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Citrix Systems, Inc (NASDAQ:CTXS)

Q4 2005 Earnings Conference Call

January 18th 2006, 4:45 PM.

Executives:

Jeff Lilly, Senior Manager of Investor Relations

Mark Templeton, President and Chief Executive Officer

David Henshall, Senior Vice President and Chief Financial Officer

Analysts:

Steve Ashley, Robert Baird

Bill Winslow, Credit Suisse First Boston.

Ed Maguire, Merrill Lynch

Israel Hernandez, Lehman Brothers

Brent Williams, KeyBank Capital Market

Brandon Barnacle, Pacific Crest Security

John Risotto, Buzzard Capital Market

Todd Raker, Deutsche Bank

Adam Holt, JP Morgan

Dino Diana, UBS

Stephen Freitas, Harris Nesbit

Kirk Materne, Banc of America Securities

Jason Craft, SIG

Jeff Englander, America’s Growth Capital

Robert Breza, RBC Capital Market

Walter Pritchard, SG Cowen & Co

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Operator

Good afternoon my name is Ramona, and I will be your Conference Operator today. At this time I would like to welcome everyone to the Citrix Systems Fourth Quarter and Full Year 2005 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer period. If would like to ask a question during this time, simply press “*�? then the number “1�? on your telephone keypad, to withdraw your question, press “*�? then the number “2�?. Thank you, I would like to introduce Jeff Lilly Senior Manager of Investor Relations, Mr. Lilly you may begin.

Jeff Lilly Senior Manager Investor Relations

Thank Ramona, good Afternoon everyone and thank you for joining us. In this call today we will be discussing Citrix’s fourth quarter and fiscal year 2005 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 Investor Relations website and a slide presentation associated with the webcast will be posted immediately following the call. Before you get started, I want to emphasize that some of the information discussed in this call maybe characterized as forward-looking statements made pursuant in the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934.

These statements involve a number of factors that could cause actual results to differ materially including risks associated with the company’s businesses involving the company’s revenue growth, products, their development and distribution, product demand in pipeline, economic and competitive factors, the company’s key strategic relationships, the effect of new account pronouncements on revenue and expense recognition including the effect of FAS 123 on certain of the company’s GAAP financial measures, and acquisition and related integration risks. Additional information concerning these factors is highlighted in the earnings press release and in the company’s filings with the SEC including the Safe Harbor disclosure contained in our most recent 10-K filings available from the SEC or the company’s Investor Relations website.

Additionally during this call, we will discuss various non-GAAP financial measures as defined by SEC Regulation G. The certain adjusted figures, which include operating expenses, operating income, gross and operating margin, net income and earnings per share. The most directly comparable GAAP financial measures and reconciliation of the differences discussed on today’s call can be found at the end of our press release stated today and on the Investor Relations page of the Citrix corporate website. Now I would like to introduce David Henshall, Senior Vice President and Chief Financial Officer of Citrix Systems.

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David Henshall, Senior Vice President and Chief Financial Officer

Thank you, Jeff and good afternoon. Today I am pleased to report strong fourth quarter results for the company, demonstrating solid execution across all aspects of the business and growing customer demand for all of our products. In addition to providing you with some commentary on the fourth quarter results, I will discuss the current trends in our business and provide you with our outlook for the first quarter and a preliminary view in the full year 2006.

Beginning with our financial results, I should note that certain numbers discussed are adjusted figures. Please refer the press release and our Investor Relations website for full reconciliation of the adjusted figures to US GAAP figures.

So let us take a look at the Q4 highlights. Total revenue was $269 million, an increase of 26% over the last year. Our GAAP EPS was $0.32 compared to $0.30 a year ago. Our adjusted EPS was $0.36 compared to $0.29 last year, an increase of 24%. Adjusted operating margin was 29% and cash flow from operations was over $79 million, so across the board really a great quarter. Taping a very solid year in which we posted a record 909 million in total revenue and $1.17 in adjusted earnings per share.

Now, I would like to discuss our revenue by product mix and geography as well as our operating metrics. In the fourth quarter, product license revenue was over $130 million, representing 23% year-over-year growth; this included solid growth in our Presentation Server and Access Suite solutions as well as 25% sequential growth in the SSL and Application gateways.

In addition, our Netscaler products in their first full quarter contributed 14 million of revenue including almost 11 million of product license. Our online services generated almost $29 million in Q4; this is an increase of 60% over last year when normalized for purchase accounting adjustments. Product license update revenue primarily from our subscription advantage program was 89 million, up 18% year-over-year and technical services, which consist of consulting, education, and support was 21 million up 33%. But looking the revenue by geographic segment, EMEA was up 16% over Q4 last year to $103 million. The America’s region continues to execute very well growing 30% to $116 million and now representing 42% of total revenue.

The Pacific region grew 9% now contributing 8% of revenue and online software services which were not included in these geo segments have grown to about 11% of total revenue. Look at the top 10 deals in the period, we had 7 transactions greater than $1 million with the remaining 3 all of over 750k. In addition, the Netscaler products generated two transactions greater than 500,000. By geography, 7 of the top 10 were in EMEA, 2 in North America and 1 in Latin America.

Next let me talk briefly about expenses and operations. An adjusted operating expense in Q4 was $173 million, up approximately 15% year-over-year. This increase was driven by the full quarter impact of the Application Networking group and modest headcount investments. During the quarter, we added 85 employees to the company. 31 joined the Application Networking team including those from the Teros acquisition, 42 were hired into the online group and the remaining 12 in other parts of the company. In total, worldwide headcount now stands at 3171. On the balance sheet, deferred revenue grew sequentially by over $30 million, bringing the total balance to 286 million; this total is up 61 million or 27% from last year.

The growth was driven by strength in our Subscription Advantage offerings. Renewal rates of this program approached 80% last quarter and we continued to be successful in driving our getCurrent programs, a strong sign that customers are seeing the value of our latest product releases. Cash, restricted cash on investments totaled 618 million down 5 million; this sequential decline was related to payments against an outstanding term loan, cash paid for the Teros acquisition and share repurchase activity. Please note that at the end of the quarter, we had $31 million outstanding against the term loan in EMEA. As a reminder, this debt facility was established in Q3 of last year to maximize the repatriation of foreign earnings under the American Jobs Creation Act.

During the fourth quarter, we also repurchased 800,000 shares at an average price of about $26 and for the full year we repurchased approximately 7.4 million at about 23.50 each. And finally cash flow from operations continues to be very strong; including the 79 million from Q4, cash flow for the year, grew to a record $293 million. In summary, these results demonstrates the continuing progress the company has made and executed against our strategy to build a complete Access Platform to solve multiple access problems for our customers and at the same time diversify our product revenue streams with managers while still maintaining operational discipline and strong profitability.

Now I would like to discuss our outlook and expectations for the first quarter and the full year ending December 31st 2006. It should be noted that we are about to make forward-looking statements that might incorporate certain risks. Please refer to the Safe Harbor statements noted in our press release and the risks that are stated in our SEC filings. Also, in the first quarter, we’ll begin recognizing equity compensation expense under FAS 123. While this number is included in our GAAP results, it will be excluded from our adjusted results. For the first quarter, we expect total revenue in the range of $240 million to $249 million. Within this total revenue number, we expect the Application Networking group to contribute 12 million to 14 million in total revenue and I would like to remind you that the revenue from this group is to split approximately 75/25 between license and services.

In addition, our online services should contribute approximately to $30 million to $31 million. Adjusted operating margin was expected to be in the range of 24 % to 25 %, related. Weighted average shares outstanding should be between 184 million and 186 million. And finally we expect earnings of $0.18 to $0.20 per share on a GAAP basis and adjusted EPS of $0.27 to $0.28. For the full year 2006, we see total revenue in the range of $1.03 billion to $1.06 billion.

Within this amount we currently expect the Application Networking products to contribute between $64 million and $68 million. GAAP EPS is expected to be in the range of $0.88 to $0.97 and adjusted EPS is expected to be in the range of $1.23 to $1.28. Also, I’d like to provide you with some thoughts on our 2006 operating model. As the Application Networking and then Gateway’s products continue to grow, we believe overall gross margin will be in the 92% to 94% range. With more profitability coming from these businesses and other US sources, the tax rate can increase by up to 4% when compared to 2005 and overall, we’ll continue to target total adjusted operating margin in the mid to upper 20% range.

So, as the results show, we built a very strong foundation to work from. In 2006, we planned to build on this momentum, invest in the business and grow the product platform. Now, I would like to turn it over to Mark, to give you additional details on the quarter’s performance and to discuss our ongoing businesses as we enter 2006. Mark?

Mark Templeton, President and Chief Executive Officer

Thanks David. And thanks for joining us on the call today. As you heard from David, we had an extraordinary fourth quarter, finishing 2005 with momentum across all areas of the business. I would like to highlight five of them.

First, strong license growth for Presentation Server held by closing on some postponed projects in EMEA along with MetaFrame, end-of-life, and getCurrent programs. Second, continued traction across our other Access product lines, including the Access Suite our Access Gateway, our new Access Essentials product and our very popular Online Services. Third, great performance from the Netscaler product line and team our newest solutions for Web Application delivery. Fourth, another healthy increases in license updates with a record level renewal rate of almost 80%. And fifth, very good growth from our technical services especially in the consulting and tech support areas. So I’m really pleased with our Q4 results.

A year ago, we’ve shared our 2005 financial goals with you, top line growth, expense management and driving revenue from new products, at $909 million for the year and adjusted EPS for $1.17, I think we delivered. We also shared our 2005 strategic goals to define, shape and lead the Access infrastructure market with innovative Access solutions that make on-demand computing a catalyst for business efficiency, agility and growth, again we delivered.

In addition, in 2005, we added 500 new employees, integrated two strategic acquisitions, completed the acquisition of Teros, introduced several product upgrades and new products and won Microsoft’s Global ISV of the year award again. 2005 was a watershed year for Citrix and I have never been prouder of this team.

You heard that Q4 deal next from David. I’d like to add a couple of comments about our two largest sales groups. Our North America team, coming off a rebuilding year in 2004, gained momentum all year and finished very strong. A profitable partner and ERM web customer segments. Our EMEA team turned in a superb Q4 performance, especially encouraging after seeing three quarters of the project postponement in government and Central Europe markets.

Our product teams also executed well, expanding to 10 product lines. All number one in their category were getting there fast. And we grew in every customer segment from prosumers to FMB and from mid-market to global enterprises. We’re focusing on four high growth opportunities, small businesses, online access services, application delivery and access security and control. I’d like to take a look at each one of these with you in a little more detail.

Citrix Access Essentials, built on our powerful Presentation Server technical platform is our first virtualization product specifically tailored for small business customers. It’s been called “Lite Done Right�? and customers and partners agreed. We call it Access Essentials because it offers secure remote access in an all-in-one, easy-to-install cost-effective solution. Released last July, Access Essentials is exceeding expectations. In the first six months since launch, we have over 1000 new small business customers and more than 1500 authorized resellers, over 600 of them are new partners. These are all leading indicators of solid growth ahead.

To build on this success, we are putting even more emphasis on small business customers going forward. In two weeks, at our annual partner’s summit, we’ll introduce a competency program for partners focused on this segment, with specialized training on Citrix small business solutions including Access Essentials, Access Gateway and GoToMeeting. So, there’s a lot more potential here.

Next, let’s look at our online access services which continue to outperform. Citrix GoToMyPC, the number one remote desktop access solution was up 43% over last year. And just a couple of weeks ago, we moved the bar even higher with the introduction of Version 5, faster performance, drag-and-drop file-transfer, true-color and Multi-Monitor support and lots more.

Citrix, GoToAssist, the industry leader for online technical support grew 42% over the last year. In Q4, we launched Version 7, with better management, integration and seamless session transfer. Citrix, GoToMeeting, now in release 2.0 continued as our fastest growing product up 38% sequentially with impressive increases in both FMB and Enterprise Customer segments. To sum it up, our online services group posted another fantastic year, hitting the cover off the ball, quarter-after-quarter and winning 15 product awards in 2005, a new record for us.

Now let us talk about application delivery. Citrix is by far, the market leader when it comes to application delivery. Our Presentation Server products prove it in more than 160,000 installations, are the industry standards for delivering Client Server Apps through virtualization. And Citrix’s NetScaler system ranked number one in both performance and customer satisfaction, are the industry benchmark for optimizing the delivery of Web Apps. Presentation Server and Access Suite continued to drive strength especially in our Enterprise Customer segment.

After just two full quarters of availability, we were pleased with the positive uptake of Presentation Server 4, a must have release with over 50 new features. And an extremely compelling ROI story for both new and existing customers. And we are seeing best ever migration intentions. In fall ‘05, 69% of customers surveyed, indicated in plan to upgrade to version 4 and 29% are already using it.

Following on in Q4, we introduced the 64-bit version supporting three times the number of users per server. PS4 for x64 fundamentally changes the economics and performance of Apps virtualization. In 2006, we are gearing up for next year’s release of Microsoft Longhorn Server. Last quarter, we previewed on a number of our project constellation technologies being built for Longhorn over the coming years. These technologies will further increase the value of our Apps virtualization solutions with some truly exciting innovations.

Next in our Apps delivery product line up is our new Citrix NetScaler product, optimizing performance, security and cost in delivering web applications. We completed our first full quarter of operations with the NetScaler product line and the results were impressive. I’m very pleased with the business metrics slope which all points to success. Feeding competitors, solid customer re-orders, winning technical product reviews, retaining talent, adding integration partners and showing strong sequential growth.

Also very exciting for us, was the latest Gartner Magic Quadrant on Apps delivery. Gartner moved Citrix up into the rise making us one of only two players in the leaders Quadrant. This will put Citrix on the shortlist of every enterprise that’s in the market for Web App Delivery systems. Also in Q4, we expanded the NetScaler product line with the new standard edition of our popular NetScaler Application Switch, bringing enterprise class Web Apps delivery to small and medium customers. And in November, we acquired Teros, the market leader and technology leader for web applications firewalls, adding their stunning technology and talent to our NetScaler products group.

We believe the Apps delivery market is still an early stage market and the opportunity here is enormous. In.Q4, we previewed another App Delivery Solution, our project known as Tarpon, our newest technology for streaming Desktop Applications. App streaming delivers Desktop Applications without the cost and the headaches of traditional installations. We will be launching Tarpon as a product in 2006 so stay tuned. As a result, Citrix will be the first vendor in the App delivery market with the compelling product line that delivers best performance, best security and best cost for delivering every type of applications, virtualization for Client Server Apps, optimization for Web Apps and streaming for Desktop Apps.

Next, Access Security and Control. In early 2005, we began the integration of Net6 entering the SSL VPN market and in combination with Citrix Password Manager created the foundation for a powerful Access Security and Control Solutions. Citrix Password Manager became the number one enterprise single sign-on solution last year, recognized by IDC as the fastest growing ESSO solution in 2004 and again in 2005. Our core offering for Access Security and Control is Citrix Access Gateway; its results have been nothing less than stunning for the quarter and the year.

We began 2005 fairly on the SSL VPN radar and finished the year with the fastest growing SSL VPN products in the industry. Our SSL Access Gateway is now available in almost every market we participate in, in the world, through over 1300 authorized partners in both standard and advanced editions. It’s a great Magic Quadrant story here too. In Gartner’s latest on the SSL VPN space, Citrix moved up from the visionary space to the doorstep of the leader’s Quadrant, one of only 3 companies that improved this position.

During 2006, we will expand the Access Gateway product line by leveraging NetScaler SSL technology, giving us the broadest SSL VPN product offering in the market. So, in each of these high growth business markets, Small Business, Online Access Services, Application Delivery and Access Security and Control, we are well positioned to accelerate our momentum throughout 2006.

Although for the past three years, we really built a new Citrix. 2003 was about strategy, moving beyond a single product, 2004 was about investing in a foundation for growth, 2005 was about leverage creating revenue diversity, 2006 is about momentum, revenue from new product cycles and multiple markets. More specifically here is what we expect from Citrix this year.

First, to breakthrough the $1 billion revenue market, balancing expense management and business investments. Secondly, to aggressively advance our lead in Access infrastructure, further expanding the product portfolio and acquiring new customers especially in the small business and mid-market segments. Third, successfully integrate the NetScaler and Teros teams and continue to set the industry pace for Web App Delivery Systems. Fourth, to streamline our partner programs and upgrade the confidences of our partners across small business, App delivery and Access Security markets. And fifth, to continue to attract the best and brightest to Citrix, to build a world class brand or rather single critical customer value and that’s Access.

So, in summary, an extraordinary Q4 and year of growth, it’s says it all. Now we will open it up for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time, I weould like to remind you if you would like to ask a question, please “*�? then the number “1�? on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster.

Your first question is from Steve Ashley with Robert Baird.

Q - Steve Ashley

Hi congratulations on the quarter, I actually joined the call just a little bit late but, David did you comment on how diluted and what impact the acquisitions of Net6 and NetScaler had on earnings per share?

A - David Henshall

No, I actually didn’t talk about that, but if you remember when we announced the acquisition of NetScaler, we had talked about 2 pennies to 3 pennies dilutive per quarter and the back half of this year. And then becoming accretive to the business by the second half of next year, so I think in the fourth quarter it was between $0.02 and $0.03 so right inline with our expectations and as we look into next year, I would expect it to continue to be 2 pennies to 3 pennies in the first quarter, maybe 1 penny in Q2 and then breaking even to accretive in the back half of the year.

Q - Steve Ashley

And have you offered any comment on terms of the Netscaler sales force, are you growing that and what are your plans just for the size of that portion at this point?

A - Mark Templeton

Hi Steve, this is Mark, we are in the process of integrating the sales force within the context of the overall sales organization, that process is well underway and we will grow that sales organization because we have more products and more opportunity. And, it will be a key theme at our upcoming summit week, in 2 weeks where we will be bringing every customer facing sales and marketing person at Citrix and then about, I think, we expect about 1700 partners to be there and that will be one of the key elements of the week.

Q - Steve Ashley

Great, nice talking to you.

A - Mark Templeton

Thank you.

Operator

Your next question is from Bill Winslow with Credit Suisse.

Q - Bill Winslow

Hi guys, what a great quarter. Just looking at the license update line as well as just the core license growth, one of the things you mentioned was just the ability that you’ve had with the getCurrent programs but also just sign-on could offer some subscription advantage. Just wondering, if you can give us a sense looking from your legacy products 1.8 XP sort for where you stand for, what do you think you are going to install base feat is, but also what percentage you think is, actually on subscription advantage right now?

A - David Henshall

Let me take the first track in that question, it’s obviously is the older platforms where the data becomes less and less precise, I think that, the crux of your question is probably trying to identify the opportunity that we still have to migrate those folks on older platforms to more current platforms or probably more importantly, what part of our installed base right now isn’t on a Access Subscription Program, then it’s really an opportunity for us to go and attach with our getCurrent program. And, the best estimates for that number is about 2 million feat at this point of time. Real active users that are not currently on subscription and will either need to maybe just re-buy the new product or buy what is essentially a migration pack through our getCurrent program, so it’s still a very large opportunity. What, I’ll just add, what we did see in the fourth quarter, a continuation of the strength that we talked about in Q3, where that business across those getCurrent programs has seen an acceleration really pointing towards the desire of customers to getCurrent on their subscriptions so that they can participate in newer platforms and the newer products.

A - Mark Templeton

And Bill, this is Mark, the only thing all I would add is that, we’ve had now several really excellent years of performance in terms of execution around subscription renewals and a key part of that has been either, specifically the getCurrent program or other programs that are designed to recapture customers and keep them on subscription. Of course, that even goes back to the days of 1.8 in XP so many of those customers, as we have executed well here it really reduces the number that are out there that are not on subscription and candidates for getCurrent in the current period. And the other thing that we have going on in this area is that, maybe a little bit of Carrot & Stick, the Carrot that we continuously put out for customers whether they are on subscription or not and regardless of version is really the velocity on enhancements to Presentation Server that really are addressed by increases in ROI which tend to then pay them back for migrating. And then we’ve obviously with the product now in it’s 4th major generation, use the Stick by having to implement end-of-life on 1.8 and now the XP edition, so that’s pushing them at the same time.

Q - Bill Winslow

Great, thanks guys.

Operator

Your next question is from Israel Hernandez with Lehman Brothers.

Q - Israel Hernandez

Hi, Good afternoon and congratulations everyone. Now that you have assembled in a broader portfolio of products over the couple of years, are you seeing any change on your enterprise customers in terms of buying behaviors and are you seeing, I guess what, are you are being seen as more in a strategic line and is that helping you pull through more sales the with existing Presentations Server, which but my calculation is up about 9% year-over-year on the core licenses, thank you.

A - Mark Templeton

The fact is real. Absolutely, we have seen great acceleration over the last 2 plus years in the enterprise market, we’re being strategic actually matters to customers and where across selling based upon that strategic position matters to revenue to the company. We saw clear evidence of that in Q4 actually encouraging about almost 10% of the NetScaler product line was driven by either direct influence or referrals from incumbent customers that were using Presentation Server and the deal team servicing them and partners servicing them and that is after just the first full quarter of integration activity. So, there is tremendous upside there and that’s where we are going to see the notion of cross selling for building a strategic access platform. So, that’s how I answer your question.

Q - Israel Hernandez

Great thank you

Operator

Your next question is from Ed Maguire with Merrill Lynch.

Q - Ed Maguire

Oh, yes first a quick question on operating expenses, it looks like G&A spiked up a little bit, R&D was down, is there anything behind that?

A - David Henshall

Nothing material Ed, I think it’s, like I mentioned in the comments, it’s primarily the inclusion of the fourth quarter impact of the NetScaler acquisition, variable comps, that always flows into the fourth quarter and other items but, really nothing specific. I would expect it going into the Q1 timeframe; you should look for G&A to be flat to even potentially down modestly on a sequential basis.

Q - Ed Maguire

Okay and in terms of R&D, look for that to, kind of continue along at probably the same rate?

A - David Henshall

Yeah, I think the R&D will be flat to modestly up.

Q - Ed Maguire

Okay and question for Mark, could you talk about your contrasting channel strategies for the Access Essentials, the Access Gateway and the NetScaler products where your approach may differ in terms of the investment, cross training and requirements for your partners?

A - Mark Templeton

Sure Ed, I think the sort of, contrasting element is that, we have a large scale partner ecosystem that has a lot of core competencies not all of which are the same. So, what we are doing is, maintaining a single-focused worldwide channel program and allowing them various types of partners to join and sign up for the different competency spaces. So, if you specialize in calling on and servicing small business customers, we’ve got a competency program and a product set design for you, if your focus is much more on the midsize to the large enterprise and you want a leverage your Presentation Server knowledge and skills, we are going to offer an Application Delivery competency that brings in the NetScaler products and obviously we will integrate the terrific Tarpon products when they are available. And if you have much more of a security kind of practice as an integration partner then we will introduce you to the competency in the Access Security and Control space and I’ll show you how you can build the business around our Access Gateway product line and our Password Management product line. So, that’s the way we are approaching it and some of it is from self-selection and on the part of partners like giving them the sort of, menu of options that will meet their appetites that address their competencies.

Q - Ed Maguire

Thank you.

Operator

Your next question is from Brent Williams with KeyBank Capital Market.

Q - Brent Williams

Question for you on North America, where there are especially significant sales of new products or was some product mix, now given the strong performance in the geography was it balanced or was there any one particular driver that we saw there?

A - Mark Templeton

I think the results in North America were quite balanced, participating in the top 10 deals and probably a little stronger than usual and then better rebalanced across all those types of licensing. So no, nothing stood out in terms of types of customers. I would say that Canada had a stunning Q4 and year that team was up almost 50% year-over-year and that’s coming off of the tough comp even last year. So, but there were many great performances but very balanced.

Q - Brent Williams

Okay and then over on the EMEA side, you have mentioned, I think that you had recaptured a few EMEA deals that had fallen out of the prior quarters due to the government sort of, bouncing around there. Now where these deals that, you have had on the forecast at the beginning of the quarter to recapture and then close them or did you just have zero in the forecast and are they just coming as bluebirds?

A - Mark Templeton

Yes, probably sum of both, as in most quarters but I think, the significance there is that, we really had three quarters where we saw postponements and frankly on an internal basis, we were disappointed that we couldn’t see that kind of behavior in the customer base and then we were sort of equally pleased in Q4 when we saw some of those get released because some customers, especially in government, especially Central Europe started to feel better about the overall political environment and released some capital spending projects. And I am not sure that was, that’s an overall industry trend per se but certainly we got, our fair share of the capital spending releases.

Q - Brent Williams

Okay and then the last thing when you reviewed the bodycount that you added on the quarter, it seemed, I think you said was at 41 that were going into the online division, that’s a pretty decent spike, what are those folks going to be doing?

A - Mark Templeton

I said, that’s actually just a modestly from the rate that we have been adding people to that team over the last year, it is a combination into the sales organization and into product development predominantly.

Q - Brent Williams

Okay. And if I look at product development, is there a lot of that is going into, you just shipped the five clients, which are using nice job on that by that way and or is there some major server reengineering on the, the server side that you are doing?

A - Mark Templeton

I think it’s really a combination of continued enhancements of the existing products as well as great new things that we haven’t yet announced.

Q - Brent Williams

Okay, great. Well, that’s it from me, thank you.

Operator

Your next question is from Brandon Barnacle with Pacific Crest Security.

Q - Brandon Barnacle

Thank you, just a couple of quick follow ups, was there any contribution from Teros in the quarter?

A - Mark Templeton

Yeah, there was minimal amount of contribution from Teros, caught around in millions.

Q - Brandon Barnacle

Okay. And the Presentation Server growth, somebody mentioned the 9% number, are you guys going to give us what that Presentation Server growth number looks like this quarter?

A - Mark Templeton

Yeah, it was up a single digit. The hard part about starting to breakout the individual products and this is what I, I, the comment that I make every quarter is that, actually sell more in terms of bundles or suites or just different solutions to customers while focusing on doing what’s best for them, the numbers are going to move, up and down from quarter-to-quarter. But, overall, I mean, it was a great quarter for the core Presentation Server and Access Suite business coming off again, it was a really tough comp in Q4 of last year, posting high single digit growth, so we are very happy with the performance of that.

Q - Brandon Barnacle

And then with the end-of-life of some products in the first part of the year here, should we see maybe seasonality that is a little more frontloading to the year than historically?

A - Mark Templeton

Well, we are not forecasting any major shifts in revenue between quarters based upon the end-of-life program. Actually for XP, we implemented the end-of-life program in international markets excluding Japan in Q4. And in Q1, it will go into place in North America and Japan. And so, this spreads the impact and any impact there might be over two quarters and will tend to offset each other so no frontloading.

A - David Henshall

The only other comment that I’d like to add is, if you recall many of our customers are participated on subscription advantage or are participating in the getCurrent program so much of that revenue is deferred and recognized relatively over the period of the year. So, I wouldn’t expect any material frontloading of that revenue into ‘06.

Q - Brandon Barnacle

Great and then just lastly David you had mentioned 2 million feats, the folks still on subscription, what’s the average revenue that would be associated with one of those feats, is there a way comp all part of that?

A - Mark Templeton

Honestly it’s a pretty wide range but just as a rough number call it $25 to $50 a seat.

Q - Brandon Barnacle

Perfect, thanks very much guys.

Operator

Your next question is from John Risotto with Buzzard Capital Market.

Q - John Risotto

Good afternoon everyone. Congratulations on a good quarter. Couple of questions on the model for you David, the license revenue mix, we saw that fluctuate between, there is lot of seasonality obviously, let us say between a 43 to 44% range. A lot of these new products coming online, what’s the right way to look at license revenue mix if you can share that with me?

A - David Henshall

Well, I think, the other line items in the business are a little bit more, surely a little bit more predictable on a sequential basis. We do see more seasonality in the license line and we are getting the new contribution from the NetScalar businesses as well as the Gateways entered in higher-and-higher percentage of the company. So, I would expect that the license component would grow, modestly next year. But it’s only approaching $400 million, so it’s going to be extremely hard to move the data materially.

Q - John Risotto

When you say, grow modestly do you mean.....

A - David Henshall

Has a percentage of the total.

Q - John Risotto

Okay, so will grow might be modestly, but you would you expect to grow faster than overall revenue?

A - David Henshall

Yes.

Q - John Risotto

Okay. And then final, can you talk a little bit on the deferred revenue, what type of seasonality you might expect coming out of that as you get into Q1, we are still trying to get our hand around, get a grip with what do expect as far as that going to happen especially as your renewal rates start to peak?

A - David Henshall

Let me make a couple of points there. First, I’ll take the second part of the question. And as far as the renewal rates, I mean, if you remember we’ve been moving those renewal rates up on about 60% two years ago, up in the current high up approaching 80s. So, I think the trend is still up into the rise, it’s surely not going to be a straight line, but we have some room to continue to move that north upward as it is right now. And, I think that from a seasonality standpoint we take a step back and we look at where the real opportunity pool is. And the pool is largest certainly in the back half of the year. So we have the greatest deferred revenue growth usually in the forth quarter, high end, record 30 million in the quarter just reported. So, I would expect it to be, much more modest in Q1, and then growing throughout the year. That’s just based on where the opportunity is.

Q - John Risotto

Okay. And, again I am not trying to put words or do it anyway? Does that mean you would expect the third revenue to increase there will be a modestly in Q1?

A - David Henshall

I think deferred revenue will certainly increase for the year.

Q - John Risotto

Okay.

A - David Henshall

I expect to increase in Q1

Q - John Risotto

Okay.

A - David Henshall

The exact amount is…

Q - John Risotto

Okay.

A - David Henshall

Is dependent upon not only the renewal rate, but also the ability to drive get current revenue, and other things that fallen to deferred….

Q - John Risotto

Okay, great, I think you are going…

A - David Henshall

Just a lot of component. So I don’t want to over simplify the answer.

Q - John Risotto

Right, I’ll appreciate what you did give us. And one quickly on that, can talk about the qualitative idea Mark, and if you understand the strategy of getting all these products into a massive installed base. Can you talk as much as you are willing to show at this quantitatively on what that meant, did you have anything to do with such a great performance in the large deals this past quarter?

A - Mark Templeton

Well, I don’t think that we are going to share more quantitative information about sort of products and segments and channels when we have at this point.

Q - John Risotto

Okay.

A - Mark Templeton

John. So, I mean, if you look at these largest deals for the quarter, all of the top ten are predictably deals driven by Presentation Server and or the Access Suite. As David, mentioned to make the top ten in a company, the bar was really high. It was over 750,000.

Q - John Risotto

Right.

A - Mark Templeton

In the Application Networking space both deals would tend to range from sort of big reorders from Media Metrics companies that will be in the north of $100,000 range to, the enterprise deals where, their customers are getting the first experience and it will be south of a $100,000. And so, what we are seeing, and I think that the indicator of what you are asking around cross selling and leveraging the installed base both on partners and customers is really evidences by what we saw in the a uptake of the SSL VPN across the year far exceeding our expectations for the year, and that is a result of leveraging our partner network across the years, starting the first quarter really behind plan catching up in mid year because all the work was front end loaded with partners and leveraging that in the back half of the year. So, that’s the partner’s synergy statement. And as, we can give you some of the quantitative there, maybe little later on, and then in the enterprise space were we are trying to leverage the relationship with larger scale strategic customers, just after the first full quarter of working together, the NetScalar team and the sort of Presentation Server centric team we’re able to collaborate and drive about 10% of the Application Networking product line during the quarter. And I think, that’s pretty good given the, I think from the first full quarter of working together. So it’s early, it’s very early and as longer range view here is that we’ll have the opportunity to integrate the products from a technical and messaging perspective that’s going on. Leverage the partner and customer base on both the relationship, and go-to-market and demand generation basis. So, I think, that’s why you know we look at 2006, when we look at our goals for the year. One of the big ones is to make sure that we get the integration done well, and streamline the programs well partners can be confident in bringing all these products together as a platform to our customers. So, that’s the way I need to answer your question right now.

Q - John Risotto

Great, congratulations again on a good quarter.

A -Mark Templeton

Thanks John.

A - David Henshall

Thanks Joe.

Operator

Your next question is from Todd Raker with Deutsche Bank.

Q - Todd Raker

Hey guys again congrats on a great quarter. Just two kind of housekeeping accounting questions for David, first. I know you talked about stock comps FAS 123 being in the GAAP numbers. But can you specifically provide the impact?

A - David Henshall

Yeah, there is a reconciliation table actually at the first back end of our press release.

Q - Todd Raker

Yeah I meant for forward guidance?

A - David Henshall

Yes I mean yes for forward guidance in the first quarter stock based comp should be about $0.04 to $0.05.

Q - Todd Raker

Okay.

A - David Henshall

And for the full year $0.16 to $0.20.

Q - Todd Raker

Okay, thanks. And then on the cash flow for the quarter basically flat year-over-year, it look like this a little bit more the back end loaded quarter with DSO and AR was there anything else going on there?

A - David Henshall

Yeah I think, there is lot of things, lot of components moving the cash flow. The biggest drivers continue to be the net income, deferred revenue and, the normal drivers. I think the that normally that you saw in fourth quarter was related to the AJCA, American Jobs Creation Act, which the tax impact with of that provided us some upward pressure to cash flow in Q3 one in, the payment that goes off in Q4. So…

Q - Todd Raker

So that was about 14 million?

A - David Henshall

That’s the only real big driver there…

Q - Todd Raker

Okay.

A - David Henshall

It was about 20 actually.

Q - Todd Raker

It was about 20 million.

A - David Henshall

Yeah, so I mean, we are very happy with the cash flow in Q4 overall.

Q - Todd Raker

Right and then more strategic for Mark, if you look at the industry you are starting to see virtualization on the desktop pickup some momentum, there is virtualization as a buzzword were it really taken off here. How do you see the operating systems on the desktop kind off playing into that, and what do you guys see Linux in your strategy longer term on the desktop?

A - Mark Templeton

I think that virtualization is a very powerful concept, like most the powerful concept in our industry gets over height before they get understood. Our view is that in a virtual machine are very, very useful tools to our centralizing, lowering costs and improving the utilization of hardware, and have some edge conditions where they can be useful in some specific solutions. We also believe that application virtualization and desktop virtualization market place where we have lead for quite sometime is actually the largest virtualization market that exists today. And so, now on the desktop, honestly Todd, out you there is that desktop, the desktop is an environment that we need to connect into and display with as it changes overtime. There is a lot of, there is a lot going on there, I am trying not to jump dig down on this one too much. In the backend we’ll see more of virtual machine impact than on the desktop. That’s our view here. And that virtualization of applications especially Client Server Application will continue to have great value to IT organizations and that really is to the answer Linux as well as. Attach to a degree that Linux becomes a desktop factor we believe that virtualization of especially Client Server, and especially Windows applications will be an important component for every IT organizations to have on board making applications virtualizations even more strategic. That’s the high level and short version of the answer perhaps on your next visit we can spend a lot more time talking about that.

Q - Todd Raker

Great, thanks a lot guys. Take care.

A - David Henshall

Thank you.

Operator

The next question is from Adam Holt of JP Morgan

Q - Adam Holt

Good afternoon, first on the Presentation Server it sounds like that this business maybe getting a little more seasonally backend loaded for the year. Do you think that the reacceleration in growth there was primarily due to seasonal yearend spending, who do you think there we’ve ride inflation point in the 4.0 cycle where we should see a year-on-year growth in the next couple of quarters?

A - Mark Templeton

Adam, I think we’ve got all three impact going on, and certainly are contributing to our outlook into the future, so some catch up on postponed deals, some normal end of the year budget flush that happens every Q4, and as I mentioned in the prepared comments some really good uptake and responsiveness in this from customers and partners on the Presentation Servers 4 platform. And all of those things are contributing to good buoyancy in the Presentation Server business, including License Update business that had a record renewal rate in Q4 of almost 80%.

Q - Adam Holt

And just a quick question on Europe your commentary and results on your, are much better that we seen out of some other coverage companies. You mentioned the impact of some large government transactions, to what extent were there other factors would play to drive what appeared to be relatively strong European results?

A - Mark Templeton

I think the actually it was pretty broad based in terms of size of deal. So in some of those project that got released yes there are a couple of larger ones. But even more so there were many smaller ones. And I think that’s really a reflection of what was going on in most of the year, centered around Germany and conservatism around capital spending that we saw extending down to even smaller business customers in that marketplace. So pretty broad based in that area.

Q - Adam Holt

Okay thank you.

Operator

Your next question is from Dino Diana with UBS.

Q - Dino Diana

Thanks and nice quarter. Can you guys quantify the boost that you got on the end-of-life of 1.8?

A - David Henshall

No, not really, because and the reason is because its more of a progression if that happens, we are not, you can never truly identify whether somebody is buying a new license simply based on end-of-life of a product for that are something just expanding another deployment. I think that the best way to think about it is the fact that we are, seeing increasing, increasing renewal rates as we talked about on our subscription programs as well as just, more and increasing activity on our Get Current programs. And so, that’s what I use kind of a best proxy to point towards how customers are viewing the current value and future value associated with our new products. So, it is not huge boost to revenue in a current period, but it certainly helps increase the overall subscription balance over a longer period of time.

Q - Dino Diana

Got it, okay. And with the straight at the end of the quarter are you still expecting the mid-single-digit growth in core Presentation Server, if though in addition to Access Essentials, what do you identify, the sling factor that will make it better or worse than mid-single-digit growth.

A - David Henshall

I think there is a couple of things, in the last March to add, we continue to believe that the overall application delivery system on Presentation Server and Access Suite, it’s the mid-single-digit growing business. We think the things we are doing to help accelerate that, and really even drive further standardization and penetration of our customer bases is evident in like the 4.O is, we are increasing the scalability of the product, we are increasing the compatibility of applications, we are essentially just improving the ROI message to remove one of those barriers to adoption and the enhancements you saw in 4.0 are things we are doing in the future should help drive that forward.

A - Mark Templeton

And the other thing Dino, is that you are probably should start thinking about separating these businesses out because yet well Access Essentials is built on the Presentation Server platform, technical platform we don’t really market it and sell it as a Presentation Server product. And so, if you want to sort of, and if you want to continue to measure, how much leverage is the company is getting off the Presentations Server technical platform, then you got locked in a lot of things, all right? We are building actually a significant part of content on the Presentation Server technical platform but it won’t be a Presentation Server product. And so what we will see here as we go forward is the product strategy that takes the technical platforms that we have and really purposes them to a much more customer-centric and segment sort of view of the world and go to market strategy. So, you can look to more and more of that which will allow us to talk more and more about markets and product that serve those markets as opposed to sort of looking backward and designing the company’s performance based upon what we used to do.

Q - Dino Diana

Got it, okay. And just switching gears a bit, if you look at the channel, I guess Mitch coming on board and I guess in the October timeframe, it is understanding easily done about a few months, can you talk about some of the strategic opportunities you have identified or kind of more importantly are there any change as to what Ross was doing before?

A - Mark Templeton

Well, I mean, I think as we’ve said our channel team is one of the best in the world and Mitch played a key role on that team, we are excited to put him in that role as leader and he is basically taking the strategy forward, obviously putting his own fingerprints on it, but really executing to, in a longer term vision we have around for channel programs and I think I mentioned a couple of those in the Q&A and that is let it be driven by markets and competencies to deliver to those markets, supported by the company when it comes to training, education, support and demand generation. And, so we’re, I think, well positioned to do that and that will be how we approach summit week in a couple of weeks.

Q - Dino Diana

All right, thank you.

A - Mark Templeton

Thank you.

Operator

Your next question is from Stephen Freitas with Harris Nesbit.

Q - Stephen Freitas

Hi Mark, I was hoping if you could talk a little bit about ICA client and what role you see for it going forward, with respect to Tarpon and maybe even NetScaler?

A - Mark Templeton

Okay, we’re happy to see so, the ICA protocol is the core of the ICA clients, the ICA protocol is also the core of being able to display a virtual session on an endpoint device like a PC or terminal or whatever. And it will continue to be that there is also a technical platform underneath it, that is extensible that we have the opportunity to and will enhance to make it very aware of the NetScaler platform on the other end, make it very aware of the Tarpon Streaming on the other end and what you might actually find is that it won’t be known as the ICA client anymore, it will be more of an Access client that has a unified kind of set of capabilities around high performance secure and cost-effective Applications Delivery and obviously we are looking at a making sure it works extremely well with our FSL endpoint technology as well so that you get a secure high-performance connection over the internet. So that’s what you expect on the client side going forward.

Q - Stephen Freitas

If it there’s something is becoming most strategic, I guess the other question is do you vision doing more in terms of delivery optimization of UDP applications like Voice over IP and streaming media, in addition what NetScaler does for a TCP-based typed applications?

A - Mark Templeton

Yes. I think that later this year, we will be able to sell some additional interesting solutions in the voice area. We are already doing some exciting things on these calls, we have a limited amount of time and we can’t talk about everything we are doing but we have done some very exciting things in the voice area and we will continue to invest and actually upscale our investments this year in that part of our technology platform, so stay tuned on that.

Q - Stephen Freitas

Okay. Do look forward to that, thanks Mark.

Operator

Your next question is from Kirk Materne with Banc of America Securities.

Q - Kirk Materne

Hi, thanks very much. David could you just address whether or not, have you seen any uptake in the amount of deals that include the Access Suite rather than just find a Presentation Server, was there any uptake in that, on the number of Suite deals this quarter, or is it still a just Server gradual progression around that?

A - David Henshall

Yeah, I think it’s a gradual progression, I mean Access Suite has a standalone product if you really want to isolate it, I mean; it had its best quarter ever, by a pretty good margin. So, I mean, we continue to see a gradual reduction in the Access Suite, and as we do things like add more proceed value to it, including the Gateway licenses and other things I mean, we expect that the Suite percentage of the Access Management group will continue to move up gradually over time. So I think Mark out pointed that 3 of the top 10 deals more Access Suite deals, so we are certainly seeing a broad scale adoption of that product.

Q - Kirk Materne

Okay and then just on NetScaler, Mark, can you just talk about two things, number one, I guess, as you brought in NetScaler I guess, what did you see happening in terms of NetScaler sales cycles, so if maybe similar bigger enterprise customers that they had, did they tighten up, given that that’s now a part of a larger corporations, so, if you’re seeing some benefit just bring in internally into Citrix. And then secondly, I think is it fair to say that maybe some competitors, Mark, or maybe you are caught off-guard with your acquisition or when even in the SSL VPN area, have you seen any of the competitors in either of those areas doing anything differently, in the channel around pricing or incentives versus what you first saw when you made this acquisitions, thanks.

A - Mark Templeton

Okay Kirk. As far as sales cycles with, there is some puts and takes, obviously Citrix brand and so forth and reputation, certainly helped in some cases and those are the put on sales cycles and the takes, people are distracted with the integration and it does, there is take energy away from the sales process and so I would say at this point, we have seen a modest upside as I mentioned in the prepared comments in terms of re-pasting there. Longer term is clearly going to help in terms of Citrix brand and then just more knowledge and awareness on the part of enterprise customers in terms of the value of Web App Delivery System and certainly Gartner Group is probably going to have as big an impact on sales cycles as anything that we could do. The other thing that we did a lot of in Q4 was work with partners we have about 80 engaged right now, better actually creating deals, pipelines etc, half of them are new to the Citrix Access partner program and about half of them come from our classical network of partners especially, Platinum and Gold partners and they actually transacted business in Q4 which was very positive to see. And as far as competitors go, at this point we are seeing any specific actions taken by the competitors, we are more focused on the white space of running as fast as we know how to run both technically and in every other way to generate demand and we had a very great quarter for winning technical reviews and even head-to-head shootouts, technical shootouts on customer premises, very, very pleased with the results there. We are beating everyone when it gets down to just the technical shootout and we are not seeing any pricing actions, I am not sure in this sort of cycle of the marketplace being still very early that pricing actions has a big impact. Because these are more early adopters and they are looking for the best technology, the fastest, the most secured et cetera and they are looking for a company with a long-term vision, aggressiveness and I think we are fulfilling off on the all of that. So, I think that’s what we are seeing out there in terms of competition Kirk.

Operator

Your next question is from Jason Craft with SIG

Q - Jason Craft

Thanks, let me brief here. Of the seven deals over a million or any of those abnormally large in the quarter and also can you talk to your operating margin goals for 2006 with respect to the Citrix Online and then NetScaler division, thanks.

A - David Henshall

Sure Jason, all the top 10 deals, there was nothing that was abnormally large, there were three deals that actually made it over to 2 million but as normal with our business, we never have a transaction that represents on a recognized basis more than 1.5% of revenue, so nothing abnormal there. I think on an operating margin outlook, I mean we have seen a good trend this year moving up throughout this year from 24% to 26%, 27% and now 29% operating margin. As we look into 2006, we continue to think that there tremendous amount of opportunities to grow, not only in platform but into the market from a revenue standpoint and we will be continuing into invest back into the business. And the output, we still believe that the mid to upper 20% range on operating margin keeps us near to the very top of our peer group from a profitability standpoint but also gives us that flexibility that I mentioned to continue to invest and so that’s the range we are looking at into 2006. I am sorry, go ahead.

Q - Jason Craft

I was just going to say, in the past, in Citrix online, has been kind of 20% to 25% Op margin, can you curve out what kind of, do you see that improving, is that where you like it to be, and with NetScaler backing into it probably the flat operating margin right now where do you see the opportunity with that?

A - David Henshall

Yeah, I think, we are now, the NetScaler and the Gateways products are running at a pretty material negative operating margin at this point of time which, we’ve talked about and that’s what is driving the 2 to 3 phases of dilution. We do think about that we’ll start to turn at the back half of next year as both businesses breakeven and go accretive. But at this point of time, we really haven’t modeled out specific operating margin targets for those two groups, online which we have talked about has in Q3, approached 20% for the first time and it was about 20% in the fourth quarter as well. I think that’s another place where we’ve got a pretty clean tradeoff between growth and profitability that we are making. And with the products growing at 60% range, we want to continue to invest pretty heavily. So I guess, my point there is that we are very happy with the profitability, we think that there is certainly some room to move upwards from there but want to continue to invest pretty heavily to expand the product base and continuing to gain market share.

Operator

Your next question is from Jeff Englander with America’s Growth Capital.

Q - Jeff Englander

Good afternoon guys. First can you just comment quickly on what you saw in terms of US Federal Government or just the US Government in general State and Federal. And then I have one follow up quickly?

A - Mark Templeton

Jeff, as I think you know, Q3 as the huge government’s quarter in pretty much anyone’s business, we didn’t see anything unusually, unusual in that market in Q4 of last year from the total year perspective, we were doing a lot of rebuilding the first half of the year in our Federal Government group and really got that done going into Q3. And so Q4 was about executing on the pipeline that was put in place but really preparing for ‘06. So, we are feeling good about our Federal business and state local we actually, we don’t fact that as part of Federal, goes more into that than normal geographic territories.

Q - Jeff Englander

Also, can you comment in terms of, what you are doing in terms of integration or maybe over relay with the NetScaler sales force and where you are in that process?

A - Mark Templeton

Let’s be sure. At this point, as we go into summit week, we are actually taking the NetScaler teams that consists of very skilled enterprise relationship managers that really going to handle the relationships and the selling at that level along with some really great people in the Murphy team and taking those teams and simply plugging them into the local area Vice President structure. So we are not breaking those teams up, we are keeping them together by plugging them into the 3 in North America, the three area Vice President driven and managed regions. As we go forward, and there is a plan to deal more and more with specialization, where parts of the team will specialize in customer relationship, other parts of the team will specialize in the product. Particular products, other parts of the team will specialize in partner relationship and yet others will specialize in integrating it all and making it all work together including consultant. So, we are really at the front end of that process and the NetScaler team will be an important group of people to help us actually implement and deliver on that.

Q - Jeff Englander

Great thank you very much.

Operator

Your next question is from Robert Breza with RBC Capital Market.

Q - Robert Breza

Hi, just under the wire I guess, when we look at the NetScaler business, can you help us to understand the strength there this quarter, did you see the new standard edition, targeted at the SME space, have a meaningful contribution to the quarter?

A - Mark Templeton

Yeah, the standard edition is just getting out of the gates and it is really designed for the partner network. I would say that a key part of recruiting partners is really associated with the availability of the standard edition because, from the price point and capability perspective and also training education and installations perspectives is within the reach of the broader partner audience. So that is really been, I think the early impact and I think we’ll actually see some revenue impact more towards sort of Q2 and beyond as partners build their pipeline and close business.

Q - Robert Breza

And then quick comment around the EMEA business, you saw good turn around this quarter. Do you think you are turning the corner there or how you are going to looking at that going forward or you still approaching it kind of cautiously?

A - Mark Templeton

Yeah Robert, we are going to continue to be the cautious about it, I think that’s the smart thing to do given what we saw last year. I think generally speaking Europe tends to be more of a backend loaded, sort of annually backend loaded kind of marketplace. And to begin with, and I think that any of the things that we saw last year related to economic or political sort of environment change just really exaggerated that. Those were, sort of going into ‘06 we just can’t approach it cautiously and hopefully we get surprise on the upside, that will be a good thing, but we are going to be cautious about it.

Q - Robert Breza

Congratulations great quarter.

A - Mark Templeton

Thank you.

A - David Henshall

Thank you.

Operator

Your next question is from Walter Pritchard with SG Cowen.

Q - Walter Pritchard

Hey, just two questions for you. One, on the incremental deferred revenue added this quarter, can you just give us a little bit more detail as to what’s the contribution was understand at most maintenance has been in the past was that the case while this quarter anything else that was been there?

A - David Henshall

Now, like in most quarters, the largest component continues to be subscription advantage renewals.

Q - Walter Pritchard

Okay. And then just last question on the services clause it looks like those picked up quite a bit sequentially, I was just wondering what the source that was?

A - David Henshall

The biggest inclusion was just the fourth quarter impact on the application that was some were.

Q - Walter Pritchard

And now that was in services?

A - David Henshall

Yeah, there is a 25% or more percentage of the revenue from that team is coming from the services line.

Q - Walter Pritchard

Okay, okay, thanks a lot.

A - David Henshall

Thank you.

Operator

There are no further no questions at this time, I would now turn the call over to the management for closing remarks.

Mark Templeton, President and Chief Executive Officer

Thank you Ramona. And thanks everyone for joining us on this call today once again, not a lot more to add, so the number speaks for themselves an extraordinary quarter and year, and now it’s on to focus on 2006. See you in 3 months. Bye, bye.

Operator

Thank you for participating in today’s Citrix conference call, you may now disconnect.

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Source: Citrix Q4 2005 Earnings Conference Call Transcript (CTXS)
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