CA Technologies Reports Third Quarter Fiscal Year 2012 Results

8/3/2019 CA Technologies Reports Third Quarter Fiscal Year 2012 Results

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CA Technologies Reports Third Quarter Fiscal Year 2012 Results

y Revenue $1.263 Billion, Up 10 Percent in Constant Currency and asReported

y GAAP EPS $0.54, Up 39 Percent in Constant Currency and 42 Percent asReported

y Non-GAAP EPS $0.65, Up 28 Percent in Constant Currency and 30Percent as Reported

y Single License Payment Contributes 3 Percentage Points to RevenueGrowth and $0.05 to GAAP and Non-GAAP EPS Growth

y Cash Flow from Continuing Operations $396 Million, Down 19 Percentin Constant Currency and 20 Percent as Reported

y Raises Full Year Outlook for GAAP and non-GAAP EPS and AdjustsRevenue Guidance to High End of Range; Maintains Cash Flow fromContinuing Operations Outlook

y Enhances Capital Allocation Program, Targeting Return of $2.5 BillionTo Shareholders Through Fiscal Year 2014

SINGAPORE, January 26, 2011 CA Technologies (NASDAQ:CA) today reportedfinancial results for its third quarter of fiscal year 2012, which ended on Dec. 31,2011.

FINANCIAL OVERVIEW

Third Quarter FY12 vs.FY11

(in millions, except sharedata)

FY12 FY11 %Change

% ChangeCC**

Revenue $1,263

$1,144

34% 24%

GAAP Income fromcontinuing operations

$263 $196 34% 24%

Non-GAAP Income fromcontinuing operations*

$319 $256 25% 18%

GAAP Diluted EPS fromcontinuing operations

$0.54 $0.38 42% 39%

Non-GAAP Diluted EPS fromcontinuing operations*

$0.65 $0.50 30% 28%

Cash Flow from continuingoperations

$396 $492 (20%) (19%)


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* Non-GAAP income and earnings per share are non-GAAP financial measures, as noted inthe discussion of non-GAAP results below. A reconciliation of non-GAAP financial measuresto their comparable GAAP financial measures is included in the tables following this newsrelease.**CC:ConstantCurrency

EXECUTIVE COMMENTARY

We had a good quarter on many measures and continued to make solid progressagainst our long-term goals, said Bill McCracken, chief executive officer, CATechnologies. However, we are not done. We remain focused on continuing toexecute on our strategy and making further operational enhancements includingdriving new product sales and increasing sales productivity.

The $2.5 billion enhanced capital allocation program announced today is theculmination of significant work evaluating ways to optimize our balance sheet,while maintaining the financial flexibility needed to build our business and enhance

our competitive positioning, McCracken continued. We believe were on a pathto achieve a balanced approach to return even more cash to shareholders, whilestill investing in our future.

REVENUE AND BOOKINGS

The Company received a final license payment in the third quarter of $39 millionunder a license agreement entered into in connection with a 2009 litigationsettlement with a software company. The payment reflects the final amountowed, which was scheduled to be repaid in fiscal years 2013 and 2014. Thecompany made the final payment at its discretion, without any discount or

concession by CA Technologies.

During the third quarter, the Company saw demand for its virtualization andservice automation products, security solutions including products from ArcotSystems, Interactive TKO (ITKO) products, mainframe solutions and professionalservices. About 8 percentage points of revenue growth in constant currency and

as reported were driven by organic products, while about 2 percentage points inconstant currency and as reported came from acquired products. About 63percent of the Companys revenue came from North America, while 37 percentcame from international operations.

Revenue year-over-year:

y Total revenue was $1.263 billion, up 10 percent in constant currency and asreported. The single license payment contributed 3 percentage points ofrevenue growth, all in North America.

y Total revenue backlog was $8.084 billion, up 2 percent in constant currencyand as reported. The current portion of revenue backlog was $3.576 billion,up 2 percent in constant currency and 1 percent as reported.

y North America revenue was $791 million, up 15 percent in constant currency


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and as reported.

y International revenue was $472 million, up 3 percent in constant currencyand as reported.

Bookings year-over-year:

y Total bookings in the third quarter were $1.284 billion, up 2 percent inconstant currency and 1 percent as reported. The single license paymentcontributed 3 percentage points of growth to bookings, all in North America.

y The Company renewed a total of 12 license agreements with incrementalcontract values in excess of $10 million each, for an aggregate contractvalue of $452 million. During the third quarter of fiscal year 2011, theCompany renewed a total of 15 license agreements with incrementalcontract values in excess of $10 million each, for an aggregate contractvalue of $456 million.

y The weighted average duration of subscription and maintenance bookingsfor the quarter was 3.53 years, compared with 3.20 years for the sameperiod in fiscal year 2011.

y North America bookings were $766 million, up 1 percent in constantcurrency and as reported.

y International bookings were $518 million, up 4 percent in constant currencyand 2 percent as reported.

EXPENSES AND MARGIN

Year-over-year GAAP results:

y Operating expenses, before interest and income taxes, were $850 million,

up 5 percent in constant currency and as reported.y Operating income, before interest and income taxes, was $413 million, up

22 percent in constant currency and up 24 percent as reported.

y Operating margin was 33 percent, up 4 percentage points from the prioryear period.

Year-over-year non-GAAP results, which exclude purchased software and otherintangibles amortization, pre-fiscal year 2010 restructuring costs, and certain othergains and losses (including recoveries and certain costs associated with derivativelitigation matters and share-based compensation expense), and which includegains and losses on hedges that mature within the quarter, but which exclude

gains and losses on hedges that do not mature within the quarter:

y Operating expenses, before interest and income taxes, were $788 million,up 4 percent in constant currency and as reported.

y Operating income, before interest and income taxes, was $475 million, up21 percent in constant currency and 23 percent as reported.

y Operating margin was 38 percent, up 4 percentage points from the prioryear period.


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Both GAAP and non-GAAP operating expense increases were primarily driven bycosts associated with acquisitions and expenses resulting from increased Servicesengagements, and product development and enhancement costs.

For the third quarter of fiscal year 2012, the Companys effective GAAP tax ratewas 34.9 percent, compared with 39.1 percent in the prior year. The Companyseffective non-GAAP tax rate was 31.5 percent, compared with 31.7 percent in theprior year.

GAAP and non-GAAP EPS were favorably affected by about $0.05 per share by thesingle license payment. In addition, GAAP and non-GAAP EPS were positivelyaffected by currency and a reduction in share count. The single license paymentalso had a positive impact of about 2 percentage points on both GAAP andnon-GAAP margin.

SEGMENT INFORMATION

Beginning in the first quarter of fiscal year 2012, CA Technologies began reportingsegment results in three areas: Mainframe Solutions, Enterprise Solutions andServices.

y Mainframe Solutions revenue was $682 million, up 9 percent in constantcurrency and as reported. The single license payment contributed 6 percentpoints of growth to Mainframe Solutions revenue. Operating expense was$277 million and operating profit was $405 million. Operating margin was59 percent, up from 54 percent a year ago.

y Enterprise Solutions revenue was $478 million, up 11 percent in constant

currency and 12 percent as reported. Operating expense was $419 millionand operating profit was $59 million. Operating margin was 12 percent, upfrom 9 percent a year ago.

y Services revenue was $103 million, up 16 percent in constant currency and17 percent as reported. Operating expense was $92 million and operatingprofit was $11 million. Operating margin was 11 percent, up from 10percent a year ago.

CASH FLOW FROM CONTINUING OPERATIONS

Cash flow from continuing operations in the third quarter was $396 million,

including the $39 million single license payment, compared with $492 million in theprior year. Cash flow from operations reflected a decline in cash collections,including a reduction in single installment payments. The Company reiterated itsfiscal year 2012 outlook for cash flow from operations.

CAPITAL STRUCTURE

y Cash, cash equivalents and marketable securities at Dec. 31, 2011 were$2.539 billion.


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y With $1.309 billion in total debt outstanding and approximately $120 millionin notional pooling, the Companys net cash, cash equivalents andmarketable securities position was $1.110 billion.

y In the third quarter, the Company repurchased approximately 9.6 millionshares of stock, for $200 million and distributed $25 million in dividends.

y The Companys outstanding share count at Dec. 31, 2011 was 480 million.

CAPITAL ALLOCATION PROGRAM

The Company announced that its Board of Directors has approved a capitalallocation program that targets the return of up to $2.5 billion to CA Technologiesshareholders through the fiscal year ending March 31, 2014.

The Companys capital allocation program plans to return approximately 80percent of expected cumulative free cash flow to shareholders through fiscal2014. This includes a planned increase in the annual dividend from $0.20 to$1.00 per common share and the authorization to repurchase up to $1.5 billion inCA Technologies common stock, including $232 million remaining under theCompanys current share repurchase authorization. Approximately $500 million ofthe planned repurchase is expected to be an accelerated share repurchasepursuant to an agreement executed in the Companys fiscal fourth quarter endingMarch 31, 2012.

For more information, see separate news release announced today.

BUSINESS HIGHLIGHTS

During the third quarter:

y The Company held CA World, a user conference that had about 5,000attendees including 135 sponsors and nearly 350 exhibitors, and announcedkey initiatives and 12 solutions centered on Business Service Innovation a customer value proposition that helps support customers as they transitionfrom simply managing IT to delivering critical business services.

y Infraserve, an Australian provider of Infrastructure-as-a-Service (IaaS)solutions, announced it is offering a new Platform as a Service (PaaS)solution powered by the CA AppLogic turnkey cloud computing platform.ViaWest, one of the largest privately owned data center and managedservices providers in North America, also announced it is using CA AppLogic

and CA Process Automation as the backbone of its new Xen-basedKINECTed Cloud Innovator service.

y The Company was named one of the top two market share leaders in theworldwide cloud systems management software market by IDC, a leadingprovider of global IT research and advice.

y CA Technologies announced CA Access Control for Virtual Environments, anew solution that extends its identity and access management (IAM)security expertise, and complements and protects VMware virtualenvironments.


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y The Company was ranked ninth out of 500 in Newsweeks 2011 GreenRankings. Newsweekranks the 500 largest publicly traded U.S. companieson their environmental footprint, management and disclosure.

OUTLOOK FOR FISCAL YEAR 2012

The Company updated its outlook for fiscal year 2012. The following guidance

represents "forward-looking statements" (as defined below). Updated guidanceincludes the impact of the single license payment, which was not included inprevious guidance.

The Company expects the following:

y Total revenue growth of 6 percent in constant currency, compared with theprevious outlook of 5 percent to 6 percent. At Dec. 31, 2011 exchangerates, this translates to reported revenue of about $4.8 billion.

y GAAP diluted earnings per share growth raised to a range of 11 percent to13 percent in constant currency, compared with the previous outlook of 6percent to 9 percent. At Dec. 31, 2011 exchange rates, this translates toreported GAAP diluted earnings per share of $1.86 to $1.90.

y Non-GAAP diluted earnings per share growth raised to a range of 11 percentto 13 percent in constant currency, compared with the previous outlook of 7percent to 10 percent. At Dec. 31, 2011 exchange rates, this translates toreported non-GAAP diluted earnings per share of $2.21 to $2.25.

y Cash flow from operations growth continues in a range of 3 percent to 5percent in constant currency. At Dec. 31, 2011 exchange rates, thistranslates to reported cash flow from operations of $1.44 billion to $1.47billion.

The Company expects a full-year GAAP operating margin of 29 percent andnon-GAAP operating margin of 34 percent. The Company also expects a full-yearGAAP and non-GAAP tax rate in a range of 31 to 32 percent. The Companyanticipates 463 million shares outstanding at fiscal year 2012 year-end andweighted average diluted shares outstanding of 486 million for the fiscal year.

Webcast

This news release and the accompanying tables should be read in conjunction withadditional content that is available on the Companys website, including a

supplemental financial package, as well as a webcast that the Company will host at5 p.m. ET today to discuss its unaudited third quarter results. The webcast will bearchived on the website. Individuals can access the webcast, as well as this pressrelease and supplemental financial information, at http://ca.com/invest or listen tothe call at 1-877-561-2748. The international participant number is1-720-545-0044.

About CA Technologies


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CA Technologies (NASDAQ: CA) is an IT management software and solutionscompany with expertise across all IT environments from mainframe anddistributed, to virtual and cloud. CA Technologies manages and secures ITenvironments and enables customers to deliver more flexible IT services. CATechnologies innovative products and services provide the insight and control

essential for IT organizations to power business agility. The majority of the GlobalFortune 500 relies on CA Technologies to manage evolving IT ecosystems. Foradditional information, visit CA Technologies at www.ca.com.

Follow CA Technologies

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y Press Releasesy Podcasts

Non-GAAP Financial Measures

This news release, the accompanying tables and the additional content that isavailable on the Company's website, including a supplemental financial package,includes certain financial measures that exclude the impact of certain items andtherefore have not been calculated in accordance with U.S. generally acceptedaccounting principles (GAAP). Non-GAAP metrics for operating expenses,operating income, operating margin, income from operations and diluted earningsper share exclude the following items: non-cash amortization of purchasedsoftware and other intangibles, share-based compensation, pre-fiscal year 2010restructuring and certain other gains and losses, which includes recoveries andcertain costs associated with derivative litigation matters and includes the gains

and losses since inception of hedges that mature within the quarter, but excludegains and losses of hedges that do not mature within the quarter. Prior to fiscalyear 2011, non-GAAP income also excludes the interest on convertible bonds. Theeffective tax rate on GAAP and non-GAAP income from operations is theCompanys provision for income taxes expressed as a percentage of pre-tax GAAPand non-GAAP income from operations, respectively. Such tax rates aredetermined based on an estimated effective full year tax rate, with the effectivetax rate for GAAP generally including the impact of discrete items in the periodsuch items arise and the effective tax rate for non-GAAP income generallyallocating the impact of discrete items pro rata to the fiscal years remainingreporting periods. Adjusted cash flow from operations excludes restructuring and

other payments. Free cash flow excludes purchases of property, equipment andcapitalized software development costs. We present constant currency informationto provide a framework for assessing how our underlying businesses performedexcluding the effect of foreign currency rate fluctuations. To present thisinformation, current and comparative prior period results for entities reporting incurrencies other than US dollars are converted into US dollars at the exchange ratein effect on March 31, 2011, which was the last day of our prior fiscal

year. Constant currency excludes the impacts from the Company's hedgingprogram. The constant currency calculation for annualized subscription and


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maintenance bookings is calculated by dividing the subscription and maintenancebookings in constant currency by the weighted average subscription andmaintenance duration in years. These non-GAAP financial measures may bedifferent from non-GAAP financial measures used by other companies. Non-GAAPfinancial measures should not be considered as a substitute for, or superior to,

measures of financial performance prepared in accordance with GAAP. Byexcluding these items, non-GAAP financial measures facilitate management'sinternal comparisons to the Company's historical operating results and cash flows,to competitors' operating results and cash flows, and to estimates made bysecurities analysts. Management uses these non-GAAP financial measuresinternally to evaluate its performance and they are key variables in determiningmanagement incentive compensation. The Company believes these non-GAAPfinancial measures are useful to investors in allowing for greater transparency ofsupplemental information used by management in its financial and operationaldecision-making. In addition, the Company has historically reported similarnon-GAAP financial measures to its investors and believes that the inclusion ofcomparative numbers provides consistency in its financial reporting. Investorsare encouraged to review the reconciliation of the non-GAAP financial measuresused in this news release to their most directly comparable GAAP financialmeasures, 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 ofthe Companys Board of Directors, in its sole discretion, after considering variousfactors, including the Companys financial condition, historical and forecastoperating results, and available cash flow, as well as any applicable laws andcontractual covenants and any other relevant factors. The Companys practice

regarding payment of dividends may be modified at any time and from time totime.

Repurchases under the Company's stock repurchase program are expected to bemade with cash on hand and may be made from time to time, subject to marketconditions and other factors, in the open market, through solicited or unsolicitedprivately negotiated transactions or otherwise. The program, which is authorizedthrough fiscal year 2014, does not obligate the Company to acquire any particularamount of common stock, and it may be modified or suspended at any time at theCompany's discretion.

Certain statements in this communication (such as statements containing thewords "believes," "plans," "anticipates," "expects," "estimates," targets andsimilar expressions) constitute "forward-looking statements" that are based uponthe beliefs of, and assumptions made by, the Company's management, as well asinformation currently available to management. These forward-lookingstatements reflect the Company's current views with respect to future events andare subject to certain risks, uncertainties, and assumptions. A number ofimportant factors could cause actual results or events to differ materially fromthose indicated by such forward-looking statements, including: the ability to


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achieve success in the Companys strategy by, among other things, increasingsales in new and emerging enterprises and markets, enabling the sales force to sellnew products, improving the Companys brand in the marketplace and ensuringthe Companys set of cloud computing, Software-as-a-Service and other newofferings address the needs of a rapidly changing market, while not adversely

affecting the demand for the Companys traditional products or its profitability;global economic factors or political events beyond the Company's control; generaleconomic conditions and credit constraints, or unfavorable economic conditions ina particular region, industry or business sector; failure to expand partnerprograms; the ability to adequately manage and evolve financial reporting andmanagerial systems and processes; acquisition opportunities that may or may notarise; the ability to integrate acquired companies and products into existingbusinesses; competition in product and service offerings and pricing; the ability toretain and attract qualified key personnel; the ability to adapt to rapidtechnological and market changes; the ability of the Companys products to remaincompatible with ever-changing operating environments; access to softwarelicensed from third parties; use of software from open source code sources;discovery of errors in the Company's software and potential product liabilityclaims; significant amounts of debt and possible future credit rating changes; thefailure to protect the Company's intellectual property rights and source code;fluctuations in the number, terms and duration of our license agreements as wellas the timing of orders from customers and channel partners; reliance upon largetransactions with customers; risks associated with sales to government customers;breaches of the Companys software products and the Companys and customersdata centers and IT environments; third-party claims of intellectual propertyinfringement or royalty payments; fluctuations in foreign currencies; failure toeffectively execute the Companys workforce reductions; successful outsourcing ofvarious functions to third parties; potential tax liabilities; and other factors

described more fully in the Company's filings with the Securities and ExchangeCommission. Should one or more of these risks or uncertainties occur, or shouldour assumptions prove incorrect, actual results may vary materially from thosedescribed herein as believed, planned, anticipated, expected, estimated ortargeted. The Company assumes no obligation to update the information in thiscommunication, except as otherwise required by law. Readers are cautioned not toplace undue reliance on these forward-looking statements, which speak only as ofthe date hereof.

Copyright 2012 CA, Inc. All Rights Reserved. One CA Plaza, Islandia, N.Y.11749. All other trademarks, trade names, service marks, and logos referenced

herein belong to their respective companies.

Documents

CA Technologies Reports Third Quarter Fiscal Year 2012 Results