) reported fourth quarter fiscal 2014 earnings of 8 cents per
share, which was at par with the Zacks Consensus Estimate. Non-GAAP
earnings (including stock based compensation) jumped 31.2% from the
year-ago quarter. The strong year-over-year growth was primarily
driven by improving margins.
Revenues decreased 2.9% from the year-ago quarter to $183.4 million
in the reported quarter and missed the Zacks Consensus Estimate of
Segment-wise, APM increased 8.7% on a year over year basis to $
83.9 million in the fourth quarter. Mainframe and Covisint, on the
other hand decreased 7.8% and 5.1% from the year ago quarter to
$75.1 million and $ 24.4 million in the reported quarter.
Management stated that dynaTrace continues to be the fastest
growing APM product in the market. It provides significant
competition to similar solutions from the likes of
With a win rate of greater than 70.0% against all competitors, new
and old alike, it is expected that dynaTrace will continue to be
Compuware's flagship APM solution in fiscal year 2015 and beyond.
Further, increased investment and go-to market strategies are
expected to drive DCRUM and APMaaS growth going forward.
Compuware's top-line also gained from robust performance of other
APM products namely Gomez Performance Network and Data Center
Real-User Monitoring solution.
Sourcewise, software license fees (23.8% of revenues) increased
5.8% on a year over year basis to $43.7 million in the fourth
quarter. Maintenance fees (47.8% of revenues), subscription fees
(10.8% of revenues), Service fees (4.3% of revenues) and
Application Service fees (13.3% of revenues) declined 1.3%, 2.6%,
4.4% and 5.1% on a year over year basis respectively.
All four of the geographic locations where the company operates
namely, North America, EMEA, APAC and Latin America, experienced
year-over-year bookings growth for the quarter.
Although the Mainframe business reported year-over-year decline in
the fourth quarter, management believes it is stabilizing and has
significant growth opportunities going forward. Fiscal 2014
Mainframe maintenance renewal rate was approximately 94.0%, the
highest renewal rate recorded by the business in the past five
During the quarter, the company released its new Data Center Real
User Monitoring solution. Also, during the quarter, the company
signed and completed an agreement with Merlin Equity Partners
whereby it sold off its Uniface, Changepoint and Professional
Services business units.
The company is exploring the feasibility of separating its APM and
Mainframe operations, which it believes would allow these very
distinct businesses competing in diverse market categories to build
on their leadership positions and thrive as independent entities.
Operating expenses as a percentage of revenues declined 990 basis
points (bps) from the year-ago quarter to 92.5% in the reported
quarter. Operating expenses exclude restructuring expenses,
amortization of purchased software, and amortization of acquired
intangible assets but include stock based compensation.
The company reported an operating income of $13.7 million in the
fourth quarter compared to an operating loss of $4.5 million in the
Adjusted net income (excluding all one-time items but including
stock based compensation) was $17.4 million or 8 cents per share
compared to $13.0 million or 6 cents per share reported in the
At the end of the fourth quarter of fiscal 2014, cash and cash
equivalents amounted to $300.1 million, up from $108.9 million in
the previous quarter. Long-term debt was nil in the reported
Compuware paid an annual dividend of 50 cents per share.
For fiscal 2015, Compuware expects revenues in the range of $720.0
million to $735.0 million. The Zacks Consensus Estimate for the
same is pegged at $764.0 million, which is much higher than the
management guided range
Management reiterated its non-GAAP earnings outlook in the range of
41 cents - 45 cents per share. However, the Zacks Consensus
Estimate for the same is pegged lower at 35 cents per share.
Management expects cash flow from operations to be in the range of
$105.0 million to $110.0 million.
In fiscal 2015, Compuware expects to reduce corporate expenses by
$43.0 million and shared service expenses by $7.0 million.
Management expects APM's contribution margin to double. and its
contribution margin to expand a healthy 600 basis points from
fiscal 2014 to fiscal 2016.
Compuware reported decent fourth quarter results. The bottom line
was in line with the Zacks Consensus Estimate while the top line
missed the same. Management provided a lower revenue guidance.
Compuware operates in an intensely competitive landscape and
competes with the likes of
International Business Machines Corp
) with respect to one or more offerings.
Nevertheless, we believe that Compuware's innovative product
pipeline, initiatives to reduce costs and new program wins will
boost profitability going forward.
Currently, Compuware has a Zacks Rank #3 (Hold).
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