Jan

312018

Citrix Reports Fourth Quarter and Fiscal Year Financial Results

Quarterly revenue of $778 million up 6 percent year-over-year. Quarterly GAAP diluted loss per share of $1.93 includes one-time charge of $429 million for U.S. tax reform. Quarterly non-GAAP diluted EPS of $1.66 excludes one-time charge of $429 million for U.S. tax reform. Quarterly GAAP operating margin of 24 percent; non-GAAP operating margin of 40 percent. Deferred revenue of $1.9 billion up 11 percent year-over-year. Repurchased approximately 7 million shares in fourth quarter

FORT LAUDERDALE, Fla. - January 31, 2018 - Citrix Systems, Inc. (NASDAQ:CTXS) today reported financial results for the fourth quarter and fiscal year ended December 31, 2017.

Financial Results

For the fourth quarter of fiscal year 2017, Citrix achieved revenue from continuing operations of $778 million, compared to $735 million in the fourth quarter of fiscal year 2016, representing 6 percent revenue growth. For fiscal year 2017, Citrix reported annual revenue from continuing operations of $2.82 billion, compared to $2.74 billion for fiscal year 2016, a 3 percent increase.

GAAP Results

Net loss from continuing operations for the fourth quarter of fiscal year 2017 was $284 million, or $1.93 per diluted share, compared to net income from continuing operations of $179 million, or $1.13 per diluted share, for the fourth quarter of fiscal year 2016. Net (loss) income from continuing operations for the fourth quarter of fiscal year 2017 and 2016 includes restructuring charges of $54 million and $6 million, respectively, for severance and facility closing costs. Net loss for the fourth quarter of fiscal year 2017 includes charges for the estimated impact from the enactment of the Tax Cuts and Jobs Act in December 2017 related to the transition tax on accumulated overseas profits and the revaluation of our U.S. deferred tax assets and liabilities due to the U.S. federal tax rate reduction from 35% to 21%. Approximately $364 million in tax expense was recorded for the transition tax on overseas earnings, and approximately $65 million in tax expense was recorded related to the revaluation of U.S. deferred tax assets and liabilities, resulting in total charges of $429 million. The impacts of U.S. tax reform may differ from this estimate, and the estimated charges may accordingly be adjusted over the course of 2018.

Annual net income from continuing operations for fiscal year 2017 was $22 million, or $0.14 per diluted share, compared to $470 million, or $2.99 per diluted share for fiscal year 2016. Annual net income from continuing operations for fiscal year 2017 and 2016 includes restructuring charges of $72 million and $67 million, respectively, for severance and facility closing costs. Annual net income from continuing operations for fiscal year 2017 also includes $429 million in charges for the estimated impact from the enactment of the Tax Cuts and Jobs Act in December 2017 related to the transition tax on accumulated overseas profits and the revaluation of our U.S. deferred tax assets and liabilities.

Non-GAAP Results

Non-GAAP net income from continuing operations for the fourth quarter of fiscal year 2017 was $248 million, or $1.66 per diluted share, compared to $218 million, or $1.38 per diluted share for the fourth quarter of fiscal year 2016. Non-GAAP net income from continuing operations for the fourth quarter of fiscal year 2017 and 2016 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 from continuing operations for the fourth quarter of fiscal year 2017 also excludes tax impact related to the separation of the GoTo business along with charges for the estimated impact from the enactment of the Tax Cuts and Jobs Act in December 2017 related to the transition tax on accumulated overseas profits and the revaluation of our U.S. deferred tax assets and liabilities. Non-GAAP net income from continuing operations for the fourth quarter of fiscal year 2016 also excludes separation costs and the tax effect related to this item. Non-GAAP net income per diluted share for the fourth quarter of fiscal year 2017 also reflects the anti-dilutive impact of the company's convertible note hedges.

Annual non-GAAP net income from continuing operations for fiscal year 2017 was $744 million, or $4.85 per diluted share, compared to $700 million, or $4.45 per diluted share for fiscal year 2016. Annual non-GAAP net income from continuing operations for fiscal year 2017 and 2016 excludes the effects of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount, separation costs, restructuring charges and the tax effects related to these items. Annual non-GAAP net income from continuing operations for fiscal year 2017 also excludes tax impact related to the separation of the GoTo business along with charges for the estimated impact from U.S. tax reform related to the transition tax and the revaluation of our U.S. deferred tax assets and liabilities. Annual non-GAAP net income per diluted share for fiscal year 2017 also reflects the anti-dilutive impact of the company's convertible note hedges.

"This quarter, we delivered strong financial results, while at the same time, accelerating innovation across our portfolio and in the cloud. Our sales execution was excellent, driving double-digit product and subscription bookings growth and the fastest revenue growth of the year," said David Henshall, president and CEO.

"Our partners and our customers are really embracing our new subscription services, which have jumpstarted the multi-year plan that we presented in October 2017. I'm proud of how the team is executing, and I'm confident that we will see continued success in 2018."

Q4 Financial Summary

In reviewing the results from continuing operations for the fourth quarter of fiscal year 2017 compared to the fourth quarter of fiscal year 2016:

  • Product and license revenue increased 3 percent;
  • Software as a service revenue increased 38 percent;
  • Revenue from license updates and maintenance increased 4 percent;
  • Professional services revenue, which is comprised of consulting, product training and certification, increased 13 percent;
  • Net revenue increased in the APJ region by 10 percent; increased in the Americas region by 8 percent; and increased in the EMEA region by 1 percent;
  • Subscription revenue as a percentage of total revenue was 12 percent;
  • Deferred revenue totaled $1.9 billion as of December 31, 2017, compared to $1.7 billion as of December 31, 2016, an increase of 11 percent;
  • Cash flow from continuing operations was $254 million for the fourth quarter of fiscal year 2017, compared to $208 million for the fourth quarter of fiscal year 2016; and

During the fourth quarter of fiscal year 2017:

  • GAAP gross margin was 84 percent. Non-GAAP gross margin was 88 percent, excluding the effects of stock-based compensation expense and amortization of acquired product related intangible assets;
  • GAAP operating margin was 24 percent. Non-GAAP operating margin was 40 percent, excluding the effects of stock-based compensation expense, amortization of acquired intangible assets, and costs associated with restructuring programs.
  • The company repurchased approximately 7.1 million shares under its accelerated share repurchase program. At the end of December 2017, the company had $1.4 billion remaining in its current share repurchase authorization

Annual Financial Summary

In reviewing the results from continuing operations for fiscal year 2017 compared to fiscal year 2016:

  • Product and license revenue decreased 3 percent;
  • Software as a service revenue increased 31 percent;
  • Revenue from license updates and maintenance increased 5 percent;
  • Professional services revenue, which is comprised of consulting, product training and certification, remained consistent;
  • Net revenue increased in the APJ region by 7 percent and increased in the Americas and EMEA regions by 3 percent;
  • Subscription revenue as a percentage of total revenue was 11 percent; and
  • Cash flow from continuing operations was $964 million for fiscal year 2017 compared with $947 million for fiscal year 2016.

During the year ended December 31, 2017:

  • GAAP gross margin was 84 percent. Non-GAAP gross margin was 87 percent, excluding stock-based compensation expense and the effects of amortization of acquired product related intangible assets;
  • GAAP operating margin was 20 percent. Non-GAAP operating margin was 32 percent, excluding the effects of stock-based compensation expense, amortization of acquired intangible assets, and costs associated with restructuring programs; and
  • The company repurchased 15.5 million shares at an average price of $81.01.

Financial Outlook for Fiscal Year 2018

Citrix management expects to achieve the following results for the fiscal year ending December 31, 2018, which does not reflect the adoption of ASC 606.

  • Net revenue is targeted to be in the range of $2.86 billion to $2.88 billion.
  • GAAP diluted earnings per share is targeted to be in the range of $3.18 to $3.33.
  • Non-GAAP diluted earnings per share is targeted to be in the range of $4.80 to $4.90, excluding $1.39 related to the effects of stock-based compensation expenses, $0.38 related to the effects of amortization of acquired intangible assets, $0.24 related to the effects of amortization of debt discount, $0.10 related to restructuring charges, and $0.39 to $0.64 for the tax effects related to these items. Non-GAAP diluted earnings per share reflects the anti-dilutive impact of the convertible note hedges and does not include any additional impacts related to U.S. tax reform, both of which cannot be calculated without unreasonable efforts.

Financial Outlook for First Quarter 2018

Citrix management expects to achieve the following results for the first quarter of fiscal year 2018 ending March 31, 2018, which does not reflect the adoption of ASC 606.

  • Net revenue is targeted to be in the range of $670 million to $680 million.
  • GAAP diluted earnings per share is targeted to be in the range of $0.69 to $0.71.
  • Non-GAAP diluted earnings per share is targeted to be in the range of $1.03 to $1.06, excluding $0.28 related to the effects of stock-based compensation expenses, $0.09 related to the effects of amortization of acquired intangible assets, $0.06 related to the effects of amortization of debt discount, $0.03 related to restructuring charges, and $0.09 to $0.14 for the tax effects related to these items. Non-GAAP diluted earnings per share reflects the anti-dilutive impact of the convertible note hedges and does not include any additional impacts related to U.S. tax reform, both of which cannot be calculated without unreasonable efforts.

Fourth 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.  

Full Financial Report

For media inquiries, contact:

Eric Armstrong
Citrix Systems, Inc.
(954) 267-2977
eric.armstrong@citrix.com

Eduardo Fleites
Citrix Systems, Inc.
(954) 229-5758
eduardo.fleites@citrix.com

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. We help customers reimagine the future of work by providing the most comprehensive secure digital workspace that unifies the apps, data and services people need to be productive, and simplifies IT’s ability to adopt and manage 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.

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 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 a subscription model; 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 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, 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; 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; the company's ability to develop, maintain a high level of quality and commercialize new products and services while growing its established virtualization and networking 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 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 recruitment and retention of qualified employees; transitions in key personnel and succession risk, including transitions in the company's executive leadership; 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 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, disruption to our ongoing business and diversion of management's attention from our ongoing business, and failure to realize expected benefits or synergies from divestitures; 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; the ability to maintain and protect our collection of brands; 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; risks related to servicing our debt; risks of political uncertainty and social turmoil; 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.

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