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Compuware Q3 Results Demonstrate &aposStrength and Growth Potential,&apos Earnings of 13 Cents Per Share

DETROIT, Jan. 24 /PRNewswire-FirstCall/ -- Compuware Corporation (Nasdaq: CPWR) today announced final financial results for its quarter ended December 31, 2007.

DETROIT, Jan. 24 /PRNewswire-FirstCall/ — Compuware Corporation (Nasdaq: CPWR) today announced final financial results for its quarter ended December 31, 2007.

"Compuware achieved Q3 results that demonstrated both the strength and growth potential of the business," said Compuware Chairman and CEO Peter Karmanos, Jr. "Specifically during Q3, the company delivered a dramatic increase in total product commitments, excellent operating cash flow, growing maintenance and improved year-over-year license fees in some of its most important product lines. I join Compuware employees around the world in maintaining my confidence in the future of the business, both in the near and the long-term."

Third Quarter Fiscal 2008 Results

Compuware reports third quarter revenues of $309.3 million, compared to $315.1 million in the same quarter last year. Earnings per share — before restructuring charges — were 14 cents. On a GAAP basis, earnings per share were 13 cents, an increase of 18 percent from 11 cents in the same quarter last year, based upon 282.5 million and 343.1 million shares outstanding, respectively.

Compuware incurred $4.9 million in restructuring charges in the third quarter. In the first nine months of the fiscal year, Compuware incurred $39.6 million in restructuring charges.

Compuware's third quarter net income — before restructuring charges — was $38.8 million, an increase of six percent from net income of $36.5 million in the same period last year. On a GAAP basis, Compuware delivered net income of $35.6 million in Q3, down slightly from Q3 of last year.

During the company's third quarter, software license fees were $79.4 million, compared to $86.0 million in the same quarter last year. Maintenance fees were $120.0 million, compared to $114.4 million in Q3 last year. Revenue from professional services in the quarter was $109.9 million, compared to $114.7 million in the same quarter last year.

The company will host a conference call at 5:00 p.m. Eastern time (22:00 GMT) today to discuss these results.

Third Quarter Fiscal Year 2008 Highlights During the Third Quarter, Compuware: – Modernized the Detroit Medical Center's application portfolio by streamlining processes, reducing IT costs and improving patient safety and care. Through this partnership, Compuware also collaborated with the DMC to deliver an Electronic Medical Records (EMR) system for the automation of patients' paper medical records. – Announced that Compuware Covisint's Chief Security Officer, David Miller, testified before the United States Senate Judiciary Committee regarding "Electronic Prescribing of Controlled Substances: Addressing Health Care and Law Enforcement Priorities." Miller outlined how proven technology developed by Covisint could help solve many problems associated with the paper-based prescribing of controlled substances. – Announced that Compuware Covisint earned its second consecutive "Best Demonstration of Value/ROI" Healthcare Innovation Award at the recent Gartner Healthcare Summit 2007. Covisint was also nominated for the third straight year for "Solution with Greatest Market Potential." – Earned — for the second consecutive year — the Yphise award for best "IT Investment and Project Portfolio Management" for the company's IT Portfolio Management solution, Compuware Changepoint. – Achieved recognition from Forrester Research, which named Compuware Changepoint as a leader in the Project Portfolio Management (PPM) market. – Announced that Conseco, a Fortune 500 insurance company, successfully deployed Compuware's Metrics-based Management solution to ensure the best available quality for its sourced application development. – Launched the Compuware Uniface 9.2 Application Platform Suite. The Uniface enterprise application development solution extends multi- channel support to include mobile technology, support for SOA, web services and enterprise mash-ups. – Released Optimal Trace 5.0, the latest version of Compuware Optimal's market-leading business requirements management solution. – Delivered a worldwide executive briefing series on balancing IT supply and demand, featuring top IT strategist presentations on best practices to deliver maximum business impact. – Released a survey in collaboration with the Ponemon Institute revealing that an overwhelming majority of organizations surveyed risk compromising critical information by using actual customer data for the development and testing of applications. – Released the results of a survey designed to help organizations better understand MIPS usage and MIPS management. The survey, commissioned by Compuware and fielded by Computerworld, revealed valuable details for IT leaders seeking information on increased MIPS consumption.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, this press release uses non-GAAP measures of net income, earnings per share and revenue. The net income and earnings per share disclosures on a non-GAAP basis excluded the impact of restructuring charges. The non-GAAP revenue disclosures provide information on total product commitments. Compuware management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Compuware's ongoing core operations and prospects for the future. 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. Management uses both GAAP and non-GAAP information in operating and evaluating its business and as such has determined that it is important to provide this information to investors. A reconciliation of non-GAAP and GAAP earnings is continued in the financial statements following this release.

Compuware Corporation

Compuware Corporation (Nasdaq: CPWR) maximizes the value IT brings to the business by helping CIOs more effectively manage the business of IT. Compuware solutions accelerate the development, improve the quality and enhance the performance of critical business systems while enabling CIOs to align and govern the entire IT portfolio, increasing efficiency, cost control and employee productivity throughout the IT organization. Founded in 1973, Compuware serves the world's leading IT organizations, including more than 90 percent of the Fortune 100 companies. Learn more about Compuware at http://www.compuware.com.

Press Contact

Lisa Elkin, Vice President, Communications and Investor Relations, +1-313-227-7345

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 2007 2006 CURRENT ASSETS: Cash and cash equivalents $178,620 $284,051 Investments 87,171 222,397 Accounts receivable, net 413,203 421,935 Deferred tax asset, net 42,622 32,038 Income taxes refundable, net 75,942 Prepaid expenses and other current assets 31,569 27,589 Total current assets 753,185 1,063,952 INVESTMENTS 83,460 PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 370,641 388,891 CAPITALIZED SOFTWARE, LESS ACCUMULATED AMORTIZATION 63,165 66,599 OTHER: Accounts receivable 200,506 190,217 Deferred tax asset, net 37,541 15,579 Goodwill 353,104 334,769 Other 35,131 34,853 Total other assets 626,282 575,418 TOTAL ASSETS $1,813,273 $2,178,320 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $19,069 $26,841 Accrued expenses 132,391 166,123 Income taxes payable 5,004 Deferred revenue 329,460 331,601 Total current liabilities 485,924 524,565 DEFERRED REVENUE 328,814 308,300 ACCRUED EXPENSES 18,639 12,168 DEFERRED TAX LIABILITY, NET 16,463 36,806 Total liabilities 849,840 881,839 SHAREHOLDERS' EQUITY: Common stock 2,742 3,282 Additional paid-in capital 669,344 683,755 Retained earnings 272,430 597,872 Accumulated other comprehensive income 18,917 11,572 Total shareholders' equity 963,433 1,296,481 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,813,273 $2,178,320 COMPUWARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) QUARTER ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2007 2006 2007 2006 REVENUES: Software license fees $79,425 $86,013 $196,712 $210,187 Maintenance fees 120,026 114,432 350,063 339,881 Professional services fees 109,884 114,703 343,920 349,905 Total revenues 309,335 315,148 890,695 899,973 OPERATING EXPENSES: Cost of software license fees 6,685 7,529 23,660 21,124 Cost of maintenance fees 11,452 10,157 33,110 30,079 Cost of professional services 103,705 102,189 309,752 313,449 Technology development and support 23,636 27,047 77,134 83,904 Sales and marketing 66,392 73,346 196,580 206,825 Administrative and general 46,158 52,139 134,412 143,523 Restructuring costs 4,894 39,645 Total operating expenses 262,922 272,407 814,293 798,904 INCOME FROM OPERATIONS 46,413 42,741 76,402 101,069 OTHER INCOME (EXPENSES) Interest income 4,537 9,133 16,004 31,413 Other 113 (121) (268) (907) OTHER INCOME, NET 4,650 9,012 15,736 30,506 INCOME BEFORE INCOME TAXES 51,063 51,753 92,138 131,575 INCOME TAX PROVISION 15,449 15,267 18,919 40,959 NET INCOME $35,614 $36,486 $73,219 $90,616 DILUTED EPS COMPUTATION Numerator: Net income $35,614 $36,486 $73,219 $90,616 Denominator: Weighted-average common shares outstanding 281,359 342,078 292,514 360,833 Dilutive effect of stock options 1,123 1,021 1,757 510 Total shares 282,482 343,099 294,271 361,343 Diluted EPS $0.13 $0.11 $0.25 $0.25 COMPUWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) NINE MONTHS ENDED DECEMBER 31, 2007 2006 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income $73,219 $90,616 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 41,364 40,547 Property and equipment impairment associated with restructuring 3,079 Capitalized software impairment 3,873 Acquisition tax benefits 3,932 3,860 Stock option compensation 8,773 7,211 Deferred income taxes (14,039) 9,864 Other 1,072 (183) Net change in assets and liabilities, net of effects from acquisitions and currency fluctuations: Accounts receivable 1,387 36,782 Prepaid expenses and other current assets 10,422 (2,689) Other assets 1,201 (166) Accounts payable and accrued expenses (10,758) (18,155) Deferred revenue (47,848) (76,125) Income taxes 32,355 1,704 Net cash provided by operating activities 108,032 93,266 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchase of: Businesses, net of cash acquired (20,484) Property and equipment (8,828) (15,317) Capitalized software (11,263) (16,003) Proceeds from sale of property 15,466 Investments: Proceeds 90,255 368,120 Purchases (376,387) Net cash provided by (used in) investing activities 70,164 (44,605) CASH FLOWS USED IN FINANCING ACTIVITIES: Net proceeds from exercise of stock options including excess tax benefits 66,531 11,899 Contribution to stock purchase plans 3,184 3,688 Repurchase of common stock (337,785) (398,741) Net cash used in financing activities (268,070) (383,154) EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,813 6,482 NET DECREASE IN CASH AND CASH EQUIVALENTS (82,061) (328,011) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 260,681 612,062 CASH AND CASH EQUIVALENTS AT END OF PERIOD $178,620 $284,051 COMPUWARE CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP INFORMATION (In Thousands, Except Per Share Data) QUARTER ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, Net income reconciliation: 2007 2006 2007 2006 GAAP net income $35,614 $36,486 $73,219 $90,616 Restructuring costs, net of tax 3,181 25,769 Capitalized software impairment, net of tax 2,517 Net income as adjusted $38,795 $36,486 $101,505 $90,616 EPS reconciliation: GAAP diluted EPS $ 0.13 $ 0.11 $0.25 $0.25 Restructuring costs, net of tax 0.01 0.08 Capitalized software impairment, net of tax 0.01 Diluted EPS as adjusted $ 0.14 $ 0.11 $0.34 $0.25 Compuware initiated a restructuring plan in FY08. Our non-GAAP disclosures exclude these charges, primarily employee termination benefits, facilities costs (primarily lease abandonments and property and equipment impairment) and capitalized software impairment. We believe it is useful to exclude these costs when evaluating overall performance. COMPUWARE CORPORATION AND SUBSIDIARIES OPERATIONAL HIGHLIGHTS (dollar amounts in thousands) QUARTER ENDED QUARTER ENDED DECEMBER DECEMBER SEPTEMBER 31 31 YR – YR 30 QTR – QTR 2007 2006 % Change 2007 % Change License Fees: Distributed Product License Fees DevPartner $2,607 $2,586 0.8% $2,561 1.8% QACenter and File-AID Client/Server 6,213 6,930 (10.3%) 6,845 (9.2%) UNIFACE and Optimal 4,908 6,091 (19.4%) 3,983 23.2% Vantage 20,018 18,905 5.9% 21,547 (7.1%) Changepoint 3,781 3,618 4.5% 6,758 (44.1%) Total Distributed Product License Fees 37,527 38,130 (1.6%) 41,694 (10.0%) Mainframe Product License Fees 41,898 47,883 (12.5%) 28,322 47.9% Total License Fees 79,425 86,013 (7.7%) 70,016 13.4% Maintenance Fees 120,026 114,432 4.9% 116,296 3.2% Total Products Revenue $199,451 $200,445 (0.5%) $186,312 7.1% Total Mainframe Products Revenue $125,710 $132,194 (4.9%) $110,484 13.8% Total Distributed Products Revenue $73,741 $68,251 8.0% $75,828 (2.8%) Total Products Revenue by Geography North America $97,898 $108,103 (9.4%) $98,236 (0.3%) International $101,553 $92,342 10.0% $88,076 15.3% Product Releases Mainframe 2 9 (77.8%) 11 (81.8%) Distributed 12 6 100.0% 4 200.0% Total Costs of Software Products $108,165 $118,079 (8.4%) $106,441 1.6% Deferred license fees Current $68,033 $72,218 (5.8%) $63,414 7.3% Long-term $48,087 $39,686 21.2% $37,845 27.1% Deferred during quarter $38,064 $26,308 44.7% $13,598 179.9% Recognized during quarter $23,550 $25,571 (7.9%) $26,295 (10.4%) Professional Services Professional Services Revenue $109,884 $114,703 (4.2%) $115,659 (5.0%) Contribution Margin 5.6% 10.9% 11.8% Billable Headcount 3,251 3,488 (6.8%) 3,284 (1.0%) Total Company Headcount 6,496 7,578 (14.3%) 6,731 (3.5%) Total DSO 120.2 120.5 118.8 Total DSO (Billed) 55.1 54.1 51.9 COMPUWARE CORPORATION AND SUBSIDIARIES PRODUCT COMMITMENTS (In Thousands) QUARTER QUARTER QUARTER ENDED ENDED ENDED DECEMBER SEPTEMBER DECEMBER 31, 30, 31, 2007 2007 2006 License revenue $79,425 $70,016 $86,013 Change in deferred license 14,515 (12,698) 737 License contracts entered into during period 93,940 57,318 86,750 Maintenance revenue 120,026 116,296 114,432 Change in deferred maintenance (8,302) (30,123) (32,265) Maintenance contracts & renewals entered into during period 111,724 86,173 82,167 Total products commitments during period $205,664 $143,491 $168,917 As Compuware continues to emphasize solution selling, deals are becoming more complex, increasing the likelihood that software transactions will be recognized ratably over the maintenance term. Therefore to understand the health of Compuware's software business, we believe it is important to also consider the amount of product commitments during the reported periods.

SOURCE Compuware Corporation

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