Citrix Systems (CTXS) stock is climbing after the software virtualization specialist announced better-than-expected fourth-quarter results. Revenue rose 6.1% over the same year-ago period, to $851 million, while adjusted net income increased 5.8%, to $1.10 per diluted share. That might not sound impressive at first, but analysts were only expecting earnings of $1.03 per share on sales of $844 million.
It's also valuable to listen to what Citrix management has to say in their subsequent earnings conference calls, when they spend roughly an hour speaking with analysts to provide more insight on the results. Here are five of the most important points they brought up during this quarter's call:
The restructuring centers around long-term growth
Over the last few months, we've simplified our software-defined workplace strategy, a unique perspective and approach that's resonating well with customers and partners. Internally this is driving organizational realignment, clarity and focus. In addition, the actions announced today will drive operational efficiency while enabling continued investments in the areas that will power long-term growth, like mobility, cloud services and networking. -- Citrix CFO David Henshall
In my initial earnings recap, I noted that Citrix's restructuring -- which unfortunately eliminates 700 full-time and 200 contractor positions -- is expected to generate annualized pre-tax savings of $90 million to $100 million. But arguably more important than those savings is that this move should better align Citrix's business with its long-term ambitions. In turn, this will allow it to focus on its most promising growth prospects.
As CEO Mark Templeton later put it, "I think we all know it's extremely difficult to make a restructuring decision like this. ... At the same time, these changes are necessary to deliver on the promise of our software-defined workplace strategy."
Mobility is leading the way
We've been driving a broader conversation with customers about transforming the delivery of IT services to enable mobile work styles, securely and efficiently. Mobility has been the primary catalyst, plus the need for customers is to take a holistic approach to solving these problems. This strategy is what drove the creation of the Workspace Suite offering in the middle of last year. -- David Henshall
As mobile devices become more prominent in the enterprise world, it should surprise no one that mobile solutions are driving Citrix's core Workspace Services business, which accounted for more than 51% of total revenue during the quarter. And if Henshall's next quote is any indication, customers apparently love what they've seen so far.
Workspace Suite customers are in it for long haul
In Q4 we saw significant uptake of the Suite from both new and existing customers. And while contributing about 15% of Workspace Services license revenue, it also drove the majority of growth in our long term deferred revenue as many customers chose to enter into multi-year arrangements. -- David Henshall
Remember, after last quarter's conference call, Henshall explained that the new licensing structure of Workspace Suite was expected to drive a significant uptick in recurring revenue per customer. Investors should be encouraged, then, that his prediction is coming true, with so many customers not only adopting Workspace Suite, but signifying their satisfaction and confidence in Citrix by signing multi-year agreements. Over the long-term, this should also mean a much more predictable revenue stream for Citrix.
Innovation at Citrix is alive and well
I'm also very excited about our increased pace of innovation, both organic and acquired, especially what we're launching this quarter. ... For example, in customers and engineering, manufacturing and government sectors, we're adding support for Linux-based DDI and remote apps. To add contextual security for banking, government and health care apps, we're releasing HDX screen recording. During our recent partner summit, this feature was highly, highly applauded. -- Citrix CEO Mark Templeton
Investors should also be happy knowing Citrix isn't resting on its laurels. In addition to the HDX recording example, Templeton highlighted multiple other innovations, including HTML five-based receivers to simplify "anywhere access" for people connecting over high-packet loss networks, a streamlined single console in XenMobile 10 to handle app delivery and device and mobile app security, and storage virtualization tools from its recent acquisition of Sanbolic. Together, these innovations should serve to both win new customers and accelerate pipeline closure rates.
Guidance is better than it seems
In the first half [of 2015], we'll continue to optimize the business model, streamlining the organization, initiating a multi-year expansion of margins, and increasing focus on our core growth markets. Our guidance accounts for some potential impacts executions stemming from the restructuring, modest headwinds from foreign currency, and a slightly higher deferral rate on new customer bookings.
Finally, the rise in Citrix shares might be confusing at first because, despite the beat, Citrix also offered weaker-than-expected revenue and earnings guidance. Given the wild card presented by the restructuring, however, it seems prudent of Citrix management to incorporate the possibility it might have a negative effect on the company's near-term execution. If those execution challenges wane after the restructuring is complete, it would be a trade-off that should be more than worth it for patient, long-term investors.
