Computer Associates 2015 Annual Report Download - page 29

CA Technologies Business Model
We generate revenue from the following sources: license fees — licensing our products on a right-to-use basis; maintenance
fees — providing customer technical support and product enhancements; service fees — providing professional services such
as product implementation, consulting, customer training and customer education; and SaaS offerings — typically licensed
using a subscription fee. The timing and amount of fees recognized as revenue during a reporting period are determined in
accordance with generally accepted accounting principles in the United States of America (GAAP). Revenue is reported net
of applicable sales taxes.
Under our business model, we offer customers a wide range of licensing options. For traditional, on-premise licensing, we
typically license to customers either perpetually or on a subscription basis for a specified term. Our customers also purchase
maintenance and support services that provide technical support and any general product enhancements released during the
maintenance period.
Under a perpetual license, the customer has the right to use the licensed program for an indefinite period of time upon
payment of a one-time license fee. If the customer wants to receive maintenance, the customer is required to pay an
additional annual maintenance fee.
Under a subscription license, the customer has the right to usage and maintenance of the licensed products during the term
of the agreement. Under our flexible licensing terms, customers can license our software products under multi-year licenses,
with most customers choosing terms of one-to-five years, although longer terms may sometimes be negotiated by customers
in order to obtain greater cost certainty. Thereafter, the license generally renews for a similar period of time on similar
terms and conditions, but subject to the customer’s payment of our then prevailing subscription license fee.
For our mainframe solutions, the majority of our licenses provide customers with the right to use one or more of our
products up to a specific license capacity, generally measured in millions of instructions per second (MIPS). For these
products, customers may acquire additional capacity during the term of a license by paying us an additional license fee and
maintenance fee. For our enterprise solutions, our licenses may provide customers with the right to use one or more of our
products limited to a number of servers, users or copies, among other things. Customers may license these products for
additional servers, users or copies, etc., during the term of a license by paying us an additional license fee.
Our services are typically delivered on a time-and-materials basis, but alternative pay arrangements, such as fixed fee or
staff augmentations, can also be arranged.
SaaS is another delivery model we offer to our customers who prefer to utilize our technology off-premise with little to no
infrastructure required. Our SaaS offerings are typically licensed using a subscription fee, most commonly on a monthly or
annual basis.
Executive Summary
A summary of key results for fiscal 2015 compared with fiscal 2014 is as follows:
Revenue
• Total revenue decreased $150 million, or 3%, as a result of a decline in subscription and maintenance revenue and a
decline in professional services revenue. In addition, during fiscal 2015, there was an unfavorable foreign exchange
effect of $71 million compared with fiscal 2014.
• As a result of insufficient revenue from new sales to offset the decline in revenue contribution from renewals,
particularly in our Mainframe Solutions segment, we expect a year-over-year decrease in total revenue for fiscal 2016
compared with fiscal 2015 due to the high percentage of our revenue that is recognized from license agreements with
customers signed in prior periods that are being recognized ratably.
Bookings
• Total bookings decreased 18% primarily due to a year-over-year decrease in renewals within subscription and
maintenance bookings. There was also a decline in professional services bookings for fiscal 2015 compared with fiscal
2014.
• The decrease in renewals was primarily driven by two factors: (1) a four-year contract renewal with a large system
integrator for more than $300 million executed during fiscal 2014; and (2) the value of contracts renewed prior to their
scheduled expiration dates being lower in fiscal 2015 than we had historically experienced.
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