Covisint Corporation Announces Fourth Quarter and Full-Year Fiscal 2017 Financial Results

DETROIT, June 05, 2017 (GLOBE NEWSWIRE) — Covisint Corporation (Nasdaq:COVS), the leading Cloud Platform for building Identity and Internet of Things (IoT) applications, today announced financial results for the fourth quarter and full fiscal year ended March 31, 2017.

Fiscal 2017 Financial Results

Revenue

  • Total revenue was $70.2 million, a decrease of 8% compared to $76.0 million in the prior year.
  • Subscription revenue was $60.7 million, a decrease of 4% compared to $63.4 million in the prior fiscal year.
  • Services revenue was $9.5 million, a decrease of 25% compared to $12.7 million in the prior fiscal year.

Profitability

  • GAAP gross margin was 53%, compared to 54% in the prior year.
  • Non-GAAP gross margin was 59%, in-line with the prior year.
  • GAAP net loss was $12.7 million or ($0.31) per share, compared to net loss of $14.9 million or ($0.38) per share in the prior year.
  • Non-GAAP net loss was $9.4 million or ($0.23) per share, compared to net loss of $12.9 million or ($0.33) per share in the prior year.

Fourth Quarter Fiscal 2017 Financial Highlights

Revenue

  • Total revenue was $19.0 million, a decrease of 5% compared to $20.0 million in the same period last year.
  • Subscription revenue was $16.8 million, a decrease of 2% compared to $17.2 million in the same period last year.
  • Services revenue was $2.2 million, a decrease of 21% compared to the same period last year.

Profitability

  • GAAP gross margin was 60%, compared to 49% in the prior fiscal quarter and 61% in the same period last year.
  • Non-GAAP gross margin was 66%, compared to 56% in the prior fiscal quarter and 65% in the same period last year.
  • GAAP net income was $1.6 million or $0.04 per diluted share, compared to net loss of $0.1 million or ($0.00) per share in the same period last year.
  • Non-GAAP net income was $2.6 million or $0.06 per diluted share, compared to net loss of $0.5 million or ($0.01) per share in the same period last year.

Balance Sheet

  • The Company had $33.2 million in cash and cash equivalents at March 31, 2017, compared with $30.4 million at December 31, 2016. 

Fourth Quarter Fiscal 2017 Business Highlights

  • Hosted customers and showcased the Covisint IoT Platform at the 2017 Consumer Electronics Show (CES) in Las Vegas.
  • Sponsored AutoMobili-D 2017, in conjunction with the North American International Auto Show (NAIAS), with a “Connecting the Global Automotive Ecosystem” themed exhibit and presented on “Enabling and Monetizing Connected Cars.”
  • Announced that Covisint was recognized as “Supplier of the Year” for the second consecutive year by SAIC General Motors.
  • Launched the most complete IoT Platform for enabling digital transformation, unlocking the full business value of enterprise IoT solutions by securely connecting complete ecosystems of people, systems and things.
  • Exhibited at the 2017 RSA Conference in San Francisco, and showcased an identity-centric approach to the Internet of Things with the Covisint Platform.
  • Showcased the Covisint Platform at the Gartner Identity & Access Management Summit in London in March 2017.  Covisint Chief Security Officer, David Miller, presented on “Orchestrating Identities Across the Internet of Things.”

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles in the United States (“GAAP”), Covisint monitors non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income (loss), and 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), and 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 June 5, 2017, through June 12, 2017. The U.S. toll-free replay dial-in number is 1-844-512-2921 and the international replay dial-in number is 1-412-317-6671. The replay passcode is 13663623.

About Covisint Corporation

Covisint is the connected company – we securely connect ecosystems of people, systems and things to enable new service offerings, optimize operations, develop new business models and ultimately enable the connected economy. Today, we support more than 2,000 organizations and connect to more than 212,000 business partners and customers worldwide. Learn more at 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 risks 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, Except Share Data)
 
  March 31, 2017   March 31, 2016
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 33,227     $ 39,681  
Accounts receivable, net of allowance for doubtful accounts of $36 and $39 as of March 31, 2017 and 2016, respectively   8,066       12,836  
Prepaid expenses   1,992       2,167  
Other current assets   878       1,603  
Total current assets   44,163       56,287  
PROPERTY AND EQUIPMENT, NET   5,103       7,847  
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET   10,031       11,486  
OTHER:      
Goodwill   25,385       25,385  
Deferred costs   56       580  
Deferred tax asset, net   172       171  
Other assets   156       289  
Total other assets   25,769       26,425  
TOTAL ASSETS $ 85,066     $ 102,045  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
CURRENT LIABILITIES:      
Accounts payable $ 2,427     $ 5,061  
Accrued commissions and bonuses   1,423       1,071  
Deferred revenue   14,595       15,952  
Accrued expenses   1,432       2,377  
Total current liabilities   19,877       24,461  
DEFERRED REVENUE   2,115       3,595  
ACCRUED LIABILITIES   2,265       2,327  
DEFERRED TAX LIABILITY, NET   327       353  
Total liabilities   24,584       30,736  
COMMITMENTS AND CONTINGENCIES      
SHAREHOLDERS’ EQUITY:      
Preferred stock, no par value – authorized 5,000,000 shares; none issued and outstanding          
Common stock, no par value – authorized 50,000,000 shares; issued and outstanding 40,865,897 and 40,490,928 as of March 31, 2017 and 2016, respectively          
Additional paid-in capital   164,120       161,997  
Accumulated deficit   (103,253 )     (90,527 )
Accumulated other comprehensive loss   (385 )     (161 )
Total shareholders’ equity   60,482       71,309  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 85,066     $ 102,045  

See notes to consolidated financial statements.

 
COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In Thousands, Except Per Share Data)
 
  YEAR ENDED MARCH 31,
   2017
   2016
   2015
REVENUE $ 70,243     $ 76,024     $ 88,534  
COST OF REVENUE   33,279       34,953       66,404  
GROSS PROFIT   36,964       41,071       22,130  
OPERATING EXPENSES:          
Research and development   11,381       13,019       10,416  
Sales and marketing   26,804       29,448       32,593  
General and administrative   11,497       13,286       17,640  
Total operating expenses   49,682       55,753       60,649  
OPERATING LOSS   (12,718 )     (14,682 )     (38,519 )
Other (expense) income   61       (23 )     69  
LOSS BEFORE INCOME TAX PROVISION   (12,657 )     (14,705 )     (38,450 )
INCOME TAX PROVISION   69       189       112  
NET LOSS ($ 12,726 )   ($ 14,894 )   ($ 38,562 )
Basic and diluted loss per share ($ 0.31 )   ($ 0.38 )   ($ 1.01 )
Weighted average shares used to compute net loss per share attributable to common stockholders – basic and diluted   40,719     39,658     38,217
OTHER COMPREHENSIVE LOSS, NET OF TAX          
Foreign currency translation adjustments   (224 )     (137 )     (12 )
OTHER COMPREHENSIVE LOSS, NET OF TAX   (224 )     (137 )     (12 )
COMPREHENSIVE LOSS ($ 12,950 )   ($ 15,031 )   ($ 38,574 )

See notes to consolidated financial statements.

 
COVISINT CORPORATION
RECONCILIATION OF U.S. GAAP TO NON-U.S. GAAP
(In Thousands, Except Per Share Data)
(Unaudited)
 
    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
  2016   2017   2016
Gross profit   $ 11,296     $ 12,102     $ 36,964     $ 41,071  
Gross margin     60 %     61 %     53 %     54 %
Adjustments:                
Stock compensation expense     16       3       53       71  
Amortization of capitalized software     1,128       787       4,274       3,398  
Non-U.S. GAAP gross profit   $ 12,440     $ 12,892     $ 41,291     $ 44,540  
Non-U.S. GAAP gross margin     66 %     65 %     59 %     59 %

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
   2017
   2016
Cost of revenue   $ 7,685     $ 7,885     $ 33,279     $ 34,953  
Adjustments:                
Stock compensation expense     16       3       53       71  
Amortization of capitalized software     1,128       787       4,274       3,398  
Non-U.S. GAAP cost of revenue   $ 6,541     $ 7,095     $ 28,952     $ 31,484  

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
   2017
   2016
Research and development   $ 2,065     $ 3,129     $ 11,381     $ 13,019  
Adjustments:                
Capitalized internal software costs     (644 )     (1,673 )     (2,819 )     (4,238 )
Stock compensation expense     11       2       37       78  
Non-U.S. GAAP research and development   $ 2,698     $ 4,800     $ 14,163     $ 17,179  

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
   2017
   2016
Sales and marketing   $ 5,412     $ 6,225     $ 26,804     $ 29,448  
Adjustments:                
Stock compensation expense     85       91       296       501  
Non-U.S. GAAP sales and marketing   $ 5,327     $ 6,134     $ 26,508     $ 28,947  

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
   2017
   2016
General and administrative   $ 2,290     $ 2,770     $ 11,497     $ 13,286  
Adjustments:                
Stock compensation expense     369       381       1,513       2,166  
Non-U.S. GAAP general and administrative   $ 1,921     $ 2,389     $ 9,984     $ 11,120  

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
   2017
   2016
Net income (loss)   $ 1,589     ($ 110 )   ($ 12,726 )   ($ 14,894 )
Adjustments:                
Capitalized internal software costs     (644 )     (1,673 )     (2,819 )     (4,238 )
Stock compensation expense     480       478       1,899       2,817  
Amortization of capitalized software     1,128       787       4,274       3,398  
Non-U.S. GAAP net income (loss)   $ 2,553     ($ 518 )   ($ 9,372 )   ($ 12,917 )

    Three Months Ended
March 31,
  Twelve Months Ended
March 31,
     2017
   2016
  2017   2016
Diluted EPS   $ 0.04   $ 0.00   ($ 0.31 )   ($ 0.38 )
Adjustments:                
Capitalized internal software costs     (0.02 )     (0.04 )     (0.07 )     (0.11 )
Stock compensation expense     0.01       0.01       0.05       0.07  
Amortization of capitalized software     0.03       0.02       0.10       0.09  
Non-U.S. GAAP Diluted EPS   $ 0.06     ($ 0.01 )   ($ 0.23 )   ($ 0.33 )

COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
  YEAR ENDED MARCH 31,
   2017
   2016
   2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:          
Net loss ($ 12,726 )   ($ 14,894 )   ($ 38,562 )
Adjustments to reconcile net loss to cash provided by (used in) operations:          
Depreciation and amortization   7,210       6,772       9,574  
Capitalized software and other intangible asset impairment               8,751  
Deferred income taxes   (8 )     148       11  
Stock award compensation   1,899       2,817       6,232  
Other   1       18       307  
Net change in assets and liabilities:          
Accounts receivable   4,705       2,474       6,377  
Other assets   1,532       5,397       3,306  
Accounts payable and accrued expenses (1)   (2,751 )     (4,157 )     4,919  
Deferred revenue   (2,799 )     (2,441 )     (5,610 )
Net cash used in operating activities   (2,937 )     (3,866 )     (4,695 )
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:          
Purchase of:          
Property and equipment (1)   (229 )     (3,817 )     (3,953 )
Capitalized software   (2,819 )     (4,238 )     (3,509 )
Proceeds from asset disposals   2       33        
Net cash used in investing activities   (3,046 )     (8,022 )     (7,462 )
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   (614 )     (728 )      
Net proceeds from exercise of stock awards   239       2,191       2,865  
Net cash provided by (used in) financing activities   (375 )     1,463       12,985  
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (96 )     29       (287 )
NET CHANGE IN CASH   (6,454 )     (10,396 )     541  
CASH AT BEGINNING OF YEAR   39,681       50,077       49,536  
CASH AT END OF YEAR $ 33,227     $ 39,681     $ 50,077  

(1)   Accounts payable and accrued expenses in the balance sheet as of March 31, 2015 include $3.0 million associated with purchases of property and equipment, which are non-cash acquisitions of fixed assets as of March 31, 2015.

See notes to consolidated financial statements.

 

CONTACT: Investor Relations Contact
866-319-7659
investors@covisint.com

Media Contact
Brad Schechter, Vice President, Corporate Marketing
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