This is a summary of the third quarter fiscal 2009 earnings call conducted by CA, Inc. (CA) on January 29, 2008.
Management:
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Chief Executive Officer: John Swainson
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Chief Financial Officer: Nancy Cooper
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VP of Investor Relations: Joseph Doncheski
Key Investor Issues:
- Revenue at the software maker fell to $1.04 billion from $1.1 billion a year earlier.
- Third-quarter bookings fell 2% to $1.25 billion.
- CA maintained its forecast of a 10% to 15% increase in full-year bookings.
- For the fiscal year, the company slightly raised the top of its forecast range for earnings excluding special items to between $1.48 and $1.57 per share from $1.48 to $1.55.
- At current currency rates, CA expects full-year revenue to rise between 1% and 2% from last year, compared with its previous forecast for a 2% increase.
Third Quarter Highlights:
Total bookings were $1.248 billion in total, down 2% when compared to the prior-year period or up 3% on a constant currency basis. Strength in bookings was seen in North America, primarily due to strong renewals and the continued demand for mainframe capacity. This was partially offset by EMEA which faced unfavorable currency movements, three large deals signed in the prior-year period and more renewals being outside the third quarter.
In the quarter the weighted average life of subscription and maintenance bookings were 3.1 years as compared to 2.94 years in the prior-year period.
- Annualized subscription and maintenance bookings were $359 million a year-over-year decrease of 5% or flat on a constant currency basis.
- On a year-to-date basis total bookings grew 18% to $3.78 billion which was why CA is reaffirming the full year bookings guidance of 10-15% growth.
- Year-to-date annualized subscription and maintenance bookings grew 1% both on a reported as well as on a constant currency basis.
Total revenue was $1.024 billion, down 5% from the prior-year or flat on a constant currency basis.
From a geographic perspective, North American revenue was up 1% as compared to the prior-year period or up 2% on a constant currency basis while international revenue decreased 13% or 3% on a constant currency basis.
Overall performance was driven by the composition of bookings as well as lower revenue from professional services some of which was the result of the current economic environment and some of it as a result of a more selective approach to driving more profitable contracts. The focus on more profitable services and engagements is contributing positively to margin expansion.
Non-GAAP operating expenses were $704 million, down $94 million or 12% from the prior year or down approximately 8% on a constant currency basis.
Expenses also benefited from the operating income hedging program instituted at the beginning of the fiscal year. While the impact of this program varies depending on the fluctuation of currencies it is prudent to have this approach to the international business.
Non-GAAP operating income before interest and taxes was $338 million, up 12% from the prior year and non-GAAP operating margin was 32%, a year-over-year increase of 5 percentage points.
Non-GAAP operating margin excluding stock based compensation continues to be two points higher. Since benefits continue to be realized at an accelerated pace, CA now expects full-year non-GAAP operating margin between 30-31% or 4-5 points higher than last year based on current foreign exchange rates.
Interest income started to be negatively impacted by declining interest rates on the cash balances and this is expected to continue.
Non-GAAP net income was $233 million and non-GAAP EPS was $0.43, increasing 21% and 19% from the prior year respectively.
GAAP results include purchased software, intangible amortization, restructuring and other expenses and gains and losses on hedges of operating income related to the remainder of the fiscal year. Including these items, total expenses before interest and taxes was $733 million, down 14% from the prior year or down 10% on a constant currency basis.
GAAP net income was $213 million or $0.40 per diluted common share increasing 31% and 29% from the prior year respectively.
