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Technology Stocks : Citrix Systems (CTXS) -- Ignore unavailable to you. Want to Upgrade?

To: Tom Gebing who wrote (6428)	4/20/1999 10:30:00 AM
From: Tom Gebing	Respond to of 9068

H&Q comments from this morning........ ** Hambrecht & Quist Hambrecht & Quist Hambrecht & Quist ** Company: Citrix Systems, Inc.Price: 31.25Recommendation: Buy - Focus List Notes: a, b,fDate: 4/20/99 Delivering in Q1 and Estimates Raised Again - BUY/Focus List Market turmoil aside, Citrix announced another very strong quarter. Revenue of $85M and EPS of $0.30 significantly exceeded our estimates of $81M and $0.27, respectively. Citrix's board approved the repurchase of up to $200M in stock and the creation of an Internet Business Unit. Channel surveys and company commentary suggest demand is strong going into Q2. We're raising EPS estimates by a dime this year and next and reiterating our BUY/Focus Listrating. 1998 A 1999 E 2000 E Q1 EPS $0.18 $0.30 $ Q2 EPS 0.19 0.32 Q3 EPS 0.23 0.32 Q4 EPS 0.27 0.34 FY EPS 0.87 1.28 1.63 FY REVS (M) 249 374 500 CY EPS 0.87 1.28 1.63 CY P/E 35 24 19 FY Ends Dec Current Price $31.25 52-Week Range $23-53 Market Cap(M) $2,928 Shares Out(M) 93.7 Book Value $3.66 Net Cash/Share $4.87 3-Year EPS Growth 40% CY99 P/E-to-Growth 80% Strong Revenue and Earnings Growth Highlight a Very Clean Quarter Citrix reported a record quarter and held an upbeat conference call conveying a positive message in regard to near-term business and the longer-term market opportunity. March quarter results included revenue of $85M, up 72% y/y and 13% q/q, and $0.30 in EPS from operations, up 66% y/y. Citrix exceeded our revenue and cash EPS estimates of $81M and $0.27, respectively. We note that Citrix also reported EPS including intangible amortization of $0.28 (three cents better than our estimate) but because the cash EPS was what was being compared against, the controversy of earlier in the year has seemingly been relegated to an accounting footnote. The quarter was highlighted by strong product revenue growth of 104% y/y to $80M, which exceeded our estimate of $75M. Citrix posted impressive results both domestically and internationally. North American revenue was up 25% q/q and accounted for approximately 60% of total while international revenue came in at $33M, up 8% q/q, representing 40% of total. The balance sheet was strong with total cash of $619 million (subsequent to the $293M notes offering in the quarter) and DSO was up seven days sequentially to 46 days, which we view as very low relative to the range for other enterprise software companies. MetaFrame sales exhibited strong growth and came in at $39M, representing 46% of total revenue and a 51% increase q/q. As expected, WinFrame sales were down q/q at $6M, mainly as a result of the ongoing customer desire for the new interface and functionality of WTS and MetaFrame. Options revenue was up 5% sequentially to $25M. We are upbeat on the prospects of options revenue growth in Q2 as option sales generally lag purchase of new base product and the company just released two new option packages, RMS (Q1) and IMS (Q2). Service revenue at 3% of total and the Microsoft component at 12% were in-line. Citrix reported multiple customer wins with a diverse set of customers. In Q2, Citrix had substantial international customer wins at MRV AG Insurance (70 MetaFrame servers and 3500 concurrent licenses) and Norway's Department of Labor (200 MetaFrame servers). Domestically, customer wins included AT&T Wireless, US Air Force Central Command, and US Cellular. During the quarter, the Citrix's business alliance program grew to over 400 members with new partners including SAP America, SHARP, Data General, Unisys, British Telecom, Fujitsu Computers, and NEC.Expanding the Message - Creation of an iBusiness Unit Citrix continued to add to its new business momentum with the formation of an iBusiness Unit, which will focus on the Application Service Provider (ASP) market as well as the market for deploying and managing web-based applications. Chris Phoenix who was formerly the General Manager of APM /Digitivity will lead this business unit. We expect Citrix to make several product, technology, and partnership announcements regarding this segment over the next few quarters as we believe that the company will come to represent a core infrastructure component in the deploying and managing of web-based applications. In fact, we look toward the H&Q Conference (4/26) as a key event where further disclosures with this unit may be revealed. Channel Surveys Reveal Positive Demand Trends In addition to what the quarter demonstrated, our recent conversations with Platinum and Gold Citrix resellers indicate that demand levels right now are strong. We continue to see an increase in the number as well as in the size of installations. In addition, we believe that sales from the installed base are increasing as many enterprises with single application server installations have broadly adopted the server-based computing concept and are adding Citrix servers to run additional applications. Raising Estimates and Reiterating Highest Rating We are raising our FY 99 revenue and operating EPS estimates to $374M and $1.28 from $361M and $1.18 and raising our FY 00 revenue and operating EPS estimates to $500M and $1.63 from $478M and $1.53, respectively. We reiterate our BUY-Focus List rating. We continue to believe that a twelve month target price of $55 is justified. This target represents a multiple of 34x our FY 2000 estimate. 1999 Copyright Hambrecht & Quist LLC. All rights reserved. The information contained herein is based on sources believed to be reliable but is neither all-inclusive nor guaranteed by our firm. Opinions reflect our judgment at this time and are subject to change. We do not undertake to advise you of changes in our opinion or information. In the course of our regular business, we may be long or short in the securities mentioned and may make purchases and/or sales of them from time to time in the open market, as a market maker, or otherwise. In addition, we may perform or seek to perform investment banking services for the issuers of these securities. Most of the companies we follow are emerging and mid-size growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. For these and other reasons, the investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. This report is not a recommendation or a solicitation that any particular investor should purchase or sell any particular security in any amount, or at all. on suitability considerations, please contact your account executive. RESEARCH NOTES: H&Q publishes brief Research Notes covering very recent or developing events or situations regarding companies or industries covered. These reports are made available to interested clients of H&Q on a request basis. They often contain only partial information in very brief, often in outline form; their purpose is to provide rapid information and preliminary evaluations of such events or situations which may very rapidly be changed as a result of subsequent additional information and analysis. Please contactyour