Citrix's (CTXS) Q3 Earnings Decline, Revenues Increase Y/Y

Citrix Systems CTXS reported third-quarter 2021 non-GAAP earnings of $1.20 per share, down from $1.38 reported in the prior year quarter.

Citrix reported revenues (including contribution from Wrike) of $778 million in third-quarter 2021, up 1% 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.

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

Given the ongoing transition to the cloud, the company lowered its revenue outlook for the year. Revenues for 2021 are expected in the range of $3.19-$3.20 billion compared with earlier guided range of $3.22 billion and $3.25 billion. The Zacks Consensus Estimate for revenues is currently pegged at $3.22 billion.

Shares of Citrix were down 3.3% in the pre-market trading on Nov 4, following third-quarter 2021 results.

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Quarter in Details

Product and license revenues (3% of total revenues) declined 71% year over year to $25 million.

Support and services revenues (48%) fell 11% on a year-over-year basis to $370 million.

Subscription revenues (49%) surged 46% from the year-ago quarter’s figure to $383 million.

During the quarter under review, SaaS revenues were $229 million (60% of total subscription revenues), up 66% year over year. SaaS revenues account for a significant part of subscription transition. Other subscription revenues in the reported quarter totaled $155 million, rallying 24% year over year.

Total ARR (annualized recurring revenues) came in at $3.08 billion, indicating year-over-year growth of 20%. Total ARR, excluding Wrike, increased 13% year over year in the quarter under review.

Subscription ARR came in at $1.76 billion, surging 71% year over year. Software as a service (SaaS) ARR stood at $1.10 billion, up 75% year over year. Excluding Wrike, SaaS ARR was $934 million, up 48% from the prior-year quarter’s levels.

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

In the third quarter, Citrix cloud paid subscribers stood at 12.2 million, up 47% year over year.

Future committed revenues (deferred plus unbilled) were $2.99 billion, up 15% year over year.

Revenues per Product Group

Workspace revenues (77% of total revenues) were up 5% year over year to $600 million.

Workspace subscription revenues contributed 53% to the figure. Approximately 71% of Workspace SaaS bookings were subscription based.

App Delivery and Security revenues (20%) were down 7% from the year-ago quarter’s level at $155 million. App Delivery and Security subscription revenues increased 10% from the prior-year quarter’s figure. App Delivery and Security software revenues contributed 56% to App Delivery and Security revenues.

Approximately 80% 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 16% on a year-over-year basis to $23 million. As business shifts toward subscription solutions, Professional services revenues are anticipated to decline over time due to the transition to subscription-based model.

Geographic Revenues

Revenues in the Americas (55% of total revenues) were $428 million, up 3% on a year-over-year basis. Meanwhile, revenues in Europe, Middle East and Africa or EMEA (35% of total revenues) declined 3% from the year-ago quarter’s figure to $269 million. Revenues in Asia-Pacific and Japan or APJ (11% of total revenues) increased 7% year over year to $82 million.

Margin Details

Total operating expenses increased 7% year over year to $547.2 million. As a percentage of revenues, the figure expanded 360 basis points (bps) to 70.3%.

Non-GAAP operating margin was reported at 26.3%, which contracted 250 bps year over year.

Balance Sheet & Cash Flow

As of Sep 30, 2021, Citrix had cash and cash equivalents and investments of $464 million compared with $532 million as of Jun 30, 2021. As of Sep 30, 2021, long-term debt came in at $3.325 billion. The company repaid $150 million worth of term loans in the quarter under review.

Cash flow from operations was reported at $156 million compared with $144 million in the prior quarter.

The company paid out dividends worth $46 million in the third quarter. Citrix’s board of directors announced quarterly dividend of 37 cents per share, payable on Dec 21, to shareholders as on Dec 7.

Q4 Guidance

For fourth-quarter 2021, Citrix anticipates revenues between $825 million and $835 million. The Zacks Consensus Estimate for revenues is pegged at $869.9 million.

Non-GAAP earnings are expected in the range of $1.04-$1.09 per share. The Zacks Consensus Estimate for earnings is pegged at $1.29 per share.

2021 Outlook

Non-GAAP earnings are now expected between $4.90 and $4.95 per share. Earlier, the company had guided non-GAAP earning between $4.75 and $4.95 per share.

Wrike is expected to report SaaS ARR of $170-$180 million in 2021, noted Citrix. Earlier, management expected Wrike to report SaaS ARR of $180-$190 million. 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 around 25% compared with the earlier guidance of 24-25%.

SaaS bookings, as a percentage of total subscription bookings, are now projected to be 60% compared with earlier guidance of 60-70%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader technology sector include HP Inc HPQ, Synaptics Incorporated SYNA and Etsy ETSY. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rate of HP Inc, Synaptics and Etsy is pegged at 12.7%, 10% and 19.7%, respectively.

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