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Citrix (CTXS) Down 2.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Citrix Systems (CTXS). Shares have lost about 2.2% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Citrix Earnings and Revenues Lags Estimates in Q2

Citrix Systems reported second-quarter 2019 non-GAAP earnings of $1.21 per share, missing the Zacks Consensus Estimate of $1.33 per share. Moreover, the figure decreased by 7 cents from the year ago-quarter.

Revenues of $749 million lagged the Zacks Consensus Estimate of $772 million. However, the figure improved 1% from the year-ago quarter.

Product and license (19% of total revenues) decreased 27% year over year to almost $141 million. Support and services (60%) revenues rose 3% on a year-over-year basis to nearly $452 million.

Subscription (21%) revenues surged 41% from the year-ago figure to $156 million.

During the quarter under review, SaaS revenue came in at $91 million (41% of total subscription business) and was up 59% year over year. Notably, SaaS revenues are the most significant part of subscription transition.

Other subscription revenues during the reported quarter came in at $65 million, up 41% year over year.

Revenues as per Product Group

Workspace revenues increased 7% year over year to $535 million (71% of total revenues) on the back of rapid adoption of unified workspace solutions. Workspace subscription revenues increased 40% year over year during the second quarter. Management stated that approximately 71% of new product bookings were subscription based.

Networking revenues declined 14% from the year-ago to $178 million (24% of total revenues). Notably, decline in the SSP business affected networking revenues during the reported quarter. Management stated that approximately 35% of new product bookings were subscription based. Networking subscription revenue increased 46% year over year. The company anticipates shift toward software-based solutions from traditional hardware.

Professional Services revenues advanced 5% on a year-over-year basis to $35 million (5% of total revenues).

Revenues as per Customer

Revenues from SSP customers came in at $24 million (3% of total revenues) during the reported quarter, down 39% year over year. Other customers revenues increased 3% year over year and came in at $725 million during the quarter.

Geographic Revenues

Revenues in Americas were flat year over year to $432 million. Europe, Middle East and Africa (EMEA) revenues advanced 3% from the year-ago quarter to $$240 million. Asia-Pacific and Japan (APJ) revenues decreased 3% year over year to $76 million.

Margin Details

Non-GAAP operating margin was reported at 27% during the reported quarter. Operating margin in during the quarter was primarily impacted by the shift toward subscription model.

Balance Sheet & Cash Flow

Cash and cash equivalents at the end of the quarter were $504.7 million compared with $1.612 billion in the previous quarter. Long-term debt at the end of the quarter came in at $742.5 million. Cash flow from operations was reported at $162 million.

Deferred and unbilled revenues of $2.23 billion grew approximately 15% year over year.

Citrix repurchased shares 1.7 million during the second quarter. Moreover, roughly $518 million is still remaining under share repurchase authorization.

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

Guidance

For third-quarter 2019, Citrix anticipates revenues between $700 million and $720 million.

Moreover, non-GAAP earnings are expected in the range of $1.15-$1.30 per share.

Citrix lowered guidance for 2019. The company now expects revenues between $2.97 billion and $3.01 billion, down from the previous guidance in the range of $3.08 billion and $3.09 billion.

Non-GAAP operating margin is now anticipated to be in the range of 29% to 30%, down from the previously guided range of 31.5% to 32%.

Moreover, non-GAAP earnings are now expected to be in the range of $5.35-$5.60 per share, down from the previous guidance of approximately $6.00 per share.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

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 -26.02% due to these changes.

VGM Scores

At this time, Citrix has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 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. It's no surprise Citrix has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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