Citrix 2005 Annual Report Download - page 23

Page฀21
RESULTS฀OF฀OPERATIONS
The฀following฀table฀sets฀forth฀our฀consolidated฀statements฀of฀income฀data฀and฀presentation฀of฀that฀data฀as฀a฀percentage฀of฀change฀
from฀period-to-period.
Year฀Ended฀December฀31, 2005฀
Compared฀to
2004฀
Compared฀to
(In฀thousands) 2005 2004 2003 2004 2003
Revenues:
฀ Product฀licenses $฀409,435 $฀369,826 $฀374,403 10.7% (1.2)%
฀ License฀updates 331,102 271,547 168,793 21.9 60.9
฀ Online฀services 99,097 44,101 — 124.7 *
฀ Technical฀services 69,088 55,683 45,429 24.1 22.6
฀ ฀ Total฀net฀revenues 908,722 741,157 588,625 22.6 25.9
Cost฀of฀revenues:
฀ Cost฀of฀product฀license฀revenues 14,404 3,824 13,555 276.7 (71.8)
฀ Cost฀of฀services฀revenues 26,794 16,472 6,481 62.7 154.2
฀ Amortization฀of฀core฀and฀product฀technology 16,766 6,127 11,036 173.6 (44.5)
฀ ฀ Total฀cost฀of฀revenues 57,964 26,423 31,072 119.4 (15.0)
Gross฀margin 850,758 714,734 557,553 19.0 28.2
Operating฀expenses:
฀ Research฀and฀development 108,687 86,357 64,443 25.9 34.0
฀ Sales,฀marketing฀and฀support 393,420 337,566 252,749 16.5 33.6
฀ General฀and฀administrative 125,538 106,516 85,672 17.9 24.3
฀ Amortization฀of฀other฀intangible฀assets 11,622 6,204 300 87.3 *
฀ In-process฀research฀and฀development 7,000 19,100 — (63.4) *
฀ ฀ Total฀operating฀expenses 646,267 555,743 403,164 16.3 37.8
Income฀from฀operations 204,491 158,991 154,389 28.6 3.0
Interest฀income 23,614 14,274 21,120 65.4 (32.4)
Interest฀expense (2,229) (4,367) (18,280) (49.0) (76.1)
Write-off฀of฀deferred฀debt฀issuance฀costs —(7,219) — * *
Other฀(expense)฀income,฀net (368) 2,754 3,458 (113.4) (20.4)
Income฀before฀income฀taxes 225,508 164,433 160,687 37.1 2.3
Income฀taxes 59,168 32,887 33,744 79.9 (2.5)
Net฀income $฀166,340 $฀131,546 $฀126,943 26.5 3.6
*not฀meaningful.
Revenues
Our฀operations฀consist฀of฀the฀design,฀development,฀marketing฀and฀support฀of฀access฀products฀and฀services฀that฀enable฀on-demand฀
access฀to฀information฀and฀applications฀for฀our฀customers,฀which฀include฀individual฀consumers฀and฀professionals,฀small฀businesses฀
and฀enterprises.
Net฀ revenues฀ include฀ the฀ following฀ categories:฀ Product฀ Licenses,฀ License฀ Updates,฀ Online฀ Services฀ and฀ Technical฀ Services.฀
Product฀Licenses฀primarily฀represents฀fees฀related฀to฀the฀licensing฀of฀our฀Access฀Suite฀products,฀Citrix฀NetScaler฀products฀and฀our฀
Citrix฀Access฀Gateway฀products.฀These฀revenues฀are฀reflected฀net฀of฀sales฀allowances฀and฀provisions฀for฀stock฀balancing฀return฀
rights.฀In฀addition,฀we฀offer฀incentive฀programs฀to฀our฀channel฀distributors฀and฀value-added฀resellers฀to฀stimulate฀demand฀for฀our฀
products.฀Revenues฀associated฀with฀these฀programs฀are฀partially฀offset฀by฀these฀incentives฀to฀our฀channel฀distributors฀and฀value-
added฀resellers.฀Our฀Presentation฀Server฀product฀accounted฀for฀approximately฀84.6%฀of฀our฀Product฀License฀revenue฀for฀the฀year฀
ended฀ December฀ 31,฀ 2005,฀ 93.3%฀ of฀ our฀ Product฀ License฀ revenue฀ for฀ the฀ year฀ ended฀ December฀ 31,฀ 2004฀ and฀ 97.6%฀ of฀ our฀
Product฀License฀revenue฀for฀the฀year฀ended฀December฀31,฀2003.฀The฀decrease฀in฀our฀Presentation฀Server฀product฀as฀a฀percent฀of฀
our฀Product฀License฀revenue฀when฀comparing฀the฀year฀ended฀December฀31,฀2005฀to฀the฀year฀ended฀December฀31,฀2004฀is฀due฀
to฀an฀increase฀in฀sales฀of฀our฀Citrix฀NetScaler฀products,฀our฀Access฀Suite฀and฀our฀Citrix฀Access฀Gateway฀products.฀During฀2006,฀
we฀expect฀our฀Presentation฀Server฀product฀to฀continue฀to฀decrease฀as฀a฀percent฀of฀our฀Product฀License฀revenue฀due฀to฀expected฀
increases฀in฀sales฀of฀our฀Citrix฀NetScaler฀products,฀our฀Access฀Suite฀and฀our฀Citrix฀Access฀Gateway฀products.฀License฀Updates฀
consist฀of฀fees฀related฀to฀our฀Subscription฀Advantage฀program฀that฀are฀recognized฀ratably฀over฀the฀term฀of฀the฀contract,฀which฀is฀
typically฀12฀to฀24฀months.฀ Subscription฀Advantage฀is฀an฀annual฀renewable฀program฀that฀provides฀subscribers฀with฀automatic฀