What happened
Shares of Citrix Systems (NASDAQ: CTXS) plummeted 14.3% through 1:15 p.m. EDT today, after the software-as-a-service (SaaS) provider announced what even it called "mixed" results in its fiscal Q2 2021 financial report.
On the one hand, Citrix beat earnings with a report of $1.24 per share (pro forma) earned, where Wall Street had been looking for only $1.19. On the other hand, though, Citrix's sales for the quarter -- $812 million -- fell well short of the $846 million that analysts had predicted.
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So what
It gets worse. Citrix's $1.24-per-share pro forma profit vastly overstated the company's profits as calculated according to generally accepted accounting principles (GAAP), which amounted to only $0.50 per share, a year-over-year decline of 44%. The company's sales grew, but only 2%.
Citrix accentuated the positive aspects of the report, noting for example that SaaS annual recurring revenue (ARR) grew 74% year over year, while overall subscription revenue (which investors love, because it's recurring and thus more dependable over time) grew nearly 54%. And the company says that 63% of its subscription revenue now comes from SaaS, well ahead of management's previous objective of getting this number up above 50%.
Problem was, Citrix didn't earn nearly as much on its revenue as investors might have wished. Total operating profit margin for the quarter got cut nearly in half as compared with last year's Q2, falling to just 10.4%, resulting in a steep decline in profits.
Now what
I hate to say it, but ... it gets even worse when we turn to guidance. Looking ahead to all of fiscal 2021, Citrix sees revenue declining, not growing, in comparison to last year, to range from $3.22 billion to $3.25 billion. Operating profit margin on that revenue will also shrink, from just over 10% in Q2 to about 8% to 9% for the year as a whole.
In the end, Citrix sees its pro forma profits coming in at a robust $4.75 to $4.95 per share this year, but GAAP profits will be only $1.45 to $1.66 -- less than half of the $4 Citrix earned last year.
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