Citrix 2005 Annual Report Download - page 25

Page฀23
An฀analysis฀of฀our฀reportable฀segment฀net฀revenue฀is฀presented฀below:
Year฀Ended฀December฀31, Revenue฀Growth Revenue฀Growth
(In฀thousands) 2005 2004 2003 2004฀to฀2005 2003฀to฀2004
Americas(1) $฀397,233 $฀335,436 $฀291,470 18.4% 15.1%
EMEA(2) 334,900 293,690 243,890 14.0 20.4
Asia-Pacific 77,492 67,930 53,265 14.1 27.5
Online฀Services฀division 99,097 44,101 — 124.7 *
฀ Consolidated฀net฀revenues $฀908,722 $฀741,157 $฀588,625 22.6 25.9
(1)฀ ฀Our฀Americas฀segment฀is฀comprised฀of฀the฀United฀States,฀Canada฀and฀Latin฀America.
(2)฀ ฀Defined฀as฀Europe,฀Middle฀East฀and฀Africa.
*Not฀meaningful.
With฀respect฀to฀our฀segment฀revenues,฀the฀increase฀in฀net฀revenues฀during฀2005฀as฀compared฀to฀2004฀was฀due฀primarily฀to฀the฀
factors฀ mentioned฀ above฀ across฀ the฀ Americas,฀ EMEA฀ and฀ Asia-Pacific฀ segments.฀ Revenues฀ from฀ our฀ Online฀ Services฀ division฀
increased฀$55.0฀million฀for฀the฀year฀ended฀December฀31,฀2005฀compared฀to฀the฀year฀ended฀December฀31,฀2004฀primarily฀due฀to฀
growth฀resulting฀from฀continued฀acceptance฀of฀new฀and฀existing฀products฀in฀our฀Online฀Services฀division฀and,฀to฀a฀lesser฀extent,฀
the฀full฀year฀impact฀in฀2005฀of฀our฀Expertcity฀acquisition.฀The฀increase฀in฀net฀revenues฀during฀2004฀as฀compared฀to฀2003฀was฀due฀
primarily฀to฀the฀factors฀mentioned฀above฀across฀all฀geographic฀segments.฀For฀additional฀information฀on฀our฀acquisitions,฀please฀฀
see฀“Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations—Acquisitions”฀and฀Note฀3฀to฀our฀
consolidated฀financial฀statements฀and฀for฀more฀information฀on฀our฀international฀revenues,฀please฀refer฀to฀Note฀12฀to฀our฀consolidated฀
financial฀statements.
Cost฀of฀Revenues
Year฀Ended฀December฀31, 2005฀฀
Compared฀to
2004฀฀
Compared฀to
(In฀thousands) 2005 2004 2003 2004 2003
Cost฀of฀product฀license฀revenues $฀ 14,404 $฀ 3,824 $฀ 13,555 $10,580 $(9,731)
Cost฀of฀services฀revenues 26,794 16,472 6,481 10,322 9,991
Amortization฀of฀core฀and฀product฀technology 16,766 6,127 11,036 10,639 (4,909)
฀ Total฀cost฀of฀revenues $฀ 57,964 $฀ 26,423 $฀ 31,072 $31,541 $(4,649)
Cost฀of฀product฀license฀revenues฀consists฀primarily฀of฀hardware,฀product฀media฀and฀duplication,฀manuals,฀packaging฀materials,฀
shipping฀ expense,฀ server฀ capacity฀ costs฀ and฀ royalties.฀ Cost฀ of฀ services฀ revenue฀ consists฀ primarily฀ of฀ compensation฀ and฀ other฀
personnel-related฀costs฀of฀providing฀technical฀support,฀consulting,฀as฀well฀as฀our฀online฀services.฀Also฀included฀in฀cost฀of฀revenues฀
is฀amortization฀of฀core฀and฀product฀technology.฀Cost฀of฀product฀licenses฀revenues฀increased฀$10.6฀million฀in฀2005฀as฀compared฀to฀
2004฀due฀primarily฀to฀sales฀of฀our฀Citrix฀NetScaler฀products,฀and฀sales฀of฀our฀Citrix฀Access฀Gateway฀products฀both฀of฀which฀contain฀
hardware฀components฀that฀have฀a฀higher฀cost฀than฀our฀other฀software฀products.฀Cost฀of฀services฀revenues฀increased฀$10.3฀million฀
in฀2005฀compared฀to฀2004฀primarily฀due฀to฀increased฀sales฀in฀our฀Online฀Services฀division฀due฀to฀continued฀acceptance฀of฀our฀new฀
and฀existing฀online฀products฀and,฀to฀a฀lesser฀extent,฀due฀to฀increased฀sales฀of฀consulting฀and฀technical฀support฀services฀related฀to฀
our฀Access฀Suite฀products฀and฀sales฀of฀services฀related฀to฀our฀new฀Citrix฀NetScaler฀products.฀Amortization฀of฀core฀and฀product฀
technology฀increased฀$10.6฀million฀in฀2005฀as฀compared฀to฀2004฀primarily฀due฀to฀amortization฀related฀to฀core฀and฀product฀technology฀
acquired฀in฀acquisitions.฀The฀increase฀in฀amortization฀of฀core฀and฀product฀technology฀was฀partially฀offset฀by฀other฀core฀and฀product฀
technology฀assets฀becoming฀fully฀amortized฀during฀the฀year.฀For฀more฀information฀regarding฀the฀acquisitions,฀see฀“Management’s฀
Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations—Acquisitions”฀and฀Note฀3฀to฀our฀consolidated฀financial฀
statements.฀We฀anticipate฀that฀in฀2006,฀cost฀of฀product฀license฀revenues฀will฀increase฀as฀compared฀to฀current฀levels฀as฀we฀currently฀
expect฀sales฀of฀our฀Citrix฀NetScaler฀products฀and฀Citrix฀Access฀Gateway฀products฀to฀increase.฀Our฀Citrix฀NetScaler฀products฀and฀
Citrix฀Access฀Gateway฀products฀have฀a฀higher฀cost฀of฀revenues฀than฀our฀software฀license฀products฀due฀to฀their฀hardware฀component.฀
In฀addition,฀in฀2006,฀we฀expect฀our฀cost฀of฀services฀revenues฀to฀increase฀due฀to฀increased฀sales฀of฀our฀online฀services฀products฀
and฀an฀increase฀in฀technical฀support฀costs฀as฀we฀increase฀our฀customer฀base,฀have฀more฀frequent฀product฀releases฀and฀more฀
complex฀ products.฀ Our฀ reported฀ total฀ cost฀ of฀ revenues฀ is฀ also฀ expected฀ to฀ increase฀ due฀ to฀ increased฀ compensation฀ expense฀
related฀to฀our฀adoption฀of฀SFAS฀No.฀123R.