Compuware Announces Fiscal Year 2013 Q3 Results

  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

Business Wire

DETROIT -- January 22, 2013

Compuware Corporation (Nasdaq: 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                                                         
                                                 2012            2011
CURRENT ASSETS:
Cash and cash equivalents                        $ 64,884        $ 82,201
Accounts receivable, net                           449,964         470,724
Deferred tax asset, net                            38,669          47,460
Income taxes refundable                            3,693           4,634
Prepaid expenses and other current assets         32,377        32,283    
Total current assets                               589,587         637,302
                                                                 
PROPERTY AND EQUIPMENT, LESS ACCUMULATED           314,404         326,099
DEPRECIATION AND AMORTIZATION
                                                                 
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE          119,041         117,175
ASSETS, NET
                                                                 
ACCOUNTS RECEIVABLE                                190,613         216,735
DEFERRED TAX ASSET, NET                            36,254          40,789
GOODWILL                                           799,823         797,163
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 expenses                                   98,171          107,512
Income taxes payable                               14,883          19,073
Deferred revenue                                  413,446       435,219   
Total current liabilities                          540,009         688,609
                                                                 
LONG TERM DEBT                                     70,000          -
                                                                 
DEFERRED REVENUE                                   311,036         356,693
                                                                 
ACCRUED EXPENSES                                   29,139          27,908
                                                                 
DEFERRED TAX LIABILITY, NET                       84,648        77,100    
Total liabilities                                 1,034,832     1,150,310 
                                                                 
SHAREHOLDERS' EQUITY:
Common stock                                       2,121           2,188
Additional paid-in capital                         692,133         681,359
Retained earnings                                  368,445         355,650
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         2011          2012         2011
REVENUES:
Software license fees    $ 64,831      $ 57,121      $ 130,499     $ 152,958
Maintenance fees           102,341       106,843       307,487       322,908
Subscription fees          20,793        19,931        61,503        58,156
Professional services      46,049        50,575        140,155       157,403
fees
Application services      23,852      18,587      64,981      52,302  
fees
Total revenues            257,866     253,057     704,625     743,727 
                                                                             
OPERATING EXPENSES:
Cost of software           5,388         4,844         15,117        13,150
license fees
Cost of maintenance        8,639         9,603         26,653        28,907
fees
Cost of subscription       7,603         7,291         22,823        22,192
fees
Cost of professional       39,694        45,277        122,080       136,496
services
Cost of application        20,758        17,265        57,468        53,934
services
Technology development     25,629        27,265        79,675        78,706
and support
Sales and marketing        65,773        69,683        184,604       197,255
Administrative and        44,733      39,236      122,819     122,717 
general
Total operating           218,217     220,464     631,239     653,357 
expenses
                                                                             
INCOME FROM OPERATIONS     39,649        32,593        73,386        90,370
                                                                             
OTHER INCOME              (55     )    231         (90     )    1,221   
(EXPENSE), NET
                                                                             
INCOME BEFORE INCOME       39,594        32,824        73,296        91,591
TAXES
                                                                             
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              212,836       218,534       215,318       218,427
outstanding
Dilutive effect of        4,036       3,349       4,153       4,134   
stock options
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 amortization                        49,358         44,706
Stock award compensation                             20,663         17,555
Deferred income taxes                                6,172          7,460
Other                                                552            221
Net change in assets and liabilities, net of
effects from currency fluctuations and
acquisitions:
Accounts receivable                                  17,140         (14,201  )
Prepaid expenses and other current assets            (2,024   )     1,940
Other assets                                         6,632          (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  )     (18,346  )
Other                                               (1,400   )    (575     )
Net cash used in investing activities               (44,458  )    (284,137 )
                                                                  
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from borrowings                             142,800        180,200
Payments on borrowings                               (117,800 )     (70,200  )
Net proceeds from exercise of stock awards           11,965         8,503
including excess tax benefits
Employee contribution to common stock purchase       2,046          2,101
plans
Repurchase of common stock                          (76,366  )    (4,259   )
Net cash provided by (used in) financing            (37,355  )    116,345  
activities
                                                                  
EFFECT OF EXCHANGE RATE CHANGES ON CASH             (1,451   )    (3,936   )
                                                                  
NET CHANGE IN CASH AND CASH EQUIVALENTS              (34,296  )     (98,043  )
                                                                  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD    99,180       180,244  
                                                                  
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $ 64,884      $ 82,201   


COMPUWARE CORPORATION AND SUBSIDIARIES
OPERATIONAL HIGHLIGHTS
(Dollar Amounts In Thousands)

                                         QUARTER                   
                                          ENDED
                                          DEC 31,                     YR - YR
                                          2012         2011          % Chg
Total Product Software Revenue by
Geography
North America                             $ 106,211     $ 98,244      8.1   %
International                               81,754        85,651      (4.5  %)
                                                                      
Deferred License Fees
Current                                   $ 19,451      $ 26,952      (27.8 %)
Long-term                                   10,276        12,270      (16.3 %)
                                                                      
Deferred Maintenance
Current                                   $ 310,450     $ 323,485     (4.0  %)
Long-Term                                   269,275       305,549     (11.9 %)
                                                                      
Deferred Subscription
Current                                   $ 48,315      $ 50,444      (4.2  %)
Long-Term                                   8,333         13,265      (37.2 %)
                                                                      
Deferred Professional Services            $ 22,322      $ 20,361      9.6   %
                                                                      
Deferred Application Services             $ 36,060      $ 39,586      (8.9  %)
                                                                      
                                                                      
                                                                      
Other:
Total Company Headcount                     4,579         4,722       (3.0  %)
                                                                      
Total DSO (Billed)                          83.9          88.0
Total DSO                                   157.0         167.4
                                                                      
                                                                      
                                                                      
Stock-based compensation expense
                                                                      
Cost of license fees                      $ -           $ -           N/A
Cost of maintenance fees                    164           202         (18.8 %)
Cost of subscription fees                   (47     )     (68     )   30.9  %
Cost of professional services               65            54          20.4  %
Cost of application services                396           254         55.9  %
Technology development and support          468           575         (18.6 %)
Sales and marketing                         1,328         1,493       (11.1 %)
Administrative and general                 3,110       3,062      1.6   %
                                                                      
Total stock-based compensation expense    $ 5,484      $ 5,572      (1.6  %)
before income taxes


COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)

                                                                                Covisint                 
                                                                       Professional   Application   Unallocated
Quarter        APM            Changepoint   Mainframe     Uniface      Services       Services      Expenses      Total
Ended:
                                                                                                                  
December 31,
2012
                                                                                                                  
Software       $ 33,938       $ 2,684       $ 24,743      $ 3,466         -              -            -           $ 64,831
license fees
Maintenance      23,369         4,139         67,048        7,785         -              -            -             102,341
fees
Subscription     20,130         663           -             -             -              -            -             20,793
fees
Professional
services         7,624          3,137         673           1,413      $  33,202         -            -             46,049
fees
Application
services        -            -           -           -           -          $  23,852     -           23,852  
fees
Total            85,061         10,623        92,464        12,664        33,202         23,852       -             257,866
revenues
                                                                                                                  
Operating       76,773       10,951      24,727      5,254       28,264       21,664    $ 50,584      218,217 
expenses
                                                                                                                  
Income
(loss) from    $ 8,288       $ (328   )    $ 67,737     $ 7,410     $  4,938      $  2,188     $ (50,584 )   $ 39,649  
operations
Contribution     9.7     %      (3.1   %)     73.3    %     58.5   %      14.9    %      9.2    %                   15.4    %
margin %
                                                                                                                  
Operating
expenses
include:
Stock awards   $ 680          $ 12          $ 606         $ 6          $  45          $  396        $ 3,739       $ 5,484
compensation
Amortization
of purchased   $ 2,272        $ -           $ -           $ -          $  -           $  148        $ -           $ 2,420
software
Amortization
of other
acquired       $ 1,758        $ -           $ -           $ -          $  -           $  113        $ -           $ 1,871
intangible
assets
                                                                                                                  
                                                                                                                  
December 31,
2011
                                                                                                                  
Software       $ 24,360       $ 3,513       $ 26,720      $ 2,528         -              -            -           $ 57,121
license fees
Maintenance      19,441         3,895         75,782        7,725         -              -            -             106,843
fees
Subscription     19,379         552           -             -             -              -            -             19,931
fees
Professional
services         8,893          4,517         558           981        $  35,626         -            -             50,575
fees
Application
services        -            -           -           -           -          $  18,587     -           18,587  
fees
Total            72,073         12,477        103,060       11,234        35,626         18,587       -             253,057
revenues
                                                                                                                  
Operating       82,118       11,683      24,721      5,044       31,794       17,265    $ 47,839      220,464 
expenses
                                                                                                                  
Income
(loss) from    $ (10,045 )    $ 794        $ 78,339     $ 6,190     $  3,832      $  1,322     $ (47,839 )   $ 32,593  
operations
Contribution     (13.9   %)     6.4    %      76.0    %     55.1   %      10.8    %      7.1    %                   12.9    %
margin %
                                                                                                                  
Operating
expenses
include:
Stock awards   $ 1,679        $ 82          $ 415         $ 47         $  28          $  254        $ 3,067       $ 5,572
compensation
Amortization
of purchased   $ 2,563        $ -           $ -           $ -          $  -           $  148        $ -           $ 2,711
software
Amortization
of other
acquired       $ 2,143        $ -           $ -           $ -          $  -           $  113        $ -           $ 2,256
intangible
assets


COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)

                                                                                Covisint                  
                                                                       Professional   Application   Unallocated
Nine Months    APM            Changepoint   Mainframe     Uniface      Services       Services      Expenses       Total
Ended:
                                                                                                                   
December 31,
2012
                                                                                                                   
Software       $ 74,237       $ 5,545       $ 43,566      $ 7,151         -             -             -            $ 130,499
license fees
Maintenance      66,544         12,321        205,972       22,650        -             -             -              307,487
fees
Subscription     59,526         1,977         -             -             -             -             -              61,503
fees
Professional
services         23,003         9,898         1,640         3,684      $  101,930       -             -              140,155
fees
Application
services        -            -           -           -           -          $ 64,981      -            64,981  
fees
Total            223,310        29,741        251,178       33,485        101,930       64,981        -              704,625
revenues
                                                                                                                   
Operating       226,928      31,392      67,856      15,279      85,322      59,731     $ 144,731      631,239 
expenses
                                                                                                                   
Income
(loss) from    $ (3,618  )    $ (1,651 )    $ 183,322    $ 18,206    $  16,608     $ 5,250      $ (144,731 )   $ 73,386  
operations
Contribution     (1.6    %)     (5.6   %)     73.0    %     54.4   %      16.3    %     8.1    %                     10.4    %
margin %
                                                                                                                   
Operating
expenses
include:
Stock awards   $ 3,834        $ 42          $ 2,118       $ 42         $  160         $ 1,105       $ 13,362       $ 20,663
compensation
Amortization
of purchased   $ 6,755        $ -           $ -           $ -          $  -           $ 444         $ -            $ 7,199
software
Amortization
of other
acquired       $ 5,435        $ -           $ -           $ -          $  -           $ 338         $ -            $ 5,773
intangible
assets
                                                                                                                   
December 31,
2011
                                                                                                                   
Software       $ 54,142       $ 7,643       $ 83,874      $ 7,299         -             -             -            $ 152,958
license fees
Maintenance      57,003         11,647        230,776       23,482        -             -             -              322,908
fees
Subscription     56,639         1,517         -             -             -             -             -              58,156
fees
Professional
services         22,646         12,487        3,960         3,259      $  115,051       -             -              157,403
fees
Application
services        -            -           -           -           -          $ 52,302      -            52,302  
fees
Total            190,430        33,294        318,610       34,040        115,051       52,302        -              743,727
revenues
                                                                                                                   
Operating       231,489      33,989      72,926      15,595      95,045      53,934     $ 150,379      653,357 
expenses
                                                                                                                   
Income
(loss) from    $ (41,059 )    $ (695   )    $ 245,684    $ 18,445    $  20,006     $ (1,632 )    $ (150,379 )   $ 90,370  
operations
Contribution     (21.6   %)     (2.1   %)     77.1    %     54.2   %      17.4    %     (3.1   %)                    12.2    %
margin %
                                                                                                                   
Operating
expenses
include:
Stock awards   $ 4,945        $ 288         $ 1,451       $ 164        $  231         $ 1,196       $ 9,280        $ 17,555
compensation
Amortization
of purchased   $ 5,994        $ -           $ -           $ -          $  -           $ 444                        $ 6,438
software
Amortization
of other
acquired       $ 5,956        $ -           $ -           $ -          $  -           $ 338                        $ 6,294
intangible
assets

Contact:

Press Contact
Lisa Elkin, +1-313-227-7345
Senior Vice President, Investor Relations, Marketing and Communications
Compuware Corporation
 
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