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BMC Software Inc. (BMC) reported second quarter 2012 earnings per share of 75 cents, surpassing the Zacks Consensus Estimate of 71 cents.

Revenue

Reported revenue of $556.7 million increased 10.8% year over year. During the quarter, BMC witnessed a number of cloud wins. Moreover, the company currently has a strong line up of new cloud deals.

Another strategic imperative on the company’s part is to become the leader in Software-as-a-Service (S-a-a-S) management. The company added a number of new SaaS customers during the quarter and the related amount of subscription annual contract value (ACV) exhibited strong growth.

License revenue was $229.7 million, up 10.4% from $208.1 million reported in the year-ago quarter. Maintenance revenue increased 7.1% to $270.5 million from $252.5 million in the year-ago quarter. Professional services revenue was $56.5 million in the reported quarter versus $41.7 million in the year-ago quarter.

Bookings

Total bookings declined 16.0% year over year. Total license bookings decreased 15.0% year over year to $188.0 million in the quarter. After normalizing for contract length, trailing 12-month annualized bookings were $986.0 million in the reported quarter, up 6.0% year over year.

Operating Results

Operating income on a GAAP basis was $161.0 million, up 12.2% from $143.5 million in the year-ago quarter. Excluding special items such as severance costs and amortization of intangible assets, but including stock-based compensation expense, non-GAAP operating income was $185.6 million in the reported quarter, up 12.1% from $165.5 million in the prior-year quarter. The company witnessed substantial reduction in R&D expenses, along with some reduction in General & Administrative expenses.

Net income on a GAAP basis was $114.7 million or 65 cents per share compared with $131.8 million or 73 cents in the year-ago quarter. Excluding special items such as amortization and severance costs, but including stock-based compensation expense, non-GAAP net income was $131.9 million or 75 cents per share compared with $139.3 million or 76 cents in the year-ago quarter.

Balance Sheet, Cash Flow & Share Repurchase

BMC Software generated $161.7 million in cash flow from operations in the reported quarter, up from $127.1 million in the previous quarter. The company exited the quarter with cash and investments of $1.46 billion, down from $1.58 billion in the prior quarter.

During the second quarter of 2012, the company repurchased 5.4 million shares for a total cost of $225.0 million. The company’s board of directors authorized an additional $1.0 billion for further repurchase. The company currently has $1.2 billion remaining under its existing share repurchase program.

Guidance

For fiscal 2012, BMC Software expects non-GAAP diluted earnings per share in the range of $3.21 to $3.31 per share. At the midpoint, this reflects a 9.0% increase over the fiscal 2011 non-GAAP EPS. This range includes approximately 2 cents of dilution related to the company’s acquisition of Coradiant.

Our Take

BMC Software Inc. is one of the leading software vendors and providers of system and service management solutions across the globe. BMC reported decent second quarter results. Moreover, the company provided mediocre guidance for fiscal 2012. This apart, the company witnessed substantial reduction in total bookings.

The company witnessed growth in most of its business segments, and witnessed decent cash flow. However, we are a bit apprehensive about the bleak business conditions in Europe. This apart, growing competition from big players such as International Business Machines Inc. (IBM), Hewlett-Packard Company (HPQ), EMC Corp. (EMC) and CA Inc. (CA), will pose challenges to the company.

The company holds a Zacks #4 Rank, implying a short-term Sell rating. 

 
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