Quarterly revenue of $732 million up 6%
year-over-year
Quarterly subscription revenue of $112 million
up 37% year-over-year
Quarterly GAAP diluted EPS of $1.08; non-GAAP
diluted EPS of $1.40
Cash flow from operations of $301 million up
18% year-over-year
Board of directors declares $0.35 per share
dividend and authorizes $750 million increase to share repurchase
program
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the third quarter of fiscal year 2018 ended
September 30, 2018.
Financial Results
For the third quarter of fiscal year 2018, Citrix achieved
revenue of $732 million, compared to $691 million in the third
quarter of fiscal year 2017, representing 6 percent revenue
growth.
GAAP Results
Net income for the third quarter of fiscal year 2018 was $159
million, or $1.08 per diluted share, compared to $127 million, or
$0.82 per diluted share, for the third quarter of fiscal year 2017.
Net income for the third quarter of fiscal year 2018 includes a tax
benefit of approximately $23 million, or $0.16 per diluted share,
related to the estimated transition tax on deemed repatriation of
deferred foreign income. Net income for the third quarter of fiscal
year 2017 includes restructuring charges of approximately $9
million, or $0.06 per diluted share, primarily for facility closing
costs and a tax benefit of approximately $8 million, or $0.05 per
diluted share, related to the expiration of the statute of
limitation for a prior domestic tax year.
Non-GAAP Results
Non-GAAP net income for the third quarter of fiscal year 2018
was $197 million, or $1.40 per diluted share, compared to $186
million, or $1.22 per diluted share for the third quarter of fiscal
year 2017. Non-GAAP net income for the third quarter of fiscal
years 2018 and 2017 excludes the effects of stock-based
compensation expense, amortization of intangible assets,
amortization of debt discount, restructuring credits and charges
and the tax effects related to these items. Non-GAAP net income for
the third quarter of fiscal year 2018 also excludes a tax benefit
related to the estimated transition tax on deemed repatriation of
deferred foreign income. Non-GAAP net income per diluted share for
the third quarter of fiscal years 2018 and 2017 reflects the
anti-dilutive impact of the company’s convertible note hedges.
In addition to quarterly financial results, Citrix also
announced that its Board of Directors declared a $0.35 per share
dividend payable December 21, 2018 to all shareholders of record as
of the close of business on December 7, 2018 and authorized it to
repurchase up to an additional $750 million of its common stock. As
of September 30, 2018, approximately $398 million remained for
repurchases from previous authorizations.
“Our solid performance this quarter was yet another positive
step as we continue to execute on our transformation as a company,”
said David Henshall, president and CEO. “We’ve doubled revenue
growth rates from a year ago, and we’ve delivered a lot of upside
against margin and EPS goals. Organizations are looking to operate
in a multi-cloud, hybrid-cloud world, and Citrix is uniquely
positioned to provide the simple, secure, and unified solutions
they need to address these challenges.”
Q3 Financial Summary
The results for the third quarter of fiscal year 2018 compared
to the third quarter of fiscal year 2017 are as follows:
- Subscription revenue increased 37
percent;
- Product and license revenue increased 1
percent;
- Support and services revenue increased
2 percent; and
- Net revenue increased in the EMEA
region by 7 percent; increased in the Americas region by 6 percent;
and increased in the APJ region by 2 percent.
During the third quarter of fiscal year 2018 (1):
- GAAP gross margin was 86 percent and
non-GAAP gross margin was 88 percent;
- GAAP operating margin was 23 percent
and non-GAAP operating margin was 32 percent;
- Subscription revenue as a percentage of
total revenue was 15 percent;
- Deferred and unbilled revenue totaled
$1.9 billion as of September 30, 2018, compared to $1.7
billion as of September 30, 2017, an increase of 11 percent;
- Cash flow from operations was $301
million; and
- The company repurchased approximately
1.1 million shares during the third quarter.
Financial Outlook for Fiscal Year 2018(1)
Citrix management expects to achieve the following results for
fiscal year 2018:
- Net revenue is targeted to be in the
range of $2.95 billion to $2.97 billion.
- GAAP operating margin is targeted to be
in the range of 21 percent to 22 percent, and
- Non-GAAP operating margin is targeted
to be in the range of 30.5 percent to 31.5 percent.
- GAAP diluted earnings per share is
targeted to be in the range of $3.81 to $3.88, and
- Non-GAAP diluted earnings per share is
targeted to be in the range of $5.55 to $5.60.
Preliminary Financial Outlook for Fiscal Year 2019(1)
The company's current preliminary outlook for the full fiscal
year 2019 is for net revenue to grow by approximately 4 percent. In
addition, Citrix management is targeting GAAP diluted earnings per
share to be approximately $3.93 and non-GAAP diluted earnings per
share to be approximately $6.00.
The above statements are based on current targets. These
statements are forward-looking, and actual results may differ
materially.
(1) A reconciliation of GAAP to non-GAAP measures has been
provided in the financial statement tables included in this press
release. An explanation of these measures is also included below
under the heading “Reconciliation of Non-GAAP Financial Measures to
Comparable U.S. GAAP Measures.”
Third Quarter Earnings Conference Call
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 for approximately 30 days on the Investor
Relations section of the Citrix corporate website at http://www.citrix.com/investors.
About Citrix
Citrix (NASDAQ:CTXS) is powering a better way to work with
unified workspace, networking, and analytics solutions that help
organizations unlock innovation, engage customers, and boost
productivity, without sacrificing security. With Citrix, users get
a seamless work experience and IT has a unified platform to secure,
manage, and monitor diverse technologies in complex cloud
environments. Citrix solutions are in use by more than 400,000
organizations including 99 percent of the Fortune 100 and 98
percent of the Fortune 500. Learn more at www.citrix.com.
For Citrix Investors
This release contains forward-looking statements that 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 CEO and president, statements
contained in the Financial Outlook sections and under the Non-GAAP
Financial Measures Reconciliation section, statements regarding the
amount and timing of any future dividends or share repurchases, 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, risks associated with the success and growth of the
Company's product lines, including competition, demand and pricing
dynamics and the impact of our transition to new business models,
including the subscription sales mix and its impact on revenue and
earnings; the impact of the global economy, volatility in global
stock markets, foreign exchange rate volatility and uncertainty in
the IT spending environment; the risks associated with maintaining
the security of our products, services, supply chain and networks,
including securing customer data stored by our services; changes in
Citrix’s pricing and licensing models, promotional programs and
product mix, all of which may impact Citrix's revenue recognition;
changes to Citrix’s product and service naming and branding;
increased competition in markets for Citrix's virtualization and
networking products and secure data services and the introduction
of new products by competitors or the entry of new competitors into
these markets; the concentration of customers in Citrix’s
networking business; seasonal fluctuations in the Company's
business; failure to successfully partner with key distributors,
resellers, system integrators, service providers and strategic
partners and the Company's reliance on the success of those
partners for the marketing and distribution of the Company's
products; the size, timing and recognition of revenue from
significant orders; conversion of unbilled revenue and backlog into
future revenue; the recruitment and retention of qualified
employees in an increasingly competitive labor market; transitions
in key personnel and succession risk; risks in effectively
controlling operating 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
impact of U.S. tax reform, including unanticipated transition
taxes, changes in valuation of tax assets and liabilities,
non-renewal of tax credits or exposure to additional tax
liabilities; the ability of Citrix to make suitable acquisitions on
favorable terms in the future; risks associated with Citrix's
acquisitions and divestitures, 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, and disruption to our
ongoing business and diversion of management's attention from our
ongoing business; changes in the amounts or frequency of share
repurchases or dividends; litigation and disputes, including
challenges to our intellectual property rights or allegations of
infringement of the intellectual property rights of others; charges
in the event of a write-off or impairment of acquired assets,
underperforming businesses, investments or licenses; and other
risks detailed in Citrix'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 trademark or registered trademark 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,
2018 2017 2018
2017 Revenues: Subscription $ 111,539 $
81,373 $ 325,493 $ 225,060 Product and license 170,952 168,716
523,707 529,990 Support and services 449,985 440,836
1,322,833 1,291,779 Total net
revenues 732,476 690,925 2,172,033
2,046,829 Cost of net revenues: Cost of
subscription, support and services 64,717 61,096 195,625 184,922
Cost of product and license revenues 27,571 27,277 91,150 89,723
Amortization of product related intangible assets 11,629
17,564 34,177 43,062
Total cost of net revenues 103,917 105,937
320,952 317,707 Gross margin 628,559
584,988 1,851,081
1,729,122 Operating expenses: Research and development
111,557 107,113 323,050 316,478 Sales, marketing and services
262,562 249,499 800,505 764,564 General and administrative 86,084
79,378 227,151 237,033 Amortization of other intangible assets
4,063 3,733 11,748 11,071 Restructuring (486 ) 8,552
13,138 18,678 Total operating expenses
463,780 448,275 1,375,592
1,347,824 Income from operations 164,779 136,713 475,489
381,298 Interest income 10,896 7,873 29,029 19,045 Interest expense
(19,962 ) (11,726 ) (60,840 ) (35,286 ) Other income (expense), net
3,702 981 (1,847 ) 3,166
Income from continuing operations before income taxes 159,415
133,841 441,831 368,223 Income tax expense 558 7,121
31,882 62,349 Income from
continuing operations 158,857 126,720 409,949 305,874 (Loss) from
discontinued operations, net of income taxes — —
— (42,704 ) Net income $ 158,857
$ 126,720 $ 409,949 $ 263,170
Diluted earnings (loss) per share: Income from continuing
operations $ 1.08 $ 0.82 $ 2.80 $ 1.96 (Loss) from discontinued
operations — — — (0.28 )
Diluted net earnings per share: $ 1.08 $ 0.82 $ 2.80 $ 1.68
Weighted average shares
outstanding - diluted 147,568 154,627
146,554 156,384
CITRIX SYSTEMS,
INC. Condensed Consolidated Balance Sheets
(In thousands - unaudited)
September 30, 2018 December
31, 2017 ASSETS Cash and cash equivalents $
1,205,182 $ 1,115,130 Short-term investments, available-for-sale
628,696 632,516 Accounts receivable, net 413,509 712,535
Inventories, net 21,386 13,912 Prepaid expenses and other current
assets 229,188 147,330 Total current assets
2,497,961 2,621,423 Long-term investments, available-for-sale
657,727 984,328 Property and equipment, net 247,544 252,932
Goodwill 1,661,264 1,614,494 Other intangible assets, net 128,297
141,952 Deferred tax assets, net 127,703 152,362 Other assets
116,031 52,685 Total assets $ 5,436,527
$ 5,820,176
LIABILITIES, TEMPORARY EQUITY,
AND STOCKHOLDERS' EQUITY Accounts payable $ 71,110 $ 66,893
Accrued expenses and other current liabilities 293,883 277,679
Income taxes payable 29,918 34,033 Current portion of convertible
notes 1,415,970 — Current portion of deferred revenues 1,212,280
1,308,474 Total current liabilities 3,023,161
1,687,079 Long-term portion of deferred revenues 467,722 555,769
Long-term debt 741,551 2,127,474 Long-term income taxes payable
286,695 335,457 Other liabilities 144,892 121,936 Temporary equity
from convertible notes 19,286 — Stockholders' equity: Common stock
308 306 Additional paid-in capital 5,193,928 4,883,670 Retained
earnings 4,052,211 3,509,484 Accumulated other comprehensive loss
(18,291 ) (10,806 ) 9,228,156 8,382,654 Less - common stock
in treasury, at cost (8,474,936 ) (7,390,193 ) Total
stockholders' equity 753,220 992,461 Total
liabilities, temporary equity and stockholders' equity $ 5,436,527
$ 5,820,176
CITRIX SYSTEMS, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands - unaudited)
Nine Months Ended September 30, 2018
OPERATING ACTIVITIES Net Income $ 409,949 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other 161,582 Stock-based
compensation expense 144,306 Deferred income tax expense 2,508
Effects of exchange rate changes on monetary assets and liabilities
denominated in foreign currencies 7,226 Other non-cash items 5,558
Total adjustments to reconcile net income to net cash
provided by operating activities 321,180 Changes in
operating assets and liabilities, net of the effects of
acquisitions: Accounts receivable 296,286 Inventories (7,549 )
Prepaid expenses and other current assets (51,726 ) Other assets
(17,540 ) Income taxes, net (83,273 ) Accounts payable 2,945
Accrued expenses and other current liabilities 40,503 Deferred
revenues (85,072 ) Other liabilities 3,233 Total changes in
operating assets and liabilities, net of the effects of
acquisitions 97,807 Net cash provided by operating
activities 828,936
INVESTING ACTIVITIES Purchases of
available-for-sale investments (435,876 ) Proceeds from sales of
available-for-sale investments 442,360 Proceeds from maturities of
available-for-sale investments 320,259 Purchases of property and
equipment (54,289 ) Cash paid for acquisitions, net of cash
acquired (65,983 ) Cash paid for licensing agreements and
technology (2,140 ) Other 1,399 Net cash provided by
investing activities 205,730
FINANCING ACTIVITIES
Proceeds from issuance of common stock under stock-based
compensation plans 164 Repayment of acquired debt (5,674 ) Stock
repurchases, net (881,153 ) Cash paid for tax withholding on vested
stock awards (53,589 ) Net cash used in financing activities
(940,252 ) Effect of exchange rate changes on cash and cash
equivalents (4,362 ) Change in cash and cash equivalents
90,052 Cash and cash equivalents at beginning of period
1,115,130 Cash and cash equivalents at end of period $
1,205,182
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 intangible assets and
debt discount, stock-based compensation expenses and charges
associated with the Company’s restructuring programs, the related
tax effect of those items, and charges or benefits related to the
implementation of U.S. tax reform. The income tax effect on
non-GAAP items is calculated based upon the tax laws and statutory
income tax rates applicable in the tax jurisdiction(s) of the
underlying non-GAAP adjustment. The Company also reflects the
effect of anti-dilutive convertible note hedges in the number of
shares used in non-GAAP diluted earnings per share. These non-GAAP
financial measures are presented on a continuing operations basis.
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 of intangible assets and 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 of intangible assets 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 Company has engaged in various
restructuring activities over the past several years that have
resulted in costs associated with reductions in headcount,
consolidation of leased facilities and related costs. Each
restructuring activity has been a discrete event based on a unique
set of business objectives or circumstances, and each has differed
from the others in terms of its operational implementation,
business impact and scope. While the Company’s operations
previously benefited from the employees and facilities covered by
the various restructuring charges, these employees and facilities
have benefited different parts of the Company’s business in
different ways, and the amount of these charges has varied
significantly from period to period. 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.
- The Company has convertible note hedges
in place to offset potential dilution from the embedded conversion
feature in its convertible notes. For GAAP diluted earnings per
share purposes, the Company cannot reflect the anti-dilutive impact
of the convertible note hedges. The Company believes that
reflecting the anti-dilutive impact of the convertible note hedges
in non-GAAP diluted earnings per share provides investors with
useful information in evaluating the financial performance of the
Company on a per share basis.
- Tax charges or benefits resulting from
the enactment of U.S. tax reform are not anticipated to be ongoing
costs; and, thus, are outside of the normal operations of the
Company’s business. Therefore, the Company 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.
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 Ended
September 30, 2018
GAAP gross margin 85.8% Add: stock-based compensation 0.3 Add:
amortization of product related intangible assets 1.6 Non-GAAP
gross margin 87.7%
Three Months Ended
September 30, 2018
GAAP operating margin 22.5% Add: stock-based compensation 7.2 Add:
amortization of product related intangible assets 1.6 Add:
amortization of other intangible assets 0.6 Add: restructuring
charges (0.1) Non-GAAP operating margin 31.8%
Three Months Ended September 30, 2018
2017 GAAP net income $158,857 $126,720 Add:
stock-based compensation 52,739 51,732 Add: amortization of product
related intangible assets 11,629 17,564 Add: amortization of other
intangible assets 4,063 3,733 Add: amortization of debt discount
8,836 8,536 Add: restructuring charges (486 ) 8,552 Less: tax
effects related to above items (14,879 ) (30,690 ) Less: benefit
from transition tax
(23,324
)
- Non-GAAP net income $197,435 $186,147
Three Months Ended September 30,
2018 2017
Number of shares used in diluted earnings
per share
calculations:
GAAP weighted average shares outstanding 147,568 154,627
Less: effect of convertible note hedges (6,999 ) (1,484 )
Non-GAAP weighted average shares outstanding 140,569
153,143
Three Months Ended September
30, 2018 2017 GAAP earnings per share –
diluted $1.08 $0.82 Add: stock-based compensation 0.36 0.34
Add: amortization of product related intangible assets 0.08 0.12
Add: amortization of other intangible assets 0.03 0.02 Add:
amortization of debt discount 0.06 0.06 Add: restructuring charges
— 0.06 Less: tax effects related to above items (0.10) (0.20) Less:
benefit from transition tax (0.16) — Add: effect of convertible
note hedges 0.05 — Non-GAAP earnings per share - diluted
$1.40 $1.22
Forward Looking Guidance
For the Twelve
Months Ended
December 31,
2018 GAAP earnings per share – diluted $3.81 to $3.88 Add:
adjustments to exclude the effects of amortization of intangible
assets 0.44 Add: adjustments to exclude the effects of expenses
related to stock-based
compensation
1.46 Add: adjustments to exclude the effects of amortization of
debt discount 0.25 Add: adjustments to exclude the effects of
restructuring charges 0.11 Less: tax effects related to above items
(0.69 to 0.81) Add: effect of convertible note hedges 0.22 Non-GAAP
earnings per share – diluted $5.55 to $5.60
For the Twelve
Months Ended
December 31, 2018
GAAP operating margin 21.0% to 22.0% Add: stock-based compensation
6.9 Add: amortization of product related intangible assets 2.1 Add:
restructuring charges 0.5 Non-GAAP operating margin 30.5% to 31.5%
For the Twelve
Months Ended
December 31,
2019 GAAP earnings per share – diluted $3.93 Add:
adjustments to exclude the effects of amortization of intangible
assets 0.29 Add: adjustments to exclude the effects of expenses
related to stock-based
compensation
1.94 Add: adjustments to exclude the effects of amortization of
debt discount 0.08 Less: tax effects related to above items (0.49)
Add: effect of convertible note hedges 0.25 Non-GAAP earnings per
share - diluted $6.00
Note: Non-GAAP diluted earnings per share does not include any
additional impacts related to our convertible note warrants, which
cannot be calculated without unreasonable efforts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181024005870/en/
Citrix Systems, Inc.For media inquiries:Eric Armstrong,
954-267-2977eric.armstrong@citrix.comorFor investor
inquiries:Dawn Morris, 954-229-5990dawn.morris@citrix.com
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