Cover-All Technologies Inc. (NYSE MKT: COVR) today announced financial results for the quarter ended March 31, 2014.
“We are pleased to report solid financial results driven by growth in services revenue and improvements in gross margins for support and services revenue,” said Manish Shah, CEO and President of Cover-All. “We are focusing on executing services backlogs, further improving gross margins and extending our sales and marketing efforts to boost organic growth while we look for accretive and strategic acquisition targets.”
Mr. Shah continued: “Historically, license revenues vary quarter-to-quarter and, as a result, we do not use it as a measure for growth by comparing it against previous quarters. Our services and support revenue grew 83% and 5%, respectively, this quarter compared to the same period in 2013.
“The cost saving initiatives implemented in 2013 resulted in improved margins, operating profitability and free cash flow. Gross margins for services and support revenue were 36% this quarter compared to 3% for the same period in 2013.
“We are extending our sales and marketing reach to grow organically and continue to see demand for our core systems and data analytics in the US P/C insurance industry. To support our organic growth strategies, we believe there are opportunities for accretive acquisitions. We are seeking acquisitions that create enterprise-wide solutions, develop cloud, mobile, and analytic products, and complement our business processing services.”
FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2014
Revenue
- Total revenues for the three months ended March 31, 2014 were $5.2 million compared to $6.9 million for the same period in 2013.
- License revenue for the three months ended March 31, 2014 was $808,000 compared to $3.6 million for the same period in 2013.
- Support Services revenue (which represents contracted continuing revenue) was $2.1 million for the three months ended March 31, 2014 compared to $2.0 million in the same period in 2013.
- Professional Services revenue for the three months ended March 31, 2014 was $2.3 million compared to $1.2 million for the same period in 2013.
Profitability
- Operating income for the three months ended March 31, 2014 was $531,000 compared to $803,000 in the comparable period in 2013.
- Net income for the three months ended March 31, 2014 was $434,000, or $0.02 per basic and diluted share, compared to $705,000, or $0.03 per basic and diluted share, in the same period of 2013.
Non-GAAP* Profitability
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP metric, for the three months ended March 31, 2014 was $1.0 million, or $0.04 per basic and diluted share, compared to $2.0 million, or $0.08 per basic and diluted share, in the same period of 2013.
Balance Sheet
- As of March 31, 2014, the Company had $2.2 million in cash and cash equivalents and $1.8 million in accounts receivable. Stockholders’ equity was $11.4 million as of March 31, 2014 compared to $10.9 million as of December 31, 2013.
WEBCAST AND CONFERENCE CALL INFORMATION
Management will conduct a live teleconference to discuss its 2014 first quarter financial results at 4:30 p.m. EDT on Thursday, May 15, 2014. Anyone interested in participating should call 1-877-941-2069 if calling from the United States, or 1-480-629-9713 if dialing internationally. A replay will be available until May 29, 2014, which can be accessed by dialing 1-877-870-5176 within the United States and 1-858-384-5517 if dialing internationally. Please use passcode 4682684 to access the replay.
In addition, the call will be webcast and will be available on the Company’s website at www.cover-all.com or by visiting http://public.viavid.com/index.php?id=109172.
FORWARD-LOOKING STATEMENTS
Statements in this press release, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks which may cause the Company’s actual results in future periods to differ materially from expected results. Those risks include, among others, risks associated with increased competition, customer decisions, the successful completion of continuing development of new products, the successful negotiations, execution and implementation of anticipated new software contracts, the successful implementation of our acquisition strategies and our ability to complete or integrate acquisitions, the successful addition of personnel in the marketing and technical areas, our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits and other business factors beyond the Company’s control. Those and other risks are described in the Company’s filings with the Securities and Exchange Commission (“SEC”) over the last 12 months, including but not limited to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 28, 2014, copies of which are available from the SEC or may be obtained upon request from the Company.
*ABOUT NON-GAAP FINANCIAL MEASURES
In evaluating its business, Cover-All considers and uses EBITDA as a supplemental measure of its operating performance. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The Company presents EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.
The term EBITDA is not defined under U.S. generally accepted accounting principles (“U.S. GAAP”) and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. EBITDA has limitations as an analytical tool, and when assessing the Company’s operating performance, investors should not consider EBITDA in isolation or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, EBITDA does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than Cover-All, limiting their usefulness as comparative tools. Cover-All compensates for these limitations by relying on its U.S. GAAP results and using EBITDA only supplementally.
ABOUT COVER-ALL TECHNOLOGIES INC.
Cover-All provides property and casualty insurance professionals a robust state-of-the-art, browser-based family of Policy, Business Intelligence, and Claims solutions designed to deliver products to market faster, enhance quality, ensure compliance, and reduce costs. With offices in Morristown, NJ and Honolulu, HI, Cover-All continues its tradition of developing technology solutions designed to revolutionize the way property and casualty insurance business is conducted. Additional information is available online at www.cover-all.com.
Cover-All®, My Insurance Center™ (MIC) NexGen, Insurance Policy Database™ (IPD) and PipelineClaims™ are trademarks or registered trademarks of Cover-All Technologies Inc. All other company and product names mentioned are trademarks or registered trademarks of their respective holders.
Cover-All Technologies Inc. and Subsidiaries | |||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||
(UNAUDITED) | |||||||
Three months ended March 31, | |||||||
2014 | 2013 | ||||||
Revenues: | |||||||
Licenses | $ | 807,599 | $ | 3,623,249 | |||
Support Services | 2,129,663 | 2,022,963 | |||||
Professional Services | 2,270,288 | 1,239,621 | |||||
Total Revenues | 5,207,550 | 6,885,833 | |||||
Cost of Revenues: | |||||||
Licenses | — | 360,000 | |||||
Support Services | 1,685,454 | 2,677,850 | |||||
Professional Services | 1,110,657 | 677,281 | |||||
Total Cost of Revenues | 2,796,111 | 3,715,131 | |||||
Direct Margin | 2,411,439 | 3,170,702 | |||||
Operating Expenses: | |||||||
Sales and Marketing | 478,358 | 648,053 | |||||
General and Administrative | 733,797 | 577,029 | |||||
Amortization of Capitalized Software | 372,638 | 1,092,107 | |||||
Research and Development | 295,437 | 51,010 | |||||
Total Operating Expenses | 1,880,230 | 2,368,199 | |||||
Operating Income | 531,209 | 802,503 | |||||
Other (Income) Expense: | |||||||
Interest Expense | 93,672 | 92,511 | |||||
Interest Income | — | — | |||||
Other Income | — | — | |||||
Total Other (Income) Expense | 93,672 | 92,511 | |||||
Income Before Income Taxes | 437,537 | 709,992 | |||||
Income Taxes Expense | 3,688 | 4,666 | |||||
Net Income | $ | 433,849 | $ | 705,326 | |||
Basic Earnings Per Common Share | $ | 0.02 | $ | 0.03 | |||
Diluted Earnings Per Common Share | $ | 0.02 | $ | 0.03 | |||
Weighted Average Number of Common Shares | |||||||
Outstanding for Basic Earnings | |||||||
Per Common Share | 26,543,000 | 26,029,000 | |||||
Weighted Average Number of Common Shares | |||||||
Outstanding for Diluted Earnings | |||||||
Per Common Share | 26,555,000 | 26,201,000 |
Cover-All Technologies Inc. and Subsidiaries | |||||||||
CONSOLIDATED BALANCE SHEET | |||||||||
(UNAUDITED) | |||||||||
March 31, 2014 | December 31, 2013 | ||||||||
(unaudited) | |||||||||
Assets: | |||||||||
Current Assets: | |||||||||
Cash and Cash Equivalents | $ | 2,171,355 | $ | 1,848,571 | |||||
Accounts Receivable (Less Allowance for Doubtful Accounts of $25,000) | 1,838,322 | 2,604,489 | |||||||
Prepaid Expenses | 623,453 | 491,905 | |||||||
Deferred Tax Asset | 850,500 | 850,500 | |||||||
Total Current Assets | 5,483,630 | 5,795,465 | |||||||
Property and Equipment – Net | 634,656 | 708,590 | |||||||
Goodwill | 1,039,114 | 1,039,114 | |||||||
Capitalized Software (Less Accumulated Amortization of $22,677,829 and $22,305,191 in 2014 and 2013, respectively) | 7,591,945 | 7,964,583 | |||||||
Customer Lists/Relationships (Less Accumulated Amortization of $356,500 and $341,333 in 2014 and 2013, respectively) | 45,500 | 60,667 | |||||||
Deferred Tax Asset | 2,674,928 | 2,674,928 | |||||||
Deferred Financing Costs (Net Amortization of $43,667 and $36,082 in 2014 and 2013, respectively) | 48,616 | 56,201 | |||||||
Other Assets | 328,000 | 424,522 | |||||||
Total Assets | $ | 17,846,389 | $ | 18,724,070 | |||||
Liabilities and Stockholders’ Equity: | |||||||||
Current Liabilities: | |||||||||
Accounts Payable | $ | 953,612 | $ | 1,059,238 | |||||
Accrued Expenses | 631,221 | 1,412,400 | |||||||
Deferred Charges | 219,679 | 231,051 | |||||||
Current Portion of Capital Lease | 115,862 | 114,640 | |||||||
Unearned Revenue | 2,493,208 | 2,997,455 | |||||||
Total Current Liabilities | 4,413,582 | 5,814,784 | |||||||
Long-Term Liabilities: | |||||||||
Long-Term Debt | 1,687,813 | 1,639,109 | |||||||
Long-Term Portion of Capital Lease | 323,711 | 353,139 | |||||||
Total Long-Term Liabilities | 2,011,524 | 1,992,248 | |||||||
Total Liabilities | 6,425,106 | 7,807,032 | |||||||
Commitments and Contingencies | — | — | |||||||
Stockholders’ Equity: | |||||||||
Common Stock ($0.01 Par Value, Authorized 75,000,000 Shares; 26,638,477 and 26,402,227 Shares Issued and Outstanding in 2014 and 2013, respectively) | 266,385 | 264,022 | |||||||
Additional Paid-In Capital | 32,742,407 | 32,674,374 | |||||||
Accumulated Deficit | (21,587,509 | ) | (22,021,358 | ) | |||||
Total Stockholders’ Equity | 11,421,283 | 10,917,038 | |||||||
Total Liabilities and Stockholders’ Equity | $ | 17,846,389 | $ | 18,724,070 |
Cover-All Technologies Inc. and Subsidiaries | |||||||
RECONCILIATION of U.S. GAAP NET INCOME to EBITDA | |||||||
(UNAUDITED) | |||||||
Three months ended March 31, | |||||||
2014 | 2013 | ||||||
Net Income | $ | 433,849 | $ | 705,326 | |||
Interest (Income) Expense, Net | 93,672 | 92,511 | |||||
Income Tax Expense | 3,688 | 4,666 | |||||
Depreciation | 81,829 | 61,838 | |||||
Amortization: | |||||||
Amortization of Capitalized Software | 372,638 | 1,092,107 | |||||
Amortization of Customer Lists/Relationships | 15,167 | 33,500 | |||||
Amortization of Deferred Financing Costs | 7,585 | 6,746 | |||||
Total Amortization | $ | 395,390 | $ | 1,132,353 | |||
EBITDA | $ | 1,008,428 | $ | 1,996,694 | |||
EBITDA per Common Share: | |||||||
Basic | $ | 0.04 | $ | 0.08 | |||
Diluted | $ | 0.04 | $ | 0.08 |
Contacts:
Ann Massey, 973-461-5190
Chief
Financial Officer
amassey@cover-all.com