CA Inc. (CA) reported first quarter 2012 adjusted earnings per share (EPS) of 52 cents, surpassing the Zacks Consensus Estimate of 50 cents.
Revenue
Revenue of $1.16 billion was up 9.0% from $1.07 billion reported in the year-ago quarter. Revenue growth was primarily attributable to healthy demand for its service assurance, identity and access management, Nimsoft and mainframe products. About 62.0% of the company's revenue came from North America, while the remaining was derived from International operations.
Subscription and Maintenance revenue increased 7.2% year over year to $1007.0 million. Professional Services revenue came in at $90.0 million, up 15.4% from the prior-year quarter. Software Fees and Other revenues increased 26.9% to $66.0 million from $52.0 million in the year-ago quarter .
On the basis of geographical segments, North America generated revenues of $716.0 million, up 9.0% from $655.0 million in the year-ago quarter. International revenue (excluding America) was up 8.0% to $447.0 million from $414.0 million reported in the year-ago quarter. Continuous weakness in Europe, the Middle East and Africa affected revenues.
Bookings
Total bookings in the first quarter shot up 18% to $865 million. The company signed 8 license agreements for an aggregate contract value of $255.0 million (more than $10.0 million each) compared with 6 license agreements worth $188 million (each valuing more than $10.0 million) in the comparable period last year.
Operating Results
Operating income in the first quarter stood at $228.0 million, up from $221.0 million in the year-ago quarter. Excluding special items, such as purchased software amortization, intangibles amortization, restructuring and other costs, and including hedging gains and losses, non-GAAP operating income in the quarter was $417.0 million versus $364.0 million in the year-ago quarter.
Net income on a GAAP basis in the reported quarter was 45 cents per share versus 43 cents per share in the year-ago quarter. Excluding special items, such as software amortization, intangible amortization, restructuring and other and hedging gains/losses, non-GAAP net income in the first quarter was 52 cents per share versus 43 cents reported in the prior-year quarter.
Balance Sheet and Cash Flow
CA Inc. generated cash flow from continuing operations of $143 million compared with $122 million in the prior year quarter. Cash, cash equivalents and marketable securities were $2.950 billion. The company's net cash, cash equivalents and marketable securities position was $1.643 billion while total debt outstanding was $1.307 billion. In the first quarter, the company repurchased approximately 6.4 million shares of its common stock for $150 million and distributed $25 million in dividends.
Guidance
For fiscal 2012, the company expects revenue growth in the range of 6.0% to 8.0% at constant currency. The company estimates revenues between $4.9 billion and $5.0 billion. GAAP diluted earnings per share growth at constant currency are projected in the range of 5.0% to 9.0%, down from the previous range of 6.0% of 11.0%, implying diluted earnings per share between $1.79 and $1.86.
Non-GAAP diluted earnings per share are expected to grow in a range of 6.0% to 10.0%, implying non-GAAP diluted earnings per share in the band of $2.14 to $2.21.
Our Take
CA Inc. posted decent first quarter results, exceeding earnings estimates. Revenue also improved on a year-over-year basis. However, the product demand trend was moderate in the reported quarter. Keeping in mind the quarter’s revenue backlog, we believe the fiscal 2012 guidance is a bit conservative. We further believe that CA Inc.’s endeavor to return shareholder value through share buybacks and dividend increases will boost investor sentiment.
On the other hand, we are apprehensive about intense competition in the software & cloud computing space from big players, such as International Business Machines (IBM) and Hewlett-Packard Company (HPQ). In addition, its high debt balance and European exposure may pose some challenges going forward.
Currently, CA Inc. has a Zacks #4 Rank, implying a short-term Hold rating.
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