Compuware Profit Falls To Break-Even

DETROIT — Compuware Corp. (Nasdaq: CPWR), the developer of software for mainframe and app debugging and provider of tech services, reported a tiny profit of $52,000 or less than a penny a share in its first fiscal quarter ended June 30, down from net income of $10 million or 5 cents a share a year earlier.

Revenue was $164.5 million for the quarter, down from $170.8 million a year earlier.

The investing website SeekingAlpha.com said Compuware’s earnings were in line with analyst expectations, while revenue fell short of expectations by $1.1 million.

Among components of revenue, new software license fees — an important barometer of future maintenance and subscription revenue — were $26.7 million, down from $31.7 million a year earlier. Maintenance fees were $88.5 million, down from $87.2 million. Subscription fees were $19.4 million, down from $20.1 million. Services fees were $8.4 million, up from $7.7 million. And application services fees hit $21.6 million, down from $24 million a year earlier.

Software revenue was $76.7 million in North America, down 4.9 percent, and $57.8 million elsewhere, down 1 percent.

The company’s employee count was 2,957 as of June 30, down 32 percent from 4,363 a year earlier. That reflects the January sale of its Changepoint project management, Uniface application development and IT services businesses to a California private equity firm, Marlin Equity Partners.

Compuware also released an adjusted, “non-GAAP” (generally accepted accounting principles) net income figure of $11.3 million or 5 cents a share, down from $16.5 million or 7 cents a share a year earlier. The adjusted figure excludes stock-based compensation, the writedown of purchased software and intangible assets, restructuring expense, advisory fees, and the income tax effect of those items.

In a written statement, Compuware CEO Bob Paul said the quarter was “essentially in line with expectations. We are experiencing solid business momentum and are seeing positive metrics across the board for Q2 and the rest of the fiscal year. Additionally, our cost rationalization and business transformation efforts continue to progress well, and our previously announced strategic- and shareholder-value initiatives remain on track, with the board remaining committed to reviewing and evaluating credible opportunities to create additional value for shareholders.”

Also reporting results Tuesday was Covisint Corp. (Nasdaq: COVS), the secure collaboration technology provider that was spun out of Compuware and remains majority-owned by it.

Covisint reported revenue of $21.6 million in the quarter ended June 30, down from $24.1 million a year earlier. It reported a loss of $12.1 million or 32 cents a share, worse than last year’s loss of $4.7 million or 16 cents a share.

Covisint shares Tuesday, before the earnings announcement, rose 7 cents or 1.8 percent to $4.04. They were unchanged in light trading after hours.

In a conference call with analysts and journalists Tuesday night, Paul said about $4.5 million in Covisint expenses dragged down Compuware’s overall profitability — but he also said the spending would cut Covisint’s losses going forward. He also said it took longer than expected to complete a reorganization of the company’s application performance management sales force — “We’re a little bit disappointed in the APM growth,” Paul said.

As for the current quarter, Paul said, “We are seeing positive metrics for Q2 across the board… Cost rationalization and business transformation efforts are working well.”

Compuware also said it is on track to acheive its fiscal yaer target of operating cash flow of $105 million to $110 million, with $22 million in cash flow for the quarter. The company has $276 million cash on hand.

Compuware is predicting fiscal 2015 revenue of $720 million to $735 million and “adjusted” earnings per share of 41 to 45 cents.

Compuware stock closed the regular trading day at $9.21 a share, down 22 cents or 2.3 percent. The shares were also unchanged in after-hours trading.

More at www.compuware.com.

To listen to a replay of a conference call discussing these results, call (800) 475-6701 in the United States and (320) 365-3844 and use the pass code 329744.

Compuware faced an $11-a-share takeover bid in December 2012 from Elliott Management, a hedge fund controlled by New York billionaire Paul Singer. Compuware eventually reached an agreement with Elliott to take steps to boost profits and add outside directors who it’s assumed would be tougher on company performance, including cutting $80 million to $100 million in costs over two years. The cuts involved the layoff of 160 employees and the closure or cutting of 16 offices.

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