Citrix Reports Second Quarter Financial Results

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Citrix Reports Second Quarter Financial Results

Quarterly Revenue of $730 Million up 19% Year over Year

Deferred Revenue of $1.3 Billion as of Quarter End; Up 24% Year-over-Year


Second Quarter GAAP Diluted Earnings Per Share of $0.34

Second Quarter Non-GAAP Diluted Earnings Per Share of $0.66

SANTA CLARA, Calif.--(BUSINESS WIRE)-- Citrix Systems, Inc. (NAS: CTXS) today reported financial results for the second quarter of fiscal year 2013 ended June 30, 2013.

FINANCIAL RESULTS

For the second quarter of fiscal year 2013, Citrix achieved revenue of $730 million, compared to $615 million in the second quarter of fiscal year 2012, representing 19 percent revenue growth.

GAAP Results

Net income for the second quarter of fiscal year 2013 was $64 million, or $0.34 per diluted share, compared to $92 million, or $0.49 per diluted share, for the second quarter of fiscal year 2012. Net income for the second quarter of fiscal year 2012 includes net tax benefits of approximately $22 million, or $0.11 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 2013 was $124 million, or $0.66 per diluted share, compared to $135 million, or $0.71 per diluted share, for the second quarter of fiscal year 2012. Non-GAAP net income for the second quarter of fiscal year 2012 includes net tax benefits of approximately $22 million, or $0.11 per diluted share, primarily related to the closing of audits with the IRS for certain tax years. Non-GAAP net income excludes the effects of amortization of acquired intangible assets, stock-based compensation expenses and the tax effects related to these items.

"I'm pleased with our overall Q2 performance," said Mark Templeton, President and CEO, Citrix. "We're executing well on product, go-to-market and partnership investments to drive growth in business mobility and cloud infrastructure.

"Everywhere, I continue to hear from CIOs about how they are challenged by the transformation, consumerization and fragmentation that is taking place in computing. Our long-term strategy remains focused on helping our customers as they deal with these areas - using cloud services and business mobility to improve the security and agility of their infrastructure."

Q2 Financial Summary

In reviewing the results for the second quarter of fiscal year 2013, compared to the second quarter of fiscal year 2012:

  • Product and license revenue increased 21 percent;
  • Software as a service revenue increased 15 percent;
  • Revenue from license updates and maintenance increased 18 percent;
  • Professional services revenue, which is comprised of consulting, product training and certification, increased 25 percent;
  • Net revenue increased in the Americas region by 24 percent, increased in the EMEA region by 16 percent and increased in the Pacific region by 10 percent;
  • Deferred revenue totaled $1.3 billion as of June 30, 2013, compared to $1.0 billion as of June 30, 2012, an increase of 24%; and
  • Cash flow from operations was $209 million for the second quarter of fiscal year 2013, compared with $168 million for the second quarter of fiscal year 2012.

During the second quarter of fiscal year 2013:

  • GAAP gross margin was 83 percent and non-GAAP gross margin was 86 percent, excluding the effects of amortization of acquired product related intangible assets and stock-based compensation expense.
  • GAAP operating margin was 10 percent and non-GAAP operating margin was 22 percent, excluding the effects of amortization of acquired intangible assets and stock-based compensation expense.
  • The company repurchased 0.6 million shares at an average price of $64.58.

Financial Outlook for Third Quarter 2013

Citrix management expects to achieve the following results for the third quarter of fiscal year 2013 ending September 30, 2013:

  • Net revenue is targeted to be in the range of $730 million to $740 million;
  • GAAP diluted earnings per share is targeted to be in the range of $0.41 to $0.42. Non-GAAP diluted earnings per share is targeted to be in the range of $0.72 to $0.73, excluding $0.18 related to the effects of amortization of acquired intangible assets, $0.26 related to the effects of stock-based compensation expenses, and $(0.12) to $(0.14) 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 2013

Citrix management expects to achieve the following results for the fiscal year ending December 31, 2013:

  • Net revenue is targeted to be in the range of $2.96 billion to $2.98 billion;
  • GAAP gross margin is targeted to be in the range of 82.6 percent to 83.1 percent. Non-GAAP gross margin is targeted to be in the range of 86.0 percent to 86.5 percent, excluding 3.3 percent related to the effects of amortization of acquired product related intangible assets and 0.1 percent related to stock-based compensation expenses.
  • GAAP diluted earnings per share is targeted to be in the range of $1.88 to $1.91. Non-GAAP diluted earnings per share is targeted to be in the range of $3.09 to $3.11, excluding $0.74 related to the effects of amortization of acquired intangible assets, $1.00 related to the effects of stock-based compensation expenses, and $(0.51) to $(0.56) 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 (NAS: CTXS) is the cloud computing company that enables mobile workstyles - empowering people to work and collaborate from anywhere, accessing apps and data on any of the latest devices, as easily as they would in their own office - simply and securely. Citrix cloud computing solutions help IT and service providers build both private and public clouds - leveraging virtualization and networking technologies to deliver high-performance, elastic and cost-effective services for mobile workstyles. With market leading solutions for mobility, desktop virtualization, cloud networking, cloud platforms, collaboration, and data sharing, Citrix helps organizations of all sizes achieve the kind of speed and agility necessary to succeed in an increasingly mobile and dynamic world. Citrix products are in use at more than 260,000 organizations and by over 100 million users globally. Annual revenue in 2012 was $2.59 billion.

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 Third Quarter 2013 and Financial Outlook for Fiscal Year 2013 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 risks associated with successfully introducing new products into Citrix's distribution channels and ability of markets for these products to become mainstream and sustain growth; the company's product concentration and its ability to develop and commercialize new products and services, including its enterprise mobility and cloud platform products, while maintaining development and sales of its established virtualization, networking and collaboration products and services; disruptions due to changes and transitions in key personnel and succession risks; 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, OEM's 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 introduction of new products by competitors or the entry of new competitors into the markets for Citrix's products and services; 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; 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; competition, international market readiness, execution and other risks associated with the markets for Citrix's products and services; unanticipated changes in tax rates 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,

2013 2012 2013 2012
Revenues:  
Product and licenses$227,215$187,917$420,298$366,281
Software as a service143,858125,510281,424246,243
License updates and maintenance322,895272,537638,633537,062
Professional services36,416 29,246  62,928 55,119
Total net revenues730,384615,2101,403,2831,204,705
 
Cost of net revenues:
Cost of product and licenses revenues31,70020,85457,49439,658
Cost of services and maintenance revenues71,19856,404135,609107,408
Amortization of product related intangible assets24,342 17,100  49,051 33,635
Total cost of net revenues127,24094,358242,154180,701
Gross margin603,144520,8521,161,1291,024,004
 
Operating expenses:
Research and development132,299110,028262,791213,650
Sales, marketing and services317,096262,139614,778510,596
General and administrative67,34361,299130,128121,155
Amortization of other intangible assets10,518 5,194  20,936 15,661
Total operating expenses527,256 438,660  1,028,633 861,062
 
Income from operations75,88882,192132,496162,942
 
Other income, net1,375 3,353  2,571 7,153
Income before income taxes77,26385,545135,067170,095
 
Income tax expense (benefit)12,802 (6,461) 10,918 9,822
Net income$64,461 $92,006  $124,149 $160,273
 
Earnings per common share - diluted$0.34 $0.49  $0.66 $0.85
Weighted average shares outstanding - diluted188,486 189,279  188,750 189,082
 

  

CITRIX SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(In thousands - unaudited)

 

 

June 30, 2013

 

December 31, 2012

ASSETS:
Cash and cash equivalents$263,153$643,609
Short-term investments436,997285,022
Accounts receivable, net493,671630,956
Inventories, net13,69710,723
Prepaid expenses and other current assets123,753106,579
Current portion of deferred tax assets, net40,087  36,846 
Total current assets1,371,3581,713,735
 
Long-term investments819,590595,313
Property and equipment, net311,316303,294
Goodwill1,762,7141,518,219
Other intangible assets, net558,416556,205
Long-term portion of deferred tax assets, net111,26743,097
Other assets61,350  66,539 
Total assets$4,996,011  $4,796,402 
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable$72,613$71,116
Accrued expenses and other current liabilities255,230257,135
Income taxes payable14,89249,346
Current portion of deferred revenues1,007,887  965,276 
Total current liabilities1,350,6221,342,873
 
Long-term portion of deferred revenues263,476232,719
Other liabilities105,72499,033
 
Stockholders' equity:
Common stock289287
Additional paid-in capital3,856,4823,691,111
Retained earnings2,688,1672,564,018
Accumulated other comprehensive loss(16,975)(7,705)
Less - common stock in treasury, at cost(3,251,774) (3,125,934)
Total stockholders' equity3,276,189  3,121,777 
Total liabilities and stockholders' equity$4,996,011  $4,796,402 
 

  

CITRIX SYSTEMS, INC.

Condensed Consolidated Statement of Cash Flows

(In thousands - unaudited)

 

Three Months
Ended June 30,
2013

Six Months
Ended June 30,
2013

OPERATING ACTIVITIES
Net Income$64,461$124,149
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation65,950130,486
Stock-based compensation expense47,85791,413
Provision for accounts receivable allowances2,0964,122
Deferred income tax benefit(21,182)(39,371)
Other non-cash items1,047(593)

Total adjustments to reconcile net income to net cash provided by operating activities

95,768186,057

 

Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable(45,898)137,994
Inventory(2,774)(3,914)
Prepaid expenses and other current assets17,765(17,393)
Other assets5,7966,607
Deferred revenues39,63061,078
Accounts payable10,890(422)
Income taxes, net(6,127)(49,460)
Accrued expenses27,8466,508
Other liabilities1,5457,177
Total changes in operating assets and liabilities, net of the effects of acquisitions48,673148,175
Net cash provided by operating activities208,902458,381
 
INVESTING ACTIVITIES
Purchases of available-for-sale investments, net(106,104)(380,013)
Purchases of property and equipment(38,484)(66,781)
Cash paid for acquisitions, net of cash acquired-(324,049)
Proceeds from sales of cost method investments1,5001,500
Purchases of cost method investments(1,365)(2,467)
Cash paid for licensing and core technology(2,258)(4,494)
Net cash used in investing activities(146,711)(776,304)
 
FINANCING ACTIVITIES
Proceeds from issuance of common stock under stock-based compensation plans9,70834,959
Excess tax benefit from exercise of stock options2,46829,263
Stock repurchases, net(39,672)(101,036)
Cash paid for tax withholding on vested stock awards(22,550)(24,804)
Other912912
Net cash used in financing activities(49,134)(60,706)
 
Effect of exchange rate changes on cash and cash equivalents(1,369)(1,827)
Change in cash and cash equivalents11,688(380,456)
Cash and cash equivalents at beginning of period251,465643,609
Cash and cash equivalents at end of period$263,153$263,153
 

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, stock-based compensation expenses 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
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