Compuware Announces Fiscal Year 2013 Q3 Results

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Compuware Announces Fiscal Year 2013 Q3 Results

  • Earns twelve cents per share on $257.9M in total revenues
  • APM total revenues increase 18 percent y-o-y to $85.1M
  • Covisint revenues increase 28 percent y-o-y to $23.9M

DETROIT--(BUSINESS WIRE)-- Compuware Corporation (NAS: CPWR) , the technology performance company, today announced financial results for its third quarter ended December 31, 2012 that reflect improving margins and strong revenue momentum from its growth businesses, particularly its APM unit.


During the third quarter, total revenues were $257.9 million, compared to $253.1 million in the third quarter last year. Net income was $25.3 million, compared to $21.6 million in the third quarter last year. Earnings per share were twelve cents compared to ten cents last year, based upon 217 million and 222 million shares outstanding, respectively.

"Our results reflect the progress we are making in our business transformation, as our two growth businesses experienced year-over-year revenue growth and margin improvement," said Compuware CEO Bob Paul. "We have stabilized the Mainframe business and continue to generate significant revenue and cash flow to fund investments and innovation in our growth businesses. Mainframe revenue grew 17 percent quarter-over-quarter, and we expect our new Compuware APM for Mainframe offering to meaningfully contribute to our Mainframe earnings going forward. At the same time, we continued to extend our competitive advantages beyond Mainframe into higher-growth, market-leading capabilities. Today, more than 40% of our revenues come from these higher-growth businesses, which is a dramatic improvement over prior years. Our APM business delivered 27 percent growth over last quarter, driven by the strength of the enterprise licensing business, which was up 89 percent from the second quarter.

"We are moving quickly to anticipate industry trends and drive the business forward with differentiated value solutions that optimize the user experience," Paul added. "We remain focused on optimizing each of our business units through prudent capital allocation and improved efficiencies and are also pursuing specific shareholder value creation strategies such as the IPO of Covisint, for which we filed a registration statement with the SEC during the quarter. While we have additional work ahead of us, we are confident that our strategic approach to business transformation and shareholder value is delivering results."

Mr. Paul noted that Compuware's Board of Directors is in the process of carefully reviewing the proposal by Elliott Management Corporation. The Board will be meeting later this week to conclude its review and plans to respond very shortly to the proposal.

Compuware noted that during the company's third quarter:

  • software license fees were $64.8 million
  • maintenance fees were $102.3 million
  • subscription fees were $20.8 million
  • professional services fees were $46.0 million
  • application services fees were $23.9 million

Third Quarter Fiscal Year 2013 Highlights

During the third quarter, Compuware:

  • Introduced Compuware APM for Mainframe, which is marketed as PurePath for zOS, the industry's first and only solution for deep transaction management from the edge through the Mainframe. PurePath gives Compuware a formidable differentiator to successfully compete and grow market share, and is showing strong potential with several early deals already completed. The company also announced major enhancements to Compuware Strobe.
  • Submitted a registration statement on a confidential basis for Covisint Corporation, to the U.S. Securities and Exchange Commission for a possible initial public offering of its Class A common stock.
  • Announced that it has been positioned by Gartner, Inc. in the "Magic Quadrant for Integrated IT Portfolio Analysis (IIPA) Applications," based on analyst evaluation of the Company's market-leading project and portfolio management solution Changepoint.
  • Announced that John Van Siclen, General Manager of Compuware's application performance management business, was named a Top 25 Disrupter of 2012 by CRN.
  • Was recognized by the Michigan Business & Professional Association for the 12th consecutive year as a "101 Best and Brightest Companies to Work For" in the Detroit region.
  • Developed a new generation performance analytics solution that raises the intelligence of software-as-a-service application performance management. Outage Analyzer provides real-time visualizations and alerts of outages in third-party web services that are mission critical to web, mobile and cloud applications around the world.
  • Detailed its strategy for helping customers to modernize enterprise applications and to leverage new technologies including cloud computing.
  • Released Uniface 9.6, a significant milestone in its vision of helping organizations modernize applications and enabling the development of applications of engagement.
  • Announced that it is providing "day one" support for IBM's CICS Transaction Server for z/OS V5.1, a crucial component of modern, multi-tiered and customer-facing applications.
  • Announced that it has partnered with REAL TECH AG, a provider of software solutions for enterprise-wide IT management and SAP consultancy, to incorporate Compuware APM - dynaTrace Data Center Real User Monitoring into the latest release of its IT service management software.

Compuware Corporation

Compuware Corporation, the technology performance company, provides software, experts and best practices to ensure technology works well and delivers value. Compuware solutions make the world's most important technologies perform at their best for leading organizations worldwide, including 46 of the top 50 Fortune 500 companies and 12 of the top 20 most visited U.S. web sites. Learn more at: http://www.compuware.com.

Conference Call Information

Compuware will host a conference call to discuss these results at 5:00 p.m. Eastern time (21:00 GMT) today. To join the conference call, interested parties in the United States should call 800-700-7860. For international access, the conference call number is +1-612-332-0226. No password is required.

A conference call replay will also be available. The United States replay number will be 800-475-6701, and the international replay number will be +1-320-365-3844. The replay passcode will be 274653. Additionally, investors can listen to the conference call via webcast by visiting the Compuware Corporation Investor Relations web site at http://www.compuware.com.

Certain statements in this release that are not historical facts, including those regarding the Company's future plans, objectives and expected performance, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. While we believe any forward-looking statements we have made are reasonable, actual results could differ materially since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in the Company's reports filed with the Securities and Exchange Commission. Readers are cautioned to consider these factors when relying on such forward-looking information. The Company does not undertake, and expressly disclaims any obligation, to update or alter its forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

 
COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
 
 AS OF DECEMBER 31,
ASSETS 
20122011
CURRENT ASSETS:
Cash and cash equivalents$64,884$82,201
Accounts receivable, net449,964470,724
Deferred tax asset, net38,66947,460
Income taxes refundable3,6934,634
Prepaid expenses and other current assets 32,377  32,283 
Total current assets589,587637,302
 

PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION

314,404326,099
 

CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET

119,041117,175
 
ACCOUNTS RECEIVABLE190,613216,735
DEFERRED TAX ASSET, NET36,25440,789
GOODWILL799,823797,163
OTHER ASSETS 35,202  35,547 
 
TOTAL ASSETS$2,084,924 $2,170,810 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Accounts payable$13,509$16,805
Current portion of long term debt-110,000
Accrued expenses98,171107,512
Income taxes payable14,88319,073
Deferred revenue 413,446  435,219 
Total current liabilities540,009688,609
 
LONG TERM DEBT70,000-
 
DEFERRED REVENUE311,036356,693
 
ACCRUED EXPENSES29,13927,908
 
DEFERRED TAX LIABILITY, NET 84,648  77,100 
Total liabilities 1,034,832  1,150,310 
 
SHAREHOLDERS' EQUITY:
Common stock2,1212,188
Additional paid-in capital692,133681,359
Retained earnings368,445355,650
Accumulated other comprehensive loss (12,607) (18,697)
Total shareholders' equity 1,050,092  1,020,500 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$2,084,924 $2,170,810 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 
 THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31,DECEMBER 31,
 
2012 20112012 2011
REVENUES:
Software license fees$64,831$57,121$130,499$152,958
Maintenance fees102,341106,843307,487322,908
Subscription fees20,79319,93161,50358,156
Professional services fees46,04950,575140,155157,403
Application services fees 23,852  18,587  64,981  52,302 
Total revenues 257,866  253,057  704,625  743,727 
 
OPERATING EXPENSES:
Cost of software license fees5,3884,84415,11713,150
Cost of maintenance fees8,6399,60326,65328,907
Cost of subscription fees7,6037,29122,82322,192
Cost of professional services39,69445,277122,080136,496
Cost of application services20,75817,26557,46853,934
Technology development and support25,62927,26579,67578,706
Sales and marketing65,77369,683184,604197,255
Administrative and general 44,733  39,236  122,819  122,717 
Total operating expenses 218,217  220,464  631,239  653,357 
 
INCOME FROM OPERATIONS39,64932,59373,38690,370
 
OTHER INCOME (EXPENSE), NET (55) 231  (90) 1,221 
 
INCOME BEFORE INCOME TAXES39,59432,82473,29691,591
 
INCOME TAX PROVISION 14,254  11,236  26,894  30,339 
 
NET INCOME$25,340 $21,588 $46,402 $61,252 
 
DILUTED EPS COMPUTATION
Numerator: Net income$25,340 $21,588 $46,402 $61,252 
Denominator:
Weighted-average common shares outstanding212,836218,534215,318218,427
Dilutive effect of stock options 4,036  3,349  4,153  4,134 
Total shares 216,872  221,883  219,471  222,561 
Diluted EPS$0.12 $0.10 $0.21 $0.28 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
 NINE MONTHS ENDED
DECEMBER 31,
2012 2011
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income$46,402$61,252

Adjustments to reconcile net income to cash provided by operations:

Depreciation and amortization49,35844,706
Stock award compensation20,66317,555
Deferred income taxes6,1727,460
Other552221

Net change in assets and liabilities, net of effects from currency fluctuations and acquisitions:

Accounts receivable17,140(14,201)
Prepaid expenses and other current assets(2,024)1,940
Other assets6,632(3,451)
Accounts payable and accrued expenses(24,868)783
Deferred revenue(91,181)(53,184)
Income taxes 20,122  10,604 
Net cash provided by operating activities 48,968  73,685 
 
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of:
Business, net of cash acquired-(249,337)
Property and equipment(18,241)(15,879)
Capitalized software(24,817) Read Full Story

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