Earlier this month, Citrix Systems, (NASDAQ:CTXS) stock plunged when the company announced weaker-than-expected preliminary first-quarter results. Today, however, Citrix released its official numbers. And lucky for investors in the software virtualization specialist, they weren't as bad as Citrix initially feared.
When all was said and done in the first quarter, Citrix's revenue climbed 1.3% year over year to $761 million, or just above the high end of the $755 million to $760 million range it provided less than two weeks ago. But that was still well below Citrix's original guidance provided three months ago for sales of $780 million to $790 million.
Meanwhile, Citrix's GAAP net income came in at $29 million, or $0.18 per diluted share, down from $0.30 per share in the same year-ago period. Again, however, that was above Citrix's preliminary range for GAAP net income per share of $0.15 to $0.17, and not alarmingly below its original range of $0.20 to $0.22. On a non-GAAP basis -- which means excluding things like amortization charges and stock-based compensation -- Citrix's net income was $106 million, and up by a penny on a per-share basis over the same year-ago period to $0.65. That's at the high end of Citrix's expected $0.63 to $0.65 revised range, but again falls below its previous range of $0.70 to $0.72 per share. To be fair, keep in mind Citrix also repurchased 2.4 million shares during the quarter at an average price of roughly $63.12 per share.
As it turns out, analysts were similarly optimistic going into the report, calling for adjusted earnings and revenue of $0.65 per share and $762.9 million, respectively. Even so, after rising nearly 1% in Wednesday's regular session, shares of Citrix are currently up another 1% in after-hours trading. As it stands, Citrix sits almost exactly where it stood before the pre-announcement on April 9.
Revenue from products and license sales continued to remain weak, falling 12% year over year to $183.3 million. And the smaller professional services segment fell 13% over the same period to $36.9 million. But those declines were more than offset by an 8% increase from Citrix's Software-as-a-Service business to $169.4 million, and 8% growth from the larger licensing updates and maintenance stream to $371.3 million.
To blame for its overall weakness, according to Citrix CEO Mark Templeton, is a combination of foreign exchange volatility, and the greater-than-expected negative impact to Citrix's business from its ongoing restructuring effort. Templeton expressed disappointment with the results, but elaborated, "We underestimated the impact caused by our restructuring, organizational evolution, and changes to our field and channel strategies, which were the result of important decisions made to get the business ready for our next phase of growth." [emphasis mine]
For perspective, during last quarter's earnings conference call, CFO David Henshall detailed how the restructuring was centered around long-term growth. As the restructuring continues to forge ahead, that growth should be realized not just through the unfortunate elimination of redundant positions, but more importantly by better aligning Citrix's business with its long-term ambitions. To start, Henhall says, that means furthering its vision of a "simplified software-defined workplace," and seizing market share in the related mobility, cloud services, and networking industries.
What to expect next
In the meantime, Citrix expects current quarter revenue of $785 million to $795 million, and adjusted earnings per diluted share of $0.80 to $0.83. Both ranges fall short of analysts' models, which called for adjusted second-quarter earnings of $0.86 per share on sales of $815.4 million.
For the full year, however, Citrix sees revenue of $3.22 billion to $3.25 billion, with adjusted earnings per share of $3.55 to $3.60. In this case, Wall Street would have settled for 2015 earnings of just $3.53 per share on slightly higher sales of $3.26 billion.
All things considered, it helps that Citrix got the bad news out of the way early in releasing its light preliminary results. That gave investors time to digest the information and realize while its not ideal, these current headwinds should ultimately pass and leave Citrix a stronger business in the end. As a result, with the caveat that I'll be watching Citrix's progress closely in the coming quarters, I still think Citrix stock is poised to reward patient shareholders going forward.
Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.