Covisint Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 9, 2017

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NEWS RELEASE
26533 Evergreen Rd., Suite 500 • Southfield, Michigan 48076
(800) 229-4125

For Immediate Release     
February 9, 2017


Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results


DETROIT - February 9, 2017 -- Covisint Corporation (Nasdaq: COVS), the leading Cloud Platform for building Identity and Internet of Things (IoT) applications, today announced financial results for the third quarter of fiscal 2017, which ended December 31, 2016.

"During the third quarter, we achieved total revenue of $16.6 million, which included $14.7 million in subscription revenue. We finished the quarter with over $30 million in cash, which was in-line with our expectations. Earlier, we announced our shift in focus towards our core heritage, the automotive vertical. I have been pleased with the progress we have made and the make-up of our new team. The quality of our pipeline is improving, and we are seeing new account opportunities, not only in Cloud Identity, but also in Connected Car,” said Covisint CEO, Sam Inman.

Third Quarter Fiscal 2017 Financial Highlights

Revenue
•
Total revenue was $16.6 million, a decrease of 13% compared to $19.2 million in the same period last year.
•
Subscription revenue was $14.7 million, a decrease of 3% compared to $15.3 million in the same period last year.
•
Services revenue was $1.9 million, a decrease of 51% compared to the same period last year.
 
Profitability
•
GAAP gross margin was 49%, compared to 48% in the prior fiscal quarter and 54% in the same period last year.
•
Non-GAAP gross margin was 56%, compared to 55% in the prior fiscal quarter and 58% in the same period last year.
•
GAAP net loss was $4.4 million or ($0.11) per diluted share, compared to net loss of $4.1 million or ($0.10) per diluted share in the same period last year.
•
Non-GAAP net loss was $3.5 million or ($0.09) per diluted share, compared to net loss of $3.8 million or ($0.09) per diluted share in the same period last year.





Page 2
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

Balance Sheet
•
The Company had $30.4 million in cash and cash equivalents at December 31, 2016, compared with $34.8 million at September 30, 2016.

Third Quarter Fiscal 2017 Business Highlights
•
Featured in Forrester report, The Future of Identity And Access Management, October, 2016.
•
Showcased the Covisint IoT Platform at the Gartner Symposium / ITxpo in Orlando, in October, 2016.
•
Recognized as a winner at the 2016 Sogeti IoT Hackathon in November, 2016, finishing second for our Connected Baggage Tracking solution built for the world's largest airline.
•
Highlighted by Gartner analyst Earl Perkins for our Identity for IoT capabilities at Gartner Identity and Access Management Summit in Las Vegas, November, 2016.
•
Closed agreements with Chinese automotive OEMs, SAIC General Motors (SGM) and NextEV to launch their supplier engagement platforms in December, 2016.

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.

Page 3
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

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 9, 2017, through February 16, 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 13653476.

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.

•
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 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.

Page 4
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

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


Page 5
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

COVISINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 
December 31, 2016
 
March 31, 2016
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents

$30,438

 

$39,681

Accounts receivable, net of allowance for doubtful accounts of $93 and $39 as of December 31, 2016 and March 31, 2016, respectively
8,266

 
12,836

Prepaid expenses
2,281

 
2,167

Other current assets
629

 
1,603

Total current assets
41,614

 
56,287

PROPERTY AND EQUIPMENT, NET
5,731

 
7,847

CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET
10,514

 
11,486

OTHER:
 
 
 
Goodwill
25,385

 
25,385

Deferred costs
291

 
580

Deferred tax asset, net
170

 
171

Other assets
173

 
289

Total other assets
26,019

 
26,425

TOTAL ASSETS

$83,878

 

$102,045

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable

$6,267

 

$5,061

Accrued commissions
1,993

 
1,071

Deferred revenue
12,589

 
15,952

Accrued expenses
1,525

 
2,377

Total current liabilities
22,374

 
24,461

DEFERRED REVENUE
423

 
3,595

ACCRUED LIABILITIES
2,310

 
2,327

DEFERRED TAX LIABILITY, NET
382

 
353

Total liabilities
25,489

 
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 (40,490,928 issued and outstanding as of March 31, 2016)
—

 
—

Additional paid-in capital
163,644

 
161,997

Accumulated deficit
(104,842
)
 
(90,527
)
Accumulated other comprehensive loss
(413
)
 
(161
)
Total shareholders' equity
58,389

 
71,309

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$83,878

 

$102,045


See notes to consolidated financial statements.


Page 6
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In Thousands, Except Per Share Data)
(Unaudited)
 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
2016
 
2015
 
2016
 
2015
REVENUE

$16,646

 

$19,162

 

$51,261

 

$56,037

COST OF REVENUE
8,500

 
8,822

 
25,594

 
27,068

GROSS PROFIT
8,146

 
10,340

 
25,667

 
28,969

OPERATING EXPENSES:
 
 
 
 
 
 
 
Research and development
2,578

 
3,100

 
9,315

 
9,890

Sales and marketing
7,128

 
8,564

 
21,392

 
23,223

General and administrative
2,813

 
2,699

 
9,207

 
10,516

Total operating expenses
12,519

 
14,363

 
39,914

 
43,629

OPERATING LOSS
(4,373
)
 
(4,023
)
 
(14,247
)
 
(14,660
)
Other income (expense)
13

 
3

 
46

 
(28
)
LOSS BEFORE INCOME TAX PROVISION
(4,360
)
 
(4,020
)
 
(14,201
)
 
(14,688
)
INCOME TAX PROVISION
40

 
52

 
114

 
96

NET LOSS

($4,400
)
 

($4,072
)
 

($14,315
)
 

($14,784
)
Basic and diluted loss per share

($0.11
)
 

($0.10
)
 

($0.35
)
 

($0.38
)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
 
 
 
 
 
 
 
Foreign currency translation adjustments
(144
)
 
(72
)
 
(252
)
 
(154
)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
(144
)
 
(72
)
 
(252
)
 
(154
)
COMPREHENSIVE LOSS

($4,544
)
 

($4,144
)
 

($14,567
)
 

($14,938
)

See notes to consolidated financial statements.


Page 7
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017


COVISINT CORPORATION
RECONCILIATION OF U.S. GAAP TO NON-U.S. GAAP
(In Thousands, Except Per Share Data)
(Unaudited)



 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Gross profit
 

$8,146

 

$10,340

 

$25,667

 

$28,969

Gross margin
 
49
%
 
54
%
 
50
%
 
52
%
Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
16

 
15

 
38

 
68

Amortization of capitalized software
 
1,152

 
802

 
3,147

 
2,611

Non-U.S. GAAP gross profit
 

$9,314

 

$11,157

 

$28,852

 

$31,648

Non-U.S. GAAP gross margin
 
56
%
 
58
%
 
56
%
 
56
%





 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 

$8,500

 

$8,822

 

$25,594

 

$27,068

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
16

 
15

 
38

 
68

Amortization of capitalized software
 
1,152

 
802

 
3,147

 
2,611

Non-U.S. GAAP cost of revenue
 

$7,332

 

$8,005

 

$22,409

 

$24,389






 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Research and development
 

$2,578

 

$3,100

 

$9,315

 

$9,890

Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(746
)
 
(1,039
)
 
(2,175
)
 
(2,565
)
Stock compensation expense
 
11

 
23

 
26

 
76

Non-U.S. GAAP research and development
 

$3,313

 

$4,116

 

$11,464

 

$12,379


Page 8
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017



 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Sales and marketing
 

$7,128

 

$8,564

 

$21,392

 

$23,223

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
93

 
69

 
211

 
410

Non-U.S. GAAP sales and marketing
 

$7,035

 

$8,495

 

$21,181

 

$22,813




 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
General and administrative
 

$2,813

 

$2,699

 

$9,207

 

$10,516

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
371

 
410

 
1,144

 
1,785

Non-U.S. GAAP general and administrative
 

$2,442

 

$2,289

 

$8,063

 

$8,731




 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Net loss
 

($4,400
)
 

($4,072
)
 

($14,315
)
 

($14,784
)
Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(746
)
 
(1,039
)
 
(2,175
)
 
(2,565
)
Stock compensation expense
 
491

 
517

 
1,419

 
2,339

Amortization of capitalized software and other intangibles
 
1,152

 
802

 
3,147

 
2,611

Non-U.S. GAAP net loss
 

($3,503
)
 

($3,792
)
 

($11,924
)
 

($12,399
)



 
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
 
2016
 
2015
 
2016
 
2015
Diluted EPS
 
($0.11)
 
($0.10)
 
($0.35)
 
($0.38)
Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(0.02
)
 
(0.02
)
 
(0.05
)
 
(0.07
)
Stock compensation expense
 
0.01

 
0.01

 
0.03

 
0.06

Amortization of capitalized software and other intangibles
 
0.03

 
0.02

 
0.08

 
0.07

Non-U.S. GAAP Diluted EPS
 

($0.09
)
 

($0.09
)
 

($0.29
)
 

($0.32
)


Page 9
Covisint Corporation Announces Third Quarter Fiscal 2017 Financial Results
February 9, 2017

COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
 
Nine Months Ended 
 December 31,
 
2016
 
2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 
 
 
Net loss

($14,315
)
 

($14,784
)
Adjustments to reconcile net loss to cash provided by (used in) operations:
 
 
 
Depreciation and amortization
5,410

 
5,144

Deferred income taxes
50

 
64

Stock award compensation
1,419

 
2,339

Other
3

 
—

Net change in assets and liabilities:
 
 
 
Accounts receivable
4,497

 
5,684

Other assets
1,236

 
4,611

Accounts payable and accrued expenses
1,809

 
(2,600
)
Deferred revenue
(6,475
)
 
(8,101
)
Net cash used in operating activities
(6,366
)
 
(7,643
)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 
 
 
Purchase of:
 
 
 
Property and equipment
(189
)
 
(3,772
)
Capitalized software
(2,175
)
 
(2,565
)
Proceeds from asset disposals
—

 
33

Net cash used in investing activities
(2,364
)
 
(6,304
)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 
 
 
Vendor financing payments
(614
)
 
(548
)
Net proceeds from exercise of stock awards
239

 
2,074

Net cash provided by (used in) financing activities
(375
)
 
1,526

EFFECT OF EXCHANGE RATE CHANGES ON CASH
(138
)
 
(41
)
NET CHANGE IN CASH
(9,243
)
 
(12,462
)
CASH AT BEGINNING OF PERIOD
39,681

 
50,077

CASH AT END OF PERIOD

$30,438

 

$37,615



See notes to consolidated financial statements.


Covisint Corp Reports