- Achieved FY2016 Guidance for
Revenue, Operating Margin, and EPS, and Exceeded for CFFO
- 4Q and FY2016 Revenue of $1.009
Billion and $4.025 Billion, Respectively
- 4Q and FY2016 GAAP EPS of $0.41 and
$1.78, Respectively
- 4Q and FY2016 Non-GAAP EPS of $0.60
and $2.43, Respectively
- 4Q and FY2016 Cash Flow From
Continuing Operations of $471 Million and $1,034 Million,
Respectively
CA Technologies (NASDAQ:CA) today reported financial results for
its fourth quarter and full fiscal year 2016, which ended
March 31, 2016.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
“I am pleased to report that we achieved our guidance for
full-year revenue, operating margin and EPS results, and exceeded
guidance for full-year cash flow from continuing operations.
“Our efforts to reposition the product portfolio, refine our
go-to-market strategy, and sharpen our focus on customer success
have culminated in new sales growth for the year. This was a
notable improvement relative to prior years. At the same time,
there is still work to do to drive the level of sustained growth
that our company is capable of delivering.
“Looking forward, we will continue to manage the business with
thoughtful discipline, and remain committed to our strategic
imperative of delivering long term growth and profitability.”
FINANCIAL OVERVIEW
(dollars in millions, except share data)
Fourth
Quarter FY16 vs. FY15 Full Year FY16 vs. FY15
FY16 FY15
%Change
%ChangeCC**
FY16 FY15
%Change
%ChangeCC**
Revenue $1,009 $1,023 (1)% 1% $4,025
$4,262 (6)% (1)% GAAP Income from Continuing
Operations $171 $145 18% 30% $769 $810
(5)% 10% Non-GAAP Income from Continuing Operations*
$252 $247 2% 15% $1,050 $1,125
(7)% 3% GAAP Diluted EPS from Continuing Operations $0.41
$0.33 24% 36% $1.78 $1.82 (2)%
13% Non-GAAP Diluted EPS from Continuing Operations* $0.60
$0.56 7% 21% $2.43 $2.53 (4)%
6% Cash Flow from Continuing Operations $471
$485 (3)% 0% $1,034 $1,030 0%
9% * Non-GAAP income and non-GAAP 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
Fourth
Quarter
(dollars in millions)
Fourth Quarter FY16 vs. FY15
FY16
% ofTotal
FY15
% ofTotal
%Change
%ChangeCC**
North America Revenue $681 67% $682 67%
0% 0% International Revenue $328 33% $341
33% (4)% 3% Total Revenue $1,009
$1,023 (1)% 1%
North America Bookings $636 66% $727
68% (13)% (12)% International Bookings $324
34% $342 32% (5)% (4)% Total Bookings
$960 $1,069 (10)%
(10)%
Current Revenue Backlog $3,113
$3,141 (1)% (1)% Total
Revenue Backlog $6,829 $6,530
5% 4%
**CC: Constant Currency
- Total revenue declined as a result
of an unfavorable foreign exchange effect of $28 million. Our
fiscal 2016 acquisitions of Rally Software Development Corp. and
Xceedium, Inc. (“our fiscal 2016 acquisitions”) contributed
approximately 3 points of revenue growth for the quarter.
- Total bookings declined primarily due
to lower renewals and, to a lesser extent, lower new product
sales.
- The Company executed a total of 13
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $271 million.
During the fourth quarter of fiscal 2015, the Company executed a
total of 19 license agreements with incremental contract values in
excess of $10 million each, for an aggregate contract value of $507
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 2.66
years, compared with 3.05 years for the same period in fiscal
2015.
Full
Year
(dollars in millions)
Full Year FY16 vs. FY15
FY16
% ofTotal
FY15
% ofTotal
%Change
%ChangeCC**
North America Revenue $2,712 67% $2,766 65%
(2)% (1)% International Revenue $1,313 33%
$1,496 35% (12)% 1% Total Revenue
$4,025 $4,262 (6)%
(1)%
North America Bookings $2,987 70%
$2,353 65% 27% 28% International
Bookings $1,260 30% $1,256 35% 0%
11% Total Bookings $4,247 $3,609
18% 22%
**CC: Constant Currency
- Total revenue
declined primarily as a result of an unfavorable foreign
exchange effect of $212 million. Our fiscal 2016 acquisitions
contributed approximately 2 points of revenue growth for the
year.
- Total bookings grew primarily due to
higher renewals, which included a renewal with a large system
integrator in excess of $500 million in fiscal 2016 and, to a
lesser extent, bookings related to our fiscal 2016
acquisitions.
- The Company executed a total of 48
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $1.965
billion. During fiscal 2015, the Company executed a total of 51
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $1.448
billion.
- The weighted average duration of
subscription and maintenance bookings for fiscal 2016 was 3.71
years, compared with 3.24 years for fiscal 2015.
EXPENSES, MARGIN AND EARNINGS PER SHARE
Fourth
Quarter
(dollars in millions)
Fourth Quarter FY16 vs. FY15
FY16 FY15
%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income
Taxes $730 $812 (10)% (10)% Operating Income
Before Interest and Income Taxes $279 $211 32%
45% GAAP Diluted EPS from Continuing Operations $0.41 $0.33
24% 36% Operating Margin 28% 21%
Effective Tax Rate 35.2% 28.2%
Non-GAAP* Operating Expenses
Before Interest and Income Taxes $630 $693 (9)%
(11)% Operating Income Before Interest and Income Taxes $379
$330 15% 29% Non-GAAP Diluted EPS from
Continuing Operations $0.60 $0.56 7% 21%
Operating Margin 38% 32%
Effective Tax Rate 30.8% 23.1%
*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: Constant
Currency
- GAAP and non-GAAP operating expenses
decreased primarily as a result of a decline in non-acquisition
personnel-related costs, partially offset by costs from our fiscal
2016 acquisitions.
- In the fourth quarter of fiscal 2015,
GAAP and non-GAAP operating expenses were affected by $40 million
from severance costs.
- GAAP EPS was positively impacted by
$0.17 from an improvement in GAAP operating margin, which was
partially offset by $0.04 impact from unfavorable foreign exchange
and $0.04 impact from an increase in GAAP effective tax rate.
- Non-GAAP EPS was positively impacted by
$0.17 from an improvement in non-GAAP operating margin, which was
partially offset by $0.07 impact from unfavorable foreign exchange
and $0.06 impact from an increase in non-GAAP effective tax
rate.
Full
Year
(dollars in millions)
Full Year FY16 vs. FY15
FY16 FY15
%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income
Taxes $2,890 $3,100 (7)% (5)% Operating Income
Before Interest and Income Taxes $1,135 $1,162 (2)%
11% GAAP Diluted EPS from Continuing Operations $1.78
$1.82 (2)% 13% Operating Margin 28% 27%
Effective Tax Rate 29.1% 27.4%
Non-GAAP* Operating
Expenses Before Interest and Income Taxes $2,494 $2,665
(6)% (4)% Operating Income Before Interest and Income
Taxes $1,531 $1,597 (4)% 5% Non-GAAP Diluted
EPS from Continuing Operations $2.43 $2.53 (4)%
6% Operating Margin 38% 37%
Effective Tax Rate 29.1% 27.4%
*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. **CC: Constant Currency
- GAAP and non-GAAP operating expenses
decreased primarily as a result of a decrease in non-acquisition
personnel-related costs and a favorable foreign exchange effect,
partially offset by costs from our fiscal 2016 acquisitions.
- GAAP EPS was negatively impacted by
$0.24 impact from unfavorable foreign exchange, $0.08 impact from
our fiscal 2016 acquisitions and $0.04 impact from an increase in
GAAP effective tax rate. These items were partially offset by a
$0.27 improvement in GAAP operating margin and $0.05 increase from
an overall share count reduction.
- Non-GAAP EPS was negatively impacted by
$0.24 impact from unfavorable foreign exchange, $0.08 impact from
our fiscal 2016 acquisitions and $0.06 impact from an increase in
non-GAAP effective tax rate. These items were partially offset by a
$0.21 improvement in non-GAAP operating margin and $0.07 increase
from an overall share count reduction.
- The increase in both GAAP and non-GAAP
effective tax rates was primarily due to the favorable resolutions
of uncertain tax positions in fiscal 2015 relating to the
completion of the examination of our U.S. federal income tax
returns for the tax years ended March 31, 2011 and 2012.
SELECTED HIGHLIGHTS
Leadership and recognition during the quarter
include:
- CA Technologies was recognized as a
2016 World’s Most Ethical Company® by the Ethisphere Institute, a
global leader in defining and advancing the standards of ethical
business practices.
- For the fourth year in a row, CA
Technologies was once again named as a recipient of the NorthFace
ScoreBoard AwardSM from Omega Management Group Corp in recognition
of achieving excellence in customer service and support for
2015.
- CA Technologies was again named a
leader by KuppingerCole in its Leadership Compass: Access
Management and Federation. (1)
- CA Technologies was named a leader by
the IDC Marketscape: Worldwide Enterprise IT PPM 2016 Vendor
Assessment. (2)
Customer traction for CA Technologies innovation during the
quarter include:
- A global health insurance and benefits
provider chose CA Agile Central as their enterprise standard for
agile management, displacing deployments from two other
vendors.
- A leader in the global money-transfer
space standardized on CA Release Automation to accelerate and
improve the quality of their development processes.
- A global consumer products company
selected CA Privileged Access Management after a competitive
proof-of concept evaluation for its ease of deployment and
demonstrated value.
- A multinational pharmaceutical company
chose CA Project and Portfolio Management SaaS for its IT
operations and M&A activities.
- A leading SaaS company chose to expand
its footprint with CA API Management after observing the value of
the product at one of its acquired companies.
SEGMENT INFORMATION
Fourth
Quarter
(dollars in millions)
Fourth Quarter FY16 vs. FY15
Revenue
%Change
%ChangeCC**
Operating Margin FY16 FY15
FY16 FY15 Mainframe
Solutions $547 $572 (4)% (2)% 61%
56% Enterprise Solutions $380 $368 3%
6% 10% 4% Services $82 $83 (1)%
0% 7% -4%
**CC: Constant Currency
- Mainframe Solutions revenue declined
primarily due to an unfavorable foreign exchange effect and
insufficient revenue from prior period new sales to offset the
decline in revenue contribution from renewals. Operating margin
increased compared with the year-ago period primarily due to the
decline in personnel-related costs.
- Enterprise Solutions revenue increased
as a result of additional revenue associated with our fiscal 2016
acquisitions, which contributed approximately 7 points of revenue
growth for the quarter. Operating margin increased primarily due to
lower non-acquisition related costs partially offset by additional
costs from our fiscal 2016 acquisitions.
- Services revenue decreased due to an
unfavorable foreign exchange effect. Operating margin improved
primarily due to a decrease in personnel-related costs as a result
of our prior period severance actions.
Full
Year
(dollars in millions)
Full Year FY16 vs. FY15
Revenue
%Change
%ChangeCC**
Operating Margin FY16 FY15
FY16 FY15 Mainframe
Solutions $2,215 $2,392 (7)% (2)% 61%
59% Enterprise Solutions $1,484 $1,519 (2)%
2% 10% 11% Services $326 $351
(7)% (3)% 7% 3%
**CC: Constant Currency
- Mainframe Solutions revenue declined
primarily due to an unfavorable foreign exchange effect and, to a
lesser extent, insufficient revenue from new sales to offset the
decline in revenue contribution from renewals. Mainframe Solutions
operating margin increased primarily due to a decrease in
personnel-related costs.
- Enterprise Solutions revenue declined
due to an unfavorable foreign exchange effect. Excluding the
unfavorable effect of foreign exchange, Enterprise Solutions
revenue increased as a result of additional revenue associated with
our fiscal 2016 acquisitions, which contributed approximately 5
points of revenue growth for the year. Enterprise Solutions
operating margin decreased primarily due to costs from our fiscal
2016 acquisitions, partially offset by a decrease in
non-acquisition personnel-related costs.
- Services revenue decreased primarily
due to an unfavorable foreign exchange effect and, to a lesser
extent, a decline in professional services engagements in the first
half of fiscal 2016 and during fiscal 2015, partially offset by an
increase in services revenue from our Rally acquisition. Operating
margin for Services increased primarily due to a decrease in
personnel-related costs as a result of our prior period severance
actions and a decrease in external consulting costs.
CASH FLOW FROM OPERATIONS
- Cash flow from continuing operations
for the fourth quarter was $471 million, compared with $485 million
in the prior year. Cash flow from operations decreased primarily
due to an unfavorable effect of foreign exchange.
- For the full year, cash flow from
continuing operations was $1.034 billion, compared with $1.030
billion in the prior fiscal year. Cash flow from operations
increased slightly due to lower disbursements, lower payments
associated with our Fiscal Year 2014 Rebalancing Plan and lower
income tax payments, net, offset by a decrease in cash collections
from billings, which included lower single installment payments.
There was an overall unfavorable effect from foreign exchange of
$82 million on net cash provided by continuing operating
activities.
CAPITAL STRUCTURE
- Cash, cash equivalents and investments
at March 31, 2016 were $2.812 billion.
- With $1.953 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $720
million.
- For fiscal 2016, the Company
repurchased 26 million shares of stock for $707 million.
- As of March 31, 2016, the Company
is currently authorized to purchase $750 million of its common
stock under its current stock repurchase program that was
authorized in November 2015.
- During the fourth quarter of fiscal
2016, the Company distributed $104 million in dividends to
shareholders. For fiscal 2016, the Company distributed $429 million
in dividends to shareholders.
- The Company’s outstanding share count
at March 31, 2016 was 413 million.
OUTLOOK FOR FISCAL 2017
The following outlook for fiscal 2017 contains "forward-looking
statements" (as defined below).
The Company expects the following:
- Total revenue to increase in a range of
flat to plus 1 percent in constant currency. At March 31, 2016
exchange rates, this translates to reported revenue of $4.04
billion to $4.08 billion.
- GAAP diluted earnings per share from
continuing operations to increase in a range of 3 percent to 6
percent in constant currency. At March 31, 2016 exchange
rates, this translates to reported GAAP diluted earnings per share
from continuing operations of $1.92 to $1.97.
- Non-GAAP diluted earnings per share
from continuing operations to increase in a range of 1 percent to 3
percent in constant currency. At March 31, 2016 exchange
rates, this translates to reported non-GAAP diluted earnings per
share from continuing operations of $2.51 to $2.56.
- Cash flow from continuing operations to
increase in a range of 1 percent to 5 percent in constant currency.
At March 31, 2016 exchange rates, this translates to reported
cash flow from continuing operations of $1.06 billion to $1.10
billion.
This outlook assumes no material acquisitions. The Company
expects a full-year GAAP operating margin of 30 percent and
non-GAAP operating margin of 38 percent. The Company also expects a
full-year GAAP and non-GAAP effective tax rate of between 28
percent and 29 percent.
The Company anticipates approximately 410 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 fourth quarter and full
fiscal year 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) KuppingerCole Leadership Compass: Access Management and
Federation, March 2016
(2) 2016 IDC MarketScape: Worldwide Enterprise IT PPM 2016
Vendor Assessment - Enabling Business Execution and Optimization,
February 2016, IDC #US40473615
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 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, 2016,
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
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 Fiscal Year Ended
March 31,
March 31,
Revenue:
2016
2015
2016
2015
Subscription and maintenance $ 821 $ 851 $ 3,317 $ 3,560
Professional services 82 83 326 351 Software fees and other
106 89 382 351
Total revenue $ 1,009 $ 1,023 $ 4,025 $
4,262
Expenses: Costs of licensing and maintenance $
74 $ 80 $ 283 $ 297 Cost of professional services 76 85 300 338
Amortization of capitalized software costs 64 69 256 273 Selling
and marketing 255 278 1,006 1,060 General and administrative 88 108
367 377 Product development and enhancements 140 160 560 603
Depreciation and amortization of other intangible assets 23 30 106
129 Other expenses, net 10 2 12
23
Total expenses before interest and
income taxes $ 730 $ 812 $ 2,890 $ 3,100
Income from continuing operations before interest and
income taxes $ 279 $ 211 $ 1,135 $ 1,162 Interest expense, net
15 9 51 47
Income from continuing operations before income taxes $ 264
$ 202 $ 1,084 $ 1,115 Income tax expense 93 57
315 305
Income from
continuing operations $ 171 $ 145 $ 769 $ 810 Income from
discontinued operations, net of income taxes $ 3 $ 6
$ 14 $ 36
Net income $ 174 $ 151
$ 783 $ 846
Basic income per common
share: Income from continuing operations $ 0.41 $ 0.33 $ 1.79 $
1.83 Income from discontinued operations 0.01
0.01 0.03 0.08
Net income
$ 0.42 $ 0.34 $ 1.82 $ 1.91
Basic
weighted average shares used in computation 413 437 426 439
Diluted income per common share: Income from
continuing operations $ 0.41 $ 0.33 $ 1.78 $ 1.82 Income from
discontinued operations 0.01 0.01
0.03 0.08
Net income $ 0.42
$ 0.34 $ 1.81 $ 1.90
Diluted
weighted average shares used in computation 414 439 427 441
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)
March 31, March 31, 2016 2015 (unaudited) Cash and
cash equivalents $ 2,812 $ 2,804 Trade accounts receivable, net 625
652 Deferred income taxes - 318 Other current assets 124
212
Total current assets $ 3,561 $
3,986 Property and equipment, net $ 242 $ 252 Goodwill 6,086
5,806 Capitalized software and other intangible assets, net 795 731
Deferred income taxes 407 92 Other noncurrent assets, net
113 106
Total assets $ 11,204 $
10,973 Current portion of long-term debt $ 6 $ 10
Deferred revenue (billed or collected) 2,197 2,114 Deferred income
taxes - 7 Other current liabilities 691 807
Total current liabilities $ 2,894 $ 2,938
Long-term debt, net of current portion $ 1,947 $ 1,247 Deferred
income taxes 3 45 Deferred revenue (billed or collected) 737 863
Other noncurrent liabilities 245 255
Total liabilities $ 5,826 $ 5,348
Common stock $ 59 $ 59 Additional paid-in capital 3,664 3,631
Retained earnings 6,575 6,221 Accumulated other comprehensive loss
(416 ) (418 ) Treasury stock (4,504 ) (3,868 )
Total stockholders’ equity $ 5,378 $ 5,625
Total liabilities and stockholders’ equity $ 11,204 $
10,973
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
March 31,
2016
2015
Operating activities from continuing operations: Net income
$ 174 $ 151 Income from discontinued operations (3 )
(6 ) Income from continuing operations $ 171 $ 145
Adjustments to reconcile income from
continuing operations to net cash provided by operating
activities:
Depreciation and amortization 87 99 Deferred income taxes (62 ) (10
) Provision for bad debts - 2 Share-based compensation expense 27
22 Other non-cash items (1 ) 4 Foreign currency transaction gains
(1 ) (3 ) Changes in other operating assets and liabilities, net of
effect of acquisitions: Decrease (increase) in trade accounts
receivable 4 (12 ) Increase in deferred revenue 248 307 Decrease in
taxes payable, net (25 ) (132 ) (Decrease) increase in accounts
payable, accrued expenses and other (12 ) 29 Increase in accrued
salaries, wages and commissions 25 22 Changes in other operating
assets and liabilities 10 12
Net
cash provided by operating activities - continuing operations $
471 $ 485
Investing activities from continuing
operations: Acquisitions of businesses, net of cash acquired,
and purchased software $ - $ (6 ) Purchases of property and
equipment (14 ) (7 ) Decrease in restricted cash 4 - Other
investing activities (1 ) -
Net cash used
in investing activities - continuing operations $ (11 ) $ (13 )
Financing activities from continuing operations: Dividends
paid $ (104 ) $ (111 ) Purchases of common stock (2 ) (90 )
Notional pooling borrowings, net 15 83 Debt repayments (1 ) (1 )
Exercise of common stock options 3 1 Other financing activities
(1 ) -
Net cash used in financing
activities - continuing operations $ (90 ) $ (118 ) Effect of
exchange rate changes on cash $ 62 $ (222 )
Net change in
cash and cash equivalents - continuing operations $ 432 $ 132
Cash used in operating activities - discontinued operations $ (23 )
$ (11 ) Cash provided by investing activities - discontinued
operations 50 -
Net effect of
discontinued operations on cash and cash equivalents $ 27
$ (11 )
Increase in cash and cash equivalents $ 459 $
121
Cash and cash equivalents at beginning of period $ 2,353
$ 2,683
Cash and cash equivalents at end of
period $ 2,812 $ 2,804 Results reflect the
discontinued operations associated with the CA ERwin Data Modeling
business.
Table 4 CA Technologies Operating
Segments (unaudited) (dollars in millions) Three
Months Ended March 31, 2016 Fiscal Year Ended March 31, 2016
Mainframe
Enterprise
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 547 $ 380 $ 82 $ 1,009 $
2,215 $ 1,484 $ 326 $ 4,025 Expenses (3) 213
341 76 630 854
1,337 303 2,494
Segment profit $ 334 $ 39 $ 6 $ 379
$ 1,361 $ 147 $ 23 $ 1,531
Segment operating margin 61 % 10 % 7 % 38 % 61 % 10 % 7 % 38
%
Segment profit $ 379 $ 1,531
Less: Purchased
software amortization 40 146 Other intangibles amortization 8 44
Internally developed software products amortization 24 110
Share-based compensation expense 27 97 Other expenses (gains), net
(4) 1 (1 ) Interest expense, net 15 51
Income from continuing operations before income taxes $ 264
$ 1,084 Three Months Ended March 31,
2015 Fiscal Year Ended March 31, 2015
Mainframe
Enterprise
Mainframe
Enterprise
Solutions (1)
Solutions (1)
Services (1) Total
Solutions (1)
Solutions (1)
Services (1) Total Revenue (2) $ 572 $ 368 $ 83 $ 1,023 $
2,392 $ 1,519 $ 351 $ 4,262 Expenses (3) 253
354 86 693 970
1,353 342 2,665
Segment profit $ 319 $ 14 $ (3 ) $ 330
$ 1,422 $ 166 $ 9 $ 1,597
Segment
operating margin 56 % 4 % -4 % 32 % 59 % 11 % 3 % 37 %
Segment profit $ 330 $ 1,597
Less: Purchased software
amortization 37 124 Other intangibles amortization 13 58 Internally
developed software products amortization 32 149 Share-based
compensation expense 22 87 Other expenses, net (4) 15 17 Interest
expense, net 9 47
Income from
continuing operations before income taxes $ 202 $ 1,115
(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 (gains), 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 March
31, Fiscal Year Ended March 31,
% Increase
% Increase
% Increase
(Decrease)
% Increase
(Decrease)
(Decrease)
in Constant
(Decrease)
in Constant
2016
2015
in $ US
Currency (1)
2016
2015
in $ US
Currency (1)
Bookings $ 960 $ 1,069 (10 )% (10 )% $ 4,247 $ 3,609
18 % 22 %
Revenue: North America $ 681 $ 682 0 % 0 %
$ 2,712 $ 2,766 (2 )% (1 )% International 328
341 (4 )% 3 % 1,313 1,496 (12 )%
1 % Total revenue $ 1,009 $ 1,023 (1 )% 1 % $ 4,025 $ 4,262 (6 )%
(1 )%
Revenue: Subscription and maintenance $ 821 $
851 (4 )% (1 )% $ 3,317 $ 3,560 (7 )% (2 )% Professional services
82 83 (1 )% 0 % 326 351 (7 )% (3 )% Software fees and other
106 89 19 % 23 % 382 351
9 % 13 % Total revenue $ 1,009 $ 1,023 (1 )% 1 % $ 4,025 $
4,262 (6 )% (1 )%
Segment Revenue: Mainframe
solutions $ 547 $ 572 (4 )% (2 )% $ 2,215 $ 2,392 (7 )% (2 )%
Enterprise solutions $ 380 368 3 % 6 % 1,484 1,519 (2 )% 2 %
Services 82 83 (1 )% 0 % 326 351 (7 )% (3 )%
Total
expenses before interest and income taxes: Total non-GAAP (2) $
630 $ 693 (9 )% (11 )% $ 2,494 $ 2,665 (6 )% (4 )% Total GAAP 730
812 (10 )% (10 )% 2,890 3,100 (7 )% (5 )% (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
Fiscal Year Ended
March 31,
March 31,
2016
2015
2016
2015
GAAP net income $ 174 $ 151 $ 783 $ 846 GAAP income from
discontinued operations, net of income taxes (3 ) (6
) (14 ) (36 ) GAAP income from continuing operations
$ 171 $ 145 $ 769 $ 810 GAAP income tax expense 93 57 315 305
Interest expense, net 15 9 51
47 GAAP income from continuing operations
before interest and income taxes $ 279 $ 211 $ 1,135
$ 1,162 GAAP operating margin (% of revenue) (1) 28 %
21 % 28 % 27 % Non-GAAP adjustments to expenses: Costs of
licensing and maintenance (2) $ 2 $ 1 $ 7 $ 5 Cost of professional
services (2) 1 1 4 4 Amortization of capitalized software costs (3)
64 69 256 273 Selling and marketing (2) 9 7 34 30 General and
administrative (2) 10 8 35 29 Product development and enhancements
(2) 5 5 17 19 Depreciation and amortization of other intangible
assets (4) 8 13 44 58 Other expenses (gains), net (5) 1
15 (1 ) 17 Total Non-GAAP
adjustment to operating expenses $ 100 $ 119 $ 396
$ 435 Non-GAAP income from continuing operations
before interest and income taxes $ 379 $ 330 $ 1,531 $ 1,597
Non-GAAP operating margin (% of revenue) (6) 38 % 32 % 38 % 37 %
Interest expense, net 15 9 51 47 GAAP income tax expense 93
57 315 305 Non-GAAP adjustment to income tax expense (7) 19
17 115 120
Non-GAAP income tax expense $ 112 $ 74 $ 430 $
425 Non-GAAP income from continuing operations $ 252
$ 247 $ 1,050 $ 1,125 (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 March 31, 2016 and 2015, non-GAAP
adjustment consists of $40 million and $37 million of purchased
software amortization and $24 million and $32 million of internally
developed software products amortization, respectively. For the
twelve month periods ending March 31, 2016 and 2015, non-GAAP
adjustment consists of $146 million and $124 million of purchased
software amortization and $110 million and $149 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 Fiscal Year Ended
March 31,
March 31,
Operating
Expenses
2016
2015
2016
2015
Total expenses before interest and income taxes $ 730 $ 812
$ 2,890 $ 3,100 Non-GAAP operating adjustments: Purchased
software amortization 40 37 146 124 Other intangibles amortization
8 13 44 58 Internally developed software products amortization 24
32 110 149 Share-based compensation 27 22 97 87 Other expenses
(gains), net (1) 1 15 (1 )
17 Total non-GAAP operating adjustment $ 100 $
119 $ 396 $ 435 Total non-GAAP
operating expenses $ 630 $ 693 $ 2,494 $ 2,665
Three Months Ended Fiscal Year Ended
March 31,
March 31,
Diluted EPS from
Continuing Operations
2016
2015
2016
2015
GAAP diluted EPS from continuing operations $ 0.41 $ 0.33 $
1.78 $ 1.82 Non-GAAP adjustments, net of taxes: Purchased
software amortization 0.06 0.06 0.24 0.20 Other intangibles
amortization 0.01 0.02 0.07 0.10 Internally developed software
products amortization 0.04 0.05 0.18 0.24 Share-based compensation
0.04 0.04 0.16 0.14 Other expenses, net (1) - 0.02 - 0.03 Non-GAAP
effective tax rate adjustments (2) 0.04 0.04
- - Total non-GAAP adjustment $
0.19 $ 0.23 $ 0.65 $ 0.71
Non-GAAP diluted EPS from continuing operations $ 0.60 $
0.56 $ 2.43 $ 2.53 (1) Other expenses
(gains), 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 Fiscal Year Ended
March 31,
2016
March 31,
2016
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 279 $ 379 $ 1,135 $ 1,531 Interest expense, net
15 15 51 51 Income
from continuing operations before income taxes $ 264 $ 364 $ 1,084
$ 1,480 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 92 $ 127 $ 379 $ 518 Adjustments for discrete and
permanent items (2) 1 (15 ) (64 )
(88 ) Total tax expense $ 93 $ 112 $ 315 $ 430
Effective tax rate (3) 35.2 % 30.8 % 29.1 % 29.1 %
Three Months Ended Fiscal Year Ended
March 31,
2015
March 31,
2015
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 211 $ 330 $ 1,162 $ 1,597 Interest expense, net
9 9 47 47 Income
from continuing operations before income taxes $ 202 $ 321 $ 1,115
$ 1,550 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 71 $ 112 $ 390 $ 543 Adjustments for discrete and
permanent items (2) (14 ) (38 ) (85 )
(118 ) Total tax expense $ 57 $ 74 $ 305 $ 425 Effective tax
rate (3) 28.2 % 23.1 % 27.4 % 27.4 % (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,
2017
Projected GAAP diluted EPS from continuing
operations range
$
1.92
to
$
1.97
Non-GAAP adjustments, net of taxes: Purchased software
amortization 0.25 0.25 Other intangibles amortization 0.03 0.03
Internally developed software products amortization 0.14 0.14
Share-based compensation 0.17
0.17 Total non-GAAP adjustment $ 0.59 $
0.59 Projected non-GAAP diluted EPS from continuing
operations range $ 2.51 to $ 2.56
Fiscal Year Ending
Projected Operating
Margin
March 31,
2017
Projected GAAP operating margin 30 % Non-GAAP
operating adjustments: Purchased software amortization 4 % Other
intangibles amortization 0 % Internally developed software products
amortization 2 % Share-based compensation 2 % Total
non-GAAP operating adjustment 8 % 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/20160511006513/en/
CA TechnologiesSaswato Das, 646-710-6690Corporate
CommunicationsSaswato.das@ca.comorJennifer DiClerico,
917-968-9680Corporate
CommunicationsJennifer.diclerico@ca.comorTraci Tsuchiguchi,
650-534-9814Investor Relationstraci.tsuchiguchi@ca.comorRobert Lung,
212-415-6908Investor Relationsrobert.lung@ca.com
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