CA Technologies' CEO Discusses Q2 2012 Results - Earnings Call Transcript

 |  About: CA Inc. (CA)
by: SA Transcripts


Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CA Technologies Second Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Kelsey Doherty, Senior Vice President of Investor Relations. Please go ahead, ma'am.

Kelsey Doherty

Thank you, and good afternoon, everyone. Welcome to CA Technologies Second Quarter Fiscal 2012 Earnings Call. Joining me today are Bill McCracken, our Chief Executive Officer; and Rich Beckert, our Chief Financial Officer.

Bill will open the call with an overview of second quarter and execution priorities for the remainder of fiscal year 2012, then Rich will provide more detail behind our results and full year fiscal 2012 guidance. Bill will return to conclude, and we will take your questions.

As a reminder, this conference call is being broadcast on Wednesday, October 26, 2011, over the telephone and the Internet. The information shared in this call is effective as of today's date and will not be updated. All content is the property of CA Technologies and is protected by U.S. and international copyright law and may not be reproduced or transcribed in any way without the expressed written consent of CA Technologies. We consider your continued participation in this call as consent to our recording.

During this call, non-GAAP financial measures will be discussed. Reconciliations to the most directly comparable GAAP financial measures are included in the earnings release, which was filed on Form 8-K earlier today, as well as in our supplemental earnings materials, all of which are available on our website at

Today's discussion will include forward-looking statements subject to risks and uncertainties, and actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for a detailed discussion of potential risks.

And with that, let me turn the call over to Bill.

William E. McCracken

Thanks, Kelsey, and good afternoon to everyone. I would like to start this afternoon with a summary of our second quarter results, an update to our full year guidance and a review of our execution priorities for the back half of the year.

In the second quarter, we continued to expand our top line and improve our bottom line. As a reminder, our second quarter results reflects investments in the business, including a $44 million charge for our workforce reduction to better align CA Technologies resources with our market opportunity. We are investing in new technologies and acquiring new customers.

During the quarter, revenue grew 5% in constant currency and 10% as reported. Just over 3 points of this constant currency growth was organic. Mainframe Solutions grew 2% in constant currency and 7% as reported, while our Enterprise Solutions grew 9% in constant currency and 14% as reported. Including the $44 million expense, non-GAAP earnings per share decreased 1% in constant currency and increased 6% as reported.

Cash flow from operations grew 37% in cost of currency and 47% as reported. And finally, current revenue backlog, a good indicator of our expected subscription and maintenance revenue growth, grew 3% in constant currency and 4% as reported.

Full year guidance provided this afternoon factors in both our operational performance for the first half of the year, including new product sales which did not meet our expectations and a cautious view on macroeconomic conditions.

Revenue is now expected to grow 5% to 6% in constant currency, updated from 6% to 8%. This is in line with our multi-year guidance of mid-single-digit growth through fiscal 2015. We were also able to bring up the bottom end of our non-GAAP earnings per share guidance range, the result of ongoing expense controls and share repurchases. Non-GAAP earnings per share is now expected to grow 7% to 10% in constant currency, updated from 6% to 10%.

We are reaffirming the expectations for cash flow from operations and are committed to maintaining our 34% non-GAAP operating margin expectations for the full year. As our multi-year guidance of 100 basis points of margin expansion over the next 3 years indicates, we carefully balance the need to invest in the future with operational improvement.

With respect to our capital structure, we accelerated our repurchase program, buying approximately $200 million worth of shares during the quarter. We also purchased an incremental $48 million worth of shares between October 1 and last Friday.

Management and the Board of Directors continue to evaluate ways to optimize our balance sheet, while maintaining the financial flexibility we need to build our business and enhance our competitive positioning. As we said at our Analyst Day in July, our focus is business execution and management of the full range of our assets, including talent, intellectual property and financial resources to enhance our competitive position and drive total shareholder return.

While we delivered a balanced performance in the first half of the year, there are areas where I am not satisfied yet. Essentially, it is about driving new product sales and improving sales productivity. This plays out in 3 ways: expanding our product penetration; improving execution in EMEA; and driving consistent performance out of our acquisitions. Each of these actions is designed to better address the demand we see in the market and accelerate new product sales.

As our guidance indicates, we expect to make these midyear adjustments within our current fiscal year 2012 expense plan.

First, while we are improving our ability to sell the value of our software outside the renewal process, particularly to our 1,000 largest accounts, it is clear that there is demand for our solutions that we do not reach today. As we have said, the next step for CA Technologies is acquisition of new customers.

Since the beginning of the year, we have been focused on expanding the reach of our sales force. As part of this effort, beginning in the third quarter, we are rebalancing our sales force to add approximately 300 new quota-carrying sales reps. These incremental reps will be dedicated to and compensated for selling products to new customers.

Second, EMEA continues to be a work in progress, made more challenging by the macroeconomic climate. Our EMEA President and Regional Executive, Marco Comastri, is establishing a platform from which we can grow. We have added resources to his team to bring more discipline to our renewals process and pipeline management, which we spoke about last quarter.

At the same time, we are remapping our EMEA sales coverage, favoring countries with the most resilient IT spending and where we can profitably acquire new customers. All of these changes are designed to accelerate new you product sales and improve account penetration.

Finally, we remain focused on driving performance of our acquired technology. We saw some good momentum in the second quarter. Nimsoft added 65 new logos. Arcot currently has more than 160 million identities under management. Base Technologies, our public sector services acquisition, delivered its largest booking quarter to date. And AppLogic closed its largest 7-figure transaction to date. Despite these successes, we know we need to do more, particularly outside the U.S.

In addition to the new quota-carrying reps, we continue to invest the equivalent of 5 points of Enterprise Solutions segment margin; to build out our indirect sales channel, SaaS capabilities and international presence; and we are seeing traction in the accounts like JBS in Japan and PEER 1 Hosting in Canada, both of which bought Nimsoft during the quarter. I continue to hear first hand from customers and partners like these that the opportunity we see in the market is there.

During the quarter, I traveled extensively, visiting with customers and partners around the world. In addition to dozens of one-on-one meetings, we hosted customers at CIO events in Asia, and partners representing almost every route to market in EMEA. They confirmed that they are looking to CA Technologies to manage their IT across technology platforms and environments, drive the implementation of new technology and help them gain greater value for their existing IT investments.

Helping our customers achieve these goals is the basis of our strategy and fundamental to our success going forward.

Now let me turn the call over to Rich.

Richard J. Beckert

Thank you, Bill. Turning to our second quarter results. Please note that our growth rates are year-over-year unless otherwise indicated, and all results from are from continuing operations.

Total revenue for the quarter was $1.2 billion and grew 5% at constant currency and 10% as reported. This includes a positive foreign exchange impact of approximately $50 million.

From a segment perspective, Mainframe Solutions revenue was $655 million, up 2% in constant currency and 7% as reported. Our Enterprise Solutions revenue for the fiscal second quarter was $449 million, up 9% in constant currency and 14% as reported. Services revenue was $96 million in the second quarter, up 16% in constant currency and 22% as reported.

Underlying these results, total new capacity and product sales were down high single digits. In Mainframe, new capacity sales more than doubled, while new product sales were down approximately 10%. The new IBM mainframe has -- brings increased attention to the platform and should served as a slow, steady tailwind to CA Technologies.

Enterprise Solutions new product sales were down just over 20%. This was largely driven by a difficult year-over-year compare and shorter duration of maintenance associated with our new product sales.

Service Assurance and Virtualization and Automation declined, while Identity and Access Management grew. As Bill said, we are taking action to improve new product sales.

Finally, service engagements grew both sequentially and year-over-year. On the renewal side, second quarter renewals came in better than anticipated in July, down approximately 5% year-over-year, not 35%. This variance was primarily driven by timing, including a large government contract which renewed a quarter early. We had good renewal pricing this quarter. Our renewal yield was in the low 90s, and we did not see material change in duration.

We now expect the 2012 renewal portfolio to be down approximately 15% year-over-year. For modeling purposes, please note that our fourth quarter 2012 renewals face a significant headwind due to more than $500 million system integrator contract signed last year in our fiscal fourth quarter.

Looking at revenue backlog. Current revenue backlog was $3.5 billion, up 3% in constant currency and 4% as reported. Total revenue backlog was $8.1 billion, up 4% in constant currency and as reported.

From a non-GAAP perspective, non-GAAP operating income before interest and taxes was $378 million, down 7% in constant currency and 2% as reported. For the quarter, our non-GAAP operating margin was 32%, including $44 million of expense related to our second quarter workforce reduction of 400 employees. Excluding these expenses, our non-GAAP operating margin was 35%.

Operating margins for the Mainframe Solutions was 53%, 56% excluding the workforce reduction. Operating margins for the Enterprise Solutions was 6%, 10% excluding the workforce reduction. This includes 5 points of continued investment in building out our indirect sales channel, SaaS capabilities and international presence.

Finally, operating margin for Services was 4%, 5% excluding the workforce reduction. Non-GAAP diluted earnings per share was $0.51, down 1% in constant currency and up 6% as reported, including a year-over-year $0.03 tailwind from currency. This quarter, EPS benefited from operational improvements, as well as our stock repurchase program which accelerated during the quarter, partially offset by the $44 million workforce reduction which equates to $0.06. Our effective non-GAAP tax rate for the second quarter of 2012 was 31.5%.

Turning to cash flow from operations in the quarter, which was $190 million, up 37% in constant currency and 47% as reported. Cash flow is driven by the top line growth and year-over-year decrease in cash taxes. Single installment payments were $100 million in the second quarter compared to $124 million in the second quarter of fiscal 2011. Total billings backlog of $5 billion was up 8% in constant currency and 7% as reported. DSOs were essentially flat year-over-year.

Moving to the second quarter GAAP results. Second quarter operating margin before interest and tax was 28%. GAAP operating income was $333 million, down 6% in constant currency and up 10% as reported. And GAAP diluted earnings per share was $0.47, down 7% in constant currency and up 9% as reported. Our effective GAAP tax rate for the second quarter was 27.8%.

Now moving to the balance sheet. We ended the quarter with approximately $1 billion in net cash. Between July 1 and October 21, we purchased approximately 12 million shares of stock for a total of approximately $248 million. This leaves approximately $384 million available under our current authorization.

Now let me turn to guidance. As has been our practice, guidance is based on September 30 exchange rates, includes a partial hedge of operating income and updates our expectations for share count. As Bill mentioned in his remarks, revised guidance this afternoon reflects first half underperformance in new product sales and a cautious view of the global macroeconomic environment.

Guidance is the following: Total revenue growth is now expected to be in a range of 5% to 6% in constant currency. This translates to reported revenue of $4.7 billion to $4.8 billion. Non-GAAP diluted earnings per share growth in constant currency is now expected to be in a range of 7% to 10%. This translates to reported non-GAAP diluted earnings per share of $2.13 to $2.18.

GAAP diluted earnings per share growth in constant currency is now expected to be in a range of 6% to 9%. This translates to reported GAAP diluted earnings per share of $1.78 to $1.83. Cash flow from operations is expected to grow at 3% to 5% in constant currency. This translates to reported cash from operations of $1.44 billion to $1.47 billion.

Underlying this guidance, we expect our GAAP and non-GAAP tax rate to be 31% to 32% in this fiscal year. At the end of the year, we expect approximately 478 million shares outstanding and a weighted average diluted share count of approximately 491 million shares. We expect our non-GAAP operating margin to be 34% for fiscal year 2012.

And now I'll turn the call back over to Bill.

William E. McCracken

Thanks, Rich. The CA Technologies team is very focused on delivering a strong finish to the back half of fiscal year 2012. While we remain convinced that our strategic direction is the right one, I am mindful of making the right choices to maximize total shareholder return. As we told you at Analyst Day in July, this is an ongoing process, but one that we expect to update you on during our fiscal fourth quarter.

Our principles are basic: continue to grow healthy core businesses; invest in strategic opportunities to position CA Technologies for the future; continue to shrink or disinvest non-core businesses; and return cash to shareholders.

On November 13, we will kick off CA World in Las Vegas. This is our annual user conference where we expect to host about 5,000 customers and partners. During World, we plan to share our strategic direction and the new products announcements. We hope to see you there.

And with that, I will turn the call back to Kelsey, and we will take your questions.

Kelsey Doherty

Thank you, Bill. As the operator is polling for questions, I would like to inform you that CA Technologies is presenting at the Wells Fargo Technology, Media & Telecom Conference in New York City on Tuesday, November 8, and the Credit Suisse 2011 Annual Technology Conference in Scottsdale, Arizona on Wednesday, November 30.

As Bill mentioned, CA World starts on November 13 in Las Vegas. If you're interested in attending, please contact me or Amy Fitzgerald in the Investor Relations department.

In the interest of time, please limit yourself to 2 questions. Operator, please open the call for questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line John DiFucci from JPMorgan.

John S. DiFucci - JP Morgan Chase & Co, Research Division

Bill, in the prepared remarks, I think you said Enterprise Solutions product sales were down a little over 20% -- or either Rich might have said it. I realize it's a difficult comp, and you mentioned that. But also, you said there is shorter duration of contracts. The bookings duration was actually up slightly year-over-year, and I know this probably goes back to what you're talking about with the new business. I guess just -- you talked a lot about that, but I'm just curious as to why you think the new product sales were weaker than you thought they'd be? And I guess if you could address it just -- not just from within CA but your perception of the macro environment?

William E. McCracken

So I'm going to have Rich go through some of the key points, John, that you mentioned on duration, those kind of things. And then I'm going [indiscernible] talk about.

Richard J. Beckert

This is Rich. On the shorter duration question, those are stand-alone transactions, so done outside of the ELA. What we saw in the quarter was actually our license was slightly up, but the actual duration, normally, they're more in the 3-year, was slightly down, about 20% down in the maintenance side of that. So that says several months shorter just on an average. You're correct on the overall renewal portfolio, which we were happy with, the mid-90 -- or let's just say low 90 renewal rate. They were slightly up about 1/10 of a year. So call that 2 months on average. So I think we're happy to see both those clear. We're not happy to see the overall renewal -- or the overall new licenses could have been done at a little higher rate but the license count itself, we're happy with the maintenance stream being a little shorter. That happens when you're outside of renewal. Renewals tend to be a longer in tail because there's a lot more products that are included inside of that.

John S. DiFucci - JP Morgan Chase & Co, Research Division

That sort of implies that you're happy with the new business license sales but it also -- which doesn't -- I mean, I think reading and listening to what you're saying, that was an area that you would have liked to have done better. And I'm not sure why new business would be shorter than normal -- it seems like it was shorter than it normally would is or what you normally would have expected for those maintenance contracts.

Richard J. Beckert

That's a good question. The reason why is these tend to be single product transactions as opposed to multiple product transactions. When you have multiple product transactions, they tend to go 3-plus years. When they're single product, they can absolutely go one and a trailing one or 2 years of maintenance. And so all we're seeing is we saw more in a 2-year range than a 3-year range. You're overall question, were we happy? If we were delighted, guidance would have stayed where it was. But we're bringing it back down through the first half. We can see the license are tracking okay.

William E. McCracken

So John, to follow up then, I think, on the thrust of what you're asking about and also the back end of what you asked about, we see strong demand for our new products. And that's why we focused on the one piece that I talked about in my prepared remarks, and that is the demand is there. Frankly, we're not reaching it. We're moving to the second phase of our sales coverage that we talked about on Investor Day in July. Where we're moving now, a sales organization that's looking strictly at new products in new accounts, and that's what they'll be paid on. So that focus is there. So then, in fact, we reached that opportunity. Because, clearly, what we saw on this quarter, when we got there, we got the new orders on the PMPV [ph] or on the new sales side. And so the demand is there. We believe that the next phase of improving our sales productivity, that's a move we need to make and that will drive, we believe, the new sales in that because we see the demand when we go there.

John S. DiFucci - JP Morgan Chase & Co, Research Division

Okay. And if I could, on my follow-up, can you just tell us, I guess, Rich, how much you got in cash from upfront collections or sometimes you call them single installment payments?

Richard J. Beckert

Yes, it was around $100 million and that was lower than last year by -- I think, last year was $124 million, John. So through the first half, we're actually tracking a little bit lighter than normal. So the fact that they we're at 37% is a good -- up 37% is a good place to be through the first half of the year. Just be mindful, we did not change our overall guidance on CFFO. So we still see CFFO coming in the 5% to 7% range.


And our next question comes from the line of Kirk Materne of Evercore Partners.

S. Kirk Materne - Evercore Partners Inc., Research Division

I guess, Rich, maybe just a question around the adjustment to guidance or -- I guess, I'm just trying to get a sense on when you look at the adjustment, I guess, how much of that was you all not expecting to get some of the improvements you may have thought you would get from a sales productivity standpoint? I guess, are you expecting things to sort of remain the way they were in the second quarter, expect them to get better? I guess, I'm just trying to get a sense on how do you see some of these -- I guess, some of the positive moves that you guys are trying to put in place impacting the sales trends in the back half of the year?

Richard J. Beckert

Sure. So the small headwinds we see in the overall macro environment is a piece of it. But the CA EMEA sales transformation is still in progress and is still heading at a little bit slower rate than maybe we had hoped. The acquisitions outside of the Americas where the Americas are actually doing very well, and that's a lot of what you heard Bill talk about, it's still getting -- gaining traction and we'd like to see that at a faster level. But through the first half, we had anticipated the Enterprise Solutions to be in the low teens. And right now, as you saw, they came in around 9% at constant currency. And with our model, which is so ratable, it allow -- it kind of says that we need to bring ourselves down to the 5% to 6%.


Our next question comes from the line of Phil Winslow of Credit Suisse.

Sitikantha Panigrahi - Crédit Suisse AG, Research Division

This is Siti Panigrahi for Phil Winslow. I have just one question. Have you seen any verticals that stand out in the quarter from a strength or weakness perspective?

William E. McCracken

Say that again, if you would, Phil? I'm sorry.

Sitikantha Panigrahi - Crédit Suisse AG, Research Division

Have you seen any verticals that stand out in this quarter from a strength or weakness perspective?

Richard J. Beckert

We actually -- this is Rich. We actually had a good quarter with the government. So that was a transaction that was due to mature next quarter. And both parties thought it was good to do it in 2Q, so I would say we are happy with our government. So that's a particular vertical that we saw.

William E. McCracken

Yes. And the financial remain strong as well, especially in the new growth geographies. So I think that from our perspective, it shows from a vertical point of view that the demand is still hanging in there. And it varies by geography. But on the growing geographies, we saw the strength in the financials as well.


Our next question comes from the line of Mark Moerdler of Sanford C. Bernstein & Co.

Mark L. Moerdler - Sanford C. Bernstein & Co., LLC., Research Division

Got 2 questions for you. The first one is I want to -- can we get a little more clarity, from what I understand, you're planning on adding a headcount on the sales and approximately, I think, it's 300 people? Are those going to be dedicated predominantly to the new product areas or those going to be overall qouta-carrying? And the second question is relating to operating expenses or I should say, it's -- so you've given that operating expenses were -- before interest and taxes were up 11% in constant currency and 10% as reported. But operating income before interest and taxes were down 6% in constant currency but up 10% as reported. That was in the write-up. So 6% down and 10% up. Is that driven by the layout of where the income is? What should we figure in terms of modeling of how that's being done if the currency's change?

William E. McCracken

Okay, Mark. So I'm going to take the sales force and the quota pieces that you asked about, and then we'll have Rich take you through the expense side. But it is a dedicated sales force to new products in new midrange accounts, and they will be compensated just for that. And they'll be quoted just for that. And the reason we're doing that, that's the second half of the transition that we talked about when we were in July, talking about how we want to improve our sales productivity. And the encouraging thing about the quarter was we saw the demand there when we got there but we, frankly, didn't get there as much as we want to. That's why we're deploying that resource, and that is contained within the expense that we had for the year. But let me throw the rest of that over to Rich.

Richard J. Beckert

Mark, so I think the easiest thing, this will tie back to Table 7, which will allow you to -- if you see, we're up $118 million year-over-year. FX was about 4% of that. We also had acquisitions inside of there at about 4%. We talked about the workforce reduction, which was 6%. So if you look at our organic operations, it was only about 2% of that. So part of the reason why we were able to hold, even though we had our revenue top line come down and you saw the rest of our metrics in line, it is in anticipation of that. We've been doing a lot of things to curtail the operations. So we think we're on right path in order for us to deliver on our metrics.

Mark L. Moerdler - Sanford C. Bernstein & Co., LLC., Research Division

It's cost cutting that's going on there. Okay.


Our next question comes from the line of Scott Zeller from Needham & Company.

Scott Zeller - Needham & Company, LLC, Research Division

I have a question about the reorg of coverage for Europe. Could you tell us if this is a brand-new plan for reorganization of coverage? And if so, had that been factored into guidance previously or is that in today's guidance? Can you just give us some color on that?

William E. McCracken

So I'll talk to you a little bit about the dedicated forces and some of the resource we've put in there, and I'll ask Rich to talk a little bit about the guidance piece. Scott, so 2 things: first is the deployment of the dedicated resource to go after new products and new accounts. That's a worldwide initiative. And so it's North America, EMEA, AP, Latin America. And so that's a new additional one. It's a transition I spoke of about a minute ago. In addition to that in Europe, with Marco on the ground there, asking the kinds of questions as he's looking at the things he's looking at, we deployed additional resource there from the whole process of how we are selling the value into the accounts and the things that we do to sell the solutions into the accounts to give more discipline around that. You may recall in previous quarters, we said that, in fact, we hadn't shifted there as fast in EMEA as we had in North America. We put additional resource and skills in place, which we said we were going to do. We did that, and that's in place to do that. Rich, take the rest.

Richard J. Beckert

As far as you asked the question, was that in guidance? When we set our plan for EMEA, we did have them growing at a much lower rate than other geographies. They're coming in a little bit slower than that, but it's not the majority of the reason why we've moved guidance from where it was before, down to the 5% to 6% range. Both that being said, the 300 or so folks that Bill is referring to, about a large part that will have to do with us getting the acquisitions up and running and getting traction outside of the Americas. And that is really where part of the focus is, so we'll see that come back in the very back half of the year, which in our ratable model, doesn't drive a lot of revenue.

William E. McCracken

It's probably worth a final comment on that, Scott. in that the action that we've taken on the deployment of the dedicated sales force affects new products and new accounts. It affects EMEA coming up. And as Rich just pointed out, it also affects the penetration of the acquisitions that we made in the last year as well, too. So with the one move that we've made here on the continued deployment of that, we're really affecting 3 very important areas of our business.

Scott Zeller - Needham & Company, LLC, Research Division

And just to clarify and follow up, when will that new plan be in effect on the ground in Europe?

William E. McCracken

We are in the process of doing it right now.


And our next question comes from the line of James Wesman from Raymond James.

James Wesman

It's James Wesman sitting in for Michael Turits. Question on Mainframe. Where do you feel we are in the renewal cycle and have you seen any changes in the price of your competition, particularly against IBM?

Richard J. Beckert

This is Rich. I think I'd say 2 things. If you go back to our Analyst Day in July, what you saw, our renewal cycle, we're at this year and next will be the lows. And then, it starts to rebuild again in FY '14. That being said, what you will also see is the renewal yield that we received, that 93% says that we don't always -- there's always at a very competitive marketplace. But at a low 90s, we feel pretty good about the fact that we're getting the right price that we're looking for. About a year ago, we put a new price action in place, and we're seeing that as we come up for renewals. So we're not getting that kind of price pressure either. There is -- over time, there'll be a tailwind with the Z-Box. So we should see that -- remember, that cycles through our business on a slower rate when the hardware comes out. And that will also give us a positive lift as we go forward.

William E. McCracken

Okay. So just one comment about that, and that is what we do see is that we had said before that we see a tailwind coming off the Mainframe replacement cycle. We continue to see that. Rich mentioned that we had the capacity up double in the 4, that continued. New sales there as well, too, took us back to the plus side on the Mainframe. So we see that continuing for us, and it gives us the right trend.


[Operator Instructions] We do have another question now from the line of Walter Prichard from Citi.

Kenneth Wong

This is Ken Wong for Walter Prichard. Last -- I think last earnings, Bill, you guys indicated that macro wasn't much of an issue and it was purely execution. Just wondering this quarter, are you guys seeing anything different in terms of macro and how has that played into your outlook?

William E. McCracken

Ken, I think what I said, I think, the last quarter was that the changes we needed to make in EMEA really were the most important things for us to focus on. And that really wasn't being significantly affected in the macroeconomic environment. That is true. It was true, and it's still true. And that's where Marco is focused. However, as you look at the macroeconomic environment as it exist in the marketplace now, we wanted to be cautious and prudent in the way we dealt with that going into the guidance and that's the way we levered it in.

Richard J. Beckert

This is Rich. I just want to say one thing when I answered John. I had given him the year-over-year growth rate when he was asking about cash flow, and it really should be 3% to 5%. I had given the year-over-year 5% to 7%. It's really 3% to 5% is what we're calling for guidance.

William E. McCracken

Okay. Well, with that, let me wrap. I think there's really 3 key points that I'd make as we wrap up today. We're going to continue to balance our performance across our broad portfolio of products and solutions and drive quarterly performance with that. We're focused each quarter in moving to the next phase. This quarter, it's sales deployment, it's EMEA execution and it's AP and LA investment results. And we've seen some trends in LA and AP that our investments there are beginning to return to us. And then frankly, to wrap up, we're confident in the second half performance and looking forward to wrap this year up.

Thanks to all of you for joining us, and we'll talk to you again.


Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.

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