Citrix Systems (NASDAQ: CTXS) reported a 24% drop in earnings for the first quarter of 2019 due to higher costs and expenses as well as an increase in income tax expense. Despite the results exceeding analysts’ expectations, the company guided second-quarter earnings below consensus estimates.
Net income dropped by 24% to $110 million and earnings plunged by 21% to $0.78 per share. Adjusted earnings declined by 1.6% to $1.27 per share.
Revenue rose by 3% to $719 million. Subscription revenue climbed 37% while product and license revenue decreased by 16%. Support and services revenue rose by 2%. The subscription model transition created an estimated 100 to 200 basis point headwind to reported revenue in the first quarter.
Looking ahead into the second quarter of 2019, the company expects net revenue in the range of $765 million to $775 million, earnings in the range of $0.76 to $0.81 per share and adjusted earnings in the range of $1.30 to $1.35 per share.
For the full year 2019, the company now predicts net revenue in the range of $3.08 billion to $3.09 billion, earnings of about $3.69 per share and adjusted earnings of about $6.00 per share. Operating margin is now expected to be in the range of 20.4% to 20.9% and adjusted operating margin is anticipated to be in the range of 31.5% and 32%.
For the first quarter, Workspace revenue increased by 13% primarily driven by Workspace subscription revenue, which jumped by 45% year-over-year. However, Networking revenue dropped by 18% due in large part to the cyclical ordering patterns at its SSP customers.
Revenue in the Americas declined by 3% year-over-year due to the negative impact of the uneven order trends at SSP customers within its Networking business. Revenue in EMEA and APJ increased by 10% and 18% respectively.
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Deferred and unbilled revenue, which denotes future committed revenue, jumped by 21% to $2.14 billion as of March 31, 2019, from the previous year. This increase is driven by the growth in its subscription bookings.
The company expects Strategic Service Provider (SSP) customers, which is Citrix’s three historically largest hyperscale Networking customers, to continue creating a headwind to its revenue that will persist into the second quarter. For the first quarter, total revenue excluding three SSP customers was $697 million, up 10% year-over-year.
In the long term, the company expects that average duration may increase as more of its customers’ transition to a subscription model, which typically has a 3-year average duration and is a reflection of deepening and extending relationships with its customers.
In addition, Citrix Systems said its chief financial officer Andrew Del Matto will be leaving the company to pursue another opportunity in California effective April 26, 2019. As conducting its search for the role, considering both internal and external candidates, Jessica Soisson, Citrix’s Chief Accounting Officer, and Corporate Controller, has been named Interim CFO.
Shares of Citrix Systems ended Wednesday’s regular session down 0.42% at $100.46 on the Nasdaq. The stock has risen over 4% in the past year while it has fallen over 1% in the past three months.