- First Quarter Results Exceed Company
Expectations; Raising Full Year Guidance
- First Quarter Revenue of $1,025
Million
- First Quarter GAAP EPS of
$0.42
- First Quarter Non-GAAP EPS of
$0.61
- First Quarter Cash Flow From
Operations of $298 Million
CA Technologies (NASDAQ:CA) today reported financial results for
its first quarter fiscal 2018, which ended June 30, 2017.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
"I am very pleased with our overall performance during the first
quarter. CA Technologies continues to gain traction in the market
and with our customers, who increasingly view CA as a strategic
partner. As the momentum from fiscal year 2017 has continued into
the early part of fiscal year 2018, we have increased confidence
that these positive data points are beginning to form a trend. We
are building CA for long-term sustainable growth and are pleased to
be in a position to raise our fiscal year 2018 guidance."
FINANCIAL OVERVIEW
(dollars in millions, except share data)
First Quarter FY18 vs. FY17 FY18
FY17 % Change
% ChangeCC*
Revenue $1,025 $999 3% 4% GAAP Net Income $178
$198 (10)% (4)% Non-GAAP Net Income* $256
$269 (5)% (3)% GAAP Diluted EPS $0.42
$0.47 (11)% (4)% Non-GAAP Diluted EPS* $0.61
$0.64 (5)% (3)% Cash Flow provided by Operations
$298 $194 54% 52%
* Non-GAAP income, Non-GAAP earnings per share and CC or Constant
Currency are non-GAAP financial measures, as noted in "Non-GAAP
Financial Measures" 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
FY18 vs. FY17 FY18
% ofTotal
FY17
% ofTotal
%Change
%ChangeCC*
North America Revenue $690 67% $669 67%
3% 3% International Revenue $335 33% $330
33% 2% 4% Total Revenue $1,025
$999 3% 4%
North America Bookings $487 69% $992 73%
(51)% (51)% International Bookings $216 31%
$361 27% (40)% (39)% Total Bookings
$703 $1,353 (48)%
(48)%
Current Revenue Backlog $3,206
$3,031 6% 6% Total
Revenue Backlog $7,295 $7,151
2% 2% *CC
or Constant Currency is a non-GAAP financial measure, as noted in
"Non-GAAP Financial Measures" 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 due to an
increase in software fees and other revenue, partially offset by
decreases in subscription and maintenance revenue and professional
services revenue. Our fourth quarter fiscal 2017 acquisitions of
Automic Holding GmbH (Automic) and Veracode, Inc. (Veracode)
contributed approximately 6 points of revenue growth for the
quarter.
- Total bookings decreased due to a
decline in renewal bookings, which included a large system
integrator transaction that occurred in the first quarter of fiscal
2017 with an incremental contract value in excess of $475
million.
- The Company executed a total of 9
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $176 million.
During the first quarter of fiscal 2017, 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 which included the aforementioned large system integrator
transaction.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 3.17
years, compared with 4.93 years for the same period in fiscal
2017.
EXPENSES, MARGIN AND EARNINGS PER SHARE
(dollars in millions)
First Quarter
FY18 vs. FY17 FY18 FY17
%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income
Taxes $762 $707 8% 7% Operating Income Before
Interest and Income Taxes $263 $292 (10)% (4)%
Diluted EPS $0.42 $0.47 (11)% (4)% Operating
Margin 26% 29% Effective Tax
Rate 25.2% 28.5%
Non-GAAP*
Operating Expenses Before Interest and Income Taxes $642
$607 6% 6% Operating Income Before Interest and
Income Taxes $383 $392 (2)% 0% Diluted EPS
$0.61 $0.64 (5)% (3)% Operating Margin 37%
39% Effective Tax Rate
28.5% 28.6%
*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 "Non-GAAP
Financial Measures" 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 operating expenses
increased primarily due to operational costs associated with our
Automic and Veracode acquisitions, which were mainly
personnel-related. These increases were partially offset by a
decrease of non-acquisition-related costs, which included
personnel-related, commission and promotion costs.
- GAAP operating expenses were also
affected by higher amortization expenses of purchased software and
other intangible assets.
- GAAP EPS was negatively impacted by
$0.03 from our acquisitions and $0.03 from unfavorable foreign
exchange effect.
- Non-GAAP EPS was negatively impacted by
$0.03 from our acquisitions.
SELECTED HIGHLIGHTS FROM THE QUARTER
- CA Technologies was named as a Leader
in the Gartner Magic Quadrant for Project Portfolio Management,
Worldwide. The report evaluated CA Project & Portfolio
Management (CA PPM) and positioned CA Technologies highest in the
Leaders quadrant for ability to execute.1,4
- CA Technologies was named a Leader in
the Gartner Magic Quadrant for Enterprise Agile Planning Tools. The
report evaluated CA Agile Central, an enterprise-class platform
purpose-built for scaling agile development practices. CA
Technologies was positioned the furthest in the Leaders quadrant
for Completeness of Vision. 2,4
- CA Technologies was named a Leader in
the Gartner Magic Quadrant for Access Management, Worldwide 2017.
The report evaluated CA’s identity and access management portfolio
and the Company’s ability to execute and completeness of
vision.3,4
- CA Technologies was named an Overall
Leader in Privilege Management for the fourth consecutive year in
KuppingerCole’s Leadership Compass report. CA Privileged Access
Management was recognized as a leader in the Product, Innovation
and Market Categories.5
- CA Technologies was named by Forbes
magazine as one of America’s Best Employers for 2017.
- CA Technologies was named by Working
Mother magazine as one of the Best Companies for Multicultural
Women for 2017.
SEGMENT INFORMATION
(dollars in millions)
First Quarter
FY18 vs. FY17 Revenue
%Change
%ChangeCC*
Operating Margin FY18 FY17
FY18 FY17 Mainframe
Solutions $536 $551 (3)% (2)% 65%
62% Enterprise Solutions $414 $371 12%
12% 8% 13% Services $75 $77 (3)%
(2)% 1% 3% *CC or Constant
Currency is a non-GAAP financial measure, as noted in "Non-GAAP
Financial Measures" 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.
Mainframe Solutions operating margin increased primarily due to a
reduction in personnel-related expenses in the first quarter of
fiscal 2018.
- Enterprise Solutions revenue increased
due to our fourth quarter fiscal 2017 acquisitions of Automic and
Veracode which contributed approximately 14 points of revenue
growth for the quarter. Enterprise Solutions operating margin
decreased primarily due to operating losses associated with our
Automic and Veracode acquisitions, which were mainly
personnel-related.
- Services revenue decreased slightly
primarily due to a decline in professional services engagements,
partially offset by an increase in professional services revenue
associated with our fourth quarter fiscal 2017 acquisitions of
Veracode and Automic. The decline in professional services
engagements was a result of several factors including our products
being easier to install and manage, and an increase in customers’
use of partners for services engagements. Operating margin for
Services decreased primarily as a result of the decline in our
professional services revenue.
CASH FLOW FROM OPERATIONS
- Cash flow from operations for the first
quarter of fiscal 2018 was $298 million, versus $194 million in the
year-ago period. Cash flow from operations increased compared
with the year-ago period due to an increase in cash collections
from billings, mainly from higher single installment collections,
and lower cash tax payments, partially offset by an increase in
vendor disbursements and payroll.
CAPITAL STRUCTURE
- Cash and cash equivalents at
June 30, 2017 were $2.971 billion.
- With $2.788 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash position was $44 million.
- Approximately 59% of the Company’s cash
and cash equivalents were held by foreign subsidiaries outside the
United States at June 30, 2017.
- As of June 30, 2017, the Company
was authorized to purchase $650 million of its common stock under
its current stock repurchase program.
- The Company distributed $107 million in
dividends to stockholders during the first quarter of fiscal
2018.
- The Company’s outstanding share count
at June 30, 2017 was approximately 416 million.
OUTLOOK FOR FISCAL YEAR 2018
The Company updated its fiscal 2018 outlook. This guidance
assumes no material acquisitions, and contains "forward-looking
statements" (as defined below).
The Company expects the following:*
- Total revenue to increase approximately
4 percent as reported and in constant currency. Previous guidance
was to increase in a range of 2 percent to 3 percent as reported
and 3 percent to 4 percent in constant currency. At June 30,
2017 exchange rates, this translates to reported revenue of $4.20
billion to $4.23 billion.
- Full-year GAAP operating margin between
26 percent and 27 percent, unchanged from previous guidance. Full
year non-GAAP operating margin between 36 percent and 37 percent,
previous guidance was 36 percent. 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.
- GAAP diluted earnings per share to
decrease in a range of 8 percent to 5 percent as reported and in
constant currency. Previous guidance was to decrease in a range of
10 percent to 7 percent as reported and 8 percent to 6 percent in
constant currency. At June 30, 2017 exchange rates, this
translates to reported GAAP diluted earnings per share of $1.70 to
$1.76.
- Non-GAAP diluted earnings per share to
decrease in a range of 2 percent to flat as reported and in
constant currency. Previous guidance was to decrease in a range of
5 percent to 3 percent as reported and 4 percent to 2 percent in
constant currency. At June 30, 2017 exchange rates, this
translates to reported non-GAAP diluted earnings per share of $2.42
to $2.48.
- Approximately 412 million shares
outstanding at fiscal 2018 year-end and weighted average diluted
shares outstanding of approximately 415 million for fiscal
2018.
- Cash flow to increase in a range of 1
percent to 5 percent as reported and flat to 4 percent in constant
currency. Previous guidance was to change in a range of minus 2
percent to plus 2 percent as reported and in constant currency. At
June 30, 2017 exchange rates, this translates to reported cash
flow from operations of $1.09 billion to $1.14 billion.
*In the outlook section, certain non-material differences
between growth rates and translated dollar amounts may arise from
impact of rounding.
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.
1Gartner “Magic Quadrant for Project Portfolio Management,
Worldwide,” by Daniel B. Stang, Matt Light, Teresa Jones, May 25,
2017.
2Gartner "Magic Quadrant for Enterprise Agile Planning Tools,"
by Thomas E. Murphy, Mike West, Keith James Mann, April 27,
2017.
3 Gartner “Magic Quadrant for Access Management, Worldwide,” by
Gregg Kreizman and Anmol Singh, June 7, 2017.
4 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 [Annual/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.
5 KuppingerCole, “Leadership Compass: Privilege Management,” by
Martin Kuppinger, April 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, net income, and
diluted earnings per share exclude the following items: non-cash
amortization of purchased software, internally developed software
and other intangible assets; share-based compensation expense;
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 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. Non-GAAP
adjusted cash flow from operations excludes payments associated
with the Board-approved rebalancing initiative, restructuring and
other payments. Non-GAAP 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, 2017, March 31, 2016 and March
31, 2015, 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 by the Company
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 news release (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 business strategy by,
among other things, ensuring that any new offerings address the
needs of a rapidly changing market while not adversely affecting
the demand for the Company’s traditional products or the Company’s
profitability to an extent greater than anticipated, enabling the
Company’s sales force to accelerate growth of sales to new
customers and expand sales with existing customers, including sales
outside of the Company’s renewal cycle and to a broadening set of
purchasers outside of traditional information technology operations
(with such growth and expansion at levels sufficient to offset any
decline in revenue and/or sales in the Company’s Mainframe
Solutions segment and in certain mature product lines in the
Company’s Enterprise Solutions segment), effectively managing the
strategic shift in the Company’s business model to develop more
easily installed software, provide additional Software-as-a-Service
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 financial
performance to an extent greater than anticipated, and effectively
managing the Company’s pricing and other go-to-market strategies,
as well as improving the Company’s brand, technology and innovation
awareness in the marketplace; 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 global operations; the failure to
expand partner programs and sales of the Company’s solutions by the
Company’s partners; the ability to retain and attract qualified
professionals; general economic conditions and credit constraints,
or unfavorable economic conditions in a particular region, business
or industry 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 and software products, and the IT
environments of the Company’s business partners and customers; the
ability to adequately manage, evolve and protect the Company’s
information systems, infrastructure and processes; the failure to
renew license agreement transactions on a satisfactory basis;
fluctuations in foreign exchange rates; changes in generally
accepted accounting principles; 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 and/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 partners; potential tax liabilities; changes in market
conditions or the Company’s credit ratings; 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; successful and secure outsourcing
of various functions to third parties; and other factors described
more fully in the Company’s other 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 the
forward-looking information described herein as believed, planned,
anticipated, expected, estimated, targeted or similarly identified.
We do not intend to update these forward-looking statements, 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 © 2017 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:
2017
2016
Subscription and maintenance $ 817 $ 826 Professional services 75
77 Software fees and other 133 96
Total
revenue $ 1,025 $ 999
Expenses: Costs of licensing and
maintenance $ 71 $ 68 Cost of professional services 73 75
Amortization of capitalized software costs 70 66 Selling and
marketing 246 242 General and administrative 107 88 Product
development and enhancements 158 148 Depreciation and amortization
of other intangible assets 26 20 Other expenses, net 11
-
Total expenses before interest and income taxes $
762 $ 707
Income before interest and income taxes $ 263 $
292 Interest expense, net 25 15
Income before
income taxes $ 238 $ 277 Income tax expense 60 79
Net income $ 178 $ 198
Basic income per common
share $ 0.42 $ 0.47
Basic weighted average shares used in
computation 415 414
Diluted income per common
share $ 0.42 $ 0.47
Diluted weighted average shares used in
computation 417 415
Table 2 CA
Technologies Condensed Consolidated Balance Sheets (in
millions) June 30, March 31, 2017 2017
(unaudited) Cash and cash equivalents $ 2,971 $ 2,771 Trade
accounts receivable, net 461 764 Other current assets 180
198
Total current assets $ 3,612 $
3,733 Property and equipment, net $ 234 $ 237 Goodwill 6,864
6,857 Capitalized software and other intangible assets, net 1,299
1,307 Deferred income taxes 313 327 Other noncurrent assets, net
154 149
Total assets $ 12,476
$ 12,610 Current portion of long-term debt $
18 $ 18 Deferred revenue (billed or collected) 2,111 2,222 Other
current liabilities 588 766
Total
current liabilities $ 2,717 $ 3,006 Long-term debt, net
of current portion $ 2,770 $ 2,773 Deferred income taxes 129 119
Deferred revenue (billed or collected) 772 794 Other noncurrent
liabilities 219 229
Total
liabilities $ 6,607 $ 6,921 Common stock $
59 $ 59 Additional paid-in capital 3,660 3,702 Retained earnings
6,994 6,923 Accumulated other comprehensive loss (399 ) (483 )
Treasury stock (4,445 ) (4,512 )
Total
stockholders’ equity $ 5,869 $ 5,689
Total
liabilities and stockholders’ equity $ 12,476 $ 12,610
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
June 30,
2017
2016
Operating activities: Net income $ 178 $ 198 Adjustments to
reconcile net income to net cash provided by operating activities:
by operating activities: Depreciation and amortization 96 86
Deferred income taxes 5 3 Provision for bad debts 2 1 Share-based
compensation expense 32 29 Other non-cash items 1 1 Foreign
currency transaction losses (gains) 1 (2 ) Changes in other
operating assets and liabilities, net of effect of acquisitions:
Decrease in trade accounts receivable 308 193 Decrease in deferred
revenue (172 ) (245 ) Decrease in taxes payable, net (56 ) (38 )
(Decrease) increase in accounts payable, accrued expenses and other
(5 ) 8 Decrease in accrued salaries, wages and commissions (102 )
(65 ) Changes in other operating assets and liabilities, net
10 25
Net cash provided by operating
activities $ 298 $ 194
Investing
activities: Acquisitions of businesses, net of cash acquired,
and purchased software $ (6 ) $ (1 ) Purchases of property and
equipment (12 ) (8 )
Net cash used in investing
activities $ (18 ) $ (9 )
Financing activities:
Dividends paid $ (107 ) $ (107 ) Purchases of common stock - (50 )
Notional pooling (repayments) borrowings, net (18 ) 4 Debt
repayments (5 ) (4 ) Debt issuance costs (3 ) - Exercise of common
stock options 1 10 Payments related to tax withholding for
share-based compensation (31 ) (30 ) Other financing activities
(3 ) -
Net cash used in financing
activities $ (166 ) $ (177 ) Effect of exchange rate changes on
cash, cash equivalents and restricted cash $ 88 $ (44 )
Increase (decrease) in cash, cash equivalents and restricted
cash $ 202 $ (36 )
Cash, cash equivalents and restricted
cash at beginning of period $ 2,772 $ 2,813
Cash, cash equivalents and restricted cash at end of period
$ 2,974 $ 2,777
Table 4 CA
Technologies Operating Segments (unaudited) (dollars in
millions) Three Months Ended June 30, 2017
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1)
Total
Revenue (2) $ 536 $ 414 $ 75 $ 1,025 Expenses (3) 187
381 74 642
Segment profit $ 349 $ 33 $ 1 $ 383
Segment operating margin 65 % 8 % 1 % 37 %
Segment profit $ 383
Less: Purchased software
amortization 58 Other intangibles amortization 10 Internally
developed software products amortization 12 Share-based
compensation expense 32 Other expenses, net (4) 8 Interest expense,
net 25
Income before income taxes $ 238
Three Months Ended June 30, 2016
MainframeSolutions (1)
EnterpriseSolutions (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 Interest expense, net 15
Income before income taxes $ 277 (1)
The Company’s Mainframe Solutions and Enterprise Solutions segments
are comprised of its software business organized by the nature of
the Company’s software offerings and the platforms on which the
products operate. The Services segment is comprised of product
implementation, consulting, customer education and customer
training services, 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 assigned to the Mainframe Solutions
and Enterprise Solutions segments is 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 products); (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, 2017 2016
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
Bookings $ 703 $ 1,353 (48 )% (48 )%
Revenue: North America $ 690 $ 669 3 % 3 % International
335 330 2 % 4 % Total revenue $ 1,025 $ 999 3 % 4 %
Revenue: Subscription and maintenance $ 817 $ 826 (1
)% 0 % Professional services 75 77 (3 )% (2 )% Software fees and
other 133 96 39 % 40 % Total revenue $ 1,025 $ 999 3
% 4 %
Segment Revenue: Mainframe solutions $ 536 $
551 (3 )% (2 )% Enterprise solutions 414 371 12 % 12 % Services 75
77 (3 )% (2 )%
Total expenses before interest and income
taxes: Total GAAP $ 762 $ 707 8 % 7 % Total non-GAAP (2) 642
607 6 % 6 % (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, 2017, 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,
2017
2016
GAAP net income $ 178 $ 198 GAAP income tax expense 60 79 Interest
expense, net 25 15 GAAP income before
interest and income taxes $ 263 $ 292 GAAP operating
margin (% of revenue) (1) 26 % 29 % 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) 70 66 Selling and marketing (2) 10 10 General and
administrative (2) 12 11 Product development and enhancements (2) 7
5 Depreciation and amortization of other intangible assets (4) 10 5
Other gains, net (5) 8 - Total Non-GAAP
adjustment to operating expenses $ 120 $ 100 Non-GAAP
income before interest and income taxes $ 383 $ 392 Non-GAAP
operating margin (% of revenue) (6) 37 % 39 % Interest
expense, net 25 15 GAAP income tax expense 60 79 Non-GAAP
adjustment to income tax expense (7) 42 29
Non-GAAP income tax expense $ 102 $ 108
Non-GAAP net income $ 256 $ 269 (1)
GAAP operating margin is calculated by dividing GAAP income 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, 2017 and 2016, non-GAAP adjustment consists of $58
million and $43 million of purchased software amortization and $12
million and $23 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 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 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
2017
2016
Total expenses before interest and income taxes $ 762 $ 707
Non-GAAP operating adjustments: Purchased software
amortization 58 43 Other intangibles amortization 10 5 Internally
developed software products amortization 12 23 Share-based
compensation 32 29 Other expenses, net (1) 8 -
Total non-GAAP operating adjustment $ 120 $ 100
Total non-GAAP operating expenses $ 642 $ 607
Three Months Ended
June 30,
Diluted
EPS
2017
2016
GAAP diluted EPS $ 0.42 $ 0.47 Non-GAAP adjustments:
Purchased software amortization 0.14 0.10 Other intangibles
amortization 0.02 0.01 Internally developed software products
amortization 0.03 0.06 Share-based compensation 0.08 0.07 Other
expenses, net (1) 0.02 - Tax effect of non-GAAP adjustments (0.07 )
(0.07 ) Non-GAAP effective tax rate adjustments (2) (0.03 )
- Total non-GAAP adjustment $ 0.19 $ 0.17
Non-GAAP diluted EPS $ 0.61 $ 0.64
(1) Other expenses, 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 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,
2017
GAAP
Non-GAAP
Income before interest and income taxes (1) $ 263 $ 383
Interest expense, net 25 25 Income
before income taxes $ 238 $ 358 Statutory tax rate 35 % 35 %
Tax at statutory rate $ 83 $ 125 Adjustments for discrete
and permanent items (2) (23 ) (23 ) Total tax expense
$ 60 $ 102 Effective tax rate (3) 25.2 % 28.5 % Three
Months Ended
June 30,
2016
GAAP
Non-GAAP
Income before interest and income taxes (1) $ 292 $ 392
Interest expense, net 15 15 Income
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 %
(1) Refer to Table 6 for a reconciliation of income before
interest and income taxes on a GAAP basis to income 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 is the Company's provision for income taxes expressed as a
percentage of GAAP and non-GAAP income 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
March 31,
2018
Projected GAAP diluted EPS range $ 1.70 to $ 1.76
Non-GAAP adjustments: Purchased software amortization 0.55 0.55
Other intangibles amortization 0.10 0.10 Internally developed
software products amortization 0.09 0.09 Share-based compensation
0.27 0.27 Tax effect of non-GAAP adjustments (0.29 )
(0.29 ) Total non-GAAP adjustment $ 0.72 $ 0.72
Projected non-GAAP diluted EPS range $ 2.42 to $ 2.48
Fiscal Year Ending
Projected Operating
Margin
March 31,
2018
Projected GAAP operating margin range 26 % to 27 %
Non-GAAP operating adjustments: Purchased software amortization 5 %
5 % Other intangibles amortization 1 % 1 % Internally developed
software products amortization 1 % 1 % Share-based compensation
3 % 3 % Total non-GAAP operating adjustment 10
% 10 % Projected non-GAAP operating margin 36
% to 37 % 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/20170802006416/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.comorStefan Putyera,
631-342-4710Investor Relationsstefan.putyera@ca.com
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