Computer Associates 2013 Annual Report Download - page 42

into during a reporting period. These amounts include the sale of products directly by us and may include additional
products, services or other fees for which we have not established vendor specific objective evidence (VSOE). Subscription
and maintenance bookings also includes indirect sales by distributors and volume partners, value-added resellers and
exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified future
software products, and other contracts without these rights entered into in close proximity or contemplation of such
agreements. These amounts are expected to be recognized ratably as subscription and maintenance revenue over the
applicable term of the agreements. Subscription and maintenance bookings exclude the value associated with certain
perpetual licenses, license-only indirect sales, SaaS offerings and professional services arrangements.
The license and maintenance agreements that contribute to subscription and maintenance bookings represent binding
payment commitments by customers over periods that range generally from three to five years, although in certain cases
customer commitments can be for longer or shorter periods. These current period bookings are often renewals of prior
contracts that also had various durations, usually from three to five years. The amount of new subscription and maintenance
bookings recorded in a period is affected by the volume, duration and value of contracts renewed during that period.
Subscription and maintenance bookings typically increases in each consecutive quarter during a fiscal year, with the first
quarter having the least bookings and the fourth quarter having the most bookings. However, subscription and maintenance
bookings may not always follow the pattern of increasing in consecutive quarters during a fiscal year, and the
quarter-to-quarter differences in subscription and maintenance bookings may vary. Given the varying durations of the
contracts being renewed, year-over-year comparisons of bookings are not always indicative of the overall bookings trend.
Within bookings, we also consider the yield on our renewals. We define ‘‘renewal yield’’ as the percentage of the renewable
value of a prior contract (i.e., the maintenance value and, in the case of non-perpetual licenses, the license value) realized in
current period bookings. The renewable value of a prior contract is an estimate affected by various factors including
contractual renewal terms, price increases and other conditions. We estimate the aggregate yield for a quarter based on a
review of material transactions representing a substantial majority of the dollar value of renewals during the current period.
There may be no correlation between year-over-year changes in bookings and year-over-year changes in renewal yield, since
renewal yield is based on the renewable value of contracts of various durations, most of which are longer than one year.
Additionally, period-to-period changes in subscription and maintenance bookings do not necessarily correlate to changes in
cash receipts. The contribution to current period revenue from subscription and maintenance bookings from any single
license or maintenance agreement is relatively small, since revenue is recognized ratably over the applicable term for these
agreements.
Weighted Average Subscription and Maintenance License Agreement Duration in Years — The weighted average
subscription and maintenance license agreement duration in years reflects the duration of all subscription and maintenance
agreements executed during a period, weighted by the total contract value of each individual agreement. Weighted average
subscription and maintenance license agreement duration in years can fluctuate from period to period depending on the mix
of license agreements entered into during a period. Weighted average duration information is disclosed in order to provide
additional understanding of the volume of our bookings.
Total Revenue Backlog — Total revenue backlog represents the aggregate amount we expect to recognize as revenue in the
future as either subscription and maintenance revenue, professional services revenue or software fees and other revenue
associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is
composed of amounts recognized as liabilities in our Consolidated Balance Sheets as deferred revenue (billed or collected)
as well as unearned amounts yet to be billed under subscription and maintenance and software fees and other agreements.
Classification of amounts as current and noncurrent depends on when such amounts are expected to be earned and
therefore recognized as revenue. Amounts that are expected to be earned and therefore recognized as revenue in 12 months
or less are classified as current, while amounts expected to be earned in greater than 12 months are classified as noncurrent.
The portion of the total revenue backlog that relates to subscription and maintenance agreements is recognized as revenue
evenly on a monthly basis over the duration of the underlying agreements and is reported as subscription and maintenance
revenue in our Consolidated Statements of Operations. Generally, we believe that an increase or decrease in the current
portion of revenue backlog on a year-over-year basis is a favorable or unfavorable indicator of future subscription and
maintenance revenue performance, respectively, due to the high percentage of our revenue that is recognized from license
agreements that are already committed and being recognized ratably.
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