Citrix Systems, Inc. (NASDAQ:CTXS) Q3 2018 Earnings Conference Call Transcript

Oct 24, 2018 • 04:45 pm ET


Citrix Systems, Inc. (NASDAQ:CTXS) Q3 2018 Earnings Conference Call Transcript


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My name is Jemaria and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems Third Quarter Earnings Conference Call. (Operator Instructions) After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) Thank you.

I would now like to introduce Ms. Dawn Morris, Manager of Investor Relations. Ms. Morris, you may begin your conference.

Dawn Morris

Thank you. Good afternoon, everyone, and thank you for joining us for today's third quarter 2018 earnings presentation. Participating on the call will be David Henshall, President and Chief Executive Officer; Andrew Del Matto, Executive Vice President and Chief Financial Officer.

This presentation is being webcast on Citrix Systems Investor Relations website, and the webcast replay will be posted immediately following the call. Before we begin, I want to state that we have posted product specification and historical revenue trends related to our product groupings to our Investor Relations website.

(Forward-Looking Cautionary Statement)

Now, I'd like to turn it over to Drew, our EVP and CFO. Drew?

Andrew Del Matto

Thank you, Dawn, and welcome to everyone joining us today. Our transition to the cloud continues to gain momentum, driving our Q3 revenue growth rate, which about doubled over last year. Financial highlights include: revenue grew 6% year-over-year, led by subscription revenue growth of 37% year-on-year. Our adjusted operating margin was 32%; adjusted EPS was $1.40 per share, up 16% versus last year; and cash flow from operations was $301 million, a record -- a Q3 record growing 18% over last year.

Q3 was a typical back-end loaded quarter due to summer time seasonality around the world. This impacted the timing of revenue from cloud and subscription transaction, both of which closed in late September. The result was a deceleration in the subscription revenue growth rate from our second quarter. We expect subscription revenue to re-accelerate in Q4 as we'll see a full quarter of revenue from our September transactions, plus the benefit of the typically more linear bookings quarter.

Our Q3 Enterprise business was solid, as we closed 55 $1 million-plus transactions with concentration in healthcare, technology and government sectors. We saw strength in our cloud and subscription offerings across our portfolio, particularly in Workspace services as customers embrace our future of work vision, driving higher productivity and employee engagement. All of our geographies grew at a consistent rate with the transition of Enterprise to our subscription offerings strong across all regions.

Citrix's cloud simplified hybrid-cloud adoption, providing the same infrastructure on-premise or in the cloud. Customers are realizing the value of reduced infrastructure complexity, better overall user experience, increased security, faster access to innovation and flexibility to align with their business initiatives.

Next, let's take a closer at Q3 results within our primary businesses. Workspace services maintained its momentum, growing 7% year-over-year to $462 million. This was driven by a continuation of recent trends towards our unified Workspace and CSP offerings. Within Workspace services, subscriptions were roughly half of the total Workspace product bookings mix in