- Revenue $1.145 Billion, Up 1 Percent in Constant Currency and Down 2 Percent as Reported
- GAAP EPS $0.51, Up 11 Percent in Constant Currency and 13 Percent as Reported
- Non-GAAP EPS $0.63, Up 16 Percent in Constant Currency and 15 Percent as Reported
- Cash Flow from Continuing Operations $183 Million, Up 10 Percent in Constant Currency and 28 Percent as Reported
- IP Transaction Adds $0.05 to GAAP and Non-GAAP EPS, and $35 Million to Cash Flow from Continuing Operations
- Updates Revenue, GAAP and Non-GAAP EPS Outlook for Full Fiscal Year 2013
CA Technologies (NASDAQ:CA) today reported financial results for its first quarter of fiscal year 2013, ended June 30, 2012.
“Despite the headwinds to top-line growth we experienced during the first quarter, we remain committed to delivering the earnings per share and cash flow from operations growth we provided at the beginning of the fiscal year,” said Bill McCracken, chief executive officer, CA Technologies. “In addition to the benefits of a $35 million intellectual property transaction we closed during the quarter, we will drive increased profitability in our organic business and now expect to deliver further expansion of our GAAP operating margin to 31 percent and our non-GAAP operating margin to 36 percent for the full fiscal year.”
REVENUE AND BOOKINGS
In constant currency, revenue from existing products and services was flat, while revenue increased 1 percent from acquired technologies. On an as reported basis, revenue from existing products and services decreased 2 percent, while revenue from acquired technologies increased less than 1 percent. Acquired technologies are defined as technologies acquired within the past 12 months. About 63 percent of the Company’s revenue came from North America, while 37 percent came from International operations.
- Total revenue was $1.145 billion, up 1 percent in constant currency and down 2 percent as reported.
- Total revenue backlog was $7.771 billion, down 5 percent in constant currency and 9 percent as reported. The current portion of revenue backlog was $3.527 billion, down 1 percent in constant currency and 5 percent as reported.
- North America revenue was $726 million, up 2 percent in constant currency and 1 percent as reported.
- International revenue was $419 million, up 1 percent in constant currency and down 6 percent as reported.
- Total bookings in the first quarter were $553 million, down 34 percent in constant currency and 36 percent as reported, primarily due to a decrease in renewals. The Company previously stated that it expected its fiscal year 2013 renewal portfolio to decline in the single digits year-over-year with the first quarter being the low point.
- The Company renewed a total of 4 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $61 million. During the first quarter of fiscal year 2012, the Company renewed a total of 8 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $255 million.
- The weighted average duration of subscription and maintenance bookings for the quarter was 2.79 years, compared with 3.28 years for the same period in fiscal year 2012.
- North America bookings were $326 million, down 39 percent in constant currency and as reported.
- International bookings were $227 million, down 26 percent in constant currency and 31 percent as reported.
EXPENSES AND MARGIN
As part of the Company’s efforts to more fully utilize its intellectual property assets, in the first quarter of fiscal year 2013, it closed a transaction that assigned the rights to certain intellectual property assets to a large technology company for $35 million. The Company will continue to have the right to use these intellectual property assets in current and future product offerings. For the first quarter of fiscal year 2013, total expenses before interest and income taxes includes the positive effect of $35 million received from this transaction.
Year-over-year GAAP results:
- Operating expenses, before interest and income taxes, were $764 million, down 3 percent in constant currency and 7 percent as reported.
- Operating income, before interest and income taxes, was $381 million, up 10 percent in constant currency and 11 percent as reported.
- Operating margin was 33 percent, up 4 percentage points from the prior year period.
Year-over-year non-GAAP results exclude purchased software and other intangibles amortization, share-based compensation, and certain other gains and losses. The results also include gains and losses on hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter.
- Operating expenses, before interest and income taxes, were $706 million, down 2 percent in constant currency and 5 percent as reported.
- Operating income, before interest and income taxes, was $439 million, up 8 percent in constant currency and 5 percent as reported.
- Operating margin was 38 percent, up 2 percentage points from the prior year period.
For the first quarter of fiscal year 2013, the Company’s effective GAAP tax rate was 35.1 percent, compared with 31.5 percent in the prior year period. The Company’s effective non-GAAP tax rate was 30.6 percent, compared with 31.6 percent in the prior year period.
GAAP and non-GAAP EPS were favorably affected by about $0.05 per share from the intellectual property transaction. In addition, GAAP and non-GAAP EPS were positively affected by a reduction in share count. The intellectual property transaction also had a positive impact of about 3 percentage points on both GAAP and non-GAAP operating margin.
- Mainframe Solutions revenue was $628 million, flat in constant currency and down 3 percent as reported. Operating expense was $260 million and operating profit was $368 million. Operating margin was 59 percent, up from 57 percent a year ago.
- Enterprise Solutions revenue was $426 million, up 2 percent in constant currency and flat as reported. Operating expense was $359 million and operating profit was $67 million. Operating margin was 16 percent, up from 11 percent a year ago. The intellectual property transaction had a favorable effect of about 8 percentage points on this margin.
- Services revenue was $91 million, up 4 percent in constant currency and 1 percent as reported. Operating expense was $87 million and operating profit was $4 million. Operating margin was 4 percent, up from 2 percent a year ago.
CASH FLOW FROM CONTINUING OPERATIONS
Cash flow from continuing operations in the first quarter was $183 million, which includes the $35 million received from the intellectual property transaction, compared with $143 million in the prior year. Cash flow from continuing operations was also favorably affected by lower income tax payments and an increase in upfront cash collections.
- Cash and cash equivalents at June 30, 2012 were $2.541 billion.
- With $1.298 billion in total debt outstanding and $140 million in notional pooling, the Company’s net cash and cash equivalents was $1.103 billion.
- During the quarter, the Company successfully completed its Accelerated Share Repurchase (ASR) agreement with the receipt of 3.7 million common shares, in addition to the 15 million shares received in the fourth quarter of fiscal year 2012.
- Subsequent to the completion of the ASR, the Company repurchased 3.8 million shares in the market for approximately $96 million.
- The Company is currently authorized to repurchase an additional $900 million of common stock through fiscal year 2014.
- The Company’s outstanding share count at June 30, 2012 was 463 million.
- During the quarter, the Company distributed $119 million in dividends.
During the first quarter the Company:
- Announced a new CA Global Partner Program that provides an expanded set of benefits to support partners’ evolving business models. The program supports efforts by solution providers, service providers, alliance partners and resellers to enable customers to deliver innovative business services. Later in the quarter, the program was extended to include next-generation mainframe modernization solutions to help customers reduce costs and increase efficiency.
- Announced it has extended its university relationship program with plans to roll out a new Innovation Center in partnership with Tel Aviv University (TAU) in Israel, collaborating on topics such as IT management and cyber security. The announcement builds on its programs recently announced at the University Innovation Center in Hyderabad, India and at the CA Technologies Innovation Center at Stony Brook University in New York.
- Announced that channel partners with expert proficiency in CA Automation Suite for Clouds now meet the Cloud Management Competency Validation criteria for the Cloud Builder designation of the Cisco Cloud Partner Program.
- Announced Nimsoft Monitor has attained the VCE™ and Vblock™ Ready certification. This enables users to confidently leverage Nimsoft IT Management-as-a-Service capabilities to rapidly and cost-efficiently gain full visibility into their Vblock infrastructure—along with the rest of their cloud and non-cloud environments.
- Announced a new version of CA Process Automation that helps customers increase agility for competitive advantage while lowering costs.
OUTLOOK FOR FISCAL YEAR 2013
The Company updated its revenue and GAAP and non-GAAP earnings per share from continuing operations outlook and reaffirmed cash flow from continuing operations guidance for fiscal year 2013. The following guidance consists of “forward-looking statements” (as defined below).
The Company expects the following:
- Total revenue growth in a range of 1 percent to 2 percent in constant currency. At June 30, 2012 exchange rates, this translates to reported revenue of $4.74 billion to $4.80 billion. Previously, total revenue growth outlook was in a range of 2 percent to 4 percent in constant currency.
- GAAP diluted earnings per share from continuing operations growth in constant currency in a range of 12 percent to 14 percent. At June 30, 2012 exchange rates, this translates to GAAP reported diluted earnings per share of $2.07 to $2.12. Previously, GAAP diluted earnings per share from continuing operations in constant currency was 10 percent to 14 percent.
- Non-GAAP diluted earnings per share from continuing operations growth in constant currency in a range of 10 percent to 12 percent. At June 30, 2012 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.45 to $2.50. Previously, non-GAAP diluted earnings per share from continuing operations in constant currency was 9 percent to 12 percent.
- Cash flow from continuing operations growth in a range of 4 percent to 6 percent in constant currency. At June 30, 2012 exchange rates, this translates to reported cash flow from continuing operations of $1.54 billion to $1.57 billion.
This outlook also assumes no material acquisitions and a partial currency hedge of operating income. The Company expects a full-year GAAP operating margin of 31 percent, up from the previous guidance of 30 percent, and non-GAAP operating margin of 36 percent, up from a previous outlook of 35 percent. The Company also expects an effective full-year GAAP and non-GAAP tax rate to come in closer to the high-end of the 30 to 31 percent provided at the outset of the fiscal year.
The Company anticipates approximately 452 million shares outstanding at fiscal year 2013 year-end and weighted average diluted shares outstanding of approximately 459 million for the fiscal year.
This news release and the accompanying tables should be read in conjunction with additional content that is available on the Company’s website, including a supplemental financial package, as well as a webcast that the Company will host at 5 p.m. ET today to discuss its unaudited first quarter results. The webcast will be archived on the website. Individuals can access the webcast, as well as this press release and supplemental financial information, at http://investor.ca.com/ or listen to the call at 1-877-561-2748. The international participant number is 1-720-545-0044.