- Total New Sales Up More Than Forty
Percent Year over Year
- Second Quarter Revenue of $1,005
Million
- Second Quarter GAAP EPS of
$0.39
- Second Quarter Non-GAAP EPS of
$0.56
- Second Quarter Cash Flow From
Continuing Operations of $43 Million
CA Technologies (NASDAQ:CA) today reported financial results for
its second quarter fiscal 2016, which ended September 30,
2015.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
"I am pleased with the progress we have demonstrated this
quarter. Our new sales performance reflects the continued
improvements we are making in both our products as well as our
sales execution. New sales were up more than forty percent. This is
an indicator of the great traction our products are experiencing
and CA's value in today's application economy. In addition, our
renewal yields were the best in recent history.
“We recognize that there is still work to do in order to realize
the kind of growth that CA can achieve. CA remains focused on
product quality, product innovation, overall execution and fiscal
discipline.
“Our strategy continues to stress organic innovation,
complemented by targeted investments that give us competitive
advantage.
“Looking ahead, we are encouraged by the breadth of
opportunities in front of us. That said, for the rest of the fiscal
year, we expect results to be weighted towards the fourth
quarter.”
FINANCIAL OVERVIEW
(dollars in millions, except share data)
Second
Quarter FY16 vs. FY15 FY16 FY15
% Change
% ChangeCC**
Revenue $1,005 $1,079 (7)% (1)% GAAP Income
from Continuing Operations $172 $235 (27)%
(14)% Non-GAAP Income from Continuing Operations* $247 $292
(15)% (7)% GAAP Diluted EPS from Continuing
Operations $0.39 $0.53 (26)% (13)% Non-GAAP
Diluted EPS from Continuing Operations* $0.56 $0.65
(14)% (6)% Cash Flow from Continuing Operations $43
$66 (35)% (32)%
* Non-GAAP income and earnings per share are non-GAAP financial
measures, as noted in the discussion of non-GAAP results below. A
reconciliation of non-GAAP financial measures to their comparable
GAAP financial measures is included in the tables following this
news release.**CC: Constant Currency
REVENUE AND BOOKINGS
(dollars in millions)
Second Quarter FY16 vs.
FY15 FY16
% ofTotal
FY15
% ofTotal
%Change
%Change CC**
North America Revenue $677 67% $693 64%
(2)% (1)% International Revenue $328 33% $386
36% (15)% 1% Total Revenue $1,005
$1,079 (7)% (1)%
North America Bookings $1,173 85% $552
74% 113% 114% International Bookings $210
15% $197 26% 7% 22% Total
Bookings $1,383 $749 85%
92%
Current Revenue Backlog $3,006
$3,230 (7)% (2)% Total
Revenue Backlog $6,614 $6,811
(3)% 2%
**CC: Constant Currency
- Total revenue
declined primarily as a result of an unfavorable foreign
exchange effect of $67 million. Our second quarter fiscal 2016
acquisitions of Rally Software Development Corp. and Xceedium,
Inc., contributed approximately two points of revenue for the
quarter.
- Total bookings increased primarily due
to a renewal with a large system integrator in excess of $500
million and, to a lesser extent, an increase in new product sales
and Mainframe Solutions renewals. Even without the large system
integrator deal, there was a significant increase in total
bookings.
- The Company executed a total of 11
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $887 million.
During the second quarter of fiscal 2015, the Company executed a
total of 6 license agreements with incremental contract values in
excess of $10 million each, for an aggregate contract value of $217
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 4.46
years, compared with 3.10 years for the same period in fiscal
2015.
EXPENSES AND MARGIN
(dollars in millions)
Second Quarter FY16 vs.
FY15 FY16 FY15
%Change
%Change CC**
GAAP Operating Expenses Before Interest and Income
Taxes $746 $759 (2)% 1% Operating Income
Before Interest and Income Taxes $259 $320 (19)%
(6)% Operating Margin 26% 30%
Effective Tax Rate 30.4% 23.7%
Non-GAAP* Operating Expenses Before Interest and
Income Taxes $648 $650 0% 5% Operating Income
Before Interest and Income Taxes $357 $429 (17)%
(9)% Operating Margin 36% 40%
Effective Tax Rate 28.4% 30.0%
*A reconciliation of non-GAAP financial measures to their
comparable GAAP financial measures is included in the tables
following this news release. Year-over-year non-GAAP results
exclude purchased software and other intangibles amortization,
share-based compensation, capitalization (an add-back) and
amortization of internal software costs, Board approved workforce
rebalancing initiatives 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 on hedges that do not
mature within the quarter.**CC: Constant Currency
- GAAP second quarter operating expenses
decreased as a result of a favorable foreign exchange effect and a
decrease in amortization expenses as a result of an impairment
charge of $13 million recorded in the second quarter of fiscal
2015. These favorable effects were partially offset against costs
from our second quarter fiscal 2016 acquisitions.
- Non-GAAP second quarter operating
expenses were generally consistent as a result of a favorable
foreign exchange effect, offset against costs from our second
quarter fiscal 2016 acquisitions.
- GAAP and Non-GAAP EPS in the second
quarter of fiscal 2016 declined primarily due to an unfavorable
foreign exchange effect and an increase in expenses from our second
quarter fiscal 2016 acquisitions.
SELECTED HIGHLIGHTS FROM THE QUARTER
- Customer traction for CA Technologies
gained this quarter include:
- A major competitive win at a large
Canadian bank that dramatically expands CA's footprint.
- A large engagement at one of the
world's largest automakers that represents an enterprise-wide
expansion of our relationship and involves a range of our
products.
- Another notable deal was a competitive
win at a leading athletic apparel company that is transforming its
brand with a leading digital health program.
- A particularly large upgrade order from
a global leader in networking routers and switches, which reflects
the success of Rally's land-and-expand strategy.
- Solutions Leadership and Recognition
during the quarter:
- CA made available for general delivery
the first release of a bi-directionally integrated, combined Rally
and CA Project and Portfolio Management (PPM) solution.
- The release of CA PPM 14.3 last month
allows customers to glean powerful management insights from data
across all platforms and devices, including mobile.
- CA’s Security business had a very
strong performance with the close of multiple, six figure
transactions across a range of vertical industries.
- Gartner has rated CA Technologies with
an overall "Positive" rating in its August 2015 Vendor Rating
report. (1)
SEGMENT INFORMATION
(dollars in millions)
Second Quarter FY16 vs.
FY15 Revenue
%Change
%Change CC**
Operating Margin FY16 FY15
FY16 FY15 Mainframe
Solutions $554 $610 (9)% (3)% 62%
62% Enterprise Solutions $368 $378 (3)%
3% 3% 13% Services $83 $91 (9)%
(3)% 5% 2%
**CC: Constant Currency
- Mainframe Solutions revenue declined
primarily due to an unfavorable foreign exchange effect and, to a
lesser extent, insufficient revenue from prior period new sales to
offset the decline in revenue contribution from renewals. Operating
margin was consistent compared with the year-ago period.
- Enterprise Solutions revenue declined
due to an unfavorable foreign exchange effect. Excluding the
unfavorable effect of foreign exchange, Enterprise Solutions
revenue would have increased as a result of additional revenue
associated with our second quarter fiscal 2016 acquisitions.
Operating margin decreased 10% primarily due to our second quarter
fiscal 2016 acquisitions.
- Services revenue decreased primarily
due to an unfavorable foreign exchange effect and, to a lesser
extent, lower professional services engagements in fiscal 2015.
Operating margin increased primarily due to a decrease in
personnel-related costs as a result of prior period severance
actions.
CASH FLOW FROM OPERATIONS
- Cash flow from operations for the
second quarter of fiscal 2016 was $43 million, versus $66 million
in the year ago period. Cash flow from operations decreased
compared with the year-ago period primarily due to a decrease in
cash collections, as a result of lower single installment
collections and an unfavorable effect of foreign exchange, offset
by a decline in vendor disbursements and payroll, which is due to a
favorable foreign exchange effect, and a decrease in income tax
payments.
CAPITAL STRUCTURE
- Cash, cash equivalents and investments
at September 30, 2015 were $2.458 billion.
- With $1.657 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $662
million.
- In the second quarter of fiscal 2016,
the Company repurchased 2.3 million shares of common stock for $65
million.
- As of September 30, 2015, the
Company is currently authorized to purchase $670 million of its
common stock under its current stock repurchase program.
- The Company distributed $110 million in
dividends to shareholders.
- The Company’s outstanding share count
at September 30, 2015 was 434 million.
OUTLOOK FOR FISCAL YEAR 2016
The Company updated its fiscal 2016 outlook for GAAP diluted
earnings per share from continuing operations. The following
outlook contains "forward-looking statements" (as defined
below).
The Company expects the following:
- Total revenue to change in a range of
minus 1 percent to flat in constant currency, unchanged from
previous guidance. The Company currently expects total revenue to
be at the lower end of this range due primarily to the greater
portion of new sales bookings recognized ratably in the first
quarter and second quarters, compared to historical trends. At
September 30, 2015 exchange rates, this translates to reported
revenue of $4.00 billion to $4.04 billion.
- GAAP diluted earnings per share from
continuing operations to increase in a range of 7 percent to 11
percent in constant currency. Previous guidance was to increase in
a range of 6 percent to 10 percent in constant currency. At
September 30, 2015 exchange rates, this translates to reported
GAAP diluted earnings per share from continuing operations of $1.70
to $1.76.
- Non-GAAP diluted earnings per share
from continuing operations to increase in a range of 2 percent to 5
percent in constant currency, unchanged from previous guidance. At
September 30, 2015 exchange rates, this translates to reported
non-GAAP diluted earnings per share from continuing operations of
$2.34 to $2.40.
- Cash flow from continuing operations to
increase in the range of 2 percent to 7 percent in constant
currency, unchanged from previous guidance. At September 30,
2015 exchange rates, this translates to reported cash flow from
continuing operations of $0.97 billion to $1.02 billion.
This outlook assumes no further material acquisitions and a
partial currency hedge of operating income. The Company expects a
full-year GAAP operating margin of 28 percent and non-GAAP
operating margin of 38 percent, unchanged from previous
guidance.
The Company also expects a full-year GAAP and non-GAAP effective
tax rate of between 28 percent and 29 percent, unchanged from
previous guidance.
The Company anticipates approximately 431 million shares
outstanding at fiscal 2016 year-end and weighted average diluted
shares outstanding of approximately 436 million for the fiscal
year.
Webcast
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 conference call and webcast that the Company will host at
5:00 p.m. ET today to discuss its unaudited second quarter results.
The webcast will be archived on the website. Individuals can access
the webcast, as well as the press release and supplemental
financial information at http://ca.com/invest or can listen to the
call at 1-877-561-2748. The international participant number is
1-720-545-0044.
(1) Gartner, Inc., “ Vendor Rating: CA Technologies, David
Cappuccio, et.al, 31 August 2015
Gartner does not endorse any vendor, product or service depicted
in its research publications, and does not advise technology users
to select only those vendors with the highest ratings or other
designation. Gartner research publications consist of the opinions
of Gartner's research organization and should not be construed as
statements of fact. Gartner disclaims all warranties, expressed or
implied, with respect to this research, including any warranties of
merchantability or fitness for a particular purpose.
About CA Technologies
CA Technologies (NASDAQ: CA) creates software that fuels
transformation for companies and enables them to seize the
opportunities of the Application Economy. Software is at the heart
of every business in every industry. From planning, to development,
to management and security, CA is working with companies worldwide
to change the way we live, transact, and communicate - across
mobile, private and public cloud, distributed and mainframe
environments. Learn more at www.ca.com.
Follow CA Technologies
- Twitter
- Social Media Page
- Press Releases
- Blogs
Non-GAAP Financial Measures
This news release, the accompanying tables and the additional
content that is available on the Company's website, including a
supplemental financial package, include certain financial measures
that exclude the impact of certain items and therefore have not
been calculated in accordance with U.S. generally accepted
accounting principles (GAAP). Non-GAAP metrics for operating
expenses, operating income, operating margin, income from
continuing operations and diluted earnings per share exclude the
following items: share-based compensation expense; non-cash
amortization of purchased software and other intangible assets;
charges relating to rebalancing initiatives that are large enough
to require approval from the Company's Board of Directors and
certain other gains and losses, which include the gains and losses
since inception of hedges that mature within the quarter, but
exclude gains and losses of hedges that do not mature within the
quarter. The Company began expensing costs for internally developed
software where development efforts commenced in the first quarter
of fiscal 2014. Due to this change, the Company also adds back
capitalized internal software costs and excludes amortization of
internally developed software costs previously capitalized from
these non-GAAP metrics. The effective tax rate on GAAP and non-GAAP
income from operations is the Company's provision for income taxes
expressed as a percentage of pre-tax GAAP and non-GAAP income from
continuing operations, respectively. These tax rates are determined
based on an estimated effective full year tax rate, with the
effective tax rate for GAAP generally including the impact of
discrete items in the period in which such items arise and the
effective tax rate for non-GAAP generally allocating the impact of
discrete items pro rata to the fiscal year's remaining reporting
periods. Adjusted cash flow from operations excludes payments
associated with the fiscal 2014 Board-approved rebalancing
initiative as described above, capitalized software development
costs as described above, and restructuring and other payments.
Free cash flow excludes purchases of property and equipment and
capitalized software development costs. The Company presents
constant currency information to provide a framework for assessing
how the Company's underlying businesses performed excluding the
effect of foreign currency rate fluctuations. To present this
information, current and comparative prior period results for
entities reporting in currencies other than U.S. dollars are
converted into U.S. dollars at the exchange rate in effect on the
last day of the Company's prior fiscal year (i.e., March 31, 2015,
March 31, 2014 and March 31, 2013, respectively). Constant currency
excludes the impacts from the Company's hedging program. The
constant currency calculation for annualized subscription and
maintenance bookings is calculated by dividing the subscription and
maintenance bookings in constant currency by the weighted average
subscription and maintenance duration in years. These non-GAAP
financial measures may be different from non-GAAP financial
measures used by other companies. Non-GAAP financial measures
should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP.
By excluding these items, non-GAAP financial measures facilitate
management's internal comparisons to the Company's historical
operating results and cash flows, to competitors' operating results
and cash flows, and to estimates made by securities analysts.
Management uses these non-GAAP financial measures internally to
evaluate its performance and they are key variables in determining
management incentive compensation. The Company believes these
non-GAAP financial measures are useful to investors in allowing for
greater transparency of supplemental information used by management
in its financial and operational decision-making. In addition, the
Company has historically reported similar non-GAAP financial
measures to its investors and believes that the inclusion of
comparative numbers provides consistency in its financial
reporting. Investors are encouraged to review the reconciliation of
the non-GAAP financial measures used in this news release to their
most directly comparable GAAP financial measures, which are
attached to this news release.
Cautionary Statement Regarding Forward-Looking
Statements
The declaration and payment of future dividends is subject to
the determination of the Company's Board of Directors, in its sole
discretion, after considering various factors, including the
Company's financial condition, historical and forecast operating
results, and available cash flow, as well as any applicable laws
and contractual covenants and any other relevant factors. The
Company's practice regarding payment of dividends may be modified
at any time and from time to time.
Repurchases under the Company's stock repurchase program may be
made from time to time, subject to market conditions and other
factors, in the open market, through solicited or unsolicited
privately negotiated transactions or otherwise. The program does
not obligate the Company to acquire any particular amount of common
stock, and it may be modified or suspended at any time at the
Company's discretion.
Certain statements in this communication (such as statements
containing the words "believes," "plans," "anticipates," "expects,"
"estimates," "targets" and similar expressions relating to the
future) constitute "forward-looking statements" that are based upon
the beliefs of, and assumptions made by, the Company's management,
as well as information currently available to management. These
forward-looking statements reflect the Company's current views with
respect to future events and are subject to certain risks,
uncertainties, and assumptions. A number of important factors could
cause actual results or events to differ materially from those
indicated by such forward-looking statements, including: the
ability to achieve success in the Company's strategy by, among
other things, enabling the Company's sales force to accelerate
growth of new product sales (at levels sufficient to offset any
decline in revenue in the Company's Mainframe Solutions segment),
improving the Company's brand, technology and innovation awareness
in the marketplace, ensuring the Company's offerings for cloud
computing, application development and IT operations (DevOps),
Software-as-a-Service (SaaS), and mobile device management, as well
as other new offerings, address the needs of a rapidly changing
market, while not adversely affecting the demand for the Company's
traditional products or its profitability to an extent greater than
anticipated, and effectively managing the strategic shift in the
Company's business model to develop more easily installed software,
provide additional SaaS offerings and refocus the Company's
professional services and education engagements on those
engagements that are connected to new product sales, without
affecting the Company's performance to an extent greater than
anticipated; the failure to innovate or adapt to technological
changes and introduce new software products and services in a
timely manner; competition in product and service offerings and
pricing; the ability of the Company's products to remain compatible
with ever-changing operating environments, platforms or third party
products; global economic factors or political events beyond the
Company's control and other business and legal risks associated
with non-U.S. operations; the failure to expand partner programs;
the failure to expand partner programs; the ability to retain and
attract qualified professionals; general economic conditions and
credit constraints, or unfavorable economic conditions in a
particular region, industry or business sector; the ability to
successfully integrate acquired companies and products into the
Company's existing business; risks associated with sales to
government customers; breaches of the Company's data center,
network, as well as the Company's software products, and the IT
environments of the Company's vendors and customers; the ability to
adequately manage, evolve and protect the Company's information
systems, infrastructure and processes; fluctuations in foreign
exchange rates; discovery of errors or omissions in the Company's
software products or documentation and potential product liability
claims; the failure to protect the Company's intellectual property
rights and source code; the failure to renew large license
transactions on a satisfactory basis; access to software licensed
from third parties; risks associated with the use of software from
open source code sources; third-party claims of intellectual
property infringement or royalty payments; fluctuations in the
number, terms and duration of the Company's license agreements, as
well as the timing of orders from customers and channel partners;
events or circumstances that would require the Company to record an
impairment charge relating to the Company's goodwill or capitalized
software and other intangible assets balances; potential tax
liabilities; changes in market conditions or the Company's credit
ratings; the failure to effectively execute the Company's workforce
reductions, workforce rebalancing and facilities consolidations;
successful and secure outsourcing of various functions to third
parties; changes in generally accepted accounting principles; and
other factors described more fully in the Company's filings with
the Securities and Exchange Commission. Should one or more of these
risks or uncertainties occur, or should the Company's assumptions
prove incorrect, actual results may vary materially from those
described herein as believed, planned, anticipated, expected,
estimated, targeted or similarly expressed in a forward-looking
manner. The Company assumes no obligation to update the information
in this communication, except as otherwise required by law. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.
Copyright © 2015 CA, Inc. All Rights Reserved. All other
trademarks, trade names, service marks, and logos referenced herein
belong to their respective companies.
Table 1 CA Technologies Consolidated Statements of
Operations (unaudited) (in millions, except per share amounts)
Three Months Ended Six Months Ended
September
30,
September
30,
Revenue:
2015
2014
2015
2014
Subscription and maintenance $ 832 $ 908 $ 1,668 $ 1,817
Professional services 83 91 162 178 Software fees and other
90 80 152 153
Total revenue $ 1,005 $ 1,079 $ 1,982 $
2,148
Expenses: Costs of licensing and maintenance $
70 $ 71 $ 136 $ 143 Cost of professional services 78 88 149 169
Amortization of capitalized software costs 67 75 127 142 Selling
and marketing 248 253 474 499 General and administrative 99 87 189
179 Product development and enhancements 151 150 287 300
Depreciation and amortization of other intangible assets 29 34 56
68 Other expenses, net 4 1 1
15
Total expenses before interest and
income taxes $ 746 $ 759 $ 1,419 $ 1,515
Income from continuing operations before interest and
income taxes $ 259 $ 320 $ 563 $ 633 Interest expense, net
12 12 21 26
Income from continuing operations before income taxes $ 247
$ 308 $ 542 $ 607 Income tax expense 75 73
163 160
Income from
continuing operations $ 172 $ 235 $ 379 $ 447 Income from
discontinued operations, net of income taxes $ 2 $ 21
$ 7 $ 26
Net income $ 174 $ 256
$ 386 $ 473
Basic income per common
share: Income from continuing operations $ 0.39 $ 0.53 $ 0.86 $
1.01 Income from discontinued operations -
0.05 0.02 0.06
Net income
$ 0.39 $ 0.58 $ 0.88 $ 1.07
Basic
weighted average shares used in computation 436 440 436 440
Diluted income per common share: Income from
continuing operations $ 0.39 $ 0.53 $ 0.86 $ 1.00 Income from
discontinued operations - 0.05
0.02 0.06
Net income $ 0.39 $
0.58 $ 0.88 $ 1.06
Diluted weighted average
shares used in computation 437 441 437 441
Results reflect the discontinued operations associated with the
CA ERwin Data Modeling and CA arcserve data protection
businesses.
Table 2 CA Technologies Condensed
Consolidated Balance Sheets (in millions)
September 30, March 31, 2015 2015 (unaudited) Cash and cash
equivalents $ 2,458 $ 2,804 Trade accounts receivable, net 439 652
Deferred income taxes 342 318 Other current assets 183
213
Total current assets $ 3,422 $
3,987 Property and equipment, net $ 246 $ 252 Goodwill 6,120
5,806 Capitalized software and other intangible assets, net 953 731
Deferred income taxes 39 92 Other noncurrent assets, net 113
111
Total assets $ 10,893 $
10,979 Current portion of long-term debt $ 8 $ 10
Deferred revenue (billed or collected) 1,870 2,114 Deferred income
taxes 7 7 Other current liabilities 677 807
Total current liabilities $ 2,562 $ 2,938
Long-term debt, net of current portion $ 1,649 $ 1,253 Deferred
income taxes 70 45 Deferred revenue (billed or collected) 646 863
Other noncurrent liabilities 264 255
Total liabilities $ 5,191 $ 5,354
Common stock $ 59 $ 59 Additional paid-in capital 3,614 3,631
Retained earnings 6,387 6,221 Accumulated other comprehensive loss
(439 ) (418 ) Treasury stock (3,919 ) (3,868 )
Total stockholders’ equity $ 5,702 $ 5,625
Total liabilities and stockholders’ equity $ 10,893 $
10,979
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
September
30,
2015
2014
Operating activities from continuing operations: Net income
$ 174 $ 256 Income from discontinued operations (2 )
(21 ) Income from continuing operations $ 172 $ 235
Adjustments to reconcile income from
continuing operations to net cash provided by operating
activities:
Depreciation and amortization 96 109 Deferred income taxes (18 )
(29 ) Provision for bad debts - 2 Share-based compensation expense
23 22 Asset impairments and other non-cash items - (1 ) Foreign
currency transaction losses 3 3 Changes in other operating assets
and liabilities, net of effect of acquisitions: Decrease in trade
accounts receivable 3 12 Decrease in deferred revenue (257 ) (212 )
Decrease in taxes payable, net (25 ) (59 ) Increase in accounts
payable, accrued expenses and other 24 8 Increase in accrued
salaries, wages and commissions 17 18 Changes in other operating
assets and liabilities 5 (42 )
Net cash
provided by operating activities - continuing operations $ 43
$ 66
Investing activities from continuing
operations: Acquisitions of businesses, net of cash acquired,
and purchased software $ (610 ) $ (1 ) Purchases of property and
equipment (10 ) (13 ) Proceeds from sale of short-term investments
48 -
Net cash used in investing
activities - continuing operations $ (572 ) $ (14 )
Financing activities from continuing operations: Dividends
paid $ (110 ) $ (111 ) Purchases of common stock (65 ) - Notional
pooling borrowings, net 13 45 Debt borrowings (repayments), net 399
(3 ) Debt issuance costs (3 ) - Exercise of common stock options -
2 Other financing activities 5 -
Net
cash provided by (used in) financing activities - continuing
operations $ 239 $ (67 ) Effect of exchange rate changes on
cash $ (70 ) $ (186 )
Net change in cash and cash equivalents -
continuing operations $ (360 ) $ (201 ) Cash provided by (used
in) operating activities - discontinued operations $ 2 $ (31 ) Cash
provided by investing activities - discontinued operations -
170
Net effect of discontinued operations
on cash and cash equivalents $ 2 $ 139
Decrease in cash and cash equivalents $ (358 ) $ (62 )
Cash and cash equivalents at beginning of period $ 2,816
$ 3,255
Cash and cash equivalents at end of
period $ 2,458 $ 3,193 Results reflect the
discontinued operations associated with the CA ERwin Data Modeling
and CA arcserve data protection businesses.
Table 4
CA Technologies Operating Segments (unaudited)
(dollars in millions) Three Months Ended September
30, 2015 Six Months Ended September 30, 2015
Mainframe
Enterprise
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 554 $ 368 $ 83 $ 1,005 $
1,114 $ 706 $ 162 $ 1,982 Expenses (3) 212 357
79 648 423
647 150 1,220
Segment
profit $ 342 $ 11 $ 4 $ 357 $ 691
$ 59 $ 12 $ 762
Segment operating
margin 62 % 3 % 5 % 36 % 62 % 8 % 7 % 38 %
Segment
profit $ 357 $ 762
Less: Purchased software amortization
39 67 Other intangibles amortization 14 25 Internally developed
software products amortization 28 60 Share-based compensation
expense 23 45 Other (gains) expenses, net (4) (6 ) 2 Interest
expense, net 12 21
Income from
continuing operations before income taxes $ 247 $ 542
Three Months Ended September 30, 2014 Six
Months Ended September 30, 2014
Mainframe
Enterprise
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 610 $ 378 $ 91 $ 1,079 $
1,224 $ 746 $ 178 $ 2,148 Expenses (3) 234 327
89 650 469
652 171 1,292
Segment
profit $ 376 $ 51 $ 2 $ 429 $ 755
$ 94 $ 7 $ 856
Segment operating
margin 62 % 13 % 2 % 40 % 62 % 13 % 4 % 40 %
Segment
profit $ 429 $ 856
Less: Purchased software amortization
31 59 Other intangibles amortization 16 31 Internally developed
software products amortization 44 83 Share-based compensation
expense 22 42 Other (gains) expenses, net (4) (4 ) 8 Interest
expense, net 12 26
Income from
continuing operations before income taxes $ 308 $ 607
(1) The Company’s Mainframe Solutions and Enterprise
Solutions segments comprise its software business organized by the
nature of the Company’s software offerings and the platform on
which the products operate. The Services segment comprises product
implementation, consulting, customer education and customer
training, including those directly related to the Mainframe
Solutions and Enterprise Solutions software that the Company sells
to its customers. (2) The Company regularly enters into a
single arrangement with a customer that includes mainframe
solutions, enterprise solutions and services. The amount of
contract revenue assigned to operating segments is generally based
on the manner in which the proposal is made to the customer. The
software product revenue is assigned to the Mainframe Solutions and
Enterprise Solutions segments based on either: (1) a list price
allocation method (which allocates a discount in the total contract
price to the individual products in proportion to the list price of
the product); (2) allocations included within internal contract
approval documents; or (3) the value for individual software
products as stated in the customer contract. The price for the
implementation, consulting, education and training services is
separately stated in the contract and these amounts of contract
revenue are assigned to the Services segment. The contract value
assigned to each operating segment is then recognized in a manner
consistent with the revenue recognition policies the Company
applies to the customer contract for purposes of preparing the
Consolidated Financial Statements. (3) Segment expenses
include costs that are controllable by segment managers (i.e.,
direct costs) and, in the case of the Mainframe Solutions and
Enterprise Solutions segments, an allocation of shared and indirect
costs (i.e., allocated costs). Segment-specific direct costs
include a portion of selling and marketing costs, licensing and
maintenance costs, product development costs and general and
administrative costs. Allocated segment costs primarily include
indirect and non-segment specific direct selling and marketing
costs and general and administrative costs that are not directly
attributable to a specific segment. The basis for allocating shared
and indirect costs between the Mainframe Solutions and Enterprise
Solutions segments is dependent on the nature of the cost being
allocated and is either in proportion to segment revenues or in
proportion to the related direct cost category. Expenses for the
Services segment consist of cost of professional services and other
direct costs included within selling and marketing and general and
administrative expenses. There are no allocated or indirect costs
for the Services segment. (4) Other (gains) expenses, net
consists of costs associated with the FY2014 Board approved
rebalancing initiative (the Fiscal 2014 Plan), certain foreign
exchange derivative hedging gains and losses, and other
miscellaneous costs. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses.
Table 5
CA Technologies
Constant Currency Summary
(unaudited)
(dollars in millions)
Three Months Ended September 30, Six Months
Ended September 30,
% Increase
% Increase
% Increase
(Decrease)
% Increase
(Decrease)
(Decrease)
in Constant
(Decrease)
in Constant
2015
2014
in $ US
Currency (1)
2015
2014
in $ US
Currency (1)
Bookings $ 1,383 $ 749 85 % 92 % $ 2,045 $ 1,473 39 %
46 %
Revenue: North America $ 677 $ 693 (2 )% (1 )% $
1,329 $ 1,375 (3 )% (3 )% International 328
386 (15 )% 1 % 653 773 (16 )% 0
% Total revenue $ 1,005 $ 1,079 (7 )% (1 )% $ 1,982 $ 2,148 (8 )%
(2 )%
Revenue: Subscription and maintenance $ 832 $
908 (8 )% (2 )% $ 1,668 $ 1,817 (8 )% (2 )% Professional services
83 91 (9 )% (3 )% 162 178 (9 )% (3 )% Software fees and other
90 80 13 % 17 % 152
153 (1 )% 4 % Total revenue $ 1,005 $ 1,079 (7 )% (1
)% $ 1,982 $ 2,148 (8 )% (2 )%
Segment Revenue:
Mainframe solutions $ 554 $ 610 (9 )% (3 )% $ 1,114 $ 1,224 (9 )%
(3 )% Enterprise solutions 368 378 (3 )% 3 % 706 746 (5 )% 0 %
Services 83 91 (9 )% (3 )% 162 178 (9 )% (3 )%
Total
expenses before interest and income taxes: Total non-GAAP (2) $
648 $ 650 0 % 5 % $ 1,220 $ 1,292 (6 )% (1 )% Total GAAP 746 759 (2
)% 1 % 1,419 1,515 (6 )% (3 )% (1) Constant currency
information is presented to provide a framework for assessing how
the Company's underlying businesses performed excluding the effect
of foreign currency rate fluctuations. To present this information,
current and comparative prior period results for entities reporting
in currencies other than U.S. dollars are converted into U.S.
dollars at the exchange rate in effect on March 31, 2015, which was
the last day of the prior fiscal year. Constant currency excludes
the impacts from the Company's hedging program. (2) Refer to
Table 7 for a reconciliation of total expenses before interest and
income taxes to total non-GAAP operating expenses. Results
reflect the discontinued operations associated with the CA ERwin
Data Modeling and CA arcserve data protection businesses.
Certain non-material differences may arise versus actual from
impact of rounding.
Table 6 CA Technologies
Reconciliation of Select GAAP Measures to Non-GAAP Measures
(unaudited) (dollars in millions) Three Months Ended
Six Months Ended
September
30,
September
30,
2015
2014
2015
2014
GAAP net income $ 174 $ 256 $ 386 $ 473 GAAP income from
discontinued operations, net of income taxes (2 ) (21
) (7 ) (26 ) GAAP income from continuing operations $
172 $ 235 $ 379 $ 447 GAAP income tax expense 75 73 163 160
Interest expense, net 12 12 21
26 GAAP income from continuing operations
before interest and income taxes $ 259 $ 320 $ 563
$ 633 GAAP operating margin (% of revenue) (1) 26 %
30 % 28 % 29 % Non-GAAP adjustments to expenses: Costs of
licensing and maintenance (2) $ 1 $ 1 $ 3 $ 2 Cost of professional
services (2) 1 1 2 2 Amortization of capitalized software costs (3)
67 75 127 142 Selling and marketing (2) 8 8 16 15 General and
administrative (2) 9 7 16 13 Product development and enhancements
(2) 4 5 8 10 Depreciation and amortization of other intangible
assets (4) 14 16 25 31 Other (gains) expenses, net (5) (6 )
(4 ) 2 8 Total Non-GAAP
adjustment to operating expenses $ 98 $ 109 $ 199
$ 223 Non-GAAP income from continuing operations
before interest and income taxes $ 357 $ 429 $ 762 $ 856 Non-GAAP
operating margin (% of revenue) (6) 36 % 40 % 38 % 40 %
Interest expense, net 12 12 21 26 GAAP income tax expense 75 73 163
160 Non-GAAP adjustment to income tax expense (7) 23
52 48 89 Non-GAAP income
tax expense $ 98 $ 125 $ 211 $ 249
Non-GAAP income from continuing operations $ 247 $ 292
$ 530 $ 581 (1) GAAP operating margin
is calculated by dividing GAAP income from continuing operations
before interest and income taxes by total revenue (refer to Table 1
for total revenue). (2) Non-GAAP adjustment consists of
share-based compensation. (3) For the three month periods
ending September 30, 2015 and 2014, non-GAAP adjustment consists of
$39 million and $31 million of purchased software amortization and
$28 million and $44 million of internally developed software
products amortization, respectively. For the six month periods
ending September 30, 2015 and 2014, non-GAAP adjustment consists of
$67 million and $59 million of purchased software amortization and
$60 million and $83 million of internally developed software
products amortization, respectively. (4) Non-GAAP adjustment
consists of other intangibles amortization. (5) Non-GAAP
adjustment consists of charges relating to the FY2014 Board
approved rebalancing initiative (the Fiscal 2014 Plan) and certain
other gains and losses, including gains and losses since inception
of hedges that mature within the quarter, but excludes gains and
losses of hedges that do not mature within the quarter. (6)
Non-GAAP operating margin is calculated by dividing non-GAAP income
from continuing operations before interest and income taxes by
total revenue (refer to Table 1 for total revenue). (7) The
full year non-GAAP income tax expense is different from GAAP income
tax expense because of the difference in non-GAAP income from
continuing operations before income taxes. On an interim basis,
this difference would also include a difference in the impact of
discrete and permanent items where for GAAP purposes the effect is
recorded in the period such items arise, but for non-GAAP such
items are recorded pro rata to the fiscal year's remaining
reporting periods. Refer to the discussion of non-GAAP
financial measures included in the accompanying press release for
additional information. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses. Certain non-material
differences may arise versus actual from impact of rounding.
Table 7 CA Technologies Reconciliation of GAAP to
Non-GAAP Operating Expenses and Diluted Earnings per
Share (unaudited) (in millions, except per share amounts)
Three Months Ended Six Months Ended
September
30,
September
30,
Operating
Expenses
2015
2014
2015
2014
Total expenses before interest and income taxes $ 746 $ 759
$ 1,419 $ 1,515 Non-GAAP operating adjustments: Purchased
software amortization 39 31 67 59 Other intangibles amortization 14
16 25 31 Internally developed software products amortization 28 44
60 83 Share-based compensation 23 22 45 42 Other (gains) expenses,
net (1) (6 ) (4 ) 2 8
Total non-GAAP operating adjustment $ 98 $ 109 $ 199
$ 223 Total non-GAAP operating expenses $ 648
$ 650 $ 1,220 $ 1,292
Three Months Ended Six Months Ended
September
30,
September
30,
Diluted EPS from
Continuing Operations
2015
2014
2015
2014
GAAP diluted EPS from continuing operations $ 0.39 $ 0.53 $
0.86 $ 1.00 Non-GAAP adjustments, net of taxes: Purchased
software amortization 0.06 0.05 0.11 0.10 Other intangibles
amortization 0.02 0.02 0.04 0.05 Internally developed software
products amortization 0.04 0.08 0.09 0.14 Share-based compensation
0.04 0.04 0.07 0.07 Other (gains) expenses, net (1) (0.01 ) (0.01 )
- 0.01 Non-GAAP effective tax rate adjustments (2) 0.02
(0.06 ) 0.03 (0.07 ) Total
non-GAAP adjustment $ 0.17 $ 0.12 $ 0.34 $
0.30 Non-GAAP diluted EPS from continuing operations
$ 0.56 $ 0.65 $ 1.20 $ 1.30 (1)
Other (gains) expenses, net consists of costs associated with the
FY2014 Board approved rebalancing initiative (the Fiscal 2014
Plan), certain foreign exchange derivative hedging gains and
losses, and other miscellaneous costs. (2) The non-GAAP
effective tax rate is equal to the full year GAAP effective tax
rate, therefore no adjustment is required on an annual basis. On an
interim basis, the difference in non-GAAP income tax expense and
GAAP income tax expense relates to the difference in non-GAAP
income from continuing operations before income taxes, and includes
a difference in the impact of discrete and permanent items where
for GAAP purposes the effect is recorded in the period such items
arise but for non-GAAP purposes such items are recorded pro rata to
the fiscal year's remaining reporting periods. Refer to the
discussion of non-GAAP financial measures included in the
accompanying press release for additional information.
Results reflect the discontinued operations associated with the CA
ERwin Data Modeling and CA arcserve data protection businesses.
Certain non-material differences may arise versus actual
from impact of rounding.
Table 8 CA
Technologies Effective Tax Rate Reconciliation GAAP
and Non-GAAP (unaudited) (dollars in millions)
Three Months Ended Six Months Ended
September 30,
2015
September 30,
2015
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 259 $ 357 $ 563 $ 762 Interest expense, net 12
12 21 21 Income
from continuing operations before income taxes $ 247 $ 345 $ 542 $
741 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 86 $ 121 $ 190 $ 259 Adjustments for discrete and
permanent items (2) (11 ) (23 ) (27 )
(48 ) Total tax expense $ 75 $ 98 $ 163 $ 211 Effective tax
rate (3) 30.4 % 28.4 % 30.1 % 28.5 % Three Months
Ended Six Months Ended
September 30,
2014
September 30,
2014
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 320 $ 429 $ 633 $ 856 Interest expense, net 12
12 26 26 Income
from continuing operations before income taxes $ 308 $ 417 $ 607 $
830 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 108 $ 146 $ 212 $ 291 Adjustments for discrete and
permanent items (2) (35 ) (21 ) (52 )
(42 ) Total tax expense $ 73 $ 125 $ 160 $ 249 Effective tax
rate (3) 23.7 % 30.0 % 26.4 % 30.0 % (1) Refer to Table 6
for a reconciliation of income from continuing operations before
interest and income taxes on a GAAP basis to income from continuing
operations before interest and income taxes on a non-GAAP basis.
(2) The effective tax rate for GAAP generally includes the
impact of discrete and permanent items in the period such items
arise, whereas the effective tax rate for non-GAAP generally
allocates the impact of such items pro rata to the fiscal year's
remaining reporting periods. (3) The effective tax rate on
GAAP and non-GAAP income from continuing operations is the
Company's provision for income taxes expressed as a percentage of
GAAP and non-GAAP income from continuing operations before income
taxes, respectively. The non-GAAP effective tax rate is equal to
the full year GAAP effective tax rate. On an interim basis, the
effective tax rates are determined based on an estimated effective
full year tax rate after the adjustments for the impacts of certain
discrete items (such as changes in tax rates, reconciliations of
tax returns to tax provisions and resolutions of tax
contingencies). Refer to the discussion of non-GAAP
financial measures included in the accompanying press release for
additional information. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses. Certain non-material
differences may arise versus actual from impact of rounding.
Table 9 CA Technologies Reconciliation of
Projected GAAP Metrics to Projected Non-GAAP Metrics
(unaudited) Fiscal Year Ending
Projected Diluted
EPS from Continuing Operations
March 31,
2016
Projected GAAP diluted EPS from continuing operations range
$
1.70
to
$
1.76
Non-GAAP adjustments, net of taxes: Purchased software
amortization 0.24 0.24 Other intangibles amortization 0.07 0.07
Internally developed software products amortization 0.18 0.18
Share-based compensation 0.15 0.15
Total non-GAAP adjustment $ 0.64 $ 0.64
Projected non-GAAP diluted EPS from continuing operations range $
2.34 to $ 2.40 Fiscal Year Ending
Projected Operating
Margin
March 31,
2016
Projected GAAP operating margin 28 % Non-GAAP
operating adjustments: Purchased software amortization 4 % Other
intangibles amortization 1 % Internally developed software products
amortization 3 % Share-based compensation 2 % Total non-GAAP
operating adjustment 10 % Projected non-GAAP operating
margin 38 % Refer to the discussion of non-GAAP financial
measures included in the accompanying press release for additional
information.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151021006638/en/
CA TechnologiesSaswato Das, 646-710-6690Corporate
CommunicationsSaswato.das@ca.comorTraci Tsuchiguchi,
650-534-9814Investor Relationstraci.tsuchiguchi@ca.com
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