- Strong Start to Fiscal 2017
- First Quarter Revenue of $999
Million
- First Quarter GAAP EPS of
$0.47
- First Quarter Non-GAAP EPS of
$0.64
- First Quarter Cash Flow From
Continuing Operations of $161 Million
CA Technologies (NASDAQ:CA) today reported financial results for
its first quarter fiscal 2017, which ended June 30, 2016.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
“Following solid performance in fiscal year 2016, I am pleased
to report that we are off to a strong start in fiscal year
2017.
“In the first quarter, revenue grew year-over-year, total new
sales were strong and we delivered a solid operating margin. These
results improve our confidence in our ability to cross over into
modest growth for the full year.
“Though we recognize that we still have work ahead to reach our
potential, we are progressing well on our journey to position CA
for sustainable, long-term growth. Looking ahead, we will continue
to be customer-focused and agile as we evolve CA to meet the
challenges of an incredibly dynamic technology market. This is
reflected in the organizational changes we are announcing
today.”
ORGANIZATIONAL UPDATE
CA Technologies has agreed with Richard Beckert, Chief Financial
Officer, that it is the appropriate time to transition the role,
and he retired as CFO from CA Technologies effective July 26.
Beckert joined CA in 2006 during a pivotal time in the Company’s
history, and he played an important role in our ongoing
transformation.
Kieran J. McGrath, Corporate Controller, has been named interim
Chief Financial Officer, reporting to CEO Mike Gregoire. McGrath,
who has been with CA since 2014 as corporate controller, was
previously the Finance lead of IBM’s $25B Global Software Business
and brings a wealth of financial, operational and transformational
management experience. McGrath will lead CA’s Finance organization
while the Company undertakes the process of identifying a new
CFO.
Gregoire commented, “I would like to thank Rich for his many
contributions to CA and the positive impact he has had on our
business. On behalf of CA we wish Rich much continued success in
the future. Separately, I look forward to working closely with
Kieran in the months ahead and have the utmost confidence in his
ability to help lead this important evolution.”
CA Technologies also announced that Adam Elster, formerly EVP of
Sales, has been named President, Global Field Operations, and that
Ayman Sayed, formerly EVP and Chief Product Officer, has been named
President, Chief Product Officer.
Gregoire continued, “In these new roles, Adam and Ayman will be
responsible for collaborating to ensure that our development and
go-to-market efforts are completely aligned to customer and market
demand, and that we are positioned to achieve our goal of
consistently delivering better, more impactful products to our
customers.”
FINANCIAL OVERVIEW
(dollars in millions, except share data)
First
Quarter FY17 vs. FY16 FY17 FY16
% Change
% ChangeCC*
Revenue $999 $977 2% 3% GAAP Income from
Continuing Operations $198 $207 (4)% (9)%
Non-GAAP Income from Continuing Operations* $269 $283
(5)% (6)% GAAP Diluted EPS from Continuing Operations $0.47
$0.47 0% (4)% Non-GAAP Diluted EPS from
Continuing Operations* $0.64 $0.64 0% (2)%
Cash Flow from Continuing Operations $161 $188
(14)% (10)% * Non-GAAP income, Non-GAAP earnings per share
and CC or Constant Currency 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.
REVENUE AND BOOKINGS
(dollars in millions)
First Quarter FY17 vs.
FY16 FY17
% ofTotal
FY16
% ofTotal
%Change
%ChangeCC*
North America Revenue $669 67% $652 67%
3% 3% International Revenue $330 33% $325
33% 2% 2% Total Revenue $999
$977 2% 3%
North America Bookings $992 73% $451 68%
120% 120% International Bookings $361 27%
$211 32% 71% 76% Total Bookings $1,353
$662 104% 106%
Current Revenue Backlog $3,031
$3,042 0% 0% Total Revenue
Backlog $7,151 $6,278
14% 15% *CC or Constant Currency is a non-GAAP
financial measure, 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.
- Total revenue increased as a
result of an increase in software fees and other revenue, partially
offset by a decrease in subscription and maintenance revenue. The
fiscal 2016 acquisitions of Rally Software Development Corp.
(Rally) and Xceedium, Inc. (Xceedium) contributed approximately 4
points of revenue growth for the quarter.
- Total bookings grew primarily due to
the replacement and extension of a large system integrator
transaction that was scheduled to expire in fiscal 2018, as well as
an increase in mainframe solutions renewals that were not
associated with this transaction. The large system integrator
transaction provides an incremental contract value in excess of
$475 million, extends the term of the replaced agreement for an
additional five years and was a strong contributor to renewals and
new product sales in the quarter.
- The Company executed a total of 14
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $910 million
including the aforementioned large system integrator transaction.
During the first quarter of fiscal 2016, 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 $214
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 4.93
years, compared with 3.45 years for the same period in fiscal
2016.
EXPENSES AND MARGIN AND EARNINGS PER
SHARE
(dollars in millions)
First Quarter FY17 vs.
FY16 FY17 FY16
%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income
Taxes $707 $673 5% 8% Operating Income Before
Interest and Income Taxes $292 $304 (4)% (8)%
Diluted EPS from Continuing Operations $0.47 $0.47 0%
(4)% Operating Margin 29% 31%
Effective Tax Rate 28.5% 29.8%
Non-GAAP* Operating Expenses Before Interest and
Income Taxes $607 $572 6% 8% Operating Income
Before Interest and Income Taxes $392 $405 (3)%
(5)% Diluted EPS from Continuing Operations $0.64
$0.64 0% (2)% Operating Margin 39% 41%
Effective Tax Rate 28.6% 28.5%
*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, 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 or Constant Currency is a non-GAAP financial measure, 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.
- GAAP and Non-GAAP first quarter
operating expenses increased primarily due to operational costs
associated with the acquisitions of Rally and Xceedium.
- GAAP and Non-GAAP EPS in the first
quarter of fiscal 2017 were consistent with the year-ago period due
to an increase in expenses, primarily due to operational costs
associated with the acquisitions of Rally and Xceedium, offset by
an increase in revenue and a decrease in weighted average
common shares outstanding.
SELECTED HIGHLIGHTS FROM THE QUARTER
Leadership and recognition during the quarter
include:
- For the second consecutive year, CA
Technologies was positioned by Gartner, Inc. as a leader in the
Magic Quadrant for IT Project and Portfolio Management Software
Applications, Worldwide.(1)
- IT Central Station, a leading product
review site for enterprise technology, named CA Unified
Infrastructure Management as the number one solution for cloud
monitoring.(2)
- CA Technologies was named an API
Management market leader for 2016-2017 by Ovum in its API
Management Decision Matrix, and received the highest overall score
for the technology evaluation dimension.(3)
Customer traction for CA Technologies innovation during the
quarter include:
- CA Privileged Access Management (CA
PAM) closed its single largest deal ever and was selected over
competitors to become the standard for this American multinational
corporation's 1000+ global customers.
- CA PAM also displaced an incumbent at a
large American multi-national telecommunications company that chose
the product for the strength of its password management.
- CA Project and Portfolio Management
(PPM) closed several six-figure transactions during the quarter,
three of which were brand new customers to the platform.
SEGMENT INFORMATION
(dollars in millions)
First Quarter FY17 vs.
FY16 Revenue
%Change
%ChangeCC*
Operating Margin FY17
FY16 FY17
FY16 Mainframe Solutions $551
$560 (2)% (1)% 62%
62% Enterprise Solutions $371 $338
10% 10% 13% 14%
Services $77 $79 (3)%
(2)% 3%
10%
*CC or Constant Currency is a non-GAAP financial measure, 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.
- Mainframe Solutions revenue declined
primarily due to insufficient revenue from prior period new sales
to offset the decline in revenue contribution from renewals.
- Enterprise Solutions revenue increased
primarily driven by the additional revenue associated with the
Rally and Xceedium acquisitions, which contributed approximately 9
points of revenue growth for the quarter.
- Services revenue decreased primarily
due to a decline in professional services engagements from prior
periods. Operating margin decreased as a result of the decrease in
revenue and additional personnel-related costs associated with the
Rally acquisition.
CASH FLOW FROM OPERATIONS
- Cash flow from operations for the first
quarter of fiscal 2017 was $161 million, versus $188 million in the
year-ago period. Cash flow from operations decreased compared
with the year-ago period primarily due to the increase in income
tax payments, partially offset by the decrease in vendor
disbursements and payroll.
CAPITAL STRUCTURE
- Cash and cash equivalents at
June 30, 2016 were $2.776 billion.
- With $1.95 billion in total debt
outstanding and $138 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $688
million.
- In the first quarter of fiscal 2017,
the Company repurchased 1.6 million shares of common stock for $50
million.
- As of June 30, 2016, the Company
is currently authorized to purchase $700 million of its common
stock under its current stock repurchase program.
- The Company distributed $107 million in
dividends to shareholders.
- The Company’s outstanding share count
at June 30, 2016 was 414 million.
OUTLOOK FOR FISCAL YEAR 2017
The Company updated its fiscal 2017 outlook for GAAP diluted
earnings per share from continuing operations and full-year GAAP
operating margin. This guidance update reflects the increase in
share-based compensation expense as a result of the increase in the
Company's share price. The following outlook contains
"forward-looking statements" (as defined below) and assumes no
material acquisitions.
The Company expects the following:
- Total revenue to increase in a range of
flat to plus 1 percent in constant currency, unchanged from
previous guidance. At June 30, 2016 exchange rates, this
translates to reported revenue of $4.03 billion to $4.07
billion.
- GAAP diluted earnings per share from
continuing operations to increase in a range of 2 percent to 5
percent in constant currency. Previous guidance was to increase in
a range of 3 percent to 6 percent in constant currency. At
June 30, 2016 exchange rates, this translates to reported GAAP
diluted earnings per share from continuing operations of $1.88 to
$1.93.
- Non-GAAP diluted earnings per share
from continuing operations to increase in a range of 1 percent to 3
percent in constant currency, unchanged from previous guidance. At
June 30, 2016 exchange rates, this translates to reported
non-GAAP diluted earnings per share from continuing operations of
$2.49 to $2.54.
- Cash flow from continuing operations to
increase in the range of 1 percent to 5 percent in constant
currency, unchanged from previous guidance. At June 30, 2016
exchange rates, this translates to reported cash flow from
continuing operations of $1.05 billion to $1.09 billion.
The Company expects a full-year GAAP operating margin of 29
percent and non-GAAP operating margin of 38 percent. This
translates to 1-point decrease from previous guidance for GAAP
operating margin of 30 percent and unchanged from previous guidance
for non-GAAP operating margin.
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 411 million shares
outstanding at fiscal 2017 year-end and weighted average diluted
shares outstanding of approximately 414 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 first 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., “Magic Quadrant for IT
Project and Portfolio Management Software Applications, Worldwide,”
Daniel B. Stang, Robert A. Handler, Teresa Jones, May 24, 2016
The Gartner Report(s) described herein,
(the "Gartner Report(s)") represent(s) research opinion or
viewpoints published, as part of a syndicated subscription service,
by Gartner, Inc. ("Gartner"), and are not representations of fact.
Each Gartner Report speaks as of its original publication date (and
not as of the date of this Quarterly Report) and the opinions
expressed in the Gartner Report(s) are subject to change without
notice.
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.
(2)
https://www.itcentralstation.com/products/ca-unified-infrastructure-management
(3)
Ovum Decision Matrix: Selecting an API
Management Solution, 2016-2017
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, internally developed 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 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. 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. Adjusted cash flow from operations
excludes payments associated with the fiscal 2014 Board-approved
rebalancing initiative as described above and restructuring and
other payments. Free cash flow excludes purchases of property and
equipment. 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, 2016, March 31, 2015 and March 31, 2014,
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 forecasted 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
and sales of our solutions by our partners; 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; the failure to renew large
license transactions on a satisfactory basis; 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; 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; changes in generally accepted accounting principles; 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; 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 © 2016 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
June 30,
Revenue:
2016
2015
Subscription and maintenance $ 826 $ 836 Professional services 77
79 Software fees and other 96 62
Total
revenue $ 999 $ 977
Expenses: Costs of licensing
and maintenance $ 68 $ 66 Cost of professional services 75 71
Amortization of capitalized software costs 66 60 Selling and
marketing 242 226 General and administrative 88 90 Product
development and enhancements 148 136 Depreciation and amortization
of other intangible assets 20 27 Other expenses (gains), net
- (3 )
Total expenses before interest and income
taxes $ 707 $ 673
Income from continuing operations
before interest and income taxes $ 292 $ 304 Interest expense,
net 15 9
Income from continuing operations
before income taxes $ 277 $ 295 Income tax expense 79
88
Income from continuing operations $ 198 $
207 Income from discontinued operations, net of income taxes $ - $
5
Net income $ 198 $ 212
Basic
income per common share: Income from continuing operations $
0.47 $ 0.47 Income from discontinued operations -
0.01
Net income $ 0.47 $ 0.48
Basic
weighted average shares used in computation 414 436
Diluted income per common share: Income from continuing
operations $ 0.47 $ 0.47 Income from discontinued operations
- 0.01
Net income $ 0.47 $ 0.48
Diluted weighted average shares used in computation 415 438
Table 2 CA Technologies Condensed
Consolidated Balance Sheets (in millions) June
30, March 31, 2016 2016 (unaudited) Cash and cash
equivalents $ 2,776 $ 2,812 Trade accounts receivable, net 430 625
Other current assets 144 124
Total
current assets $ 3,350 $ 3,561 Property and equipment,
net $ 229 $ 242 Goodwill 6,084 6,086 Capitalized software and other
intangible assets, net 725 795 Deferred income taxes 405 407 Other
noncurrent assets, net 114 113
Total
assets $ 10,907 $ 11,204 Current portion
of long-term debt $ 4 $ 6 Deferred revenue (billed or collected)
2,027 2,197 Other current liabilities 607 691
Total current liabilities $ 2,638 $ 2,894
Long-term debt, net of current portion $ 1,946 $ 1,947 Deferred
income taxes 2 3 Deferred revenue (billed or collected) 654 737
Other noncurrent liabilities 240 245
Total liabilities $ 5,480 $ 5,826
Common stock $ 59 $ 59 Additional paid-in capital 3,628 3,664
Retained earnings 6,666 6,575 Accumulated other comprehensive loss
(445 ) (416 ) Treasury stock (4,481 ) (4,504 )
Total stockholders’ equity $ 5,427 $ 5,378
Total liabilities and stockholders’ equity $ 10,907 $
11,204
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
June 30,
2016
2015
Operating activities from continuing operations: Net income
$ 198 $ 212 Income from discontinued operations -
(5 ) Income from continuing operations $ 198 $ 207
Adjustments to reconcile income from
continuing operations to net cash provided by operating
activities:
Depreciation and amortization 86 87 Deferred income taxes 3 (10 )
Provision for bad debts 1 1 Share-based compensation expense 29 22
Other non-cash items 1 - Foreign currency transaction (gains)
losses (2 ) 3 Changes in other operating assets and liabilities,
net of effect of acquisitions: Decrease in trade accounts
receivable 193 228 Decrease in deferred revenue (245 ) (239 )
(Decrease) increase in taxes payable, net (41 ) 27 Increase
(decrease) in accounts payable, accrued expenses and other 8 (33 )
Decrease in accrued salaries, wages and commissions (65 ) (83 )
Changes in other operating assets and liabilities (5 )
(22 )
Net cash provided by operating activities -
continuing operations $ 161 $ 188
Investing
activities from continuing operations: Acquisitions of
businesses, net of cash acquired, and purchased software $ (1 ) $
(37 ) Purchases of property and equipment (8 ) (13 )
Net cash used in investing activities - continuing
operations $ (9 ) $ (50 )
Financing activities from
continuing operations: Dividends paid $ (107 ) $ (110 )
Purchases of common stock (50 ) (50 ) Notional pooling borrowings
(repayments), net 4 (16 ) Debt repayments (4 ) (5 ) Exercise of
common stock options 13 4 Other financing activities -
(23 )
Net cash used in financing activities -
continuing operations $ (144 ) $ (200 ) Effect of exchange rate
changes on cash $ (44 ) $ 69
Net change in cash and cash
equivalents - continuing operations $ (36 ) $ 7 Cash provided
by operating activities - discontinued operations $ - $ 5
Net effect of discontinued operations on cash and cash
equivalents $ - $ 5
(Decrease) increase in
cash and cash equivalents $ (36 ) $ 12
Cash and cash
equivalents at beginning of period $ 2,812 $ 2,804
Cash and cash equivalents at end of period $ 2,776
$ 2,816
Table 4 CA Technologies
Operating Segments (unaudited) (dollars in millions)
Three Months Ended June 30, 2016
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 551 $ 371 $ 77 $ 999
Expenses (3) 208 324 75
607
Segment profit $ 343 $ 47
$ 2 $ 392
Segment operating
margin 62 % 13 % 3 % 39 %
Segment profit $ 392
Less: Purchased software amortization 43 Other intangibles
amortization 5 Internally developed software products amortization
23 Share-based compensation expense 29 Other expenses, net (4) -
Interest expense, net 15
Income from
continuing operations before income taxes $ 277
Three Months Ended June 30, 2015
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 560 $ 338 $ 79 $ 977
Expenses (3) 211 290 71
572
Segment profit $ 349 $ 48
$ 8 $ 405
Segment operating
margin 62 % 14 % 10 % 41 %
Segment profit $ 405
Less: Purchased software amortization 28 Other intangibles
amortization 11 Internally developed software products amortization
32 Share-based compensation expense 22 Other expenses, net (4) 8
Interest expense, net 9
Income from
continuing operations before income taxes $ 295
(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 expenses, net consists
of costs associated with certain foreign exchange derivative
hedging gains and losses, and other miscellaneous costs.
Table 5 CA Technologies Constant Currency
Summary (unaudited) (dollars in millions) Three
Months Ended June 30,
% Increase
% Increase
(Decrease)
(Decrease)
in Constant
2016
2015
in $ US
Currency (1)
Bookings $ 1,353 $ 662 104 % 106 %
Revenue: North America $ 669 $ 652 3 % 3 %
International 330 325 2 %
2 % Total revenue $ 999 $ 977 2 % 3 %
Revenue:
Subscription and maintenance $ 826 $ 836 (1 )% (1 )% Professional
services 77 79 (3 )% (2 )% Software fees and other 96
62 55 % 55 % Total revenue $ 999 $ 977
2 % 3 %
Segment Revenue: Mainframe solutions $ 551 $
560 (2 )% (1 )% Enterprise solutions $ 371 338 10 % 10 % Services
77 79 (3 )% (2 )%
Total expenses before interest and
income taxes: Total non-GAAP (2) $ 607 $ 572 6 % 8 % Total GAAP
707 673 5 % 8 % (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, 2016, 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. 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
June 30,
2016
2015
GAAP net income $ 198 $ 212 GAAP income from
discontinued operations, net of income taxes -
(5 ) GAAP income from continuing operations $ 198 $
207 GAAP income tax expense 79 88 Interest expense, net
15 9 GAAP income from continuing
operations before interest and income taxes $ 292 $
304 GAAP operating margin (% of revenue) (1) 29 % 31
% Non-GAAP adjustments to expenses: Costs of licensing and
maintenance (2) $ 2 $ 2 Cost of professional services (2) 1 1
Amortization of capitalized software costs (3) 66 60 Selling and
marketing (2) 10 8 General and administrative (2) 11 7 Product
development and enhancements (2) 5 4 Depreciation and amortization
of other intangible assets (4) 5 11 Other expenses, net (5)
- 8 Total Non-GAAP adjustment to
operating expenses $ 100 $ 101 Non-GAAP
income from continuing operations before interest and income taxes
$ 392 $ 405 Non-GAAP operating margin (% of revenue) (6) 39 % 41 %
Interest expense, net 15 9 GAAP income tax expense 79 88
Non-GAAP adjustment to income tax expense (7) 29
25 Non-GAAP income tax expense $
108 $ 113 Non-GAAP income from continuing
operations $ 269 $ 283 (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 June 30, 2016 and 2015, non-GAAP
adjustment consists of $43 million and $28 million of purchased
software amortization and $23 million and $32 million of internally
developed software products amortization, respectively. (4)
Non-GAAP adjustment consists of other intangibles amortization.
(5) Non-GAAP adjustment consists 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. 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
June 30,
Operating
Expenses
2016
2015
Total expenses before interest and income taxes $ 707 $ 673
Non-GAAP operating adjustments: Purchased software
amortization 43 28 Other intangibles amortization 5 11 Internally
developed software products amortization 23 32 Share-based
compensation 29 22 Other expenses, net (1) - 8
Total non-GAAP operating adjustment $ 100 $ 101
Total non-GAAP operating expenses $ 607 $ 572
Three Months Ended
June 30,
Diluted EPS from
Continuing Operations
2016
2015
GAAP diluted EPS from continuing operations $ 0.47 $ 0.47
Non-GAAP adjustments: Purchased software amortization 0.10
0.06 Other intangibles amortization 0.01 0.02 Internally developed
software products amortization 0.06 0.07 Share-based compensation
0.07 0.05 Other expenses, net (1) - 0.02 Tax effect of non-GAAP
adjustments (0.07 ) (0.06 ) Non-GAAP effective tax rate adjustments
(2) - 0.01 Total non-GAAP adjustment $
0.17 $ 0.17 Non-GAAP diluted EPS from
continuing operations $ 0.64 $ 0.64 (1) Other
expenses (gains), net consists of costs associated with 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.
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
June 30,
2016
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 292 $ 392 Interest expense, net 15
15 Income from continuing operations before income taxes $
277 $ 377 Statutory tax rate 35 % 35 % Tax at
statutory rate $ 97 $ 132 Adjustments for discrete and permanent
items (2) (18 ) (24 ) Total tax expense $ 79 $ 108
Effective tax rate (3) 28.5 % 28.6 % Three Months
Ended
June 30,
2015
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 304 $ 405 Interest expense, net 9
9 Income from continuing operations before income taxes $
295 $ 396 Statutory tax rate 35 % 35 % Tax at
statutory rate $ 103 $ 139 Adjustments for discrete and permanent
items (2) (15 ) (26 ) Total tax expense $ 88 $ 113
Effective tax rate (3) 29.8 % 28.5 % (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. 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,
2017
Projected GAAP diluted EPS from continuing operations
range $ 1.88 to $ 1.93 Non-GAAP adjustments: Purchased
software amortization 0.37 0.37 Other intangibles amortization 0.03
0.03 Internally developed software products amortization 0.19 0.19
Share-based compensation 0.26 0.26 Tax effect of non-GAAP
adjustments (0.24 ) (0.24 ) Total non-GAAP adjustment
$ 0.61 $ 0.61 Projected non-GAAP diluted EPS
from continuing operations range $ 2.49
to
$ 2.54 Fiscal Year Ending
Projected Operating
Margin
March 31,
2017
Projected GAAP operating margin 29 % Non-GAAP
operating adjustments: Purchased software amortization 4 % Other
intangibles amortization 0 % Internally developed software products
amortization 2 % Share-based compensation 3 % Total non-GAAP
operating adjustment 9 % Projected non-GAAP operating margin
38 % Refer to the discussion of non-GAAP financial
measures included in the accompanying press release for additional
information. Certain non-material differences may arise versus
actual from impact of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727006526/en/
CA TechnologiesDarlan Monterisi, 646-826-6071Corporate
Communicationsdarlan.monterisi@ca.comorJennifer DiClerico,
212-415-6997Corporate
Communicationsjennifer.diclerico@ca.comorTraci Tsuchiguchi,
650-534-9814Investor Relationstraci.tsuchiguchi@ca.comorRobert
Lung, 212-415-6908Investor Relationsrobert.lung@ca.com
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