Quarterly revenue of $843 million up 6 percent
year over year
Quarterly GAAP operating margin of 18 percent;
non-GAAP operating margin of 28 percent
Quarterly GAAP diluted EPS of $0.77; non-GAAP
diluted EPS of $1.20
Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial
results for the second quarter of fiscal year 2016 ended June 30,
2016.
Financial Results
For the second quarter of fiscal year 2016, Citrix achieved
revenue of $843 million, compared to $797 million in the second
quarter of fiscal year 2015, representing 6 percent revenue
growth.
GAAP Results
Net income for the second quarter of fiscal year 2016 was $121
million, or $0.77 per diluted share, compared to $103 million, or
$0.64 per diluted share, for the second quarter of fiscal year
2015. GAAP net income includes net tax benefits of approximately
$21 million, or $0.13 per diluted share, for the second quarter of
fiscal year 2015 primarily related to the closing of audits with
the IRS for certain tax years. In addition, net income for the
second quarter of fiscal year 2016 includes $14 million in
separation costs associated with the previously announced spin-off
of the GoTo business.
Non-GAAP Results
Non-GAAP net income for the second quarter of fiscal year 2016
was $188 million, or $1.20 per diluted share, compared to $163
million, or $1.00 per diluted share for the second quarter of
fiscal year 2015. Non-GAAP net income for the second quarter of
fiscal years 2016 and 2015 excludes the effects of stock-based
compensation expense, amortization of acquired intangible assets,
amortization of debt discount, restructuring charges, and the tax
effects related to these items. Non-GAAP net income for the second
quarter of fiscal year 2016 also excludes separation costs
associated with the previously announced spin-off of the GoTo
business and the tax effect related to this item.
“I am very encouraged by our performance this quarter. It’s a
clear signal that our renewed focus on the strategy to deliver the
world’s best integrated technology services for secure delivery of
apps and data is resonating well with our customers and the
market,” said Kirill Tatarinov, president and CEO of Citrix. “Our
restructuring efforts and continued progress on creating a ‘new
Citrix’ are producing strong results.”
Q2 Financial Summary
In reviewing the results for the second quarter of fiscal year
2016 compared to the second quarter of fiscal year 2015:
- Product and license revenue increased 7
percent;
- Software as a service revenue increased
14 percent;
- Revenue from license updates and
maintenance increased 3 percent;
- Professional services revenue, which is
comprised of consulting, product training and certification,
decreased 6 percent;
- Net revenue decreased in the Pacific
region by 9 percent, increased in the Americas region by 11
percent, and decreased in the EMEA region by less than 2
percent;
- Deferred revenue totaled $1.6 billion
as of June 30, 2016, compared to $1.5 billion as of June 30, 2015,
an increase of 6 percent; and
- Cash flow from operations was $228
million for the second quarter of fiscal year 2016, compared with
$201 million for the second quarter of fiscal year 2015.
During the second quarter of fiscal year 2016:
- GAAP gross margin was 83 percent.
Non-GAAP gross margin was 85 percent, excluding the effects of
amortization of acquired product related intangible assets and
stock-based compensation expense; and
- GAAP operating margin was 18 percent.
Non-GAAP operating margin was 28 percent, excluding the effects of
stock-based compensation expense, amortization of acquired
intangible assets, separation costs related to the previously
announced spin-off of the GoTo business and costs associated with
the 2015 restructuring program.
Financial Outlook for Third Quarter 2016
Citrix management expects to achieve the following results at
the consolidated level for the third quarter of fiscal year 2016
ending September 30, 2016:
- Net revenue is targeted to be in the
range of $820 million to $830 million.
- GAAP diluted earnings per share is
targeted to be in the range of $0.71 to $0.74. Non-GAAP diluted
earnings per share is targeted to be in the range of $1.18 to
$1.20, excluding $0.29 related to the effects of stock-based
compensation expenses, $0.15 related to the effects of amortization
of acquired intangible assets, $0.05 related to the effects of
amortization of debt discount, $0.09 related to separation costs
associated with the previously announced spin-off of the GoTo
business, $0.03 related to restructuring charges and $0.12 to $0.17
for the tax effects related to these items.
Financial Outlook for Fiscal Year 2016
Citrix management expects to achieve the following results at
the consolidated level for the fiscal year ending December 31,
2016:
- Net revenue is targeted to be in the
range of $3.37 billion to $3.39 billion.
- GAAP diluted earnings per share is
targeted to be in the range of $2.86 to $2.99. Non-GAAP diluted
earnings per share is targeted to be in the range of $5.00 to
$5.10, excluding $1.15 related to the effects of stock-based
compensation expenses, $0.57 related to the effects of amortization
of acquired intangible assets, $0.21 related to the effects of
amortization of debt discount, $0.64 related to separation costs
associated with the previously announced spin-off of the GoTo
business, $0.35 related to restructuring charges and $0.68 to $0.91
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.
Second Quarter Earnings Conference Call
Citrix will host a conference call today at 5:15 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) aims to power a world where
people, organizations and things are securely connected and
accessible to make the extraordinary possible. Its technology
makes the world’s apps and data secure and easy to access,
empowering people to work anywhere and at any time. Citrix provides
a complete and integrated portfolio of Workspace-as-a-Service,
application delivery, virtualization, mobility, network delivery
and file sharing solutions that enables IT to ensure critical
systems are securely available to users via the cloud or on-premise
and across any device or platform. With annual revenue in 2015 of
$3.28 billion, Citrix solutions are in use by more than 400,000
organizations and over 100 million users globally. 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, 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 transitions in key personnel, including our CEO,
and succession risk; the failure to complete the separation of the
GoTo business and proposed Reverse Morris Trust transaction with
LogMeIn on a timely basis or at all, and the related disruptions to
management and the GoTo business; risks associated with the future
performance of core Citrix if the transaction is completed, failure
to achieve the expected strategic, operational and competitive
benefits of the proposed separation of the GoTo business, and the
effect of the separation on Citrix, its shareholders, customers,
partners and employees; the impact of the global economy,
volatility in global stock markets, foreign exchange rate
volatility 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, mobility and networking
products and collaboration services; the company's ability to
develop, maintain a high level of quality and commercialize new
products and services, including its enterprise mobility products
and cloud services, while growing its established virtualization
and networking products and services; disruptions to execution due
to Citrix's restructuring programs and actions to be taken as a
result of its operational review; 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 large enterprise accounts and reliance on large service provider
customers; 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 achieve
anticipated cost savings from the restructuring programs and other
cost savings initiatives; ability to effectively meet our domestic
cash requirements and 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 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
June 30,
Six Months Ended
June 30,
2016 2015 2016
2015 Revenues: Product and licenses $219,618
$204,974 $421,823 $388,255 Software as a service 201,646 177,584
399,494 346,948 License updates and maintenance 386,864 377,161
779,882 748,458 Professional services 34,852 37,040
67,459 73,900 Total net revenues 842,980 796,759 1,668,658
1,557,561 Cost of net revenues: Cost of product and licenses
revenues 33,623 24,290 65,018 48,974 Cost of services and
maintenance revenues 95,029 89,733 187,611 178,923 Amortization of
product related intangible assets 15,670 18,728
30,785 37,460 Total cost of net revenues 144,322 132,751
283,414 265,357 Gross margin 698,658 664,008 1,385,244 1,292,204
Operating expenses: Research and development 124,761 140,203
248,720 284,844 Sales, marketing and services 298,449 296,258
591,197 602,663 General and administrative 97,136 79,872 187,915
161,898 Amortization of other intangible assets 7,286 10,992 14,680
20,433 Restructuring 4,016 14,534 50,081 48,485 Separation 13,923
- 28,610 - Total operating expenses 545,571
541,859 1,121,203 1,118,323 Income from
operations 153,087 122,149 264,041 173,881 Interest income
4,164 2,841 7,915 5,675 Interest expense 11,196 11,001 22,351
22,121 Other expense, net (272) (3,262) (1,275)
(11,111) Income before income taxes 145,783 110,727 248,330
146,324 Income tax expense 24,885 7,452 43,969
14,162 Net income $120,898 $103,275 $204,361
$132,162 Earnings per common share – diluted $0.77
$0.64 $1.31 $0.82 Weighted average shares
outstanding – diluted 156,666 162,027 156,258
161,674
CITRIX SYSTEMS, INC. Condensed
Consolidated Balance Sheets (In thousands - unaudited)
June 30, 2016
December 31, 2015(*)
ASSETS: Cash and cash equivalents $666,232 $368,518
Short-term investments 684,599 502,852 Accounts receivable, net
504,420 669,276 Inventories, net 11,509 10,521 Prepaid expenses and
other current assets 135,031 132,784 Total current assets
2,001,791 1,683,951 Long-term investments 854,486 891,964
Property and equipment, net 365,804 373,817 Goodwill 1,962,169
1,962,722 Other intangible assets, net 260,668 283,418 Deferred tax
assets, net 214,505 215,196 Other assets 54,791 56,449 Total
assets $5,714,214 $5,467,517
LIABILITIES AND
STOCKHOLDERS’ EQUITY: Accounts payable 72,639 95,396 Accrued
expenses and other current liabilities 315,259 317,468 Income taxes
payable 27,682 18,351 Current portion of deferred revenues
1,211,103 1,249,754 Total current liabilities 1,626,683
1,680,969 Long-term portion of deferred revenues 425,979
414,314 Convertible notes 1,329,478 1,311,071 Other liabilities
90,029 87,717 Stockholders’ equity: Common stock 301 299
Additional paid-in capital 4,697,059 4,566,919 Retained earnings
3,678,986 3,474,625 Accumulated other comprehensive loss (21,900)
(28,527) Less – common stock in treasury, at cost (6,112,401)
(6,039,870) Total stockholders’ equity 2,242,045
1,973,446 Total liabilities and stockholders’ equity $5,714,214
$5,467,517
(*) During the first quarter of fiscal 2016 we adopted an
accounting standard update on the presentation of debt issuance
costs. The new guidance requires debt issuance costs related to a
recognized debt liability to be presented in the balance sheet as a
direct deduction from the carrying amount of the debt liability on
the condensed consolidated balance sheet. The December 31, 2015
condensed consolidated balance sheet was retrospectively adjusted
to reflect this change.
CITRIX SYSTEMS, INC. Condensed Consolidated Statement of
Cash Flows (In thousands – unaudited)
Six Months Ended
June 30, 2016
OPERATING ACTIVITIES Net Income $204,361 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other 149,019 Stock-based
compensation expense 87,920 Deferred income tax benefit (9,508)
Excess tax benefit from stock-based compensation (10,308)
Effects of exchange rate changes on
monetary assets and liabilities denominated
in foreign currencies
(2,242) Other non-cash items
liabilities demo
2,819 Total adjustments to reconcile net income to net cash 217,700
provided by operating activities Changes in operating assets and
liabilities, net of the effects of acquisitions: Accounts
receivable 164,000 Inventories (1,463) Prepaid expenses and other
current assets (15,565) Other assets 1,790 Income taxes, net 34,399
Accounts payable (29,020) Accrued expenses and other current
liabilities 17,238 Deferred revenues (22,316) Other liabilities
(2,797) Total changes in operating assets and liabilities, net of
the effects of acquisitions 146,266 Net cash provided by operating
activities 568,327
INVESTING ACTIVITIES Purchases of
available-for-sale investments (907,498) Proceeds from sales of
available-for-sale investments 446,932 Proceeds from maturities of
available-for-sale investments 322,100 Purchases of property and
equipment (76,677) Cash paid for licensing agreements and
technology (24,836) Other 544 Net cash used in investing activities
(239,435)
FINANCING ACTIVITIES Proceeds from issuance of
common stock under stock-based compensation plans 30,559 Excess tax
benefit from stock-based compensation 10,308 Stock repurchases, net
(28,689) Cash paid for tax withholding on vested stock awards
(43,842) Net cash used in financing activities (31,664) Effect of
exchange rate changes on cash and cash equivalents 486 Change in
cash and cash equivalents 297,714 Cash and cash equivalents at
beginning of period 368,518 Cash and cash equivalents at end of
period $666,232
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 programs,
significant litigation charges or benefits, separation costs 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 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. The Company does not engage in
restructuring activities in the ordinary course of business. 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.
• 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.
• Separation costs represent transaction and
transition costs associated with preparing businesses for
independent operations consisting primarily of financial advisory
fees, legal fees, accounting fees, tax services and information
systems infrastructure duplication. These charges are not
anticipated to be ongoing costs; and, thus, are outside of the
normal operations of the Company's business. 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 programs, significant litigation charges or
benefits, separation costs 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
Ended June 30, 2016
GAAP gross margin 82.9% Add: stock-based compensation 0.1 Add:
amortization of product related intangible assets 1.9 Non-GAAP
gross margin 84.9%
Three Months
Ended June 30, 2016
GAAP operating margin 18.2% Add: stock-based compensation 5.4 Add:
amortization of product related intangible assets 1.9 Add:
amortization of other intangible assets 0.9 Add: separation costs
1.6 Add: restructuring charges 0.5 Non-GAAP operating margin 28.5%
Three Months Ended June 30,
2016 2015 GAAP net income $120,898
$103,275 Add: stock-based compensation 45,823 30,792 Add:
amortization of product related intangible assets 15,670 18,728
Add: amortization of other intangible assets 7,286 10,992 Add:
amortization of debt discount 8,222 7,980 Add: separation costs
13,923 - Add: restructuring charges 4,015 14,534 Less: tax effects
related to above items (27,350) (23,568) Non-GAAP net income
$188,487 $162,733
Three Months Ended June 30,
2016 2015 GAAP earnings per share – diluted
$0.77 $0.64 Add: stock-based compensation 0.29 0.19 Add:
amortization of product related intangible assets 0.10 0.11 Add:
amortization of other intangible assets 0.05 0.07 Add: amortization
of debt discount 0.05 0.05 Add: separation costs 0.09 - Add:
restructuring charges 0.03 0.09 Less: tax effects related to above
items (0.18) (0.15) Non-GAAP earnings per share – diluted
$1.20 $1.00
Forward Looking Guidance
For the Three
Months Ended
September 30,
For the Twelve
Months Ended
December 31,
2016 2016 GAAP earnings per share – diluted
$0.71 to $0.74 $2.86 to $2.99 Add: adjustments to exclude the
effects of amortization of intangible assets 0.15 0.57 Add:
adjustments to exclude the effects of expenses related to
stock-based compensation 0.29 1.15 Add: adjustments to exclude the
effects of amortization of debt discount 0.05 0.21 Add: adjustments
to exclude the effects of separation costs 0.09 0.64 Add:
adjustments to exclude the effects of restructuring charges 0.03
0.35 Less: tax effects related to above items (0.12) to (0.17)
(0.68) to (0.91) Non-GAAP earnings per share – diluted $1.18
to $1.20 $5.00 to $5.10
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160726006481/en/
Citrix Systems, Inc.For media inquiries:Eric Armstrong,
954-267-2977eric.armstrong@citrix.comorFor investor
inquiries:Eduardo Fleites,
954-229-5758eduardo.fleites@citrix.com
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