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Citrix (CTXS) Down 3.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Citrix Systems (CTXS). Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Citrix due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Citrix Q1 Earnings and Revenues Beat Estimates

Citrix delivered first-quarter 2020 non-GAAP earnings of $1.73 per share, beating the Zacks Consensus Estimate by 47.86%. The bottom line improved 36% on a year-over-year basis.

Revenues of $860.95 million surpassed the Zacks Consensus Estimate by 17.24%. The figure improved 20% on a year-over-year basis.

Robust adoption of the company’s offerings enabling secure remote work amid coronavirus crisis-induced work-from-home wave was a key catalyst.

Product and license revenues (20% of total revenues) improved 28% year over year to $172.8 million.

Support and services revenues (49%) declined 5% on a year-over-year basis to $418.9 million.

Subscription revenues (31%) surged 89% from the year-ago figure to $268.2 million.

During the quarter under review, SaaS revenues came in at $122 million (46% of total subscription revenues) and were up 43% year over year. Notably, SaaS revenues account for significant part of subscription transition. Other subscription revenues in the reported quarter came in at $146 million, up 159% year over year.

Revenues as per Product Group

Workspace revenues (76% of total revenues) increased 27% year over year to $654 million due to higher adoption of SaaS-bases subscription solutions. Workspace subscription revenues contributed 34% to the figure. Approximately 61% of Workspace product bookings were subscription based. Management noted sharp increase in Workspace deployments as employees were compelled to work remotely in the wake of the coronavirus pandemic, which called for secure remote work infrastructure.

Networking revenues (21%) improved 5% from the year-ago period to $180 million. Networking subscription revenues soared 131% from the prior-year figure. Networking software revenues contributed 44% to the figure. The company anticipates shift toward software-based solutions from traditional hardware to weigh on Networking revenues going ahead.

However, Professional Services revenues (3%) declined 18% on a year-over-year basis to $27 million. As the business shifts toward subscription solutions, Professional services revenue are anticipated to decline over time.

Customer Wise Revenues

Revenues from SSP customers came in at $20 million (2% of total revenues) during the reported quarter, down 10% year over year. Revenues from non-SSP customers (98% of total revenues) improved 21% year over year to $841 million.

Geographic Revenues

Revenues in the Americas (56% of total revenues) came in at $484 million, up 21% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or “EMEA” (34% of total revenues) advanced 24% from the year-ago quarter to $294 million. Revenues in Asia-Pacific and Japan or “APJ” (10% of total revenues) improved 2% year over year to $83 million.

Margin Details

Total operating expenses increased 11.3% year over year to $543.8 million. As a percentage of revenues, the figure contracted 480 basis points (bps) to 63.2%

Non-GAAP operating margin was reported at 31%.



Balance Sheet & Cash Flow

As of Mar 31, 2020, Citrix had cash and cash equivalents of $524.9 million compared with $545.8 million in the previous quarter. Long-term debt at the end of the quarter came in at $1.731 billion, compared with $742.9 million in the prior quarter.

Cash flow from operations was reported at $284.2 million, compared with $206 million in the prior quarter.

Deferred and unbilled revenues of $2.534 billion grew approximately 19% year over year.

Citrix repurchased shares worth $200 million during the first quarter. The company has $714 million remaining in share repurchase authorization.

The company paid out quarterly dividends worth $43 million.

Q2 View

For second-quarter 2020, Citrix anticipates revenues between $760 million and $770 million.

Moreover, non-GAAP earnings are expected in the range of $1.18-$1.23 per share.

Revises 2020 Guidance

For full-year 2020, Citrix updated guidance on the heels of strong pipeline for secure, remote work offerings. The company now expects revenues between $3.10 billion and $3.16 billion, compared with the earlier guided range of $3.10-$3.13 billion.

Moreover, non-GAAP earnings are now expected in the range of $5.40-$5.60, compared with the previously guided range of $5.35-$5.55 per share.

Management continues to anticipate non-GAAP operating margin in the range of 28-29%.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

At this time, Citrix has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Citrix has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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