Finance assignment 2/2020-annual-report-and-2021-proxy.pdf
2020 Annual Report
+
Notice of
2021 Annual Meeting
of Shareholders and
Proxy Statement
(In thousands, except per share data XXXXXXXXXX
Revenues:
Subscription 1,114,798 650,810 455,276
Product and license 444,437 583,474 734,495
Support and services 1,677,465 1,776,280 1,784,132
Total net revenues 3,236,700 3,010,564 2,973,903
Cost of net revenues 498,546 464,047 433,803
Gross margin 2,738,154 2,546,517 2,540,100
Operating expenses 2,129,346 2,010,399 1,862,140
Income from operations 608,808 536,118 677,960
Other expense, net (53, XXXXXXXXXX, XXXXXXXXXX,505)
Income from operations before income taxes 554,880 509,500 629,455
Income tax expense (benefit) 50, XXXXXXXXXX,313) 53,788
Net income 504,446 681,813 575,667
Net earnings per share—diluted XXXXXXXXXX
Weighted average shares outstanding—diluted 126,152 135,495 145,934
Financial highlights
Year ended December 31
SaaS revenue
(millions)
XXXXXXXXXX
$274
$391
$541
XXXXXXXXXX
$1,035
$783
$936
Subscription
ookings mix
XXXXXXXXXX
42%
62%
75%
Operating cash flow
(millions)
Revenue
(millions)
XXXXXXXXXX
$2,974
$3,011
$3,237
In 2020, Citrix revenue grew by 8%.
To our stakeholders:
The year 2020 was one of transformation, as people and
organizations around the world faced unparalleled challenges on
a variety of fronts—from public health and social justice to the
ongoing threat of climate change. Following the wildfires that
egan the year—reminding us of the devastating effects of
climate change—a pandemic invoked a global crisis, forcing
millions of people to shift to working from home in a matter of
weeks. Then, in the wake of the onset of the pandemic, we saw
the human toll of systemic racial inequality spark mass protests
calling for long overdue action. A year later, we are still grappling
with these issues. Although it has taken a concerted effort, I am
extremely proud of how quickly we were able to respond and help
our employees, customers, and partners drive meaningful change
during these times.
In response to the pandemic, we took decisive actions aimed at
making an impact in the most pressing areas: keeping employees
safe, helping our customers ensure business continuity, and
supporting the communities in which we live and work. Early last
March, Citrix employees shifted to remote work seamlessly. We
put measures in place to help our teams and neighborhoods by
extending benefits for employees directly affected by COVID-19,
establishing a relief fund for nonprofits in our local communities,
and doubling our match limit for employees’ charitable donations.
For our customers, there’s no doubt that the pandemic accelerated
their digital transformation roadmaps, move to the cloud, and
adoption of flexible and hy
id workstyles. Citrix solutions help
organizations deliver a consistent and secure work experience to
all users, across all devices in any location. This value proposition
ecame increasingly important—particularly for our customers in
the healthcare, supply chain, and public sector verticals. Through
the pandemic, we have proudly helped customers around the
world and across industries transition to remote work and maintain
usiness operations with minimal disruption.
In response to the racial and social injustices experienced in
the past year and through the course of time, Citrix remains
committed to working toward an equitable future for all.
This starts with our own organization—our racial demographics
should reflect the world in which we live and the customers
we serve. We have implemented a racial equity strategy to
I believe more than ever
in our ability to change
the way the world works.
Our strong core values
and customer-centric
culture have positioned
us to deliver innovative
solutions to an increasing
ase of users.
David J. Henshall
President and CEO
Shareholder lette
increase Black and African American representation within Citrix and to assess our internal
processes to eliminate biases and ensure equality. We are steadfast in our commitment to
create lasting impact. In addition, we are investing in STEM programs, scholarships, and youth
mentoring to support a diverse talent pipeline for our future and reflect our commitment to
long-term systemic change.
And finally, as organizations evaluate their future work environments, they are increasingly
committed to sustainability—a trend accelerated by the pandemic as we see how widespread
emote work and reduced commuting and travel can quickly reduce environmental impacts.
Because Citrix solutions increase employee engagement and productivity while working
emotely, we can support our customers’ sustainability goals by decreasing energy
consumption and greenhouse gas (GHG) emissions—through both the use of energy efficient
devices and, longer term, the reduction of real estate needs. In 2020, we also accelerated ou
environmental, social, and governance (ESG) initiatives—evaluating our own global operations
to identify opportunities for improvement—and have set targets tied to executive
compensation to further encourage achievement. Moving forward, we are committed
to continuing to increase transparency through our ESG-related disclosures.
2020 business performance
While 2020 was a challenging year in many ways, our
financial performance exceeded expectations, and we
made considerable progress in our subscription model
transition. In 2020, subscription revenue increased
71 percent year over year, and our future committed
evenue, or the combination of defe
ed and unbilled
evenue1, increased 18 percent, to $2.9 billion. Ou
subscription ARR2 balance reached over $1.2 billion,
up 62 percent year over year, and the SaaS
component of ARR increased 39 percent, with an
ending balance of $725 million. We exited the yea
with subscription bookings representing 85 percent
of our total product bookings, and 95 percent of ou
Workspace product bookings in the fourth quarter of
2020, up from 69 percent and 73 percent respectively
in the fourth quarter of 2019. We are continuing to
grow our recu
ing, predictable, sustainable revenue
and cash flow by delivering both Workspace and
Application Delivery and Security solutions through
subscription offerings.
1. Unbilled revenue primarily represents future billings under our subscription agreements that have not been invoiced and, accordingly, are not recorded in accounts receivable or
defe
ed revenue within our consolidated financial statements.
2. Annualized Recu
ing Revenue, or ARR, is an operating metric that represents the contracted recu
ing value of all termed subscriptions normalized to a one-year period. It is calculated
at the end of a reporting period by taking each contract’s recu
ing total contract value and dividing by the length of the contract. ARR includes only active contractually committed,
fixed subscription fees. Our definition of ARR includes contracts expected to recur and therefore excludes contracts with durations of 12 months or less where licenses were issued to
address extraordinary business continuity events for our customers. All contracts are annualized, including 30-day offerings where we take monthly recu
ing revenue multiplied by 12
to annualize. ARR should be viewed independently of U.S. GAAP revenue, defe
ed revenue, and unbilled revenue and is not intended to be combined with or to replace those items. ARR
is not a forecast of future revenue.
Annualized recu
ing revenue
(millions)
XXXXXXXXXX
SaaS
Subscription
$743
$520$528
$350
$1,205
$725
Shareholder lette
The onset of COVID-19 in early 2020 resulted in a rapid
shift to remote work and a
oad realization of hy
id
workstyle benefits. We saw customers who already
had an established cloud footprint quickly and easily
scale capacity as needed with Citrix solutions.
Specifically, Citrix Cloud enabled customers to deploy
workloads significantly faster than those who ran
workloads on-premises. Due to the urgency of remote
work, the majority of on-premises customers chose to
expand their seats with our on-premises subscription
offering, rather than migrating workloads to the cloud.
Our Application Delivery and Security business
eflects the secular shift to software from hardware-
ased solutions, and we expect this trend to continue
over the longer term. Software accounted for
44 percent of total Application Delivery and Security
evenue, up from 29 percent in 2019, with many
customers utilizing our Application Delivery and
Security solutions to optimize delivery of Citrix
Workspace. Customers are seeing the value in our
pooled-capacity subscription offering, which allows
them to utilize capacity across various deployment
models—whether on-premises, in the cloud, or in a
hy
id infrastructure. Our solutions enable full visibility
with an optimized user experience, while offering
maximum protection to our customers’ ecosystems.
I’m extremely proud of our team’s performance and
how we came together to support our customers.
Whether operating in multiple clouds or on-premises,
our customers were able to provide their employees
a safe and productive work experience through Citrix
Workspace, with optimized performance provided by
Citrix Application Delivery and Security solutions.
Looking ahead
With our subscription licensing model transition largely
complete, our focus is now on: 1) migrating our large
installed customer base from on-premises to the cloud;
2) expanding our existing footprint with general
purpose Workspace, Analytics, and Security solutions
to reach more users within our customer base; and
3) successfully executing on our opportunity to
accelerate growth with our recent acquisition of Wrike.
ODOT supports a mobile workforce
and COVID-19 volunteers with
Citrix Workspace
The Ohio Department of Transportation
(ODOT) maintains one of the nation’s
largest transportation systems, with
infrastructure assets valued at over
$116 billion. To improve remote access
to applications across a wide range of
devices, ODOT uses Citrix Workspace to
deliver a secure and unified experience
for various employees, from roadway
construction crews to
idge inspectors
and highway maintenance workers. When
the global pandemic was declared in
early 2020, ODOT did not have a formal
work-from-home policy in place. Within
four days, Citrix solutions enabled
1,800 employees to work securely and
productively at home.
ODOT was also able to support
neighboring state agencies during
the crisis. As Ohio saw unemployment
numbers dramatically increase due to
COVID-19, the Ohio Department of Jobs
and Family Services did not have the
capacity to handle the volume of calls and
equested assistance from other state
agencies. With a modernized workspace
architecture powered by Citrix, ODOT
quickly took action, and in three days
supported more than 1,100 volunteers
with the applications they needed,
delivering vital support to Ohio citizens
through Citrix Workspace.
Shareholder lette
Accelerating the cloud migration: Organizations are looking to
modernize their application infrastructure by both adopting SaaS
applications and transitioning on-premises workloads to public
clouds. As customers work through various stages of their cloud
journey, Citrix solutions simplify their management of applications
while offering a flexible, secure, and seamless experience to end
users. That said, we know that a customer’s decision to move an
on-premises Citrix workload