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Compuware (CPWR)

Q4 2012 Earnings Call

May 22, 2012 5:00 pm ET


Lisa Elkin

Robert C. Paul - Chief Executive Officer and Director

Joseph Angileri - President and Chief Operating Officer

Laura L. Fournier - Chief Financial Officer, Chief Accounting Officer, Executive Vice President and Treasurer

Larry Angeli - Former Vice President of Marketing & Healthcare Vertical


Stewart Materne - Evercore Partners Inc., Research Division

Aaron Schwartz - Jefferies & Company, Inc., Research Division

Michael Latimore - Northland Capital Markets, Research Division

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Mark C. Jordan - Noble Financial Group, Inc., Research Division


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Hello, and welcome to the Compuware Corporation Q4 and Year-End 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, Senior Vice President of Communications and Investor Relations for Compuware Corporation. Ms. Elkin, you may begin.

Lisa Elkin

Thank you very much, Carey, and good afternoon, ladies and gentlemen. With me this afternoon are Bob Paul, Chief Executive Officer; Joe Angileri, 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 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.

I will now turn the call over to Bob, who will provide a summary of the quarter's results. Joe will then highlight business unit operating results, followed by Laura who will close with key financial information. We will then open the call to your questions. Bob?

Robert C. Paul

Thanks, Lisa. I'm pleased to report that Compuware achieved strong results for both our fiscal year and fiscal fourth quarter 2012. For the year, we delivered an approximately 9% year-over-year increase in total revenues, our largest revenue increase in a dozen years. In Q4 alone, revenues increased almost 7% year-over-year to $266 million. With every one of our business units generating year-over-year revenue growth, we believe we have crossed a major threshold in our strategic transformation and have strong momentum propelling us in the fiscal year '13.

While we had some challenges predicting performance over the year, given the changes to our business model, and the integrations of our acquisitions, earnings for the year were $0.40 per share, this includes $3.1 million of severance expense last quarter. So for the quarter, earnings were $0.12 per share. That's inclusive of the severance.

For fiscal year '12, total company operating margin came in at 12.5% as we absorbed the financial impact of the dynaTrace acquisition. We recognize that we still have a great deal of progress to make in improving our margins. This is a top priority for the company, which I'll discuss more in detail later.

Overall, Compuware's positive macro results during a year of significant transition demonstrate that we've built the company for both near-term performance and long-term dominance. We are successfully executing on the updated 3-year strategic plan that we announced in December. This plan focuses us on enhancing shareholder value, maintaining market leadership and driving growth and profitability across each of our business units.

We are making progress in achieving the financial, operational and growth targets we set for ourselves as we continue to deliver differentiated solutions that optimize user experience. Thanks to the hard work of our team, we have returned Compuware to a growth story. In 2008, our high-growth businesses accounted for just 16% of total revenue. In fiscal year '12, we've boosted that to almost 40%. Our transition into Q1 sales has been strong and major new releases earlier this month, which I'll talk about shortly, bode well for the coming year. While Joe will discuss the specific operating results by business unit, I do want to note a few key strategic highlights across the organization.

The Compuware APM business performed well in Q4, reaching a more than 20% increase in total year-over-year revenues for the quarter. For the year, total revenues increased nearly 17%. We saw strong growth from Compuware APM license revenues in Q4 with license fees up nearly 30% year-over-year, and the momentum is continuing into the fiscal year.

For fiscal year '12, Compuware APM license fees increased almost 10%. The Compuware Gomez SaaS business achieves a nearly 13% year-over-year growth rate in fiscal year '12. Both of these percentages should continue to increase with our recently announced major product releases.

The spring release of Compuware APM brings tremendous innovation and value to our customers, more than any release in recent history. This release features several industry-leading firsts, including a deep transaction monitoring solution for dynamic cloud and big data environments, including Cassandra NoSQL and Hadoop. We have also dramatically increased time to value, with 0 configuration instrumentation, out-of-the-box analytics, dynamic baselining and, of course, iPv6 support for cloud, Web and mobile platforms.

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