Covisint Corporation
Covisint Corp (Form: 8-K, Received: 11/03/2016 16:11:51)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): November 3, 2016


Covisint Corporation
(Exact Name of Registrant as Specified in its Charter)


Commission File Number: 001-36088

Michigan
(State or other jurisdiction of incorporation or organization)
26-2318591
(I.R.S. Employer Identification No.)

26533 Evergreen Road, Suite 500, Southfield, Michigan

(Address of Principal Executive Offices)

48076
(Zip Code)


(Registrant’s telephone number, including area code): (248) 483-2000



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 2.02. Results of Operations and Financial Condition.

On November 3, 2016, Covisint Corporation (“Covisint”) issued a press release announcing financial results for its second quarter of the fiscal year ended March 31, 2017 and certain other information.  A copy of the press release is furnished with the Report as Exhibit 99.1. The Registrant intends to hold an investor call and webcast to discuss these results on November 3, 2016, at 5:00 p.m. Eastern Time. Additional presentation materials relating to such call are furnished hereto as Exhibit 99.2 and are incorporated herein by reference.

Forward-Looking Statements

Certain statements in this Current Report on Form 8-K, including but not limited to statements set forth in the attached press release and additional presentation materials, may constitute forward-looking statements. These forward looking statements involve a number of known and unknown risks, uncertainties and other factors that may cause such forward-looking statements not to be realized and that could cause actual results to differ materially from Covisint’s expectations in these statements. For more information about other risks that could affect the forward-looking statements herein, please see Covisint’s most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other filings made with the Securities and Exchange Commission. Covisint expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations, or any change in events or circumstances on which those statements are based, unless otherwise required by law.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1
Press Release, dated November 3, 2016.
99.2
Presentation materials dated November 3, 2016.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

COVISINT CORPORATION


Date: November 3, 2016                        By:     /s/ Enrico Digirolamo    
Enrico Digirolamo
Chief Financial Officer









INDEX OF EXHIBITS


Exhibit No.
Description
99.1
Press Release, dated November 3, 2016
 
99.2
Presentation materials dated November 3, 2016
 




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

For Immediate Release     
November 3, 2016     


Covisint Corporation Announces Second Quarter Fiscal 2017 Financial Results

DETROIT - November 3, 2016 -- Covisint Corporation (Nasdaq: COVS), the leading Cloud Platform for building Identity and Internet of Things (IoT) applications, today announced financial results for the second quarter of fiscal 2017, which ended September 3 0 , 2016.

"During the second quarter, we delivered total revenue of $17.2 million, which included $14.6 million in subscription revenue. Our margins remain strong and we finished the quarter with nearly $35 million in cash, which was ahead of our expectations. We remain focused on driving subscription revenue sales growth, particularly within our core automotive vertical, while aggressively managing our cash position through strong expense management. We are raising our Fiscal Year End 2017 cash guidance to $33 million and expect to be cash flow break-even for Fiscal Year 2018,” said Covisint CEO, Sam Inman.

Second Quarter Fiscal 2017 Financial Highlights

Revenue
Total revenue was $17.2 million, a decrease of 7% compared to $18 . 4 million in the prior year period.
Subscription revenue was $14 . 6 million, a decrease of 4% compared to $15 . 3 million in the prior year period.
Services revenue was $2.6 million, a decrease of 18% compared to the prior year period.
 
Profitability
GAAP gross margin was 48%, compared to 53% in the prior fiscal quarter and 54% in the prior year period.
Non-GAAP gross margin was 55%, compared to 58% in the prior fiscal quarter and 59% in the prior year period.
GAAP net loss was $4.9 million or ($0.12) per diluted share, compared to net loss of $4.1 million or ($0.10) per diluted share in the prior year.
Non-GAAP net loss was $4.1 million or ($0.10) per diluted share, compared to net loss of $3.7 million or ($0.09) per diluted share in the prior year.





Balance Sheet
The Company had $34.8 million in cash and cash equivalents at September 30, 2016, compared with $41.8 million at June 30, 2016 .

Second Quarter Fiscal 2017 Business Highlights
Enhanced relationships by renewing contracts with two global automotive OEMs to deliver their Supplier Portal, with new 5-year and 3-year agreements. We also renewed contracts with several Tier I automotive suppliers.
Showcased the Covisint Platform at the 2016 Cisco Live! Conference in Las Vegas, July 2016.
Featured in 451 Research, The Internet of Things Market Map 2016 , published August 2016.
Exhibited and presented at the 2016 Gartner Catalyst Conference in San Diego, August 2016, where Covisint Chief Security Officer, David Miller presented on “Orchestrating Identities Across People, Systems and Things.”
Featured in Gartner Research, Critical Capabilities for Identity and Access Management as a Service, Worldwide , published September 2016.
Showcased the Covisint Platform at the 2016 World Mobility Leadership Forum in Detroit, September 2016.
Featured in ABI Research, Vehicle Prognostics Pave the Way for Advanced Driver Assistance Systems Progression , published September 2016.

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 November 3, 2016, through November 10, 2016. 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 13647593 .

About Covisint Corporation

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

The Covisint Cloud Platform supports customers in their endeavors to securely identify, authenticate and connect users, devices, applications and information. It supports 2,000 organizations who connect more than 212,000 business partners and customers that support $4 billion in ecommerce transactions annually. Learn more at http://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 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, 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





COVISINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 
September 30, 2016
 
March 31, 2016
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents

$34,814

 

$39,681

Accounts receivable, net of allowance for doubtful accounts of $72 and $39 as of September 30, 2016 and March 31, 2016, respectively
9,243

 
12,836

Prepaid expenses
2,069

 
2,167

Other current assets
689

 
1,603

Total current assets
46,815

 
56,287

PROPERTY AND EQUIPMENT, NET
6,460

 
7,847

CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET
10,920

 
11,486

OTHER:
 
 
 
Goodwill
25,385

 
25,385

Deferred costs
381

 
580

Deferred tax asset, net
169

 
171

Other assets
205

 
289

Total other assets
26,140

 
26,425

TOTAL ASSETS

$90,335

 

$102,045

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable

$4,654

 

$5,061

Accrued commissions
1,911

 
1,071

Deferred revenue
16,504

 
15,952

Accrued expenses
1,565

 
2,377

Total current liabilities
24,634

 
24,461

DEFERRED REVENUE
655

 
3,595

ACCRUED LIABILITIES
2,355

 
2,327

DEFERRED TAX LIABILITY, NET
364

 
353

Total liabilities
28,008

 
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 40,797,757 (40,490,928 issued and outstanding as of March 31, 2016)

 

Additional paid-in capital
163,038

 
161,997

Retained deficit
(100,442
)
 
(90,527
)
Accumulated other comprehensive loss
(269
)
 
(161
)
Total shareholders' equity
62,327

 
71,309

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$90,335

 

$102,045


See notes to consolidated financial statements.





COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In Thousands, Except Per Share Data)
(Unaudited)
 
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
REVENUE

$17,170

 

$18,393

 

$34,616

 

$36,875

COST OF REVENUE
8,873

 
8,469

 
17,094

 
18,246

GROSS PROFIT
8,297

 
9,924

 
17,522

 
18,629

OPERATING EXPENSES:
 
 
 
 
 
 
 
Research and development
2,962

 
3,127

 
6,738

 
6,790

Sales and marketing
7,053

 
7,183

 
14,264

 
14,659

General and administrative
3,187

 
3,730

 
6,395

 
7,817

Total operating expenses
13,202

 
14,040

 
27,397

 
29,266

OPERATING LOSS
(4,905
)
 
(4,116
)
 
(9,875
)
 
(10,637
)
Other income (expense)
17

 
(33
)
 
33

 
(31
)
LOSS BEFORE INCOME TAX PROVISION
(4,888
)
 
(4,149
)
 
(9,842
)
 
(10,668
)
INCOME TAX PROVISION (BENEFIT)
24

 
(23
)
 
73

 
44

NET LOSS

($4,912
)
 

($4,126
)
 

($9,915
)
 

($10,712
)
Basic and diluted loss per share

($0.12
)
 

($0.10
)
 

($0.24
)
 

($0.27
)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
 
 
 
 
 
 
 
Foreign currency translation adjustments
(13
)
 
(85
)
 
(108
)
 
(82
)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
(13
)
 
(85
)
 
(108
)
 
(82
)
COMPREHENSIVE LOSS

($4,925
)
 

($4,211
)
 

($10,023
)
 

($10,794
)

See notes to consolidated financial statements.








COVISINT CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(In Thousands, Except Per Share Data)
(Unaudited)
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Gross profit
 

$8,297

 

$9,924

 

$17,522

 

$18,629

Gross margin
 
48
%
 
54
%
 
51
%
 
51
%
Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
16

 
22

 
21

 
52

% of total revenue
 
%
 
%
 
%
 
%
Amortization of capitalized software
 
1,150

 
905

 
1,995

 
1,809

% of total revenue
 
7
%
 
5
%
 
5
%
 
5
%
Non-GAAP gross profit
 

$9,463

 

$10,851

 

$19,538

 

$20,490

Non-GAAP gross margin
 
55
%
 
59
%
 
56
%
 
56
%
 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 

$8,873

 

$8,469

 

$17,094

 

$18,246

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
16

 
22

 
21

 
52

Amortization of capitalized software
 
1,150

 
905

 
1,995

 
1,809

 
 
 
 
 
 
 
 
 
Non-GAAP cost of revenue
 

$7,707

 

$7,542

 

$15,078

 

$16,385

 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Research and development
 

$2,962

 

$3,127

 

$6,738

 

$6,790

Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(740
)
 
(1,126
)
 
(1,428
)
 
(1,526
)
Stock compensation expense
 
11

 
28

 
15

 
54

 
 
 
 
 
 
 
 
 
Non-GAAP research and development
 

$3,691

 

$4,225

 

$8,151

 

$8,262

 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Sales and marketing
 

$7,053

 

$7,183

 

$14,264

 

$14,659

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
69

 
232

 
118

 
341

Amortization of customer relationship agreements
 

 

 

 

 
 
 
 
 
 
 
 
 
Non-GAAP sales and marketing
 

$6,984

 

$6,951

 

$14,146

 

$14,318

 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
General and administrative
 

$3,187

 

$3,730

 

$6,395

 

$7,817

Adjustments:
 
 
 
 
 
 
 
 
Stock compensation expense
 
340

 
391

 
773

 
1,375

Amortization of trademarks
 

 

 

 

 
 
 
 
 
 
 
 
 
Non-GAAP general and administrative
 

$2,847

 

$3,339

 

$5,622

 

$6,442

 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Net loss
 

($4,912
)
 

($4,126
)
 

($9,915
)
 

($10,712
)
Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(740
)
 
(1,126
)
 
(1,428
)
 
(1,526
)
Stock compensation expense
 
436

 
673

 
927

 
1,822

Amortization of capitalized software and other intangibles
 
1,150

 
905

 
1,995

 
1,809

Non-GAAP net loss
 

($4,066
)
 

($3,674
)
 

($8,421
)
 

($8,607
)
 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THREE MONTHS ENDED
SEPTEMBER 30,
 
SIX MONTHS ENDED
SEPTEMBER 30,
 
 
2016
 
2015
 
2016
 
2015
Diluted EPS
 

($0.12
)
 

($0.10
)
 

($0.24
)
 

($0.27
)
Adjustments:
 
 
 
 
 
 
 
 
Capitalized internal software costs
 
(0.02
)
 
(0.03
)
 
(0.04
)
 
(0.04
)
Stock compensation expense
 
0.01

 
0.02

 
0.02

 
0.05

Amortization of capitalized software and other intangibles
 
0.03

 
0.02

 
0.05

 
0.04

Non-GAAP diluted EPS
 

($0.10
)
 

($0.09
)
 

($0.21
)
 

($0.22
)






COVISINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
 
Six Months Ended 
 September 30,
 
2016
 
2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 
 
 
Net loss

($9,915
)
 

($10,712
)
Adjustments to reconcile net loss to cash provided by (used in) operations:
 
 
 
Depreciation and amortization
3,587

 
3,497

Deferred income taxes
23

 
48

Stock award compensation
927

 
1,822

Other

 
5

Net change in assets and liabilities:
 
 
 
Accounts receivable
3,565

 
2,723

Other assets
1,285

 
3,658

Accounts payable and accrued expenses
(72
)
 
(1,625
)
Deferred revenue
(2,360
)
 
(2,986
)
Net cash used in operating activities
(2,960
)
 
(3,570
)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 
 
 
Purchase of:
 
 
 
Property and equipment
(188
)
 
(3,451
)
Capitalized software
(1,428
)
 
(1,526
)
Proceeds from asset disposals

 
29

Net cash used in investing activities
(1,616
)
 
(4,948
)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 
 
 
Vendor financing payments
(369
)
 
(369
)
Net proceeds from exercise of stock awards
121

 
486

Net cash provided by (used in) financing activities
(248
)
 
117

EFFECT OF EXCHANGE RATE CHANGES ON CASH
(43
)
 
19

NET CHANGE IN CASH
(4,867
)
 
(8,382
)
CASH AT BEGINNING OF PERIOD
39,681

 
50,077

CASH AT END OF PERIOD

$34,814

 

$41,695



See notes to consolidated financial statements.

11/3/2016 1 Covisint Corporation Second Quarter Fiscal 2017 Results November 3, 2016


 
This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any projections of financial information; any statements about historical results that may suggest trends for our business and results of operations; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief regarding future events, potential markets or market size, technology developments, or enforceability of our intellectual property rights; and any statements of assumptions underlying any of the foregoing. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. Actual results could differ materially from our current expectations as a result of many factors, including but 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; and failure to protect our intellectual property. These and other risks and uncertainties associated with our business are described in Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the period ended September 30, 2016. We assume no obligation and do not intend to update these forward-looking statements. In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These historical and forward-looking non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP measures is included in the appendix to this presentation. Covisint is a registered trademark of Covisint Corporation. This presentation also contains additional trademarks and service marks of ours and of other companies. We do not intend our use or display of other companies’ trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Forward Looking Statements 2


 
FY17 Priorities 3 • Re-Focus our Sales Resources and Expenses • Will keep tight focus on Auto Customers and Auto Vertical • Strategic Partnership Strategy remains a core focus • Moved out of the General Territory Sale Model • Targeted Investments in Marketing to Drive Awareness and Enablement • Further develop standing and recognition with leading industry analysts in auto and technology • Establish strong thought leadership cadence and awareness in areas of focus, including Connected Transportation, Internet of Things, and Identity and Access Management • Manage Cash Position Through Strong Expense Management • Increased Fiscal 2017 year end cash guidance • Expect cash flow break-even for Fiscal 2018


 
4 Q2 FY17: Financial Overview Key Metrics ($ in thousands) Guidance Summary * Excludes the impact of stock compensation and the expensing of certain R&D costs (rather than capitalizing such costs), refer to the reconciliation of Q1 results on slide 6 and the reconciliation of guidance on slide 7. ** Y/Y growth FY17 Q3FY17 Subscription Revenue** (3) - (5)% (5)% About 15% of About 15% of Total Revenue Total Revenue Non-GAAP Net Loss* $(11) – (12) mil $(3) – (4) mil Cash on Hand (EOP) $33 mil $30 mil Total Shares Outstanding 41.0 mil 41.0 mil Services Revenue Q2 FY 17 Y/Y Q/Q Subscription Revenue $ 14,608 (4%) 0% Services Revenue $ 2,562 (18%) (10%) Total Revenue $ 17,170 (7%) (2%) Q2 FY 17 Y/Y Q/Q Gross Profit $ 8,297 (16%) (10%) Gross Margin 48% Stock Compensation Expense $ 16 Amortization of Capitalized Software $ 1,150 Non-GAAP Gross Profit* $ 9,463 (13%) (6%) Non-GAAP Gross Margin 55% Net Loss $ (4,912) Stock Compensation Expense $ 436 Capitalized internal software costs $ (740) Amortization of Capitalized Software $ 1,150 Non-GAAP Net Loss* $ (4,066) Net Change in Cash $ (6,945) Net proceeds from exercise of stock awards $ (76) Vendor Financing Payment $ 242 Effect of Exchange Rate Changes on Cash $ - Free Cash Flow $ (6,779) Highlights • Cash at $35 million • Non-GAAP Gross Margin at plan levels • Cash Flow better than plan • Fiscal 2018 Cash Flow break-even


 
Appendix


 
6 Q2 FY17: Non-GAAP Reconciliation ($ in thousands, except per share) Q2'FY17 Cost of revenue 8,873 Adjustments: Stock compensation expense 16 Cost of revenue - amortization of capitalized software 1,150 Cost of revenue, non-GAAP 7,707 Q2'FY17 Research and development 2,962 Adjustments: Capitalized internal software costs (740) Stock compensation expense 11 Research and development, non-GAAP 3,691 Q2'FY17 Sales and marketing 7,053 Adjustments: Stock compensation expense 69 Sales and marketing, non-GAAP 6,984 Q2'FY17 General and administrative 3,187 Adjustments: Stock compensation expense 340 General and administrative, non-GAAP 2,847 Q2'FY17 Net loss (4,912) Adjustments: Capitalized internal software costs (740) Stock compensation expense 436 Am rtizatio of capitalized software and other intangibles 1,150 Net loss, non-GAAP (4,066) Q2'FY17 Diluted EPS (0.12) Adjustments: Capitalized internal software costs (0.02) Stock compensation expense 0.01 Amortization of capitalized software and other intangibles 0.03 Diluted EPS, non-GAAP (0.10) Net Change in Cash $ (6,945) Net proceeds from exercise of stock awards $ (76) Vendor Financing Payment $ 242 Effect of Exchange Rate Changes on Cash $ - Free Cash Flow $ (6,779)


 
7 Non-GAAP Forecast Reconciliation ($ in millions) Forecast Net Loss (12.3) - (16.3) (2.8) - (5.2) Capitalized internal software costs (4.5) - (2.5) (1.5) - (0.5) Stock compensation expense 1.8 - 2.3 0.4 - 0.6 Amortization of capitalized software 4.0 - 4.5 0.9 - 1.1 Forecast Non-GAAP Net Loss (11.0) - (12.0) (3.0) - (4.0) Forec st Net Change in Cash (6.0) - (8.0) (4.0) - (6.0) Net proceeds from exercise of stock awards - - (0.3) - - (0.3) Vendor Financing Payment 0.3 - - - - - Effect of exchange rate changes on cash - - - - - - Forecast Free Cash Flow (5.7) - (8.3) (4.0) - (6.3) FY 17 Q3 FY17