Quarterly revenue of $782 million up 7 percent
year over year
Second quarter GAAP diluted earnings per share
of $0.31
Second quarter non-GAAP diluted earnings per
share of $0.83
Repurchased approximately 21 million shares in
second quarter
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the second quarter of fiscal year 2014 ended June 30,
2014.
FINANCIAL RESULTS
For the second quarter of fiscal year 2014, Citrix achieved
revenue of $782 million, compared to $730 million in the second
quarter of fiscal year 2013, representing 7 percent revenue
growth.
GAAP Results
Net income for the second quarter of fiscal year 2014 was $53
million, or $0.31 per diluted share, compared to $64 million, or
$0.34 per diluted share, for the second quarter of fiscal year
2013. The current quarter GAAP results include impairment charges
of approximately $30 million related to certain intangible assets
within our Enterprise and Service Provider division, which are
included in amortization of product related intangible assets, as
well as a restructuring charge of approximately $5 million for
severance costs incurred to better align resources to strategic
initiatives. In addition, GAAP net income for the second quarter of
fiscal year 2014 includes net tax benefits of approximately $9
million, or $0.05 per diluted share, primarily related to the
closing of audits with the IRS for certain tax years.
Non-GAAP Results
Non-GAAP net income for the second quarter of fiscal year 2014
was $142 million, or $0.83 per diluted share, compared to $124
million, or $0.66 per diluted share, for the second quarter of
fiscal year 2013. Non-GAAP net income excludes the effects of
amortization of acquired intangible assets and debt discount,
stock-based compensation expenses, the restructuring program
implemented in the first quarter of fiscal year 2014 and the tax
effects related to these items. Non-GAAP net income for the second
quarter of fiscal year 2014 includes net tax benefits of
approximately $9 million, or $0.05 per diluted share, primarily
related to the closing of audits with the IRS for certain tax
years.
“I’m pleased with our performance and results for Q2,” said Mark
Templeton, president and CEO at Citrix. “I’m really proud of how
our team delivered greater operating efficiencies while driving our
very significant pivot to mobility. As we move into the second
half, we’ll continue to refine operations to further increase
shareholder value and to stay aggressive with valuable solutions
for our customers’ mobility needs.
“And, on a personal level, I’m excited to be back, energized,
and looking forward to the future here at Citrix.”
Q2 Financial Summary
In reviewing the results for the second
quarter of fiscal year 2014, compared to the second quarter of
fiscal year 2013:
- Product and license revenue increased 2
percent;
- Software as a service revenue increased
12 percent;
- Revenue from license updates and
maintenance increased 7 percent;
- Professional services revenue, which is
comprised of consulting, product training and certification,
increased 15 percent;
- Revenue increased in the EMEA and
Pacific regions by 8 percent; and increased in the Americas region
by 4 percent;
- Deferred revenue totaled $1.4 billion
as of June 30, 2014, compared to $1.3 billion as of June 30, 2013,
an increase of 12 percent; and
- Cash flow from operations was $204
million for the second quarter of fiscal year 2014, compared with
$209 million for the second quarter of fiscal year 2013.
During the second quarter of fiscal
year 2014:
- GAAP gross margin was 78 percent, and
non-GAAP gross margin was 85 percent, excluding the effects of
amortization of acquired product related intangible assets and
stock-based compensation expense; and
- GAAP operating margin was 7 percent,
and non-GAAP operating margin was 22 percent, excluding the effects
of amortization of acquired intangible assets, stock-based
compensation expenses, and costs associated with the 2014
restructuring program.
- The company repurchased 20.9 million
shares at an average price of $58.50.
Financial Outlook for Third Quarter 2014
Citrix management expects to achieve the
following results for the third quarter of fiscal year 2014 ending
September 30, 2014:
- Net revenue is targeted to be in the
range of $765 million to $775 million;
- GAAP gross margin is targeted to be in
the range of 81 percent to 82 percent. Non-GAAP gross margin is
targeted to be in the range of 84 percent to 85 percent, excluding
3 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 $0.32 to $0.36. Non-GAAP diluted
earnings per share is targeted to be in the range of $0.70 to
$0.73, excluding $0.21 related to the effects of amortization of
acquired intangible assets, $0.28 related to the effects of
stock-based compensation expenses, $0.05 related to the effects of
amortization of debt discount, $0.01 related to the effects of
restructuring charges, and $(0.14) to $(0.21) 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.
Financial Outlook for Fiscal Year 2014
Citrix management expects to achieve the
following results for the fiscal year ending December 31, 2014:
- Net revenue is targeted to be in the
range of 8.5 percent to 10 percent;
- GAAP gross margin is targeted to be in
the range of 80 percent to 81 percent. Non-GAAP gross margin is
targeted to be in the range of 84 percent to 85 percent, excluding
4 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 $1.62 to $1.67. Non-GAAP diluted
earnings per share is targeted to be in the range of $3.20 to
$3.25, excluding $0.96 related to the effects of amortization of
acquired intangible assets, $1.02 related to the effects of
stock-based compensation expenses, $0.12 related to the effects of
amortization of debt discount, $0.10 related to the effects of
restructuring charges, and $(0.57) to $(0.67) for the tax effects
related to these items.
- GAAP tax rate is targeted to be in the
range of 14 percent to 14.5 percent. Non-GAAP tax rate, which
excludes the effects of amortization of acquired intangible assets,
stock-based compensation, restructuring charges and amortization of
debt discount, is targeted to be in the range of 22 percent to 22.5
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 by visiting the Investor Relations section of
the Citrix corporate website at http://www.citrix.com/investors for
approximately 30 days.
About Citrix
Citrix (NASDAQ:CTXS) is a leader in mobile workspaces, providing
virtualization, mobility management, networking and cloud services
to enable new ways to work better. Citrix solutions power business
mobility through secure, personal workspaces that provide people
with instant access to apps, desktops, data and communications on
any device, over any network and cloud. This year Citrix is
celebrating 25 years of innovation, making IT simpler and people
more productive. With annual revenue in 2013 of $2.9 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 chief executive officer,
statements contained in the Financial Outlook for Third Quarter
2014 and Financial Outlook for Fiscal Year 2014 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 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 desktop
virtualization products and collaboration services; the company's
ability to develop and commercialize new products and services,
including its enterprise mobility and cloud platform products,
while growing its established virtualization, networking and
collaboration products and services; disruptions due to 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 manage untargeted expenses; 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 the impairment of acquired
assets, 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
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Revenues: Product and licenses $231,792 $227,215 $439,216 $420,298
Software as a service 160,779 143,858 317,911 281,424 License
updates and maintenance 347,041 322,895 690,799 638,633
Professional services 41,948 36,416 84,453 62,928 Total net
revenues 781,560 730,384 1,532,379 1,403,283 Cost of net
revenues: Cost of product and licenses revenues 32,762 31,700
64,099 57,494 Cost of services and maintenance revenues 88,099
71,198 166,782 135,609 Amortization of product related intangible
assets 54,395 24,342 78,701 49,051 Total cost of net revenues
175,256 127,240 309,582 242,154 Gross margin 606,304 603,144
1,222,797 1,161,129 Operating expenses: Research and
development 140,375 132,299 273,993 262,791 Sales, marketing and
services 321,539 317,096 638,035 614,778 General and administrative
75,015 67,343 147,403 130,128 Amortization of other intangible
assets 10,445 10,518 22,899 20,936 Restructuring 4,511 - 14,161 -
Total operating expenses 551,885 527,256 1,096,491 1,028,633
Income from operations 54,419 75,888 126,306 132,496 Other
(expense) income, net (3,391) 1,375 (6,523) 2,571 Income before
income taxes 51,028 77,263 119,783 135,067 Income tax
(benefit) expense (1,996) 12,802 10,820 10,918 Net income $53,024
$64,461 $108,963 $124,149 Earnings per common share –
diluted $0.31 $0.34 $0.61 $0.66 Weighted average shares outstanding
– diluted 170,891 188,486 178,246 188,750
CITRIX SYSTEMS,
INC. Condensed Consolidated Balance Sheets
(In thousands - unaudited)
June 30, 2014
December 31, 2013
ASSETS: Cash and cash equivalents $279,402 $280,740
Short-term investments 540,996 453,976 Accounts receivable, net
506,409 654,821 Inventories, net 14,206 14,107 Prepaid expenses and
other current assets 152,755 110,981 Current portion of deferred
tax assets, net 47,802 48,470 Total current assets 1,541,570
1,563,095 Long-term investments 975,676 855,700 Property and
equipment, net 339,832 338,996 Goodwill 1,790,035 1,768,949 Other
intangible assets, net 445,643 509,595 Long-term portion of
deferred tax assets, net 90,480 115,418 Other assets 65,980 60,496
Total assets $5,249,216 $5,212,249
LIABILITIES AND
STOCKHOLDERS’ EQUITY: Accounts payable 79,621 78,452 Accrued
expenses and other current liabilities 280,038 257,606 Income taxes
payable 5,188 29,322 Current portion of deferred revenues 1,110,748
1,098,681 Total current liabilities 1,475,595 1,464,061
Long-term portion of deferred revenues 319,244 313,059 Convertible
notes 1,277,289 - Other liabilities 73,191 115,322
Stockholders’ equity: Common stock 293 291 Additional paid-in
capital 3,896,459 3,974,297 Retained earnings 3,012,504 2,903,541
Accumulated other comprehensive income 1,752 4,951 Less – common
stock in treasury, at cost (4,807,111) (3,563,273) Total
stockholders’ equity 2,103,897 3,319,807 Total liabilities and
stockholders’ equity $5,249,216 $5,212,249
CITRIX
SYSTEMS, INC. Condensed Consolidated Statement of Cash
Flows (In thousands – unaudited)
Three Months Ended
June 30, 2014
Six Months Ended
June 30, 2014
OPERATING ACTIVITIES Net Income $53,024 $108,963 Adjustments
to reconcile net income to net cash provided by operating
activities: Amortization and depreciation 98,764 168,795
Amortization of debt discount and transaction costs 5,780 5,780
Stock-based compensation expense 45,290 85,991 Provision for
accounts receivable allowances 1,368 2,562 Deferred income tax
benefit (9,925) (12,399) Other non-cash items (3,768) (5,292) Total
adjustments to reconcile net income to net cash 137,509 245,437
provided by operating activities Changes in operating assets and
liabilities, net of the effects of acquisitions: Accounts
receivable 3,230 146,204 Inventory (2,204) (1,087) Prepaid expenses
and other current assets (1,190) (8,714) Other assets 2,368 4,469
Deferred revenues 19,189 18,251 Accounts payable 4,055 2,743 Income
taxes, net (37,834) (59,377) Accrued expenses 24,409 35,007 Other
liabilities 984 (480) Total changes in operating assets and
liabilities, net of the effects of acquisitions 13,007 137,016 Net
cash provided by operating activities 203,540 491,416
INVESTING
ACTIVITIES Proceeds (purchases) of available-for-sale
investments, net 16,247 (203,467) Purchases of property and
equipment (36,672) (67,141) Cash paid for acquisitions, net of cash
acquired (17,188) (41,342) Proceeds from sales of cost method
investments 1,981 2,784 Purchases of cost method investments (661)
(1,427) Cash paid for licensing and core technology (9,016) (9,727)
Net cash used in investing activities (45,309) (320,320)
FINANCING ACTIVITIES Proceeds from issuance of common stock
under stock-based compensation plans 10,137 18,095 Proceeds from
issuance of convertible notes, net of debt issuance costs 1,415,717
1,415,717 Purchase of convertible note hedges (184,288) (184,288)
Proceeds from issuance of warrants 101,775 101,775 Repayment of
acquired debt - (3,766) Excess tax benefit from stock-based
compensation 672 3,004 Stock repurchases, net (1,500,998)
(1,500,998) Cash paid for tax withholding on vested stock awards
(20,524) (22,840) Net cash used in financing activities (177,509)
(173,301) Effect of exchange rate changes on cash and cash
equivalents 161 867 Change in cash and cash equivalents (19,117)
(1,338) Cash and cash equivalents at beginning of period 298,519
280,740 Cash and cash equivalents at end of period $279,402
$279,402
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 program 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 program, which relate to
reductions in headcount 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.
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 program 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 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
Ended June 30,
2014
GAAP gross margin 77.6% Add: stock-based compensation 0.1 Add:
amortization of product related intangible assets 6.9 Non-GAAP
gross margin 84.6%
Three Months
Ended June 30,
2014
GAAP operating margin 7.0% Add: stock-based compensation 5.8 Add:
amortization of product related intangible assets 6.9 Add:
amortization of other intangible assets 1.3 Add: restructuring
charges 0.6 Non-GAAP operating margin 21.6%
Three Months
Ended June 30, 2014 2013 GAAP net income
$53,024 $64,461 Add: stock-based compensation 45,289 47,857 Add:
amortization of product related intangible assets 54,395 24,342
Add: amortization of other intangible assets 10,445 10,518 Add:
amortization of debt discount 5,169 - Add: restructuring charges
4,511 - Less: tax effects related to above items (30,901) (22,745)
Non-GAAP net income $141,932 $124,433
Three Months Ended June 30,
2014 2013 GAAP earnings per share – diluted
$0.31 $0.34 Add: stock-based compensation 0.26 0.25 Add:
amortization of product related intangible assets 0.32 0.13 Add:
amortization of other intangible assets 0.06 0.06 Add: amortization
of debt discount 0.03 - Add: restructuring charges 0.03 - Less: tax
effects related to above items (0.18) (0.12) Non-GAAP earnings per
share – diluted $0.83 $0.66
CITRIX SYSTEMS, INC.
Forward Looking Guidance
Three Months Ended
September 30, 2014
Twelve Months Ended
December 31, 2014
GAAP gross margin 80.8% to 81.8% 80.0% to 81.0% Add: stock-based
compensation 0.1 0.1 Add: amortization of product related
intangible assets 3.1 3.9 Non-GAAP gross margin 84.0% to 85.0%
84.0% to 85.0%
For the Three Months Ended
September 30,
For the Twelve Months Ended
December 31,
2014 2014 GAAP earnings per share – diluted $0.32 to
$0.36 $1.62 to $1.67 Add: adjustments to exclude the effects of
amortization of intangible assets 0.21 0.96 Add: adjustments to
exclude the effects of expenses related to stock-based compensation
0.28 1.02 Add: adjustments to exclude the effects of
amortization of debt discount 0.05 0.12 Add: adjustments to exclude
the effects of restructuring charges 0.01 0.10 Less: tax effects
related to above items (0.14) to (0.21) (0.57) to (0.67) Non-GAAP
earnings per share – diluted $0.70 to $0.73 $3.20 to $3.25
For the Twelve Months Ended
December 31,
2014 GAAP tax rate 14.0% to 14.5% Add: tax effects of
stock-based compensation, restructuring charges and amortization of
intangible assets and debt discount 8.0 Non-GAAP tax rate 22.0% to
22.5%
Citrix Systems, Inc.For media inquiries:Eric Armstrong,
954-267-2977eric.armstrong@citrix.comorFor investor
inquiries:Eduardo Fleites,
954-229-5758eduardo.fleites@citrix.com
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