Compuware Corporation F4Q10 (Qtr End 03/30/10) Earnings Call Transcript

Compuware Corporation F4Q10 (Qtr End 03/30/10) Earnings Call Transcript
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Compuware Corporation (CPWR)

F4Q10 Earnings Call

May 20, 2010 5:00 pm ET


Lisa Elkin – Vice President of Communications

Peter J. Karmanos, Jr. – Chairman of the Board & Chief Executive Officer

Robert C. Paul – President, Chief Operating Officer & Director

Laura Lawson Fournier – Executive Vice President Administration & Chief Financial Officer


Kirk Materne – Rafferty Capital Markets

Gary Spivak – Noble Financial

David Rudow – Thrivent Financial

Mike Latimore – Northland Securities

Gabe Lowy – Mizuho Securities



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Welcome to Compuware Corporation’s fourth 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 Lisa Elkin, Vice President of Communications and Investor Relations for Compuware Corporation.

Lisa Elkin

With me this afternoon are Peter Karmanos, Jr., Chairman and Chief Executive Officer; Bob Paul, President and Chief Operating Officer; and Laura Fournier, Executive Vice President and Chief Financial Officer. 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 law.

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 risk and uncertainties. These risks and uncertainties are discussed in the company’s reports filed with the Securities & 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 fiscal year and other Compuware Business. We will then open the call to your questions.

Compuware growth drivers gained velocity as the company delivers solid Q4. FY ’10 earnings per share reached $0.60 GAAP. Q4 earnings per share are $0.16 GAAP. Compared to Q4 last year, Vantage license fees up 22%, Covisint revenues grew 15%, Changepoint license fees rise 7%, Gomez Web Performance division delivered strong commitments of $20.9 million in Q4. Total products revenue excluding divested products increased to 10% compared to Q4 last year, increased 2% including divested products.

Professional services margins reached 14.7% excluding Covisint. Services revenue increased sequentially. Currently FY ’11 guidance assumes revenue growth, strong EPS and cash flow. Compuware Corporation today announced financial results for its fourth quarter and fiscal year ended March 31, 2010. During the fiscal year revenues were $892.2 million compared to $1.09 billion in the previous fiscal year. Net income was $140.8 million compared to $139.6 million in fiscal 2009.

Earnings per share were $0.60, an increase of 9% from $0.55 in fiscal 2009 based upon 234.6 million and 252.4 million shares outstanding respectively. During fiscal 2010, software license fees were $194.5 million and maintenance and subscription fees were $456.4 million. Professional services fees for fiscal 2010 were $241.3 million. During the fourth quarter revenues were $230 million compared to $253.4 million in the fourth quarter last year. Net income was $37.4 million compared to $48.4 million in Q4 last year.

Earnings per share were $0.16 compared to $0.20 last year based upon 228.7 million and 246 million shares outstanding respectively. During the company’s fourth quarter software license fees were $51.8 million compared to $50.3 million excluding divested products and $55.5 million as reported in the fourth quarter last year. Maintenance and subscription fees were $117.9 million in the fourth quarter compared to $104 million excluding divested products and $111.6 million as recorded in the fourth quarter last year. Revenue from professional services in the fourth quarter was $60.3 million compared to $86.3 million in the same quarter last year.

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

Robert C. Paul

During a year of significant transition Compuware produced strong financial results. We increased revenue in our key growth drivers and generated more than $200 million in cash flow from operations. At the same time, we’ve sharpened the fundamental structure of the company, we divested solutions where we were not best in class and invested in our growth businesses. We’ve also increased our competitive advantage and profitability in our mature lines of business. Bottom line, Compuware is positioned for success and to deliver consistent long term earnings and revenue growth.

Among our growth drivers Gomez and Vantage performed well in the fiscal year 2010 and also showed major promise in the year ahead. Everyday applications on the web and the complex applications delivery chain behind them become more critical to our customers’ brand awareness, revenue growth and overall market share. The markets for solutions to ensure the optimal performance of these applications is large and its growing rapidly. Compuware has an unmatched solution for optimizing the performance of these applications across the enterprise, the Internet and the cloud. We know and the industry analysts agree that none of our competitors can match these capabilities.

This quarter alone we closed 15 agreements with enterprise Internet customers, some in the seven figure range. Given that we’ve just recently acquired Gomez we’re just scratching the potential of this joint offering driven by the increasingly complex and multisource nature of delivering mission critical applications. Cloud computing in particular remains one of the top issues for CIOs today. The two greatest concerns regarding cloud are security and performance.

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