Quarterly revenue of $759 million up 6 percent
year over year
Third quarter GAAP diluted earnings per share
of $0.29
Third quarter non-GAAP diluted earnings per
share of $0.75
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the third quarter of fiscal year 2014 ended September
30, 2014.
FINANCIAL RESULTS
For the third quarter of fiscal year 2014, Citrix achieved
revenue of $759 million, compared to $713 million in the third
quarter of fiscal year 2013, representing 6 percent revenue
growth.
GAAP Results
Net income for the third quarter of fiscal year 2014 was $48
million, or $0.29 per diluted share, compared to $77 million, or
$0.41 per diluted share, for the third quarter of fiscal year 2013.
GAAP results for the third quarter of fiscal year 2014 include a
charge of approximately $21 million related to a previously
disclosed patent lawsuit, as well as a restructuring charge of $3
million for severance costs incurred to better align resources to
strategic initiatives.
Non-GAAP Results
Non-GAAP net income for the third quarter of fiscal year 2014
was $125 million, or $0.75 per diluted share, compared to $132
million, or $0.70 per diluted share, for the third quarter of
fiscal year 2013. Non-GAAP net income for the third quarters of
fiscal year 2014 and 2013 exclude the effects of amortization of
acquired intangible assets and stock-based compensation expense and
the tax effects related to these items. Non-GAAP net income for
third quarter of fiscal year 2014 also excludes charges related to
amortization of debt discount, a previously disclosed patent
lawsuit and the restructuring program implemented in the first
quarter of fiscal year 2014 and the tax effects related to these
items.
“I am pleased with our operational and strategic performance in
Q3,” said Mark Templeton, CEO for Citrix.
“While our results were clearly mixed, we executed well in many
important areas including product releases, go-to market
investments and partnership initiatives, all while maintaining
focus on operational refinements and profitability.”
Q3 Financial Summary
In reviewing the results for the third quarter of fiscal year
2014, compared to the third quarter of fiscal year 2013:
- Product and license revenue decreased 4
percent;
- Software as a service revenue increased
12 percent;
- Revenue from license updates and
maintenance increased 9 percent;
- Professional services revenue, which is
comprised of consulting, product training and certification,
increased 25 percent;
- Revenue increased in the EMEA region by
8 percent; increased in the Americas region by 4 percent and
increased in the Pacific region by 4 percent;
- Deferred revenue totaled $1.40 billion
as of September 30, 2014, compared to $1.27 billion as of September
30, 2013, an increase of 11 percent; and
- Cash flow from operations was $164
million for the third quarter of fiscal year 2014, compared with
$223 million for the third quarter of fiscal year 2013.
During the third quarter of fiscal year
2014:
- GAAP gross margin was 82 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;
- GAAP operating margin was 8 percent,
and non-GAAP operating margin was 21 percent, excluding the effects
of amortization of acquired intangible assets, stock-based
compensation expense, the charge related to a previously disclosed
patent lawsuit, and costs associated with the 2014 restructuring
program; and
- The company repurchased 1.5 million
shares at an average price of $69.48.
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 $3.13 billion to $3.14 billion;
- GAAP diluted earnings per share is
targeted to be in the range of $1.57 to $1.58. Non-GAAP diluted
earnings per share is targeted to be in the range of $3.22 to
$3.25, excluding $0.96 related to the effects of amortization of
acquired intangible assets, $1.00 related to the effects of
stock-based compensation expense, $0.12 related to the charge for a
previously disclosed patent lawsuit, $0.12 related to the effects
of amortization of debt discount, $0.12 related to the effects of
restructuring charges, and $(0.64) to $(0.68) 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.
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 Fiscal Year 2014
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
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 due to reorganizations, 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 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
September 30,
Nine Months Ended
September 30,
2014 2013 2014
2013 Revenues: Product and licenses $193,153
$201,443 $632,369 $621,741 Software as a service 165,253 148,179
483,164 429,603 License updates and maintenance 358,266 329,384
1,049,065 986,017 Professional services 42,322 33,725
126,775 96,653 Total net revenues 758,994
712,731 2,291,373 2,116,014 Cost of net revenues: Cost of
product and licenses revenues 24,045 26,971 88,144 84,465 Cost of
services and maintenance revenues 87,981 72,632 254,763 208,241
Amortization of product related intangible assets 23,959
24,330 102,660 73,381 Total cost of net
revenues 135,985 123,933 445,567 366,087 Gross margin 623,009
588,798 1,845,806 1,749,927 Operating expenses: Research and
development 137,877 127,049 411,870 389,840 Sales, marketing and
services 318,252 300,416 956,287 915,194 General and administrative
95,203 63,580 242,606 193,708 Amortization of other intangible
assets 9,956 10,386 32,855 31,322 Restructuring 3,124
- 17,285 - Total operating expenses 564,412
501,431 1,660,903 1,530,064
Income from operations 58,597 87,367 184,903 219,863
Interest income 2,411 2,079 6,705 6,062 Interest expense 10,551 41
17,601 102 Other (expense) income, net (2,235 ) 1,400
(6,002 ) 49 Income before income taxes 48,222 90,805 168,005
225,872 Income tax expense 690 14,075
11,510 24,993 Net income $47,532
$76,730 $156,495 $200,879 Earnings per
common share – diluted $0.29 $0.41 $0.90
$1.06 Weighted average shares outstanding – diluted
165,713 188,980 174,023 188,830
CITRIX SYSTEMS, INC.
Condensed Consolidated Balance
Sheets
(In thousands - unaudited)
September 30, 2014
December 31, 2013
ASSETS: Cash and cash equivalents $242,787 $280,740
Short-term investments 504,436 453,976 Accounts receivable, net
465,558 654,821 Inventories, net 16,483 14,107 Prepaid expenses and
other current assets 164,877 110,981 Current portion of deferred
tax assets, net 50,569 48,470 Total current
assets 1,444,710 1,563,095 Long-term investments 1,073,232
855,700 Property and equipment, net 353,720 338,996 Goodwill
1,782,645 1,768,949 Other intangible assets, net 414,751 509,595
Long-term portion of deferred tax assets, net 94,021 115,418 Other
assets 68,398 60,496 Total assets $5,231,477
$5,212,249
LIABILITIES AND
STOCKHOLDERS’ EQUITY: Accounts payable 85,802 78,452 Accrued
expenses and other current liabilities 286,689 257,606 Income taxes
payable 2,497 29,322 Current portion of deferred revenues 1,087,459
1,098,681 Total current liabilities 1,462,447
1,464,061 Long-term portion of deferred revenues 316,097
313,059 Convertible notes 1,285,092 - Other liabilities 71,503
115,322 Stockholders’ equity: Common stock 294 291
Additional paid-in capital 3,968,544 3,974,297 Retained earnings
3,060,036 2,903,541 Accumulated other comprehensive (loss) income
(20,499 ) 4,951 Less – common stock in treasury, at cost (4,912,037
) (3,563,273 ) Total stockholders’ equity 2,096,338
3,319,807 Total liabilities and stockholders’ equity
$5,231,477 $5,212,249
CITRIX SYSTEMS, INC.
Condensed Consolidated Statement of
Cash Flows
(In thousands – unaudited)
Three Months EndedSeptember 30,
2014
Nine Months EndedSeptember 30,
2014
OPERATING ACTIVITIES Net Income $47,532 $156,495 Adjustments
to reconcile net income to net cash provided by operating
activities: Amortization and depreciation 68,021 236,816
Amortization of debt discount and transaction costs 8,724 14,504
Stock-based compensation expense 42,449 128,440 Provision for
accounts receivable allowances 2,128 4,690 Deferred income tax
benefit (12,715 ) (25,114 ) Other non-cash items 1,331 735
Total adjustments to reconcile net income to net cash
109,938 360,071 provided by operating activities Changes in
operating assets and liabilities, net of the effects of
acquisitions: Accounts receivable 36,338 182,542 Inventory (3,255 )
(4,342 ) Prepaid expenses and other current assets 2,951 (5,763 )
Other assets (2,818 ) 1,651 Deferred revenues (26,434 ) (8,183 )
Accounts payable 4,783 7,526 Income taxes, net (23,107 ) (87,180 )
Accrued expenses 18,839 53,846 Other liabilities (633 ) (1,113 )
Total changes in operating assets and liabilities, net of the
effects of acquisitions 6,664 138,984 Net cash
provided by operating activities 164,134 655,550
INVESTING
ACTIVITIES Purchases of available-for-sale investments, net
(62,367 ) (265,834 ) Purchases of property and equipment (48,301 )
(115,442 ) Cash paid for acquisitions, net of cash acquired (2,000
) (43,342 ) Proceeds related to cost method investments 1,123 3,907
Purchases of cost method investments (1,396 ) (2,823 ) Cash paid
for licensing and core technology (2,985 ) (12,712 ) Net cash used
in investing activities (115,926 ) (436,246 )
FINANCING
ACTIVITIES Proceeds from issuance of common stock under
stock-based compensation plans 20,579 38,674 Proceeds from issuance
of convertible notes, net of debt issuance costs - 1,415,717
Purchase of convertible note hedges - (184,288 ) Proceeds from
issuance of warrants - 101,775 Repayment of acquired debt - (3,766
) Excess tax benefit from stock-based compensation 2,118 5,122
Stock repurchases, net (99,988 ) (1,600,986 ) Cash paid for tax
withholding on vested stock awards (4,937 ) (27,777 ) Net cash used
in financing activities (82,228 ) (255,529 ) Effect of
exchange rate changes on cash and cash equivalents (2,595 ) (1,728
) Change in cash and cash equivalents (36,615 ) (37,953 ) Cash and
cash equivalents at beginning of period 279,402 280,740
Cash and cash equivalents at end of period $242,787
$242,787
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,
significant litigation charges 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.
- 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 related to newly acquired
intangible assets and debt discount, additional charges related to
its restructuring program, significant litigation charges 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 EndedSeptember 30,
2014
GAAP gross margin 82.1% Add: stock-based compensation 0.1 Add:
amortization of product related intangible assets 3.1 Non-GAAP
gross margin 85.3%
Three Months EndedSeptember 30,
2014
GAAP operating margin 7.7% Add: stock-based compensation 5.7 Add:
amortization of product related intangible assets 3.1 Add:
amortization of other intangible assets 1.3 Add: restructuring
charges 0.4 Add: charge related to a previously disclosed patent
lawsuit 2.7 Non-GAAP operating margin 20.9%
Three
Months Ended September 30, 2014 2013 GAAP
net income $47,532 $76,730 Add: stock-based compensation
42,449 45,893 Add: amortization of product related intangible
assets 23,959 24,330 Add: amortization of other intangible assets
9,956 10,386 Add: amortization of debt discount 7,802 - Add:
restructuring charges 3,124 - Add: charge related to a previously
disclosed patent lawsuit 20,727 Less: tax effects related to above
items (30,932) (25,521) Non-GAAP net income $124,617
$131,818
Three Months Ended September
30,
2014 2013 GAAP earnings per share – diluted
$0.29 $0.41 Add: stock-based compensation 0.26 0.24 Add:
amortization of product related intangible assets 0.14 0.13 Add:
amortization of other intangible assets 0.06 0.06 Add: amortization
of debt discount 0.05 - Add: restructuring charges 0.02 - Add:
charge related to a previously disclosed patent lawsuit 0.12 Less:
tax effects related to above items (0.19) (0.14) Non-GAAP earnings
per share – diluted $0.75 $0.70
CITRIX SYSTEMS, INC.
Forward Looking Guidance
For the Twelve
MonthsEndedDecember 31,
2014 GAAP earnings per share – diluted $1.57 to $1.58 Add:
adjustments to exclude the effects of amortization of intangible
assets 0.96 Add: adjustments to exclude the effects of expenses
related to stock-based compensation 1.00 Add: charge related to a
previously disclosed patent lawsuit 0.12 Add: adjustments to
exclude the effects of amortization of debt discount 0.12 Add:
adjustments to exclude the effects of restructuring charges 0.12
Less: tax effects related to above items (0.64) to (0.68) Non-GAAP
earnings per share – diluted $3.22 to $3.25
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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