CA Technologies Reports Fourth Quarter and Full Fiscal Year 2013 Results - CA Technologies
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CA Technologies Reports Fourth Quarter and Full Fiscal Year 2013 Results


  • Fourth Quarter GAAP EPS Grows 20 Percent in Constant Currency and 18 Percent as Reported
  • Fourth Quarter Non-GAAP EPS Grows 27 Percent in Constant Currency and 21 Percent as Reported, Benefited by Discrete Tax Items
  • Fourth Quarter Revenue Decreases 2 Percent in Constant Currency and 3 Percent as Reported
  • Fourth Quarter Cash Flow From Continuing Operations Decreases 23 Percent in Constant Currency and 27 Percent as Reported
  • Will Take a Charge of Approximately $150 Million in FY 2014 to Rebalance Resources with Business Priorities
  • Issues FY 2014 Outlook

NEW YORK, N.Y., May 7, 2013 – CA Technologies (NASDAQ:CA) today reported financial results for its fourth quarter and full fiscal year 2013, ended March 31, 2013.

EXECUTIVE COMMENTARY

“While we were able to achieve GAAP and non-GAAP diluted earnings growth for the year, we know we can do better to drive new sales and revenue performance,” said Mike Gregoire, CA Technologies chief executive officer.  “When I look at the significant assets at CA Technologies, I believe there is an opportunity for us to improve our performance by stronger focus on product innovation, leveraging customer relationships and better execution in new customer adoption.

“The traditional ways we’ve looked at systems, data, applications and security are being challenged by disruptive technologies like Mobility, Cloud, SaaS and Big Data.  Businesses have higher expectations from IT, demanding far greater speed and agility and anytime, anywhere secure connectivity.  These are areas where CA has expertise and can help,” he continued.  “To better meet this customer demand, today we announced a plan and corresponding charge of approximately $150 million for fiscal year 2014  that will enable us to rebalance our resources to drive greater innovation and collaboration in product development and greater efficiency and better sales execution.”

REVENUE AND BOOKINGS

Fourth Quarter

About 63 percent of the Company’s revenue in the fourth quarter came from North America, while 37 percent came from International operations.

Total revenue year-over-year:

  • Total revenue was $1.151 billion, down 2 percent in constant currency and 3 percent as reported.
  • Total revenue backlog was $7.774 billion, down 7 percent in constant currency and 8 percent as reported.  The current portion of revenue backlog was $3.563 billion, down 3 percent in constant currency and 4 percent as reported.
  • North America revenue was $724 million, down 3 percent in constant currency and as reported.
  • International revenue was $427 million, down 1 percent in constant currency and 3 percent as reported.

Bookings year-over-year:

  • Total bookings in the fourth quarter were $1.463 billion, down 4 percent in constant currency and 5 percent as reported. 
  • The Company renewed a total of 20 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $744 million.  This total included one contract of more than $200 million with a United States government agency.  During the fourth quarter of fiscal year 2012, the Company renewed a total of 27 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $694 million.
  • The weighted average duration of subscription and maintenance bookings for the quarter was 3.78 years, compared with 3.41 years for the same period in fiscal year 2012.
  • North America bookings were $986 million, up 11 percent in constant currency and 10 percent as reported, in part because of the large government contract mentioned above.
  • International bookings were $477 million, down 24 percent in constant currency and 26 percent as reported.  International bookings in fiscal year 2012 were positively affected by a large, multi-year contract with a financial institution in Europe.

Full Year

About 63 percent of the Company’s full year revenue came from North America, while 37 percent came from International operations.

Total revenue year-over-year:

  • Total revenue was $4.643 billion, down 2 percent in constant currency and 4 percent as reported.  Full fiscal year 2012 results benefited from a final license payment of $39 million received in the third quarter of fiscal year 2012 that will not recur.
  • North America revenue was $2.925 billion, down 2 percent in constant currency and as reported.
  • International revenue was $1.718 billion, down 1 percent in constant currency and 6 percent as reported.

Bookings year-over-year:

  • Total bookings were $4.114 billion, down 11 percent in constant currency and 12 percent as reported.
  • North America bookings were $2.497 billion, down 13 percent in constant currency and as reported.
  • International bookings were $1.617 billion, down 7 percent in constant currency and 10 percent as reported. 

EXPENSES AND MARGIN

Fourth Quarter

Year-over-year GAAP results:

  • Fourth quarter GAAP earnings includes an impairment of $55 million, or $0.11 per diluted share, related to purchased software products.
  • Operating expenses, before interest and income taxes, were $877 million, down 1 percent in constant currency and as reported.
  • Operating income, before interest and income taxes, was $274 million, down 7 percent in constant currency and 9 percent as reported.
  • Operating margin was 24 percent, down a percentage point from the prior year period.

Year-over-year non-GAAP results exclude purchased software and other intangibles amortization, share-based compensation, 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 of hedges that do not mature within the quarter.

  • Operating expenses, before interest and income taxes, were $767 million, down 6 percent in constant currency and 5 percent as reported.
  • Operating income, before interest and income taxes, was $384 million, up 5 percent in constant currency and 2 percent as reported.
  • Operating margin was 33 percent, up a percentage point from the previous year.

For the fourth quarter of fiscal year 2013, the Company’s effective GAAP tax rate was 8 percent, compared with 27 percent in the prior year. The Company’s effective non-GAAP tax rate was 17 percent, down from 28 percent in the prior year. GAAP and non-GAAP earnings per share were positively affected by discrete tax items that are not expected to recur, which added $0.11 to GAAP diluted earnings per share and $0.09 to non-GAAP diluted earnings per share.

Full Year

Year-over-year GAAP results:

  • GAAP earnings include an impairment of $55 million, or $0.09 per diluted share, related to the above mentioned purchased software products.
  • Operating expenses, before interest and income taxes, were $3.281 billion, down 3 percent in constant currency and 4 percent as reported.
  • Operating income, before interest and income taxes, was $1.362 billion, up 1 percent in constant currency and down 2 percent as reported.
  • Operating margin was 29 percent, flat with the previous year period.

Year-over-year non-GAAP results:

  • Operating expenses, before interest and income taxes, were $2.986 billion, down 4 percent in constant currency and 6 percent as reported.
  • Operating income, before interest and income taxes, was $1.657 billion, up 3 percent in constant currency and 1 percent as reported.
  • The Company recorded a non-GAAP operating margin of 36 percent, up 2 percentage points from fiscal year 2012. 

For the full year, the Company’s effective GAAP and non-GAAP tax rate was 28 percent, compared with 31 percent in the prior year. Full year GAAP and non-GAAP earnings per share were positively affected by the discrete tax items mentioned above, which added $0.09 to GAAP diluted earnings per share and $0.10 to non-GAAP diluted earnings per share.

SEGMENT INFORMATION

Fourth Quarter

  • Mainframe Solutions revenue was $620 million, down 1 percent in constant currency and as reported.  Operating expense was $261 million and operating profit was $359 million.  Operating margin was 58 percent, up from 56 percent a year ago.
  • Enterprise Solutions revenue was $432 million, down 6 percent in constant currency and 7 percent as reported.  Operating expense was $417 million and operating profit was $15 million.  Operating margin was 3 percent, down from 5 percent a year ago.
  • Services revenue was $99 million, up 6 percent in constant currency and as reported.  Operating expense was $89 million and operating profit was $10 million.  Operating margin was 10 percent, up from 6 percent a year ago.

Full Year

  • Mainframe Solutions revenue was $2.489 billion, down 3 percent in constant currency and 5 percent as reported.  Full year fiscal 2012 results were positively affected by a final license payment of $39 million in the third quarter that did not recur.  Operating expense was $1.016 billion and operating profit was $1.473 billion.  Operating margin was 59 percent, up from 56 percent a year ago.
  • Enterprise Solutions revenue was $1.772 billion, down 1 percent in constant currency and 3 percent as reported.  Operating expense was $1.612 billion and operating profit was $160 million.  Operating margin was 9 percent, up a percentage point from a year ago. Operating margin was positively affected by an intellectual property transaction in the first quarter of fiscal year 2013.
  • Services revenue was $382 million, up 2 percent in constant currency and flat as reported.  Operating expense was $358 million and operating profit was $24 million.  Operating margin was 6 percent, flat from a year ago.

CASH FLOW FROM CONTINUING OPERATIONS

  • Cash flow from continuing operations in the fourth quarter was $570 million, compared with $776 million in the prior year. The decline was primarily due to lower cash collections.
  • For the full year, cash flow from continuing operations was $1.408 billion, compared with $1.505 billion in the prior fiscal year.  Fiscal year 2013 results included an increase in cash collections from single installment payments of $193 million.

CAPITAL STRUCTURE

  • Cash, cash equivalents and investments at March 31, 2013, were $2.776 billion.
  • With $1.290 billion in total debt outstanding and $136 million in notional pooling, the Company’s net cash, cash equivalents and investments position was $1.350 billion.
  • In the fourth quarter, the Company repurchased approximately 3 million shares of stock for approximately $74 million. 
  • During the first quarter of fiscal 2013, the Company successfully completed its Accelerated Share Repurchase (ASR) agreement with the receipt of 3.7 million common shares.  Subsequent to the completion of the ASR, the Company repurchased 20 million shares in the market for approximately $495 million for the fiscal year.
  • The Company is currently authorized to repurchase $505 million of common stock through fiscal year 2014.
  • During the fourth quarter, the Company distributed $114 million in dividends to shareholders.  During the fiscal year, the Company distributed $463 million in dividends to shareholders.
  • The Company said its Board of Directors remains committed to delivering on the Company’s $2.5 billion capital allocation plan announced in 2012 that includes share repurchases and the $1.00 per share annual dividend.
  • The Company’s outstanding share count at March 31, 2013 was 448 million.

CHARGE TO REBALANCE RESOURCES WITH BUSINESS PRIORITIES

The Company also announced it would be taking a charge of approximately $150 million in FY 2014 to rebalance its resources to better align with its business priorities.  It said the charge would cover the termination of approximately 1,200 employees worldwide and the consolidation of development sites into centralized development hubs.  A majority of the personnel actions are expected to be completed by the end of the first quarter of fiscal year 2014.

The Company said it expects to backfill a majority of the positions over the next 12 months with new employees with skills that will enable the Company to better focus its resources on priority products and market segments.  The consolidation of development sites into development hubs will promote collaboration and agile development.  The Company also plans to further streamline its sales structure to eliminate overlays while maintaining its focus on its existing enterprise and enterprise growth customer segments.

BUSINESS HIGHLIGHTS

During the fourth quarter:

  • Mike Gregoire assumed the role of chief executive officer and became a member of the Company’s Board of Directors.
  • The Company acquired Nolio Ltd. a recognized leader in continuous application delivery with a strong and growing international base of large enterprise and service provider customers.
  • The Company announced CA Nimsoft Service Desk 7, the latest version of its flagship SaaS service management solution.
  • The Company announced an Identity and Access Management (IAM) solution that integrates with SAP® solutions for governance, risk and compliance (GRC) to help reduce the risk of fraud and manage access compliance.  Through a partnership agreement with Greenlight TechnologiesCA’s IAM capabilities are integrated with the SAP Access Control application.

OUTLOOK FOR FISCAL YEAR 2014
The Company provided its outlook for fiscal year 2014.  The Company expects its product offerings and go-to-market strategy will evolve in future periods and that these product offerings will become available at more frequent intervals than in historical release cycles.  The Company also expects a more extensive adoption of agile development methodologies, which are characterized by a more dynamic development process.  The Company expects this will result in commencing capitalization much later in the development life cycle.  As a result, product development and enhancement expenses are expected to increase in future periods as the amount capitalized for internally developed software costs decreases.  Due to this change, beginning in the first quarter of fiscal year 2014, the Company will expense research and development costs for internally developed products as they are  incurred.  The fiscal year 2014 outlook for non-GAAP measures will also exclude the costs and payments associated with the rebalancing charge the Company announced today. 

The following outlook, which represents "forward-looking statements" (as defined below), takes into account both the adjustment for internally developed software costs and the costs and payments associated with the rebalancing charge discussed above.
The Company expects the following:

  • Total revenue decrease in a range of minus 4 percent to minus 2 percent in constant currency.  At March 31, 2013 exchange rates, this translates to reported revenue of $4.43 billion to $4.52 billion.
  • GAAP diluted earnings per share decline in constant currency in a range of minus 29 percent to minus 25 percent.  At March 31, 2013 exchange rates, this translates to GAAP reported diluted earnings per share of $1.48 to $1.56.
  • Non-GAAP diluted earnings per share decline in constant currency in a range of minus 7 percent to minus 4 percent.  At March 31, 2013 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.35 to $2.43.
  • Cash flow from continuing operations decline in a range of minus 35 percent to minus 29 percent in constant currency.  At March 31, 2013 exchange rates, this translates to reported cash flow from continuing operations of $900 million to $980 million.

Outlook for cash flow from continuing operations is being adversely affected by costs associated with the above mentioned rebalancing of resources, an expected increase in cash taxes and an increase in cash outflows relating to product development and enhancement expenses for fiscal 2014.  In FY 2013, cash flow from continuing operations does not reflect $165 million of capitalized software development costs that appears as an investment activity in our Statement of Cash Flows.

This outlook also assumes no material acquisitions and a partial currency hedge of operating income.  The Company expects a full-year GAAP operating margin of 23 percent and non-GAAP operating margin of 36 percent.  The Company also expects an effective full-year GAAP and non-GAAP tax rate, before the potential favorable effect of an expected resolution of a U.S. federal tax appeal, of about 31 percent.

The Company anticipates approximately 432 million shares outstanding at fiscal year 2014 year-end and weighted average diluted shares outstanding of approximately 441 million for the fiscal year.

To enable fiscal year 2014 guidance for non-GAAP financial measures to be compared to full year results for prior fiscal years, the Company is providing full fiscal year 2012 and 2013 results for non-GAAP operating margin and diluted earnings per share adjusted for internally developed software as described above.  The Company will also be providing a revised non-GAAP adjusted cash flow from continuing operations metric during fiscal 2014, which is additionally adjusted for both the amount of capitalized software development and the payments associated with the rebalancing charge.  The Company will also be providing results for fiscal years 2012 and 2013 for this metric.  These non-GAAP adjusted measures are provided in the Company’s supplemental financial information, at http://ca.com/invest.

Press Contacts


ABOUT CA TECHNOLOGIES

CA Technologies (NASDAQ: CA) provides IT management solutions that help customers manage and secure complex IT environments to support agile business services. Organizations leverage CA Technologies software and SaaS solutions to accelerate innovation, transform infrastructure and secure data and identities, from the data center to the cloud. Learn more about CA Technologies at www.ca.com.

LEGAL NOTICES

Copyright © 2013 CA, Inc. All Rights Reserved. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

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