Citrix : Reports Fourth Quarter and Fiscal Year Financial Results

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: [phone] or [phone], 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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