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Citrix's (CTXS) Q2 Earnings Decline, Revenues Increase Y/Y

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Citrix Systems reported second-quarter 2021 non-GAAP earnings of $1.24 per share, down from $1.53 reported in the prior year quarter.

Citrix reported revenues (including contribution from Wrike) of $812 million for the second quarter of 2021, up 2% on a year-over-year basis. Transition to subscription-based model is exerting pressure on Product and License revenues as well as Support and Services revenues.

The company also announced that it was implementing several changes to its sales organization as well as processes and go-to-market strategies to boost its SaaS business.

Citrix also revised its 2021 guidance to include impact from organizational changes to be made in the second half of the year.

For 2021, Citrix now expects revenues between $3.22 billion and $3.25 billion compared with the earlier guidance of $3.38-$3.42 billion. The Zacks Consensus Estimate for revenues is currently pegged at $3.4 billion.

Shares of Citrix were down 16.2% in the pre-market trading on Jul 29, following mixed second-quarter 2021 results and lowering of outlook.


Quarter in Details

Product and license revenues (7% of total revenues) declined 55% year over year to $59 million.

Support and services revenues (47%) declined 11% on a year-over-year basis to $379 million.

Subscription revenues (46%) surged 54% from the year-ago quarter’s figure to $374 million.

During the quarter under review, SaaS revenues were $210 million (56% of total subscription revenues), up 60% year over year. SaaS revenues account for significant part of subscription transition. Other subscription revenues in the reported quarter totaled $165 million, rallying 46% year over year.

Total ARR (annualized recurring revenues) came in at $3.02 billion, indicating year-over-year growth of 19%.  Total ARR, excluding Wrike, increased 13% year over year in the quarter under review.

Subscription ARR came in at $1.65 billion, surging 74% year over year. Software as a service (SaaS) ARR stood at $1.03 billion, up 74% 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 second quarter, Citrix cloud paid subscribers stood at 11.4 million, up 52% year over year.

Future committed revenues (deferred plus unbilled) were $3.047 billion, up 15% 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.

Wrike added $27 million to revenue (after purchasing accounting adjustments) in the second quarter and contributed $160 million SaaS ARR.

Revenues per Product Group

Workspace revenues (74% of total revenues) inched up 2% year over year to $599 million.

Workspace subscription revenues contributed 51% to the figure. Approximately 70% of Workspace SaaS bookings were subscription based.

App Delivery and Security revenues (23%) were flat from the year-ago quarter’s level at $186 million. App Delivery and Security subscription revenues soared 66% from the prior-year quarter’s figure. App Delivery and Security software revenues contributed 47% to App Delivery and Security revenues.

Approximately 78% 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 5% on a year-over-year basis to $27 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 (56% of total revenues) were $457 million, up 6% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or EMEA (34% of total revenues) declined 1% from the year-ago quarter’s figure to $275 million. Revenues in Asia-Pacific and Japan or APJ (10% of total revenues) declined 11% year over year to $79 million.

Margin Details

Total operating expenses increased 6.2% year over year to $566.1 million. As a percentage of revenues, the figure expanded 300 basis points (bps) to 69.7%.

Non-GAAP operating margin was reported at 26%, which contracted 500 bps year over year.

Balance Sheet & Cash Flow

As of Jun 30, 2021, Citrix had cash and cash equivalents and investments of $532 million compared with $510 million as of Mar 31, 2021. As of Jun 30, 2021, long-term debt came in at $3.474 billion.

Cash flow from operations was reported at $144 million compared with $213 million in the prior quarter.

The company paid out dividends worth $46 million in the second quarter. Citrix’s board of directors announced quarterly dividend of 37 cents per share, payable on Sep 24, to shareholders as on Sep 10.

Q3 Guidance

For third-quarter 2021, Citrix anticipates revenues between $765 million and $775 million. The Zacks Consensus Estimate for revenues is pegged at $831.1 million.

Non-GAAP earnings are expected in the range of 85-90 cents per share. The Zacks Consensus Estimate for earnings is pegged at $1.37 per share.

2021 Outlook

Non-GAAP earnings are now expected between $4.75 and $4.95 per share. Earlier, the company had guided non-GAAP earning to be between $5.60 and $5.80 per share.

Wrike is expected to report SaaS ARR of $180-$190 million in 2021, noted Citrix. Revenues from Wrike are expected in the range of $90-$100 million.

Total ARR, excluding contribution from Wrike, is projected to be up 10%.

Management now anticipates non-GAAP operating margin in the range of 24-25% compared with range of 27-28% guided earlier.

SaaS bookings as a percentage of total subscription bookings are now projected in the range of 60-70% compared with earlier guidance of 50-60%.

Zacks Rank & Stocks to Consider

Currently, Citrix carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader technology sector are Avnet (AVT - Free Report) , CyberArk Software (CYBR - Free Report) and Digital Turbine (APPS - Free Report) . Avnet and Digital Turbine sport a Zacks Rank #1 (Strong Buy), while CyberArk carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Digital Turbine, Avnet and CyberArk are scheduled to release earnings on Aug 9, Aug 11 and Aug 12, respectively.

Long-term earnings growth rate for CyberArk, Avnet and Digital Turbine is currently pegged at 12.1%, 22.7% and 50%, respectively.

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