Citrix Reports Second Quarter Financial Results

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 service

143,858

125,510

281,424

246,243

License updates and maintenance

322,895

272,537

638,633

537,062

Professional services

36,416

29,246

62,928

55,119

Total net revenues

730,384

615,210

1,403,283

1,204,705

Cost of net revenues:

Cost of product and licenses revenues

31,700

20,854

57,494

39,658

Cost of services and maintenance revenues

71,198

56,404

135,609

107,408

Amortization of product related intangible assets

24,342

17,100

49,051

33,635

Total cost of net revenues

127,240

94,358

242,154

180,701

Gross margin

603,144

520,852

1,161,129

1,024,004

Operating expenses:

Research and development

132,299

110,028

262,791

213,650

Sales, marketing and services

317,096

262,139

614,778

510,596

General and administrative

67,343

61,299

130,128

121,155

Amortization of other intangible assets

10,518

5,194

20,936

15,661

Total operating expenses

527,256

438,660

1,028,633

861,062

Income from operations

75,888

82,192

132,496

162,942

Other income, net

1,375

3,353

2,571

7,153

Income before income taxes

77,263

85,545

135,067

170,095

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 - diluted

188,486

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 investments

436,997

285,022

Accounts receivable, net

493,671

630,956

Inventories, net

13,697

10,723

Prepaid expenses and other current assets

123,753

106,579

Current portion of deferred tax assets, net

40,087

36,846

Total current assets

1,371,358

1,713,735

Long-term investments

819,590

595,313

Property and equipment, net

311,316

303,294

Goodwill

1,762,714

1,518,219

Other intangible assets, net

558,416

556,205

Long-term portion of deferred tax assets, net

111,267

43,097

Other assets

61,350

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 liabilities

255,230

257,135

Income taxes payable

14,892

49,346

Current portion of deferred revenues

1,007,887

965,276

Total current liabilities

1,350,622

1,342,873

Long-term portion of deferred revenues

263,476

232,719

Other liabilities

105,724

99,033

Stockholders' equity:

Common stock

289

287

Additional paid-in capital

3,856,482

3,691,111

Retained earnings

2,688,167

2,564,018

Accumulated other comprehensive loss

(16,975

)

(7,705

)

Less - common stock in treasury, at cost

(3,251,774

)

(3,125,934

)

Total stockholders' equity

3,276,189

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 depreciation

65,950

130,486

Stock-based compensation expense

47,857

91,413

Provision for accounts receivable allowances

2,096

4,122

Deferred income tax benefit

(21,182)

(39,371)

Other non-cash items

1,047

(593)

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

95,768

186,057

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 assets

17,765

(17,393)

Other assets

5,796

6,607

Deferred revenues

39,630

61,078

Accounts payable

10,890

(422)

Income taxes, net

(6,127)

(49,460)

Accrued expenses

27,846

6,508

Other liabilities

1,545

7,177

Total changes in operating assets and liabilities, net of the effects of acquisitions

48,673

148,175

Net cash provided by operating activities

208,902

458,381

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 investments

1,500

1,500

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 plans

9,708

34,959

Excess tax benefit from exercise of stock options

2,468

29,263

Stock repurchases, net

(39,672)

(101,036)

Cash paid for tax withholding on vested stock awards

(22,550)

(24,804)

Other

912

912

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 equivalents

11,688

(380,456)

Cash and cash equivalents at beginning of period

251,465

643,609

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