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Citrix Reports Second Quarter Financial Results

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Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial results for the second quarter of fiscal year 2015 ending June 30, 2015, as well as key operational initiatives.

Financial Results

For the second quarter of fiscal year 2015, Citrix achieved revenue of $797 million, compared to $782 million in the second quarter of fiscal year 2014, representing 2 percent revenue growth.

GAAP Results

Net income for the second quarter of fiscal year 2015 was $103 million, or $0.64 per diluted share, compared to $53 million, or $0.31 per diluted share, for the second quarter of fiscal year 2014. 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 and approximately $9 million, or $0.05 per diluted share, for the second quarter of fiscal year 2014 primarily related to the closing of audits with the IRS for certain tax years. In addition, GAAP results for the second quarter of fiscal year 2015 include restructuring charges of $15 million for severance and facility closing costs related to the 2015 restructuring program. The second quarter of fiscal year 2014 GAAP results included impairment charges of approximately $30 million related to certain intangible assets, which are included in amortization of product related intangible assets, and restructuring charges of approximately $5 million for severance costs related to the 2014 restructuring program.

Non-GAAP Results

Non-GAAP net income for the second quarter of fiscal year 2015 was $163 million, or $1.00 per diluted share, compared to $142 million, or $0.83 per diluted share for the second quarter of fiscal year 2014. Non-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 and approximately $9 million, or $0.05 per diluted share, for the second quarter of fiscal year 2014 primarily related to the closing of audits with the IRS for certain tax years. Non-GAAP net income per diluted share excludes the effects of amortization of acquired intangible assets, stock-based compensation expenses, charges related to amortization of debt discount, charges related to restructuring programs, and the tax effects related to these items.

“We are starting to see the benefits of the restructuring actions we took at the start of 2015 in terms of margin expansion,” said Mark Templeton, president and chief executive officer for Citrix. “Through the additional actions we are announcing today, we’re taking steps to ensure that we are focusing all of our energy on our core secure app delivery offerings and setting the company up for even better execution, greater efficiency and profitable growth.”

Forms Operations Committee to Support Operational Review

Citrix also today announced that its board of directors has formed an Operations Committee. The committee will be led by current board member Robert Calderoni, who will work closely with Mr. Templeton and the company’s management team in a comprehensive review of its operations and capital structure, building upon the company’s previously announced initiatives to drive operating margin expansion through simplification, efficiency and portfolio refinements. Citrix intends to announce the committee’s findings once its initial review has been completed and will provide updates thereafter.

As part of this initiative, Mr. Calderoni has been appointed executive chairman of the board, effective immediately, and Thomas Bogan will assume the role of lead independent director.

Commences Exploration of Strategic Alternatives for GoTo Family of Products

In addition, Citrix, with the assistance of its independent advisors, has initiated a review of strategic alternatives for the company’s GoTo family of products. The strategic alternatives review for this business could result in, among other things, a possible sale or spin-off transaction.

Qatalyst Partners and Goldman, Sachs & Co. are serving as financial advisors to Citrix and Goodwin Procter LLP is serving as legal counsel.

The company also announced that earlier this year it engaged a financial advisor to provide strategic advice related to a potential sale of its ByteMobile business.  Citrix is currently in active discussions with third parties regarding a potential sale.

Q2 Financial Summary

In reviewing the results for the second quarter of fiscal year 2015 compared to the second quarter of fiscal year 2014:

Product and license revenue decreased 12 percent;

Software as a service revenue increased 11 percent;

Revenue from license updates and maintenance increased 9 percent;

Professional services revenue, which is comprised of consulting, product training and certification, decreased 12 percent;

Excluding software as a service, net revenue increased in the Americas region by 1 percent, remained consistent in the EMEA region and decreased in the Pacific region by 8 percent;

Deferred revenue totaled $1.5 billion as of June 30, 2015, compared to $1.4 billion as of June 30, 2014, an increase of 8 percent;

GAAP operating margin increased from 7 percent to 15 percent; Non-GAAP operating margin increased from 22 percent to 25 percent; and,

Cash flow from operations was $201 million for the second quarter of fiscal year 2015, compared with $204 million for the second quarter of fiscal year 2014.

During the second quarter of fiscal year 2015:

GAAP gross margin was 83 percent, and non-GAAP gross margin was 86 percent, which excludes the effects of amortization of acquired product related intangible assets and stock-based compensation expense;

GAAP operating margin was 15 percent, and non-GAAP operating margin was 25 percent, which excludes the effects of amortization of acquired intangible assets, stock-based compensation expense, and costs associated with the restructuring programs.

The company repurchased 0.7 million shares at an average price of $66.33.

Financial Outlook for Third Quarter 2015

Citrix management expects to achieve the following results for the third quarter of fiscal year 2015 ending September 30, 2015:

Net revenue is targeted to be in the range of $780 million to $790 million.

GAAP diluted earnings per share is targeted to be in the range of $0.46 to $0.49. Non-GAAP diluted earnings per share is targeted to be in the range of $0.83 to $0.85, which excludes $0.23 related to the effects of stock-based compensation expenses, $0.20 related to the effects of amortization of acquired intangible assets, $0.02 related to restructuring charges, $0.05 related to the effects of amortization of debt discount and $(0.11) to $(0.16) for the tax effects related to these items.

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 $3.22 billion to $3.25 billion.

GAAP diluted earnings per share is targeted to be in the range of $2.11 to $2.20. Non-GAAP diluted earnings per share is targeted to be in the range of $3.65 to $3.75, which excludes $0.87 related to the effects of stock-based compensation expenses, $0.74 related to the effects of amortization of acquired intangible assets, $0.33 related to restructuring charges, $0.20 related to the effects of amortization of debt discount, $(0.01) related to a benefit from a previously disclosed patent lawsuit and $(0.49) to $(0.68) 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.

Conference Call Information

Citrix will host a conference call today at 4:45 p.m. ET to discuss its financial results, quarterly highlights, business outlook and other items announced today. 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.

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