COMPUWARE CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - COMPUWARE CORPORATION 8-K 01-26-2012 - COMPUWARE CORP	form8k.htm
EX-99.2 - EXHIBIT 99.2 - COMPUWARE CORP	ex99_2.htm

Exhibit 99.1

Compuware Announces Q3 Results

DETROIT--January 26, 2012--Compuware Corporation (Nasdaq: CPWR), the technology performance company, today announced financial results for its third quarter ended December 31, 2011.

“The growth Compuware delivered across its business in Q3 confirms that we have built the right portfolio for consistently increasing revenue and earnings going forward,” said Compuware CEO Bob Paul. “Compuware remains poised to deliver its largest year-over-year increase in full-year revenues in a dozen years, and we will use those results as a catapult into a profitable year of growth in FY ’13. To immediately optimize our ability to do so, we have sharply focused our team on enhancing sales execution and better expense management throughout the organization.”

Third Quarter Fiscal Year 2012 Results

During the company’s third quarter:

software license fees were $57.1 million, compared to $60.2 million in Q3 last year;

maintenance fees were $106.8 million, up from $106.3 million in Q3 last year;

subscription fees were $19.9 million, up from $17.8 million in Q3 last year;

revenue from professional services was $50.6 million, up from $48.3 million in Q3 last year;

application services fees were $18.6 million, up from $14.4 million in Q3 last year.

During the third quarter, total revenues were $253.1 million, up from $247.0 million in the third quarter last year. Third quarter net income was $21.6 million, and earnings per share were ten cents, based on 221.9 million shares outstanding. In Q3 of the previous year, net income was $34.0 million, and earnings per share were 15 cents based on 225.2 million shares outstanding. The decrease in net income was primarily due to increased investments in Compuware’s APM business unit, including acquisition-related expenses.

Third Quarter Fiscal Year 2012 Highlights

During the third quarter, Compuware:

Began working with the Google Page Speed team and using the Compuware Gomez platform® to make it easier for organizations to optimize mobile web application performance through best practices and tools.

Announced that esure, a leading provider of insurance in the UK, chose Compuware dynaTrace as its platform for application performance management; hybris also now offers the dynaTrace Application Performance Management solution in its eCommerce platform.

Launched new international mobile website performance benchmarks in France and Germany as well as the Compuware Gomez® China Portal 2.0. Additionally, Compuware introduced new website performance benchmarks for the credit card industry.

Announced that Covisint was accepting PQRS (Physician Quality Reporting System) submissions, which is helping Intermountain Healthcare, an internationally recognized nonprofit health system based in Salt Lake City, earn nearly $1 million in PQRS incentives granted by the Centers for Medicare and Medicaid (CMS) for PQRS.

Page 2

Compuware Announces Q3 results

January 26, 2012

Announced on CloudSleuth the one-year average results of the top 25 cloud service providers' global performance rankings. These rankings help those shopping for a cloud service provider to compare and track providers' global performance and make informed cloud purchasing decisions.

Revealed the innovations and successes of its top partners from around the world at the 2011 Compuware Partner Connect Summit

Announced that Comdata Network, Inc. has implemented a Compuware Professional Services’ test automation process.

Partnered the Compuware Test Data Privacy Solution with Dataguise, a leading innovator of enterprise security intelligence solutions, to protect employee and customer personally identifiable information.

Deployed its Compuware Changepoint Software as a Service solution for professional services automation at Brisbane, Australia-based Unidel. Additionally, Dynamic Risk Assessment Systems selected Compuware Changepoint for professional services automation.

Released the results of an independent research study conducted by Vanson Bourne, exploring mainframe use in the enterprise. Additionally announced the findings of an international study examining the impact of new technology trends and models driven by business and end-user demands, along with releasing the top retail Web and mobile site performers for Cyber Monday based on the Compuware Performance Index.

Announced the availability of the eBook: "Web Load Testing for Dummies," written by Scott Barber, Founder and Chief Technologist at PerfTestPlus, and Colin Mason, Compuware's Web Load Testing Product Manager. Together they explore the importance of web load testing and its impact on business.

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 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 (22:00 GMT) today. To join the conference call, interested parties in the United States should call 800-230-1085. For international access, the conference call number is +1-612-288-0329. 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 230756. Additionally, investors can listen to the conference call via webcast by visiting the Compuware Corporation Investor Relations web site at http://www.compuware.com.

Page 3

Compuware Announces Q3 results

January 26, 2012

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 DECEMBER 31,
ASSETS
	2011			2010
CURRENT ASSETS:
Cash and cash equivalents	$	82,201		$	81,863
Accounts receivable, net		470,724			517,775
Deferred tax asset, net		47,460			49,861
Income taxes refundable		4,634			4,624
Prepaid expenses and other current assets		32,283			30,675
Total current assets		637,302			684,798

PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION		326,099			334,482

CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET		117,175			86,133

ACCOUNTS RECEIVABLE		216,735			192,470
DEFERRED TAX ASSET, NET		40,789			32,061
GOODWILL		797,163			608,228
OTHER ASSETS		35,547			33,664

TOTAL ASSETS	$	2,170,810		$	1,971,836

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	16,805		$	18,139
Current portion of long term debt		110,000			-
Accrued expenses		107,512			97,422
Income taxes payable		19,073			21,304
Deferred revenue		435,219			449,342
Total current liabilities		688,609			586,207

DEFERRED REVENUE		356,693			354,296

ACCRUED EXPENSES		27,908			36,420

DEFERRED TAX LIABILITY, NET		77,100			56,638
Total liabilities		1,150,310			1,033,561

SHAREHOLDERS' EQUITY:
Common stock		2,188			2,185
Additional paid-in capital		681,359			636,713
Retained earnings		355,650			297,419
Accumulated other comprehensive income (loss)		(18,697	)		1,958
Total shareholders' equity		1,020,500			938,275

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	2,170,810		$	1,971,836

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,

	2011		2010		2011		2010
REVENUES:
Software license fees	$	57,121	$	60,152	$	152,958	$	139,095
Maintenance fees		106,843		106,321		322,908		314,159
Subscription fees		19,931		17,841		58,156		48,769
Professional services fees		50,575		48,332		157,403		139,576
Application services fees		18,587		14,379		52,302		37,780
Total revenues		253,057		247,025		743,727		679,379

OPERATING EXPENSES:
Cost of software license fees		4,844		3,745		13,150		10,428
Cost of maintenance fees		9,603		8,735		28,907		23,842
Cost of subscription fees		7,291		6,539		22,192		17,984
Cost of professional services		45,277		41,092		136,496		121,661
Cost of application services		17,265		12,719		53,934		34,159
Technology development and support		27,265		22,517		78,706		65,951
Sales and marketing		69,683		62,437		197,255		176,648
Administrative and general		39,236		39,760		122,717		115,977
Total operating expenses		220,464		197,544		653,357		566,650

INCOME FROM OPERATIONS		32,593		49,481		90,370		112,729

OTHER INCOME (EXPENSE), NET		231		1,376		1,221		3,103

INCOME BEFORE INCOME TAXES		32,824		50,857		91,591		115,832

INCOME TAX PROVISION		11,236		16,858		30,339		43,196

NET INCOME	$	21,588	$	33,999	$	61,252	$	72,636

DILUTED EPS COMPUTATION
Numerator: Net income	$	21,588	$	33,999	$	61,252	$	72,636
Denominator:
Weighted-average common shares outstanding		218,534		218,683		218,427		221,490
Dilutive effect of stock options		3,349		6,475		4,134		3,622
Total shares		221,883		225,158		222,561		225,112
Diluted EPS	$	0.10	$	0.15	$	0.28	$	0.32

COMPUWARE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	NINE MONTHS ENDED
	DECEMBER 31,
	2011			2010
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income	$	61,252		$	72,636
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		44,706			37,300
Stock award compensation		17,555			13,387
Deferred income taxes		7,460			7,554
Other		221			561
Net change in assets and liabilities, net of effects from currency fluctuations and acquisitions:
Accounts receivable		(14,201	)		(23,489	)
Prepaid expenses and other current assets		1,940			14,572
Other assets		(3,451	)		(1,514	)
Accounts payable and accrued expenses		783			(11,882	)
Deferred revenue		(53,184	)		(77,463	)
Income taxes		10,604			4,123
Net cash provided by operating activities		73,685			35,785

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of:
Business, net of cash acquired		(249,337	)		(18,165	)
Property and equipment		(15,879	)		(13,328	)
Capitalized software		(18,346	)		(12,877	)
Other		(575	)		-
Net cash used in investing activities		(284,137	)		(44,370	)

CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from borrowings		180,200			-
Payments on borrowings		(70,200	)		-
Net proceeds from exercise of stock awards including excess tax benefits		8,503			53,331
Employee contribution to common stock purchase plans		2,101			1,892
Repurchase of common stock		(4,259	)		(116,600	)
Net cash provided by (used in) financing activities		116,345			(61,377	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(3,936	)		1,928

NET DECREASE IN CASH AND CASH EQUIVALENTS		(98,043	)		(68,034	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		180,244			149,897

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	82,201		$	81,863

COMPUWARE CORPORATION AND SUBSIDIARIES

OPERATIONAL HIGHLIGHTS

(Dollar Amounts In Thousands)

	QUARTER								QUARTER
	ENDED								ENDED
	DEC 31,					YR - YR			SEP 30,		QTR - QTR
	2011			2010		% Chg			2011		% Chg
Total Product Software Revenue by Geography
North America	$	98,068		$	96,171		2.0	%	$	107,989		(9.2	%)
International		85,827			88,143		(2.6	%)		81,903		4.8	%

Deferred License Fees
Current	$	26,952		$	42,813		(37.0	%)	$	30,120		(10.5	%)
Long-term		12,270			28,650		(57.2	%)		14,361		(14.6	%)

Deferred Maintenance
Current	$	323,485		$	324,349		(0.3	%)	$	309,689		4.5	%
Long-Term		305,549			291,904		4.7	%		275,379		11.0	%

Deferred Subscription
Current	$	50,444		$	51,355		(1.8	%)	$	49,314		2.3	%
Long-Term		13,265			12,114		9.5	%		14,412		(8.0	%)

Deferred Professional Services	$	20,361		$	18,033		12.9	%	$	18,845		8.0	%

Deferred Application Services	$	39,586		$	34,420		15.0	%	$	38,989		1.5	%

Other:
Total Company Headcount		4,722			4,329		9.1	%		4,720		0.0	%

Total DSO (Billed)		88.0			95.4					66.8
Total DSO		167.4			188.6					149.7

Stock-based compensation Expense

Cost of maintenance fees		202			190		6.3	%		274		(26.3	%)
Cost of subscription fees		(68	)		33		(306.1	%)		32		(312.5	%)
Cost of professional services		54			118		(54.2	%)		40		35.0	%
Cost of application services		254			140		81.4	%		515		(50.7	%)
Technology development and support		575			318		80.8	%		750		(23.3	%)
Sales and marketing		1,493			1,272		17.4	%		1,767		(15.5	%)
Administrative and general		3,062			2,121		44.4	%		3,282		(6.7	%)

Total stock-based compensation expense before income taxes	$	5,572		$	4,192		32.9	%	$	6,660		(16.3	%)

COMPUWARE CORPORATION AND SUBSIDIARIES

BUSINESS UNIT RESULTS OF OPERATIONS

(In Thousands)

																Covisint
													Professional			Application			Unallocated
Quarter Ended:	APM			Changepoint			Mainframe			Uniface			Services			Services			Expenses (1)			Total

December 31, 2011

Software license fees	$	24,360		$	3,513		$	26,720		$	2,528		$	-		$	-		$	-		$	57,121
Maintenance fees		19,441			3,895			75,782			7,725			-			-			-			106,843
Subscription fees		19,379			552			-			-			-			-			-			19,931
Professional services fees		8,893			4,517			558			981			35,626			-			-			50,575
Application services fees		-			-			-			-			-			18,587			-			18,587
Total revenues		72,073			12,477			103,060			11,234			35,626			18,587			-			253,057

Operating expenses		82,118			11,683			24,721			5,044			31,794			17,265			47,839			220,464

Income (loss) from operations	$	(10,045	)	$	794		$	78,339		$	6,190		$	3,832		$	1,322		$	(47,839	)	$	32,593
Contribution margin %		(13.9	%)		6.4	%		76.0	%		55.1	%		10.8	%		7.1	%					12.9	%

December 31, 2010

Software license fees	$	21,059		$	1,545		$	34,877		$	2,671		$	-		$	-		$	-		$	60,152
Maintenance fees		17,194			3,742			77,838			7,547			-			-			-			106,321
Subscription fees		17,841			-			-			-			-			-			-			17,841
Professional services fees		5,937			4,141			1,784			1,354			35,116			-			-			48,332
Application services fees		-			-			-			-			-			14,379			-			14,379
Total revenues		62,031			9,428			114,499			11,572			35,116			14,379			-			247,025

Operating expenses		63,450			11,680			26,419			4,932			29,108			12,719			49,236			197,544

Income (loss) from operations	$	(1,419	)	$	(2,252	)	$	88,080		$	6,640		$	6,008		$	1,660		$	(49,236	)	$	49,481
Contribution margin %		(2.3	%)		(23.9	%)		76.9	%		57.4	%		17.1	%		11.5	%					20.0	%

September 30, 2011

Software license fees	$	18,329		$	2,136		$	38,456		$	2,790		$	-		$	-		$	-		$	61,711
Maintenance fees		19,129			3,913			78,019			8,019			-			-			-			109,080
Subscription fees		18,599			502			-			-			-			-			-			19,101
Professional services fees		6,787			4,300			1,569			1,072			39,528			-			-			53,256
Application services fees		-			-			-			-			-			17,548			-			17,548
Total revenues		62,844			10,851			118,044			11,881			39,528			17,548			-			260,696

Operating expenses		79,932			10,944			24,129			5,151			31,662			19,835			50,883			222,536

Income (loss) from operations	$	(17,088	)	$	(93	)	$	93,915		$	6,730		$	7,866		$	(2,287	)	$	(50,883	)	$	38,160
Contribution margin %		(27.2	%)		(0.9	%)		79.6	%		56.6	%		19.9	%		(13.0	%)					14.6	%

(1)	Unallocated expenses include costs associated with finance, human resources, legal, administration, internal technology and other corporate expenses.

COMPUWARE CORPORATION AND SUBSIDIARIES

BUSINESS UNIT RESULTS OF OPERATIONS

(In Thousands)

																Covisint
													Professional			Application			Unallocated
Nine Months Ended:	APM			Changepoint			Mainframe			Uniface			Services			Services			Expenses (1)			Total

December 31, 2011

Software license fees	$	54,142		$	7,643		$	83,874		$	7,299		$	-		$	-		$	-		$	152,958
Maintenance fees		57,003			11,647			230,776			23,482			-			-			-			322,908
Subscription fees		56,639			1,517			-			-			-			-			-			58,156
Professional services fees		22,646			12,487			3,960			3,259			115,051			-			-			157,403
Application services fees		-			-			-			-			-			52,302			-			52,302
Total revenues		190,430			33,294			318,610			34,040			115,051			52,302			-			743,727

Operating expenses		231,489			33,989			72,926			15,595			95,045			53,934			150,379			653,357

Income (loss) from operations	$	(41,059	)	$	(695	)	$	245,684		$	18,445		$	20,006		$	(1,632	)	$	(150,379	)	$	90,370
Contribution margin %		(21.6	%)		(2.1	%)		77.1	%		54.2	%		17.4	%		(3.1	%)					12.2	%

December 31, 2010

Software license fees	$	53,520		$	6,145		$	72,346		$	7,084		$	-		$	-		$	-		$	139,095
Maintenance fees		47,912			10,904			233,465			21,878			-			-			-			314,159
Subscription fees		48,769			-			-			-			-			-			-			48,769
Professional services fees		15,404			11,489			4,918			3,390			104,375			-			-			139,576
Application services fees		-			-			-			-			-			37,780			-			37,780
Total revenues		165,605			28,538			310,729			32,352			104,375			37,780			-			679,379

Operating expenses		177,527			34,370			73,591			14,231			87,748			34,159			145,024			566,650

Income (loss) from operations	$	(11,922	)	$	(5,832	)	$	237,138		$	18,121		$	16,627		$	3,621		$	(145,024	)	$	112,729
Contribution margin %		(7.2	%)		(20.4	%)		76.3	%		56.0	%		15.9	%		9.6	%					16.6	%

(1)	Unallocated expenses include costs associated with finance, human resources, legal, administration, internal technology and other corporate expenses.

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