Covisint Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 29, 2014

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NEWS RELEASE
One Campus Martius, Suite 700 • Detroit, Michigan 48226
(313) 961-4100

For Immediate Release     
July 29, 2014
    


Covisint Corporation Announces First Quarter Fiscal 2015 Earnings Results

•
Total revenue of $21.6 million
•
Subscription revenue of $15.5 million
•
Provides update on progress of strategic initiatives to refocus and position business for growth

DETROIT -- July 29, 2014 -- Covisint Corporation (Nasdaq: COVS), provider of a leading cloud engagement platform, today announced financial results for the first quarter of its fiscal 2015 ended June 30, 2014.
“We are off to a solid start to Fiscal 2015, which includes our subscription business getting back on track and performing in line with expectations,” said Covisint CEO Sam Inman. “We have made strong progress transitioning from a services and software company - to a true enterprise software company and we believe our platform is instrumental in transforming the way enterprises connect with their business partners, suppliers and customers. I am confident that the steps we are taking provide a strong foundation for our future success.”

First Quarter 2015 Financial Highlights
•
Revenues: Subscription and support revenue was $15.5 million, a decline of 3% year-over-year. Services revenue was $6.1 million, a decline of 26% year-over-year. Total revenues were $21.6 million, a decline of 10% year-over-year.

•
Gross Profit: GAAP gross profit was $6.3 million. GAAP gross margin was 29%. Non-GAAP gross profit was $8.5 million. Non-GAAP gross margin was 39%.
  
•
Earnings: GAAP diluted net loss per share was ($0.32) compared to ($0.16) in the same quarter last year. Non-GAAP diluted net loss per share was ($0.23) compared to ($0.15) in the same quarter last year.
 
First Quarter Fiscal 2015 Business Highlights
In the first quarter, Covisint:

•
Announced Covisint’s Certified Service Partner Program. During the quarter Covisint announced partnerships with CitiusTech, Lochbridge and Perficient - the program will provide certified training and increased technical support on the Covisint platform to enable these partners to develop on our platform.

•
Was recognized by Gartner, Inc. as a Leader in its first ever "Magic Quadrant for Identity Access Management as a Service (IDaaS)," published June 2, 2014. The Magic Quadrant positions vendors on their ability to execute and completeness of vision. With this recognition, Covisint has now been positioned in the three Magic Quadrants of the three key pillars for enterprise digital transformation - security, integration and presentation.




•
Was the keynote speaker and participant on two panel discussions on the future of automotive connectivity at Telematics Detroit 2014, the world's largest forum dedicated to the future of connected auto mobility. Covisint also made available at the show a whitepaper titled "Creating a Frictionless Ownership Experience for the Connected Consumer”.

•
Announced that Covisint was named a "major player" by independent analyst firm IDC in the report: IDC MarketScape: Worldwide Federated Identity Management and Single Sign-On 2014 Vender Assessment (IDC #247097, March 2014).

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 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 4:45 ET 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 investor relations page of 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 July 29, 2014, through August 5, 2014. 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 13586814.




Covisint
Covisint provides a leading cloud engagement platform for creating and enabling new mission-critical external business processes. Our solutions enable organizations to connect, engage, and collaborate with the critical external audiences that define their success--including customers, business partners and suppliers. Covisint allows its clients to establish a secure, reliable, integrated presence in the cloud, and it provides the kind of engaging information experiences that people everywhere have come to expect. Learn more at www.covisint.com.
 
Follow us:

•
Covisint on Twitter
•
Covisint on LinkedIn
•
Covisint on Facebook

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 for our solutions; the extent we are able to maintain pricing with our customers at renewal; the seasonality of our business; our ability to manage our growth; 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; our ability to penetrate new vertical markets; unpredictable macro-economic conditions; the loss of any of our key employees; the length of the sales and implementation cycles for our solutions; increased demands on our infrastructure and costs associated with operating as a public company; failure to protect our intellectual property; changes in current tax or accounting rules; 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.

Investor Relations Contact
866.319.7659
investors@covisint.com

Media Contact
Brad Schechter
313.961.5290
bschecht@covisint.com

For Sales and Marketing Information
Covisint Corporation, One Campus Martius, Suite 700, Detroit, MI 48226,
313-961-4100




http://www.covisint.com





COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 
 
June 30, 2014
 
March 31, 2014
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash
 

$43,129

 

$49,536

Accounts receivable, net
 
18,732

 
21,838

Deferred tax asset, net
 
677

 
1,017

Due from parent and affiliates
 
4,136

 
2,813

Other current assets
 
6,599

 
5,983

Total current assets
 
73,273

 
81,187

PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION
 
4,940

 
4,751

CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET
 
22,047

 
23,040

OTHER:
 
 
 
 
Goodwill
 
25,385

 
25,385

Deferred costs
 
5,198

 
6,188

Deferred tax asset, net
 
127

 
131

Other assets
 
754

 
766

Total other assets
 
31,464

 
32,470

TOTAL ASSETS
 

$131,724

 

$141,448

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts payable
 

$3,963

 

$3,893

Accrued commissions
 
1,245

 
1,640

Deferred revenue
 
14,806

 
16,606

Accrued expenses
 
3,649

 
3,752

    Total current liabilities
 
23,663

 
25,891

DEFERRED REVENUE
 
9,119

 
11,223

ACCRUED EXPENSES
 
56

 
56

DEFERRED TAX LIABILITY, NET
 
2,421

 
2,668

Total liabilities
 
35,259

 
39,838

COMMITMENTS AND CONTINGENCIES
 
—

 
—

 SHAREHOLDER’S EQUITY:
 
 
 
 
Common Stock
 
—

 
—

Additional paid-in capital
 
147,533

 
140,569

Retained deficit
 
(51,063
)
 
(38,947
)
Accumulated other comprehensive loss
 
(5
)
 
(12
)
Total shareholders' equity
 
96,465

 
101,610

TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY
 

$131,724

 

$141,448





 
 
 
 
 
 
COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands) Except Per Share Data
(Unaudited)
 
 
THREE MONTHS ENDED JUNE 30,
 
 
 
2014
 
2013
 
REVENUE
 

$21,587

 

$24,101

 
COST OF REVENUE
 
15,266

 
13,310

 
GROSS PROFIT
 
6,321

 
10,791

 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
Research and development
 
3,116

 
2,585

 
Sales and marketing
 
9,772

 
7,339

 
General and administrative
 
5,546

 
5,534

 
Total operating expenses
 
18,434

 
15,458

 
OPERATING LOSS
 
(12,113
)
 
(4,667
)
 
Other income
 
22

 
—

 
LOSS BEFORE INCOME TAX PROVISION
 
(12,091
)
 
(4,667
)
 
INCOME TAX PROVISION
 
25

 
3

 
NET LOSS
 

($12,116
)
 

($4,670
)
 
 
 
 
 
 
 
DILUTED EPS COMPUTATION
 
 
 
 
 
Numerator: Net loss
 

($12,116
)
 

($4,670
)
 
Denominator:
 


 
 
 
  Weighted-average common shares outstanding
 
37,499

 
30,003

 
  Dilutive effect of stock awards
 
—

 
 
 
  Total shares
 
37,499

 
30,003

 
Diluted EPS
 

($0.32
)
 

($0.16
)
 
 
 

 

 





COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
NON-GAAP CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
2014
 
2013
REVENUE
 

$21,587

 

$24,101

COST OF REVENUE
 
13,108

 
11,657

GROSS PROFIT
 
8,479

 
12,444

 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
  Research and development
 
3,840

 
4,490

  Sales and marketing
 
9,027

 
7,215

  General and administrative
 
4,114

 
5,125

       Total operating expenses
 
16,981

 
16,830

OPERATING LOSS
 
(8,502
)
 
(4,386
)
 
 
 
 
 
Other income
 
22

 
—

 
 
 
 
 
LOSS BEFORE INCOME TAX PROVISION
 
(8,480
)
 
(4,386
)
 
 
 
 
 
INCOME TAX PROVISION
 
25

 
3

 
 
 
 
 
NET LOSS
 

($8,505
)
 

($4,389
)
 
 
 
 
 
DILUTED EPS COMPUTATION
 
 
 
 
Numerator: Net loss
 
$
(8,505
)
 
$
(4,389
)
Denominator:
 
 
 
 
  Weighted-average common shares outstanding
 
37,499

 
30,003

  Dilutive effect of stock awards
 
 
 
 
  Total shares
 
37,499

 
30,003

Diluted EPS
 

($0.23
)
 

($0.15
)





COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
 
RECONCILIATION OF GAAP TO NON-GAAP
 
(In Thousands, Except Per Share Data)
 
(Unaudited)
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
Gross profit
 

$6,321

 

$10,791

 
Gross profit %
 
29
%
 
45
%
 
Adjustments:
 
 
 
 
 
Stock compensation expense—cost of revenue
 
515

 
5

 
% of total revenue
 
2
%
 
—
%
 
Cost of revenue—amortization of capitalized software
 
1,643

 
1,648

 
% of total revenue
 
8
%
 
7
%
 
Adjusted gross profit
 

$8,479

 

$12,444

 
Adjusted gross profit %
 
39
%
 
52
%
 
 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
Cost of revenue
 

$15,266

 

$13,310

 
Adjustments:
 
 
 
 
 
Stock compensation expense
 
515

 
5

 
Cost of revenue - amortization of capitalized software
 
1,643

 
1,648

 
 
 
 
 
 
 
Cost of revenue, non-GAAP
 

$13,108

 

$11,657

 
 
 

 

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
Research and development
 

$3,116

 

$2,585

 
Adjustments:
 
 
 
 
 
Capitalized internal software costs
 
(790
)
 
(1,952
)
 
Stock compensation expense
 
66

 
47

 
 
 
 
 
 
 
Research and development, non-GAAP
 

$3,840

 

$4,490

 
 
 

 

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 




Sales and marketing
 

$9,772

 

$7,339

 
Adjustments:
 
 
 
 
 
Stock compensation expense
 
605

 
47

 
Amortization of customer relationship agreements
 
140

 
77

 
 
 
 
 
 
 
Sales and marketing, non-GAAP
 

$9,027

 

$7,215

 
 
 

 

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
General and administrative
 

$5,546

 

$5,534

 
Adjustments:
 
 
 
 
 
Stock compensation expense
 
1,432

 
387

 
Amortization of trademarks
 
—

 
22

 
 
 
 
 
 
 
General and administrative, non-GAAP
 

$4,114

 

$5,125

 
 
 

 

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
Net loss
 

($12,116
)
 

($4,670
)
 
Adjustments:
 
 
 
 
 
Capitalized internal software costs
 
(790
)
 
(1,952
)
 
Stock compensation expense
 
2,618

 
486

 
Amortization of capitalized software and other intangibles
 
1,783

 
1,747

 
Net loss, non-GAAP
 

($8,505
)
 

($4,389
)
 
 
 

 

 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
 
2014
 
2013
 
Diluted EPS
 

($0.32
)
 

($0.16
)
 
Adjustments:
 

 

 
Capitalized internal software costs
 
(0.02
)
 
(0.07
)
 
Stock compensation expense
 
0.06

 
0.02

 
Amortization of capitalized software and other intangibles
 
0.05

 
0.06

 
Diluted EPS, non-GAAP
 

($0.23
)
 

($0.15
)
 






COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
 
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In Thousands)
 
(Unaudited)
 
 
THREE MONTHS ENDED
JUNE 30,
 
 
2014
 
2013
 
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 
 
 
 
Net loss

($12,116
)
 

($4,670
)
 
Adjustments to reconcile net loss to cash provided by (used in) operations:
 
 
 
 
Depreciation and amortization
2,343

 
2,092

 
Deferred income taxes
(53
)
 
4

 
Stock award compensation
2,619

 
486

 
Net change in assets and liabilities, net of effects from currency fluctuations:
 
 
 
 
Accounts receivable
3,108

 
2,538

 
Other assets
458

 
618

 
Accounts payable and accrued expenses
(438
)
 
(1,078
)
 
Deferred revenue
(3,898
)
 
(275
)
 
Net cash provided by (used in) operating activities

($7,977
)
 

($285
)
 
CASH FLOWS USED IN INVESTING ACTIVITIES:
 
 
 
 
Purchase of:
 
 
 
 
Property and equipment
(820
)
 
(171
)
 
Capitalized software
(790
)
 
(1,952
)
 
Net cash used in investing activities

($1,610
)
 

($2,123
)
 
CASH FLOWS PROVIDED BY FINANCING ACTIVITES:
 
 
 
 
Cash payments from parent company
8,775

 
26,224

 
Cash payments to parent company
(5,787
)
 
(23,103
)
 
Initial public offering costs
—

 
(299
)
 
Net proceeds from exercise of stock awards
196

 
—

 
Net cash provided by financing activities

$3,184

 

$2,822

 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(4
)
 
8

 
NET CHANGE IN CASH
(6,407
)
 
422

 
CASH AT BEGINNING OF PERIOD
49,536

 
966

 
CASH AT END OF PERIOD

$43,129

 

$1,388

 

Covisint Corp Reports