Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the third quarter ended September 30, 2010.
FINANCIAL RESULTS
In the third quarter of fiscal 2010, Citrix achieved revenue of
$472 million, compared to $401 million in the third quarter of
fiscal 2009, representing 18 percent revenue growth.
GAAP Results
Net income for the third quarter of fiscal 2010 was $88 million,
or $0.46 per diluted share, compared to $53 million, or $0.29 per
diluted share, for the third quarter of 2009. Net income for the
third quarter of fiscal 2010 includes net tax benefits of
approximately $18 million or $0.10 per diluted share.
Non-GAAP Results
Non-GAAP net income in the third quarter of fiscal 2010 was $118
million, or $0.62 per diluted share, compared to $80 million, or
$0.43 per diluted share, in the comparable period last year. This
includes net tax benefits of approximately $18 million recognized
in the quarter, or $0.10 per diluted share. Non-GAAP net income
excludes the effects of amortization of intangible assets primarily
related to business combinations, stock-based compensation expenses
and, charges recorded in connection with the restructuring program
that the company implemented in January 2009 and the tax effects
related to those items.
“I’m proud of our Q3 performance, and the excellent strategic,
operating and financial results we’ve delivered this year,” said
Mark Templeton, president and chief executive officer for
Citrix.
“It is clear we are at the intersection of three powerful market
forces - the transformation of IT to an on-demand service; the
consumerization of IT in the enterprise; and, the promise of cloud
services. These trends are driving a need for virtual computing,
making Citrix and our platform more relevant and strategic.”
Q3 Financial Summary
In reviewing the third quarter results of 2010, compared to the
third quarter of 2009:
- Product license revenue increased 18
percent;
- Revenue from license updates grew 15
percent;
- Online services revenue grew 16
percent;
- Technical services revenue, which is
comprised of consulting, education and technical support, grew 30
percent;
- Revenue increased in the America’s
region by 22 percent; increased in the Pacific region by 27
percent; and increased in the EMEA region by 9 percent;
- GAAP operating margin was 17 percent
for the quarter and non-GAAP operating margin was 27 percent for
the quarter, excluding the effects of amortization of intangible
assets primarily related to business combinations, stock-based
compensation expense and costs associated with the 2009
restructuring program;
- Cash flow from operations was a record
$190 million, compared with $134 million in the third quarter of
2009;
- Deferred revenue totaled $680 million,
compared to $556 million on September 30, 2009; and
- The company repurchased a total value
of $125 million or 1.9 million shares at an average price of
$59.43.
Financial Outlook for Fourth Quarter 2010
Citrix management expects to achieve the following results
during its fourth fiscal quarter of 2010 ending December 31,
2010:
- Net revenue is expected to be in the
range of $500 million to $510 million;
- Interest income is expected to be in
the range of $3 million to $4 million; and
- GAAP diluted earnings per share is
expected to be in the range of $0.47 to $0.49. Non-GAAP diluted
earnings per share is expected to be in the range of $0.59 to
$0.60, excluding $0.08 related to the effects of amortization of
intangible assets primarily related to business combinations, $0.10
related to the effects of stock-based compensation expenses,
certain charges recorded in conjunction with the company’s 2009
restructuring program, and $(0.05) to $(0.08) for the tax effects
related to these items and the effect of the differential between
GAAP and non-GAAP tax rates.
The above statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially.
Preliminary Financial Outlook for Fiscal Year 2011
The company’s preliminary financial outlook for the full fiscal
year 2011 is for net revenue to be in the range of $2.04 billion to
$2.07 billion, and for continued operational leverage to drive 50
basis point expansion in non-GAAP operating margin over the full
fiscal year 2010. Non-GAAP operating margin excludes the effects of
amortization of intangible assets primarily related to business
combinations, and stock-based compensation expense. In addition,
certain adjustments recorded in conjunction with the company’s 2009
restructuring program, if any, would also be excluded.
The above statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially.
Company, Product and Alliance Highlights
During the third quarter of 2010, Citrix announced:
- A new release of Citrix® XenDesktop®
that includes two new technologies, Citrix XenClient™ and Citrix
XenVault™, which make it easy for IT to incorporate mobile laptop
users into a unified enterprise desktop virtualization strategy
with unparalleled security and simplicity – including
corporate-owned laptops managed by IT as well as user-owned devices
used by contractors or employees in a BYOC (bring your own
computer) program.
- Citrix has partnered with Cisco to
provide the new Cisco Desktop Virtualization Solution with Citrix
XenDesktop to deliver a cost-effective, scalable and
high-performance solution for hosting, securing and optimizing the
delivery of virtual desktops and applications.
- Citrix and Microsoft introduced
V-Alliance, an expanded global partnership with Microsoft that
gives Citrix and Microsoft partners access to special sales and
marketing tools, as well as content, demo resources, promotions and
training to address customers’ desktop and server virtualization
needs.
- Acquired VMLogix, a leading provider of
virtualization management for private and public clouds, and
enhancements to its Citrix OpenCloud™ infrastructure platform that
extend the company’s leadership position as the most widely
deployed provider of virtualization and networking solutions for
the open cloud.
- Frost & Sullivan recognized Citrix
Online as the number two provider in revenue market share in the
worldwide web conferencing market and the fastest growing provider
among all top SaaS web conferencing brands in 2009. (Frost &
Sullivan, “World Web Conferencing Hosted Services Market,” Roopam
Jain, August 2010.)
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. In addition, an audio replay of the
conference call will be available for approximately 15 days by
dialing (800) 642-1687 or (706) 645-9291 (passcode required:
16880191).
About Citrix
Citrix Systems, Inc. (NASDAQ:CTXS) is a leading provider of
virtual computing solutions that help companies deliver IT as an
on-demand service. Founded in 1989, Citrix combines virtualization,
networking, and cloud computing technologies into a full portfolio
of products that enable virtual workstyles for users and virtual
datacenters for IT. More than 230,000 organizations worldwide rely
on Citrix to help them build simpler and more cost-effective IT
environments. Citrix partners with over 10,000 companies in more
than 100 countries. Annual revenue in 2009 was $1.61 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 Fourth
Quarter 2010, Preliminary Financial Outlook for Fiscal Year 2011
sections, 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, including Citrix’s
European markets; the success and growth of the company’s product
lines, including risks associated with successfully introducing new
products into Citrix’s distribution channels, including XenDesktop;
the company’s product concentration and its ability to develop and
commercialize new products and services, including XenDesktop and
its other virtualization offerings, while maintaining growth in its
core products, especially XenApp; 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; Citrix’s ability to develop server,
application and desktop virtualization products, and jointly market
those products with Microsoft; the introduction of new products by
competitors or the entry of new competitors into the markets for
Citrix’s products as the enterprise software landscape evolves;
failure to further develop and successfully market the technology
and products of acquired companies, including the possible failure
to achieve or maintain anticipated revenues and profits from
acquisitions; the management of anticipated future growth; the
recruitment and retention of qualified employees, including those
of acquired companies; disruptions due to changes in key personnel
and succession risks; risks in effectively controlling operating
expenses, including failure to manage unexpected expenses;
impairment of the value of the company’s investments; the effect of
new accounting pronouncements on revenue and expense recognition;
litigation, including litigation challenging our intellectual
property rights or alleging the infringement of the intellectual
property rights of third parties; changes in the company’s pricing
and licensing models, promotional programs and product mix, all of
which may impact Citrix’s revenue recognition, including with
respect to XenDesktop and SaaS business models, or those of its
competitors; charges in the event of the impairment of assets
acquired through business combinations and licenses; competition
and other risks associated with the markets for Citrix’s Web-based
access, collaboration and customer assistance services and for our
Web application delivery appliances; 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.
Use of Non-GAAP Financial Measures
In Citrix’s earnings release, conference call, slide
presentation or webcast, Citrix may use or discuss non-GAAP
financial measures as defined by SEC Regulation G. The GAAP
financial measure most directly comparable to each non-GAAP
financial measure used or discussed and a reconciliation of the
differences between each non-GAAP financial measure and the
comparable GAAP financial measure are included in this press
release after the condensed consolidated financial statements or
can be found on the Investor Relations page of the Citrix corporate
Web site at http://www.citrix.com/investors.
Citrix®, XenDesktop®, XenClient™, XenVault™, and OpenCloud™ are
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
Nine Months Ended
September 30,
September 30,
2010 2009 2010
2009 Revenues: Product licenses $ 151,758 $ 129,060 $
423,197 $ 370,652 License updates 174,128 151,041 505,684 448,573
Online services 91,660 78,878 265,821 226,208 Technical services
54,687 42,063 150,236 117,495
Total net revenues 472,233 401,042 1,344,938 1,162,928 Cost
of net revenues: Cost of product license revenues 19,325 13,191
47,125 36,191 Cost of services revenues 25,934 20,685 75,613 63,440
Amortization of product related intangible assets 12,539
11,542 37,314 35,064 Total cost of net
revenues 57,798 45,418 160,052 134,695 Gross margin 414,435 355,624
1,184,886 1,028,233 Operating expenses: Research and
development 87,399 68,865 244,644 215,062 Sales, marketing and
services 174,734 168,233 531,855 498,952 General and administrative
67,404 57,254 188,828 175,295 Amortization of other intangible
assets 3,334 5,111 11,267 15,268 Restructuring 87
61 922 22,827 Total operating expenses
332,958 299,524 977,516 927,404
Income from operations 81,477 56,100 207,370 100,829 Other
income, net 5,700 5,625 10,508
11,863 Income before income taxes 87,177 61,725 217,878 112,692
Income taxes (602 ) 8,302 35,193
9,823 Net income $ 87,779 $ 53,423 $ 182,685 $ 102,869
Earnings per common share – diluted $ 0.46 $ 0.29 $
0.96 $ 0.56 Weighted average shares outstanding – diluted
191,004 186,334 189,827 184,344
CITRIX SYSTEMS, INC.
Condensed Consolidated Balance
Sheets
(In thousands - unaudited)
September 30, 2010
December 31, 2009
ASSETS: Cash and cash equivalents $ 398,988 $ 261,443
Short-term investments 503,191 338,168 Accounts receivable, net
273,286 304,912 Other current assets, net 211,183
134,772 Total current assets 1,386,648 1,039,295 Long-term
investments 689,211 607,646 Property and equipment, net 247,208
247,703 Goodwill and other intangible assets, net 1,114,542
1,113,014 Other long-term assets 59,378 83,489 Total
assets $ 3,496,987 $ 3,091,147
LIABILITIES AND
STOCKHOLDERS’ EQUITY: Accounts payable and accrued expenses $
308,523 $ 278,850 Current portion of deferred revenues
580,739 555,514 Total current liabilities 889,262 834,364
Long-term portion of deferred revenues 99,434 63,336 Other
liabilities 6,697 4,940 Stockholders' equity
2,501,594 2,188,507 Total liabilities and stockholders’
equity $ 3,496,987 $ 3,091,147
CITRIX SYSTEMS, INC.
Condensed Consolidated Statement of
Cash Flows
(In thousands - unaudited)
Three Months
Ended
September
30, 2010
Nine Months
Ended
September
30, 2010
OPERATING ACTIVITIES Net Income $ 87,779 $ 182,685
Adjustments to reconcile net income to net cash provided by
operating activities: Amortization and depreciation 34,471 102,626
Stock-based compensation expense 30,833 83,906 Provision for
accounts receivable allowances 721 3,255 Other non-cash items
(3,186 ) (2,832 ) Total adjustments to reconcile net
income to net cash Activities 62,839 186,955 provided by operating
activities Changes in operating assets and liabilities, net of the
effects of acquisitions: Accounts receivable 46,109 25,802 Prepaid
expenses and other current assets (31,089 ) (74,134 ) Other assets
(36 ) 3,632 Deferred tax assets, net (344 ) 7,574 Accounts payable
and accrued expenses 30,810 41,945 Deferred revenues (6,190 )
61,324 Other liabilities 303 1,182
Total changes in operating assets and liabilities, net of the
effects of acquisitions 39,563 67,325
Net cash provided by operating activities 190,181 436,965
INVESTING ACTIVITIES Purchases of available-for-sale
investments, net (125,748 ) (280,287 ) Proceeds from trading
securities - 44,560 Purchases of property and equipment (23,029 )
(53,101 ) Purchases of other assets (2,500 ) (3,500 ) Cash paid for
acquisitions, net of cash acquired (10,445 ) (20,672 ) Cash paid
for licensing and core technology (2,647 ) (12,882 )
Net cash used in investing activities (164,369 ) (325,882 )
FINANCING ACTIVITIES Proceeds from issuance of common stock
under stock-based compensation plans 126,638 310,830 Excess tax
benefit from exercise of stock options 24,984 43,098 Stock
repurchases (124,962 ) (324,906 ) Other (99 ) (4,237
) Net cash provided by financing activities 26,561
24,785 Effect of exchange rate changes on cash and
cash equivalents 1,911 1,677 Change in cash and cash equivalents
54,284 137,545 Cash and cash
equivalents at beginning of period 344,704
261,443 Cash and cash equivalents at end of period $ 398,988
$ 398,988
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 business combinations,
stock-based compensation expenses, charges associated with the
Company’s 2009 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
gross 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
acquired intangible assets and certain stock-based compensation
expenses and the related tax effects that are primarily related to
business combinations, 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.
• The charges incurred in conjunction with the Company's 2009
restructuring program, which relate to reductions in headcount and
exit costs associated with consolidating certain 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.
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 of intangible assets primarily
related to new business combinations, 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
September 30,
2010 GAAP operating margin 17.3 % Add: stock-based
compensation 6.5 % Add: amortization of product related intangible
assets 2.7 % Add: amortization of other intangible assets 0.7 %
Add: restructuring charges 0.0 % Non-GAAP operating margin 27.2 %
Three Months Ended September 30, 2010
2009 GAAP net income $ 87,779 $ 53,423 Add:
stock-based compensation 30,833 27,892 Add: amortization of product
related intangible assets 12,539 11,542 Add: amortization of other
intangible assets 3,334 5,111 Add: restructuring charges 87 61
Less: Differential between the GAAP and non-GAAP tax rates and tax
effects related to above items (16,330 ) (17,727 )
Non-GAAP net income $ 118,242 $ 80,302
Three Months Ended September
30,
2010 2009 GAAP earnings
per share – diluted $ 0.46 $ 0.29 Add: stock-based compensation
0.16 0.15 Add: amortization of product related intangible assets
0.07 0.06 Add: amortization of other intangible assets 0.02 0.03
Add: restructuring charges - - Less: Differential between the GAAP
and non-GAAP tax rates and tax effects related to above items tax
effects related to above items (0.09 ) (0.10 )
Non-GAAP earnings per share – diluted $ 0.62 $ 0.43
CITRIX SYSTEMS, INC.
Forward Looking Guidance
For the Three Months Ended
December 31,
2010 GAAP earnings per share - diluted $0.47 to $0.49 Add:
Adjustments to exclude the effects of amortization of intangible
assets 0.08 Add: Adjustments to exclude the effects of expenses
related to stock-based compensation 0.10 Add: restructuring charges
related to 2009 - Less: Differential between the GAAP and non-GAAP
tax rates and tax effects related to above items (0.05) to (0.08)
Non-GAAP earnings per share - diluted $0.59 to $0.60
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