- Enterprise and Mainframe Solutions
New Sales up Year over Year
- Third Quarter Revenue of $1,034
Million
- Third Quarter GAAP EPS of
$0.52
- Third Quarter Non-GAAP EPS of
$0.63
- Third Quarter Cash Flow From
Continuing Operations of $332 Million
CA Technologies (NASDAQ:CA) today reported financial results for
its third quarter fiscal 2016, which ended December 31,
2015.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
"I am pleased to report that total new sales, revenue, earnings
and cash flow from operations outperformed our expectations. Third
quarter results benefited from the combination of strong
performance from recent acquisitions, a higher level of renewal
bookings growth, and better sales execution, relative to our
expectations. It shows that our strategy is beginning to gather
momentum. I am really happy to see that our acquisitions are
beginning to deliver on their potential.
"We feel that we are near an inflection point in the business.
We stand by our fiscal 2016 and medium-term guidance. As we said in
November, we expect our upcoming fiscal 2017 to be the year CA
crosses into sustained, albeit initially modest, revenue growth.
That said, we know there is still work to be done to grow at a rate
that is representative of CA’s true potential.
"As the pendulum swings towards the desire to reduce complexity
and consolidate around full suite solutions providers who can
operate globally at scale, customers are finding CA and its broad
portfolio to be more attractive than point product vendors. We are
investing in innovation that matters to ensure that CA solutions
are meaningful, compelling and can drive growth for years to come,
while maintaining rigorous fiscal and execution discipline."
FINANCIAL OVERVIEW
(dollars in millions, except share data)
Third
Quarter FY16 vs. FY15
FY16
FY15 % Change
% ChangeCC**
Revenue $1,034 $1,091 (5)% (1)% GAAP Income
from Continuing Operations $219 $218 0% 13%
Non-GAAP Income from Continuing Operations* $268 $297
(10)% (2)% GAAP Diluted EPS from Continuing Operations $0.52
$0.49 6% 18% Non-GAAP Diluted EPS from
Continuing Operations* $0.63 $0.67 (6)% 1%
Cash Flow from Continuing Operations $332 $313 6%
18%
* Non-GAAP income and earnings per share are non-GAAP financial
measures, as noted in the discussion of non-GAAP results below. A
reconciliation of non-GAAP financial measures to their comparable
GAAP financial measures is included in the tables following this
news release.
**CC: Constant Currency
REVENUE AND BOOKINGS
(dollars in millions)
Third Quarter FY16 vs. FY15
FY16
% ofTotal
FY15
% ofTotal
%Change
%ChangeCC**
North America Revenue $702 68% $709 65%
(1)% 0% International Revenue $332 32% $382
35% (13)% (1)% Total Revenue $1,034
$1,091 (5)% (1)%
North America Bookings $727 59% $615
58% 18% 19% International Bookings $515
41% $452 42% 14% 29% Total Bookings
$1,242 $1,067 16%
23%
Current Revenue Backlog $3,030
$3,189 (5)% (2)% Total Revenue
Backlog $6,800 $6,685 2%
5%
**CC: Constant Currency
- Total revenue
declined primarily as a result of an unfavorable foreign
exchange effect of $51 million. Our fiscal 2016 acquisitions of
Rally Software Development Corp. and Xceedium, Inc., contributed
approximately 3 points of revenue growth for the quarter.
- Total bookings grew primarily due to an
increase in Mainframe Solutions renewals and bookings related to
our acquisitions of Rally and Xceedium.
- The Company executed a total of 18
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $593 million.
During the third quarter of fiscal 2015, the Company executed a
total of 18 license agreements with incremental contract values in
excess of $10 million each, for an aggregate contract value of $394
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 3.76
years, compared with 3.29 years for the same period in fiscal
2015.
EXPENSES AND MARGIN
(dollars in millions)
Third Quarter FY16 vs.
FY15 FY16 FY15
%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income
Taxes $741 $773 (4)% (2)% Operating Income
Before Interest and Income Taxes $293 $318 (8)%
2% Operating Margin 28% 29%
Effective Tax Rate 21.2% 28.8%
Non-GAAP* Operating Expenses Before Interest and
Income Taxes $644 $680 (5)% (2)% Operating
Income Before Interest and Income Taxes $390 $411
(5)% 3% Operating Margin 38% 38%
Effective Tax Rate 28.5% 25.6%
*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: Constant Currency
- GAAP and Non-GAAP third quarter
operating expenses decreased primarily as a result of a favorable
foreign exchange effect and a decrease in non-acquisition
personnel-related costs, partially offset by costs from our
acquisitions of Rally and Xceedium.
- GAAP EPS in the third quarter of fiscal
2016 was positively impacted by $0.05 from a decrease in the GAAP
effective tax rate and by $0.02 from the accelerated share
repurchase that was completed in November 2015. These items were
partially offset by a negative $0.05 impact from unfavorable
foreign exchange.
- Non-GAAP EPS in the third quarter of
fiscal 2016 was negatively affected by $0.06 from unfavorable
foreign exchange and by $0.03 due to an increase in the Non-GAAP
effective tax rate. These items were partially offset by a $0.02
increase from the accelerated share repurchase.
SELECTED HIGHLIGHTS FROM THE QUARTER
- At CA World in November, the Company:
- Introduced four new organically
developed products -- CA Mobile App Services, CA Virtual Network
Assurance, CA Unified Infrastructure Management for z Systems, and
CA Data Content Discovery.
- Showcased innovations and future
products currently in development.
- Increased
overall attendance, customer engagement, pipeline
generation, and visibility across traditional and social
media outlets.
- Customer traction for CA Technologies
innovations continued in the quarter, as highlighted by:
- A large global financial institution's
expanded use of CA Agile Central from a single division across its
global operations.
- A multi-national conglomerate's
selection of CA Project & Portfolio Management (PPM) after
extensive evaluation in a highly competitive win.
- CA API Management added one of the
largest insurance companies in the world and an international
financial technology company among its new customers; expansion
wins included a major US airline and a leading global payments
company.
- CA Privileged Access Management was
chosen in two highly competitive wins by a large U.S. federal
agency and by a global mass media and entertainment
conglomerate.
- Solutions Leadership & Recognition
for the quarter included:
- CA Technologies was again recognized as
a leader in the Gartner Magic Quadrant for Integrated IT Portfolio
Analysis Applications, 2015.(1)
- CA Technologies was named a leader in
Privilege Management by KuppingerCole.(2)
- CA Technologies was named a leader in
Privileged Identity Management by Ovum.(3)
SEGMENT INFORMATION
(dollars in millions)
Third Quarter FY16 vs.
FY15 Revenue
%Change
%ChangeCC**
Operating Margin FY16 FY15
FY16 FY15 Mainframe Solutions $554 $596 (7)%
(2)% 61% 58% Enterprise Solutions $398 $405 (2)% 3% 12% 14%
Services $82 $90 (9)% (4)% 6% 6%
**CC: Constant Currency
- Mainframe Solutions revenue declined
primarily due to an unfavorable foreign exchange effect and, to a
lesser extent, insufficient revenue from prior period new sales to
offset the decline in revenue contribution from renewals. Operating
margin increased compared with the year-ago period primarily due to
the decrease in total operating 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 second quarter fiscal 2016 acquisitions, which contributed
approximately 8 points of revenue growth for the quarter. Operating
margin decreased primarily due to our second quarter fiscal 2016
acquisitions.
- Services revenue decreased primarily
due to an unfavorable foreign exchange effect and, to a lesser
extent, lower professional services engagements in the first half
of fiscal 2016 and fiscal 2015. Operating margin was consistent
with the year-ago period.
CASH FLOW FROM OPERATIONS
- Cash flow from operations for the third
quarter of fiscal 2016 was $332 million, versus $313 million in the
year ago period. Cash flow from operations increased compared
with the year-ago period primarily due to a decrease in vendor
disbursements and payroll, partially offset by the decrease in cash
collections due to an unfavorable effect of foreign exchange.
CAPITAL STRUCTURE
- Cash, cash equivalents and investments
at December 31, 2015 were $2.353 billion.
- With $1.964 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $250
million.
- In November 2015, the Company
repurchased 22 million shares of common stock in a private
transaction for $590 million.
- The Company has completed its prior $1
billion stock repurchase program authorized in May 2014.
- The Company’s Board of Directors
approved a new $750 million stock repurchase program which the
Company expects to begin to execute in fiscal 2017.
- The Company distributed $105 million in
dividends to shareholders.
- The Company’s outstanding share count
at December 31, 2015 was 412 million.
- The Company announced its intention to
increase the dividend per share of Common Stock in fiscal year
2017, subject to quarterly approval of its board of directors, to
$1.02 per share for the year (or $0.255 per share on a quarterly
basis).
OUTLOOK FOR FISCAL YEAR 2016
The Company reaffirmed the following outlook, which represents
"forward-looking statements" (as defined below).
The Company expects the following:
- Total revenue to change in a range of
minus 1 percent to flat in constant currency, unchanged from
previous guidance. The Company currently expects total revenue to
be at the lower end of this range due primarily to the greater
portion of new sales bookings recognized ratably in the first half
of fiscal 2016, compared to historical trends. At December 31,
2015 exchange rates, this translates to reported revenue of $3.99
billion to $4.03 billion.
- GAAP diluted earnings per share from
continuing operations to increase in a range of 8 percent to 13
percent in constant currency. At December 31, 2015 exchange
rates, this translates to reported GAAP diluted earnings per share
from continuing operations of $1.74 to $1.80.
- Non-GAAP diluted earnings per share
from continuing operations to increase in a range of 4 percent to 7
percent in constant currency. At December 31, 2015 exchange
rates, this translates to reported non-GAAP diluted earnings per
share from continuing operations of $2.39 to $2.45.
- Cash flow from continuing operations to
increase in the range of 2 percent to 7 percent in constant
currency, unchanged from previous guidance. At December 31,
2015 exchange rates, this translates to reported cash flow from
continuing operations of $0.97 billion to $1.02 billion.
This outlook assumes no further material acquisitions. The
Company expects a full-year GAAP operating margin of 28 percent and
non-GAAP operating margin of 38 percent, unchanged from previous
guidance.
The Company also expects a full-year GAAP and non-GAAP effective
tax rate of between 28 percent and 29 percent, unchanged from
previous guidance.
The Company anticipates approximately 412 million shares
outstanding at fiscal 2016 year-end and weighted average diluted
shares outstanding of approximately 427 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 third quarter results.
The webcast will be archived on the website. Individuals can access
the webcast, as well as the press release and supplemental
financial information at http://ca.com/invest or can listen to the call at
1-877-561-2748. The international participant number is
1-720-545-0044.
(1) Gartner, Inc., “Magic Quadrant for Integrated IT Portfolio
Analysis Applications, 2015,” Daniel B. Stang and Jim Duggan,
November 30, 2015.
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.
(2) KuppingerCole Leadership Compass: Privilege Management,
December 2015
(3) Ovum Decision Matrix: Selecting a Privileged Identity
Management Solution, 2015-2016
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, 2015,
March 31, 2014 and March 31, 2013, respectively). Constant currency
excludes the impacts from the Company's hedging program. The
constant currency calculation for annualized subscription and
maintenance bookings is calculated by dividing the subscription and
maintenance bookings in constant currency by the weighted average
subscription and maintenance duration in years. These non-GAAP
financial measures may be different from non-GAAP financial
measures used by other companies. Non-GAAP financial measures
should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP.
By excluding these items, non-GAAP financial measures facilitate
management's internal comparisons to the Company's historical
operating results and cash flows, to competitors' operating results
and cash flows, and to estimates made by securities analysts.
Management uses these non-GAAP financial measures internally to
evaluate its performance and they are key variables in determining
management incentive compensation. The Company believes these
non-GAAP financial measures are useful to investors in allowing for
greater transparency of supplemental information used by management
in its financial and operational decision-making. In addition, the
Company has historically reported similar non-GAAP financial
measures to its investors and believes that the inclusion of
comparative numbers provides consistency in its financial
reporting. Investors are encouraged to review the reconciliation of
the non-GAAP financial measures used in this news release to their
most directly comparable GAAP financial measures, which are
attached to this news release.
Cautionary Statement Regarding Forward-Looking
Statements
The declaration and payment of future dividends is subject to
the determination of the Company's Board of Directors, in its sole
discretion, after considering various factors, including the
Company's financial condition, historical and forecast operating
results, and available cash flow, as well as any applicable laws
and contractual covenants and any other relevant factors. The
Company's practice regarding payment of dividends may be modified
at any time and from time to time.
Repurchases under the Company's stock repurchase program may be
made from time to time, subject to market conditions and other
factors, in the open market, through solicited or unsolicited
privately negotiated transactions or otherwise. The program does
not obligate the Company to acquire any particular amount of common
stock, and it may be modified or suspended at any time at the
Company's discretion.
Certain statements in this communication (such as statements
containing the words "believes," "plans," "anticipates," "expects,"
"estimates," "targets" and similar expressions relating to the
future) constitute "forward-looking statements" that are based upon
the beliefs of, and assumptions made by, the Company's management,
as well as information currently available to management. These
forward-looking statements reflect the Company's current views with
respect to future events and are subject to certain risks,
uncertainties, and assumptions. A number of important factors could
cause actual results or events to differ materially from those
indicated by such forward-looking statements, including: the
ability to achieve success in the Company's strategy by, among
other things, enabling the Company's sales force to accelerate
growth of new product sales (at levels sufficient to offset any
decline in revenue in the Company's Mainframe Solutions segment),
improving the Company's brand, technology and innovation awareness
in the marketplace, ensuring the Company's offerings for cloud
computing, application development and IT operations (DevOps),
Software-as-a-Service (SaaS), and mobile device management, as well
as other new offerings, address the needs of a rapidly changing
market, while not adversely affecting the demand for the Company's
traditional products or its profitability to an extent greater than
anticipated, and effectively managing the strategic shift in the
Company's business model to develop more easily installed software,
provide additional SaaS offerings and refocus the Company's
professional services and education engagements on those
engagements that are connected to new product sales, without
affecting the Company's performance to an extent greater than
anticipated; the failure to innovate or adapt to technological
changes and introduce new software products and services in a
timely manner; competition in product and service offerings and
pricing; the ability of the Company's products to remain compatible
with ever-changing operating environments, platforms or third party
products; global economic factors or political events beyond the
Company's control and other business and legal risks associated
with non-U.S. operations; the failure to expand partner programs;
the ability to retain and attract qualified professionals; general
economic conditions and credit constraints, or unfavorable economic
conditions in a particular region, industry or business sector; the
ability to successfully integrate acquired companies and products
into the Company's existing business; risks associated with sales
to government customers; breaches of the Company's data center,
network, as well as the Company's software products, and the IT
environments of the Company's vendors and customers; the ability to
adequately manage, evolve and protect the Company's information
systems, infrastructure and processes; fluctuations in foreign
exchange rates; discovery of errors or omissions in the Company's
software products or documentation and potential product liability
claims; the failure to protect the Company's intellectual property
rights and source code; the failure to renew large license
transactions on a satisfactory basis; access to software licensed
from third parties; risks associated with the use of software from
open source code sources; third-party claims of intellectual
property infringement or royalty payments; fluctuations in the
number, terms and duration of the Company's license agreements, as
well as the timing of orders from customers and channel partners;
events or circumstances that would require the Company to record an
impairment charge relating to the Company's goodwill or capitalized
software and other intangible assets balances; potential tax
liabilities; changes in market conditions or the Company's credit
ratings; the failure to effectively execute the Company's workforce
reductions, workforce rebalancing and facilities consolidations;
successful and secure outsourcing of various functions to third
parties; changes in generally accepted accounting principles; and
other factors described more fully in the Company's filings with
the Securities and Exchange Commission. Should one or more of these
risks or uncertainties occur, or should the Company's assumptions
prove incorrect, actual results may vary materially from those
described herein as believed, planned, anticipated, expected,
estimated, targeted or similarly expressed in a forward-looking
manner. The Company assumes no obligation to update the information
in this communication, except as otherwise required by law. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.
Copyright © 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 Nine Months
Ended
December
31,
December
31,
Revenue:
2015
2014
2015
2014
Subscription and maintenance $ 828 $ 892 $ 2,496 $ 2,709
Professional services 82 90 244 268 Software fees and other
124 109 276 262
Total revenue $ 1,034 $
1,091 $ 3,016 $ 3,239
Expenses: Costs of licensing and
maintenance $ 73 $ 74 $ 209 $ 217 Cost of professional services 75
84 224 253 Amortization of capitalized software costs 65 62 192 204
Selling and marketing 277 283 751 782 General and administrative 90
90 279 269 Product development and enhancements 133 143 420 443
Depreciation and amortization of other intangible assets 27 31 83
99 Other expenses, net 1 6 2 21
Total expenses before interest and income taxes $ 741 $ 773
$ 2,160 $ 2,288
Income from continuing operations before
interest and income taxes $ 293 $ 318 $ 856 $ 951 Interest
expense, net 15 12 36 38
Income from
continuing operations before income taxes $ 278 $ 306 $ 820 $
913 Income tax expense 59 88 222 248
Income from continuing operations $ 219 $ 218 $ 598 $ 665
Income from discontinued operations, net of income taxes $ 4 $ 4 $
11 $ 30
Net income $ 223 $ 222 $ 609 $ 695
Basic
income per common share: Income from continuing operations $
0.52 $ 0.49 $ 1.37 $ 1.50 Income from discontinued operations
0.01 0.01 0.03 0.07
Net income $
0.53 $ 0.50 $ 1.40 $ 1.57
Basic weighted average shares used in
computation 420 440 431 440
Diluted income per common
share: Income from continuing operations $ 0.52 $ 0.49 $ 1.37 $
1.49 Income from discontinued operations 0.01 0.01
0.03 0.07
Net income $ 0.53 $ 0.50 $ 1.40 $
1.56
Diluted weighted average shares used in computation 421
441 432 441 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) December 31, March 31, 2015 2015
(unaudited) Cash and cash equivalents $ 2,353 $ 2,804 Trade
accounts receivable, net 618 652 Deferred income taxes 341 318
Other current assets 142 213
Total
current assets $ 3,454 $ 3,987 Property and equipment,
net $ 249 $ 252 Goodwill 6,123 5,806 Capitalized software and other
intangible assets, net 866 731 Deferred income taxes 55 92 Other
noncurrent assets, net 110 111
Total
assets $ 10,857 $ 10,979 Current portion
of long-term debt $ 8 $ 10 Deferred revenue (billed or collected)
1,983 2,114 Deferred income taxes 7 7 Other current liabilities
701 807
Total current
liabilities $ 2,699 $ 2,938 Long-term debt, net of
current portion $ 1,956 $ 1,253 Deferred income taxes 53 45
Deferred revenue (billed or collected) 667 863 Other noncurrent
liabilities 255 255
Total
liabilities $ 5,630 $ 5,354 Common stock $
59 $ 59 Additional paid-in capital 3,638 3,631 Retained earnings
6,506 6,221 Accumulated other comprehensive loss (469 ) (418 )
Treasury stock (4,507 ) (3,868 )
Total
stockholders’ equity $ 5,227 $ 5,625
Total
liabilities and stockholders’ equity $ 10,857 $ 10,979
Table 3
CA Technologies Condensed Consolidated Statements of Cash
Flows (unaudited) (in millions) Three Months
Ended
December
31,
2015
2014
Operating activities from continuing operations: Net income
$ 223 $ 222 Income from discontinued operations (4 )
(4 ) Income from continuing operations $ 219 $ 218 Adjustments to
reconcile income from continuing operations to net cash provided by
operating activities: Depreciation and amortization 92 93 Deferred
income taxes (25 ) (13 ) Provision for bad debts (1 ) - Share-based
compensation expense 25 23 Asset impairments and other non-cash
items 1 1 Foreign currency transaction gains (1 ) (2 ) Changes in
other operating assets and liabilities, net of effect of
acquisitions: Increase in trade accounts receivable (181 ) (172 )
Increase in deferred revenue 143 52 Increase in taxes payable, net
51 76 Decrease in accounts payable, accrued expenses and other (41
) (16 ) Increase in accrued salaries, wages and commissions 23 17
Changes in other operating assets and liabilities 27
36
Net cash provided by operating activities -
continuing operations $ 332 $ 313
Investing
activities from continuing operations: Acquisitions of
businesses, net of cash acquired, and purchased software $ (1 ) $
(20 ) Purchases of property and equipment (11 ) (12 )
Net cash used in investing activities - continuing
operations $ (12 ) $ (32 )
Financing activities from
continuing operations: Dividends paid $ (105 ) $ (111 )
Purchases of common stock (590 ) (75 ) Notional pooling borrowings,
net 10 25 Debt borrowings (repayments), net 298 (502 ) Debt
issuance costs (1 ) - Exercise of common stock options 1 11 Other
financing activities (5 ) -
Net cash used
in financing activities - continuing operations $ (392 ) $ (652
) Effect of exchange rate changes on cash $ (37 ) $ (125 )
Net
change in cash and cash equivalents - continuing operations $
(109 ) $ (496 ) Cash provided by (used in) operating activities -
discontinued operations $ 4 $ (14 )
Net effect of
discontinued operations on cash and cash equivalents $ 4
$ (14 )
Decrease in cash and cash equivalents $ (105 ) $
(510 )
Cash and cash equivalents at beginning of period $
2,458 $ 3,193
Cash and cash equivalents at end of
period $ 2,353 $ 2,683 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 December 31, 2015
Nine Months Ended December 31, 2015
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 554 $ 398 $
82 $ 1,034 $ 1,668 $ 1,104 $ 244 $ 3,016 Expenses (3) 218
349 77 644
641 996 227 1,864
Segment profit $ 336 $ 49 $ 5 $ 390
$ 1,027 $ 108 $ 17 $ 1,152
Segment operating margin 61 % 12 % 6 % 38 % 62 % 10 % 7 % 38
%
Segment profit $ 390 $ 1,152
Less: Purchased
software amortization 39 106 Other intangibles amortization 11 36
Internally developed software products amortization 26 86
Share-based compensation expense 25 70 Other gains, net (4) (4 ) (2
) Interest expense, net 15 36
Income
from continuing operations before income taxes $ 278 $
820 Three Months Ended December 31, 2014 Nine
Months Ended December 31, 2014
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 596 $ 405 $ 90 $ 1,091 $
1,820 $ 1,151 $ 268 $ 3,239 Expenses (3) 248
347 85 680 717
999 256 1,972
Segment
profit $ 348 $ 58 $ 5 $ 411 $ 1,103
$ 152 $ 12 $ 1,267
Segment operating
margin 58 % 14 % 6 % 38 % 61 % 13 % 4 % 39 %
Segment
profit $ 411 $ 1,267
Less: Purchased software
amortization 28 87 Other intangibles amortization 14 45 Internally
developed software products amortization 34 117 Share-based
compensation expense 23 65 Other (gains) expenses, net (4) (6 ) 2
Interest expense, net 12 38
Income
from continuing operations before income taxes $ 306 $
913 (1) The Company’s Mainframe Solutions and
Enterprise Solutions segments comprise its software business
organized by the nature of the Company’s software offerings and the
platform on which the products operate. The Services segment
comprises product implementation, consulting, customer education
and customer training, including those directly related to the
Mainframe Solutions and Enterprise Solutions software that the
Company sells to its customers. (2) The Company regularly
enters into a single arrangement with a customer that includes
mainframe solutions, enterprise solutions and services. The amount
of contract revenue assigned to operating segments is generally
based on the manner in which the proposal is made to the customer.
The software product revenue is assigned to the Mainframe Solutions
and Enterprise Solutions segments based on either: (1) a list price
allocation method (which allocates a discount in the total contract
price to the individual products in proportion to the list price of
the product); (2) allocations included within internal contract
approval documents; or (3) the value for individual software
products as stated in the customer contract. The price for the
implementation, consulting, education and training services is
separately stated in the contract and these amounts of contract
revenue are assigned to the Services segment. The contract value
assigned to each operating segment is then recognized in a manner
consistent with the revenue recognition policies the Company
applies to the customer contract for purposes of preparing the
Consolidated Financial Statements. (3) Segment expenses
include costs that are controllable by segment managers (i.e.,
direct costs) and, in the case of the Mainframe Solutions and
Enterprise Solutions segments, an allocation of shared and indirect
costs (i.e., allocated costs). Segment-specific direct costs
include a portion of selling and marketing costs, licensing and
maintenance costs, product development costs and general and
administrative costs. Allocated segment costs primarily include
indirect and non-segment specific direct selling and marketing
costs and general and administrative costs that are not directly
attributable to a specific segment. The basis for allocating shared
and indirect costs between the Mainframe Solutions and Enterprise
Solutions segments is dependent on the nature of the cost being
allocated and is either in proportion to segment revenues or in
proportion to the related direct cost category. Expenses for the
Services segment consist of cost of professional services and other
direct costs included within selling and marketing and general and
administrative expenses. There are no allocated or indirect costs
for the Services segment. (4) Other (gains) expenses, net
consists of costs associated with the FY2014 Board approved
rebalancing initiative (the Fiscal 2014 Plan), certain foreign
exchange derivative hedging gains and losses, and other
miscellaneous costs. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses.
Table 5 CA
Technologies Constant Currency Summary (unaudited)
(dollars in millions) Three Months Ended
December 31, Nine Months Ended December 31, 2015 2014
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
2015 2014
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
Bookings $ 1,242 $ 1,067 16 % 23 % $ 3,287 $ 2,540 29
% 36 %
Revenue: North America $ 702 $ 709 (1 )% 0 % $
2,031 $ 2,084 (3 )% (2 )% International 332 382 (13
)% (1 )% 985 1,155 (15 )% 0 % Total revenue $ 1,034 $
1,091 (5 )% (1 )% $ 3,016 $ 3,239 (7 )% (1 )%
Revenue: Subscription and maintenance $ 828 $ 892 (7 )% (2
)% $ 2,496 $ 2,709 (8 )% (2 )% Professional services 82 90 (9 )% (4
)% 244 268 (9 )% (3 )% Software fees and other 124
109 14 % 18 % 276 262 5 % 10 % Total revenue $ 1,034
$ 1,091 (5 )% (1 )% $ 3,016 $ 3,239 (7 )% (1 )%
Segment
Revenue: Mainframe solutions $ 554 $ 596 (7 )% (2 )% $ 1,668 $
1,820 (8 )% (3 )% Enterprise solutions 398 405 (2 )% 3 % 1,104
1,151 (4 )% 1 % Services 82 90 (9 )% (4 )% 244 268 (9 )% (3 )%
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 644 $ 680 (5 )% (2 )% $ 1,864 $ 1,972 (5 )% (1
)% Total GAAP 741 773 (4 )% (2 )% 2,160 2,288 (6 )% (3 )%
(1) Constant currency information is presented to provide a
framework for assessing how the Company's underlying businesses
performed excluding the effect of foreign currency rate
fluctuations. To present this information, current and comparative
prior period results for entities reporting in currencies other
than U.S. dollars are converted into U.S. dollars at the exchange
rate in effect on March 31, 2015, which was the last day of the
prior fiscal year. Constant currency excludes the impacts from the
Company's hedging program. (2) Refer to Table 7 for a
reconciliation of total expenses before interest and income taxes
to total non-GAAP operating expenses. Results reflect the
discontinued operations associated with the CA ERwin Data Modeling
and CA arcserve data protection businesses. Certain
non-material differences may arise versus actual from impact of
rounding.
Table 6 CA Technologies
Reconciliation of Select GAAP Measures to Non-GAAP Measures
(unaudited) (dollars in millions) Three Months
Ended Nine Months Ended
December
31,
December
31,
2015
2014
2015
2014
GAAP net income $ 223 $ 222 $ 609 $ 695 GAAP income from
discontinued operations, net of income taxes (4 ) (4
) (11 ) (30 ) GAAP income from continuing operations
$ 219 $ 218 $ 598 $ 665 GAAP income tax expense 59 88 222 248
Interest expense, net 15 12 36
38 GAAP income from continuing operations
before interest and income taxes $ 293 $ 318 $ 856
$ 951 GAAP operating margin (% of revenue) (1) 28 %
29 % 28 % 29 % Non-GAAP adjustments to expenses: Costs of
licensing and maintenance (2) $ 2 $ 2 $ 5 $ 4 Cost of professional
services (2) 1 1 3 3 Amortization of capitalized software costs (3)
65 62 192 204 Selling and marketing (2) 9 8 25 23 General and
administrative (2) 9 8 25 21 Product development and enhancements
(2) 4 4 12 14 Depreciation and amortization of other intangible
assets (4) 11 14 36 45 Other (gains) expenses, net (5) (4 )
(6 ) (2 ) 2 Total Non-GAAP adjustment
to operating expenses $ 97 $ 93 $ 296 $ 316
Non-GAAP income from continuing operations before interest
and income taxes $ 390 $ 411 $ 1,152 $ 1,267 Non-GAAP operating
margin (% of revenue) (6) 38 % 38 % 38 % 39 % Interest
expense, net 15 12 36 38 GAAP income tax expense 59 88 222
248 Non-GAAP adjustment to income tax expense (7) 48
14 96 103 Non-GAAP income
tax expense $ 107 $ 102 $ 318 $ 351
Non-GAAP income from continuing operations $ 268 $ 297
$ 798 $ 878 (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 December 31, 2015 and 2014, non-GAAP adjustment consists of
$39 million and $28 million of purchased software amortization and
$26 million and $34 million of internally developed software
products amortization, respectively. For the nine month periods
ending December 31, 2015 and 2014, non-GAAP adjustment consists of
$106 million and $87 million of purchased software amortization and
$86 million and $117 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 Nine Months Ended
December
31,
December
31,
Operating
Expenses
2015
2014
2015
2014
Total expenses before interest and income taxes $ 741 $ 773
$ 2,160 $ 2,288 Non-GAAP operating adjustments: Purchased
software amortization 39 28 106 87 Other intangibles amortization
11 14 36 45 Internally developed software products amortization 26
34 86 117 Share-based compensation 25 23 70 65 Other (gains)
expenses, net (1) (4 ) (6 ) (2 ) 2
Total non-GAAP operating adjustment $ 97 $ 93
$ 296 $ 316 Total non-GAAP operating expenses
$ 644 $ 680 $ 1,864 $ 1,972
Three Months Ended Nine Months Ended
December
31,
December
31,
Diluted EPS from
Continuing Operations
2015
2014
2015
2014
GAAP diluted EPS from continuing operations $ 0.52 $ 0.49 $
1.37 $ 1.49 Non-GAAP adjustments, net of taxes: Purchased
software amortization 0.07 0.05 0.18 0.14 Other intangibles
amortization 0.02 0.02 0.06 0.08 Internally developed software
products amortization 0.05 0.05 0.14 0.19 Share-based compensation
0.05 0.04 0.12 0.11 Other (gains) expenses, net (1) (0.01 ) (0.01 )
- - Non-GAAP effective tax rate adjustments (2) (0.07 )
0.03 (0.04 ) (0.04 ) Total non-GAAP
adjustment $ 0.11 $ 0.18 $ 0.46 $ 0.48
Non-GAAP diluted EPS from continuing operations $ 0.63
$ 0.67 $ 1.83 $ 1.97 (1) Other
(gains) expenses, net consists of costs associated with the FY2014
Board approved rebalancing initiative (the Fiscal 2014 Plan),
certain foreign exchange derivative hedging gains and losses, and
other miscellaneous costs. (2) The non-GAAP effective tax
rate is equal to the full year GAAP effective tax rate, therefore
no adjustment is required on an annual basis. On an interim basis,
the difference in non-GAAP income tax expense and GAAP income tax
expense relates to the difference in non-GAAP income from
continuing operations before income taxes, and includes a
difference in the impact of discrete and permanent items where for
GAAP purposes the effect is recorded in the period such items arise
but for non-GAAP purposes such items are recorded pro rata to the
fiscal year's remaining reporting periods. Refer to the
discussion of non-GAAP financial measures included in the
accompanying press release for additional information.
Results reflect the discontinued operations associated with the CA
ERwin Data Modeling and CA arcserve data protection businesses.
Certain non-material differences may arise versus actual
from impact of rounding.
Table 8 CA
Technologies Effective Tax Rate Reconciliation GAAP
and Non-GAAP (unaudited)
(dollars in millions)
Three Months Ended Nine Months Ended
December 31,
2015
December 31,
2015
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 293 $ 390 $ 856 $ 1,152 Interest expense, net 15
15 36 36 Income
from continuing operations before income taxes $ 278 $ 375 $ 820 $
1,116 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 97 $ 131 $ 287 $ 391 Adjustments for discrete and
permanent items (2) (38 ) (24 ) (65 )
(73 ) Total tax expense $ 59 $ 107 $ 222 $ 318 Effective tax
rate (3) 21.2 % 28.5 % 27.1 % 28.5 % Three Months Ended Nine
Months Ended
December 31,
2014
December 31,
2014
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 318 $ 411 $ 951 $ 1,267 Interest expense, net 12
12 38 38 Income
from continuing operations before income taxes $ 306 $ 399 $ 913 $
1,229 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 107 $ 140 $ 320 $ 430 Adjustments for discrete and
permanent items (2) (19 ) (38 ) (72 )
(79 ) Total tax expense $ 88 $ 102 $ 248 $ 351 Effective tax
rate (3) 28.8 % 25.6 % 27.2 % 28.6 % (1) Refer to Table 6
for a reconciliation of income from continuing operations before
interest and income taxes on a GAAP basis to income from continuing
operations before interest and income taxes on a non-GAAP basis.
(2) The effective tax rate for GAAP generally includes the
impact of discrete and permanent items in the period such items
arise, whereas the effective tax rate for non-GAAP generally
allocates the impact of such items pro rata to the fiscal year's
remaining reporting periods. (3) The effective tax rate on
GAAP and non-GAAP income from continuing operations is the
Company's provision for income taxes expressed as a percentage of
GAAP and non-GAAP income from continuing operations before income
taxes, respectively. The non-GAAP effective tax rate is equal to
the full year GAAP effective tax rate. On an interim basis, the
effective tax rates are determined based on an estimated effective
full year tax rate after the adjustments for the impacts of certain
discrete items (such as changes in tax rates, reconciliations of
tax returns to tax provisions and resolutions of tax
contingencies). Refer to the discussion of non-GAAP
financial measures included in the accompanying press release for
additional information. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses. Certain non-material
differences may arise versus actual from impact of rounding.
Table 9 CA Technologies Reconciliation of
Projected GAAP Metrics to Projected Non-GAAP Metrics
(unaudited) Fiscal Year Ending
Projected Diluted
EPS from Continuing Operations
March 31,
2016
Projected GAAP diluted EPS from continuing operations range
$ 1.74 to $ 1.80 Non-GAAP adjustments, net of taxes:
Purchased software amortization 0.24 0.24 Other intangibles
amortization 0.07 0.07 Internally developed software products
amortization 0.18 0.18 Share-based compensation 0.16
0.16 Total non-GAAP adjustment $ 0.65 $ 0.65 Projected
non-GAAP diluted EPS from continuing operations range $ 2.39 to $
2.45 Fiscal Year Ending
Projected Operating
Margin
March 31,
2016
Projected GAAP operating margin 28% Non-GAAP
operating adjustments: Purchased software amortization 4% Other
intangibles amortization 1% Internally developed software products
amortization 3% Share-based compensation 2% Total non-GAAP
operating adjustment 10% Projected non-GAAP operating margin
38% Refer to the discussion of non-GAAP financial measures
included in the accompanying press release for additional
information.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160126006642/en/
CA TechnologiesSaswato DasCorporate Communications(646)
710-6690Saswato.das@ca.comorTraci
TsuchiguchiInvestor Relations(650) 534-9814traci.tsuchiguchi@ca.com
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