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Citrix's new CEO says no new vision needed, just new spreadsheets

Q2 numbers beat the street, but the transition to SaaS-y cash flows will be tricky

When Citrix suddenly appointed a new CEO in early July, the company promised incoming leader David J Henshall would soon detail “a series of strategic initiatives” to improve the company's performance.

On the company's Q2 earnings call today Henshall revealed that those initiatives will be explained at the company's next earnings call, 90 or so days from now.

He did, however, hint at what's coming, by describing growing pains resulting from the move from software subscriptions.

“In Q2, this mix of subscription doubled year-on-year to 30 per cent of the product bookings mix,” Henshall said on the call. This means more deferred revenue, which is now “over $1.7 billion, up more than 13 per cent year-on-year.”

“Up until now, we've been trying to gradually manage this move to a more subscription-based model,” Henshall said, “but the rapid shift in demand from customers is showing that we need to be much more aggressive and speed up this transition moving forward.”

Henshall added that “our goal is to manage the business closely through this transition so that we can both accelerate our move to subscription while balancing op margin both over the medium and long term. We're currently working on a multiyear plan including capital, and we expect to share these details and metrics on the Q3 call.”

That plan will largely be financial, as Henshall added his belief that “we currently have the strongest product portfolio and roadmap that I've seen in my tenure with the company.”

While investors have to wait for that plan, they should find a fair bit to like in the company's Q2 numbers.

Revenue was up 3 per cent to US$693m and earnings per share came in at $1.03. Both figures exceeded expectations. Net income hit $109 million.

But the Q2 data also shows the size of the challenge Henshall has to tackle. SaaS revenue may have risen by 27 per cent, but it was still only $41.5m compared to the $409m gathered for conventionally-licensed software.

Which is not to say the company is in trouble: it expects between $685m and $695m to arrive in Q3 and should end the year not far short of $3bn annual revenue. Those numbers are still down on revenue from 2015, but the company has since cut costs, offloaded the GoTo business and built a $844m cash hoard to help it through the transition to cloudy subscriptions. ®

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