Citrix (CTXS) Up 3.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Citrix Systems (CTXS). Shares have added about 3.1% 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 Systems Q4 Earnings Benefit from Growing Customer Base

Citrix Systems delivered fourth-quarter 2018 non-GAAP earnings of $1.67 per share, beating the Zacks Consensus Estimate of $1.59 per share. The figure increased by 1 cent from the year ago-quarter.

Revenues rose 3.1% from the year-ago quarter to $801.9 million and comfortably surpassed the Zacks Consensus Estimate of $790 million.

Product and license (26.3% of total revenues) decreased 10.9% year over year to almost $210.8 million. Subscription (16.2%) revenues surged 44.7% from the year-ago figure to $129.8 million. Support and services (57.5%) revenues rose 2.2% on a year-over-year basis to almost $461.3 million.

During the reported quarter, SaaS revenue came in at $78 million and accounted for nearly 10% of total revenues. Notably, SaaS revenues are the most significant part of subscription transition.

Revenues as per Product Group

Workspace revenues increased 6% year over year to $557 million due to rapid adoption of unified workspace solutions. Workspace subscription revenues increased 35% year over year during the fourth quarter.

Management stated that approximately 60% of new product bookings were subscription based.

Networking revenues declined 4% from the year-ago to $206 million. Notably, a dip in the SSP business negatively impacted networking revenue by roughly $20 million during the reported quarter.

Management is elated that subscription based revenues more than doubled from the prior-year figure on the back of hybrid cloud offerings.

Content Collaboration revenues climbed 4% on a year-over-year basis to $47 million.

With ShareFile is gaining traction for the company’s enterprise Workspace customers, management anticipates integrating Content Collaboration business with Workspace results during 2019.

Revenues by Geography

Revenues in Americas decreased 1% year over year to $440 million.

Europe, Middle East and Africa (EMEA) revenues advanced 10% from the year-ago quarter to $$279.4 million.

Asia-Pacific and Japan (APJ) revenues increased 4% year over year to $82.4 million.

Notably, subscription revenues increased more than 40% year over year during the quarter under quarter in the Americas and in EMEA. In APJ the same almost doubled year over year.

Margin Details

Non-GAAP gross margin during the reported quarter came in at 88%.

Non-GAAP operating margin was reported at 35%, which contracted by 500 basis points from the year-ago figure of 40%.

Balance Sheet & Cash Flow

As of Dec 31, 2018, cash and cash equivalents were $618.8 million as compared with $1.205 billion in the previous quarter.

Cash flow from operations was reported at $206 million.

Deferred and unbilled revenues of $2.17 billion grew approximately 12% year over year.

Citrix repurchased approximately 3.7 million shares worth $380 million during the fourth quarter and paid dividends worth $47 million. Moreover, roughly $770 million is still remaining under share repurchase authorization.

The company’s board has approved a quarterly dividend payment of 35 cents to be paid on Mar 22, 2019.

Full Year 2018 Highlights

Citrix reported non-GAAP earnings of $5.67 per share. Revenues increased 5% year over year to $2.97 billion.

Product and license decreased 4% year over year. Subscription revenues surged 45% from the year-ago figure. Support and services revenues rose 2% on a year-over-year basis.

Guidance

For first-quarter 2019, Citrix anticipates revenues between $700 million and $710 million.

Moreover, non-GAAP earnings are expected in the range of $1.15-$1.20 per share.

Citrix provided guidance for fiscal 2019. The company expects 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 -22.44% due to these changes.

VGM Scores

Currently, Citrix has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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