DETROIT, Jan. 28 /PRNewswire-FirstCall/ -- Compuware Corporation today announced financial results for its third quarter ended December 31, 2008.
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Compuware reports third quarter revenues of $268.7 million, compared to $309.3 million in the same quarter last year. Earnings per share -- before restructuring charges -- grew to 15 cents in Q3, compared to 14 cents per share in the same quarter last year, based upon 246.8 million and 282.5 million shares outstanding, respectively. On a GAAP basis, earnings per share were 14 cents compared to 13 cents in the same quarter last year.
Compuware's third quarter net income -- before restructuring charges -- was $37.5 million compared to $38.8 million in the same period last year. On a GAAP basis, Compuware delivered net income of $35.0 million in Q3, compared to net income of $35.6 million in the same quarter last year.
During the third quarter, the company's software license fee revenue was $60.5 million, compared to $79.4 million in the same quarter last year. Maintenance fees recognized in the quarter were $116.6 million, compared to $120.0 million in Q3 last year. Revenue from professional services in Q3 was $91.6 million, compared to $109.9 million in the same quarter last year.
"In a really tough selling environment, Compuware has produced a good Q3, propelling us to a 44 percent increase in GAAP EPS for the fiscal year-to-date," said Compuware President and Chief Operating Officer Bob Paul. "Moving forward, we will accelerate Compuware's growth by further focusing the business on a differentiated and compelling solution that will position the company as best-in-class.
"IT leaders today face relentless pressure to deliver applications that drive innovation and eliminate costs," continued Paul. "To meet these demands in the face of increasingly complex technologies like SOA, cloud computing and virtualization, IT leadership desperately needs an end-to-end, business user's view of application performance. Compuware provides that view through Business Service Delivery, our strategic approach to ensuring that applications work well and deliver value. And we're going to achieve breakout growth by doing it better than anyone else in the world."
The company will host a conference call at 5:00 p.m. Eastern time (22:00 UTC) today to discuss these results.
Third Quarter Fiscal Year 2009 Highlights During the third quarter, Compuware:
-- Launched Changepoint 2009, the latest version of its market-leading IT portfolio management solution. Changepoint 2009 provides greater visibility into all the work of IT, increasing the ability of IT organizations to respond to business needs.
-- Announced that Covisint was named a "cloud computing pioneer" by independent analyst firm, Forrester Research, Inc. According to the report, customers can benefit from Covisint's "pay as you go" model, speed and focus. Covisint also earned its third consecutive "Best Demonstration of Value/ROI" Innovation Award at the Healthcare IT Summit 2008.
-- Released the results of a new study, commissioned by the company and conducted by the Ponemon Institute(C), that showed insiders were the number one cause of all data breaches, with hackers ranking a distant fifth. This study underscored the relevance of Compuware's Data Privacy solutions.
-- Launched the Compuware Uniface 9.3 Application Platform Suite, its enterprise application development solution, at the Compuware Uniface User Conference (CU2008). Attendees at CU2008 also received an exclusive first look at the yet-to-be-announced Uniface 9.4 development solution, as well as an update on features of the new version.
-- Announced that its Covisint subsidiary will electronically connect hospitals in Michigan's "thumb" region, now called Michigan Thumb Health Information System (THIS), enabling faster clinical decision-making and improving healthcare delivery, costs. Covisint will also electronically connect doctors across Michigan via MSMS Connect, leveraging the Covisint on- demand healthcare platform. With Covisint, MSMS Connect now enables secure messaging, including patient-specific information from physician-to-physician.
-- Earned the "diversity and multiculturalism" top honor as part of the "101 Best and Brightest Companies to Work For" award program.
-- Announced the latest version of its award-winning code quality solution, Compuware DevPartner Studio 9.0, at the Microsoft Professional Developers Conference 2008.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, this press release and the accompanying schedules following the release use a non-GAAP measure for EPS, net income and revenue (referred to as product commitments). Compuware management believes the non-GAAP financial information provided in these schedules help investors better understand and assess 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.
Compuware Corporation
Compuware Corporation makes IT rock around the world, helping CIOs optimize IT performance to achieve business goals. 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 92 percent of the Fortune 50 companies. Learn more about Compuware at http://www.compuware.com/.
Conference Call Information
Compuware will host a conference call today to discuss these results. To join the conference call, interested parties in the United States should call 800-230-1059. For international access, the conference call number is +1-612- 234-9959. 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 975120. Additionally, investors can listen to the conference call via webcast by visiting the Compuware Corporation Investor Relations web site at http://www.compuware.com/ .
Press Contact
Lisa Elkin, Vice President, Communications and Investor Relations, +1-313-227-7345
For Sales and Marketing Information
Compuware Corporation, One Campus Martius, Detroit, MI 48226, 800-521-9353, 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 2008 2007 CURRENT ASSETS: Cash and cash equivalents $163,716 $178,620 Investments 87,171 Accounts receivable, net 522,514 413,203 Deferred tax asset, net 35,403 42,622 Income taxes refundable 3,243 Prepaid expenses and other current assets 26,850 31,569 Total current assets 751,726 753,185 PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 358,660 370,641 CAPITALIZED SOFTWARE, LESS ACCUMULATED AMORTIZATION 52,853 63,165 OTHER: Accounts receivable 238,591 200,506 Deferred tax asset, net 28,960 37,541 Goodwill 349,245 353,104 Other 32,370 35,131 Total other assets 649,166 626,282 TOTAL ASSETS $1,812,405 $1,813,273 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $14,997 $19,069 Accrued expenses 104,175 132,391 Income taxes payable 8,103 5,004 Deferred revenue 422,216 329,460 Total current liabilities 549,491 485,924 DEFERRED REVENUE 363,812 328,814 ACCRUED EXPENSES 22,384 18,639 DEFERRED TAX LIABILITY, NET 20,527 16,463 Total liabilities 956,214 849,840 SHAREHOLDERS' EQUITY: Common stock 2,466 2,742 Additional paid-in capital 632,267 669,344 Retained earnings 217,499 272,430 Accumulated other comprehensive income 3,959 18,917 Total shareholders' equity 856,191 963,433 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,812,405 $1,813,273 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, 2008 2007 2008 2007 REVENUES: Software license fees $60,513 $79,425 $164,206 $196,712 Maintenance fees 116,614 120,026 367,858 350,063 Professional services fees 91,540 109,884 305,036 343,920 Total revenues 268,667 309,335 837,100 890,695 OPERATING EXPENSES: Cost of software license fees 6,117 6,685 18,460 23,660 Cost of maintenance fees 9,488 11,452 32,814 33,110 Cost of professional services 86,887 103,705 289,682 309,752 Technology development and support 22,395 23,636 67,903 77,134 Sales and marketing 55,042 66,392 174,722 196,580 Administrative and general 35,520 46,158 119,138 134,412 Restructuring costs 4,009 4,894 6,922 39,645 Total operating expenses 219,458 262,922 709,641 814,293 INCOME FROM OPERATIONS 49,209 46,413 127,459 76,402 OTHER INCOME (EXPENSES) Interest income 2,371 4,537 9,011 16,004 Other (80) 113 (453) (268) OTHER INCOME, NET 2,291 4,650 8,558 15,736 INCOME BEFORE INCOME TAXES 51,500 51,063 136,017 92,138 INCOME TAX PROVISION 16,548 15,449 44,751 18,919 NET INCOME $34,952 $35,614 $91,266 $73,219 DILUTED EPS COMPUTATION Numerator: Net income $34,952 $35,614 $91,266 $73,219 Denominator: Weighted-average common shares outstanding 246,537 281,359 252,850 292,514 Dilutive effect of stock options 262 1,123 1,385 1,757 Total shares 246,799 282,482 254,235 294,271 Diluted EPS $0.14 $0.13 $0.36 $0.25 COMPUWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) NINE MONTHS ENDED DECEMBER 31, 2008 2007 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income $91,266 $73,219 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 40,302 41,364 Property and equipment impairment 662 3,079 Capitalized software impairment 3,873 Acquisition tax benefits 3,933 3,932 Stock option compensation 12,933 8,773 Deferred income taxes 5,943 (14,039) Other 419 1,072 Net change in assets and liabilities, net of effects from acquisitions and currency fluctuations: Accounts receivable (30,433) 1,387 Prepaid expenses and other current assets 19,064 10,422 Other assets (1,549) 1,201 Accounts payable and accrued expenses (30,704) (10,758) Deferred revenue (36,099) (47,848) Income taxes 3,070 32,355 Net cash provided by operating activities 78,807 108,032 CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: Purchase of: Property and equipment (15,257) (8,828) Capitalized software (9,456) (11,263) Investment proceeds 70,212 90,255 Net cash provided by investing activities 45,499 70,164 CASH FLOWS USED IN FINANCING ACTIVITIES: Net proceeds from exercise of stock options including excess tax benefits 11,207 66,531 Contribution to stock purchase plans 2,349 3,184 Repurchase of common stock (177,195) (337,785) Net cash used in financing activities (163,639) (268,070) EFFECT OF EXCHANGE RATE CHANGES ON CASH (12,894) 7,813 NET DECREASE IN CASH AND CASH EQUIVALENTS (52,227) (82,061) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 215,943 260,681 CASH AND CASH EQUIVALENTS AT END OF PERIOD $163,716 $178,620 COMPUWARE CORPORATION AND SUBSIDIARIES OPERATIONAL HIGHLIGHTS (dollar amounts in thousands) QUARTER QUARTER ENDED ENDED DEC 31, DEC 31, YR-YR SEPT 30 QTR-QTR 2008 2007 % Change 2008 % Change License Fees: Distributed Product License Fees Vantage $18,606 $20,018 (7.1%) $9,415 97.6% Changepoint 2,967 3,781 (21.5%) 2,359 25.8% Quality 6,567 7,231 (9.2%) 5,434 20.9% Uniface 3,505 3,890 (9.9%) 2,253 55.6% DevPartner 1,274 2,607 (51.1%) 1,359 (6.3%) Total Distributed Product License Fees 32,919 37,527 (12.3%) 20,820 58.1% Mainframe Product License Fees 27,594 41,898 (34.1%) 21,431 28.8% Total License Fees 60,513 79,425 (23.8%) 42,251 43.2% Maintenance Fees 116,614 120,026 (2.8%) 124,717 (6.5%) Total Products Revenue $177,127 $199,451 (11.2%) $166,968 6.1% Total Mainframe Products Revenue $109,296 $125,710 (13.1%) $108,801 0.5% Total Distributed Products Revenue $67,831 $73,741 (8.0%) $58,167 16.6% Total Products Revenue by Geography North America $89,360 $97,898 (8.7%) $85,460 4.6% International $87,767 $101,553 (13.6%) $81,508 7.7% Product Releases Mainframe 1 2 (50.0%) 3 (66.7%) Distributed 10 12 (16.7%) 7 42.9% Total Costs of Software Products $93,042 $108,165 (14.0%) $98,876 (5.9%) Deferred license fees Current $59,880 $68,033 (12.0%) $57,808 3.6% Long-term $47,172 $48,087 (1.9%) $51,615 (8.6%) Deferred during quarter $21,403 $38,064 (43.8%) $14,618 46.4% Recognized during quarter $20,406 $23,550 (13.4%) $20,081 1.6% Professional Services Professional Services Revenue $91,540 $109,884 (16.7%) $102,877 (11.0%) Contribution Margin 5.1% 5.6% 3.8% Billable Headcount 2,747 3,251 (15.5%) 2,916 (5.8%) Total Company Headcount 5,648 6,496 (13.1%) 6,012 (6.1%) Total DSO 175.0 120.2 141.7 Total DSO (Billed) 96.1 55.1 56.8 COMPUWARE CORPORATION AND SUBSIDIARIES PRODUCT COMMITMENTS (In Thousands) QUARTER QUARTER QUARTER ENDED ENDED ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 2008 2008 2007 License revenue $60,513 $42,251 $79,425 Change in deferred license 997 (5,479) 14,515 License contracts entered into during period 61,510 36,772 93,940 Maintenance revenue 116,614 124,717 120,026 Change in deferred maintenance 17,859 (34,356) 61,394 Maintenance contracts & renewals entered into during period 134,473 90,361 181,420 Total products commitments during period $195,983 $127,133 $275,360 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. The December 31, 2007 period was adjusted to conform with current period presentation. 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: 2008 2007 2008 2007 GAAP net income $34,952 $35,614 $91,266 $73,219 Restructuring costs, net of tax 2,566 3,181 4,404 25,769 Capitalized software impairment, net of tax 2,517 Net income as adjusted $37,518 $38,795 $95,670 $101,505 EPS reconciliation: GAAP diluted EPS $0.14 $0.13 $0.36 $0.25 Restructuring costs, net of tax 0.01 0.01 0.02 0.08 Capitalized software impairment, net of tax 0.01 Diluted EPS as adjusted $0.15 $0.14 $0.38 $0.34 Compuware undertook restructuring actions in FY08 and FY09. 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.
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