Compuware Beats Q2 Consensus Analyst EPS Estimate by 70 Percent, Grows
Distributed Products License Fees by 45.5 Percent and Total Revenue by 4.7
Percent Year-over-year
DETROIT, Oct. 24 /PRNewswire-FirstCall/ -- Compuware Corporation
(Nasdaq: CPWR) today announced financial results for its second quarter
ended September 30, 2007.
"After a near-disastrous Q1, Compuware produced one heck of a second
quarter," said Compuware Chairman and CEO Peter Karmanos, Jr. "With
dramatic year-over-year increases in EPS and distributed products license
fees -- as well as growth in year-over-year revenues for the third time in
the past four quarters -- Compuware significantly exceeded analysts'
estimates for performance in Q2. And we beat those estimates even with
$18.7 million in restructuring charges this quarter.
"These accomplishments put Compuware on strong footing for attaining
its goals in FY '08," continued Karmanos. "I want to thank all of the
Compuware employees who have worked so hard to produce these results and
encourage them to continue working diligently to attain our goals for the
fiscal year."
Second Quarter Fiscal 2008 Results
Compuware reports second quarter revenues of $302.0 million, compared
to $288.5 million in the same quarter last year.
Compuware increased EPS -- before restructuring charges -- to 17 cents
per share in Q2, an increase of approximately 143 percent over the same
period last year. On a GAAP basis, earnings per share (diluted computation)
were 13 cents, an increase of 86 percent from seven cents in the same
quarter last year, based upon 295.4 million and 364.5 million shares
outstanding, respectively.
Compuware incurred $18.7 million in restructuring charges in the second
quarter. In the first six months of the fiscal year, Compuware incurred
$34.8 million in restructuring charges.
Compuware's net income -- before restructuring charges -- was $49.6
million, an increase of 100 percent from net income of $24.8 million in the
same period last year. On a GAAP basis, Compuware delivered net income of
$37.4 million in Q2, an increase of 51 percent from Q2 last year.
During the company's second quarter, software license fees were $70.0
million, compared to $56.7 million in the same quarter last year.
Maintenance fees were $116.3 million, compared to $115.1 million in Q2 last
year. Revenue from professional services in the quarter was $115.7 million,
compared to $116.7 million in the same quarter last year.
The company will host a conference call at 5:00 p.m. Eastern time
(21:00 GMT) today to discuss these results.
Second Quarter Fiscal Year 2007 Highlights
During the second quarter, Compuware:
-- announced that the company's Board of Directors authorized the
repurchase of an additional $200 million of the company's common stock.
-- announced the centralization -- to the company's Detroit headquarters
-- of product development activities for the company's Strobe product
family, Vantage Service Management product and Optimal Trace product.
-- announced the development of the Covisint Collaboration Portal, an
on-demand platform that provides a highly secure, hosted service for
business users who require real-time information and application
sharing. The Collaboration Portal is an enhancement to the existing
Covisint portal used by more than 250,000 subscribers at 30,000
companies in 86 countries.
-- continued to build upon Covisint's on-demand security platform,
extending the company's introduction of Covisint Trusted Identity
Broker by launching Covisint Trusted Authorization Manager.
-- announced that its Vantage IT Service Management solution now supports
ITIL Version 3 continual service improvement for automated service
measurement and quality improvement.
-- announced with Wipro a partnership to enable organizations to
continually improve service quality by leveraging ITIL v3 and Six
Sigma. Wipro's Business Service Analysis, Transformation and
Optimization consulting solution includes Compuware's Vantage Service
Manager, the first service management product to automate Six Sigma
techniques.
-- announced that Jenner & Block, a full-service law firm with 460 lawyers
and offices in Chicago; Washington, D.C.; New York and Dallas, uses
Compuware Vantage to help ensure that its IT systems are always
available.
-- recorded an income tax benefit of approximately $12 million related to
the state of Michigan's enactment of the Michigan Business Tax (MBT) as
a replacement for the Single Business Tax, which expires at the end of
2007. This benefit relates primarily to the recognition of Brownfield
Redevelopment credits that existed prior to the MBT enactment and are
available to offset MBT liabilities through the company's fiscal year
2022.
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 and capitalized software impairment. 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 on-going 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 contained in the financial statements
following this release.
Compuware Corporation
Compuware Corporation (Nasdaq: CPWR) is a world leader in delivering
software and services that enable businesses to manage their enterprises
and maximize the value of their IT assets. Compuware solutions accelerate
the development, improve the quality and enhance the performance of
business- driving applications. 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/.
Conference Call Information
Compuware will host a conference call today to discuss these results at
5:00 p.m. Eastern time (21:00 GMT). Interested parties from the United
States should call 877-260-8897. For international access, the conference
call number is +1-612-288-0340.
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 886458. 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
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 SEPTEMBER 30,
ASSETS
2007 2006
CURRENT ASSETS:
Cash and cash equivalents $215,654 $470,095
Investments 95,404 242,030
Accounts receivable, net 398,703 381,262
Deferred tax asset, net 36,835 30,744
Income taxes refundable, net 31,272 81,509
Prepaid expenses and other current
assets 29,183 41,437
Total current assets 807,051 1,247,077
INVESTMENTS 10,958 49,446
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 375,555 391,239
CAPITALIZED SOFTWARE, LESS ACCUMULATED
AMORTIZATION 65,543 65,450
OTHER:
Accounts receivable 174,657 195,039
Deferred tax asset, net 33,185 16,051
Goodwill 354,133 334,639
Other 35,048 35,314
Total other assets 597,023 581,043
TOTAL ASSETS $1,856,130 $2,334,255
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $18,632 $23,040
Accrued expenses 117,372 145,018
Deferred revenue 371,867 365,069
Total current liabilities 507,871 533,127
DEFERRED REVENUE 277,963 297,298
ACCRUED EXPENSES 19,407 13,200
DEFERRED TAX LIABILITY, NET 17,437 32,750
Total liabilities 822,678 876,375
SHAREHOLDERS' EQUITY:
Common stock 2,861 3,522
Additional paid-in capital 693,160 720,946
Retained earnings 316,934 723,610
Accumulated other comprehensive income 20,497 9,802
Total shareholders' equity 1,033,452 1,457,880
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,856,130 $2,334,255
COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
QUARTER ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
REVENUES:
Software license fees $70,016 $56,709 $117,287 $124,174
Maintenance fees 116,296 115,132 230,037 225,449
Professional services fees 115,659 116,666 234,036 235,202
Total revenues 301,971 288,507 581,360 584,825
OPERATING EXPENSES:
Cost of software license fees 6,609 7,010 16,975 13,595
Cost of maintenance fees 10,206 9,795 21,658 19,919
Cost of professional services 101,970 103,645 206,047 211,260
Technology development and
support 24,170 29,744 53,498 56,860
Sales and marketing 65,456 67,711 130,188 133,479
Administrative and general 42,874 45,156 88,254 91,384
Restructuring costs 18,731 34,751
Total operating expenses 270,016 263,061 551,371 526,497
INCOME (LOSS) FROM OPERATIONS 31,955 25,446 29,989 58,328
OTHER INCOME (EXPENSES)
Interest income 5,503 11,037 11,467 22,280
Other (76) (424) (381) (786)
OTHER INCOME, NET 5,427 10,613 11,086 21,494
INCOME BEFORE INCOME TAXES 37,382 36,059 41,075 79,822
INCOME TAX PROVISION (34) 11,250 3,470 25,692
NET INCOME $37,416 $24,809 $37,605 $54,130
DILUTED EPS COMPUTATION
Numerator: Net income $37,416 $24,809 $37,605 $54,130
Denominator:
Weighted-average common shares
outstanding 294,321 363,834 298,122 370,261
Dilutive effect of stock
options 1,116 713 2,239 704
Total shares 295,437 364,547 300,361 370,965
Diluted EPS $0.13 $0.07 $0.13 $0.15
COMPUWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
SIX MONTHS ENDED
SEPTEMBER 30,
2007 2006
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $37,605 $54,130
Adjustments to reconcile net income
to cash provided
by operations:
Depreciation and amortization 27,554 26,900
Property and equipment impairment
associated with restructuring 3,079
Capitalized software impairment 3,873
Acquisition tax benefits 2,621 2,585
Stock option compensation 7,183 4,862
Deferred income taxes (3,634) 6,405
Other 815 (329)
Net change in assets and liabilities,
net of effects from acquisitions
and currency fluctuations:
Accounts receivable 39,425 64,142
Prepaid expenses and other
current assets 12,762 (4,315)
Other assets 3,652 (99)
Accounts payable and
accrued expenses (24,657) (33,107)
Deferred revenue (53,760) (44,772)
Income taxes (4,045) (3,982)
Net cash provided by
operating activities 52,473 72,420
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Purchase of:
Businesses, net of cash acquired (20,484)
Property and equipment (6,691) (10,485)
Capitalized software (7,889) (9,475)
Proceeds from sale of property 3,298
Investments:
Proceeds 71,375 272,305
Purchases (266,248)
Net cash provided by (used in)
investing activities 56,795 (31,089)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Net proceeds from exercise of stock options
including excess tax benefits 64,379 1,218
Contribution to stock purchase plans 2,230 2,577
Repurchase of common stock (227,695) (190,104)
Net cash provided by (used in)
financing activities (161,086) (186,309)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 6,791 3,011
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (45,027) (141,967)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 260,681 612,062
CASH AND CASH EQUIVALENTS AT END OF PERIOD $215,654 $470,095
COMPUWARE CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
(In Thousands)
QUARTER ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
Net income reconciliation:
GAAP net income $37,416 $24,809 $37,605 $54,130
Restructuring costs 18,731 - 34,751 -
Capitalized software
impairment - - 3,872 -
Taxes related to above
items (6,556) - (12,163) -
Net income as adjusted $49,591 $24,809 $64,065 $54,130
EPS reconciliation:
GAAP diluted EPS $0.13 $0.07 $0.13 $0.15
Restructuring costs 0.06 - 0.11 -
Capitalized software
impairment - - 0.01
Taxes related to above
items (0.02) - (0.04) -
Diluted EPS as adjusted $0.17 $0.07 $0.21 $0.15
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
QUARTER ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 YR - YR JUNE 30 QTR - QTR
2007 2006 % Change 2007 % Change
License Fees:
Distributed Product
License Fees
DevPartner $2,561 $2,966 (13.7%) $2,173 17.9%
QACenter and File-AID
Client/Server 6,845 6,600 3.7% 6,002 14.0%
UNIFACE and Optimal 3,983 3,015 32.1% 4,063 (2.0%)
Vantage 21,547 12,831 67.9% 10,537 104.5%
Changepoint 6,758 3,243 108.4% 2,363 186.0%
Total Distributed
Product License
Fees 41,694 28,655 45.5% 25,138 65.9%
Mainframe Product
License Fees 28,322 28,054 1.0% 22,133 28.0%
Total License Fees 70,016 56,709 23.5% 47,271 48.1%
Maintenance Fees 116,296 115,132 1.0% 113,741 2.2%
Total Products
Revenue $186,312 $171,841 8.4% $161,012 15.7%
Total Mainframe
Products Revenue $110,484 $113,941 (3.0%) $103,237 7.0%
Total Distributed
Products Revenue $75,828 $57,900 31.0% $57,775 31.2%
Total Products Revenue
by Geography
North America $98,236 $94,315 4.2% $85,416 15.0%
International $88,076 $77,526 13.6% $75,596 16.5%
Product Releases
Mainframe 11 4 175.0% 4 175.0%
Distributed 4 11 (63.6%) 9 (55.6%)
Total Costs of Software
Products $106,441 $114,260 (6.8%) $115,878 (8.1%)
Deferred license fees
Current $63,414 $66,975 (5.3%) $70,081 (9.5%)
Long-term $37,845 $42,060 (10.0%) $40,739 (7.1%)
Deferred during
quarter $13,598 $11,475 18.5% $17,465 (22.1%)
Recognized during
quarter $26,295 $20,999 25.2% $24,035 9.4%
Professional Services
Professional
Services Revenue $115,659 $116,666 (0.9%) $118,377 (2.3%)
Contribution Margin 11.8% 11.2% 12.1%
Billable Headcount 3,284 3,502 (6.2%) 3,384 (3.0%)
Total Company Headcount 6,731 7,582 (11.2%) 7,091 (5.1%)
Total DSO 118.8 118.9 118.4
Total DSO (Billed) 51.9 48.0 48.9
COMPUWARE CORPORATION AND SUBSIDIARIES
PRODUCT COMMITMENTS
(In Thousands)
QUARTER ENDED QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
2007 2007 2006
License revenue $70,016 $47,271 $56,709
Change in deferred license (12,698) (6,570) (9,524)
License contracts entered into
during period 57,318 40,701 47,185
Maintenance revenue 116,296 113,741 115,132
Change in deferred
maintenance (30,123) (10,826) (19,151)
Maintenance contracts &
renewals entered into during
period 86,173 102,915 95,981
Total products commitments
during period $143,491 $143,616 $143,166
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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Related links:
http://www.compuware.com
http://www.prnewswire.com/comp/112310.html /
CONTACT:
Lisa Elkin, Vice President, Communications
and Investor Relations, Compuware Corporation, +1-313-227-7345
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