It has been about a month since the last earnings report for Citrix Systems . Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Citrix due for a pullback? 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 drivers.
Citrix Q4 Earnings Decline Year Over Year
Citrix Systems reported fourth-quarter 2020 non-GAAP earnings of $1.46 per share, which declined 14.6% on a year-over-year basis.
Citrix reported revenues of $809.66 million for the fourth quarter of 2020 that remained almost flat on a year-over-year basis.
The top line was supported by continued momentum witnessed in adoption of workspace and desktop virtualization solutions traction due to remote work trend during the pandemic. However, transition to subscription-based model is exerting pressure on Product and License revenues as well as Support and Services revenues.
Product and license revenues (7% of total revenues) declined 69% year over year to $54 million.
Support and services revenues (51%) declined 6% on a year-over-year basis to $415 million.
Subscription revenues (42%) surged 76% from the year-ago quarter’s figure to $341 million.
During the quarter under review, SaaS revenues were $150 million (44% of total subscription revenues), up 32% year over year. Notably, SaaS revenues account for significant part of subscription transition. Other subscription revenues in the reported quarter totaled $191 million, soaring 138% year over year.
Revenues as per Product Group
Workspace revenues (73% of total revenues) increased 5% year over year to $591 million courtesy of higher adoption of SaaS-bases subscription solutions. Workspace subscription revenues improved 27% year over year and contributed 44% to the figure. Approximately 95% of Workspace product bookings were subscription based. Increases in Workspace deployments benefited growth as employees were compelled to work remotely due to the ongoing coronavirus pandemic, which necessitated secure remote work infrastructure.
However, App Delivery and Security revenues (23%) declined 11% from the year-ago period to $189 million. App Delivery and Security subscription revenues soared 98% from the prior-year quarter’s figure. App Delivery and Security software revenues contributed 50% to App Delivery and Security revenues. Approximately 57% 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 has changed Networking product grouping to App Delivery and Security beginning fourth-quarter 2020.
Professional Services revenues (4%) declined 7% on a year-over-year basis to $30 million. As business shifts toward subscription solutions, Professional services revenues are anticipated to decline over time due to transition to subscription-based model.
Customer Wise Revenues
Revenues from SSP customers amounted to $20 million (2% of total revenues) during the reported quarter, down 45% year over year. Revenues from non-SSP customers (98% of total revenues) improved 2% year over year to $790 million.
Geographic Revenues
Revenues in the Americas (54% of total revenues) were $436 million, down 4% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or EMEA (37% of total revenues) advanced 8% from the year-ago quarter to $300 million. Revenues in Asia-Pacific and Japan or APJ (9% of total revenues) declined 7% year over year to $74 million.
Margin Details
Total operating expenses increased 7.1% year over year to $540.9 million. As a percentage of revenues, the figure expanded 440 basis points (bps) to 66.8%.
Non-GAAP operating margin was reported at 27.3%, which contracted 710 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2020, Citrix had cash and cash equivalents and investments of $891 million compared with $938 million as of Sep 30, 2020. As of Dec 31, 2020, long-term debt at the end of the quarter came in at $1.73 billion.
Cash flow from operations was reported at $120 million compared with $112 million in the prior quarter.
The company paid out quarterly dividends worth $43 million and repurchased shares worth $89 million in the fourth quarter. The company has $626 million remaining in share repurchase authorization.
Notably, Citrix’s board of directors approved a dividend hike of 5.7%, totaling to 37 cents per share, payable on Mar 26, to shareholders as on Mar 12.
Q1 Guidance
For first-quarter 2021, Citrix anticipates revenues between $785 million and $795 million. Moreover, non-GAAP earnings are expected in the range of $1.40-$1.45 per share.
2021 Outlook
For 2021, Citrix now expects revenues between $3.33 billion and $3.36 billion. Moreover, non-GAAP earnings are now expected between $6.20 and $6.40. Management anticipates non-GAAP operating margin to be near 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Citrix has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 D. 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 has been net zero. 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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Why Is Citrix (CTXS) Up 1% Since Last Earnings Report?
It has been about a month since the last earnings report for Citrix Systems . Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Citrix due for a pullback? 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 drivers.
Citrix Q4 Earnings Decline Year Over Year
Citrix Systems reported fourth-quarter 2020 non-GAAP earnings of $1.46 per share, which declined 14.6% on a year-over-year basis.
Citrix reported revenues of $809.66 million for the fourth quarter of 2020 that remained almost flat on a year-over-year basis.
The top line was supported by continued momentum witnessed in adoption of workspace and desktop virtualization solutions traction due to remote work trend during the pandemic. However, transition to subscription-based model is exerting pressure on Product and License revenues as well as Support and Services revenues.
Product and license revenues (7% of total revenues) declined 69% year over year to $54 million.
Support and services revenues (51%) declined 6% on a year-over-year basis to $415 million.
Subscription revenues (42%) surged 76% from the year-ago quarter’s figure to $341 million.
During the quarter under review, SaaS revenues were $150 million (44% of total subscription revenues), up 32% year over year. Notably, SaaS revenues account for significant part of subscription transition. Other subscription revenues in the reported quarter totaled $191 million, soaring 138% year over year.
Revenues as per Product Group
Workspace revenues (73% of total revenues) increased 5% year over year to $591 million courtesy of higher adoption of SaaS-bases subscription solutions. Workspace subscription revenues improved 27% year over year and contributed 44% to the figure. Approximately 95% of Workspace product bookings were subscription based. Increases in Workspace deployments benefited growth as employees were compelled to work remotely due to the ongoing coronavirus pandemic, which necessitated secure remote work infrastructure.
However, App Delivery and Security revenues (23%) declined 11% from the year-ago period to $189 million. App Delivery and Security subscription revenues soared 98% from the prior-year quarter’s figure. App Delivery and Security software revenues contributed 50% to App Delivery and Security revenues. Approximately 57% 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 has changed Networking product grouping to App Delivery and Security beginning fourth-quarter 2020.
Professional Services revenues (4%) declined 7% on a year-over-year basis to $30 million. As business shifts toward subscription solutions, Professional services revenues are anticipated to decline over time due to transition to subscription-based model.
Customer Wise Revenues
Revenues from SSP customers amounted to $20 million (2% of total revenues) during the reported quarter, down 45% year over year. Revenues from non-SSP customers (98% of total revenues) improved 2% year over year to $790 million.
Geographic Revenues
Revenues in the Americas (54% of total revenues) were $436 million, down 4% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or EMEA (37% of total revenues) advanced 8% from the year-ago quarter to $300 million. Revenues in Asia-Pacific and Japan or APJ (9% of total revenues) declined 7% year over year to $74 million.
Margin Details
Total operating expenses increased 7.1% year over year to $540.9 million. As a percentage of revenues, the figure expanded 440 basis points (bps) to 66.8%.
Non-GAAP operating margin was reported at 27.3%, which contracted 710 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2020, Citrix had cash and cash equivalents and investments of $891 million compared with $938 million as of Sep 30, 2020. As of Dec 31, 2020, long-term debt at the end of the quarter came in at $1.73 billion.
Cash flow from operations was reported at $120 million compared with $112 million in the prior quarter.
The company paid out quarterly dividends worth $43 million and repurchased shares worth $89 million in the fourth quarter. The company has $626 million remaining in share repurchase authorization.
Notably, Citrix’s board of directors approved a dividend hike of 5.7%, totaling to 37 cents per share, payable on Mar 26, to shareholders as on Mar 12.
Q1 Guidance
For first-quarter 2021, Citrix anticipates revenues between $785 million and $795 million. Moreover, non-GAAP earnings are expected in the range of $1.40-$1.45 per share.
2021 Outlook
For 2021, Citrix now expects revenues between $3.33 billion and $3.36 billion. Moreover, non-GAAP earnings are now expected between $6.20 and $6.40. Management anticipates non-GAAP operating margin to be near 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Citrix has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 D. 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 has been net zero. Notably, Citrix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.