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Citrix Systems Inc. (CTXS - Analyst Report) declared mixed financial results for the fourth quarter of 2013. While net income surpassed the Zacks Consensus Estimate, total revenue missed the same. Following the results, management significantly slashed its earnings per share projection for the next quarter. As a result, the stock price of Citrix plummeted 4.95% or $2.85 yesterday in the aftermarket trade.  

GAAP net income, in fourth-quarter 2013, was $138.6 million or 74 cents per share compared with $114 million or 60 cents per share in the prior-year quarter. Quarterly adjusted earnings per share of 87 cents easily beat the Zacks Consensus Estimate of 79 cents. The total revenue was $802.4 million, up 8.4% year over year but slightly below the Zacks Consensus Estimate of $807 million.

Gross margin in the said quarter was 83% compared with 84.1% in the year-ago quarter. Operating expenses were around $504.9 million versus $477.2 million in the prior-year quarter. Quarterly operating margin was 20.1% against 19.6% in the prior-year quarter. At the end of the reported quarter, deferred revenues were $1.4 billion, up 18% year over year. Citrix repurchased 4.4 million of its common shares for a total consideration of about $250 million.

During the fourth quarter of 2013, Citrix generated approximately $229.7 million of cash from operations and free cash flow (cash flow from operations less capital expenditures) was around $193.4 million. The company had nearly $734.7 million of cash and marketable securities compared with $928.6 million at the end of 2012. The balance sheet remains free of any debt obligations.

Revenues by Product Mix

Product and Licenses revenues were $269.9 million, up 0.4% year over year. License updates and maintenance revenues were $337 million, up 11.2% year over year. Software-as-a-Service revenues came in at $153.3 million, a 13.2% increase from the prior-year quarter while Professional Services revenues were $42.2 million, up 28.3% year over year.

Revenues by Product Grouping

Mobile and Desktop revenues in the fourth quarter of 2013 were $428.3 million, up 12.4% year over year. Networking and Cloud Solutions revenues were $175.9 million, up 20.2% year over year. Software-as-a-Service revenues were $153.3 million, an increase of 3.4% over the prior-year quarter. Revenues from Other Products were $45 million, up 12.6% year over year.

Revenues by Geography

Revenues in the Americas (both North & Latin America) region were $338.3 million, up 8.2% year over year. Revenues in Europe, Africa, and the Middle East region were $232.2 million, up 14.4% year over year. Revenues in the Asia Pacific region were $78.6 million, down 11.7% year over year.

First Quarter of 2014 Financial Outlook

Management forecasted first-quarter 2014 net revenues to increase in the range of 8–10%. GAAP earnings per share are expected to be 24–26 cents and non-GAAP earnings per share will likely be between 57 cents and 60 cents, exclusive of stock-based compensation expenses and effects of amortization of acquired intangible assets of 26–19 cents per share. GAAP gross margin is projected to be between 81% and 82% while Non-GAAP gross margin is anticipated in the range of 84–85%.

2014 Financial Outlook

Management projected 2014 net revenue to increase in the range of 8–10%. Non-GAAP gross margin is expected to be in between 84 and 85%. Non-GAAP tax rate is projected to remain at 24% while non-GAAP earnings per share will likely be in the $2.85 –$2.95 band.

Other Stocks to Consider

Citrix Systems currently has a Zacks Rank #4 (Sell). Other stocks worth considering in the Business Software & Services industry are American Software, Inc. (AMSWA), Open Text Corporation (OTEX - Snapshot Report) and Check Point Software Technologies Ltd. (CHKP - Analyst Report). Both American Software and Open Text carry a Zacks Rank #1 (Strong Buy) while Check Point carries a Zacks Rank #2 (Buy).

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