Jul

282010

Citrix Reports Second Quarter Financial Results

Quarterly revenue of $458 million GAAP operating margin of 16% Non-GAAP operating margin of 26% Deferred Revenue increased by $50 million

SANTA CLARA, Calif. - Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial results for the second quarter ended June 30, 2010.

FINANCIAL RESULTS

In the second quarter of fiscal 2010, Citrix achieved revenue of $458 million, compared to $393 million in the second quarter of fiscal 2009, representing 17 percent revenue growth.

GAAP Results
Net income for the second quarter of fiscal 2010 was $48 million, or $0.25 per diluted share, compared to $43 million, or $0.23 per diluted share, for the second quarter of fiscal 2009.  Net income for the second quarter of fiscal 2010 includes approximately $13 million in income tax expense, or approximately $0.07 per diluted share, for the settlement in principle the company reached with the Internal Revenue Service related to transfer pricing issues as previously announced.

Non-GAAP Results
Non-GAAP net income in the second quarter of fiscal 2010 was $78 million, or $0.41 per diluted share, compared to $72 million, or $0.39 per diluted share, in the comparable period last year. Non-GAAP net income for the second quarter of fiscal 2010 includes the $13 million tax expense, or approximately $0.07 per diluted share, as noted above.  Both periods exclude the effects of amortization of intangible assets primarily related to business combinations, stock-based compensation expenses, 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 very pleased with our performance for the second quarter.  We demonstrated great execution across all geographies, divisions and functional teams,” said Mark Templeton, president and CEO for Citrix.

“Leading indicators for the second half are solid.  We are seeing excellent vibrancy in the channel, higher levels of strategic engagement with our customers, and really good pipeline growth.”

“We are excited about the trajectory we are seeing in XenDesktop licensing.  Clearly, the desktop virtualization revolution is here now and adoption is accelerating.  By our measures, we are now number one in this market.”

Q2 Financial Summary

In reviewing the second quarter results of 2010, compared to the second quarter of 2009:

  • Product license revenue increased 15 percent;
  • Revenue from license updates grew 13 percent;
  • Online services revenue grew 18 percent;
  • Technical services revenue, which is comprised of consulting, education and technical support, grew 35 percent;
  • Revenue increased in the America’s region by 17 percent, increased in the EMEA region by 11 percent and increased in the Pacific region by 31 percent;
  • Deferred revenue totaled $686 million, compared to $538 million on June 30, 2009;
  • GAAP operating margin was 16 percent for the quarter and non-GAAP operating margin was 26 percent for the quarter, excluding the effects of amortization of intangible assets primarily related to business combinations, stock-based compensation expense and charges recorded in connection with the 2009 restructuring program;
  • Other income decreased 83 percent primarily due to losses on the re-measurement of non U.S. dollar denominated financial statement balances;
  • Cash flow from operations was $103 million, compared with $86 million in the second quarter of 2009; and
  • The company repurchased 2.2 million shares at an average price of $46.74 or $101 million.

Financial Outlook for Third Quarter 2010

Citrix management expects to achieve the following results during its third fiscal quarter of 2010 ending September 30, 2010:

  • Net revenue is expected to be in the range of $450 million to $460 million; and
  • GAAP diluted earnings per share is expected to be in the range of $0.31 to $0.32. Non-GAAP diluted earnings per share is expected to be in the range of $0.48 to $0.49, excluding $0.08 related to the effects of amortization of intangible assets primarily related to business combinations, $0.16 related to the effects of stock-based compensation expenses, certain charges recorded in conjunction with the company’s 2009 restructuring program, and $(0.06) to $(0.08) for the effect of the differential between the GAAP and non-GAAP tax rates and tax effects related to these items.
  • Interest income is expected to be $4 million.
  • Adjusted tax rate is expected to be in the range of 23% to 24%.

The above statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Financial Outlook for Fiscal Year 2010

Citrix management expects to achieve the following results during its fiscal year 2010 ending December 31, 2010:  

  • Net revenue is expected to be in the range of $1.81 billion to $1.83 billion;
  • Non-GAAP operating margin is expected to increase by 150 basis points compared to fiscal year 2009, excluding the effects of amortization of intangible assets primarily related to business combinations and stock-based compensation expense, and certain charges recorded in conjunction with the company’s 2009 restructuring program;
  • Interest income is expected to be $10 million to $12 million; and
  • GAAP diluted earnings per share is expected to be in the range of $1.27 to $1.31. Non-GAAP diluted earnings per share is expected to be in the range of $1.87 to $1.89, excluding $0.34 related to the effects of amortization of intangible assets primarily related to business combinations, $0.54 related to the effects of stock-based compensation expenses, certain charges recorded in conjunction with the company’s 2009 restructuring program and $(0.26) to $(0.32) for the effect of the differential between the GAAP and non-GAAP tax rates and tax effects related to these items.
  • Adjusted tax rate is expected to be in the range of 26% to 27%.

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 second quarter of 2010, Citrix announced:

  • The first public release of Citrix® XenClient™, a new client-side virtualization solution, developed in collaboration with Intel, that allows centrally managed virtual desktops to run directly on corporate laptops and PCs, even when they are disconnected from the network.
  • New Citrix HDX™ “Nitro” technologies, which include groundbreaking innovations at all levels of the desktop virtualization infrastructure - from servers and datacenters to networks and clients - to advance the high-definition experience for virtual desktop users, from instant start-up of apps to breakthrough sense-and-respond technology that optimizes each user’s connection based on the capabilities of their device and network connection.
  • Citrix XenDesktop® 4 won the “Best of Interop” 2010 award for leading innovation in virtualization.
  • The availability of Citrix NetScaler 9.2 and a new high-performance NetScaler VPX™ virtual appliance, as well as three new ultra high-performance NetScaler MPX™ hardware appliances that leverage all the power of the recently released Intel® Xeon® processor 5680 series technology.
  • Citrix® NetScaler® “burst pack” licenses, which extend the flexible pay-as-you-grow model by scaling data center capacity to ensure high performance during traffic spikes without overpaying for capacity under normal conditions.
  • The availability of Citrix XenServer® 5.6 with powerful new features for the free and paid editions, as well as a new attractively priced advanced edition that makes it easier for enterprise and cloud customers running free XenServer to add more advanced high availability and management capabilities at a fraction of the cost of competing solutions.
  • Two new applications for the Apple iPad, Citrix Receiver™ and Citrix GoToMeeting®, are available on the App Store, making it possible for teleworkers in any industry to get easy access to their corporate resources and collaborate wherever they are located, giving the business consumer the power of choice.

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 fifteen days by dialing (800) 642-1687 or (706) 645-9291 (passcode required: 87760708).

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 Third Quarter 2010 and Fiscal Year 2010 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 4; the company’s product concentration and its ability to develop and commercialize new products and services, including XenDesktop 4 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 and the recruitment and retention of qualified employees, including those of acquired companies, and any disruptions due to changes in key personnel; 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, packaging and licensing models which may impact Citrix’s revenue recognition, including with respect to XenDesktop 4 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.

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Citrix®, XenApp™, XenServer®, XenClient™, XenDesktop®, NetScaler®, MPX™, HDX™, VPX™, GoToMeeting®, Citrix Essentials™, Citrix Cloud Center™, Citrix Delivery Center™, Citrix Receiver™ and Citrix Ready® 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.