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Compuware Corporation (



F3Q2011 Earnings Call Transcript

January 27, 2011 5:00 pm ET


Lisa Elkin – VP, Communications and IR

Bob Paul – President and COO

Laura Fournier – EVP, CFO and Treasurer


Kirk Materne – Evercore Partners

Aaron Schwartz – MKM Partners

Mike Latimore – Northland Capital Markets

Gabe Lowy – Mizuho Securities

Francisco Penafiel – Noble Financial


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Hello, and welcome to the Compuware Corporation third quarter results teleconference. At the request of Compuware, this conference is being recorded for instant replay purposes.

At this time, I’d like to turn the conference over to Ms. Lisa Elkin, Vice President of Communications and Investor Relations for Compuware Corporation. Ms. Elkin, you may begin.

Lisa Elkin

Thank you very much, Doug, and good afternoon, ladies and gentlemen. With me this afternoon are Bob Paul, President and Chief Operating Officer; Laura Fournier, Executive Vice President and Chief Financial Officer; and Pat Stayer, our Senior Vice President of Worldwide Sales.

Certain statements made during this conference call 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 conference call. 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. You should refer to and 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.

For those of you who do not have a copy, I will begin by summarizing the press release. Bob and Laura will then provide details about the quarter and other Compuware business activities. We will then open the call to your questions.

Compuware earned $0.15 per share in Q3. For six consecutive quarters Compuware meet or beat analyst consensus estimates for EPS. EPS jumped 36.4% year-over-year, total revenues increased 7.5% year-over-year, total APM revenues reached $56.1 million, up 34% on a GAAP basis year-over-year.

Covisint revenues grew 32.8% year-over-year to $14.4 million. Non-mainframe solutions revenue up 22.5% on a GAAP basis year-over-year. Professional services segment contribution margins reaches 12.5%. Compuware Corporation, a technology performance company, today announced financial results for the third quarter ended December 31.

Compuware reports third quarter revenues of $247 million up 7.5% from $229.9 million in Q3 last year. Third quarter earnings per share were $0.15 based upon $225.2 million shares outstanding, up 36.4% from $0.11 based on 231.1 million shares outstanding in Q3 last year.

Third quarter net income was $34 million, up 39.3% from $24.4 million in Q3 last year.

During the company’s third quarter, software license fees were $60.2 million, up 15.6% from $52 million in Q3 last year. Maintenance and subscription fees were $124.2 million in the third quarter up 5.6% from $117.6 million in Q3 last year.

Revenue from professional services in the third quarter was $62.7 million, up 4.1% from $60.3 million in Q3 last year.

I would now like to turn the call over to Bob. Bob?

Bob Paul

Thanks, Lisa. Compuware delivered another strong on target quarter increasing revenues, operating margin and earnings per share sequentially and year-over-year. Q3’s year-over-year comparisons include EPS up 36% and total revenues up more than 7%. The highlights for the quarter include strong performances in our mainframe, Covisint and professional services business.

Compuware is now consistently achieving business success. We have met or exceeded consensus analyst expectations for EPS for 6 straight quarters; we are vigilantly managing our margins and showing profitability in our mature businesses. Simultaneously we are investing in the businesses that will drive Compuware’s breakout growth both in revenue and in earnings in the years ahead.

For application performance management, we find ourselves with the best in class solution in a high-growth category. Most companies today are investing in strategic web-based apps due to the promise of top line revenue growth, improved market share and brand awareness. This dramatic increase in Web-based applications, Cloud computing, multi-devices and virtualization all drive the need for greater visibility of application performance inside and outside the firewall.

Compuware has the only solution to this problem and offers a single dashboard with deep dive analytics across the entire application delivery and chain giving executives and practitioners critical performance information. This capability has created significant separation from our competitors. Furthermore, we have the ability to measure the app’s performance based upon the end-user experience, which is the point where IT delivers value to the business.

This is the only meaningful way of solving the problem and only Compuware can do it. Our intention is to further this competitive gap with more disruptive value based capabilities in the coming quarters. This fiscal year we have gained well over 400 new application performance management customers, a rapid rate of market penetration that I expect to increase.

Gomez has become one of the most important solutions in the Internet business. Q3 was the best bookings quarter in Gomez’s history with 31% year-over-year bookings growth on a pro forma basis to more than $28 million. Gomez also delivered nearly 26% year-over-year revenue growth on a pro forma basis to $18 million. We added 133 net new Gomez customers in Q3.

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