Dreamstime
shares are trading sharply lower Thursday after the virtualization-software company reported disappointing first-quarter results and full-year guidance, as it works through a business model transition toward the cloud and away from on-premise perpetual software licenses.
The issues Citrix (ticker: CTXS) is working through are familiar—companies like
(ADBE),
(ADSK), and, more recently,
(SPLK) have suffered through some of the same ordeal—falling reported revenue amid a shifting revenue recognition model. Switching to a subscription model spreads out revenue ratably over time, initially reducing reported revenue. It can be tricky to navigate.
Citrix shares were down 9.5%, at $125.30, in recent trading. The
was up 0.2%.
For the first quarter, Citrix posted revenue of $776 million, down 10% from a year ago and short of the Street consensus forecast of $798 million. Non-GAAP profits were $1.42 a share, a penny shy of the Street consensus at $1.43 a share.
The company said that software-as-a-service annualized recurring revenue was $793 million, up 43% excluding the company’s recent acquisition of Wrike, a work-management software company. Including Wrike, the total was $943 million, up 70%. But Citrix noted that product and license revenue—the traditional on-premise business—saw revenue in the quarter fall 75% from a year ago to $44 million from $173 million, reflecting the business model change.
Citrix added that revenue came in below expectations due in part to supply-chain challenges that caused hardware shipment delays, which affected the company’s application delivery and security business, “a challenge we expect will persist in coming months.” The company said that revenue was also hurt by lower-than-expected duration of some on-premise contracts.
“Our transition to the cloud is progressing well, and we expect our first quarter results to mark the trough in terms of the impact of the business model transition on the income statement,” the company said in a letter to shareholders. “Beginning in the second quarter and continuing through the year, we expect to see top line acceleration in our income statement metrics as headwinds from the model transition become a tailwind.”
For the second quarter, Citrix projects revenue of $840 million to $850 million, above the Street consensus at $829 million, but with non-GAAP profits of $1.15 to $1.20 a share, below consensus at $1.55. For the full year, the company is projecting revenue of $3.38 billion to $3.42 billion, with non-GAAP profits of $5.60 to $5.80 a share; the Street has been projecting $3.39 billion and $6.37 a share.
Write to Eric J. Savitz at eric.savitz@barrons.com
