BMC Software (BMC) reported first quarter 2011 earnings per share of 52 cents, missing the Zacks Consensus Estimate of 56 cents by 7.14%. The company delivered revenue of $461.0 million, below the Zacks Consensus revenue estimate of $474.0 million.
Revenue
Revenue of $461.0 million was up 2.4% from the year-ago period. The increase in revenue can be attributed to decent bookings growth. The company also continues to grow in other technology segments such as cloud computing, virtualization and software-as-a-service.
License revenue for the first quarter was $171.2 million, up 2.5% from $167.0 million reported in the year-ago quarter. Maintenance revenue for the quarter was $253.8 million, up 1.0% from $251.2 million reported in the year-ago quarter. Professional services revenue for the quarter was $35.9 million, down 12.9% from $31.8 million reported in the year-ago quarter.
Bookings
The company witnessed total bookings of $443 million in the first quarter, increasing 14.0% compared to the year-ago quarter. Total bookings in the license segment increased by 27.0% year-over-year to the level of $135 million. ESM license bookings for the quarter were $101 million, increasing 40.0% from $73.0 million in the year-ago period.
Operating Results
Operating income on a GAAP basis was $108.1 million, down 0.1% from $108.2 million reported in the year-ago quarter. Excluding special items like severance cost, amortization of intangible assets and stock-based compensation, non-GAAP operating income for the quarter was $156.8 million, down 6.1% from $147.8 million reported in the year-ago quarter. The GAAP operating margin decreased 1.0 percentage point from the year-ago quarter to 23.0%. Excluding special items, the non-GAAP operating margin was 34.0%, up 1.0 percentage point on a year-over-year basis.
Net income on a GAAP basis for the first quarter was $93.0 million, or $0.50 per share, up from $82.0 million or $0.44 per share reported in the year-ago quarter. Excluding special items such as amortization and severance costs, non-GAAP net income was $95.7 million or $0.52 per share, down from $95.9 million or $0.51 per share reported in the year-ago quarter.
Balance Sheet, Cash Flow & Share Repurchase
BMC generated cash flow from operations of $167.4 million in the first quarter, down from $303.5 million reported in the previous quarter. The company exited the quarter with cash and investments of $1.42 billion, flat compared to $1.42 billion in the previous quarter. The company repurchased approximately 4.0 million shares for a total of $149.0 million. As of June 30 2010, the company authorized an additional $921.0 million in share repurchases. This apart, the company exited the quarter with a long-term borrowing of $348.4 million.
Guidance
For 2011, BMC reiterated its previous guidance of non-GAAP earnings per share in the range of $2.84 to $2.94, which at the midpoint would represent a 9.0% increase compared to the company’s initial 2010 guidance. Total bookings and revenue are expected to increase in the mid-single-digit range on a reported basis. For 2010, cash flow from operations is expected to be in the range of $660 million to $710 million, which remains unchanged from the prior guidance.
Conclusion
The company reported decent first quarter results, although falling short of our expectation. However, the company provided a positive outlook for fiscal year 2011. Acquisitions have helped expand the product portfolio, leading to more comprehensive solutions. Growth prospects in the SaaS, cloud computing and virtualization segment, position in the government vertical and strong cash generation abilities are other positives.
That said, we are a bit apprehensive about the intense competition from big players like IBM (IBM), Hewlett-Packard (HPQ), EMC (EMC) and CA (CA), which bundle hardware and software offerings. The debt level also appears high. We maintain a Neutral rating on BMC shares.
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