Computer Associates 2016 Annual Report Download - page 39

preference, customer needs for additional products or capacity, or our preference. The level of contracts closed prior to
scheduled expiration dates and the reasons for such closings can vary from quarter to quarter. Generally, quarters with smaller
renewal inventories result in a lower level of bookings because renewal bookings will be lower and, to a lesser extent, because
renewals remain an important opportunity for new product sales.
Mainframe solutions new product sales and capacity growth can be inconsistent on both a quarterly and annual basis. We
believe the period-over-period change in mainframe solutions new product sales and capacity combined is a more appropriate
measure of performance and, therefore, we provide only total mainframe solutions new sales information, which includes
mainframe solutions capacity. The amount of new product sales for a period, as currently tracked by us, requires estimation by
management and has been historically reported by providing only growth rate comparisons. Within a given period, the amount
of new product sales may not be material to the change in our total bookings or revenue compared with prior periods. New
product sales can be reflected as subscription and maintenance bookings in the period (for which revenue would be recognized
ratably over the term of the contract) or in software fees and other bookings (which are recognized as software fees and other
revenue in the current period).
Subscription and Maintenance Bookings: Subscription and maintenance bookings is the aggregate incremental amount we
expect to collect from our customers over the terms of the underlying subscription and maintenance agreements entered into
during a reporting period. These amounts include the sale of products either directly by us or through distributors and volume
partners, value-added resellers and exclusive representatives to end-users and may include the right for the customer to receive
unspecified future software products and/or additional products, services or other fees for which we have not established VSOE
for all undelivered elements. These amounts are expected to be recognized ratably as subscription and maintenance revenue
over the applicable term of the agreements. Subscription and maintenance bookings excludes the value associated with
perpetual licenses for which revenue is recognized on an up-front basis, SaaS offerings and professional services arrangements.
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. Price increases are not considered as part of the renewable value of the
prior period contract. We estimate the aggregate renewal yield for a quarter based on a review of material transactions
representing a 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.
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 and dollar amounts of the contracts being renewed, year-over-year
comparisons of bookings are not always indicative of the overall bookings trend.
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.
Annualized Subscription and Maintenance Bookings: Annualized subscription and maintenance bookings is an indicator that
normalizes the bookings recorded in the current period to account for contract length. It is calculated by dividing the total value
of all new subscription and maintenance license agreements entered into during a period by the weighted average subscription
and license agreement duration in years for all such subscription and maintenance license agreements recorded during the same
period.
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