516         14,112    
Total operating expenses   14,363         14,326         43,629         47,457    
OPERATING LOSS   (4,023 )       (6,955       (14,660       (26,356  
Other income (expense)   3         15         (28 )       54    
LOSS BEFORE INCOME TAXES   (4,020 )       (6,940       (14,688       (26,302  
INCOME TAX PROVISION   52         21         96         79    
NET LOSS ($ 4,072 )     ($ 6,961 )     ($ 14,784     ($ 26,381  
               
DILUTED EPS COMPUTATION              
Numerator:  Net loss ($ 4,072 )     ($ 6,961     ($ 14,784     ($ 26,381  
Denominator:              
Weighted-average common shares outstanding   39,791         38,423         39,400         37,962    
Dilutive effect of stock awards                              
Total shares   39,791         38,423         39,400         37,962    
Diluted EPS ($ 0.10 )     ($ 0.18     ($ 0.38     ($ 0.69  
               

COVISINT CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP (In Thousands, Except Per Share Data) (Unaudited)
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Gross profit $ 10,340       $ 7,371       $ 28,969       $ 21,101    
Gross profit %   54 %       34 %       52       32 %  
Adjustments:              
Stock compensation expense—cost of revenue   15         (1  )       68         583    
% of total revenue   %       %       %       1  
Cost of revenue—amortization of capitalized software   802         1,728         2,611         5,103    
% of total revenue   4       8       5       8  
Adjusted gross profit $ 11,157       $ 9,098       $ 31,648       $ 26,787    
Adjusted gross profit %   58       42       56       41  
               
       
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Cost of revenue $ 8,822       $ 14,384       $ 27,068       $ 43,976    
Adjustments:              
Stock compensation expense   15         (1  )       68         583    
Cost of revenue - amortization of capitalized software   802         1,728         2,611         5,103    
               
Cost of revenue, non-GAAP $ 8,005       $ 12,657       $ 24,389       $ 38,290    
               
               
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Research and  development $ 3,100       $ 2,865       $ 9,890       $ 8,564    
Adjustments:              
Capitalized internal software costs   (1,039 )       (869       (2,565       (2,298  
Stock compensation expense   23         55         76         149    
               
Research and  development, non-GAAP $ 4,116       $ 3,679       $ 12,379       $ 10,713    
               
               
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Sales and marketing $ 8,564       $ 7,006       $ 23,223       $ 24,781    
Adjustments:              
Stock compensation expense   69         424         410         1,369    
Amortization of customer relationship agreements           77                 294    
               
Sales and marketing, non-GAAP $ 8,495       $ 6,505       $ 22,813       $ 23,118    
               
               
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
General and administrative $ 2,699       $ 4,455       $ 10,516       $ 14,112    
Adjustments:              
Stock compensation expense   410         1,221         1,785         3,470    
               
General and administrative, non-GAAP $ 2,289       $ 3,234       $ 8,731       $ 10,642    
               
               
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Net loss ($ 4,072     ($ 6,961     ($ 14,784     ($ 26,381  
Adjustments:              
Capitalized internal software costs   (1,039       (869       (2,565       (2,298  
Stock compensation expense   517         1,699         2,339         5,571    
Amortization of capitalized software and other intangibles   802         1,805         2,611         5,397    
Net loss, non-GAAP ($ 3,792     ($ 4,326     ($ 12,399     ($ 17,711  
               
               
  THREE MONTHS ENDED DECEMBER 31,   NINE MONTHS ENDED DECEMBER 31,
  2015   2014   2015   2014
Diluted EPS ($ 0.10     ($ 0.18     ($ 0.38     ($ 0.69  
Adjustments:              
Capitalized internal software costs   (0.02       (0.02       (0.07       (0.06  
Stock compensation expense   0.01         0.04         0.06         0.14    
Amortization of capitalized software and other intangibles   0.02         0.05         0.07         0.14    
Diluted EPS, non-GAAP ($ 0.09     ($ 0.11     ($ 0.32     ($ 0.47  
                                       

COVISINT CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (Unaudited)
  NINE MONTHS ENDED DECEMBER 31,
  2015   2014
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:      
Net loss ($ 14,784     ($ 26,381  
Adjustments to reconcile net loss to cash provided by (used in) operations:      
Depreciation and amortization   5,144         7,091    
Deferred income taxes   64         (8  
Stock award compensation   2,339         5,571    
Net change in assets and liabilities, net of effects from currency fluctuations:      
Accounts receivable   5,684         7,626    
Other assets   4,611         2,713    
Accounts payable and accrued expenses   (2,600 )       105    
Deferred revenue   (8,101       (11,134  
Net cash (used in) operating activities   (7,643       (14,417  
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:      
Purchase of:      
Property and equipment   (3,772       (1,975  
Capitalized software   (2,565       (2,298  
Proceeds from asset disposals   33            
Net cash (used in) investing activities   (6,304       (4,273  
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:      
Cash payments from former parent company           23,999    
Cash payments to former parent company           (13,879  
Vendor financing payments   (548          
Net proceeds from exercise of stock awards   2,074         2,404    
Net cash provided by financing activities   1,526         12,524    
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (41       (45  
NET CHANGE IN CASH   (12,462       (6,211  
CASH AT BEGINNING OF PERIOD   50,077         49,536    
CASH AT END OF PERIOD $ 37,615       $ 43,325    
                   

 
Investor Relations Contact866.319.7659investors@covisint.comMedia ContactBrad SchechterVice President, Corporate Marketing, Covisint248.483.2097bschecht@covisint.comFor Sales and Marketing InformationCovisint Corporation, 26533 Evergreen Road, Suite 500, Southfield, MI 48076, 800-229-4125http://www.covisint.com

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