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Citrix (CTXS) Down 4.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Citrix Systems (CTXS). Shares have lost about 4.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Citrix Q1 Earnings & Revenues Surpass Estimates

Citrix Systems delivered first-quarter 2019 non-GAAP earnings of $1.27 per share, beating the Zacks Consensus Estimate of $1.17 per share. However, the figure decreased by 2 cents from the year ago-quarter.

Revenues rose 3% from the year-ago quarter to $719.1 million and comfortably surpassed the Zacks Consensus Estimate of $712 million.

Product and license (18.8% of total revenues) decreased 16% year over year to almost $135 million. Subscription (19.7%) revenues surged 37% from the year-ago figure to $141.6 million. Support and services (61.5%) revenues rose 2% on a year-over-year basis to nearly $442.5 million.

During the quarter under review, SaaS revenue came in at $85 million (60% of total subscription business) and was up 43% year over year. Notably, SaaS revenues are the most significant part of subscription transition.

Subscription revenues during the reported quarter came in at $142 million, up 37% year over year.

Revenues as per Product Group

Workspace revenues increased 13% year over year to $515 million (72% of total revenues) on the back of rapid adoption of unified workspace solutions. Workspace subscription revenues increased 45% year over year during the first quarter. Management stated that approximately 62% of new product bookings were subscription based.

Networking revenues declined 18% from the year-ago to $171 million (24% of total revenues). Notably, decline in the SSP business negatively impacted networking revenue during the reported quarter. Management stated that approximately 25% of new product bookings were subscription based. The company anticipates shift toward software-based solutions from traditional hardware.

Professional Services revenues climbed 6.4% on a year-over-year basis to $33.3 million (4% of total revenues).

Revenues by Geography

Revenues in Americas decreased 3% year over year to $401.1 million. Europe, Middle East and Africa (EMEA) revenues advanced 10% from the year-ago quarter to $$236.8 million. Asia-Pacific and Japan (APJ) revenues increased 18% year over year to $81.2 million.

Margin Details

Non-GAAP gross margin during the reported quarter came in at 86.5%. Non-GAAP operating margin was reported at 28.2% during the reported quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2019, cash and cash equivalents were $1.612 billion as compared with $618.8 million in the previous quarter. Long-term debt at the end of the quarter came in at $742.1 million compared with $741.8 million reported at the end of the previous quarter. Cash flow from operations was reported at $267.6 million.

Deferred and unbilled revenues of $2.14 billion grew approximately 21% year over year. Citrix repurchased shares worth $94 million during the first quarter. Moreover, roughly $670 million is still remaining under share repurchase authorization.

The company paid quarterly dividend of 35 cents worth $46 million during the quarter under review.

Guidance

For second-quarter 2019, Citrix anticipates revenues between $765 million and $775 million. Moreover, non-GAAP earnings are expected in the range of $1.30-$1.35 per share.

Citrix reiterated guidance for 2019. The company continues to expect revenues between $3.08 billion and $3.09 billion.

Non-GAAP operating margin is anticipated to be in the range of 31.5% to 32%. Moreover, non-GAAP earnings are expected to be approximately $6.00 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.4% due to these changes.

VGM Scores

Currently, Citrix has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Citrix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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