HOUSTON--(BUSINESS WIRE)--July 28, 2010--BMC Software (NASDAQ: BMC) today announced its fiscal 2011 first quarter results, showing very strong growth in total bookings and ESM license bookings. Both metrics are primary leading indicators of customer adoption and market growth.

Fiscal 2011 first quarter total revenue was $461 million, up 2 percent from the year-ago period, both as reported and on a constant currency basis. License revenue in the first quarter was $171 million, an increase of 3 percent compared to the first quarter of fiscal 2010.

The Company’s GAAP net earnings for the quarter were $93 million, or $0.50 per diluted share, versus $82 million and $0.44 per diluted share in the year-ago period. The Company’s non-GAAP net earnings for the fiscal first quarter, after adjustments, were $114 million, or $0.62 per diluted share, compared to $111 million, or $0.59 per diluted share, in the year-ago quarter. Included in the financial tables is a reconciliation between non-GAAP and GAAP results.

First quarter GAAP net earnings were positively impacted by a $14 million income tax benefit recorded by the Company in connection with a settlement with a taxing authority relating to prior years’ tax matters. This tax benefit was excluded from the Company’s non-GAAP results.

“During the first quarter of fiscal 2011, BMC Software had robust bookings growth and a solid overall performance,” said Bob Beauchamp, BMC’s chairman and chief executive officer. “BMC is continuing to lead our market in terms of both vision and technology. The technology trends driving our markets – such as cloud computing, virtualization and software-as-a-service – represent a strengthening tailwind that is propelling the Company forward.”

During the first fiscal quarter, BMC continued its stock repurchase activities, spending $149 million to repurchase 4 million shares. As of June 30, 2010, the Company had $921 million remaining under its existing share repurchase program.

Steve Solcher, BMC’s chief financial officer, said: “We are pleased with our solid first quarter performance and start to our fiscal year. We had strong total bookings growth and ESM license bookings growth. In addition, we’re very pleased that our key business initiatives are proving successful. Our efforts to strengthen and expand our sales force are showing momentum. We are now seeing signs of traction in our professional services organization. And we’re maintaining our customary financial discipline.”

The Company reiterates its previously issued expectations for the full year fiscal 2011. BMC expects non-GAAP diluted earnings per share in the range of $2.84 to $2.94, which at the midpoint would represent a 9 percent increase over last year. This range excludes an estimated $0.71 to $0.76 per share for non-GAAP adjustments, including share-based compensation expense; the amortization of intangible assets; severance, exit costs and related charges; as well as the related tax impacts of these items; and certain discrete tax items.

The Company also expects full year fiscal 2011 cash flow from operations to be between $660 million and $710 million.

A conference call to discuss fiscal 2011 first quarter results is scheduled for today, July 28, 2010 at 4:00 pm Central Time. Those interested in participating may call (913) 312-1491 and use the pass code BMC. To access a replay of the conference call, that will be available for one week, dial (719) 457-0820 or (888) 203-1112 and use the pass code BMC. A live web cast of the conference call will be available on the Company's website at http://investors.bmc.com. A replay of the web cast will be available within 24 hours and archived on the website.

In an effort to provide investors with additional information regarding the Company’s results as determined by U.S. generally accepted accounting principles (GAAP), the Company has also disclosed in this press release and the accompanying tables the following non-GAAP information: (a) non-GAAP operating expenses, (b) non-GAAP operating income, (c) non-GAAP operating margin, (d) non-GAAP net earnings and (e) non-GAAP diluted earnings per share. Each of these financial measures excludes the impact of certain items and therefore has not been calculated in accordance with GAAP. These non-GAAP financial measures exclude share-based compensation expense; the amortization of intangible assets; severance, exit costs and related charges; as well as the related tax impacts of these items; and certain discrete tax items. Each of the non-GAAP adjustments is described in more detail below. This press release also contains a reconciliation of each of these non-GAAP measures to its most comparable GAAP financial measure.

We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our operating results because they exclude amounts that BMC management and the Board of Directors do not consider part of core operating results when assessing the performance of the organization. In addition, we have historically reported similar non-GAAP financial measures and we believe that inclusion of these non-GAAP financial measures provides consistency and comparability with past reports of financial results. Accordingly, we believe these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management.

While we believe that these non-GAAP financial measures provide useful supplemental information, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Items such as share-based compensation expense; the amortization of intangible assets; severance, exit costs and related charges; as well as the related tax impacts of these items; and certain discrete tax items that are excluded from our non-GAAP financial measures can have a material impact on net earnings. As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, net earnings, cash flow from operations or other measures of performance prepared in accordance with GAAP. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures that are included elsewhere in this press release.

The following discusses the reconciliations of our non-GAAP financial measures to the most comparable GAAP financial measures:

• Share-based compensation expense. Our non-GAAP financial measures exclude the compensation expenses required to be recorded by GAAP for equity awards to employees and directors. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding expenses related to share-based compensation, because these costs are generally fixed at the time an award is granted, are then expensed over several years and generally cannot be changed or influenced by management once granted.

• Amortization of intangible assets. Our non-GAAP financial measures exclude costs associated with the amortization of intangible assets. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding amortization of intangible assets, because these costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition.

• Severance, exit costs and related charges. Our non-GAAP financial measures exclude severance, exit costs and related charges, and any subsequent changes in estimates, as they relate to our corporate restructuring activities. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding restructuring costs, in order to provide comparability and consistency with historical operating results.

• Certain discrete tax items. Our non-GAAP financial measures exclude a net tax benefit of $14.0 million in the quarter ended June 30, 2010 associated with a settlement with a taxing authority related to prior years’ tax matters. Management excludes the impact of this item when evaluating the performance of the Company, our business units and management teams, including the determination of management incentive compensation, and when making decisions to allocate resources. Therefore, we exclude this item when presenting non-GAAP financial measures.

In this press release we refer to certain bookings information. Bookings represent the transactional value of new contracts executed by us and reflected in our financial statements, including amounts recorded to both revenue and deferred revenue. We also refer to growth rates for revenue and bookings at constant currency or adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of the Company’s business performance. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

Business thrives when IT runs smarter, faster and stronger. That’s why the most demanding IT organizations in the world rely on BMC Software across both distributed and mainframe environments. Recognized as the leader in Business Service Management, BMC offers a comprehensive approach and unified platform that helps IT organizations cut cost, reduce risk and drive business profit. For the four fiscal quarters ended June 30, 2010, BMC revenue was approximately $1.92 billion. Visit www.bmc.com for more information.

This news release and other related public statements we make contain both historical information and forward-looking statements. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “intends,” “expects,” “estimates,” “guidance” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding our expectations and guidance for fiscal 2011 earnings per share and cash flow from operations, including the underlying assumptions, as well as statements we make regarding our plans, objectives, strategies and expectations for future operations and results. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: 1) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; 2) competition in our markets and market entrants utilizing alternative business models can result in pricing pressures and competition for new customers as well as potential displacements of our existing customers; 3) our cash flow from operations could be affected by many factors, including, but not limited to, lengthening sales cycles, the size and timing of bookings, customer payment terms, the timing of collections, increased expenses, reduced net earnings and movement in foreign currency exchange rates; 4) a significant percentage of our license transactions are completed during the final weeks and days of each quarter, which creates a level of uncertainty as to whether revenue, license bookings and/or earnings will have met expectations until after the end of the quarter; 5) our operating costs and expenses are relatively fixed over the short term, so if we have a shortfall in revenue in any given quarter, our ability to offset revenue shortfalls in the near-term is limited; 6) software product development is highly technical and inherently complex and delays in the timing and feasibility of product releases could have a material adverse effect on expectations and actual results for bookings, revenue, margins and cash flow from operations; 7) changes to our sales organization, including personnel, compensation practices and organizational and process changes, may be disruptive and negatively impact our results of operations; 8) our expectations for revenue and earnings are based on assumptions of the percentage of license revenue which will be recognized upfront versus deferred and the percentage of customer renewals for maintenance contracts; if our actual results do not match our assumptions, our recognized revenue and resultant earnings could fall short of expectations; 9) our effective tax rate is subject to quarterly fluctuation and any change in such tax rate could affect our earnings; 10) we conduct significant transactions in currencies other than the United States dollar and changes in the value of major foreign currencies relative to the U.S. dollar can significantly affect our reported revenue and operating results; and 11) the additional risks and important factors described in BMC Software's Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the U.S. Securities and Exchange Commission. These filings are available on our website at http://investors.bmc.com. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

BMC, BMC Software, and the BMC Software logo are the exclusive properties of BMC Software Inc., are registered with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other BMC trademarks, service marks, and logos may be registered or pending registration in the U.S. or in other countries. All other trademarks or registered trademarks are the property of their respective owners. © 2010 BMC Software, Inc.


BMC SOFTWARE, INC. STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited)

							Incr/(Decr)
	Quarter Ended June 30,						Percentage
	2009			2010			Change
Revenue:
License	$	167.0		$	171.2		2.5	%
Maintenance		251.2			253.8		1.0	%
Professional services		31.8			35.9		12.9	%
Total revenue		450.0			460.9		2.4	%

Operating expenses:
Cost of license revenue		28.1			31.9		13.5	%
Cost of maintenance revenue		37.3			40.7		9.1	%
Cost of professional services revenue		33.2			35.7		7.5	%
Selling and marketing expenses		125.9			141.3		12.2	%
Research and development expenses		53.7			38.0		(29.2	)%
General and administrative expenses		54.6			53.8		(1.5	)%
Amortization of intangible assets		8.0			8.4		5.0	%
Severance, exit costs and related charges		1.0			3.0		200.0	%
Total operating expenses		341.8			352.8		3.2	%
Operating income		108.2			108.1		(0.1	)%
Other loss, net		(0.7	)		(5.5	)	nm
Earnings before income taxes		107.5			102.6		(4.6	)%
Provision for income taxes		25.1			9.8		(61.0	)%
Net earnings	$	82.4		$	92.8		12.6	%

Diluted earnings per share	$	0.44		$	0.50		13.6	%

Shares used in computing diluted earnings per share		187.9			183.8		(2.2	)%


BMC SOFTWARE, INC. BALANCE SHEETS (In millions)

	Unaudited								Unaudited
	June 30,		September 30,		December 31,		March 31,		June 30,
	2009		2009		2009		2010		2010

Current assets:
Cash and cash equivalents	$	997.0	$	1,137.8	$	1,079.5	$	1,368.6	$	1,410.0	(a)
Short-term investments		213.8		74.7		128.0		65.5		10.3	(a)
Trade accounts receivable, net		134.6		174.6		208.9		212.3		168.4
Trade finance receivables, net		62.5		85.3		121.7		117.7		71.5
Other current assets		149.4		148.2		147.6		140.9		128.7
Total current assets		1,557.3		1,620.6		1,685.7		1,905.0		1,788.9

Property and equipment, net		106.7		104.3		97.9		95.0		99.0
Software development costs		120.8		135.5		144.1		145.5		159.9
Long-term investments		74.3		76.3		62.3		62.4		51.0	(a)
Long-term trade finance receivables, net		44.9		52.5		123.8		122.6		75.5
Goodwill and intangible assets, net		1,469.9		1,490.8		1,548.4		1,524.4		1,493.1
Other long-term assets		263.0		267.3		252.4		282.7		272.2
Total assets	$	3,636.9	$	3,747.3	$	3,914.6	$	4,137.6	$	3,939.6

Current liabilities:
Trade accounts payable	$	54.4	$	46.9	$	33.9	$	37.5	$	37.0
Finance payables		8.0		13.9		15.1		23.0		10.5
Accrued liabilities		202.7		239.4		283.0		324.7		227.2
Deferred revenue		968.0		934.1		922.6		975.9		985.1
Total current liabilities		1,233.1		1,234.3		1,254.6		1,361.1		1,259.8

Long-term deferred revenue		759.8		762.5		804.5		847.2		820.0
Long-term borrowings		311.7		309.8		340.9		340.9		348.4
Other long-term liabilities		196.3		215.7		210.0		200.7		169.4
Total long-term liabilities		1,267.8		1,288.0		1,355.4		1,388.8		1,337.8

Total stockholders' equity		1,136.0		1,225.0		1,304.6		1,387.7		1,342.0

Total liabilities and stockholders' equity	$	3,636.9	$	3,747.3	$	3,914.6	$	4,137.6	$	3,939.6



(a) Total cash and investments	$	1,285.1	$	1,288.8	$	1,269.8	$	1,496.5	$	1,471.3


BMC SOFTWARE, INC. STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
	Quarter Ended June 30,
	2009			2010

Cash flows from operating activities:
Net earnings	$	82.4		$	92.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization		42.8			44.7
Deferred income tax provision (benefit)		(1.8	)		6.1
Share-based compensation expense		20.6			25.1
Loss (gain) on investments, net		(1.2	)		1.0
Changes in operating assets and liabilities:
Trade accounts receivable		83.2			43.3
Trade finance receivables		84.0			95.6
Accrued and other current liabilities		(90.7	)		(107.9	)
Deferred revenue		(60.1	)		(18.0	)
Other operating assets and liabilities		(3.9	)		(15.3	)
Net cash provided by operating activities		155.3			167.4

Cash flows from investing activities:
Proceeds from maturities of investments		0.9			50.0
Proceeds from sales of investments		35.1			18.4
Purchases of investments		(173.4	)		(1.9	)
Capitalization of software development costs		(12.8	)		(30.1	)
Purchases of property and equipment		(7.8	)		(5.0	)
Other investing activities		-			1.0
Net cash provided by (used in) investing activities		(158.0	)		32.4

Cash flows from financing activities:
Treasury stock acquired		(50.0	)		(149.0	)
Repurchases of stock to satisfy employee tax withholding obligations		(4.9	)		(10.7	)
Proceeds from stock options exercised and other		17.5			11.2
Excess tax benefit from share-based compensation expense		1.7			2.9
Repayments of borrowings and capital lease obligations		(3.7	)		(3.0	)
Net cash used in financing activities		(39.4	)		(148.6	)

Effect of exchange rate changes on cash and cash equivalents		15.8			(9.8	)
Net change in cash and cash equivalents		(26.3	)		41.4
Cash and cash equivalents, beginning of period		1,023.3			1,368.6
Cash and cash equivalents, end of period	$	997.0		$	1,410.0


BMC SOFTWARE, INC. Table of Reconciliation from GAAP Operating Expenses to Non-GAAP Operating Expenses (In millions) (Unaudited)

	Quarter Ended June 30,
	2009			2010

GAAP operating expenses	$	341.8		$	352.8

Share-based compensation expense		(20.6	)		(25.1	)

Amortization of intangible assets		(18.0	)		(20.6	)

Severance, exit costs and related charges		(1.0	)		(3.0	)

Non-GAAP operating expenses	$	302.2		$	304.1


BMC SOFTWARE, INC. Table of Reconciliation from GAAP Operating Income to Non-GAAP Operating Income (In millions) (Unaudited)

	Quarter Ended June 30,
	2009		2010

GAAP operating income	$	108.2	$	108.1

Share-based compensation expense		20.6		25.1

Amortization of intangible assets		18.0		20.6

Severance, exit costs and related charges		1.0		3.0


Non-GAAP operating income	$	147.8	$	156.8


BMC SOFTWARE, INC. Table of Reconciliation from GAAP Operating Margin to Non-GAAP Operating Margin (In millions) (Unaudited)

	Quarter Ended June 30,					Quarter Ended June 30,					Quarter Ended June 30,
	2009		2010			2009		2010			2009		2010

GAAP revenue:	$	450.0	$	460.9	GAAP operating income:	$	108.2	$	108.1	GAAP operating margin:	24	%	23	%

					Share-based compensation expense		20.6		25.1

					Amortization of intangible assets		18.0		20.6

					Severance, exit costs and related charges		1.0		3.0

GAAP revenue:	$	450.0	$	460.9	Non-GAAP operating income:	$	147.8	$	156.8	Non-GAAP operating margin:	33	%	34	%


BMC SOFTWARE, INC. Table of Reconciliation from GAAP Net Earnings to Non-GAAP Net Earnings (In millions) (Unaudited)

	Quarter Ended June 30,
	2009			2010

GAAP net earnings	$	82.4		$	92.8

Share-based compensation expense		20.6			25.1

Amortization of intangible assets		18.0			20.6

Severance, exit costs and related charges		1.0			3.0


Subtotal pre-tax reconciling items		39.6			48.7

Tax effect of above pre-tax items		(11.4	)		(13.9	)

Impact of certain discrete tax items		-			(14.0	)

Non-GAAP net earnings	$	110.6		$	113.6


BMC SOFTWARE, INC. Table of Reconciliation from GAAP Diluted Earnings Per Share to Non-GAAP Diluted Earnings Per Share (Unaudited)

	Quarter Ended June 30,
	2009			2010

GAAP diluted earnings per share	$	0.44		$	0.50

Share-based compensation expense		0.11			0.14

Amortization of intangible assets		0.10			0.11

Severance, exit costs and related charges		0.01			0.02


Subtotal pre-tax reconciling items		0.21			0.26

Tax effect of above pre-tax items		(0.06	)		(0.08	)

Impact of certain discrete tax items		-			(0.08	)

Non-GAAP diluted earnings per share	$	0.59		$	0.62

Shares used in computing diluted earnings per share (in millions)		187.9			183.8

CONTACT:
BMC Software
Global Communications:
Mark Stouse, 832-715-0234
mark_stouse@bmc.com
or
Investor Relations:
Derrick Vializ, 713-918-1805
derrick_vializ@bmc.com