Quarterly revenue of $826 million up 9 percent
year over year
Quarterly GAAP operating margin of 13 percent;
non-GAAP operating margin of 29 percent
Quarterly GAAP diluted EPS of $0.54; non-GAAP
diluted EPS of $1.18
Record quarterly cash flow from operations of
$340 million
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the first quarter of fiscal year 2016 ended March 31,
2016.
Financial Results
For the first quarter of fiscal year 2016, Citrix achieved
revenue of $826 million, compared to $761 million in the first
quarter of fiscal year 2015, representing 9 percent revenue
growth.
GAAP Results
Net income for the first quarter of fiscal year 2016 was $83
million, or $0.54 per diluted share, compared to $29 million, or
$0.18 per diluted share, for the first quarter of fiscal year 2015.
Net income for the first quarter of fiscal year 2016 includes
restructuring charges of $46 million for severance and facility
closing costs related to the 2015 restructuring program and $15
million in separation costs associated with the previously
announced spin-off of the GoTo business. Net income for the first
quarter of fiscal year 2015 includes restructuring charges of $34
million for severance and facility closing costs related to the
2015 restructuring program.
Non-GAAP Results
Non-GAAP net income for the first quarter of fiscal year 2016
was $184 million, or $1.18 per diluted share, compared to $106
million, or $0.65 per diluted share for the first quarter of fiscal
year 2015. Non-GAAP net income for the first quarter of fiscal
years 2016 and 2015 excludes the effects of stock-based
compensation expense, amortization of acquired intangible assets,
amortization of debt discount, restructuring charges, and the tax
effects related to these items. Non-GAAP net income for the first
quarter of fiscal year 2016 also excludes separation costs
associated with the previously announced spin-off of the GoTo
business and the tax effect related to this item. Non-GAAP net
income for the first quarter of fiscal year 2015 also excludes a
benefit from a patent lawsuit and the tax effect related to this
item.
“I am very pleased with our performance this quarter on both the
top line and bottom line,” said Kirill Tatarinov, chief executive
officer for Citrix. “The progress we made in refocusing the company
- simplifying our portfolio and sharpening our message – is
starting to pay off.
“We are seeing a strong improvement in our operating margin, and
our focused strategy has made it easier for our field teams and
channel partners to execute; consequently, we saw improvement in
the top line. It gives us a measure of confidence that we are
on the right path, and it gives us opportunities to solidify our
leadership position in our core areas.”
Board Update
Also, the Citrix Board of Directors today announced that Board
members Tom Bogan and Francis deSouza will not be standing for
re-election to the company's Board at the Citrix annual shareholder
meeting on June 23, 2016.
“Tom and Francis have demonstrated thoughtful and insightful
leadership in their service and commitment to the Board,” said Bob
Calderoni, executive chairman of the Board. “We offer our deep
thanks to both for their service to the company, the Board and our
shareholders.”
“And I offer a special thanks to Tom, who has served tirelessly
on the Board for 13 years, including 10 as chairman.”
Bogan and deSouza both are not standing for re-election to the
Board to spend more time on their chief executive officer roles.
Bogan was appointed chief executive officer of Adaptive
Technologies in January 2015, and it was recently announced that
deSouza would be assuming the role of chief executive officer at
Illumina in July 2016.
The Board reiterated its commitment to recruiting Board members
with outstanding capabilities and the diverse skills needed to
oversee Citrix for the long term.
Q1 Financial Summary
In reviewing the results for the first quarter of fiscal year
2016 compared to the first quarter of fiscal year 2015:
- Product and license revenue increased
10 percent;
- Software as a service revenue increased
17 percent;
- Revenue from license updates and
maintenance increased 6 percent;
- Professional services revenue, which is
comprised of consulting, product training and certification,
decreased 12 percent;
- Net revenue increased in the Americas
region by 14 percent, increased in the EMEA region by less than 1
percent, and decreased in the Pacific region by 8 percent;
- Deferred revenue totaled $1.6 billion
as of March 31, 2016, compared to $1.5 billion as of March 31,
2015, an increase of 7 percent; and
- Cash flow from operations was $340
million for the first quarter of fiscal year 2016, compared with
$292 million for the first quarter of fiscal year 2015.
During the first quarter of fiscal year 2016:
- GAAP gross margin was 83 percent.
Non-GAAP gross margin was 85 percent, excluding the effects of
amortization of acquired product related intangible assets and
stock-based compensation expense;
- GAAP operating margin was 13 percent.
Non-GAAP operating margin was 29 percent, excluding the effects of
stock-based compensation expense, amortization of acquired
intangible assets, separation costs related to the previously
announced spin-off of the GoTo business and costs associated with
the 2015 restructuring programs; and
- The company received 0.9 million shares
from repurchases at an average price of $71.96.
Financial Outlook for Second Quarter 2016
Citrix management expects to achieve the following results at
the consolidated level for the second quarter of fiscal year 2016
ending June 30, 2016:
- Net revenue is targeted to be in the
range of $810 million to $820 million.
- GAAP diluted earnings per share is
targeted to be in the range of $0.61 to $0.66. Non-GAAP diluted
earnings per share is targeted to be in the range of $1.12 to
$1.15, excluding $0.31 related to the effects of stock-based
compensation expenses, $0.15 related to the effects of amortization
of acquired intangible assets, $0.05 related to the effects of
amortization of debt discount, $0.12 related to separation costs
associated with the previously announced spin-off of the GoTo
business, $0.05 related to restructuring charges and $0.14 to $0.22
for the tax effects related to these items.
Financial Outlook for Fiscal Year 2016
Citrix management expects to achieve the following results at
the consolidated level for the fiscal year ending December 31,
2016:
- Net revenue is targeted to be in the
range of $3.34 billion to $3.36 billion.
- GAAP diluted earnings per share is
targeted to be in the range of $2.75 to $2.90. Non-GAAP diluted
earnings per share is targeted to be in the range of $4.90 to
$5.00, excluding $1.25 related to the effects of stock-based
compensation expenses, $0.57 related to the effects of amortization
of acquired intangible assets, $0.21 related to the effects of
amortization of debt discount, $0.53 related to separation costs
associated with the previously announced spin-off of the GoTo
business, $0.34 related to restructuring charges and $0.65 to $0.90
for the tax effects related to these items.
The above statements are based on current targets. These
statements are forward-looking, and actual results may differ
materially.
First Quarter Earnings Conference Call
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
2015 of $3.28 billion, Citrix solutions are in use at more than
400,000 organizations and by over 100 million users globally. Learn
more at www.citrix.com.
For Citrix Investors
This release contains forward-looking statements that 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 CEO and president, statements
contained in the Financial Outlook 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, risks
associated with transitions in key personnel, including our CEO,
and succession risk; the completion and timing of the proposed
spinoff, the future performance of core Citrix and the GoTo
businesses on a standalone basis if the spinoff is completed, the
expected strategic, operational and competitive benefits of the
proposed spinoff, and the effect of the separation on Citrix, its
shareholders, customers, partners and employees; the impact of the
global economy, volatility in global stock markets, 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, mobility
and networking products and collaboration services; the company's
ability to develop, maintain a high level of quality and
commercialize new products and services, including its enterprise
mobility products and cloud services, while growing its established
virtualization and networking products and services; disruptions to
execution due to Citrix's restructuring programs and actions to be
taken as a result of its operational review; 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 large enterprise accounts and reliance on
large service provider customers; 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 savings initiatives; ability to effectively meet our
domestic cash requirements and 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,
2016 2015 Revenues: Product and
licenses $202,205 $183,281 Software as a service 197,848 169,364
License updates and maintenance 393,018 371,297 Professional
services 32,607 36,860 Total net revenues
825,678 760,802 Cost of net revenues: Cost of product and
licenses revenues 31,395 24,684 Cost of services and maintenance
revenues 92,582 89,190 Amortization of product related intangible
assets 15,115 18,732 Total cost of net
revenues 139,092 132,606 Gross margin 686,586 628,196
Operating expenses: Research and development 123,959 144,641 Sales,
marketing and services 292,748 306,405 General and administrative
90,779 82,026 Amortization of other intangible assets 7,394 9,441
Restructuring 46,065 33,951 Separation 14,687 -
Total operating expenses 575,632 576,464
Income from operations 110,954 51,732 Interest
income 3,751 2,834 Interest expense 11,155 11,120 Other expense,
net (1,003 ) (7,849 ) Income before income taxes 102,547
35,597 Income tax expense 19,084 6,710
Net income $83,463 $28,887 Earnings per
common share – diluted $0.54 $0.18 Weighted
average shares outstanding – diluted 155,945 162,036
CITRIX SYSTEMS, INC.
Condensed Consolidated Balance
Sheets
(In thousands - unaudited)
March 31, 2016
December 31, 2015(*)
ASSETS: Cash and cash equivalents $513,306 $368,518
Short-term investments 642,448 502,852 Accounts receivable, net
450,000 669,276 Inventories, net 12,194 10,521 Prepaid expenses and
other current assets 169,622 132,784 Total
current assets 1,787,570 1,683,951 Long-term investments
849,490 891,964 Property and equipment, net 376,012 373,817
Goodwill 1,962,232 1,962,722 Other intangible assets, net 281,796
283,418 Deferred tax assets, net 205,938 215,196 Other assets
55,651 56,449 Total assets $5,518,689
$5,467,517
LIABILITIES AND STOCKHOLDERS’
EQUITY: Accounts payable 85,490 95,396 Accrued expenses and
other current liabilities 310,881 317,468 Income taxes payable
18,458 18,351 Current portion of deferred revenues 1,209,435
1,249,754 Total current liabilities 1,624,264
1,680,969 Long-term portion of deferred revenues 412,580
414,314 Convertible notes 1,320,240 1,311,071 Other liabilities
93,525 87,717 Stockholders’ equity: Common stock 301 299
Additional paid-in capital 4,632,163 4,566,919 Retained earnings
3,558,088 3,474,625 Accumulated other comprehensive loss (21,063 )
(28,527 ) Less – common stock in treasury, at cost (6,101,409 )
(6,039,870 ) Total stockholders’ equity 2,068,080
1,973,446 Total liabilities and stockholders’ equity
$5,518,689 $5,467,517
(*) During the first quarter of fiscal 2016 we adopted an
accounting standard update on the presentation of debt issuance
costs. The new guidance requires debt issuance costs related to a
recognized debt liability to be presented in the balance sheet as a
direct deduction from the carrying amount of the debt liability on
the condensed consolidated balance sheet. The December 31, 2015
condensed consolidated balance sheet was retrospectively adjusted
to reflect this change.
CITRIX SYSTEMS, INC.
Condensed Consolidated Statement of
Cash Flows
(In thousands – unaudited)
Three Months EndedMarch 31,
2016
OPERATING ACTIVITIES Net Income $83,463 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other 70,961 Stock-based
compensation expense 42,097 Deferred income tax expense 4,830
Excess tax benefit from stock-based compensation (5,889 ) Effects
of exchange rate changes on monetary assets and liabilities
denominated in foreign currencies (1,454 )
Other non-cash items
2,641
Total adjustments to reconcile net income
to net cash provided by operating activities
113,186
Changes in operating assets and liabilities, net of the effects of
acquisitions: Accounts receivable 219,570 Inventories (2,072 )
Prepaid expenses and other current assets (29,115 ) Other assets
750 Income taxes, net 1,602 Accounts payable (14,559 ) Accrued
expenses and other current liabilities 2,919 Deferred revenues
(37,402 ) Other liabilities 1,623 Total changes in operating
assets and liabilities, net of the effects of acquisitions 143,316
Net cash provided by operating activities 339,965
INVESTING ACTIVITIES Purchases of available-for-sale
investments (466,718 ) Proceeds from sales of available-for-sale
investments 234,242 Proceeds from maturities of available-for-sale
investments 139,244 Proceeds from cost method investments, net 747
Purchases of property and equipment (41,550 ) Cash paid for
licensing agreements and technology (24,281 ) Other 261 Net
cash used in investing activities (158,055 )
FINANCING
ACTIVITIES Proceeds from issuance of common stock under
stock-based compensation plans 6,024 Excess tax benefit from
stock-based compensation 5,889 Stock repurchases, net (28,689 )
Cash paid for tax withholding on vested stock awards (22,428 ) Net
cash used in financing activities (39,204 ) Effect of exchange rate
changes on cash and cash equivalents 2,082 Change in cash
and cash equivalents 144,788 Cash and cash equivalents at
beginning of period 368,518 Cash and cash equivalents at end
of period $513,306
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 and related conference call, slide
presentation or webcast 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, separation costs 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 of intangible assets and 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 of intangible assets 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.
- Separation costs represent transaction
and transition costs associated with preparing businesses for
independent operations consisting primarily of financial advisory
fees, legal fees, accounting fees, tax services and information
systems infrastructure duplication. These charges are not
anticipated to be ongoing costs; and, thus, are outside of the
normal operations of the Company's business. 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 related to newly acquired
intangible assets and debt discount, additional charges related to
its restructuring programs, significant litigation charges or
benefits, separation costs 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 Months EndedMarch 31,
2016
GAAP gross margin 83.2% Add: stock-based compensation 0.1 Add:
amortization of product related intangible assets 1.8 Non-GAAP
gross margin 85.1%
Three Months EndedMarch 31,
2016
GAAP operating margin 13.4% Add: stock-based compensation 5.1 Add:
amortization of product related intangible assets 1.8 Add:
amortization of other intangible assets 0.9 Add: separation costs
1.8 Add: restructuring charges 5.6 Non-GAAP operating margin 28.6%
Three Months Ended March 31,
2016 2015 GAAP net income $83,463
$28,887 Add: stock-based compensation 42,097 34,211 Add:
amortization of product related intangible assets 15,115 18,732
Add: amortization of other intangible assets 7,394 9,441 Add:
amortization of debt discount 8,161 7,920 Add: separation costs
14,687 - Add: restructuring charges 46,065 33,951 Add: benefit
related to a patent lawsuit - (982 ) Less: tax effects related to
above items (33,465 ) (26,285 ) Non-GAAP net income $183,517
$105,875
Three Months Ended March 31,
2016 2015 GAAP earnings per share – diluted
$0.54 $0.18 Add: stock-based compensation 0.27 0.21 Add:
amortization of product related intangible assets 0.10 0.12 Add:
amortization of other intangible assets 0.05 0.06 Add: amortization
of debt discount 0.05 0.05 Add: separation costs 0.09 - Add:
restructuring charges 0.30 0.21 Add: benefit related to a patent
lawsuit - (0.01 ) Less: tax effects related to above items (0.22 )
(0.17 ) Non-GAAP earnings per share – diluted $1.18
$0.65
Forward Looking Guidance
For the ThreeMonths
EndedJune 30,
For the TwelveMonths
EndedDecember 31,
2016 2016 GAAP earnings per share – diluted
$0.61 to $0.66 $2.75 to $2.90 Add: adjustments to exclude the
effects of amortization of intangible assets 0.15 0.57 Add:
adjustments to exclude the effects of expenses related to
stock-based compensation 0.31 1.25 Add: adjustments to exclude the
effects of amortization of debt discount 0.05 0.21 Add: adjustments
to exclude the effects of separation costs 0.12 0.53 Add:
adjustments to exclude the effects of restructuring charges 0.05
0.34 Less: tax effects related to above items (0.14) to (0.22)
(0.65) to (0.90) Non-GAAP earnings per share – diluted $1.12
to $1.15 $4.90 to $5.00
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160420006295/en/
Citrix Systems, Inc.Media Inquiries: Eric Armstrong,
954-267-2977eric.armstrong@citrix.comorInvestor Inquiries: Eduardo
Fleites, 954-229-5758eduardo.fleites@citrix.com
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