思杰系統 (CTXS) 2001 Q1 法說會逐字稿

Good afternoon everyone, and thank you for participating in today's conference call with Citrix Systems. By now, you all should have received a copy of today's first quarter 2001 earnings release. In the event that you have not, I would like to direct you to either the investor information section of the Citrix corporate website, www.citrix.com/investors or alternatively to the Financial Relations Board at 212-661-8030, and we'll be glad to fax or e-mail a copy to you immediately following this conference call. Without further ado, I'd like to now introduce Scott Davidson, Director of Corporate Treasury to begin the presentation. Scott?

Thanks Peter. Good afternoon everybody, and welcome to the first quarter 2001 Citrix conference call. Joining me here on the call is Mark Templeton, the Citrix President, John Cunningham, our CFO, and Roger Roberts, our COO and Chairman. Our agenda today is going to include a review of our financial results and markets followed by question and answer period. The duration of the call should last approximately 1 hour, and I would ask that when we proceed to the Q&A period that you limit your questions to one per person and a followup if required, in order for us to enable everyone to participate. Before we begin, I'll put on my legal hat and remind everybody that forward-looking statements in this presentation are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements made in this presentation, which are not strictly historical statements including statements regarding current or future financial performance, management's plans or objectives, future operations, products' plans and performance, management's assessment of market factors, as well as statements regarding the strategy and plans of the company and its strategic partners, constitute forward-looking statements, which involve risks and uncertainties described in the company's filings with the Securities Exchange Commission. Now I'd like to turn it over to Mark.

Scott, thanks for those inspiring words, and thanks everyone for joining us today. As you can see in the release, we had another good quarter. We're very pleased with our Q1 business results. The positive strides that we've made in execution and how we're currently positioned with new and enhanced solutions for our customers. Overall, the first quarter of 2001 was highlighted by solid financial performance in earnings and record revenue, a number of really good customer wins, the introduction of MetaFrame XP, a new family of application servers for Windows, the announcement of our plans to acquire Sequoia Software, and expansion of executive bandwidth via the recent appointments of a new Citrix Chief Technology Officer and a new VP for our European operations. In a few minutes, we will discuss these highlights and the outlook a little further, but first, let me turn it over to John to talk about our Q1 financial and operating results. John.

Good afternoon everyone, and thanks Mark. I really am pleased to report on the progress that we have made this quarter. Despite the general uncertainty in the economy and especially in the technology sector, our results showed satisfactory growth, both sequentially and over the comparable period of last year. Our international operations showed strong sequential growth over the fourth quarter, and the domestic operations, although down sequentially, performed to our seasonal expectations. Let's start by addressing some of the quarter's financial highlights, and then I'll provide some deeper insight into our performance, and finally, I will comment on our outlook for the remainder of '01. My comments going forward from here will, of course, be net of amortization. We reported revenue of 132.8 million. That equates to 7.7% sequential increase from the fourth quarter and a 4% increase over the first quarter of 2000. Operating expenses were 83.6 million, up 6% from the fourth quarter of 2000. The Citrix team continues to manage our expenditures in line with revenue or making the necessary investments that we need for our future growth. The operating margin expanded a full point to 31.6% from the fourth quarter. Our operating margin dollars increased by 4.2 million or 11%, over the fourth quarter of 2000. Our net earnings were 33.9 million, an increase of 2.2 million or 7%, from the fourth quarter of 2000. The earnings per share for the quarter were ¢17 compared to the 16% in the fourth quarter. DSOs were 29 days for the quarter compared to 27 days in the fourth quarter. Our electronic licensing accounted for 19% of product sales. Cash flow from operation was $57 million in the quarter, and we expended 29.9 million on our stock repurchase program and acquired 1.6 million shares. Our cash in investments at March 31st amounted to $877.6 million. With respect to our progress on the Sequoia acquisition, the Hart-Scott-Rodino waiting period expired the week of April 12 with no comment, and we are on track to close the transaction this quarter. As mentioned before, we plan to provide financial guidance on the impact of this transaction in detail when it is consummated. At this point, let's spend a few minutes looking at the operations in a little bit more detail. Total revenue in the quarter, as I said, amounted to 132.8 million, an increase of 5.3 million or 4.2%, from the corresponding period of last year and a 7.7% increase or 9.5 million sequentially. Our international revenue represented 51% of our total revenue in the quarter and that compared to 40% in the fourth quarter. All of our international geographies registered strong performance. Our domestic operation, as I mentioned previously, showed, as expected, a seasonal pattern and was down sequentially but did meet our expectations. Electronic licensing accounted for 19% of our product revenue as compared to only 9% in the comparable period of the prior year and 24% in the fourth quarter of 2000. Our e-licensing reorder rates have continued to grow, reflecting further adoption of our product within the large enterprises. We feel that this quarter's e-licensing activity was somewhat impacted by the introduction of our new XP product line, which customers have begun to evaluate and to deploy. We continue to expect that electronic licensing will be a significant part of our revenue stream, but our mix will vary depending on customer delivery preferences. Looking at our performance from the product perspective, the application server products represented approximately 74% of our revenue stream, management service products 11%, professional services 7%, Microsoft 7%, and our OEM business 1%. Our operating expenses for the quarter were 83.6 million. This represents an increase of approximately 5 million or 6%, from the fourth quarter and compares favorably to the 7.7% increase in revenue. Our headcount at quarter's end was at 1,471, up from 1,397 in the fourth quarter. Our operating income amounted to 41.9 million and represented 4.2 million or 11% increase sequentially over the fourth quarter. As I mentioned before, our operating margin improved to 31.6% compared to the 30.6% in the fourth quarter. You will note that our other income line amounted to 4.6 million. There are two components to this. Interest income increased by 1.6 million, and we recorded a valuation write-down of approximately 3.9 million relating to several public investment securities held in our portfolio, and we did this in accordance with the accounting rules. This asset value impairment and the associated write-down negatively affected our reporting earnings by approximately ¢2 per share. We have also had a reduction in our tax rate due to the change in geographic mix of our business and also some other factors, and the tax rate has been reduced to 28% compared to 30% in the year 2000. This change did not materially affect our reported earnings per share for the quarter. Net income for the first quarter was 33.9 million or ¢17 per share. This represents an increase of 2.3 million or 7% from the fourth quarter. The earnings per share calculation for the quarter is based upon the weighted average shares outstanding of approximately 196 million shares. Our balance sheet remained strong with cash in investments at $877.6 million. During the quarter, we generated $57 million in cash from operations, and at the same time, we expended 29.9 million in our stock repurchase program and invested $15 million in the purchase of a facility in the UK. During the quarter, we repurchased, as I mentioned, 1.6 million shares at an average price of 26.18 per share. The deferred revenue account related to product sales was 53 million at the quarter's end compared to 40.8 million at the end of 2000. This increase is primarily attributable to the revenue associated with sales of the e-licensed version of MetaFrame 1.8 sold after the XP announcement. These products, as you know, may be freely migrated to the MetaFrame XP so that a portion of these sales cannot be recognized until such time as the end-user migrates or enabling kits are delivered to the end-user. We anticipate that this revenue will be recognized in the next few quarters, as we fulfill our customer's requirements. However, in addition, we continue to experience continued acceptance of our subscription advantage program, which also has added to our deferred revenue. Total deferred revenue at the end of the first quarter was 97 million, which includes the remaining portion of the Microsoft revenue. Our day sales outstanding increased to 29 days for the quarter, and the DSOs, as I mentioned previously, were 27 days in the fourth quarter. These DSOs will continue to fluctuate as business conditions such as the introduction of new products like the MetaFrame XP, linearity of the quarter, and the percentage of timing of electronic licensing, all can cause this number to vary considerably. So with those details behind us, let us now focus on the outlook. Our comments are going to be limited to the calendar year 2001 as it is really too early to comment on 2002. I wouldn't mind commenting on the last. Also, these comments pertain to our current business and will not reflect our thinking on the pending Sequoia acquisition, which we will address at the closing of the transaction. Looking at the macro level, we have to be respectful to the environment that we are in, and at this point, we remain positive but cautious on our business outlook. Up until now, we have not seen material impact in our business from these issues. Our solutions are predicated on delivering the core values of saving time and money, both of which are imparted to the customer's purchase decision especially during these economic times. Given that background, our outlook for the remainder of the year remains constant. We expect to grow revenue for the year in the lower 20% range and earnings per share in the mid 20% range. If I look a little closer into the second quarter, we expect our revenue growth will approximate 5% sequentially. Regarding interest income, due to the interest rate declines and the upcoming expenditures for the pending Sequoia acquisition, we expect interest income will decline modestly over the near term. In closing, I would like to leave you with the understanding that the whole Citrix team is committed to grow and manage our business by developing and selling solutions, which address the real issues encountered by IT professionals on a worldwide basis, and we feel well positioned with this team to continue to do so moving forward. Now let me turn it back over to Mark to discuss some of the additional highlights. Mark?

Thanks John. Looking back, there are several highlights from Q1 that will be important to our go-forward business plan and outlook. Along with our financials and guidance, we'd like these 5 points to be your key takeaways from today's call. First, we continued with a number of key customer wins. Second, we introduced our first family of application servers, MetaFrame XP. Third, we announced plans to acquire Sequoia Software. Fourth, we added additional bandwidth to the executive team. And fifth, there continues to be strong drivers to our business even though there is much macro level uncertainty. So next I'd like to briefly expand on each one of these. We had some great customer wins with both medium and large customers during the quarter. Some of these included Shell, Voicestream Wireless, Hilton Hotels, The Cleveland Clinic, Dana Corporation, Mercury Insurance Services, Bravida Norge, Statoil, and Maersk. Our largest deal of the quarter was with The Cleveland Clinic. The clinic has around 100 locations and signed a Citrix Enterprise License agreement for over 10,000 users. The Cleveland, Ohio based server farm will support their epic clinic management, loss in financials, and patient tracking systems, and cleverly, the clinic also intends to deploy a nursing documentation system over a wireless WAN using MetaFrame infrastructure. They have also licensed our Extranet product to give doctors and key administrators system access from beyond the clinic walls over the Internet via a web portal solution, beginning later this year. Cleveland Clinic is a great example of how our products can work as a system for broad reach and access for mission-critical applications. Continuing on, in Sweden, we saw an agreement with Bravida, a utility installation services company, for over 3,000 users of Lotus Notes, Microsoft Office, and CROM Financial Control System software, all running in a Windows 2000 environment. Expanding our penetration of the hospitality industry, Hilton Hotels will deploy Microsoft Office and PeopleSoft to over 2,000 users on the MetaFrame for Windows 2000 platform. Voicestream Wireless expanded their Citrix platform by almost 2,000 users, to support the deployment of Amdocs' customer care and billing software. Although the agreement and revenue were recognized in Q4, in January, Royal Dutch/Shell publicly announced plans to deploy MetaFrame across at least 15,000 Windows 2000 desktops making it one of the largest Finn client deployments ever. This announcement received significant press coverage in publications like Computer Weekly, ComputerWire, Computergram, and Silicon.com. One publication noted the deployment is anticipated to save Shell, 30% of its $2 billion IT budget, a key reason why companies can continue to buy our products in the face of an economic slowdown. Now, the second key point is the introduction of the MetaFrame XP application server family. Leveraging our proven MetaFrame 1.8 solutions, the MetaFrame XP application server family represents the most powerful solution for application serving in management specifically designed for Windows 2000, Microsoft's upcoming Whistler platform, and the Internet. MetaFrame XP is an application server family consisting of XP Server, XP Advanced Server, and XP Enterprise Edition designed for departmental, divisional, and enterprise solutions, respectively. Each product is a one-stop solution that includes everything the customer needs to efficiently manage their Windows-based applications from a single centralized location. We introduced MetaFrame XP in February and received an extremely positive reception from customers, retailers, and the technical press. Modest shipments were made in the distribution during the quarter and early sell-through reports showed good straight graph movement. We expect that new customers will rapidly adopt the MetaFrame XP platform as it is our most powerful product offering, and we also expect that existing customers will more slowly migrate in conjunction with their Windows 2000 and Whistler server migrations. MetaFrame XP and our NFuse application portal are essential to paving the way for new portal software products that we are planning to introduce as a result of our announced plans to acquire Sequoia Software. This important announcement is the third area I would like to highlight today. As John mentioned, we're making good progress towards closing the deal and bringing the Sequoia products, technology, and team on board. This acquisition is an important next step for Citrix in our journey toward providing a very powerful and exciting way for IT organizations and service providers to extend a true virtual workplace environment to users everywhere they need to be, regardless of application, service, and device. Overall, the March 12th announcement was received well. Delphi Group's analysis concluded that and I quote, "With the acquisition of Sequoia, Citrix is taking out a much richer e-business platform play supported by a strong relationship with Microsoft and its dot net initiatives. Citrix gained Sequoia's XML-based integration technologies and gives its channel partners a more complete offering to work with." So we like this viewpoint, and we fully agree with it. In fact, we view the portal server as a core building block in our application services platform, because it is critical toward providing one place to get personalized access to a wide variety of information and applications. And as we get down to business here, we plan to offer Sequoia's sophisticated high-end portal solutions and new instant on-solutions for middle market and departmental customers. And what's great is that these products will be able to be sold as solutions on their own, or through our NFuse product, smoothly integrated with our MetaFrame application servers to form a solutions system. Today, our products give access to Windows and Unix applications through the browser. This acquisition will allow us to include web applications, web content, and web services as well. So users will get access to the widest range of digital business information from Windows to web in one place. Another industry analyst, Zona Research really summed it up well. They said and I quote "We believe the Sequoia acquisition will be instrumental in Citrix' continuing evolution from being a client server software company to being a key provider of core application and information access technology that spans Windows, Unix, and the web. Moreover, in the long term, we believe there is significant opportunity for Citrix to establish a key position in the enterprise portal software market," and we agree. The fourth key takeaway is about building the executive team. Adding executive bandwidth continues to be an essential ingredient to our growth plans. We made 2 recent notable announcements to this end. In February, we named Stefan Sjostrom as Vice President for our Europe, Middle East, and Africa operations. An experienced general manager, Stefan brings over 20 years of high technology sales, field marketing, business development, and services experience, to our EMEA team, which accounted for almost $200 million in our revenue during 2000. This month we made another important executive appointment when we named Bob Kruger as our new Chief Technical Officer. As CTO, he will drive the technical vision and long-term strategic direction as it relates to Citrix customers, the marketplace, and our partners. Bob's great experience with BMC Software and Microsoft brings a fresh and exciting perspective to our vision and will play a central role in bringing that vision into better focus and within reach. Both of these execs are great additions to the team as we continue to step up the pace. As John commented, we are positive but monitoring carefully our near-term business. So the fifth key takeaway is about some strong business market drivers to our business. First, we see increased customer focus on the cost and value of computing. This is a very logical reaction during leaner revenue times for our customers and fundamentally good for companies like Citrix with strong ROI value propositions and with products that really work. The second driver is the fact that complex computing integration issues are being brought on by mergers. In a merger, people integration is tough enough getting disparate systems to communicate and deliver and acquiring companies' applications to acquirees and vice versa presents a monumental system, cost, and time issue. Rapid cost effective application deployment has always been core to the Citrix business value and customer value. Next, we see customers that are implementing distance-working projects due to their growing geographical dispersion. Work from home, from branch office, from customer premise, from hotel, from airport lounge, etc., is becoming a mandate for CIO's in an attempt to lower costs, increase information access, and improve overall employee productivity. Our solutions have been core to distance-working solutions since their inception in the early 1990s. And last, we find a strong customer drive toward broader distribution of business intelligence to employees, customers, and business partners. So once again, being able to cost effectively and rapidly deliver business critical applications and information everywhere is a core value customers are looking for and exactly what we deliver. So let's start wrapping up. Going forward, let's think about how 2001 may shape up. We have an expanded set of product offerings and a large-scale selling channel. We have a super install base of successful customers, and we have a strong management team that's executing. Overall, we continue to feel well positioned for 2001, even though we are all facing uncertain economic and IT budget conditions. As we navigate 2001, we are stepping up our focus on the economic value of our products. Our products have always delivered solid ROI and relatively short paybacks for our customers, helping them get more out of their existing IT infrastructure and operating budgets. Our sales and marketing programs through our channel are directed at tapping this opportunity in 2001 more than ever. Secondly, we are looking toward driving the deployment cycle of Windows 2000 server. The Windows 2000 server environment is absolutely the best platform with which to tap into MetaFrame's power, and we are looking to help our customers continue to adopt this new Microsoft platform. So it was a solid quarter for results and for laying important groundwork for future growth, we approach Q2 cautiously confident that the past problems that hampered us have been analyzed, understood, and acted upon. We still have lots of work to do. Our customers are looking to migrate to a more web-centric computing architecture in order to be able to incorporate web content, applications, and services, and now, with an even more robust software platform, we are best positioned to bring all this legacy and web information together into a powerful all digital workplace. Historically, the Citrix brand has stood for providing virtual access from any device over any network. Virtual access to a fully digital workplace represents a unique and compelling complete solution for customers as they look to optimize their business operations and results. Thanks again for joining us today, and now I'd like to open it up for some Q&A. Thank you.

Thank you. At this time, if you do have a question, please press *1 on your touchtone phone. Your name will be announced. Prior to asking your question, we do ask that you state your company name. Again, that's * followed by 1. Our first question comes from Sarah Mattson.

Hi, this is Sarah at Dain Rauscher Wessels. Great execution. One quick question on Windows 2000; if you can give us a metric in terms of percentage of business sold onto the new platform versus NT 4.0, that'd be great, and also any commentary that you can add relative to what you're seeing in regards to adoption of the new operating system?

Okay, Sarah. Thanks. Okay, so on Win 2000 mix, I'll give you a sense for that, and I would point out first that this mix is on the MetaFrame 1.8 platform that is actually packaged separately for terminal server and separately for Windows 2000. And I would point out before I answer that, going forward, the MetaFrame XP platform is not packaged that way as MetaFrame XP is designed to be deployed primarily on Win 2000, but it can be and is supported on the Terminal server platform. We saw continued increase in the mix of MetaFrame 1.8 on Windows 2000. In Q3, it was just under 25%, in Q4, it was just under 50%, and in the first quarter, we saw it increase over 50% and achieve somewhere in the mid 50s. Okay?

So any commentary in regards to what you're seeing in terms of Win 2K adoption? Do you think it's starting to accelerate? Any change in adoption?

From our seat, we see it being pretty steady and pretty confident. That's certainly what would be indicated by the mix numbers that I just gave you. And then on our MetaFrame XP platform, as we said in our prepared comments, the sell through has just begun. It's only been in the channel and available for about 6 weeks now.

Okay. Thanks very much.

Our next question comes from Tom Ernst.

Yes. Good afternoon. Could you give us an idea for, in terms of deal size, how the largest deals compare to previous quarters, the seven figure, as well as some of the smaller deals under 50K?

Thanks Tom. What we saw in the quarter is a little bit of a skewing toward more moderately sized deals, and where in prior quarters we had more deals in our enterprise licensing program, which are 5000 users and above and are very typically sold in a customer situation where they are looking at a global kind of a deployment, we saw, actually, a sequential increase in our corporate licensing program, which are deals from 500 to 5000 concurrent users.

Alright. Thank you.

Our next question comes from Mike Cristinziano. Please state your company name.

It's Gerard Klauer. Could you go over again the discussion of the deferred revenue? It appears that it's increased sequentially, and the rationale behind that again please?

Yes, this is John. The deferred revenue increased, as I mentioned, from approximately 40 million at the end of the year to 53 million. A large portion of that, probably half or a little bit better, is due to the 1.8, alright, that we shipped, and what we have to do because that product is upgradeable by the customer to the XP family, so what we have to do is recognize the XP or fulfill the XP part of the transaction before we can claim the revenue. So we had to defer from the first quarter into subsequent quarters, a little bit more than $5 million until we had the time to fulfill that transaction with the customer.

But XP is shipping now so?

But I had not fulfilled it with the customer and shipped them the media kit that would have enabled them to upgrade some of them from the 1.8 to the MetaFrame XP.

The deferral's on 1.8.

Yeah. The deferral is on the 1.8 shipments.

I see.

. . . with subscription, because when you ship the 1.8 with subscription, he has the right to go to XP, and until we fulfill that XP, the accounting will say we cannot recognize the revenue, and we did not.

Got it. Just one follow-up on the follow off and electronic licenses, do you think is this due simply to people evaluating XP or do you think it's got something to do with the macro environment where these larger deals are just taking longer?

As you look at it, I would sum it as probably a little bit of all the above. I think the XP, some of the data we have say customers are evaluating the XP. I think some of it is the economy. So I think it's a little bit of all of those transactions that cause the drop, but as I said in the remarks, that's going to bounce around and go back up, and we still feel that the electronic licensing will continue to be a very significant part of our business.

In the past, Mark, you commented about the number of large deals in the pipeline. Could you talk about the trend there?

Yeah, actually Mike, we never did report on pipeline statistics. I think maybe you're thinking about just the number of deals that we highlighted, and I tend to try to pick 4 or 5 deals that are worthy size wise, and we had just as many to talk about this quarter, as we have had in prior quarters, but as I mentioned, on the enterprise licensing side, which would be the 5000 and above, we saw fewer on that side during the quarter, but we saw more in the corporate licensing program in the 500 to 5000 user range.

Thanks.

Our next question comes from John Puricelli. Please state your company name.

AG Edwards. My congratulations also guys. Looked like a good execution in a tough market, so much to pick from. Tax rate at 28%, is that something we should think about for the year or do you see that maybe coming back up to 30 as the domestic business picks up? And that's it for now.

Number one, as you remember last year, we took our tax rate down to 30, and I would look at holding it at the 28% for the full year based upon the Citrix business. When we merge finally with Sequoia, the rate may change, but on the Citrix business as it is, I would see it being constant at 28 for the whole year, and that's what I said.

Okay, so you could probably say that was, maybe, an additional benefit of that European restructuring that we saw last year?

Yes.

Okay, instead of a onetime event because of the Sequoia business?

No, yeah. Though the tax rate has declined based upon the program we've put in place and as our mix changes more to international where we have the lower tax rate, the tax rate, as I said, will continue to decline.

Okay. Thanks guys. Good quarter.

I would also point out that if you looked at it at 30, I took it down because that was the right thing to do, but the difference between 28 and 30% is really not material, as I believe if you calculate it, you'll find its less than half a cent.

I did, and that is the number that it was.

Okay. You're right.

Thanks guys.

Okay.

Once again, if anyone has a question please press *1. Our next question comes from Chris Galvin. Please state your company name.

JP Morgan. Let's see. First off, can you refresh our memory on, I know you don't want to go through Sequoia yet, 'cause that hasn't closed, but what we should be thinking about in the back of our mind for guidance, when the deal was announced, there was some discussion about it having diluted impact in 2001. If you could refresh us on what you think along those lines, that'd be helpful?

Chris I think what we said, and I'll do this from memory, I believe what we said, we believed it would be dilutive somewhere between ¢5 and ¢7 a share. Everything we've done, and I think the work is being done by our team and by the very good people up in Sequoia, the integration, as I said, is going extremely well and both teams are working very well together. I would say that's the only guidance I gave you back then, and I would stay with the 5 to 7 until we close the transaction.

Okay, and this a longer-term question for Mark. We're getting back into a period where the comparisons on the revenue growth side are going to get easier, and thinking about Citrix' longer-term growth rate in the sort of the low 20s, if you could help us understand, if you are thinking at this point that that's kind of a good long-term growth rate or are there some issues that have to be wrestled with to keep it at that point or it should be even higher?

Chris, at this point, we're providing guidance for '01, and I think John was pretty specific about that. On a longer term basis, part of the answer to your question will be how the whole Sequoia integration goes, when these products will come on line, etc., and we think that we've acquired a company with products in a market that would be a nicely growing marketplace, and when we get to that part, I think we'll be able to provide '01 guidance and give you a sense for that on a longer range basis.

Okay. Thank you.

Okay. Thanks.

I'm showing a followup question from Tom Ernst.

Oh yes, one followup. Can you comment on the geographic split? If there is anything that's idiosyncratic to this quarter in the international revenues so we can have a sense as to what to expect for the rest of the year?

I think I mentioned that the international revenue for the quarter was at 60% or 51%.

51%.

51% for the quarter, it was the international. If you looked at all the geographies within the international, they all performed well, and as I mentioned, the US, although down sequentially, came in exactly as we had planned it. So that's, I don't know what else to tell you.

Do you expect a similar sort of 50-50 mix on the go-forward or do you expect it to continue to ramp more internationally?

I would think going forward, as we look at it, you'd have more of a, some quarters the US will be stronger than will Europe, which was the pattern we had last year, and in other quarters, the European will be stronger. For example, Europe will probably be less strong in the third quarter, which is traditionally their down quarter, but as an average going forward, I would say 50-50 over a period of time is probably a good number.

Okay, one more question. How about in terms of total employee headcount and maybe the sales headcount, split US and international for the year? Do you have a target?

No. I mean we don't give our breakdowns, but as I said, we have 1,471, I believe, there is 172 people on board, and a large portion of those are sales people, but I don't have the breakdown between international and US on my fingertips.

Okay, how about just qualitatively? Are you looking to invest more in employees internationally than domestic?

Well, you have got to realize that the international is sales mainly with some engineering, while the US is a lot more engineering. So depending on what we see in the various markets, we will add sales people to the markets as we see the markets develop, and will add the engineers when we need them to do the work that they do, but we will grow it from here to the end of the year probably consistent in both geographies.

Alright. Thank you.

Our next question comes from Mark Perutz. Please state your company name.

Robertson Stephens. My question is with regards to the ASP program. I wanted to see how that was going. I know you said that you didn't expect that to account for material revenues in 2001. I wanted to see if there is any update on the number of new members added and how you see that progressing?

Thanks Mark. The ASP program continues on. We did increase the number of players in it by about 10 firms during the quarter, and obviously, there has been a lot of turmoil in the ASP marketplace in general. As we've said before, we believe in it, we'll continue to invest in it at the rate that is prudent, and that because it's fundamentally a good idea. We are seeing some ASPs have some successes, and we're certainly spending a lot of time working with them to try to see how we can bring them forward to replicate those successes. So we'll keep you posted from time to time, but as you mentioned, this is not a material number to our revenue.

Okay. Thanks a lot.

Once again, if you wish to ask a question, please press *1. We do have a followup question from John Puricelli.

I'm going to take advantage of this guys. If I do the math right, the reported other income was 4.6 million, give or take. If I put that 3.9 million write off back in there, I get about 8.5 million. Am I thinking about that right? And. . .

Yes. Yes you are John, because as I tried to mention, that if you put it back in there, you are almost back to apples to apples on interest income, quarter to quarter, and you would have seen an increase on the interest income because of our cash position in our portfolio. And then the action we took, took it down by 3.9. So you are looking at it the right way.

Right, but if I keep doing the math, it looks like long-term investment's gone up more than short term and cash. So that would sort of be anti-intuitive to such an increased interest rate. How about that part of the equation?

Well, it's really how we have looked at deploying our, and the rates that we have gotten on the portfolio as we've invested the portfolio.

Okay, so . . .

I would expect, as I mentioned, I'm not sure I mentioned, but I would expect that the interest income will come down as we go forward from here, as the interest rates have dropped. I would expect that for two reasons. One, because of the interest rate, and then as you know, we have to expend $185 million, for the $184.6 million for the acquisition of Sequoia.

Right.

And the interest income will go down.

Come down from 8.5 though, not from 4.6.

Oh yes, absolutely. That's why I tried to breakout to 2 pieces.

Right. So put the write off back in and then come down from there?

Yes sir.

Not from 4.6. Okay. I understand now.

Absolutely.

Thanks again.

Okay.

We are showing no further questions at this time.

Alright. Very good. Let's wrap it up. So our Q1 performance represents the third successive quarter of revenue growth and improved employee morale. We approach Q2 cautiously confident that the problems that hampered us last year have been analyzed, understood, and acted upon. Having said this, all software developers are facing a more uncertain general economy than seen in a long time, and while Citrix may not be entirely immune to the effects, we iterate John's earlier guidance. We feel we've done well in delivering on expectations, and that the business continues to be managed very well. Thanks again for the confidence you've shown in us as we continue to build Citrix as a world class, worldwide software company. Thank you.