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Citrix Systems, Inc. Q1 2010 Earnings Call Transcript

Citrix Systems, Inc. Q1 2010 Earnings Call Transcript

Citrix Systems, Inc.




Q1 2010 Earnings Call Transcript

April 21, 2010 4:45 pm ET


Eduardo Fleites – Director, IR

David Henshall – SVP and CFO

Mark Templeton – President and CEO


Sarah Friar – Goldman Sachs

Phil Winslow – Credit Suisse

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Robert Breza – RBC Capital Markets

Abhey Lamba – ISI Group

Bhavan Suri – William Blair & Company

Rob Owens – Pacific Crest

Steve Ashley – Robert W. Baird

Daniel Ives – FBR Capital Markets

John DiFucci – JP Morgan

Michael Turits – Raymond James

Todd Raker – Deutsche Bank

Ed Maguire – CLSA

Israel Hernandez – Barclays Capital

Walter Pritchard – Citigroup

Adam Holt – Morgan Stanley



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Good afternoon. My name is Casey and I will be your conference operator today. At this time, I would like to welcome everyone to the Citrix Systems first quarter 2010 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to introduce Mr. Eduardo Fleites, Senior Director of Investor Relations. Mr. Fleites, you may begin your conference.


duardo Fleites

Thank you, Casey. Good afternoon, everyone, and thank you for joining us for today's call where we will be discussing Citrix’s first quarter 2010 financial results. Participating in the call will be Mark Templeton, President and Chief Executive Officer, and David Henshall, Senior Vice President and Chief Financial Officer. This call is being webcast with a slide presentation on the Citrix Systems Investor Relations website, and the slide presentation associated with the webcast will be posted immediately following the call.

Before we begin to review our financial results, I want to state that we have posted product classification and historical revenue trends related to our product groupings to the Investor Relations page of our website. I’d like to remind you that today's conversation will include forward-looking statements made under the Safe Harbor provisions of the US Securities Laws.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties such as the impact of the global economic climate, uncertainty in the IT spending environment, risks associated with our products and competition. Obviously these risks could cause actual results to differ from those anticipated.

Additional information concerning these and other factors is highlighted in today's press release and in the company's filings with the SEC, including the risk factor disclosure contained in our most recent annual report on Form 10-K, which is available from the SEC or on the company's Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures as defined by the SEC’s Reg G. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today’s call can be found at the end of today's press release and on the Investor Relations page of our website.

Now I would like to turn it over to David Henshall, our Chief Financial Officer. David?

David Henshall

Thanks, Eduardo. And welcome to everyone joining us this afternoon. As you can see from the release, we are off to a strong start in 2010, delivering $414 million in total revenue, more than a three point increase in adjusted op margin, and $144 million in cash flow from operations, all driving adjusted earnings per share of $0.40, up 23% from last year.

So coming off a record Q4, we entered 2010 cautiously optimistic. In Q1, while there were really only a handful of large transactions that closed, the demand environment continued to trend towards a more normalized seasonal spending cycle with EMEA still trailing the US, as expected. I’m very pleased with our execution in the field operationally and within our product divisions.

So drilling into the different revenue line items in Q1, new sales were $123 million, up 10% from last year, driven by growth across both the desktop and data center businesses. License updates increased 10% from last year due to strong customer interest in the XenDesktop trade-up program. Technical services grew 18%, led by consulting and tech support, and online SaaS revenue was $85 million, up 18% year-on-year with web collaboration leading the way, up over 30%.

From a geographic perspective, the Americas region continues to execute well, delivering a revenue growth of 14% from last year for a total of $178 million. And included in this total is product license growth of about 20% year-on-year. Internationally, EMEA showed slow by steady improvement in the business environment leading to $119 million in total revenue, up 6% from last year. And finally, revenue in Japan and the Pacific grew 13% to $32 million. So overall, a real solid quarter within a mixed economic environment.

Customer interest in pipeline build are record levels, and we remain focused on delivering results while building momentum across the main product categories of desktops, data center and cloud, and online collaboration. So now I’d like to discuss the Q1 results within these three areas. First, our desktop business grew 9% over last year to $264 million

The results in the quarter were highlighted by demand of our latest desktop virtualization product, XenDesktop 4, and the desktop trade-up program, which gives existing XenApp customers the opportunity to upgrade to the complete solution for delivering both apps and desktops on demand. In total, XenDesktop contributed $32 million of recognized revenue, with trade-up products adding another $14 million to the deferred revenue balance. And as a reminder, the accounting for trade-ups is largely ratable in nature, with revenue hitting the P&L of our future quarters.

Also in the desktop business, there were a number of strong metrics in the quarter. In fact, four out of the five largest transactions across the company included XenDesktop. More than 10% of existing XenApp customers that were up for renewal in Q1 chose instead to trade up to XenDesktop. We also added several hundred brand new customers and partners to Citrix due to the increasing interest in desktop virtualization. So overall, really good momentum across the board.

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