Compuware Shares Up 8% As Q1 Results Top Estimates

(RTTNews) - Shares of Compuware Corp. (CPWR) surged more than eight percent in extended trading on Tuesday after the software company reported results for the first quarter that topped analysts' expectations. However, profit for the quarter decreased from last year on lower operating margins amid higher expenses.

"The first quarter was a good start to the year, and the results support our fiscal year 2014 forecast. The quarter was marked by several positive developments, including the improvement of our sales pipelines, the release of key, innovative solution enhancements and the acquisition of several new, strategic customers in critical new growth areas," President and CEO Bob Paul said in a statement.

The Detroit, Michigan-based technology performance company reported net income of $9.97 million for the first quarter, lower than $10.47 million in the prior-year quarter, while earnings per share remained flat with last year at $0.05.

Excluding items, adjusted net income for the quarter was $22.42 million or $0.10 per share, compared to $19.09 million or $0.09 per share in the year-ago quarter.

On average, five analysts polled by Thomson Reuters expected earnings of $0.05 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter edged up to $227.52 million from $226.16 million in the same quarter last year, and topped five Wall Street analysts' consensus estimate of $226.92 million by a whisker.

Software license fees grew 4.2 percent to $35 million, while maintenance fees declined 4.3 percent to $99 million from last year.

Subscription fees increased 1.5 percent to $21 million, and professional services fees grew 1.1 percent to $49 million from the year-ago quarter.

Application services fees or Covisint revenues grew 17.1 percent to $24 million from the year ago, with subscription fees up 22 percent year-over-year.

In mid-May, Compuware cloud engagement platform Covisint filed with the U.S. Securities and Exchange Commission to raise up to $100 million in an initial public offering. Covisint's shares are expected to be traded on the Nasdaq global stock market under the symbol "COVS".

The company had rejected an acquisition offer made by activist investment company Elliott Management Corp. in late January and then decided to spin-off Covisint as a separately traded company.

Operating margin for the quarter contracted 210 basis points to 5.2 percent from last year's 7.3 percent as total operating expenses grew to $216 million, reflecting restructuring costs of $5 million.

"In addition to establishing strong momentum during the quarter, Q1 was also highlighted by the continued progress of our shareholder-creation initiatives, including the issuance of the company's first-ever quarterly cash dividend and the furthering of our cost-rationalization efforts," Paul added.

Regarding these efforts, Paul noted that the company remains on track to eliminate $45 million in corporate expenses in fiscal year 2014, as part of its larger goal of eliminating a minimum of $80 million to $100 million of these costs from the business over the next two years. CPWR closed Tuesday's regular trading session at $10.99, down $0.01 or 0.09% on a volume of 1.47 million shares. However, the stock surged $0.91 or 8.28% in after-hours trading.