• Third Quarter Results Consistent With Company Expectations
• Third Quarter Revenue of $1,007 Million
• Third Quarter GAAP EPS of $0.50
• Third Quarter Non-GAAP EPS of $0.63
• Third Quarter Cash Flow From Continuing Operations of $517 Million
India, January 31, 2017 - CA Technologies (NASDAQ:CA) today reported financial results for its third quarter fiscal 2017, which ended December 31, 2016.
Mike Gregoire, CA Technologies Chief Executive Officer, said:
“I am pleased with the strong growth in cash flow from operations as well as the healthy operating margin and earnings per share we delivered in the third quarter. On a constant currency basis, our revenue in the quarter came in as expected. The cadence and quality of our product releases is improving and we are making progress across a number of strategic imperatives, but we still have work to do to achieve the level of sustainable growth we are targeting.”
FINANCIAL OVERVIEW
(dollars in millions, except share data)
|
Third Quarter FY17 vs. FY16
| |||||
FY17
|
FY16
|
% Change
|
% Change CC*
| |||
Revenue
|
$1,007
|
$1,034
|
(3)%
|
(2)%
| ||
GAAP Income from Continuing Operations
|
$208
|
$219
|
(5)%
|
(9)%
| ||
Non-GAAP Income from Continuing Operations*
|
$263
|
$268
|
(2)%
|
(3)%
| ||
GAAP Diluted EPS from Continuing Operations
|
$0.50
|
$0.52
|
(4)%
|
(8)%
| ||
Non-GAAP Diluted EPS from Continuing Operations*
|
$0.63
|
$0.63
|
0%
|
(2)%
| ||
Cash Flow provided by Continuing Operations
|
$517
|
$332
|
56%
|
57%
| ||
* Non-GAAP income, Non-GAAP earnings per share and CC or Constant Currency are non-GAAP financial measures, as noted in "Non-GAAP Financial Measures" below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.
REVENUE AND BOOKINGS
(dollars in millions)
|
Third Quarter FY17 vs. FY16
| |||||||
FY17
|
% of
Total |
FY16
|
% of
Total |
%
Change |
%
Change CC* | |||
North America Revenue
|
$674
|
67%
|
$702
|
68%
|
(4)%
|
(4)%
| ||
International Revenue
|
$333
|
33%
|
$332
|
32%
|
0%
|
1%
| ||
Total Revenue
|
$1,007
|
$1,034
|
(3)%
|
(2)%
| ||||
North America Bookings
|
$809
|
64%
|
$727
|
59%
|
11%
|
11%
| ||
International Bookings
|
$449
|
36%
|
$515
|
41%
|
(13)%
|
(12)%
| ||
Total Bookings
|
$1,258
|
$1,242
|
1%
|
2%
| ||||
Current Revenue Backlog
|
$2,994
|
$3,030
|
(1)%
|
0%
| ||||
Total Revenue Backlog
|
$7,005
|
$6,800
|
3%
|
4%
| ||||
*CC or Constant Currency is a non-GAAP financial measure, as noted in "Non-GAAP Financial Measures" below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.
• Total revenue decreased due to decline in subscription and maintenance revenue, professional services revenue and software fees and other revenue.
• Total bookings increased primarily due to an increase in enterprise solutions renewals, partially offset by decreases in mainframe solutions renewals and enterprise solutions new product sales.
• The Company executed a total of 21 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $577 million. During the third quarter of fiscal 2016, 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.
• The weighted average duration of subscription and maintenance bookings for the quarter was 3.32 years, compared with 3.76 years for the same period in fiscal 2016.
EXPENSES, MARGIN AND EARNINGS PER SHARE
(dollars in millions)
|
Third Quarter FY17 vs. FY16
| |||||
FY17
|
FY16
|
%
Change |
%
Change CC** | |||
GAAP
| ||||||
Operating Expenses Before Interest and Income Taxes
|
$699
|
$741
|
(6)%
|
(4)%
| ||
Operating Income Before Interest and Income Taxes
|
$308
|
$293
|
5%
|
2%
| ||
Diluted EPS from Continuing Operations
|
$0.50
|
$0.52
|
(4)%
|
(8)%
| ||
Operating Margin
|
31%
|
28%
| ||||
Effective Tax Rate
|
28.8%
|
21.2%
| ||||
Non-GAAP*
| ||||||
Operating Expenses Before Interest and Income Taxes
|
$623
|
$644
|
(3)%
|
(2)%
| ||
Operating Income Before Interest and Income Taxes
|
$384
|
$390
|
(2)%
|
(2)%
| ||
Diluted EPS from Continuing Operations
|
$0.63
|
$0.63
|
0%
|
(2)%
| ||
Operating Margin
|
38%
|
38%
| ||||
Effective Tax Rate
|
28.5%
|
28.5%
| ||||
*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 or Constant Currency is a non-GAAP financial measure, as noted in "Non-GAAP Financial Measures" below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.
• GAAP and non-GAAP operating expenses decreased primarily due to favorable foreign exchange and a decline in legal settlement expense included within other (gains) expenses, net, and a decrease in commission expense as a result of the decline in total new product sales, partially offset by an increase in personnel-related costs as a result of severance actions during the third quarter of fiscal 2017.
• GAAP operating expenses were also affected by lower amortization expenses of capitalized software and other intangible assets.
• GAAP EPS was negatively impacted by $0.05 from an increase in GAAP effective tax rate partially offset by a $0.03 impact from improvement in GAAP operating margin primarily due to an overall decrease in GAAP operating expenses.
SELECTED HIGHLIGHTS FROM THE QUARTER
• At CA World last November, the Company announced a series of new solutions across its Agile, DevOps, Security and Mainframe portfolios, which included:
* A new identity-as-a-service solution to address identity and access management (IAM) needs for both on-premises and cloud-based applications.
* New DevOps capabilities with intelligent analytics and integrations for cloud services and virtual networks.
* Predictive analytics capabilities with machine learning for the mainframe.
* Enhancements to its leading SaaS solution purpose-built to scale agile practices.
• CA Technologies added new cloud-enabled automation and orchestration capabilities across its portfolio and increased its reach into the European market with the acquisition of Automic Holding GmbH (Automic), a leader in business automation software. The deal, valued at approximately 600 million euros net of cash and cash equivalents acquired, closed earlier this month and complements the company's organic innovation.
• CA Technologies was positioned highest in the Gartner Leader’s Quadrant for Ability to Execute within the Full Life Cycle API Management Magic Quadrant. (1)
• CA Technologies has been named a leader in the Gartner Integrated IT Portfolio Analysis Applications Magic Quadrant for the fifth consecutive year.(2)
• CA Technologies has been named a leader in The Forrester Wave: API Management Solutions, Q4 2016.(3)
SEGMENT INFORMATION
(dollars in millions)
|
Third Quarter FY17 vs. FY16
| |||||||
Revenue
|
%
Change |
%
Change CC* |
Operating Margin
| |||||
FY17
|
FY16
|
FY17
|
FY16
| |||||
Mainframe Solutions
|
$546
|
$554
|
(1)%
|
(1)%
|
61%
|
61%
| ||
Enterprise Solutions
|
$389
|
$398
|
(2)%
|
(2)%
|
14%
|
12%
| ||
Services
|
$72
|
$82
|
(12)%
|
(12)%
|
-4%
|
6%
| ||
*CC or Constant Currency is a non-GAAP financial measure, as noted in "Non-GAAP Financial Measures" below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.
• Mainframe Solutions revenue declined primarily due to insufficient revenue from prior period new sales to offset the decline in revenue contribution from renewals.
• Enterprise Solutions revenue declined primarily due to a decrease in revenue recognized on an upfront basis. Enterprise Solutions operating margin increased primarily due to an overall decrease in operating expenses.
• Services revenue decreased primarily due to a decline in professional services engagements from prior periods. This decline in professional services engagements is a result of several factors including the Company's products being easier to install and manage, an increase in the use of partners for services engagements and the completion of non-strategic projects during previous periods. Operating margin for Services decreased primarily due to the overall decline in professional services revenue and an increase in personnel-related costs as a result of severance actions during the third quarter of fiscal 2017.
CASH FLOW FROM OPERATIONS
• Cash flow from operations for the third quarter of fiscal 2017 was $517 million, versus $332 million in the year-ago period. Cash flow from operations increased compared with the year-ago period primarily due to an increase in cash collections, mainly from higher single installment collections, a decrease in vendor disbursements and payroll, and a decrease in other disbursements.
CAPITAL STRUCTURE
• Cash and cash equivalents at December 31, 2016 were $2.828 billion.
• With $1.950 billion in total debt outstanding and $139 million in notional pooling, the Company’s net cash position was $739 million.
• Approximately 79% of the Company’s cash and cash equivalents were held by foreign subsidiaries outside the United States at December 31, 2016.
• As of December 31, 2016, the Company was authorized to purchase $650 million of its common stock under its current stock repurchase program.
• The Company distributed $107 million in dividends to shareholders during the third quarter of fiscal 2017.
• The Company’s outstanding share count at December 31, 2016 was 413 million.
OUTLOOK FOR FISCAL YEAR 2017
The Company has updated its fiscal 2017 outlook. This guidance includes the acquisition of Automic, assumes no further material acquisitions, and contains "forward-looking statements" (as defined below).
The Company expects the following:*
• Total revenue to be flat as reported and to increase in a range of flat to plus 1 percent in constant currency. Previous guidance was to increase in a range of flat to plus 1 percent as reported and in constant currency. At December 31, 2016 exchange rates, this translates to reported revenue of $4.01 billion to $4.03 billion.
• GAAP diluted earnings per share from continuing operations to increase in a range of 1 percent to 4 percent as reported and flat to 2 percent in constant currency. Previous guidance was to increase in a range of 6 percent to 8 percent as reported and 2 percent to 5 percent in constant currency. At December 31, 2016 exchange rates, this translates to reported GAAP diluted earnings per share from continuing operations of $1.80 to $1.85.
• Non-GAAP diluted earnings per share from continuing operations to be in a range of flat to plus 2 percent as reported and minus 2 percent to flat in constant currency. Previous guidance was to increase in a range of 2 percent to 5 percent as reported and 1 percent to 3 percent in constant currency. At December 31, 2016 exchange rates, this translates to reported non-GAAP diluted earnings per share from continuing operations of $2.42 to $2.47.
• Cash flow from continuing operations to change in a range of minus 5 percent to minus 1 percent as reported and minus 3 percent to plus 1 percent in constant currency. Previous guidance was to change in a range of minus 3 percent to plus 1 percent as reported and in constant currency. At December 31, 2016 exchange rates, this translates to reported cash flow from continuing operations of $0.99 billion to $1.03 billion.
The Company expects a full-year GAAP operating margin of 28 percent and a full year non-GAAP operating margin of 37 percent, which translates to a 1-point decrease from previous guidance for both GAAP and non-GAAP operating margins.
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 413 million shares outstanding at fiscal 2017 year-end and weighted average diluted shares outstanding of approximately 415 million for the fiscal year.
*In the outlook section, certain non-material differences between growth rates and translated dollar amounts may arise from impact of rounding.
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 Magic Quadrant for Full Life Cycle API Management, Paolo Malinverno and Mark O’Neill, October 27, 2016.
(2) Gartner Magic Quadrant for Integrated IT Portfolio Analysis Applications, Daniel Stang and Stefan Van Der Zijden, November 22, 2016.
(1)(2) 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 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.
(3) The Forrester Wave™: API Management Solutions, Q4 2016, by Randy Heffner with Christopher Mines and Amanda LeClair, November 14, 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.