BMC Software (BMC)

Q4 2010 Earnings Call

May 05, 2010 5:00 pm ET

Executives

Robert Beauchamp - Chairman, Chief Executive Officer and President

Derrick Vializ - Vice President of Investor Relations

Stephen Solcher - Chief Financial Officer and Senior Vice President

Analysts

Israel Hernandez - Barclays Capital

Matthew Hedberg - RBC Capital Markets Corporation

Michael Turits - Raymond James & Associates

Derek Bingham - Goldman Sachs Group Inc.

Philip Winslow - Crédit Suisse First Boston, Inc.

Tim Klasell - Thomas Weisel Partners Equity Research

Abhey Lamba - UBS

Yun Kim - Broadpoint AmTech, Inc.

Presentation

Operator

Good day, everyone, welcome to today's BMC Software Fourth Quarter Fiscal Year 2010 Earnings Results Conference Call. [Operator Instructions] At this time, for opening remarks and introductions, I'd like to turn things over to Mr. Derrick Vializ. Please go ahead, sir.

Derrick Vializ

Good afternoon, everyone. I'm Derrick Vializ, Vice President, Investor Relations, and I would like to thank you for joining us today. During our call, Bob Beauchamp, our Chairman and CEO, will provide an overview of both the fourth quarter and full year fiscal 2010 performance of our company and business unit, and update on recent initiatives. After that, Steve Solcher, our CFO, will provide additional financial and operational detail. Bob will then discuss our expectations for fiscal 2011 before we open the call to questions.

The prepared comments were previously recorded. This call is being webcast and a complete record of the call will be made and posted to our website. In addition to today's earnings press release, we have posted a presentation which we will refer to at various times during the call. Both of these documents are available on our Investor Relations website at investors.bmc.com

Before we continue, I would like to remind you that statements in this discussion, including statements made during the question-and-answer session regarding BMC's future financial and operating results, the development of and demand for BMC's products, BMC's operating strategies, acquisitions and other statements that are not statements of historical fact are considered forward-looking statements.

These statements are subject to numerous important factors, risks and uncertainties, which could cause actual results to differ from the results implied by these or any other forward-looking statements. Cautionary statements relative to these forward-looking statements and BMC's operating result are described in today's earnings press release, the financial presentation and in our annual report on Form 10-K. All of these documents are available on our website. These forward-looking statements are made as of today based on certain expectations and we undertake no obligation to update these forward-looking statements.

I would also like to point out that the company's use of non-GAAP financial measures is explained in today's earnings press release and a full reconciliation between non-GAAP measures and the corresponding GAAP measure is provided in the tables accompanying the press release, and in our GAAP to non-GAAP reconciliations found on our website at investors.bmc.com At this time, I will turn the call over to Bob.

Robert Beauchamp

Thank you, Derrick. Good afternoon, and thank you for joining us on today's call. The fourth quarter marked the end of another solid year business and financial performance for BMC Software.

During fiscal 2010, we performed well against our key metrics, operating cash flow, total bookings, revenue, non-GAAP operating margin and non-GAAP diluted EPS. Cash flow from operations increased 10% to $635 million. Total bookings for the year grew 4%. Total revenue for the year was $1.91 billion, up 2%.

Non-GAAP operating margin for fiscal 2010 increased two percentage points year-over-year to 35%. Non-GAAP diluted EPS increased 17% to $2.66 per share, while GAAP diluted EPS increased 74% to $2.17 per share. And our balance sheet remains strong with $1.5 billion in cash and investments and $1.8 billion in deferred revenue. So again, another very good year for BMC with momentum building in the second half, and we expect fiscal 2011 to be even better.

Let's turn now to look specifically at the fourth quarter. We generated strong bookings and strong cash flow from operations. Total bookings for the quarter were $587 million, up 9% year-over-year. And cash flow from operations was $304 million, an increase of 53% year-over-year. While I'm pleased with these results, our revenue and non-GAAP diluted EPS for the quarter were at the low end of our expectations. We had a significant ESM transaction close minutes after the end of the quarter cutoff. This materially impacted fourth quarter results by roughly $15 million to license bookings and upfront license revenue. We believe that this delayed transaction is an anomaly and not the result of our historical sales processes and practices. With the timing of this transaction, as well as several other large GSM transactions that we closed in early April, we're off to a very strong start in fiscal 2011.

While I will discuss specific guidance later in the call, our overall outlook is quite positive. The size of the pipeline in both our ESM and MSM businesses looks robust, the demand environment is improving and our competitive position remains exceptionally strong. We're seeing acceleration in the trends that drive our business.

Let me turn next to discuss some key business and operational highlights during the fourth quarter and full fiscal year. During fiscal 2010, we further strengthen our market-leading position in IT Service Management. As you know, Remedy is a strategically important solution for us because of its broad market penetration, which we leveraged to generate strategic platform sales. Not surprisingly, it's an area that attracts a lot of attention and the sharpest competition.

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