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Citrix Reports Fourth Quarter 2014 and Fiscal Year Financial Results

Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial results for the fourth quarter and fiscal year ending December 31, 2014, and announced a restructuring program to drive strategic focus and operational efficiency.

Financial Results

For the fourth quarter of fiscal year 2014, Citrix achieved revenue of $851 million, compared to $802 million in the fourth quarter of fiscal year 2013, representing 6 percent revenue growth. For fiscal year 2014, Citrix reported annual revenue of $3.14 billion, compared to $2.92 billion for fiscal year 2013, an 8 percent increase.

GAAP Results

Net income for the fourth quarter of fiscal year 2014 was $95 million, or $0.58 per diluted share, compared to $139 million, or $0.74 per diluted share, for the fourth quarter of fiscal year 2013. GAAP results for the fourth quarter of fiscal year 2014 include impairment charges of $30 million related to certain intangible assets, which are included in amortization of product related and other intangible assets, as well as a restructuring charge of $3 million for severance costs related to a restructuring program implemented in the first quarter of 2014. Net income for the fourth quarter of fiscal year 2014 also includes net tax benefits of $12 million, or $0.08 per diluted share, primarily related to the extension of the 2014 federal research and development tax credit.

Annual net income for fiscal year 2014 was $252 million, or $1.47 per diluted share, compared to $340 million, or $1.80 per diluted share for fiscal year 2013. GAAP results for fiscal year 2014 include impairment charges of $60 million related to certain intangible assets, which are included in amortization of product related and other intangible assets, a charge of $21 million related to a previously disclosed patent lawsuit, as well as a restructuring charge of $20 million for severance costs related to a restructuring program implemented in the first quarter of 2014. In addition, GAAP net income for fiscal year 2014 includes net tax benefits of $21 million, or $0.12 per diluted share, primarily related to the closing of audits with the IRS for certain tax years and the extension of the 2014 federal research and development tax credit.

 

Non-GAAP Results

Non-GAAP net income for the fourth quarter of fiscal year 2014 was $180 million, or $1.10 per diluted share, compared to $195 million, or $1.04 per diluted share for the fourth quarter of fiscal year 2013. Non-GAAP net income for the fourth quarter of fiscal year 2014 includes net tax benefits of $12 million, or $0.08 per diluted share. Non-GAAP net income for the fourth quarter of fiscal year 2014 and 2013 exclude the effects of amortization of acquired intangible assets and stock-based compensation expense and the tax effects related to these items. Non-GAAP net income for the fourth quarter of fiscal year 2014 also excludes charges related to amortization of debt discount and the restructuring program implemented in the first quarter of fiscal year 2014 and the tax effects related to these items.

Annual non-GAAP net income for fiscal year 2014 was $565 million, or $3.30 per diluted share, compared to $568 million, or $3.02 per diluted share for fiscal year 2013. Non-GAAP net income for fiscal year 2014 includes net tax benefits of $21 million, or $0.12 per diluted share. Non-GAAP net income for fiscal year 2014 and 2013 excludes the effects of amortization of acquired intangible assets, stock-based compensation expenses and the tax effects related to these items. Non-GAAP net income for fiscal year 2014 also excludes charges related to amortization of debt discount, a previously disclosed patent lawsuit and the restructuring program implemented in the first quarter of fiscal year 2014 and the tax effects related to these items.

2015 Restructuring Program

Citrix also announced the implementation of a restructuring program designed to increase strategic focus and operational efficiency. The restructuring will affect approximately 700 full-time and 200 contractor positions, and is expected to result in annualized pre-tax savings in the range of approximately $90 million to $100 million. Citrix expects to incur pre-tax charges in the range of approximately $40 million to $45 million related to employee severance arrangements and $9 million to $10 million related to the consolidation of leased facilities during fiscal year 2015.

“We hear every day from customers about the dual pressures they face – to deliver business results, while creating an engaging work-life experience for their people,” said Mark Templeton, president and CEO, Citrix. “Our focus on enabling a software-defined workplace is putting Citrix in front of this strategic challenge through the unique integration of our delivery networking solutions, workspace services and mobility apps. I’m proud of our 2014 performance, but we’re not satisfied. We are looking ahead to 2015 with a focus on innovation that delivers a better experience, more flexibility and greater security to our customers, and a more focused organizational footprint that enables profitable growth.”

 

Q4 Financial Summary

In reviewing the results for the fourth quarter of fiscal year 2014 compared to the fourth quarter of fiscal year 2013:

  • Product and license revenue decreased 1 percent;
  • Software as a service revenue increased 10 percent;
  • Revenue from license updates and maintenance increased 9 percent;
  • Professional services revenue, which is comprised of consulting, product training and certification, increased 15 percent;
  • Net revenue increased in the EMEA region by 7 percent, increased in the Pacific region by 5 percent, and increased in the Americas region by 4 percent;
  • Deferred revenue totaled $1.56 billion as of December 31, 2014, compared to $1.41 billion as of December 31, 2013, an increase of 10 percent; and
  • Cash flow from operations was $190 million for the fourth quarter of fiscal year 2014, compared with $230 million for the fourth quarter of fiscal year 2013.

During the fourth quarter of fiscal year 2014:

  • GAAP gross margin was 80 percent. Non-GAAP gross margin was 85 percent, excluding the effects of amortization of acquired product related intangible assets and stock-based compensation expense;
  • GAAP operating margin was 14 percent. Non-GAAP operating margin was 26 percent, excluding the effects of amortization of acquired intangible assets, stock-based compensation expense, and costs associated with the 2014 restructuring program; and
  • The company received 3.3 million shares, of which 2.6 million related to the company’s accelerated share repurchase agreement and 0.7 million shares from repurchases at an average price of $65.26.

Annual Financial Summary

In reviewing the results for fiscal year 2014 compared to fiscal year 2013:

  • Product and license revenue increased 1 percent;
  • Software as a service revenue increased 12 percent;
  • Revenue from license updates and maintenance increased 9 percent;
  • Professional services revenue, which is comprised of consulting, product training and certification, increased 26 percent;
  • Net revenue increased in the EMEA region by 9 percent, increased in the Pacific region by 6 percent and increased in the Americas region by 5 percent; and
  • Cash flow from operations was $846 million for fiscal year 2014 compared with $928 million for fiscal year 2013.

 

During the year ending December 31, 2014:

  • GAAP gross margin was 80 percent. Non-GAAP gross margin was 85 percent, excluding the effects of amortization of acquired product related intangible assets and stock-based compensation expense;
  • GAAP operating margin was 10 percent. Non-GAAP operating margin was 22 percent, excluding the effects of amortization of acquired intangible assets, stock-based compensation expense, the charge related to a previously disclosed patent lawsuit, and costs associated with the 2014 restructuring program; and
  • The company received 26.1 million shares, of which 21.8 million related to the company’s accelerated share repurchase agreement and 4.3 million shares from repurchases at an average price of $64.00.

Financial Outlook for Fiscal Year 2015

Citrix management expects to achieve the following results for the fiscal year ending December 31, 2015:

  • Net revenue is targeted to be in the range of $3.29 billion to $3.33 billion.
  • Today’s announcement regarding the restructuring of the company’s global workforce is expected to result in annualized pre-tax savings in the range of approximately $90 million to $100 million. Citrix expects to incur pre-tax charges in the range of approximately $40 million to $45 million related to employee severance arrangements and approximately $9 million to $10 million related to the consolidation of leased facilities during fiscal year 2015.
  • GAAP diluted earnings per share is targeted to be in the range of $2.10 to $2.15. Non-GAAP diluted earnings per share is targeted to be in the range of $3.60 to $3.65, excluding $1.00 related to the effects of stock-based compensation expenses, $0.61 related to the effects of amortization of acquired intangible assets, $0.33 related to restructuring charges, $0.19 related to the effects of amortization of debt discount and $(0.58) to $(0.68) for the tax effects related to these items.
  • GAAP tax rate is targeted to be in the range of 17 percent to 18 percent. Non-GAAP tax rate, which excludes the effects of amortization of acquired intangible assets, stock-based compensation expenses, amortization of debt discount and restructuring charges, is targeted to be in the range of 22 percent to 23 percent.

 

Financial Outlook for First Quarter 2015

Citrix management expects to achieve the following results for the first quarter of fiscal year 2015 ending March 31, 2015:

  • Net revenue is targeted to be in the range of $780 million to $790 million.
  • In the first quarter of fiscal year 2015, Citrix expects to incur a pre-tax charge in the range of approximately $30 million to $35 million related to employee severance arrangements and approximately $3 million to $5 million related to the consolidation of leased facilities in connection with the 2015 restructuring program.
  • GAAP diluted earnings per share is targeted to be in the range of $0.20 to $0.22. Non-GAAP diluted earnings per share is targeted to be in the range of $0.70 to $0.72, excluding $0.26 related to the effects of stock-based compensation expenses, $0.16 related to the effects of amortization of acquired intangible assets, $0.22 related to restructuring charges, $0.05 related to the effects of amortization of debt discount and $(0.17) to $(0.21) for the tax effects related to these items.
  • GAAP tax rate is targeted to be in the range of 17 percent to 18 percent. Non-GAAP tax rate, which excludes the effects of amortization of acquired intangible assets, stock-based compensation expenses, amortization of debt discount and restructuring charges, is targeted to be in the range of 22 percent to 23 percent.

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

Published Thursday, January 29, 2015 8:03 AM by David Marshall
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