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Citrix (CTXS) Q1 Earnings & Revenues Decline Y/Y, Shares Fall

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Citrix Systems CTXS reported first-quarter 2021 non-GAAP earnings of $1.42 per share, which declined 17.9% year over year.

Citrix reported revenues (including contribution from Wrike) of $775.77 million for the first quarter of 2021, down 10% on a year-over-year basis.

Decline in Workspace revenues (due to discontinuation of Workspace perpetual license ofering) as well as App Delivery and Security revenues negatively impacted the company’s top-line performance. Transition to subscription-based model is exerting pressure on Product and License revenues as well as Support and Services revenues.

Citrix Systems, Inc. Price, Consensus and EPS Surprise

Citrix Systems, Inc. Price, Consensus and EPS Surprise
Citrix Systems, Inc. Price, Consensus and EPS Surprise

Citrix Systems, Inc. price-consensus-eps-surprise-chart | Citrix Systems, Inc. Quote

Shares of Citrix were down 8% in the pre-market trading on Apr 29, following first-quarter 2021 results announcement.

Quarter in Details

Product and license revenues (6% of total revenues) declined 74% year over year to $44 million.

Support and services revenues (50%) declined 7% on a year-over-year basis to $389 million.

Subscription revenues (44%) surged 28% from the year-ago quarter’s figure to $342 million.

During the quarter under review, SaaS revenues were $171 million (50% of total subscription revenues), up 40% year over year. Notably, SaaS revenues account for significant part of subscription transition. Other subscription revenues in the reported quarter totaled $171 million, rising 17% year over year.

Total ARR (annualized recurring revenues) came in at $2.94 billion, indicating year-over-year growth of 22%. Total ARR, excluding Wrike, increased 15% year over year in the quarter under review.

Subscription ARR came in at 1.51 billion, surging 81% year over year. Software as a service (SaaS) ARR stood at 943 million, up 70% year over year.

The company introduced total ARR metric in the first quarter of 2021 to provide visibility into Citrix’s operations performance amid business model transition.

In the first quarter, Citrix cloud paid subscribers stood at 10.3 million, up 34% year over year.

Future committed revenues (deferred plus unbilled) were $3.04 billion, up 20% year over year.

Citrix closed the acquisition of Wrike for $2.25 billion in February 2021. Wrike is engaged in offering SaaS -based collaborative work management solutions to enterprises.

The acquisition added $7 million to SaaS revenue (after purchasing accounting adjustments) in the first quarter and contributed $150 million SaaS ARR. On a non-GAAP basis, expenses directly related to the acquisition including professional fees, integration costs and other expenses came in at $19 million. This impacted non-GAAP earnings per share for the quarter by 15 cents.

Revenues per Product Group

Workspace revenues (75% of total revenues) declined 11% year over year to $581 million, courtesy of discontinuation of Workspace perpetual license offering and tougher year-over-year comparison.

Workspace subscription revenues increased 34% year over year and contributed 48% to the figure. Approximately 53% of Workspace SaaS bookings were subscription based.

App Delivery and Security revenues (22%) declined 6% from the year-ago quarter’s level to $170 million. App Delivery and Security subscription revenues soared 29% from the prior-year quarter’s figure. App Delivery and Security software revenues contributed 48% to App Delivery and Security revenues.

Approximately 89% of App Delivery and Security product bookings were subscription based. The company anticipates shift toward software-based solutions from traditional hardware to exert pressure on App Delivery and Security revenues in the days ahead. The company changed Networking product grouping to App Delivery and Security beginning fourth-quarter 2020.

Professional Services revenues (3%) declined 9% on a year-over-year basis to $25 million. As business shifts toward subscription solutions, Professional services revenues are anticipated to decline over time due to transition to subscription-based model.

Geographic Revenues

Revenues in the Americas (55% of total revenues) were $427 million, down 12% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or EMEA (36% of total revenues) declined 5% from the year-ago quarter’s figure to $278 million. Revenues in Asia-Pacific and Japan or APJ (9% of total revenues) declined 14% year over year to $71 million.

Margin Details

Total operating expenses dropped 0.7% year over year to $540 million. As a percentage of revenues, the figure expanded 640 basis points (bps) to 69.6%.

Non-GAAP operating margin was reported at 27%, which contracted 400 bps year over year.

Balance Sheet & Cash Flow

As of Mar 31, 2021, Citrix had cash and cash equivalents and investments of $510 million compared with $891 million as of Dec 31, 2020.

As of Mar 31, 2021, long-term debt at the end of the quarter came in at $3.473 billion. In the quarter under review, Citrix entered in to a $1-billion unsecured term loan agreement to finance the buyout of Wrike. It also issued $750 million worth of senior note (slated to mature in 2026).

Cash flow from operations was reported at $213 million compared with $120 million in the prior quarter.

The company paid out dividends worth $46 million in the first quarter. Notably, Citrix’s board of directors announced quarterly dividend of 37 cents per share, payable on Jun 25, to shareholders as on Jun 11.

Q2 Guidance

For second-quarter 2021, Citrix anticipates revenues between $840 million and $850 million. The Zacks Consensus Estimate for revenues is pegged at $822.3 million.

Moreover, non-GAAP earnings are expected in the range of $1.15-$1.20 per share. The Zacks Consensus Estimate for earnings is pegged at $1.54 per share.

2021 Outlook

For 2021, Citrix now expects revenues between $3.38 and $3.42 billion compared with the earlier guidance of $3.33-$3.36 billion. The Zacks Consensus Estimate for revenues is pegged at $3.37 billion.

Moreover, non-GAAP earnings are now expected to be between $5.60 and $5.80 per share. Earlier, the company had guided non-GAAP earning to be between $6.20 and $6.40 per share. The lowering of guidance is due to impact of Wrike acquisition.

Wrike is expected to report SaaS ARR of $180-$190 million in 2021, noted Citrix.

The buyout will be neutral to Citrix’s non-GAAP earnings and free cash flow for 2022 but will become accretive to financials afterwards.

Management now anticipates non-GAAP operating margin in the range of 27-28% compared with approximately 30% guided earlier.

Zacks Rank & Stocks to Consider

Currently, Citrix carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the broader technology sector are Qorvo QRVO, Vishay Intertechnology VSH and Microchip MCHP. Vishay Intertechnology sports a Zacks Rank #1 (Strong Buy) while Qorvo and Microchip carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Vishay is set to report its quarterly results on May 4. Qorvo and Microchip are scheduled to report their quarterly results on May 5 and May 6, respectively.

Long-term earnings growth rate of Qorvo, Vishay Intertechnology and Microchip is pegged at 14%, 20.3% and 15.5%, respectively.

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