Quarterly revenue of $761 million up 1 percent
year over year; Record cash flow from operations of $292
million
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the first quarter of fiscal year 2015 ending March 31,
2015.
Financial Results
For the first quarter of fiscal year 2015, Citrix achieved
revenue of $761 million, compared to $751 million in the first
quarter of fiscal year 2014, representing 1 percent revenue
growth.
GAAP Results
Net income for the first quarter of fiscal year 2015 was $29
million, or $0.18 per diluted share, compared to $56 million, or
$0.30 per diluted share, for the first quarter of fiscal year 2014.
GAAP results for the first quarter of fiscal year 2015 include
restructuring charges of $34 million for severance and facility
closing costs related to the 2014 and 2015 restructuring programs
designed to increase strategic focus and operational efficiency.
The first quarter of fiscal year 2014 GAAP results included a
restructuring charge of approximately $10 million for severance
costs related to the 2014 restructuring program.
Non-GAAP Results
Non-GAAP net income for the first quarter of fiscal year 2015
was $106 million, or $0.65 per diluted share, compared to $119
million, or $0.64 per diluted share for the first quarter of fiscal
year 2014. Non-GAAP net income per diluted share excludes the
effects of amortization of acquired intangible assets, stock-based
compensation expenses, charges related to amortization of debt
discount and restructuring programs as well as a benefit from a
previously disclosed patent lawsuit, and the tax effects related to
these items.
"While I'm disappointed in our Q1 results, our confidence
in the financial, operational and strategic initiatives that we
announced last quarter remains strong,” said Mark Templeton,
president and CEO for Citrix. “While these changes position us for
our next phase of growth, they had a
greater near-term impact on our execution than we
anticipated. Our commitment to margin expansion, however, remains
unchanged.
“Looking beyond Q1, I'm excited about the innovations I see
across our workspace services, delivery networking and mobility
apps businesses. Through these innovations, we'll continue our
focus on enabling the software-defined workplace.”
Q1 Financial Summary
In reviewing the results for the first quarter of fiscal year
2015 compared to the first quarter of fiscal year 2014:
- Product and license revenue decreased
12 percent;
- Software as a service revenue increased
8 percent;
- Revenue from license updates and
maintenance increased 8 percent;
- Professional services revenue, which is
comprised of consulting, product training and certification,
decreased 13 percent;
- Net revenue increased in the EMEA
region by 1 percent and decreased in the Pacific region by 2
percent and in the Americas region by 1 percent;
- Deferred revenue totaled $1.5 billion
as of March 31, 2015, compared to $1.4 billion as of March 31,
2014, an increase of 7 percent; and
- Cash flow from operations was $292
million for the first quarter of fiscal year 2015, compared with
$288 million for the first quarter of fiscal year 2014.
During the first quarter of fiscal year 2015:
- GAAP gross margin was 83 percent, and
non-GAAP gross margin was 85 percent, which excludes the effects of
amortization of acquired product related intangible assets and
stock-based compensation expense;
- GAAP operating margin was 7 percent,
and non-GAAP operating margin was 19 percent, which excludes the
effects of amortization of acquired intangible assets, stock-based
compensation expense, costs associated with the restructuring
programs, and the benefit related to a previously disclosed patent
lawsuit; and
- The company repurchased 2.4 million
shares at an average price of $63.12.
Financial Outlook for Second Quarter 2015
Citrix management expects to achieve the following results for
the second quarter of fiscal year 2015 ending June 30, 2015:
- Net revenue is targeted to be in the
range of $785 million to $795 million.
- GAAP gross margin is targeted to be in
the range of 82 percent to 83 percent. Non-GAAP gross margin is
targeted to be in the range of 84 percent to 85 percent, which
excludes 2 percent related to the effects of amortization of
acquired product related intangible assets and stock-based
compensation expense.
- GAAP diluted earnings per share is
targeted to be in the range of $0.41 to $0.43. Non-GAAP diluted
earnings per share is targeted to be in the range of $0.80 to
$0.83, which excludes $0.24 related to the effects of stock-based
compensation expenses, $0.17 related to the effects of amortization
of acquired intangible assets, $0.08 related to restructuring
charges, $0.05 related to the effects of amortization of debt
discount and $(0.12) to $(0.17) for the tax effects related to
these items.
- GAAP tax rate is targeted to be in the
range of 19 percent to 20 percent. Non-GAAP tax rate, which
excludes the effects of amortization of acquired intangible assets,
stock-based compensation expenses, amortization of debt discount
and restructuring charges, is targeted to be in the range of 23
percent to 24 percent.
Financial Outlook for Fiscal Year 2015
Citrix management expects to achieve the following results for
the fiscal year ending December 31, 2015:
- Net revenue is targeted to be in the
range of $3.22 billion to $3.25 billion.
- GAAP gross margin is targeted to be in
the range of 83 percent to 84 percent. Non-GAAP gross margin is
targeted to be in the range of 85 percent to 86 percent, which
excludes 2 percent related to the effects of amortization of
acquired product related intangible assets and stock-based
compensation expense.
- GAAP diluted earnings per share is
targeted to be in the range of $2.04 to $2.10. Non-GAAP diluted
earnings per share is targeted to be in the range of $3.55 to
$3.60, which excludes $0.93 related to the effects of stock-based
compensation expenses, $0.68 related to the effects of amortization
of acquired intangible assets, $0.29 related to restructuring
charges, $0.20 related to the effects of amortization of debt
discount, $(0.01) related to a benefit from a previously disclosed
patent lawsuit and $(0.53) to $(0.64) for the tax effects related
to these items.
- GAAP tax rate is targeted to be in the
range of 19 percent to 20 percent. Non-GAAP tax rate, which
excludes the effects of amortization of acquired intangible assets,
stock-based compensation expenses, amortization of debt discount, a
benefit from a previously disclosed patent lawsuit, and
restructuring charges, is targeted to be in the range of 23 percent
to 24 percent.
The above statements are based on current targets. These
statements are forward-looking, and actual results may differ
materially.
Conference Call Information
Citrix will host a conference call today at 4:45 p.m. ET to
discuss its financial results, quarterly highlights and business
outlook. The call will include a slide presentation, and
participants are encouraged to listen to and view the presentation
via webcast at http://www.citrix.com/investors.
The conference call may also be accessed by dialing: (888)
799-0519 or (706) 634-0155, using passcode: CITRIX. A replay of the
webcast can be viewed for approximately 30 days on the Investor
Relations section of the Citrix corporate website at
http://www.citrix.com/investors.
About Citrix
Citrix (NASDAQ:CTXS) is leading the transition to
software-defining the workplace, uniting virtualization, mobility
management, networking and SaaS solutions to enable new ways for
businesses and people to work better. Citrix solutions power
business mobility through secure, mobile workspaces that provide
people with instant access to apps, desktops, data and
communications on any device, over any network and cloud. With
annual revenue in 2014 of $3.14 billion, Citrix solutions are in
use at more than 330,000 organizations and by over 100 million
users globally. Learn more at www.citrix.com.
For Citrix Investors
This release contains forward-looking statements which are made
pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933 and of Section 21E of the Securities
Exchange Act of 1934. The forward-looking statements in this
release do not constitute guarantees of future performance.
Investors are cautioned that statements in this press release,
which are not strictly historical statements, including, without
limitation, statements by Citrix's president and chief executive
officer, statements contained in the Financial Outlook for Fiscal
Year 2015 and Second Quarter 2015 sections and under the Non-GAAP
Financial Measures Reconciliation section, and statements regarding
management's plans, objectives and strategies, constitute
forward-looking statements. Such forward-looking statements are
subject to a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated by the
forward-looking statements, including, without limitation, the
impact of the global economy, foreign exchange rate volatility and
uncertainty in the IT spending environment; the success and growth
of the company's product lines, including competition, demand and
pricing dynamics and other transitions in the markets for Citrix’s
virtualization products and collaboration services; the company’s
ability to develop and commercialize new products and services,
including its enterprise mobility products, while growing its
established virtualization, networking and collaboration products
and services; disruptions to execution due to its restructuring
programs, changes and transitions in key personnel and succession
risks; the introduction of new products by competitors or the entry
of new competitors into the markets for Citrix's products and
services; changes in our revenue mix towards products and services
with lower gross margins; seasonal fluctuations in the company's
business; failure to execute Citrix's sales and marketing plans;
failure to successfully partner with key distributors, resellers,
system integrators, service providers and strategic partners and
the company's reliance on and the success of those partners for the
marketing and distribution of the company's products; the company's
ability to maintain and expand its business in small sized and
large enterprise accounts; the size, timing and recognition of
revenue from significant orders; the success of investments in its
product groups, foreign operations and vertical and geographic
markets; the ability of Citrix to make suitable acquisitions on
favorable terms in the future; risks associated with Citrix's
acquisitions, including failure to further develop and successfully
market the technology and products of acquired companies, failure
to achieve or maintain anticipated revenues and operating
performance contributions from acquisitions, which could dilute
earnings, the retention of key employees from acquired companies,
difficulties and delays integrating personnel, operations,
technologies and products, disruption to our ongoing business and
diversion of management's attention from our ongoing business; the
recruitment and retention of qualified employees; risks in
effectively controlling operating expenses, including failure to
achieve anticipated cost savings from the restructuring programs
and other cost reduction initiatives; ability to effectively manage
our capital structure and the impact of related changes on our
operating results and financial condition; the effect of new
accounting pronouncements on revenue and expense recognition; the
risks associated with securing data and maintaining security of our
networks and customer data stored by our services; failure to
comply with federal, state and international regulations;
litigation and disputes, including challenges to our intellectual
property rights or allegations of infringement of the intellectual
property rights of others; the inability to further innovate our
technology or enter into new businesses due to the intellectual
property rights of others; changes in the company's pricing and
licensing models, promotional programs and product mix, all of
which may impact Citrix's revenue recognition; charges in the event
of a write-off or impairment of acquired assets, underperforming
businesses, investments or licenses; international market
readiness, execution and other risks associated with the markets
for Citrix's products and services; unanticipated changes in tax
rates, non-renewal of tax credits or exposure to additional tax
liabilities; risks of political and social turmoil; and other risks
detailed in the company's filings with the Securities and Exchange
Commission. Citrix assumes no obligation to update any
forward-looking information contained in this press release or with
respect to the announcements described herein.
Citrix® is a trademarks or registered trademarks of Citrix
Systems, Inc. and/or one or more of its subsidiaries, and may be
registered in the U.S. Patent and Trademark Office and in other
countries. All other trademarks and registered trademarks are
property of their respective owners.
CITRIX SYSTEMS, INC. Condensed Consolidated Statements of
Income (In thousands, except per share data - unaudited)
Three Months Ended March 31, 2015
2014 Revenues: Product and licenses $183,281
$207,424 Software as a service 169,364 157,132 License updates and
maintenance 371,297 343,758 Professional services 36,860
42,505 Total net revenues 760,802 750,819 Cost of net
revenues: Cost of product and licenses revenues 24,684 31,337 Cost
of services and maintenance revenues 89,190 78,683 Amortization of
product related intangible assets 18,732 24,306 Total cost
of net revenues 132,606 134,326 Gross margin 628,196 616,493
Operating expenses: Research and development 144,641 133,618 Sales,
marketing and services 306,405 316,496 General and administrative
82,026 72,388 Amortization of other intangible assets 9,441 12,454
Restructuring 33,951 9,650 Total operating expenses 576,464
544,606 Income from operations 51,732 71,887
Interest income 2,834 2,153 Interest expense 11,120 66 Other
expense, net (7,849) (5,219) Income before income taxes
35,597 68,755 Income tax expense 6,710 12,816 Net
income $28,887 $55,939 Earnings per common share –
diluted $0.18 $0.30 Weighted average shares outstanding –
diluted 162,036 185,681
CITRIX SYSTEMS, INC. Condensed Consolidated Balance
Sheets (In thousands - unaudited)
March 31, 2015
December 31, 2014
ASSETS: Cash and cash equivalents $402,933 $260,149
Short-term investments 580,386 529,260 Accounts receivable, net
438,177 674,401 Inventories, net 12,024 12,617 Prepaid expenses and
other current assets 186,222 166,005 Current portion of deferred
tax assets, net 48,914 45,892 Total current assets 1,668,656
1,688,324 Long-term investments 986,295 1,073,110 Property
and equipment, net 373,384 367,779 Goodwill 1,858,080 1,796,851
Other intangible assets, net 411,469 390,717 Long-term portion of
deferred tax assets, net 81,680 128,198 Other assets 75,072
67,028 Total assets $5,454,636 $5,512,007
LIABILITIES AND STOCKHOLDERS’ EQUITY: Accounts payable
81,109 79,884 Accrued expenses and other current liabilities
275,834 298,079 Income taxes payable 6,768 12,053 Short-term debt
95,000 - Current portion of deferred revenues 1,175,227
1,200,093 Total current liabilities 1,633,938 1,590,109
Long-term portion of deferred revenues 340,794 357,771 Convertible
notes 1,300,872 1,292,953 Other liabilities 78,701 97,529
Stockholders’ equity: Common stock 296 295 Additional paid-in
capital 4,340,836 4,292,706 Retained earnings 3,184,151 3,155,264
Accumulated other comprehensive loss (35,972) (36,790) Less –
common stock in treasury, at cost (5,388,980) (5,237,830)
Total stockholders’ equity 2,100,331 2,173,645 Total
liabilities and stockholders’ equity $5,454,636 $5,512,007
CITRIX SYSTEMS, INC. Condensed Consolidated Statement of
Cash Flows (In thousands – unaudited) Three
Months Ended March 31, 2015 OPERATING ACTIVITIES
Net Income $28,887 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation of property and
equipment and amortization of intangible assets
amortization of intangible assets
65,179 Amortization of debt discount and transaction costs 8,902
Stock-based compensation expense 34,211 Provision for accounts
receivable allowances 1,699 Deferred income tax benefit (19,013)
Other non-cash items 640 Effects of exchange rate changes on
monetary assets and liabilities denominated in foreign currencies
liabilities demo
10,007 Total adjustments to reconcile net income to net cash
101,625 provided by operating activities Changes in operating
assets and liabilities, net of the effects of acquisitions:
Accounts receivable 231,034 Inventory 319 Prepaid expenses and
other current assets (7,313) Other assets (9,185) Deferred revenues
(41,840) Accounts payable 1,883 Income taxes, net 19,072 Accrued
expenses and other current liabilities (34,405) Other liabilities
1,794 Total changes in operating assets and liabilities, net of the
effects of acquisitions 161,359 Net cash provided by operating
activities 291,871
INVESTING ACTIVITIES Proceeds from
available-for-sale investments, net 37,853 Purchases of property
and equipment (44,091) Cash paid for acquisitions, net of cash
acquired (89,467) Purchases of cost method investments (737) Cash
paid for licensing and core technology (2,082) Net cash used in
investing activities (98,524)
FINANCING ACTIVITIES Proceeds
from issuance of common stock under stock-based compensation plans
8,413 Proceeds from revolving credit facility 95,000 Repayment of
acquired debt (3,175) Excess tax benefit from stock-based
compensation 1,151 Stock repurchases, net (124,928) Cash paid for
tax withholding on vested stock awards (19,394) Net cash used in
financing activities (42,933) Effect of exchange rate
changes on cash and cash equivalents (7,630) Change in cash and
cash equivalents 142,784 Cash and cash equivalents at beginning of
period 260,149 Cash and cash equivalents at end of period $402,933
Reconciliation of Non-GAAP Financial
Measures to Comparable U.S. GAAP Measures(Unaudited)
Pursuant to the requirements of Regulation G, the Company has
provided a reconciliation of each non-GAAP financial measure used
in this earnings release to the most directly comparable GAAP
financial measure. These measures differ from GAAP in that they
exclude amortization primarily related to acquired intangible
assets and debt discount, stock-based compensation expenses,
charges associated with the Company’s restructuring programs,
significant litigation charges or benefits and the related tax
effect of those items. The Company's basis for these adjustments is
described below.
Management uses these non-GAAP measures for internal reporting
and forecasting purposes, when publicly providing its business
outlook, to evaluate the Company's performance and to evaluate and
compensate the Company's executives. The Company has provided these
non-GAAP financial measures in addition to GAAP financial results
because it believes that these non-GAAP financial measures provide
useful information to certain investors and financial analysts for
comparison across accounting periods not influenced by certain
non-cash items that are not used by management when evaluating the
Company's historical and prospective financial performance. In
addition, the Company has historically provided this or similar
information and understands that some investors and financial
analysts find this information helpful in analyzing the Company's
operating margins, operating expenses and net income and comparing
the Company's financial performance to that of its peer companies
and competitors.
Management typically excludes the amounts described above when
evaluating the Company's operating performance and believes that
the resulting non-GAAP measures are useful to investors and
financial analysts in assessing the Company's operating performance
due to the following factors:
• The Company does not acquire businesses on
a predictable cycle. The Company, therefore, believes that the
presentation of non-GAAP measures that adjust for the impact of
amortization and certain stock-based compensation expenses and the
related tax effects that are primarily related to acquisitions,
provide investors and financial analysts with a consistent basis
for comparison across accounting periods and, therefore, are useful
to investors and financial analysts in helping them to better
understand the Company's operating results and underlying
operational trends.
• Amortization costs and the related tax
effects 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.
• Although stock-based compensation is an
important aspect of the compensation of the Company's employees and
executives, stock-based compensation expense is generally fixed at
the time of grant, then amortized over a period of several years
after the grant of the stock-based instrument, and generally cannot
be changed or influenced by management after the grant.
• Under GAAP, certain convertible debt
instruments that may be settled in cash on conversion are required
to be accounted for as separate liability (debt) and equity
(conversion option) components in a manner that reflects the
issuer’s non-convertible debt borrowing rate. The difference
between the imputed interest expense and the coupon interest
expense, net of the interest amount capitalized, is excluded from
management’s assessment of the company’s operating performance
because management believes that the exclusion of these charges
will better help investors and financial analysts understand the
Company's operating results and underlying operational trends.
• The charges incurred in conjunction with
the Company's restructuring programs, which relate to reductions in
headcount and the consolidation of leased facilities, are not
anticipated to be ongoing costs; and, thus, are outside of the
normal operations of the Company's business. The Company,
therefore, believes that the exclusion of these charges will better
help investors and financial analysts understand the Company's
operating results and underlying operational trends as compared to
prior periods.
• Charges or benefits related to significant
litigation are not anticipated to be ongoing costs; and, thus, are
outside of the normal operations of the Company's business. These
charges or benefits are recorded in the period when it is probable
a liability had been incurred and the amount of loss can be
reasonably estimated even though the subject matter of the
underlying dispute may relate to multiple or different periods. As
such, the Company believes that these expenses do not accurately
reflect the underlying performance of continuing operations for the
period in which they are incurred.
These non-GAAP financial measures are not prepared in accordance
with accounting principles generally accepted in the United States
("GAAP") and may differ from the non-GAAP information used by other
companies. There are significant limitations associated with the
use of non-GAAP financial measures. The additional non-GAAP
financial information presented here should be considered in
conjunction with, and not as a substitute for or superior to, the
financial information presented in accordance with GAAP (such as
net income and earnings per share) and should not be considered
measures of the Company's liquidity. Furthermore, the Company in
the future may exclude amortization primarily related to newly
acquired intangible assets and debt discount, additional charges
related to its restructuring programs, significant litigation
charges or benefits and the related tax effects from financial
measures that it releases, and the Company expects to continue to
incur stock-based compensation expenses.
CITRIX SYSTEMS, INC.
Non-GAAP Financial Measures
Reconciliation
(In thousands, except per share, gross margin
and operating margin data - unaudited)
The following tables show the non-GAAP financial measures used
in this press release reconciled to the most directly comparable
GAAP financial measures.
Three MonthsEnded March
31, 2015
GAAP gross margin 82.6% Add: stock-based compensation 0.1 Add:
amortization of product related intangible assets 2.4 Non-GAAP
gross margin 85.1%
Three MonthsEnded March
31, 2015
GAAP operating margin 6.8% Add: stock-based compensation 4.5 Add:
amortization of product related intangible assets 2.4 Add:
amortization of other intangible assets 1.2 Add: restructuring
charges 4.5 Less: previously disclosed patent lawsuit benefit (0.1)
Non-GAAP operating margin 19.3%
Three Months Ended March
31,
2015 2014 GAAP net income $28,887 $55,939 Add:
stock-based compensation 34,211 40,701 Add: amortization of product
related intangible assets 18,732 24,306 Add: amortization of other
intangible assets 9,441 12,454 Add: amortization of debt discount
7,920 - Add: restructuring charges 33,951 9,650 Less: previously
disclosed patent lawsuit benefit (982) - Less: tax effects related
to above items (26,285) (24,139) Non-GAAP net income $105,875
$118,911
Three Months EndedMarch
31,
2015 2014 GAAP earnings per share – diluted $0.18
$0.30 Add: stock-based compensation 0.21 0.22 Add: amortization of
product related intangible assets 0.12 0.13 Add: amortization of
other intangible assets 0.06 0.07 Add: amortization of debt
discount 0.05 - Add: restructuring charges 0.21 0.05 Less:
previously disclosed patent lawsuit benefit (0.01) - Less: tax
effects related to above items (0.17) (0.13) Non-GAAP earnings per
share – diluted $0.65 $0.64
Forward Looking Guidance
Three Months Ended
June 30, 2015
Twelve Months Ended
December 31, 2015
GAAP gross margin 81.6% to 82.6% 82.7% to 83.7% Add: stock-based
compensation 2.3 2.2 Add: amortization of product related
intangible assets 0.1 0.1 Non-GAAP gross margin 84.0% to
85.0% 85.0% to 86.0%
For the ThreeMonths
EndedJune 30,
For the TwelveMonths
EndedDecember 31,
2015 2015 GAAP earnings per share – diluted
$0.41 to $0.43 $2.04 to $2.10 Add: adjustments to exclude the
effects of amortization of intangible assets 0.17 0.68 Add:
adjustments to exclude the effects of expenses related to
stock-based compensation 0.24 0.93 Add: adjustments to exclude the
effects of amortization of debt discount 0.05 0.20 Add: adjustments
to exclude the effects of restructuring charges 0.08 0.29 Less:
previously disclosed patent lawsuit benefit - (0.01) Less: tax
effects related to above items (0.12) to (0.17) (0.53) to
(0.64) Non-GAAP earnings per share – diluted $0.80 to $0.83
$3.55 to $3.60
For the Three Months EndedJune
30,
For the Twelve Months
EndedDecember 31,
2015 2015 GAAP tax rate 19.0% - 20.0% 19.0% -
20.0% Add: tax effects of stock-based compensation, amortization of
intangible assets, amortization of debt discount, previously
disclosed patent lawsuit benefit and restructuring charges 3.0
3.0 Non-GAAP tax rate 23.0% - 24.0% 23.0% - 24.0%
Citrix Systems, Inc.For media inquiries, contact:Eric Armstrong,
954-267-2977eric.armstrong@citrix.comorFor investor inquiries,
contact:Eduardo Fleites, 954-229-5758eduardo.fleites@citrix.com
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