BMC Top Line Grows - Analyst Blog

BMC Software (BMC) reported third quarter fiscal 2011 earnings per share of 69 cents, at par with the Zacks Consensus Estimate. The company delivered revenue of $539.9 million, handily surpassing the Zacks Consensus Estimate of $528.9 million.

Revenue

Reported revenue of $540.0 million increased 6.0% year over year. BMC's growth strategy seems to have worked well for the company as suggested by improved bookings. Service automation, SaaS and cloud solutions all continue to drive strong increases in customer demand.

Moreover, BMC has expanded its presence in key markets through new partnerships. At the same time, the company remains committed to its ongoing strategy of optimizing efficiency, productivity and profitability.

License revenue was $234.6 million, up 8.6% from $216.1 million reported in the year-ago quarter. Maintenance revenue was $259.3 million, down 0.3% from $260.2 million in the year-ago quarter. Professional services revenue was $46.0 million, up 44.7% year over year from $31.8 million.

Bookings

BMC's total bookings were $594.0 million, up 10.0% from the year-ago quarter. Total license bookings increased 19.0% year-over-year from $295.0 million. ESM license bookings were $163.0 million, up 8.0% from the year-ago quarter.

Operating Results

Operating income on a GAAP basis was $139.4 million, down 5.6% from $147.6 million reported in the year-ago quarter. Excluding special items like severance cost and amortization of intangible assets, non-GAAP operating income was $162.2 million in the reported quarter, up 3.6% from $168.2 million in the year-ago quarter.

Net income on a GAAP basis was $109.1 million, or 60 cents per share, compared to $110.7 million or 59 cents reported in the year-ago quarter. Excluding special items such as amortization and severance costs, non-GAAP net income was $125.3 million or 69 cents per share, compared to $125.4 million or 67 cents reported in the year-ago quarter.

Balance Sheet, Cash Flow & Share Repurchase

BMC Software generated $180.3 million in cash flow from operations in the third quarter, down from $127.1 million reported in the previous quarter. The company exited the quarter with cash and investments of $1.54 billion, up from $1.48 billion in the previous quarter.

During the quarter, the company repurchased 1.7 million shares for a total of $75.0 million. At the end of the quarter, the company had $771.0 million remaining under its current share repurchase program.

Guidance

BMC reiterated its fiscal 2011 non-GAAP diluted earnings per share expectation of $2.92 to $3.02.  At the midpoint, this would represent a 12% percent increase over last the prior year. The company also expects full-year 2011 cash flow from operations of between $710 million and $760 million, an increase from its prior expectation of $675 million to $725 million.

Conclusion

BMC reported decent third quarter results. Moreover, the company provided a positive outlook for fiscal 2011. Acquisitions have expanded BMC's product portfolio, leading to more comprehensive solutions. Growth prospects in most of its business segments, position in the government vertical and strong cash generation abilities are other positives.

However, we are a bit apprehensive about growing competition from big players such as International Business Machines (IBM), Hewlett-Packard Company (HPQ), EMC Corp. (EMC) and CA Inc. (CA), which bundle hardware and software offerings.

Currently, the company has a Zacks #3 Rank (short-term Hold recommendation).

 
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