CA Technologies Reports Second Quarter Fiscal Year 2015 Results

CA-Technologies-logoNew Delhi, India, October 28, 2014: CA Technologies today reported financial results for its second quarter fiscal 2015, ended September 30, 2014.

Mike Gregoire, CA Technologies Chief Executive Officer, said, “We are starting to see traction in the market as a result of our efforts. Enterprise Solutions new sales were up for the second consecutive quarter.  We continued to see solid performance in connection with renewals and we maintained financial discipline across the business.  Although we are pleased with this progress, we remain focused on the work needed to drive sustained revenue growth. 

“The Application Economy is transforming business, creating new opportunity and enormous complexity for our customers.  CA provides the software solutions businesses need to accelerate innovation, secure applications and manage their rapidly growing IT portfolios across multiple platforms.  We are uniquely positioned to help our customers build the new capabilities they need to grow and reduce the complexity they need to manage, and have focused our business on solving these problems.”

FINANCIAL OVERVIEW

(dollars in millions, except share data)  

Second Quarter FY15 vs. FY14

 

FY15

FY14

% Change

% Change CC**

Revenue

$1,079

$1,105

(2)%

(3)%

GAAP Income from Continuing Operations

$235

$231

2%

(5)%

Non-GAAP Income from Continuing Operations*

$292

$375

(22)%

(22)%

GAAP Diluted EPS from Continuing Operations

$0.53

$0.51

4%

(4)%

Non-GAAP Diluted EPS from Continuing Operations*

$0.65

$0.83

(22)%

(22)%

Cash Flow from Continuing Operations

$66

$73

(10)%

(8)%

* Non-GAAP income and earnings per share are non-GAAP financial measures, as noted in the discussion of non-GAAP results below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.

**CC: Constant Currency

REVENUE AND BOOKINGS

(dollars in millions)  

Second Quarter FY15 vs. FY14

 

FY15

% of
Total

FY14

% of
Total

%
Change

%
Change
CC**

North America Revenue

$693

64%

$715

65%

(3)%

(3)%

International Revenue

$386

36%

$390

35%

(1)%

(3)%

Total Revenue

$1,079

 

$1,105

 

(2)%

(3)%

   
North America Bookings

$552

74%

$480

57%

15%

16%

International Bookings

$197

26%

$364

43%

(46)%

(45)%

Total Bookings

$749

 

$844

 

(11)%

(11)%

   
Current Revenue Backlog

$3,230

 

$3,325

 

(3)%

(1)%

Total Revenue Backlog

$6,811

 

$7,153

 

(5)%

(3)%

**CC: Constant Currency

  • Total revenue declined primarily as a result of a decrease in subscription and maintenance revenue, which was largely due to a decrease in Mainframe Solutions revenue and, to a lesser extent, a decrease in professional services revenue.
  • Total bookings decreased primarily due to an expected year-over-year decrease in renewals from the timing of the renewal portfolio within subscription and maintenance bookings.  This timing reflects the decrease in the value of contracts generally available for renewal compared with year-ago period.  The decrease in subscription and maintenance bookings was partially offset by an increase in professional services bookings.
  • The Company executed a total of 6 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $217 million.  During the second quarter of fiscal 2014, the Company executed a total of 12 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $320 million.
  • The weighted average duration of subscription and maintenance bookings for the quarter was 3.10 years, compared with 3.32 years for the same period in fiscal 2014.

EXPENSES AND MARGIN

(dollars in millions)  

Second Quarter FY15 vs. FY14

 

FY15

FY14

%
Change

%
Change
CC**

GAAP  
Operating Expenses Before Interest and Income Taxes

$759

$760

0%

2%

Operating Income Before Interest and Income Taxes

$320

$345

(7)%

(13)%

Operating Margin

30%

31%

   
Effective Tax Rate

23.7%

30.4%

   
     
Non-GAAP*    
Operating Expenses Before Interest and Income Taxes

$650

$657

(1)%

(2)%

Operating Income Before Interest and Income Taxes

$429

$448

(4)%

(4)%

Operating Margin

40%

41%

   
Effective Tax Rate

30.0%

13.8%

   

*A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release. Year-over-year non-GAAP results exclude purchased software and other intangibles amortization, share-based compensation, capitalization (an add-back) and amortization of internal software costs, Board approved workforce rebalancing initiatives and certain other gains and losses. The results also include gains and losses on hedges that mature within the quarter, but exclude gains and losses on hedges that do not mature within the quarter.

**CC: Constant Currency

  • GAAP and non-GAAP second quarter operating expenses were generally consistent compared with the year-ago period.  GAAP operating expenses included an impairment of $13 million relating to capitalized software and other intangible assets within the Enterprise Solutions segment. The Company expects a year-over-year increase in the third quarter of fiscal 2015 for selling and marketing expenses as a result of incremental expenses associated with CA World ‘14.
  • GAAP EPS in the second quarter of fiscal 2015 was positively affected by $0.05, from a decrease in the Company’s GAAP effective tax rate.  The Company recognized a net discrete tax benefit of $19 million in the second quarter of fiscal 2015.  This net discrete tax benefit was primarily as a result of the resolution of uncertain tax positions relating to U.S. and non-U.S. jurisdictions.
  • Non-GAAP EPS in the second quarter of fiscal 2015 was negatively affected by $0.15 from an increase in the Company’s non-GAAP effective tax rate.  The Company recognized a net discrete tax benefit of approximately $181 million in the first quarter of fiscal 2014, which impacted the non-GAAP effective tax rate for the second quarter of fiscal 2014.  This net discrete tax benefit was primarily as a result of the resolution of uncertain tax positions relating to U.S. and non-U.S. jurisdictions. 

SELECTED HIGHLIGHTS FROM THE QUARTER

  • Customer traction for CA Technologies innovations continued in the quarter.

◦      One of the world’s leading consumer entertainment companies chose CA APM solutions to monitor end-to-end performance of their on-line gaming platform.

◦      A French airline is now working with CA Service Virtualization to increase the speed and stability of application updates for their new mobile booking system.

◦      A large UK-based financial services integrator signed a multi-million dollar transaction to leverage CA’s API Management solution to build a cloud based mobile platform that allows third party financial service offerings, such as mortgage and insurance products, to be provided to social consumers.

  • Solutions leadership:

◦      CA Technologies has been placed in the leaders quadrant for its Data Center Infrastructure Management (DCIM) solution by Gartner in their “Magic Quadrant for Data Center Infrastructure Management Tools” report issued in September.

◦      CA API solutions were named a “leader” by analyst firm Forrester in their report “The Forrester Wave: API Management Solutions, Q3 2014” in a report issued in September.

SEGMENT INFORMATION

(dollars in millions)  

Second Quarter FY15 vs. FY14

 

Revenue

%
Change

%
Change
CC**

Operating Margin

FY15

FY14

FY15

FY14

Mainframe Solutions

$610

$624

(2)%

(3)%

62%

63%

Enterprise Solutions

$378

$384

(2)%

(2)%

13%

12%

Services

$91

$97

(6)%

(8)%

2%

9%

**CC: Constant Currency

  • Mainframe Solutions revenue decreased compared with the year-ago period primarily due to insufficient revenue from prior period new sales to offset the decline in revenue contribution from renewals. Operating margin was generally consistent compared with the year-ago period. 
  • Enterprise Solutions revenue decreased compared with the year-ago period primarily due to a decrease in revenue that is recognized on an up-front basis in the current period.  This decline was primarily due to an increase in the percentage of our Enterprise Solutions new sales sold in connection with renewals compared with the year-ago period.  In addition, within Enterprise Solutions, there was an unfavorable effect from the decrease in revenue from certain mature product lines, partially offset by an increase in revenue from recently acquired products and sales of newly developed technologies.  Enterprise Solutions operating margin was generally consistent compared with the year-ago period. 
  • Services revenue decreased compared with the year-ago period primarily as a result of a decrease in the size and number of services engagements during the first quarter of fiscal 2015.  Operating margin for our Services segment decreased compared with the year-ago period as a result of a number of factors, including the decrease in revenue and lower utilization rates for services personnel due to the decrease in the number of services engagements. 

CASH FLOW FROM OPERATIONS 

  • Cash flow from operations for the second quarter of fiscal 2015 was $66 million, versus $73 million in the year ago period.  Prior year cash flows included a tax refund of $70 million that positively affected cash flows from operations in the year-ago period.  In the second quarter of fiscal 2015, there was an increase in cash collections, primarily attributable to higher single installment collections of $76 million. 

CAPITAL STRUCTURE

  • Cash, cash equivalents and investments at September 30, 2014 were $3.193 billion.
  • With $1.763 billion in total debt outstanding and $139 million in notional pooling, the Company’s net cash, cash equivalents and investments position was $1.291 billion.
  • The Company is currently authorized to purchase $950 million of its common stock under its current stock repurchase program.
  • The Company distributed $111 million in dividends to shareholders.
  • The Company’s outstanding share count at September 30, 2014 was 440 million. 

OUTLOOK FOR FISCAL YEAR 2015  

The Company updated its fiscal year 2015 outlook, which represents “forward-looking statements” (as defined below).

The Company expects the following:

  • Total revenue to decrease in a range of minus 2 percent to minus 1 percent in constant currency, unchanged from previous guidance.  At September 30, 2014 exchange rates, this translates to reported revenue of $4.27 billion to $4.33 billion.
  • GAAP diluted earnings per share from continuing operations to decrease in a range of minus 12 percent to minus 8 percent in constant currency, unchanged from previous guidance.  At September 30, 2014 exchange rates, this translates to reported GAAP diluted earnings per share of $1.73 to $1.80.
  • Non-GAAP diluted earnings per share from continuing operations to decrease in a range of minus 20 percent to minus 18 percent in constant currency.  Previous guidance was minus 21 to minus 19 percent in constant currency.  At September 30, 2014 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.40 to $2.47.
  • Cash flow from continuing operations to increase in a range of 5 percent to 12 percent in constant currency, unchanged from previous guidance.  At September 30, 2014 exchange rates, this translates to reported cash flow from continuing operations of $1.01 billion to $1.08 billion.

This outlook assumes no material acquisitions and a partial currency hedge of operating income.  The Company expects a full-year GAAP operating margin of 27 percent, a decrease of one point from previous guidance, and non-GAAP operating margin of 37 percent, unchanged from previous guidance.  The Company also expects to return to a normalized full-year GAAP and non-GAAP effective tax rate of approximately 30 percent, which would have a negative impact on GAAP and non-GAAP diluted earnings per share from continuing operations of approximately $0.43 and $0.59, respectively.

The Company anticipates approximately 436 million shares outstanding at fiscal 2015 year-end and weighted average diluted shares outstanding of approximately 440 million for the fiscal year.

© Technuter.com News Service

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