CA Technologies Reports Third Quarter Fiscal Year 2016 Results - CA Technologies
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CA Technologies Reports Third Quarter Fiscal Year 2016 Results


  • 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

NEW YORK, January 26, 2016 - 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


REVENUE AND BOOKINGS

  • 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

  • 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

  • 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

  • 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 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

 

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.

 

 

 

 

 

 

 

 

 

Press Contacts


Traci Tsuchiguchi

CA Technologies
Phone: (650) 534-9814

Saswato Das

CA Technologies
Phone: +1 (646) 710 6690

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.

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Copyright © 2016 CA, Inc. All Rights Reserved. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

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