EDGAR 10-K Filing

Company CIK: 877890
Filing Year: 2022
Filename: 877890_10-K_2022_0000877890-22-000019.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Business Overview
What We Do
Citrix is an enterprise software company focused on helping organizations deliver a consistent and secure work experience no matter where work needs to get done - in the office, at home, or in the field. We do this by delivering a digital workspace solution that provides unified, reliable and secure access to all work resources (apps, content, etc.) and simplifies work execution and collaboration across every work channel, device, and location. Our Workspace solutions are complemented by our general work solutions, such as content collaboration and collaborative work management solutions, and our App Delivery and Security solutions, which deliver the applications and data employees need across any network with security, reliability and speed.
Citrix believes that work is not a place -work is about business outcomes. We have helped organizations with digital transformation for many years. The challenges and complexities created by the proliferation of Software-as-a-Service (SaaS)-based applications and the emergence of hybrid multi-cloud infrastructure environments are now combined with the realities brought upon by the global COVID-19 pandemic-realities such as long-term remote and flexible work models and an increased need for risk mitigation and business continuity.
As a result, we believe organizations are accelerating their cloud and IT modernization plans to better position themselves to address these new challenges and embrace the opportunity that may arise from empowering secure, distributed, and more productive work for their teams. To do this, organizations may rely on Citrix solutions for business agility, employee productivity, security and compliance, as well as cost and efficiency. Citrix solutions are focused on employee empowerment and are designed to provide end-users with the simplicity of a common user experience while ensuring information technology, or IT, administrators are able to deliver applications and data with the security and controls necessary to protect the enterprise and its customers.
Our Business Transformation
Citrix's business continues to evolve in the following ways:
•Perpetual to Subscription: Our business model has shifted away from selling perpetual licenses towards subscription, or recurring contracts in the form of SaaS, on-premise term, and consumption-based agreements; and
•On-Premise to Cloud: As the share of applications and data continues to move rapidly from on-premise data centers to the cloud, our product development and engineering resources have increasingly focused on delivering cloud-based solutions.
Citrix was incorporated in Delaware on April 17, 1989.
Agreement and Plan of Merger
On January 31, 2022, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Picard Parent, Inc., or Parent, Picard Merger Sub, Inc., a wholly owned subsidiary of Parent, or Merger Sub, and, for certain limited purposes detailed in the Merger Agreement, TIBCO Software, Inc., or TIBCO, pursuant to which Merger Sub will merge with and into Citrix, with Citrix as the surviving corporation (we refer to this transaction as the Merger). Parent and Merger Sub were formed by TIBCO, an indirect subsidiary of an affiliate of Vista Equity Partners, or Vista, a leading global investment firm focused exclusively on enterprise software, data and technology-enabled businesses. Vista is partnering with Evergreen Coast Capital Corp., an affiliate of Elliott Investment Management L.P. that focuses on making investments exclusively in technology and technology-enabled services businesses, to acquire Citrix in an all-cash transaction valued at approximately $16.5 billion, including the assumption of Citrix debt. Under the terms of the Merger Agreement, upon the closing of the Merger, our stockholders will receive $104.00 in cash per share. The Merger is expected to close mid-year 2022, subject to customary closing conditions, including approval of the Merger Agreement by our stockholders and receipt of regulatory approvals. Upon completion of the Merger, our shares of common stock will no longer trade on the Nasdaq, and Citrix will become a private company.
Solutions and Services
We offer digital workspace solutions and services that enable companies to deliver hybrid work by providing consistent, secure and reliable access to the systems and information employees need to do their best work, no matter where work needs to get done - in the office, at home, or in the field. Our offerings empower organizations to accelerate business performance by harnessing technology to enhance employee engagement, boost productivity, and drive innovation.
Workspace
The Citrix Workspace platform supports today’s remote and hybrid work environment with a broad range of features and functionalities that tie together the myriad of applications that reside within enterprises. Citrix Workspace provides secure access to employees, helps minimize distractions and improve focus, enabling them to do their best work, elevating employee productivity and employee engagement, and improving an enterprise’s security profile. Citrix Workspace delivers a unified, secure and intelligent workspace with single sign-on access to all the applications and content employees use in one unified platform. Citrix Workspace enables IT administrators to proactively manage security threats in complex, distributed, hybrid, multi-cloud and multi-device environments, and it empowers IT administrators to deliver applications to end users more securely than operating them natively. Intelligent analytics and user behavior insights are derived to enable enhanced security, management, orchestration, and automation of workspaces and application delivery.
Citrix Workspace comes with ready integrations with widely-used business applications, including Salesforce, Workday, SAP Ariba and SAP Concur, ServiceNow, Microsoft Outlook and Google Workspace (formerly G Suite) and is compatible with identity and access management providers, including Okta, Ping, Radius, and GoogleID. Citrix Workspace can be delivered in public cloud infrastructure, on-premise, running in a customers’ datacenter, or in hybrid deployment models. Pricing for the Citrix Workspace platform is tiered based on the level of functionalities provided.
Capabilities offered as part of the platform include:
•Citrix Workspace - delivers an intelligent experience that customizes and streamlines user workflows by enabling organizations to organize, guide and automate work, tasks and functions, and allows end users to perform actions across various applications directly within the Citrix Workspace.
•Citrix Virtual Apps and Desktops - gives employees the freedom to work anywhere on any device while cutting IT costs and securely delivering Windows, Linux, Web and SaaS apps, and full virtual desktops. Services are available as a turnkey desktop-as-a-service solution running on a range of public cloud platforms including Microsoft Azure and Google Cloud Platform (“GCP”) to a host of other deployment options, including hybrid, or on-premise.
•Citrix Analytics for Security - continuously assesses the behavior of Citrix Virtual Apps and Desktops users and Citrix Workspace users and applies actions to protect sensitive corporate information. The aggregation and correlation of data across networks, virtualized applications and desktops, and content collaboration tools enables the generation of valuable insights and more focused actions to address user security threats.
•Citrix Analytics for Performance - uses machine learning to quantify user experience, providing end-to-end visibility and enabling capacity planning and proactive response to performance degradation.
•Citrix Content Collaboration - provides a secure, cloud-based file sharing, digital transaction and storage solution built to give users enterprise-class data services across all corporate and personal devices.
•Citrix Secure Workspace Access - provides an end-to-end solution to implement Zero Trust principles (i.e., required verification of all users whether inside or outside of a network), avoiding the gaps left from relying on assorted point solutions. It reduces the attack surface by protecting the user and the apps inside the workspace, where work actually gets done.
•Citrix Secure Internet Access - provides a solution that protects direct internet access for branch and remote workers using unsanctioned apps.
•Collaborative Work Management - removes workplace complexities by providing a single source of truth for people, teams, and organizations to collaborate and perform at their best. It is an intelligent and versatile work management platform that can be easily configured for any use case to put teams in control of their digital workflows, enabling them to focus on the most important work, maximize potential, and accelerate business growth.
App Delivery and Security
Our App Delivery and Security products, which primarily includes Citrix ADC, optimize the performance of application delivery and experience. They enable organizations to deliver applications with security, reliability, and better user experience. Our App Delivery and Security products can be consumed via perpetual license or under pooled licensing agreements that give customers flexibility to consume in either a hardware form factor or as software, over the term of the agreement. We offer on-premise, in-cloud and SaaS deployment options.
Customer Success
We offer support and services to help our customers and business partners get more value, achieve their business outcomes, minimize risk, and keep their solutions running at peak performance which include:
•Customer Success Management (CSM) - available to all customers with a valid SaaS or subscription entitlement. The CSM team, comprised of Customer Success Managers and Customer Success Engineers, guides business and technical outcomes. Through success planning, technical and onboarding guidance, and internal advocacy, the CSM team helps customers accelerate their implementation and maximize the value of their Citrix solutions.
•Customer Success Services - features a choice of tiered offerings combining technical support, product version upgrades, guidance, enablement, and proactive monitoring to help customers and partners fully realize their business goals and maximize their Citrix investments. Additionally, customers may upgrade to receive personalized support from a dedicated team led by an assigned account manager.
•Hardware Maintenance - features a choice of tiered offerings including technical support, software upgrades, and replacement of malfunctioning appliances to keep Citrix hardware running optimally. Premium support services are available as add-ons.
•Citrix Consulting - guides the successful design and implementation of Citrix solutions, removing the barriers to desired business outcomes. Our in-house consultants bring technical expertise with proven methodologies, tools and leading practices to improve adoption and enhance security.
•Product Training & Certification - enables customers and partners to attain self-sufficiency, increase productivity, maximize product capabilities, and advance their career with flexible training options to suit all learners and certifications to validate knowledge and skills.
Customers
Our customers are businesses of all sizes and include the largest enterprises and institutions in the world spanning every major industry vertical, including healthcare, financial services, technology, manufacturing, consumer, and government agencies. Our largest customers are often our longest tenured customers.
Technology Relationships
We have a number of technology relationships in place to accelerate the delivery of secure hybrid work. These relationships include cross-licensing, original equipment manufacturer (OEM), resell, joint reference architectures, and other arrangements that result in integrated solutions that enable our customers to accelerate their IT modernization, enable secure distributed work and boost worker productivity and engagement.
Microsoft
For over 30 years, Citrix and Microsoft have maintained a strategic partnership spanning product development, go-to-market initiatives and partner development, enabling our mutual customers’ secure, high-performance delivery of applications, desktops and data to their employees. Together, Citrix and Microsoft offer solutions and services that aid and accelerate the transition from on-premise IT infrastructure and practices to emerging hybrid-cloud and multi-cloud delivery models.
Together, Citrix and Microsoft enable a consistent and optimal flexible work experience. These joint solutions enable customers to simplify and speed their transition to the cloud and are sold through direct sales teams, the Azure Marketplace and a robust community of channel partners.
Google
Citrix and Google Cloud have been strategic partners for over a decade. We offer end-to-end user experience solutions for Citrix Workspace with GCP, Chrome Enterprise, and Google Workspace, as well as complementary App Delivery and Security. These solutions enable companies to deliver unified access to all of the apps employees need and prefer to use on Google devices and operating systems.
Global System Integrators
We continue to invest in partnerships with Global System Integrators who provide solutions and services that build on Citrix Workspace and Citrix App Delivery and Security solutions to improve employee experience and engagement, including Capgemini, Deloitte, DXC, Fujitsu, Hewlett Packard Enterprises, IBM and Wipro. These partnerships help our customers develop effective digital workspace strategies that enable them to deliver a consistent work experience across work channels and locations.
Citrix Ready Partner Program
We also provide an easy way for our customers to locate compatible solutions and our channel partners to evaluate and deploy joint offerings through our Citrix Ready program. The Citrix Ready Partner Program is a technology partner program that helps software and hardware vendors of all types develop and integrate their products with Citrix technology. It includes partners like Amazon Web Services (“AWS”), Cisco, Google, and Microsoft and hundreds of other technology companies. Hybrid work has opened a whole new set of security concerns that companies must address. To help them do it, we expanded the Citrix Ready Workspace Security Program to include Zero Trust solutions from trusted and verified partners. This expansion allows companies to simplify the selection of vendors and leverage their existing investments to design a modern security framework that delivers Zero Trust outcomes.
Research and Development
Our research and development efforts focus on developing new functionalities across our solutions, while continuing to invest in purposeful improvements to our core technologies. We solicit extensive feedback concerning product development from customers and through our channel distributors and partners, as well as our alliance partners. We believe that our global software development teams and our core technologies represent a significant competitive advantage for us. As of December 31, 2021, we held a worldwide portfolio of approximately 4,000 patents and had approximately 2,300 additional patent applications pending. We incurred research and development expenses of $581.6 million in 2021, $538.1 million in 2020 and $518.9 million in 2019.
Sales, Marketing and Services
We market and license our solutions through multiple channels worldwide, including selling through resellers, direct and over the Web. Our partner community comprises thousands of value-added resellers, or VARs, known as Citrix Solution Advisors, value-added distributors, or VADs, system integrators, or SIs, independent software vendors, or ISVs, OEMs, and Citrix Service Providers, or CSPs. Distribution channels are managed by our worldwide sales and services organization. Partners receive training and certification opportunities to support our portfolio of solutions and services.
We reward our partners that identify new business, and provide sales expertise, services delivery, customer education, technical implementation and support of our portfolio of solutions through our incentive program. We continue to focus on increasing the productivity of our existing partners, while also adding new transacting partners, building capacity through targeted recruitment, and introducing programs to increase partner mindshare, limit channel conflict, and increase partner loyalty to us.
As our customers shift workloads to the cloud, we have been cultivating a global base of technology partners within our CSP program. Our CSP program provides subscription-based services in which the CSP partners host software services to their end users. Our CSP partners, consisting of managed service providers, ISVs, Citrix Solution Advisors, hosting providers and telcos, among others, license certain of our offerings on a monthly consumption basis. With our software, these partners then create differentiated offerings of their own, consisting of cloud-hosted applications and cloud-hosted desktops, which they manage for various customers, ranging from SMBs to enterprise IT. Besides supplying technology, we are actively engaged in assisting these partners in developing their hosted businesses either within their respective data centers or leveraging public cloud infrastructure by supplying business and marketing assistance.
Online marketplaces, including Cloud Marketplaces and Cloud Service Brokers have become a strategic channel for customers to streamline the discovery, acquisition, deployment, and operations of services enabling them to adapt quickly to
changing market conditions. Growth in the use of online marketplaces has been driven by the increased focus on cloud services and the increase in demand for work-at-home, business continuity, and remote access to services and data.
We are present in three key cloud marketplaces, AWS, Azure and Google, that enable customers to easily deploy licenses acquired through multiple channels, quickly acquire new services and software, and expand as their needs grow. We provide both public and private options to drive customer and partner success.
Engagement with SIs and ISVs continues to be a substantial part of our strategic roadmap within large enterprise and government markets. Our integrator partnerships include organizations such as DXC, Fujitsu, IBM, Wipro and others, who all deliver consultancy or global offerings powered by Citrix solutions. The ISV program maintains a strong representation across targeted industry verticals including healthcare, financial services and telecommunications. Members in the ISV program include Allscripts, Cerner Corporation and Epic Systems Corporation. For all of our channels, we regularly take actions to improve the effectiveness of our partner programs and further strengthen our channel relationships through management of non-performing partners, recruitment of partners with expertise in selling into new markets and forming additional strategic global and national partnerships.
Our corporate marketing organization provides an integrated global approach to sales and industry event support, digital and social marketing, sales enablement tools and collateral, advertising, direct mail, industry analyst relations and public relations coverage to market our solutions. Our efforts in marketing are focused on generating leads for our sales organization and our indirect channels to acquire net new accounts and expand our presence with existing customers, as well as building general brand awareness in the market. Our partner development organization actively supports our partners to improve their commitment and capabilities with Citrix solutions. Our customer sales organization consists of field-based sales engineers and corporate sales professionals who work directly with our largest customers, and coordinate integration services provided by our partners. Additional sales personnel, working in central locations and in the field, provide support including recruitment of prospective partners and technical training with respect to our solutions.
In fiscal year 2021, 2020 and 2019, one distributor accounted for 17%, 17% and 15% respectively, of our total net revenues. The Company's arrangements with the distributor consist of several non-exclusive, independently negotiated agreements with its respective subsidiaries, each of which covers different countries or regions. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” and Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for information regarding our revenue recognition policy.
International revenues (sales outside the United States) accounted for 49.7% of our net revenues for the year ended December 31, 2021, 50.5% of our net revenues for the year ended December 31, 2020, and 48.2% of our net revenues for the year ended December 31, 2019. For detailed information on our international revenues, please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Segment Revenue
We operate under one reportable segment. For additional information, see Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Operations
For our cloud-based solutions, we primarily use Microsoft Azure, AWS and GCP, as well as other infrastructure-as-a-service providers in combination with co-located hosting facilities. For our App Delivery and Security products, we use independent contractors to provide a redundant source of manufacture and assembly capabilities. Independent contractors provide us with the flexibility needed to meet our product quality and delivery requirements. We have manufacturing relationships that we enter into in the ordinary course of business, primarily with Flextronics, under which we have subcontracted the majority of our hardware manufacturing activity, generally on a purchase order basis. These third-party contract manufacturers also provide final test, warehousing and shipping services. This subcontracting activity extends from prototypes to full production and includes activities such as material procurement, final assembly, test, control, shipment to our customers and repairs. Together with our contract manufacturers, we design, specify and monitor the tests that are required to meet internal and external quality standards. Our contract manufacturers produce our products based on forecasted demand for our solutions. Each of the contract manufacturers procures components necessary to assemble the products in our forecast and test the products according to our specifications. We dual-source our components; however, in some instances, those sources may be located in the same geographic area. Accordingly, if a natural disaster occurs in one of those areas, we may need to seek additional sources. Products are then shipped to our distributors, VARs or end-users. If the products go unsold for specified periods of time, we may incur carrying charges or obsolete material charges for products ordered to meet our forecast or
customer orders. In 2021, we did not experience any material difficulties or significant delays in the manufacture and assembly of our products.
While it is generally our practice to promptly ship our products upon receipt of properly finalized orders, at any given time, we have confirmed product license orders that have not shipped and are unfulfilled. Backlog includes the aggregate amounts we expect to recognize as point-in-time revenue in the following quarter associated with contractually committed amounts for on-premise subscription software licenses, as well as confirmed product license orders that have not shipped and are wholly unfulfilled. As of December 31, 2021 and 2020, the amount of backlog was not material. We do not believe that backlog, as of any particular date, is a reliable indicator of future performance.
We believe that our fourth quarter revenues and expenses are affected by a number of seasonal factors, including the lapse of many corporations' fiscal year budgets and an increase in amounts paid pursuant to our sales compensation plans due to compensation plan accelerators that are often triggered in the fourth quarter. We believe that these seasonal factors are common within our industry. Historically, our revenue for the fourth quarter of any year is typically higher than the revenue for the first quarter of the subsequent year. In addition, our European operations usually generate lower revenues in the summer months because of the generally reduced economic activity in Europe during the summer. This seasonal factor also typically results in higher fourth quarter revenues on a sequential basis.
Competition
We sell our solutions in intensely competitive markets. Some of our competitors and potential competitors have significantly greater financial, technical, sales and marketing and other resources than we do. As the markets for our solutions and services continue to develop in response to the pandemic, additional companies, including those with significant market presence in the computer appliances, software, cloud services and App Delivery and Security industries, have entered the markets in which we compete and further intensified competition, and will continue to do so. As a result, we believe price competition could become a more significant competitive factor in the future, and we may not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and financial condition. See our “Technology Relationships” discussion above and “Risk Factors” below.
Workspace
Our primary competitors for various components of and services delivered through our Workspace offering include VMware, Okta, Box, Dropbox, Amazon Web Services, or AWS, Nutanix, Ivanti, Asana, Atlassian, Monday.com, Adobe, Smartsheet, Google Cloud and Microsoft. We believe Citrix Workspace and our services, including Citrix Virtual Apps and Desktops, alongside our work solutions which include Collaborative Work Management and Citrix Content Collaboration, are differentiated by the completeness of the offerings, and the advanced technology and integrated end-user experience, as compared to competitive offerings by others. Compared to its competitors, we believe the Citrix digital work platform is differentiated by its ability to handle even the most complex workflows in a secure, integrated, intelligent and scalable way for any individual, team, department, or organization.
App Delivery and Security
Our hardware products compete in traditional data-center-deployed application environments against other established competitors, including Networks, Radware, A10 Networks and Cisco. In addition, for cloud-integrated and software-centric use cases, large cloud providers, such as AWS and Microsoft Azure, provide customers with competitive application delivery controller solutions built into their public cloud platforms. We continue to expand our open source integrations with leading companies to enhance feature capability and invest in go-to-market resources to market our application delivery solutions to our existing customer base and new potential customers.
Technology and Intellectual Property
We believe that innovation is a core Citrix competency. Our success is dependent upon our solutions, which are based on intellectual property and core proprietary and open source technologies. These technologies include innovations that optimize the end-to-end user experience, through cloud-managed workspaces and analytics, in virtual desktop and virtual application environments, and enhance App Delivery and Security capabilities to deliver a holistic and secure content collaboration and mobile computing experience.
We have been awarded numerous domestic and foreign patents and have numerous pending patent applications in the United States and foreign countries. Certain of our technology is also protected under copyright laws. Additionally, we rely on trade secret protection and confidentiality and proprietary information agreements to protect our proprietary technology. We have established proprietary trademark rights in markets across the globe, and own hundreds of U.S. and foreign trademark
registrations and pending registration applications for marks comprised of or incorporating the Citrix name. See our “Research and Development” discussion above and “Risk Factors” below.
Our People
We believe Citrix solutions enable a better way to work and embrace the power of human difference, and we are guided by our core values of Integrity, Respect, Curiosity, Courage and Unity. As of December 31, 2021, we had approximately 9,700 employees, of which approximately 41% were in the United States and 59% were in our international locations. We have a broad base of diverse talent in more than 44 countries, and we believe that attracting, developing and retaining the best talent is critical to our success and achievement of our strategic objectives. Our voluntary attrition rate was approximately 17% during fiscal year 2021.
Leadership and Governance
Our Executive Vice President and Chief People Officer is responsible for developing and executing the company’s human capital strategy. This includes directing our global policies and programs for leadership and talent development, compensation, benefits, staffing and workforce planning, human resources systems, skills training and organizational development, workplace strategies, and ensuring effective and efficient internal company operations. Our Chief People Officer is also responsible for developing and integrating our diversity, equity and inclusion priorities and strategy, and we have a dedicated team of people with executive leadership participation to implement such strategies.
Our Compensation and Human Capital Committee oversees our company-wide compensation programs and practices. Our Interim Chief Executive Officer and President and Chief People Officer regularly update our Board of Directors and the Compensation and Human Capital Committee on human capital matters.
Compensation and Benefits
Our team is global, and we offer competitive and meaningful compensation and benefits programs that meet the diverse needs of our employees, while also reflecting local market practices. In addition to competitive salaries and bonuses, we offer a robust employment total rewards package that promotes employee well-being and includes retirement planning, health care, extended parental leave and paid time off.
Equity-based compensation is also a key component in attracting, retaining and motivating our employees. We grant equity-based compensation to a significant portion of our employees. We also provide the opportunity for equity ownership through our employee stock purchase plan.
Additionally, we offer benefits to support our employees’ physical and mental health by providing tools and resources to help them improve or maintain their health and encourage healthy behaviors.
Growth, Development and Engagement
At Citrix, we have a strong focus on career development and building the capabilities of our team members. We invest in our employees by offering a wide range of development opportunities that promote learning and growth, various mentoring and coaching programs, a large library of on-demand, virtual and in-person courses that support professional and technical skills development and our tuition reimbursement program. We also believe in building organizational capability through practicing a growth mindset and continuously listening to our employees in order to create desirable employee experiences. We survey our employees frequently, providing managers and teams with highly actionable data that allows us to focus on making improvements in areas that have the largest impact on engagement and team success.
Diversity, Equity, Inclusion and Belonging
Diversity, equity, inclusion and belonging have long been a part of our culture, and we work to continually expand our diversity, equity, inclusion and belonging initiatives. We have an employee-run committee focused on diversity, inclusion and belonging initiatives, which are supported by our executive leadership team. For example, we expanded our Daring Dialogue series to include discussions on mental health, faith in the workplace, and disability and accessibility. We also launched the Citrix Employee Relief Fund to help employees and contractors through extreme financial hardships and set Environmental, Social, and Governance goals for our executive leaders, supporting them with strategies and plans to effect change within their organizations. Our learning series, “I AM Citrix”, shares best practices, builds understanding and offers support to employees as we champion inclusiveness and belonging across the enterprise. The program helps employees deepen their understanding of the culture of inclusion at Citrix, reinforces skills and concepts to support behavior change that encourage an inclusive work environment and creates meaningful connections through open dialogue.
Our employee resource groups (ERGs) support underrepresented groups of employees and are an important component of our diversity, equity, inclusion and belonging efforts, addressing topics like career development, mentoring, recruiting and interviewing candidates, advocacy and networking. As of December 31, 2021, we had ten ERGs with 29 chapters across nine offices in seven countries.
In 2021, we continued to advance our equity strategy with the objectives of supporting black students and businesses, modifying our people processes to promote racial equity, transparently sharing data as we progress on our journey, and personal learning about systemic racism. Some of our accomplishments included, launching two mentoring programs, implementing several career landing page websites, expanding the scope of our pay equity analysis to include stock, and growing our external sponsorships to support the recruitment and development of Black students.
COVID-19 Response
During the COVID-19 pandemic, our primary focus has been on the safety and well-being of our employees and their families. A large majority of our workforce worked remotely and successfully throughout 2021. For offices that re-opened, we leveraged the advice and recommendations of medical experts to implement new protocols to ensure the safety of our employees, including face coverings, temperature checks, health certifications, social distancing and capacity limits. We supported our employees through programs and benefits provided throughout the year, pivoting all of our people programs and practices to enable business continuity in the current environment.
Importantly, our response to the COVID-19 pandemic reflects our belief that work is a measure of output and accomplishment-not a place-and flexible work means people are most productive when they match their work environment to the outcomes they are trying to deliver. Our success in implementing this work philosophy during the pandemic has driven an evolution in our flexible work approach.
Sustainability
Climate Change
We believe that our solutions facilitate customers’ transition to long-term and flexible work models, helping customers to accelerate their sustainability goals by decreasing energy consumption and greenhouse gas (“GHG”) emissions - driving down corporate office space needs, enabling a shift from energy-intensive desktops and high-performance processors to more energy-efficient devices.
As companies implement commitments to dramatically reduce GHG emissions in response to regulation and/or business trends, this may include optimizing IT practices that lead to an increase in demand for our remote working and cloud services. Our cloud-based and remote workforce solutions enable customers to safeguard against potential operational disruptions that may be caused by climate-related extreme weather events. These climate impacts can hold significant consequences for company operations, in particular for those in the technology sector. Our cloud-based solutions enable our customers to address concerns around business continuity as a result of climate-related disruptions.
Climate Change Governance
As part of its oversight function, the Audit Committee regularly reviews the compliance policies and processes by which our exposure to certain significant areas of risk-including climate-related risk-is assessed and managed.
Our Chief Financial Officer regularly reviews and approves updates and decisions related to our climate change and environmental sustainability strategy, such as investments in programs and initiatives that advance Citrix's emissions reduction and renewable energy strategy.
We encourage you to review our Sustainability Report for more detailed information regarding our human capital and sustainability programs, strategy and initiatives. Nothing in our Sustainability Report shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Available Information
Our Internet address is http://www.citrix.com. We make available, free of charge, on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. The information on our website is not part of this Annual Report on Form 10-K for the year ended December 31, 2021.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
RISKS RELATED TO THE PENDING ACQUISITION OF OUR COMPANY
The Merger, the pendency of the Merger or our failure to complete the Merger could have a material adverse effect on our business, results of operations, financial condition and the price of our common stock.
On January 31, 2022, we entered into the Merger Agreement, providing for the Merger and our acquisition by entities affiliated with Vista Equity Partners and Evergreen Coast Capital Corp. in an all-cash transaction valued at approximately $16.5 billion. The completion of the Merger is subject to certain closing conditions, including approval of the Merger Agreement by our stockholders, receipt of regulatory approvals and such other conditions to completion as set forth in the Merger Agreement. There is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or at all.
During the period prior to the closing of the Merger, our business is exposed to certain inherent risks due to the effect of the announcement or pendency of the Merger on our business relationships, financial condition, operating results and business, including:
•potential adverse reactions or changes to business relationships resulting from the announcement or the pendency of the Merger;
•potential business uncertainty during the pendency of the Merger that could affect our financial performance;
•the possibility of disruption to our business and operations, including diversion of management attention and resources;
•the inability to attract and retain key personnel, and the possibility that our current employees could be distracted, and their productivity decline as a result, due to uncertainty regarding the Merger;
•our inability to solicit other acquisition proposals during the pendency of the Merger;
•the amount of the costs, fees, expenses and charges related to the Merger; and
•other developments beyond our control, including, but not limited to, changes in domestic or global economic, political or industry conditions that may affect the timing or success of the Merger.
The Merger may be delayed, and may ultimately not be completed, due to a number of factors, including:
•the failure to obtain regulatory approvals from various governmental entities (or the imposition of any conditions, limitations or restrictions on such approvals);
•potential shareholder litigation and other legal and regulatory proceedings, which could delay or prevent the Merger; and
•the failure to satisfy the other conditions to the completion of the Merger, including approval by our stockholders.
If the Merger does not close, our business and stockholders would be exposed to additional risks, including:
•to the extent that the current market price of our common stock reflects an assumption that the Merger will be completed, the price of our common stock could decrease if the Merger is not completed;
•investor confidence could decline, shareholder litigation could be brought against us, relationships with existing and prospective customers, service providers, investors, lenders and other business partners may be adversely impacted, we may be unable to retain key personnel, and profitability may be adversely impacted due to costs incurred in connection with the pending Merger; and
•under certain specified circumstances, the requirement that we pay a termination fee of $409 million if the Merger Agreement is terminated, including by the Company to enter into a definitive agreement with respect to a superior proposal or by Parent because our Board of Directors withdraws its recommendation in favor of the Merger.
Even if successfully completed, there are certain risks to our stockholders from the Merger, including:
•the amount of cash to be paid per share under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;
•the fact that receipt of the all-cash per share consideration under the Merger Agreement is taxable to stockholders that are treated as U.S. holders for U.S. federal income tax purposes; and
•the fact that, if the Merger is completed, our stockholders will not participate in any future growth potential or benefit from any future increase in the value of the Company.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.
While the Merger Agreement is in effect, we are generally required to conduct our business in the ordinary course, consistent with past practice, and are restricted from taking certain actions without Parent's prior consent, which is not to be unreasonably withheld, conditioned or delayed. These limitations include, among other things, certain restrictions on our ability to acquire other businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, pay dividends, make capital expenditures, take certain actions relating to intellectual property, take certain actions relating to our employees, amend our organizational documents and incur indebtedness. These restrictions could prevent us from pursuing strategic business opportunities and taking actions with respect to our business that we may consider advantageous and may, as a result, materially and adversely affect our business, results of operations and financial condition.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
The expansion of cloud-based solutions (as opposed to traditional on-premise delivery of our products) and our efforts to transition our customers from on-premise to the cloud, including the pace of that transition, has and will introduce a number of risks and uncertainties unique to such a shift in delivery, which could adversely affect our business, results of operations and financial condition.
Expansion of our cloud-based solutions has required, and may continue to require, a considerable investment in resources, including technical, financial, legal, sales, information technology and operational systems. Additionally, market acceptance of such offerings is affected by a variety of factors, including but not limited to: security, service availability, reliability, availability of tools to automate cloud migration, scalability, integration with public cloud platforms, customization, availability of qualified third-party service providers to assist customers in transitioning to our cloud-based solutions, performance, current license terms, customer preference, customer concerns with entrusting a third party to store and manage their data, public concerns regarding privacy and the enactment of restrictive laws or regulations.
We may not meet our financial and strategic objectives if the pace that our customers transition to cloud-based solutions is slower than predicted. For instance, although we continue to make progress with respect to this transition, a large portion of our current installed customer base has not been transitioned from our on-premise subscriptions to cloud-based offerings as of December 31, 2021. To address the challenges in transitioning our customers to the cloud, we continue to invest in innovation and feature development, simplified cloud migration, and performance and reliability, as well as other cloud customer success and sales initiatives. There can be no assurance, however, that these initiatives will result in an increase in the transition of our customers from on-premise to our cloud-based solutions. If we are unable to transition our customers to cloud-based solutions at the pace we expect, we may experience a negative impact on our overall financial performance.
In addition, our cloud-based solutions are primarily operated through third-party cloud service providers, which we do not control and which may be subject to actual or perceived damage, interruption, vulnerabilities and other cyber-related risks. Customers of our cloud-based solutions need to be able to access our platform at any time, without interruption or degradation of performance, and we provide them with service level commitments with respect to uptime. Third-party cloud providers run their own platforms that we access, and therefore, we are vulnerable to their service interruptions. We may experience interruptions, delays and outages in service and availability from time to time as a result of problems with our third-party cloud providers’ infrastructure. Lack of availability of this infrastructure could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks that we cannot predict or prevent. Such outages could lead to the
triggering of our service level agreements and the issuance of credits to our cloud offering customers, which may impact our business, results of operations and financial condition. In addition, if our security, or that of any of these third-party cloud providers, is compromised, our software is unavailable or our customers are unable to use our software within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected. In some instances, we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our customers. It is possible that our customers and potential customers would hold us accountable for any breach of security affecting a third-party cloud provider’s infrastructure and we may incur significant liability from those customers and from third parties with respect to any breach affecting these systems. We may not be able to recover a material portion of our liabilities to our customers and third parties from a third-party cloud provider. It may also become increasingly difficult to maintain and improve our performance, especially during peak usage times, as our software becomes more complex and the usage of our software increases.
Our cloud-based solutions provide customers with increased visibility into the level of active use of such solutions by the customers’ employees or other end users. This enhanced visibility may adversely impact renewal rates, if enough users in a customer organization do not actively engage with our solutions.
In addition, the pace of adoption by our customers of cloud-based solutions as opposed to on-premise delivery of our products has and will introduce a number of risks unique to such a shift, including:
•we may not be able to meet customer demand or solution requirements for cloud-based solutions;
•we may incur costs at a higher than forecasted rate as we expand our cloud-based solutions thereby decreasing our gross margins;
•we may encounter customer concerns regarding changes to pricing, service availability, and security; and
•we may experience unpredictability in revenue as a result of usage fluctuations within our cloud service provider business.
Further, the success in transitioning our customers to our cloud-based solutions is dependent on our ability to effectively align, prioritize and allocate our engineering and other resources to balance the needs of maintaining our existing products, while also innovating in future products and features, and ensuring security and resiliency.
Any of the above circumstances or events may harm our business, results of operations and financial condition.
Our multi-year transition from a perpetual licenses to a subscription-based business model is subject to numerous risks and uncertainties which could have a negative impact on our business, results of operations and financial condition.
We have been transitioning to a subscription-based business model over the past several years, which included discontinuing broad availability of perpetual licenses for Citrix Workspace in October 2020 and a large portion of our new business has transitioned to the subscription-based model. We offer our customers the option to acquire new Citrix Workspace licenses in the form of an on-premise subscription or cloud-based subscriptions. However, we will continue to support and renew existing maintenance contracts for the foreseeable future.
As we continue to transition our customers from perpetual licenses to subscriptions, we expect an impact on the timing of revenue recognition and potential reductions in operating margin and cash flows. For instance, our decision to end broad availability of perpetual Citrix Workspace licenses in October 2020 resulted in a reduction in reported revenue over subsequent quarters. Because subscription revenue related to our cloud-based solutions is typically recognized over time, we may continue to experience a near-term reduction in revenue and revenue growth as more customers move away from perpetual licenses to subscriptions. We also expect the mix shift within our App Delivery and Security business away from hardware towards software-based solutions will create pressure on reported App Delivery and Security revenue over time.
Further, while many of our subscription-based offerings involve multi-year commitments, ultimately our subscription customers may decide not to renew their subscriptions for our solutions after the expiration of the subscription term, or to renew only for a portion of our solutions or on pricing terms that are less favorable to us. Our customers’ renewal rates may decline, fluctuate, or not improve as a result of a number of factors, including their level of satisfaction with our solutions, their ability to continue their operations and spending levels, the pricing of our solutions, the availability of competing solutions and the pendency of the Merger. If our customers do not renew their subscriptions for our solutions or demand pricing or other concessions prior to renewal, or if our renewal rates fluctuate or decline, our total bookings and revenue will fluctuate or decline, and our business and financial results will be negatively affected.
In addition, the metrics we use to gauge the status of our business may evolve over the course of the transition as significant trends emerge. For example, we report annualized recurring revenue and Citrix Cloud Paid Subscribers as a key performance indicator of the health and trajectory of our business. We believe that annualized recurring revenue represents the
pace of our transition and serves as a leading indicator of revenue trends. Further, we continue to evaluate the metrics and key performance indicators that we use to measure our business internally and those that we provide as external disclosures, and there can be no guarantees that the metrics and key performance indicators that we use internally or disclose externally will prove successful in helping us manage our business or understand important trends. The transition to a subscription-based business model also means that our historical results, especially those achieved before we began the transition, may be difficult to compare to our future results. As a result, investors and financial analysts may have difficulty understanding the shift in our business model, resulting in changes in financial estimates or failure to meet investor expectations. Moreover, we have historically forecasted, and may in the future forecast, our future revenue and operating results and may provide financial projections based on a number of assumptions, including a forecasted rate of subscription bookings, as well as the mix within subscription of on-premise versus cloud. If any of our assumptions about our business model transition or the estimated mix within subscription of on-premise versus cloud are incorrect, our revenue and operating results may be impacted and could vary materially from those we may provide as guidance or from those anticipated by investors and analysts. If we are unable to navigate our transition in light of the foregoing risks and uncertainties, our business, results of operations and financial condition could be negatively impacted.
A significant portion of our revenues historically has come from our Application Virtualization and VDI solutions and our App Delivery and Security products, and decreases in sales for these solutions could adversely affect our results of operations and financial condition.
A significant portion of our revenues has historically come from our Application Virtualization and VDI solutions and App Delivery and Security products. We continue to anticipate that sales of these solutions and products and related enhancements and upgrades will constitute a majority of our revenue for the near future. Declines and variability in sales of certain of these solutions and products could occur as a result of:
•new competitive product releases and updates to existing products delivered as on premises solutions, especially cloud-based products;
•industry trend to focus on the secure delivery of applications on mobile devices;
•introduction of new or alternative technologies, products or service offerings by third parties;
•termination or reduction of our product offerings and enhancements;
•potential market saturation;
•failure to enter new markets;
•price and product competition resulting from rapid and frequent technological changes and customer needs;
•general economic conditions;
•complexities and cost in implementation;
•failure to deliver satisfactory technical support;
•failure of our technology to advance our customers’ energy efficiency and greenhouse gas emissions goals;
•dissatisfied customers; or
•lack of commercial success of our technology relationships.
We have experienced increased competition in the Application Virtualization and VDI business from directly competing solutions, alternative products and products on new platforms. For example, AWS, Microsoft and VMware each provide offerings that compete with our solutions, among numerous other competitors. Also, there continues to be an increase in the number of alternatives to Windows operating system powered desktops, in particular mobile devices such as Chromebooks, smartphones and tablets. Users may increasingly turn to these devices to perform functions that would have been traditionally performed on desktops and laptops, which in turn may reduce the market for our Application Virtualization and VDI solutions. Further, increased use of certain SaaS applications may result in customers relying less on Windows applications. If sales of our Application Virtualization and VDI solutions decline as a result of these or other factors, our revenue would decrease and our results of operations and financial condition would be adversely affected.
Similarly, we have experienced increased competition for our App Delivery and Security products, including our core Citrix ADC solution. For example, there are an increasing number of alternatives to traditional ADC hardware solutions, enabling our customers to build internal solutions, rely on open source technology or leverage software and cloud-based offerings. In addition, our App Delivery and Security business generates a substantial portion of its revenues from a limited number of customers with uneven and declining purchasing patterns. As a result, the potential for declining sales within our App Delivery and Security business may not be offset by gains in our other businesses, which could result in our operations and financial condition being adversely affected.
If our Workspace strategy is not successful in addressing our customers’ evolving needs beyond traditional Application Virtualization and VDI solutions or we face substantial technological or implementation challenges with our Workspace offerings, we may be unable to expand our user base and our financial performance could be adversely impacted.
Our success depends on customer and user adoption of our newer products and services. Increased adoption will depend on our ability to deliver a Workspace platform that provides value and use cases beyond traditional Application Virtualization and VDI solutions. The market for solutions that meet our customers’ needs in accessing and organizing their work in a secure way is evolving and dynamic.
Further, our growth strategy with respect to our Workspace offerings includes expanding the use of our platform through integrations with a variety of network, hardware and software systems, such as human resource information and enterprise resource planning and customer relationship management systems, including through the interaction of application programming interfaces (APIs). While we have established relationships with providers of complementary technology offerings and software integrations, we may be unsuccessful in maintaining relationships with these providers or establishing relationships with new providers. Third-party providers of complementary technology offerings and software integrations may decline to enter into, or may later terminate, relationships with us; change their features or platforms; restrict our access to their applications and platforms; or alter the terms governing use of and access to their applications and APIs in an adverse manner. Such changes could functionally limit or terminate our ability to use these third-party technology offerings and software integrations with our platform, which could negatively impact our offerings and harm our business. Further, we have undertaken efforts to build a developer community around our Workspace platform, but it remains unclear if the developer community will successfully generate third-party developer interest in creating new integrations or additional uses for our services.
Delivering our new solutions and our Workspace vision presents technological and implementation challenges, and may fail to meet our customers' needs. Significant investments continue to be required to develop or acquire solutions to address those challenges. To the extent that our newer products and services are adopted more slowly or are displaced by competitive solutions offered by other companies, our revenue growth rates may slow materially or our revenue may decline substantially, we may fail to realize returns on our investments in new initiatives and our operating results could be materially and adversely affected.
We face intense competition, which could result in customer loss, fewer customer orders and reduced revenues and margins.
We sell our solutions and services in intensely competitive markets. Some of our competitors and potential competitors have significantly greater financial, technical, sales and marketing and other resources than we do. We compete based on our ability to offer to our customers the most current and desired solution and services features. We expect that competition will continue to be intense, and there is a risk that our competitors’ products may be less costly, more heavily discounted or free, provide better performance or include additional features when compared to our solutions. Additionally, there is a risk that our solutions may become outdated or that our market share may erode. Further, the announcement of the release, or the actual release, of new solutions incorporating similar features to our solutions could cause our existing and potential customers to postpone or cancel plans to license certain of our existing and future solution and service offerings. Existing or new solutions and services that provide alternatives to our solutions and services could materially impact our ability to compete in these markets. As the markets for our solutions and services, especially those solutions in early stages of development, continue to develop, additional companies, including companies with significant market presence in the computer hardware, software, cloud, networking, mobile, data sharing and related industries, could enter, or increase their footprint in, the markets in which we compete and further intensify competition. In addition, we believe price competition will remain a significant competitive factor in the future. As a result, we may not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and financial condition.
We expect to continue to face additional competition as new participants enter our markets and as our current competitors seek to increase market share. Further, we may see new and increased competition in different geographic regions. The generally low barriers to entry in certain of our businesses increase the potential for challenges from new industry competitors, whether small and medium-sized businesses or larger, more established companies. Smaller companies new to our market may have more flexibility to develop on more agile platforms and have greater ability to adapt their strategies and cost structures, which may give them a competitive advantage with our current or prospective customers. We may also experience increased competition from new types of solutions as the options for Workspace and App Delivery and Security offerings increase. Further, as our industry evolves and if our company grows, companies with which we have strategic alliances may become competitors in other product areas, or our current competitors may enter into new strategic relationships with new or existing competitors, all of which may further increase the competitive pressures we face.
In addition, the industry has been volatile and there has been a trend toward industry consolidation in our markets for several years. We expect companies will attempt to strengthen or hold their market positions in an evolving and volatile industry. For example, some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer a more comprehensive solution than they had previously offered. Additionally, as IT companies attempt to strengthen or maintain their market positions in the evolving digital workspace services, networking and data sharing markets, these companies continue to seek to deliver comprehensive IT solutions to end users and combine enterprise-level hardware and software solutions that may compete with our Workspace and App Delivery and Security solutions. These consolidators or potential consolidators may have significantly greater financial, technical and other resources and brand loyalty than we do, and may be better positioned to acquire and offer complementary solutions and services. The companies resulting from these possible combinations may create more compelling solution and service offerings and be able to offer greater pricing flexibility or sales and marketing support for such offerings than we can. These heightened competitive pressures could result in a loss of customers or a reduction in our revenues or revenue growth rates, all of which could adversely affect our business, results of operations and financial condition.
Refer to Part I, Item 1 “Business” included in this Annual Report on Form 10-K for the year ended December 31, 2021 for a description of our competition.
Actual or perceived security vulnerabilities in our products and services or cyberattacks on our services infrastructure or corporate networks could have a material adverse impact on our business, results of operations and financial condition.
Use of our products and services has and may involve the transmission and/or storage of data, including in certain instances our own and our customers' and other parties’ business, financial and personal data. As we continue to evolve our products and features, we expect to host, transmit or otherwise have access to increasing amounts of potentially sensitive data. Maintaining the security of our products, computer networks and data storage resources is important and service vulnerabilities could result in loss of and/or unauthorized access to confidential information. We have in the past, and may in the future, discover vulnerabilities in our products or underlying technology, which could expose our reputation, our operations and our customers to risk. In addition, to the extent we are diverting our resources to address and mitigate these vulnerabilities, it may hinder our ability to deliver and support our products and customers in a timely manner. For example, in December 2019, we discovered a vulnerability in certain of our Application Delivery and Security products that would have allowed an unauthenticated attacker to perform arbitrary code execution. In response, we published a security advisory with detailed mitigations designed to stop a potential attack across all known scenarios and also developed and made available fixes to address this vulnerability, and such efforts required significant investment of resources across the company.
As a more general matter, unauthorized parties may attempt to misappropriate, alter, disclose, delete or otherwise compromise our confidential information or that of our employees, partners, customers or their end users, create system disruptions, product or service vulnerabilities or cause shutdowns. These unauthorized parties are becoming increasingly sophisticated, particularly those funded by or acting as formal or informal representatives of, or acting in conjunction with, nation states. Perpetrators of cyberattacks also may be able to develop and deploy viruses, worms, malware and other malicious software programs that directly or indirectly attack our products, services, infrastructure (including third-party cloud service providers - such as Microsoft Azure, AWS and Google Cloud Platform - upon which we rely), third-party software and applications that we deploy in our internal network. Because techniques used by these perpetrators to sabotage or obtain unauthorized access to our systems change frequently and sometimes are not recognized until long after being launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Despite our efforts to build secure services, we can make no assurance that we will be able to detect, prevent, timely and adequately address, or mitigate the negative effects of cyberattacks or other security compromises. Like many enterprises, we experience attempted attacks on our network and services, and certain of those attacks have resulted in successful unauthorized access to our networks and services, including a “password spraying” attack in 2019. In 2021, we learned that certain open source libraries, commonly referred to as Log4j 2 and Log4Shell, included in certain of our products and services, as well as in software and services provided by our vendors and used internally, contained vulnerabilities which, if exploited, would enable a remote attacker to take control of an environment over the internet. There is no guarantee that our preventative and mitigation actions with respect to this vulnerability and others like it will eliminate fully the risk of a malicious compromise of the company or our customers.
These misappropriations, cyberattacks or any other compromises of our security measures (or those of one of our customers) as a result of third-party action, malware, employee error, vulnerabilities, theft, malfeasance or otherwise could result in (among other consequences):
•loss or destruction of customer, employee, partner and other Citrix intellectual property or business data;
•disruptions in the operation of our business, such as interruption in the delivery of our cloud and other services;
•costs associated with investigating, responding to and remediating the root cause, including additional monitoring of systems for unauthorized activity;
•negative publicity and harm to our reputation or brand, which could result in lost trust from our customers, partners and employees and could lead some customers to seek to cancel subscriptions, stop using certain of our products or services, reduce or delay future purchases of our products or services, or use competing products or services;
•individual and/or class action lawsuits, due to, among other things, the compromise of sensitive employee or customer information, which could result in financial judgments against us or the payment of settlement amounts and cause us to incur legal fees and costs;
•regulatory enforcement action in the United States at both the federal and state level (such as by the Federal Trade Commission and/or state attorneys general) or globally under the growing number of data protection legal regimes, including without limitation the General Data Protection Regulation, or GDPR, and the California Consumer Privacy Act, or CCPA, or other similar federal, state or local laws, which could result in significant fines and/or penalties or other sanctions and which would cause us to incur legal fees and costs;
•costs associated with responding to those impacted by such issues, such as: costs of providing data owners, consumers or others with notice; legal fees; costs of any additional fraud detection activities required by such customers' credit card issuers; and costs incurred by credit card issuers associated with the compromise;
•disputes with our insurance carriers concerning coverage for the costs associated with responding to, and mitigating an incident; and/or
•longer-term remediation and security enhancement expenses.
Any of these actions could materially and adversely impact our business, results of operations and financial condition. Further, while we maintain multiple layers of oversight over enterprise cybersecurity and data protection risks associated with our products, services, information technology infrastructure and related operations - including our management-level cybersecurity risk oversight committee comprised of senior executives across core functions, as well as our Technology, Data and Information Security Committee of the Board - there is no guarantee that this oversight framework will be successful in providing the necessary governance to prevent or adequately respond to the actions described above.
We rely on indirect distribution channels and major distributors that we do not control.
We rely significantly on independent distributors and resellers to market and distribute our solutions and services. Our distributors generally sell through resellers. Our distributor and reseller base is relatively concentrated. We maintain and periodically revise our sales incentive programs for our independent distributors and resellers, and such program revisions may adversely impact our results of operations. Changes to our sales incentive programs can result from a number of factors, including our transition to a subscription-based business model. In 2021, after experiencing a lack of focus on driving transactional volume through our indirect channel, we began reevaluating and updating our channel programs to better incentivize our channel partners. Our competitors may in some cases be effective in providing incentives to current or potential distributors and resellers to favor their products or to prevent or reduce sales of our solutions. The loss of or reduction in sales to our distributors or resellers could materially reduce our revenues. Further, we could maintain individually significant accounts receivable balances with certain distributors. The financial condition of our distributors could deteriorate and distributors could significantly delay or default on their payment obligations. Any significant delays, defaults or terminations could have a material adverse effect on our business, results of operations and financial condition.
We continue to diversify our base of channel relationships by adding and training more channel partners with abilities to reach larger enterprise customers and additional mid-market customers and to sell our newer solutions and services. We are also in the process of building relationships with new types of channel partners, such as systems integrators and service providers. In addition to this diversification of our partner base, we will need to maintain a healthy mix of channel members who service smaller customers. We may need to add and remove distribution partners to maintain customer satisfaction, support a steady adoption rate of our solutions, and align with our transition to a subscription-based business model, which could increase our operating expenses, credit risk, and adversely impact our go-to-market effectiveness. In addition, our newer Workspace offerings may require additional technical capabilities to efficiently implement our solutions, and there is no guarantee we will be able to find a sufficient number of capable partners who can support these efforts. We also bear the risk that our existing or newer channel partners will fail to comply with U.S. or international anti-corruption or anti-competition laws, in which case we might be fined or otherwise penalized as a result of the agency relationship with such partners. We are currently investing, and intend to continue to invest, significant resources to develop these channel relationships, which could adversely impact our results of operations if such channels do not result in increased revenues.
The effects of the COVID-19 pandemic remain uncertain and could adversely affect our business, results of operations, financial condition and cash flows, and such effects will depend on future developments.
The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption. The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the severity of the disease and outbreak, the impact of new strains of the virus, effectiveness and availability of a vaccine, future and ongoing actions that may be taken by governmental authorities, the impact on the businesses of our customers and partners, and the length of its impact on the global economy, which remain uncertain and are difficult to predict at this time. The potential effects of the COVID-19 pandemic, each of which could adversely affect our business, results of operations, financial condition and cash flows, include:
• the rate of IT spending and the ability of our customers to purchase our offerings could be adversely impacted. Further, the impact of the COVID-19 pandemic could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates;
• we could experience disruptions in our operations as a result of continued office closures, risks associated with our employees working remotely, a significant portion of our workforce suffering illness and travel restrictions;
• we may be unable to collect amounts due on billed and unbilled revenue if our customers or partners delay payment or fail to pay us under the terms of our agreements as a result of the impact of the COVID-19 pandemic on their businesses, including their seeking bankruptcy protection or other similar relief. As a result, our cash flows could be adversely impacted, which could affect our ability to fund future product development and acquisitions or return capital to shareholders. Further, our ability to obtain outside financing or raise additional capital may be limited as a result of volatility in the financial markets during and following the COVID-19 pandemic;
• if we do not generate sufficient cash flow or our financial condition deteriorates, we may be unable to service our debt arrangements or comply with the covenants set forth in our debt arrangements;
• we may experience disruptions or delays to our supply chain or fulfillment and delivery operations as a result of the COVID-19 pandemic. For example, we rely on a concentrated number of third-party suppliers and delivery vendors for our App Delivery and Security products, and may experience disruptions from the temporary closure of third-party supplier and manufacturer facilities, interruptions in product supply, restrictions on export or shipment or disruptions in product fulfillment due to closure or delays of our delivery vendors;
• our marketing effectiveness and demand generation efforts may be impacted due to the cancellation of customer events or shifting events to virtual-only experiences. For example, we made the decision to replace our largest annual customer and partner event, Synergy, with a series of virtual-only events again in 2022. We may need to postpone or cancel other customer, employee or industry events or other marketing initiatives in the future;
• our business is dependent on attracting and retaining highly skilled employees, and our ability to attract and retain such employees may be adversely impacted by intensified restrictions on travel, immigration, or the availability of work visas during the COVID-19 pandemic;
•certain U.S. federal and state laws and regulations intended to reduce the spread of COVID-19 are in direct conflict, which means we are unable to comply with all applicable laws and regulations in some of the jurisdictions in which we operate;
• increased cyber incidents during the COVID-19 pandemic and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks; and/or
• our results of operations are subject to fluctuations in foreign currency exchange rates, which risks may be heightened due to increased volatility of foreign currency exchange rates as a result of COVID-19.
Further, our operating results and cash flows could vary materially from our expectations or from those anticipated by investors and analysts as a result of the unpredictability of the impact that the COVID-19 pandemic may have on our businesses, our customers’ and partners’ businesses and the global markets and economy.
As the emergence of various strains of COVID-19 continue to prolong the pandemic, we are preparing for the likelihood that an increasing number of our employees may continue to work remotely, and may not require physical office space in order to perform their work. If so, we may reduce our physical office space requirements resulting in the possibility of additional near-term expense and accounting charges.
To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factor” Section.
Our business could be adversely impacted by conditions affecting the information technology market in which we operate.
The markets for our solutions and services are characterized by:
•rapid technological change;
•evolving industry standards;
•fluctuations in customer demand;
•changing customer business models and increasingly sophisticated customer needs; and
•frequent new solution and service introductions and enhancements.
The demand for our solutions and services depends substantially upon the general demand for business-related computer appliances and software, which fluctuates based on numerous factors, including capital spending levels, the spending levels and growth of our current and prospective customers, and general economic conditions, including inflation. As we continue to grow our subscription service offerings, we must continue to innovate and develop new solutions and features to meet changing customer needs. Our failure to respond quickly to technological developments or customers’ increasing technological requirements could lower the demand for any solutions and services and/or make our solutions uncompetitive and obsolete. Moreover, the purchase of our solutions and services is often discretionary and may involve a significant commitment of capital and other resources. We need to continue to develop our skills, tools and capabilities to capitalize on existing and emerging technologies, which will require us to devote significant resources.
U.S. economic forecasts for the IT sector are uncertain and continue to highlight an industry in transition from legacy platforms to mobile, cloud, data analytics and social solutions. If our current and prospective customers cut costs, they may significantly reduce their IT expenditures. Additionally, if our current and prospective customers shift their IT spending more rapidly towards newer technologies and solutions as mobile, cloud, data analytics and social platforms evolve, the demand for our solutions and services most aligned with legacy platforms (such as our desktop virtualization solutions) could decrease. Fluctuations in the demand for our solutions and services could have a material adverse effect on our business, results of operations and financial condition.
Regulation of privacy and data security may adversely affect sales of our products and services and result in increased compliance costs.
There has been, and we believe that there will continue to be, increased regulation with respect to the collection, use and handling of personal, financial, government and other information. An increasing number of regulatory authorities in the United States and around the world have recently passed or are currently considering a number of legislative and regulatory proposals concerning data protection, privacy and data security. This includes the California Consumer Privacy Act, or CCPA, which came into effect in January 2020, the GDPR, which is a European Union-wide legal framework to govern data collection, use and sharing and related consumer privacy rights that became effective in May 2018, and the U.S. Department of Defense Cybersecurity Maturity Model Certification framework. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. The GDPR provides significant penalties for non-compliance (up to 4% of global revenue). European data protection authorities have already imposed fines for GDPR violations up to, in some cases, hundreds of millions of Euros. Many states in the United States are also considering their own privacy laws that, in the absence of a preemptive Federal privacy law, could impose burdensome and conflicting requirements. The interpretation and application of consumer and data protection laws, as well as cybersecurity requirements, and industry standards in the United States, Europe and elsewhere can be uncertain and continue to remain in flux. Cloud-based solutions may be subject to further regulation, including data localization requirements and other restrictions concerning international transfer of data, the operational and cost impact of which cannot be fully known at this time. In addition to the possibility of fines, application of these existing laws in a manner inconsistent with our data and privacy practices could result in an order requiring that we change our data and privacy practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial implementation and compliance costs and/or require us to change our business practices in a manner adverse to our business. Also, any new law or regulation, or interpretation of existing law or regulation, imposing greater fees or taxes or restriction on the collection, use or transfer of information or data internationally or over the Web, could result in a decline in the use and adversely affect sales of our solutions and our results of operations. Finally, as a technology vendor, our customers and regulators will expect that we can demonstrate compliance with current data privacy and security regulations as well as our privacy policies and the information we make available to our customers and the public about our data handling practices, and our inability to do so may adversely impact sales of our solutions and services to certain customers, particularly customers in highly-regulated industries, and could result in regulatory actions, fines, legal proceedings and negatively impact our brand, reputation and business.
Our solutions could contain errors that could delay the release of new products or otherwise adversely impact our products and services.
Despite significant testing by us and by current and potential customers, our products and services, including our SaaS products and services, and especially newly released or acquired products or services, do contain errors or “bugs”. In some cases, these errors are not discovered until after commercial shipments or deployments have been made. Errors in our products or services could delay the development or release of new products or services and could adversely affect market acceptance of our products and services. Additionally, our products and services use, integrate with and otherwise depend on third-party products, which third-party products could contain defects and could reduce the performance of our products or render them useless. Because our products and services are often used in mission-critical applications, errors in our products or services or the products or services of third parties upon which our products or services rely could give rise to warranty or other claims by our customers, which could have a material adverse effect on our business, financial condition and results of operations.
Certain of our offerings have sales cycles which are long and/or unpredictable which could cause significant variability and unpredictability in our revenue and operating results for any particular period.
Generally, a substantial portion of our large and medium-sized customers implement our solutions on a departmental or enterprise-wide basis. We have a long sales cycle for these departmental or enterprise-wide sales because:
•our sales force generally needs to explain and demonstrate the benefits of a large-scale deployment of our solution to potential and existing customers prior to sale;
•our service personnel typically spend a significant amount of time assisting potential customers in their testing and evaluation of our solutions and services;
•our customers are typically large and medium-sized organizations that carefully research their technology needs and the many potential projects prior to making capital expenditures for software infrastructure; and
•before making a purchase, our potential customers usually must get approvals from various levels of decision makers within their organizations, and this process can be lengthy.
Our long sales cycle for these solutions makes it difficult to predict when these sales will occur, and we may not be able to sustain these sales on a predictable basis. In addition, the long sales cycle for these solutions makes it difficult to predict the quarter in which sales will occur. Delays in sales could cause significant variability in our bookings, revenue and/or operating results for any particular period, and large projects with significant IT components may fail to meet our customers’ business requirements or be canceled before delivery, which likewise could adversely affect our revenue and operating results for any particular period. Cloud-based solutions and subscription-based business models are particularly sensitive to these factors, and as a result, we may be increasingly affected by long sales cycles as our business transitions continue.
Overall, the timing of our revenue is difficult to predict. Our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter’s total sales occur in the last month, weeks and days of each quarter. In addition, our business is subject to seasonal fluctuations and such fluctuations are generally most significant in our fourth fiscal quarter, which we believe is due to the impact on revenue from the availability (or lack thereof) in our customers’ fiscal year budgets and an increase in expenses resulting from amounts paid pursuant to our sales compensation plans as performance milestones are often triggered in the fourth quarter. We believe that these seasonal factors are common within our industry. In addition, our European operations generally generate lower sales in the summer months because of the generally reduced economic activity in Europe during the summer.
Changes to our licensing or subscription renewal programs, or bundling of our solutions, could negatively impact the timing of our recognition of revenue.
We continually re-evaluate our licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions, to market our current and future solutions and services. We could implement new licensing programs and subscription renewal programs, including promotional trade-up programs or offering specified enhancements to our current and future solution and service lines. Such changes could result in deferring revenue recognition until the specified enhancement is delivered or at the end of the contract term as opposed to upon the initial shipment or licensing of our software solution. We could implement different licensing models in certain circumstances, for which we would recognize licensing fees over a longer period, including offering additional solutions in a SaaS model. Changes to our licensing programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, promotions, auto-renewals and other factors, could impact the timing of the recognition of revenue for our solutions, related enhancements and services and could adversely affect our operating results and financial condition.
Sales and renewals of our support solutions constitute a large portion of our deferred revenue.
We anticipate that sales and renewals of our support solutions will continue to constitute a substantial portion of our deferred revenue. Our ability to continue to generate both recognized and deferred revenue from our support solutions will depend on our customers continuing to perceive value in automatic delivery of our software upgrades and enhancements. The discontinued broad availability of perpetual licenses for Citrix Workspace in October 2020 resulted in the loss of future opportunities to sell support solutions. Additionally, a decrease in demand for our support solutions could occur as a result of a decrease in demand for our Workspace and App Delivery and Security solutions or transition to our subscription-based solutions. If our customers do not continue to purchase our support solutions, our deferred revenue would decrease significantly and our results of operations and financial condition would be adversely affected.
Our App Delivery and Security business has encountered challenges meeting demand for certain products, and may continue to encounter challenges meeting demand for certain products, if there are any interruptions or delays in the supply of hardware or hardware components from our third-party sources.
We rely on a concentrated number of third-party suppliers, who provide hardware or hardware components for our App Delivery and Security products, and contract manufacturers. Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, or the need to implement costly or time-consuming protocols to comply with applicable regulations (including regulations related to conflict minerals), equipment malfunction, natural disasters and environmental factors, any of which could delay or impede their ability to meet our demand. We also may experience disruptions or delays to our supply chain or fulfillment and delivery operations, including as a result of the COVID-19 pandemic from, among other things, the temporary closure of third-party supplier and manufacturer facilities, spikes in demand for manufacturing services, interruptions in product supply or insufficient supply of components, restrictions on export or shipment or disruptions in product fulfillment due to closure or delays of our delivery vendors. For example, in the first quarter of 2021, due in part to increased customer demand, we experienced challenges in procuring hardware components for certain of our Application Delivery and Security products, which led to hardware shipment delays and lower than expected recognized revenue during the quarter. We expect that these types of supply chain challenges may continue to arise in the future. If we are unable to procure hardware and hardware components in a timely manner from our existing suppliers or are required to change suppliers, there could be a delay in the supply of our hardware or hardware components and our ability to meet the demands of our customers could be adversely affected, which could cause the loss of App Delivery and Security sales and existing or potential customers and delayed revenue recognition, all of which could adversely affect our results of operations.
In order to be successful, we must attract, engage, retain and integrate key employees and have adequate succession plans in place, and failure to do so could have an adverse effect on our ability to manage our business.
Our success depends, in large part, on our ability to attract, engage, retain, and integrate qualified executives and other key employees throughout all areas of our business. Identifying, developing internally or hiring externally, training and retaining a diverse, global population of highly-skilled engineering, technical and security professionals, and managerial, sales and services, finance and marketing personnel are critical to our future, and global competition for experienced and diverse employees can be intense. In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash and equity-based compensation. If we do not obtain the stockholder approval needed to continue granting equity compensation in a competitive manner, our ability to attract, retain, and motivate executives and key employees could be weakened or we would otherwise need to increase our use of cash-based compensation and awards to achieve the same attraction, retention and motivation benefits. In order to attract and retain executives and other key employees in a competitive marketplace, we must also provide a diverse and inclusive environment, and offer benefits to support our employees’ physical and mental health. Our inability to do so may limit our effectiveness in attracting, retaining and motivating our executives and key employees. Failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. In 2021, we experienced increased voluntary attrition compared to 2020, which put pressure on our ability to execute, as well as experienced increased competition for qualified personnel, including engineering, sales and other core talent necessary to successfully operate the business. The loss of services of any key personnel, the inability to retain and attract qualified personnel in the future or delays in hiring may harm our business and results of operations.
Effective succession planning is also important to our long-term success. We have experienced significant changes in our senior management team over the past several years. Most recently, on October 6, 2021, David J. Henshall stepped down as President and Chief Executive Officer and our Board appointed Robert M. Calderoni, our Chairman of the Board, as Interim Chief Executive Officer and President.
Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key new hires or promoted employees could adversely affect our business and results of operations.
The reorganization of our sales leadership, customer-facing organization and sales processes to better align with our business strategy may be disruptive to our operations, will require increasing the number of direct quota carrying sales personnel, and may not yield the short or long-term benefits that we expect.
While our business model transition is continuing to progress, we are facing challenges in evolving our go-to-market strategy and driving new business SaaS subscription bookings. In an effort to address these challenges, in July 2021, we announced plans to reorganize our sales leadership, re-align our customer-facing organization, and enhance our focus on indirect channels, new product adoption and SaaS migration, and to de-emphasize sales of on-premise term subscription licenses, embracing a faster pace of cloud adoption. We also have taken, and may continue to take, actions intended to re-align channel incentives to focus on landing and growing new business activities. These changes are significant, and may cause short-term disruption. Moreover, we anticipate that it will take time to realize any of the expected benefits from these changes.
We also may be unsuccessful in recruiting and retaining sales personnel with the knowledge and skills required to market our products and services effectively as part of our go-to-market strategy. As a result, there may be periods of time when our sales force is not at its desired headcount, which may result in fewer sales of our products and services.
This sales reorganization, and the evolution of our go-to-market strategy, may not result in the short or long-term benefits that we expect in a timely manner or at all. Moreover, these changes, or other similar changes that we may choose to make, may cause disruptions in our business that may negatively impact sales over one or more future quarters. Risks related to these activities include:
•challenges in reorganizing sales operations and personnel;
•inability to recruit and retain a sufficient number of qualified direct quota carrying sales personnel;
•reduced productivity among new sales team members or while members of the sales team adjust to their new roles and responsibilities and our new sales priorities;
•loss of key employees;
•inability to re-engage distributors, resellers and other channel partners due to changing market demands or competitive offerings;
•higher sales, marketing and services costs;
•lengthening of sales cycles as customers evaluate their cloud strategy and competitive offerings; and
•continued difficulties in accurately forecasting bookings and revenue and the estimated mix within subscription of on-premise versus cloud.
If the disruptions caused by these operational and organizational changes are greater or longer than anticipated, we are unable to increase our direct quota carrying sales personnel or we are unable to achieve the expected benefits of these activities, our business, financial condition, and results of operations may be adversely affected.
Our international presence subjects us to additional risks that could harm our business.
We conduct significant sales and customer support, development and engineering operations in countries outside of the United States. During the year ended December 31, 2021, we derived 49.7% of our net revenues from sales outside the United States. Potential growth and profitability could require us to further expand our international operations. To successfully maintain and expand international sales, we may need to establish additional foreign operations, hire additional personnel and recruit additional international resellers. Our international operations are subject to a variety of risks, which could adversely affect the results of our international operations. These risks include:
•compliance with foreign regulatory and market requirements, including the requirement to submit additional technical information for product registration in order to sell in certain countries;
•variability of foreign economic, political, labor conditions and global policy uncertainty, including re-locating operations internationally;
•changing restrictions imposed by regulatory requirements, tariffs or other trade barriers or by U.S. export laws;
•regional data privacy, security, secrecy and related laws that apply to the transmission of and protection of our and our customers’ data across international borders;
•health or similar issues such as pandemic or epidemic;
•difficulties in staffing and managing international operations;
•longer accounts receivable payment cycles;
•potentially adverse tax consequences;
•difficulties in enforcing and protecting intellectual property rights, including increased difficulty as a foreign entity in those international locations;
•providing technical information in order to obtain foreign filing licenses for filing our patent applications in certain countries;
•increased risk of non-compliance by foreign employees, partners, distributors, resellers and agents or other intermediaries with both U.S. and foreign laws, including antitrust regulations, the Foreign Corrupt Practices Act, the U.K. Bribery Act, U.S. or foreign sanctions regimes and export or import control laws and any trade regulations ensuring fair trade practices;
•burdens of complying with a wide variety of foreign laws;
•the impact of the COVID-19 pandemic internationally and related legal restrictions imposed in foreign nations;
•expansion of cloud-based products and services may increase risk in countries where cloud computing infrastructures are more susceptible to data intrusions or may be controlled directly or indirectly by foreign governments;
•ongoing economic and legal uncertainty, including volatility in global stock markets and currency exchange rates and increasingly divergent laws, regulations and licensing requirements between the United Kingdom and the European Union, resulting from the United Kingdom's exit from the European Union, often referred to as "Brexit";
•our software and data of our customers being stored in foreign jurisdictions, which could lead to us being required to disclose or provide access to data or intellectual property to a foreign government pursuant to national security or other laws of such foreign jurisdiction; and
•as we generate cash flow in non-U.S. jurisdictions, if required, we may experience difficulty transferring such funds to the U.S. in a tax efficient manner.
Additionally, an increasing number of jurisdictions are imposing data localization laws, which require personal information, or certain subcategories of personal information, to be stored in the jurisdiction of origin. These regulations may deter customers from using cloud-based services such as ours, and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs. Specifically, we operate in Russia where there is a local residency requirement for personal data. We do not own or operate servers in Russia. As such, to-date, we have not offered our cloud-based offerings in Russia. Due to the acquisition of Wrike, our employee presence in Russia has increased, thereby adding to our exposure to certain of the risks identified herein, including risks related to the political, security and policy uncertainty between the United States and Russia.
We operate and do business in China. Under the China Cyber Security Law, or CSL, network operators are required to provide technical support and assistance to public and state security authorities in national security and criminal investigations. The law does not provide details on the extent of technical support and assistance that may be required. There is the possibility that network operators may be required to disclose or provide access to information or data communicated or transmitted through the network owned, utilized or managed by the network operator to comply with the support and assistance requirement of the CSL. While we do not consider Citrix to be a network operator, there is the possibility that China could decide to treat Citrix as a network operator, and we would need to comply with this law.
We have had and may, from time to time, enter into strategic partnerships, joint ventures, OEM or similar business relationships with entities in foreign jurisdictions, including governmental or quasi-governmental entities, pursuant to which we may be required to license or transfer certain of our intellectual property rights to such entities. Such relationships could expose us to increased risks inherent in such activities, such as protection of our intellectual property, economic and political risks, and contractual enforcement issues.
Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee that these or other factors will not adversely affect our business or results of operations.
Adverse changes in global economic conditions could adversely affect our operating results.
As a globally operated company, we are subject to the risks arising from adverse changes in global economic and market conditions. Economic uncertainty and volatility in our significant geographic locations, including the potential impact resulting from international trade disputes, or military conflict may adversely affect sales of our solutions and services and may result in longer sales cycles, slower adoption of technologies and increased price competition. For example, if the U.S. or the European Union countries were to experience an economic downturn, these adverse economic conditions could contribute to a decline in our customers’ spending on our solutions and services. Additionally, in response to economic uncertainty, we expect that many governmental organizations that are current or prospective customers for our solutions and services would cutback spending significantly, which would reduce the amount of government spending on IT and demand for our solutions and services from
government organizations. Adverse economic conditions also may negatively impact our ability to obtain payment for outstanding debts owed to us by our customers or other parties with whom we do business.
We cannot guarantee that our previously-announced restructuring program will achieve its intended result.
On November 14, 2021, our Board of Directors approved a restructuring program that includes, among other things, the elimination of full-time positions, termination of certain contracts, and asset impairments, primarily related to facilities consolidations. We expect to record in the aggregate approximately $130.0 million to $240.0 million in pre-tax restructuring and asset impairment charges associated with the restructuring program. A significant portion of these charges will result in future cash expenditures, and the program is expected to be substantially completed over an approximate eighteen-month period. We cannot guarantee that the restructuring program will achieve or sustain the targeted benefits, or that the benefits, even if achieved, will be adequate to meet our long-term profitability expectations. Risks associated with the restructuring program also include additional unexpected costs, negative impacts on our cash flows from operations and liquidity, employee attrition and adverse effects on employee morale and our potential failure to meet operational and growth targets due to the loss of employees, any of which may impair our ability to achieve anticipated results from operations or otherwise harm our business.
If our customers choose on-premise subscription licenses with short-term durations, our operating results may be adversely affected.
The amount of our recognized revenue depends on several factors, including the average duration of on-premise subscription licenses. If our customers choose licenses with short subscription term durations, operating results may be adversely affected and not meet our investors’ expectations. For example, in the first quarter of 2021, we sought to convert into longer-term subscriptions the expiring limited-use non-renewable, on-premise term licenses issued in 2020 at the onset of the pandemic. However, in the first quarter of 2021, a number of these customers chose to convert the expiring limited-use on-premise term licenses into short-term duration agreements for on-premise licenses. If customers were to choose short-term duration for other on-premise subscription licenses in future periods, we would expect our results of operations to be adversely affected in those periods.
RISKS RELATED TO ACQUISITIONS, STRATEGIC RELATIONSHIPS AND DIVESTITURES
Acquisitions and divestitures present many risks, and we may not realize the financial and strategic goals we anticipate.
We have in the past addressed, and may continue to address, the development of new solutions and services and enhancements to existing solutions and services through acquisitions of other companies, product lines and/or technologies. For example, on February 26, 2021, we completed our previously announced acquisition of Wrike, Inc., a leading provider of SaaS collaborative work management solutions.
Acquisitions, including those of high-technology companies, such as Wrike, are inherently risky. We cannot provide any assurance that any of our acquisitions or future acquisitions will be successful in helping us reach our financial and strategic goals. The risks we commonly encounter in undertaking, managing and integrating acquisitions are:
•an uncertain revenue and earnings stream from the acquired company, which could dilute our earnings;
•difficulties and delays integrating the personnel, operations, technologies, solutions and systems of the acquired companies;
•difficulties operating acquired companies as a stand-alone business, if desired, to further our objectives and strategy;
•undetected errors or unauthorized use of a third-party’s code in solutions of the acquired companies;
•our ongoing business may be disrupted and our management’s attention may be diverted by acquisition, transition or integration activities;
•challenges with implementing adequate and appropriate controls, procedures and policies in the acquired business;
•difficulties managing or integrating an acquired company’s technologies or lines of business;
•potential difficulties in completing projects associated with purchased in-process research and development;
•entry into markets in which we have no or limited direct prior experience and where competitors have stronger market positions and which are highly competitive;
•the potential loss of key employees of the acquired company;
•potential difficulties integrating the acquired solutions and services into our sales channel or challenges selling acquired products;
•assuming pre-existing contractual relationships of an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;
•being subject to unfavorable revenue recognition or other accounting treatment as a result of an acquired company’s practices;
•potential difficulties securing financing necessary to consummate substantial acquisitions;
•incurring a significant amount of debt to finance an acquisition, which would increase our debt service requirements, expense and leverage;
•issuing shares of our stock, which may be dilutive to our stockholders;
•issuing equity awards to, or assuming existing equity awards of, acquired employees, which may more rapidly deplete share reserves available under our shareholder-approved equity incentive plans;
•intellectual property claims or disputes; and
•litigation arising from the transaction.
Our failure to successfully integrate acquired companies due to these or other factors could have a material adverse effect on our business, results of operations and financial condition. In addition, if we fail to identify and successfully complete and integrate transactions, or successfully operate acquired companies on a stand-alone basis, that further our strategic objectives, we may be required to expend resources to develop products, services and technology internally, which may put us at a competitive disadvantage.
Any future divestitures we make may also involve risks and uncertainties. Any such divestitures could result in disruption to other parts of our business, potential loss of employees or customers, exposure to unanticipated liabilities or result in ongoing obligations and liabilities to us following any such divestiture. For example, in connection with a divestiture, we may enter into transition services agreements or other strategic relationships, including long-term services arrangements, or agree to provide certain indemnities to the purchaser in any such transaction, which may result in additional expense. Further, if we do not realize the expected benefits or synergies of such transactions, our operating results and financial conditions could be adversely affected.
Our acquisition of Wrike involves a number of risks that could adversely affect our business, financial condition and operating results, and we may not realize the financial and strategic goals we anticipate.
On February 26, 2021, we completed our previously announced acquisition of Wrike, Inc., a leading provider of SaaS collaborative work management solutions, pursuant to the terms of the Agreement and Plan of Merger dated January 16, 2021. The acquisition of Wrike, and the ongoing transition of Wrike's business to Citrix's platform, involves certain risks, including:
•our failure to realize the expected benefits or synergies of the Wrike acquisition;
•an uncertain revenue and earnings stream from Wrike, which could dilute our earnings;
•difficulties and delays integrating Wrike’s personnel, operations, technologies, solutions and systems;
•difficulties operating Wrike to further our objectives and strategy;
•undetected errors or unauthorized use of a third-party’s code in Wrike’s solutions;
•our ongoing business may be disrupted and our management’s attention may be diverted by transition or integration activities involving Wrike, which may delay innovation, among other things;
•challenges with implementing adequate and appropriate controls, procedures and policies in Wrike’s business;
•potential difficulties in completing projects associated with Wrike’s in-process research and development;
•difficulty providing complementary solutions that are purchased by our or Wrike’s customers, reaching new users and expanding our customer base, or competing effectively in markets in which we have no or limited direct prior experience and where competitors have stronger market positions and which are highly competitive;
•the potential loss of Wrike’s key employees;
•potential difficulties integrating Wrike’s solutions and services into our sales channel or challenges selling Wrike’s products;
•the assumption of pre-existing contractual relationships of Wrike that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;
•being subject to unfavorable revenue recognition or other accounting treatment as a result of Wrike’s practices;
•incurring a significant amount of debt to finance the Wrike acquisition, which increased our debt service requirements, expense and leverage;
•issuing equity awards to, and assuming existing equity awards of, Wrike’s employees, which may more rapidly deplete share reserves available under our shareholder-approved equity incentive plans;
•increased exposure to risks related to foreign operations due to the increase in our employee presence in Russia, which could result in the unavailability of key technical talent, cyber security risks, disruption resulting from the transfer of employees moving from current Russia offices to alternative locations, difficulty and expenses associated with identifying alternative and adequate technical talent pools, and other risks related to the political, security and policy uncertainty between the United States and Russia; and
•litigation arising from the transaction.
Our failure to successfully integrate Wrike, or realize the expected benefits or synergies of the acquisition, due to these or other factors could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to accelerate our strategy and cloud transition, enhance our growth or accelerate Wrike’s growth expectations, provide complementary solutions that are purchased by our or Wrike’s customers, reach new users and expand our customer base, compete effectively in Wrike’s markets, or realize other expected benefits of the merger if we are unable to successfully integrate and operate Wrike. Specifically, our sales teams' ability to sell Wrike solutions has not yet met our expectations, and we have and may continue to experience slower than expected post-acquisition bookings synergy, as well as higher levels of attrition, which has negatively impacted and may continue to negatively impact, Wrike ARR growth and overall business performance.
If we determine that any of our goodwill or intangible assets, including technology purchased in acquisitions, are impaired, we would be required to take a charge to earnings, which could have a material adverse effect on our results of operations.
We have a significant amount of goodwill and other intangible assets, such as product related intangible assets, from our acquisitions. We do not amortize goodwill and intangible assets that are deemed to have indefinite lives. However, we do amortize certain product related technologies, trademarks, patents and other intangibles and we periodically evaluate them for impairment. For instance, as described in Note 2 of this Annual Report on Form 10-K, we had intangible asset impairment charges of $19.4 million for the fourth quarter of 2021 related to our previously-announced restructuring program. We review goodwill for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount could exceed fair value, at the reporting unit level, which for us also represents our operating segment. Significant judgments are required to estimate the fair value of our goodwill and intangible assets, including estimating future cash flows, determining appropriate discount rates, estimating the applicable tax rates, foreign exchange rates and interest rates, projecting the future industry trends and market conditions, and making other assumptions. Although we believe the assumptions, judgments and estimates we have made have been reasonable and appropriate, different assumptions, judgments and estimates, may materially affect our results of operations. Changes in these estimates and assumptions, including changes in our reporting structure, could materially affect our determinations of fair value. In addition, due to uncertain market conditions and potential changes in our strategy and product portfolio, it is possible that the forecasts we use to support our goodwill and other intangible assets could change in the future, which could result in non-cash charges that would adversely affect our results of operations and financial condition. Also, we may make divestitures of businesses in the future. If we determine that any of the intangible assets associated with our acquisitions is impaired or goodwill is impaired, then we would be required to reduce the value of those assets or to write them off completely by taking a charge to current earnings. If we are required to write down or write off all or a portion of those assets, or if financial analysts or investors believe we may need to take such action in the future, our stock price and operating results could be materially and adversely affected.
Our inability to maintain or develop our strategic and technology relationships could adversely affect our business.
We have several strategic and technology relationships with large and complex organizations, such as Microsoft, Google and other companies with which we work to offer complementary solutions and services. We depend on the companies with which we have strategic relationships to successfully test our solutions, to incorporate our technology into their products and to market and sell those solutions. There can be no assurance we will realize the expected benefits from these strategic relationships or that they will continue in the future. If successful, these relationships may be mutually beneficial and result in industry growth. However, such relationships carry an element of risk because, in most cases, we must compete in some business areas with a company with which we have a strategic relationship and, at the same time, cooperate with that company in other business areas. Also, if these companies fail to perform or if these relationships fail to materialize as expected, we could suffer delays in product development, reduced sales or other operational difficulties and our business, results of operations and financial condition could be materially adversely affected.
RISKS RELATED TO INTELLECTUAL PROPERTY AND BRAND RECOGNITION
Our efforts to protect our intellectual property may not be successful, which could materially and adversely affect our business.
We rely primarily on a combination of copyright, trademark, patent and trade secret laws, confidentiality procedures and contractual provisions to protect our source code, innovations and other intellectual property, all of which offer only limited protection. The loss of any material trade secret, trademark, tradename, patent or copyright could have a material adverse effect on our business. Despite our precautions, it could be possible for unauthorized third parties to infringe our intellectual property rights or steal, or misappropriate, copy, disclose or reverse engineer our proprietary information, including certain portions of our solutions or to otherwise obtain and use our proprietary source code. We have sought to protect our intellectual property
through offensive litigation and may seek other avenues for enforcement or for return on our investment in our patent portfolio, which may be costly and unsuccessful and/or subject us to successful counterclaims or challenges to our intellectual property rights. In addition, our ability to monitor and control theft, misappropriation or infringement is uncertain, particularly in countries outside of the United States. If we cannot protect our intellectual property from infringement and our proprietary source code against unauthorized theft, copying, disclosure or use, we could lose market share, including as a result of unauthorized third parties’ development of solutions and technologies similar to or better than ours.
The scope of our patent protection may be affected by changes in legal precedent and patent office interpretation of these precedents. Software-based patents are difficult to obtain and enforce in many jurisdictions and there may also be limits on recovery for damages in those jurisdictions. Further, any patents owned by us could be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of protection we seek, if at all; and if issued, may not provide any meaningful protection or competitive advantage.
Our ability to protect our proprietary rights could be affected by differences in international law and the enforceability of licenses. The laws of some foreign countries do not protect our intellectual property to the same extent as do the laws of the United States and Canada. For example, we derive a significant portion of our sales from licensing our solutions under “click-to-accept” license agreements that are not signed by licensees and through electronic enterprise customer licensing arrangements that are delivered electronically, all of which could be unenforceable under the laws of many foreign jurisdictions in which we license our solutions. Moreover, with respect to the various confidentiality, license or other agreements we utilize with third parties related to their use of our solutions and technologies, there is no guarantee that such parties will abide by the terms of such agreements.
Our solutions and services, including solutions obtained through acquisitions, could infringe third-party intellectual property rights, which could result in material litigation costs.
We are routinely subject to patent infringement claims and may in the future be subject to an increased number of claims, including claims alleging the unauthorized use of a third-party’s code in our solutions. This may occur for a variety of reasons, including:
•the expansion of our product lines through product development and acquisitions;
•the volume of patent infringement litigation commenced by non-practicing entities;
•an increase in the number of competitors in our industry segments and the resulting increase in the number of related solutions and services and the overlap in the functionality of those solutions and services;
•an increase in the number of our competitors and third parties that use their own intellectual property rights to limit our freedom to operate and exploit our solutions, or to otherwise block us from taking full advantage of our markets;
•our reliance on the technology of others and, therefore, the requirement to obtain intellectual property licenses from third parties in order for us to commercialize our solutions or services, which licenses we may not be able to obtain or continue to obtain from these third parties on reasonable terms; and
•the unauthorized or improperly licensed use of third-party code in our solutions.
Further, responding to any infringement claim, regardless of its validity or merit, could result in costly litigation. Intellectual property litigation could compel us to do one or more of the following:
•pay damages (including the potential for treble damages), license fees or royalties (including royalties for past periods) to the party claiming infringement;
•cease selling solutions or services that use the challenged intellectual property;
•obtain a license from the owner of the asserted intellectual property to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or
•redesign the challenged technology, which could be time consuming and costly, or not be accomplished.
If we were compelled to take any of these actions, our business, results of operations or financial condition may be adversely impacted.
Our use of “open source” software could negatively impact our ability to sell our solutions and subject us to possible litigation.
The solutions or technologies acquired, licensed or developed by us may incorporate so-called “open source” software, and we may incorporate open source software into other solutions in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses, including, for example, the GNU General Public License, the GNU Lesser General Public License, the Apache license (version 2), “BSD-style” licenses, “MIT-style” licenses and other open
source licenses. Even though we attempt to monitor our use of open source software in an effort to avoid subjecting our solutions to conditions we do not intend, it is possible that not all instances of our open source code usage are properly reviewed. Additionally, software purchased through the supply chain may contain open source software of which we are unaware that could present license rights and/or security risk. Further, although we believe that we have complied with our obligations under the various applicable licenses for open source software that we use such that we have not triggered any of these conditions, there is little or no legal precedent governing the interpretation or enforcement of many of the terms of these types of licenses. If an author or other third party that distributes open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations. If our defenses were not successful, we could be subject to significant damages, enjoined from the distribution of our solutions that contained open source software, and required to comply with the terms of the applicable license, which could disrupt the distribution and sale of some of our solutions. In addition, if we combine our proprietary software with open source software in an unintended manner, under some open source licenses we could be required to publicly release the source code of our proprietary software, offer our solutions that use the open source software for no cost, make available source code for modifications or derivative works we create based upon incorporating or using the open source software, and/or license such modifications or derivative works under the terms of the particular open source license.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide technology support, maintenance, warranties or assurance of title or controls on the origin of the software. Open source software may also present risks of unforeseen or unmanaged security vulnerabilities that could potentially unintentionally be introduced into our solutions.
If we lose access to third-party licenses, releases of our solutions could be delayed.
We believe that we will continue to rely, in part, on third-party licenses to enhance and differentiate our solutions. Third-party licensing arrangements are subject to a number of risks and uncertainties, including:
•undetected errors or unauthorized use of another person’s code in the third party’s software;
•disagreement over the scope of the license and other key terms, such as royalties payable and indemnification protection;
•infringement actions brought by third-parties;
•the creation of solutions by third parties that directly compete with our solutions; and
•termination or expiration of the license.
If we lose or are unable to maintain any of these third-party licenses or are required to modify software obtained under third-party licenses, it could delay the release of our solutions. Any delays could have a material adverse effect on our business, results of operations and financial condition.
Our business depends on maintaining and protecting the strength of our collection of brands.
The Citrix solution and service brands that we have developed have significantly contributed to the success of our business. Maintaining and enhancing the Citrix solution and service brands is critical to expanding our base of customers and partners. We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and services. Also, others may rely on false comparative advertising and customers or potential customers could be influenced by false advertising. Additionally, we may be unable to use some of our brands in certain countries or unable to secure trademark rights in certain jurisdictions where we do business. In order to police, maintain, enhance and protect our brands, we may be required to make substantial investments that may not be successful. If we fail to police, maintain, enhance and protect the Citrix brands, if we incur excessive expenses in this effort or if customers or potential customers are confused by others’ trademarks, our business, operating results, and financial condition may be materially and adversely affected.
RISKS RELATED TO OUR LIQUIDITY, TAXATION AND CAPITAL RETURN
Servicing our debt will require a significant amount of cash, which could adversely affect our business, financial condition and results of operations. We may not have sufficient cash flow from our business to make payments on our debt or repurchase our 2026 Notes, 2027 Notes or 2030 Notes upon certain events.
As of December 31, 2021, we had aggregate indebtedness of $3.33 billion that we have incurred in connection with the issuance of our unsecured senior notes due 2026 (the “2026 Notes”), the issuance of our unsecured senior notes due December 1, 2027 (the “2027 Notes”), the issuance of our unsecured senior notes due March 1, 2030 (the “2030 Notes”), under the credit agreement for our unsecured revolving credit facility entered into in November 2019 (the “Credit Agreement”), under the credit
agreement for our term loan credit facility entered into in February 2020 (the “2020 Term Loan Credit Agreement”), and credit agreement for our term loan credit facility entered into in February 2021 (the “2021 Term Loan Credit Agreement” and, together with the 2020 Term Loan Credit Agreement, the “Term Loan Credit Agreements”).
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, depends on our future performance, which is subject to general economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, reducing capital expenditures, restructuring debt or obtaining additional equity or debt financing on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness, as applicable, will depend on the capital markets and our financial condition at such time. We may not be able to sell assets, restructure our indebtedness or obtain additional equity or debt financing on terms that are acceptable to us or at all, which could result in a default on our debt obligations. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” and Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for information regarding our 2030 Notes, 2027 Notes, 2026 Notes, our Credit Agreement and our Term Loan Credit Agreements.
In addition, if a change in control repurchase event occurs with respect to the 2026 Notes, 2027 Notes or the 2030 Notes, we will be required, subject to certain exceptions, to offer to repurchase the 2026 Notes, 2027 Notes or 2030 Notes, as applicable, at a repurchase price equal to 101% of the principal amount of the Notes being, repurchased, plus accrued and unpaid interest, if any. In such event, we may not have enough available cash or be able to obtain financing to fund the required repurchase of the applicable Notes, or making such payments could adversely affect our liquidity. Our ability to repurchase the 2026 Notes, 2027 Notes or 2030 Notes may be limited by law, by regulatory authority or by agreements governing our other indebtedness.
Further, we are required to comply with the covenants set forth in the indentures governing the 2026 Notes, the 2027 Notes and 2030 Notes, the Credit Agreement and the Term Loan Credit Agreements. In particular, each of the Credit Agreement and Term Loan Credit Agreements requires us to maintain certain leverage and interest ratios and contains various affirmative and negative covenants, including covenants that limit or restrict our ability to grant liens, merge or consolidate, dispose of all or substantially all of our assets, change our business or incur subsidiary indebtedness. The indenture governing our 2026 Notes, 2027 Notes and 2030 Notes contains covenants limiting our ability and the ability of our subsidiaries to create certain liens, enter into certain sale and leaseback transactions, and consolidate or merge with, or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of our assets, taken as a whole, to, another person. If we fail to comply with these covenants or any other provision of the agreements governing our indebtedness and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure periods, our outstanding indebtedness may be declared immediately due and payable. Additionally, a default under an indenture, the Credit Agreement or Term Loan Credit Agreements could lead to a default under the other agreements governing our current and any future indebtedness. If the repayment of the related indebtedness were to be accelerated, we may not have enough available cash or be able to obtain financing to repay the indebtedness.
Our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:
•make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation;
•limit our flexibility in planning for, or reacting to, changes in our business and our industry;
•place us at a disadvantage compared to our competitors who have less debt; and
•limit our ability to borrow additional amounts to fund acquisitions, for working capital and for other general corporate purposes.
Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. Also, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with any potential refinancing of our indebtedness. Downgrades in our credit rating could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.
Finally, in January 2021, we committed to a goal of maintaining our investment grade credit rating and indicated that we plan to return to historical leverage levels within 24 months. If we are unable to achieve these commitments, our ability to obtain additional financing or to re-finance our existing indebtedness in the future, and the terms of any such financing, could be adversely affected. To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial
condition and cash flows as described elsewhere in this “Risk Factors” section, it may also heighten these risks related to servicing our debt.
Our portfolios of liquid securities and other investments may lose value or become impaired.
Our investment portfolio consists of agency securities, corporate securities, money market funds, and government securities. Although we follow an established investment policy and seek to minimize the credit risk associated with investments by investing primarily in investment grade, highly liquid securities and by limiting exposure to any one issuer depending on credit quality, we cannot give assurances that the assets in our investment portfolio will not lose value, become impaired, or suffer from illiquidity.
Changes in our tax rates or our exposure to additional income tax liabilities could affect our operating results and financial condition.
Our future effective tax rates could be favorably or unfavorably affected by changes in the valuation of our deferred tax assets and liabilities, the geographic mix of our revenue, or by changes in tax laws, including changes to U.S. tax law proposed by the Biden administration or the current Congress, or their interpretation. Significant judgment is required in determining our worldwide provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by tax authorities, including the IRS. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance, however, that the outcomes from these continuous examinations will not have an adverse effect on our operating results and financial condition. Evolving or revised tax laws and regulations globally, including the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) and the 2019 Swiss Federal Act on Tax Reform and AHV Financing (“TRAF”), as well as any changes in the application or interpretation by the U.S. Treasury Department, the Swiss federal and cantonal authorities, and other U.S. federal and legislative bodies of these regulations may have an adverse effect on our business or on our results of operations.
GENERAL RISKS
We are exposed to fluctuations in foreign currency exchange rates, which could adversely affect our future operating results.
Our results of operations are subject to fluctuations in exchange rates, which could adversely affect our future revenue and overall operating results. In order to minimize volatility in earnings associated with fluctuations in the value of foreign currency relative to the U.S. dollar, we use financial instruments to hedge our exposure to foreign currencies as we deem appropriate for a portion of our expenses, which are denominated in the local currency of our foreign subsidiaries. We generally initiate our hedging of currency exchange risks one year in advance of anticipated foreign currency expenses for those currencies to which we have the greatest exposure. When the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from our hedging contracts. If the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond the one year timeframe for which we hedge our risk and there is no guarantee that we will accurately forecast the expenses we are hedging. Further, a substantial portion of our overseas assets and liabilities are denominated in local currencies. To protect against fluctuations in earnings caused by changes in currency exchange rates when remeasuring our balance sheet, we utilize foreign exchange forward contracts to hedge our exposure to this potential volatility. There is no assurance that our hedging strategies will be effective. In addition, as a result of entering into these contracts with counterparties who are unrelated to us, the risk of a counterparty default exists in fulfilling the hedge contract. Should there be a counterparty default, we could be unable to recover anticipated net gains from the transactions.
We are involved in litigation, investigations and regulatory inquiries and proceedings that could negatively affect us.
From time to time, we are involved in various legal, administrative and regulatory proceedings, claims, demands and investigations relating to our business, which may include claims with respect to commercial, product liability, intellectual property, cybersecurity, privacy, data protection, antitrust, breach of contract, employment, class action, whistleblower, mergers and acquisitions and other matters. In the ordinary course of business, we also receive inquiries from and have discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations. These matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Allegations made in the course of regulatory or legal proceedings may also harm our reputation, regardless of whether there is merit to such claims. Furthermore, because litigation and the outcome of regulatory proceedings are inherently unpredictable, our business, financial condition or operating results could be materially affected by an unfavorable resolution of one or more of these proceedings, claims, demands or investigations.
Refer to Note 10 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for a description of our legal proceedings and contingencies.
Our stock price could be volatile, particularly during times of economic uncertainty and volatility in domestic and international stock markets, and you could lose the value of your investment.
Our stock price has been volatile and has fluctuated significantly in the past. The trading price of our stock is likely to continue to be volatile and subject to fluctuations in the future. Your investment in our stock could lose some or all of its value. Some of the factors that could significantly affect the market price of our stock include:
•actual or anticipated variations in operating and financial results, including the failure to meet key operational metrics;
•analyst reports or recommendations;
•rumors, announcements, or press articles regarding our or our competitors’ operations, management, organization, financial condition, or financial statements;
•the Merger, the pendency of the Merger or our failure to complete the Merger; and
•other events or factors, many of which are beyond our control.
The stock market in general, The Nasdaq Global Select Market, and the market for software companies and technology companies in particular, have experienced extreme price and volume fluctuations. We believe that these fluctuations have often been unrelated or disproportionate to operating performance. These fluctuations may continue in the future and could materially and adversely affect the market price of our stock, regardless of operating performance.
Changes or modifications in financial accounting standards may have a material adverse impact on our reported results of operations or financial condition.
A change or modification in accounting policies can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New pronouncements and varying interpretations of existing pronouncements have occurred with frequency and may occur in the future. Changes to existing rules, or changes to the interpretations of existing rules, could lead to changes in our accounting practices, and such changes could materially adversely affect our reported financial results or the way we conduct our business.
Natural disasters, climate-related impacts, or other unanticipated catastrophes that result in a disruption of our operations could negatively impact our results of operations.
Our worldwide operations are dependent on our network infrastructure, internal technology systems and website. Significant portions of our computer equipment, intellectual property resources and personnel, including critical resources dedicated to research and development and administrative support functions are presently located at our corporate headquarters in Fort Lauderdale, Florida, an area of the country that is particularly prone to hurricanes, and at our various locations in California, an area of the country that is particularly prone to earthquakes and wildfires. We also have operations in various domestic and international locations that expose us to additional diverse risks. The occurrence of natural disasters, such as extreme weather, hurricanes, floods or earthquakes; pandemics, such as the COVID-19 pandemic; or other unanticipated catastrophes, such as telecommunications failures, cyberattacks, fires or terrorist attacks, at any of the locations in which we or our key partners, suppliers and customers do business, could cause interruptions in our operations. For example, hurricanes have passed through southern Florida causing extensive damage to the region. In addition, even in the absence of direct damage to our operations, large disasters, terrorist attacks, pandemics or other casualty events could have a significant impact on our partners’, suppliers’ and customers’ businesses, which in turn could result in a negative impact on our results of operations. Extensive or multiple disruptions in our operations, or our partners’, suppliers’ or customers’ businesses, due to natural disasters, pandemics, such as the COVID-19 pandemic, or other unanticipated catastrophes could have a material adverse effect on our results of operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
We lease and sublease office space in the Americas, which is comprised of the United States, Canada and Latin America, EMEA, which is comprised of Europe, the Middle East and Africa, and APJ, which is comprised of Asia-Pacific and Japan.
The following table presents the location and square footage of our leased office space as of December 31, 2021:
Square footage
Americas 1,013,312
EMEA 315,178
APJ 636,129
Total 1,964,619
In addition, we own land and buildings in Fort Lauderdale, Florida with approximately 320,000 square feet of office space used for our corporate headquarters and approximately 41,000 square feet of office space in Chalfont St. Peter, United Kingdom.
We believe that our existing facilities are adequate for our current needs. As additional space is needed in the future, we believe that suitable space will be available in the required locations on commercially reasonable terms.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
Information with respect to this item may be found in Note 10, “Commitments and Contingencies-Legal Matters” and Note 19, “Subsequent Events”, to our consolidated financial statements in Item 8 of Part II, which are incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Common Stock and Dividend Policy
Our common stock is currently traded on The Nasdaq Global Select Market under the symbol CTXS. As of February 7, 2022, there were 478 holders of record of our common stock.
We currently intend to retain any earnings for use in our business. On November 4, 2021, we announced that our Board of Directors approved a quarterly cash dividend of $0.37 per share which was paid on December 21, 2021 to all shareholders of record as of the close of business on December 7, 2021. The Merger Agreement provides that, until the closing of the Merger or the termination of the Merger Agreement, we may not declare, set aside or pay any dividends without the prior written consent of Parent.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
Our Board of Directors authorized a stock repurchase program, of which $1.00 billion was approved in January 2020. The objective of our stock repurchase program was to improve stockholders’ returns and mitigate earnings per share dilution posed by the issuance of shares related to employee equity compensation awards. At December 31, 2021, $625.6 million was available to repurchase common stock pursuant to the stock repurchase program. While the Merger Agreement is in effect, we are prohibited from repurchasing shares of our common stock, including under the stock repurchase program. All shares repurchased were recorded as treasury stock.
The following table shows the monthly activity related to our repurchases of common stock for the quarter ended December 31, 2021.
Total Number
of Shares
Purchased (1)
Average
Price Paid
per Share
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
Approximate dollar value of Shares that may yet be
Purchased under the
Plans or Programs
(in thousands)(2)
October 1, 2021 through October 31, 2021 53,154 $ 107.89 - $ 625,561
November 1, 2021 through November 30, 2021 13,980 $ 94.94 - $ 625,561
December 1, 2021 through December 31, 2021 41,427 $ 79.34 - $ 625,561
Total 108,561 $ 95.32 - $ 625,561
(1)The total number of shares purchased are shares withheld from restricted stock units that vested in the fourth quarter of 2021 to satisfy minimum tax withholding obligations that arose on the vesting of restricted stock units.
(2)Shares withheld from restricted stock units that vested to satisfy minimum tax withholding obligations that arose on the vesting of such awards do not deplete the dollar amount available for purchases under the repurchase program.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our operating results and financial condition have varied in the past and could in the future vary significantly depending on a number of factors. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See “Note Regarding Forward-Looking Statements” and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for a discussion of certain risks and uncertainties that may cause these differences.
Pending Merger
On January 31, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Picard Parent, Inc. (“Parent”), Picard Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub”) and, for certain limited purposes detailed in the Merger Agreement, TIBCO Software, Inc. (“TIBCO”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Sub were formed by affiliates of Vista Equity Partners (“Vista”). Vista is partnering with Evergreen Coast Capital Corp. (“Evergreen”), an affiliate of Elliott Investment Management L.P. (“Elliott”), to acquire all of the Company’s outstanding shares of common stock (the “Company Common Stock”) for $104.00 per share in cash. The Merger is expected to close mid-year 2022, subject to customary closing conditions, including approval of the Merger Agreement by the Company’s stockholders and receipt of regulatory approvals.
Overview
Citrix is an enterprise software company focused on helping organizations deliver a consistent and secure work experience no matter where work needs to get done - in the office, at home, or in the field. We do this by delivering a digital workspace solution that provides unified, reliable and secure access to all work resources (apps, content, etc.) and simplifies work execution and collaboration across every work channel, device, and location. Our Workspace solutions are complemented by our general work solutions, such as content collaboration and collaborative work management solutions, and our App Delivery and Security solutions, which deliver the applications and data employees need across any network with security, reliability and speed.
Executive Summary
On February 5, 2021, we entered into a term loan credit agreement (the “2021 Term Loan Credit Agreement”) that provided us with a facility to borrow a term loan (the “2021 Term Loan”) on an unsecured basis in an aggregate principal amount of up to $1.00 billion. We borrowed $1.00 billion on February 26, 2021 under the 2021 Term Loan, and the loan matures on February 26, 2024. The proceeds under the 2021 Term Loan were used to finance a portion of the aggregate cash consideration for the Wrike acquisition.
On February 18, 2021, we issued $750.0 million of unsecured senior notes due March 1, 2026 (the “2026 Notes”). The net proceeds from this offering were $741.4 million, after deducting the underwriting discount and estimated offering expenses payable by us. Net proceeds from this offering were used to fund a portion of the aggregate cash consideration for the Wrike acquisition.
On October 6, 2021, we announced that David J. Henshall stepped down as our President and Chief Executive Officer and as a member of the Board of Directors, and that Robert M. Calderoni, our Chairman, was appointed Interim Chief Executive Officer and President. Robert M. Calderoni will continue serving as Chairman of our Board of Directors.
On November 14, 2021, the Board of Directors approved a restructuring program (the “2021 Restructuring Program”) that included, among other things, the elimination of full-time positions, termination of certain contracts, and asset impairments, primarily related to facilities consolidations. We currently expect to record in the aggregate approximately $130.0 million to $240.0 million in pre-tax restructuring and asset impairment charges associated with the restructuring program. The 2021 Restructuring Program is expected to be substantially completed over an estimated eighteen-month period.
As described above, on January 31, 2022, we entered into a definitive Merger Agreement under which affiliates of Vista, a leading global investment firm focused exclusively on enterprise software, data and technology-enabled businesses, and Evergreen, an affiliate of Elliott that focuses on making investments exclusively in technology and technology-enabled services businesses, have agreed to acquire Citrix in an all-cash transaction valued at approximately $16.5 billion, including the assumption of Citrix debt. See Part I, Item 1A,“Risk Factors” for additional information.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic did not have a significant impact on our results of operations for the year ended December 31, 2021. However, we continue to monitor our supply chain for disruptions and evaluate steps to avoid future impacts that may arise from delays.
The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the severity of the disease and outbreak, the impact of new strains of the virus, the effectiveness and availability of existing or new vaccines, future and ongoing actions that may be taken by governmental authorities, including the implementation of vaccine mandates, the impact on the businesses of our customers and partners, and the length of its impact on the global economy, which remain uncertain and are difficult to predict at this time. We are conducting business with substantial modifications to employee travel, employee work locations, and virtualization or cancellation of certain sales and marketing events, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations as required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. The potential effects of any such alterations or modifications could have an impact on our business, including our customers and prospects, or on our financial results.
Cash from operations, accounts receivable and revenues could also be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part 1, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended December 31, 2021. While the pandemic has not materially impacted our liquidity and capital resources to date, it has led to increased disruption and volatility in capital markets and credit markets which could adversely affect our liquidity and capital resources in the future.
Summary of Results
For the year ended December 31, 2021 compared to the year ended December 31, 2020, we delivered the following financial performance:
•Total net revenue decreased 0.6% to $3.22 billion;
•Subscription revenue increased 39.4% to $1.55 billion;
•SaaS revenue increased 58.5% to $857.3 million;
•Product and license revenue decreased 61.5% to $171.2 million;
•Support and services revenue decreased 11.0% to $1.49 billion;
•Gross margin as a percentage of revenue decreased from 84.6% to 80.6%;
•Operating income decreased 61.1% to $236.6 million;
•Diluted net income per share decreased from $4.00 to $2.44; and
•Deferred and unbilled revenue increased $399.0 million to $3.34 billion.
Also, operating cash flows decreased $264.2 million to $671.7 million when comparing the year ended December 31, 2021 to the year ended December 31, 2020.
Our Subscription revenue increased primarily due to continued customer cloud adoption of our solutions delivered via the cloud, mostly from our Workspace offerings, and an increase in on-premise license demand. Our Product and license revenue decreased primarily due to lower sales of our perpetual Workspace solutions due to the decision to discontinue the broad availability of new perpetual licenses as of October 1, 2020. The decrease in Support and services revenue was primarily due to decreased sales of maintenance services, as more of our revenue is reported in the Subscription revenue line commensurate with our subscription model transition. The decrease in gross margin as a percentage of revenue was primarily driven by the end of sale of Workspace perpetual licenses that have historically had a higher gross margin than our Subscription and Application Delivery and Security offerings, as well as the Wrike acquisition. The decrease in operating income was primarily due to a decrease in gross margin and an increase in operating expenses, primarily due to the Wrike acquisition and restructuring activities. The decrease in diluted net income per share was primarily due to lower operating income and higher interest expense, partially offset by an income tax benefit.
2021 Business Combination
On February 26, 2021 (the “Closing Date”), we completed the acquisition of Wrangler Topco, LLC (“Wrangler”), the parent entity of Wrike, a leader in the SaaS collaborative work management space, for approximately $2.07 billion (the “Purchase Consideration”). The Purchase Consideration consists of a base purchase price of $2.25 billion and is subject to
certain adjustments as provided for under the related Agreement and Plan of Merger dated January 16, 2021 (the “Wrike Agreement”). The addition of Wrike’s cloud-delivered capabilities was intended to expand our collaborative work management capabilities. Under the Wrike Agreement, we acquired all of the issued and outstanding equity securities of Wrangler. Wrike revenue is included in our Workspace product grouping.
Under the terms of the Wrike Agreement, we assumed certain unvested stock options held by Wrike employees and converted them into options to purchase 526,113 shares of our common stock. Of these assumed awards, 180,003 options continued with the same monthly vesting conditions under which they were originally granted. The majority of the remaining assumed options were reset to primarily cliff vest on December 31, 2021 or annually over two years.
We incurred $19.8 million of expenses related to the Wrike acquisition, of which $16.5 million and $3.3 million were expensed during the years ended December 31, 2021 and 2020, respectively, and are included in General and administrative expense in the accompanying consolidated statements of income. We also integrated certain operating processes into our internal control environment during the year ended December 31, 2021.
See Note 6 to our consolidated financial statements for additional details regarding our acquisition of Wrike.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We base these estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.
We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve more significant judgments and estimates used in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. We have discussed the development, selection and application of our critical accounting policies with the Audit Committee of our Board of Directors and our independent auditors, and our Audit Committee has reviewed our disclosure relating to our critical accounting policies and estimates in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.
Revenue Recognition
We generate all of our revenues from contracts with customers. At contract inception, we assess the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluate whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue.
The standalone selling price is the price at which we would sell a promised product or service separately to the customer. For the majority of our software licenses and hardware, CSP and on-premise subscription software licenses, we use the observable price in transactions with multiple performance obligations. For the majority of our support and services, and cloud-hosted subscription offerings, we use the observable price when we sell that support and service and cloud-hosted subscription separately to similar customers. If the standalone selling price for a performance obligation is not directly observable, we estimate it. We estimate the standalone selling price by taking into consideration market conditions, economics of the offering and customers’ behavior. We maximize the use of observable inputs and apply estimation methods consistently in similar circumstances. We allocate the transaction price to each distinct performance obligation on a relative standalone selling price basis.
Revenues are recognized when control of the promised products or services are transferred to customers, in an amount that reflects the consideration that we expect to receive in exchange for those products or services. See Note 2 and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for further information on our revenue recognition.
Valuation and Classification of Investments
The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Our available-for-sale debt investments are measured to fair value on a recurring basis. In addition, we hold direct investments in privately-held companies which are accounted for at cost, less impairment plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or a similar investment of the same issuer. These investments are periodically reviewed for impairment and when indicators of impairment exist and are measured to fair value as appropriate on a non-recurring basis. We also hold equity interests in certain private equity funds which are accounted for under the net asset value practical expedient. The net asset value of these investments is determined using quarterly capital statements from the funds which are based on our contributions to the funds, allocation of profit and loss and changes in fair value of the underlying fund investments. In determining the fair value of our investments, we are sometimes required to use various alternative valuation techniques. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
The authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1, observable inputs such as quoted prices in active markets for identical assets or liabilities, Level 2, inputs, other than quoted prices in active markets, that are observable either directly or indirectly, and Level 3, unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. Observable inputs are those that market participants would use in pricing the asset or liability that are based on market data obtained from independent sources, such as market quoted prices. When Level 1 observable inputs for our investments are not available to determine their fair value, we must then use other inputs which may include indicative pricing for securities from the same issuer with similar terms, yield curve information, benchmark data, prepayment speeds and credit quality or unobservable inputs that reflect our estimates of the assumptions market participants would use in pricing the investments based on the best information available in the circumstances. When valuation techniques, other than those described as Level 1 are utilized, management must make estimations and judgments in determining the fair value for its investments. The degree to which management’s estimation and judgment is required is generally dependent upon the market pricing available for the investments, the availability of observable inputs, the frequency of trading in the investments and the investment’s complexity. If we make different judgments regarding unobservable inputs, we could potentially reach different conclusions regarding the fair value of our investments.
The allowance for credit losses on our investments in available-for-sale debt securities is determined using a quantitative discounted cash flow analysis if impairment triggers exist after a qualitative screen is completed. Impairment on available-for-sale debt securities is determined on an individual security basis and the security is subject to impairment when its fair value declines below its amortized cost basis. If the fair value is less than the amortized cost basis, management must then determine whether it intends to sell the security or whether it is more likely than not that it will be required to sell the security before it recovers its value. If we intend to sell the security or will more-likely-than-not be required to sell the impaired security before it recovers its value, a credit loss is recorded to Other income, net in the accompanying consolidated statements of income. If we do not intend to sell the security, nor will we more-likely-than-not be required to sell the security before the security recovers its value, we must then determine whether the loss is due to credit loss or other factors. For impairment indicators due to credit loss factors, we establish an allowance for credit losses with a charge to Other income, net. For impairment indicators due to other factors, we record the loss with a charge to Accumulated other comprehensive loss in the accompanying consolidated balance sheets.
See Notes 4 and 5 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for more information on our investments.
Intangible Assets
We have product related technology assets and other intangible assets from acquisitions and other third party agreements. We allocate the purchase price of intangible assets acquired through third party agreements based on their estimated relative fair values. We allocate a portion of the purchase price of acquired companies to the product related technology assets and other intangible assets acquired based on their estimated fair values. We typically engage third party appraisal firms to assist us in determining the fair values and useful lives of product related technology assets and other intangible assets acquired. Such valuations and useful life determinations require us to make significant estimates and assumptions. These estimates are based
on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in determining the fair value and useful lives of the product related technology assets include, but are not limited to, future expected cash flows earned from the product related technology and discount rates applied in determining the present value of those cash flows. Critical estimates in valuing certain other intangible assets include, but are not limited to, future expected cash flows from customer contracts, customer retention rates, customer lists, royalty rates, distribution agreements, patents, brand awareness and market position, as well as discount rates.
Management's estimates of fair value are based upon assumptions believed to be reasonable. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.
We monitor acquired intangible assets for impairment on a periodic basis by reviewing for indicators of impairment. If an indicator exists, we compare the estimated net realizable value to the carrying value of the intangible asset as of the reporting period. The recoverability of the intangible assets is primarily dependent upon our ability to commercialize solutions utilizing the acquired technologies, retain existing customers and customer contracts, and maintain brand awareness. The estimated net realizable value of the acquired intangible assets is based on the estimated undiscounted future cash flows derived from such intangible assets. Our assumptions about future revenues and expenses require significant judgment associated with the forecast of the performance of our solutions, customer retention rates and ability to secure and maintain our market position. Actual revenues and costs could vary significantly from these forecasted amounts. If these solutions are not ultimately accepted by our customers and distributors, and there is no alternative future use for the technology; or if we fail to retain acquired customers or successfully market acquired brands, we could determine that some or all of the remaining $760.3 million carrying value of our acquired intangible assets is impaired. In the event of impairment, we would record an impairment charge to earnings that could have a material adverse effect on our results of operations.
Goodwill
The excess of the fair value of the purchase price over the fair values of the identifiable assets and liabilities from our acquisitions is recorded as goodwill. At December 31, 2021, we had $3.40 billion in goodwill related to our acquisitions under one reportable unit. Our revenues are derived from sales of our Workspace solutions and App Delivery and Security products, and related support. See Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding our reportable segment.
We account for goodwill in accordance with the Financial Accounting Standards Board's authoritative guidance, which requires that goodwill and certain intangible assets are not amortized, but are subject to an annual impairment test. We complete our goodwill and certain intangible assets impairment tests on an annual basis, during the fourth quarter of our fiscal year, or more frequently, if changes in facts and circumstances indicate that an impairment in the value of goodwill and certain intangible assets recorded on our balance sheet may exist.
In the fourth quarter of 2021, we performed a qualitative assessment to determine whether further quantitative impairment testing for goodwill and certain intangible assets is necessary, and we refer to this assessment as the Qualitative Screen. In performing the Qualitative Screen, we are required to make assumptions and judgments including but not limited to the following: the evaluation of macroeconomic conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting unit and future opportunities in the markets in which it operates. If after performing the Qualitative Screen impairment indicators are present, we would perform a quantitative impairment test to estimate the fair value of goodwill and certain intangible assets. In doing so, we would estimate future revenue, consider market factors and estimate our future cash flows. Based on these key assumptions, judgments and estimates, we determine whether we need to record an impairment charge to reduce the value of the goodwill and certain intangible assets carried on our balance sheet to their estimated fair value. Assumptions, judgments and estimates about future values are complex and often subjective and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts. Although we believe the assumptions, judgments and estimates we have made have been reasonable and appropriate, different assumptions, judgments and estimates could materially affect our results of operations. As a result of the Qualitative Screen, no further quantitative impairment test was deemed necessary. There was no impairment of goodwill as a result of the annual impairment tests completed during the fourth quarters of 2021 and 2020.
Income Taxes
We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial statements. At December 31, 2021, we had $410.2 million in net deferred tax assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We review deferred
tax assets periodically for recoverability and make estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. At December 31, 2021, we determined that a $122.5 million valuation allowance relating to deferred tax assets for net operating losses and tax credits was necessary. If the estimates and assumptions used in our determination change in the future, we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust our provisions for additional income taxes.
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain; thus judgment is required in determining the worldwide provision for income taxes. We provide for income taxes on transactions based on our estimate of the probable liability. We adjust our provision as appropriate for changes that impact our underlying judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the realizability of our deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect our results of operations, financial condition or cash flows.
Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2021 compared to the year ended December 31, 2020. For a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 which was filed with the SEC on February 8, 2021.
The following table sets forth our consolidated statements of income data and presentation of that data as a percentage of change from year-to-year (in thousands other than percentages):
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
Revenues:
Subscription $ 1,553,775 $ 1,114,798 $ 650,810 39.4 % 71.3 %
Product and license 171,186 444,437 583,474 (61.5) (23.8)
Support and services 1,492,209 1,677,465 1,776,280 (11.0) (5.6)
Total net revenues 3,217,170 3,236,700 3,010,564 (0.6) 7.5
Cost of net revenues:
Cost of subscription, support and services 453,755 389,612 310,255 16.5 25.6
Cost of product and license revenues 79,927 76,152 102,452 5.0 (25.7)
Amortization and impairment of product related intangible assets 91,395 32,782 51,340 178.8 (36.1)
Total cost of net revenues 625,077 498,546 464,047 25.4 7.4
Gross profit 2,592,093 2,738,154 2,546,517 (5.3) 7.5
Operating expenses:
Research and development 581,600 538,080 518,877 8.1 3.7
Sales, marketing and services 1,194,657 1,224,377 1,132,956 (2.4) 8.1
General and administrative 409,630 352,109 320,429 16.3 9.9
Amortization of other intangible assets 66,263 2,799 15,890 * (82.4)
Restructuring 103,323 11,981 22,247 * (46.1)
Total operating expenses 2,355,473 2,129,346 2,010,399 10.6 5.9
Income from operations 236,620 608,808 536,118 (61.1) 13.6
Interest income 1,232 3,108 18,280 (60.4) (83.0)
Interest expense (91,793) (64,687) (45,974) 41.9 40.7
Other income, net 21,088 7,651 1,076 * *
Income before income taxes 167,147 554,880 509,500 (69.9) 8.9
Income tax (benefit) expense (140,352) 50,434 (172,313) * *
Net income $ 307,499 $ 504,446 $ 681,813 (39.0) % (26.0) %
* Not meaningful
Revenues
Net revenues include Subscription, Product and license and Support and services revenues.
Subscription revenue relates to fees for SaaS, which are generally recognized ratably over the contractual term, and non-SaaS, which are generally recognized at a point in time. SaaS primarily consists of subscriptions delivered via a cloud-hosted service whereby the customer does not take possession of the software, hybrid subscription offerings and the related support. Non-SaaS consists primarily of on-premise licensing, hybrid subscription offerings, CSP services and the related support. Our hybrid subscription offerings are allocated between SaaS and non-SaaS. In addition, our CSP program provides subscription-based services in which the CSP partners host software services to their end users. The fees from the CSP program are recognized based on usage and as the CSP services are provided to their end users.
Product and license revenue represents fees related to the perpetual licensing of our solutions, primarily our App Delivery and Security products, which are recognized at a point in time. In October 2020, we discontinued broad availability of perpetual licenses for Citrix Workspace.
We offer incentive programs to our VADs and VARs to stimulate demand for our solutions. Product and license and Subscription revenues associated with these programs are partially offset by these incentives to our VADs and VARs.
Support and services revenue consists of maintenance and support fees primarily related to our perpetual offerings and include the following:
•Customer Success Services, which gives customers a choice of tiered support offerings that combine the elements of technical support, product version upgrades, guidance, enablement and proactive monitoring to help our customers and our partners fully realize their business goals. Fees associated with this offering are recognized ratably over the term of the contract; and
•Hardware Maintenance fees for our perpetual App Delivery and Security products, which include technical support and hardware and software maintenance, are recognized ratably over the contract term; and
•Fees from consulting services related to the implementation of our solutions, which are recognized as the services are provided; and
•Fees from product training and certification, which are recognized as the services are provided.
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Revenues:
Subscription $ 1,553,775 $ 1,114,798 $ 650,810 $ 438,977 $ 463,988
Product and license 171,186 444,437 583,474 (273,251) (139,037)
Support and services 1,492,209 1,677,465 1,776,280 (185,256) (98,815)
Total net revenues $ 3,217,170 $ 3,236,700 $ 3,010,564 $ (19,530) $ 226,136
Subscription
Subscription revenue increased during 2021 compared to 2020 primarily due to continued customer adoption of our solutions delivered via the cloud of $316.5 million, primarily from our Workspace offerings, which include the Wrike acquisition. There was also an increase in on-premise subscription license revenue of $122.4 million, comprised of increases in revenue from our Workspace offerings of $71.6 million, and our App Delivery and Security offerings of $50.8 million.
Product and license
Product and license revenue decreased during 2021 when compared to 2020 primarily due to lower sales of our perpetual Workspace solutions as a result of our decision to discontinue the broad availability of new perpetual licenses for Citrix Workspace beginning October 1, 2020.
Support and services
Support and services revenue decreased when comparing 2021 to 2020 primarily due to a decrease in sales of maintenance services across our Workspace perpetual offerings of $128.3 million and App Delivery and Security perpetual offerings of $39.9 million, as more of the revenue is reported in the Subscription revenue line commensurate with our subscription model transition.
Deferred Revenue, Unbilled Revenue and Backlog
Deferred revenue is primarily comprised of Support and services revenue from maintenance fees, which include software and hardware maintenance, technical support related to our perpetual offerings and services revenue related to our consulting contracts. Deferred revenue also includes Subscription revenue from our cloud-based subscription offerings and our on-premise subscription offerings.
Deferred revenue consists of billings or payments received in advance of revenue recognition and is recognized in our consolidated balance sheets and statements of income as the revenue recognition criteria are met. Unbilled revenue primarily represents future billings under our subscription agreements that have not been invoiced and, accordingly, are not recorded in accounts receivable or deferred revenue within our consolidated financial statements. Deferred revenue and unbilled revenue are influenced by several factors, including new business seasonality within the year, the specific timing, size and duration of customer subscription agreements, annual billing cycles of subscription agreements, and invoice timing. Fluctuations in unbilled revenue may not be a reliable indicator of future performance and the related revenue associated with these contractual commitments.
The following table presents the amounts of deferred and unbilled revenue (in thousands):
December 31, 2021 December 31, 2020 2021 vs. 2020
Deferred revenue $ 2,037,593 $ 1,902,576 $ 135,017
Unbilled revenue 1,300,048 1,036,072 263,976
Deferred revenues increased approximately $135.0 million as of December 31, 2021 compared to December 31, 2020 primarily due to an increase in deferred subscription revenue of $382.4 million, which includes the Wrike acquisition, partially offset by a decrease in deferred maintenance and support revenue of $251.6 million, mostly from Workspace perpetual software maintenance. Unbilled revenue as of December 31, 2021 increased $264.0 million from December 31, 2020 primarily due to increased customer adoption of multi-year subscription agreements.
While it is generally our practice to promptly ship our products upon receipt of properly finalized orders, at any given time, we have confirmed product license orders that have not shipped and are wholly unfulfilled. Backlog includes the aggregate amounts we expect to recognize as point in time revenue in the following quarter associated with contractually committed amounts for on-premise subscription software licenses, as well as confirmed product license orders that have not shipped and are wholly unfulfilled. As of December 31, 2021 and 2020, the amount of backlog was not material. We do not believe that backlog, as of any particular date, is a reliable indicator of future performance.
International Revenues
International revenues (sales outside the United States) accounted for 49.7% and 50.5% of our net revenues for the years ended December 31, 2021 and 2020, respectively. The change in our international revenues as a percentage of our net revenues for the year ended December 31, 2021 as compared to the year ended December 31, 2020 was not significant. For detailed information on international revenues, please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Cost of Net Revenues
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Cost of subscription, support and services $ 453,755 $ 389,612 $ 310,255 $ 64,143 $ 79,357
Cost of product and license revenues 79,927 76,152 102,452 3,775 (26,300)
Amortization and impairment of product related intangible assets 91,395 32,782 51,340 58,613 (18,558)
Total cost of net revenues $ 625,077 $ 498,546 $ 464,047 $ 126,531 $ 34,499
Cost of subscription, support and services revenues consists primarily of compensation and other personnel-related costs of providing technical support, consulting and cloud capacity costs, as well as the costs related to providing our offerings delivered via the cloud and hardware costs related to certain on-premise subscription offerings. Cost of product and license revenues consists primarily of hardware, shipping expense, royalties, product media and duplication, manuals and packaging materials. Also included in cost of net revenues is amortization and impairment of product related intangible assets.
Cost of subscription, support and services revenues increased during 2021 when compared to 2020 primarily due to higher costs of providing our offerings delivered via the cloud, which include the Wrike acquisition.
Cost of product and license revenues increased during 2021 when compared to 2020 primarily due to higher costs related to our App Delivery and Security perpetual products, which contain hardware components that have a higher cost than our software products.
Amortization and impairment of product related intangible assets increased during 2021 as compared to 2020 primarily due to acquired intangibles in connection with the Wrike acquisition of $49.1 million and the impairment of Sapho Inc. technology of $19.4 million in 2021, partially offset by decreases due to fully amortized developed technology intangible assets of $10.3 million.
For more information regarding our intangible asset impairments and Wrike acquired intangible assets, see Notes 2 and 6, respectively, to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Gross Margin
Gross margin as a percent of revenue was 80.6% for 2021 and 84.6% for 2020. The change in gross margin as a percent of revenue was primarily driven by the end of sale of Workspace perpetual licenses as of October 1, 2020 that have historically had a higher gross margin than our Subscription and Application Delivery and Security offerings, as well as the Wrike acquisition.
Operating Expenses
Foreign Currency Impact on Operating Expenses
The functional currency for all of our wholly-owned foreign subsidiaries is the U.S. dollar. A substantial majority of our overseas operating expenses and capital purchasing activities are transacted in local currencies and are therefore subject to fluctuations in foreign currency exchange rates. In order to minimize the impact on our operating results, we generally initiate our hedging of currency exchange risks up to 12 months in advance of anticipated foreign currency expenses. Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from our hedging contracts. Conversely, if the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond the time frame for which we hedge our risk.
Research and Development Expenses
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Research and development $ 581,600 $ 538,080 $ 518,877 $ 43,520 $ 19,203
Research and development expenses consist primarily of personnel related costs and facility and equipment costs directly related to our research and development activities. We expensed substantially all development costs included in the research and development of our products.
Research and development expenses increased during 2021 as compared to 2020 primarily due to increases in compensation and other employee-related costs of $26.5 million as a result of higher headcount, in part due to the Wrike acquisition, stock-based compensation of $7.1 million and an increase in professional services fees of $5.7 million.
Sales, Marketing and Services Expenses
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Sales, marketing and services $ 1,194,657 $ 1,224,377 $ 1,132,956 $ (29,720) $ 91,421
Sales, marketing and services expenses consist primarily of personnel related costs, including sales commissions, pre-sales support, the costs of marketing programs aimed at increasing revenue, such as brand development, advertising, trade shows, public relations and other market development programs and costs related to our facilities, equipment, information systems and pre-sale demonstration related cloud capacity costs that are directly related to our sales, marketing and services activities.
Sales, marketing and services expenses decreased during 2021 compared to 2020 primarily due to a decrease in variable compensation of $70.6 million, as the comparative period included higher amounts driven by demand of limited-use licenses. This decrease was partially offset by increases in marketing programs of $23.0 million, related to higher demand generation costs, professional services fees of $12.8 million, and compensation and other employee-related costs of $7.9 million.
General and Administrative Expenses
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
General and administrative $ 409,630 $ 352,109 $ 320,429 $ 57,521 $ 31,680
General and administrative expenses consist primarily of personnel related costs and expenses related to outside consultants assisting with information systems, as well as accounting and legal fees.
General and administrative expenses increased during 2021 compared to 2020 primarily due to increases in stock-based compensation of $22.9 million, transaction costs related to the Wrike acquisition of $13.2 million, and professional services fees of $12.3 million.
Amortization of Other Intangible Assets
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Amortization of other intangible assets $ 66,263 $ 2,799 $ 15,890 $ 63,464 $ (13,091)
Amortization of other intangible assets consists of amortization of customer relationships, trade names and covenants not to compete primarily related to our acquisitions.
The increase in Amortization of other intangible assets when comparing 2021 to 2020 was primarily due to acquired intangible assets in connection with the Wrike acquisition.
For more information regarding our Wrike acquired intangible assets, see Note 6 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Restructuring Expenses
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Restructuring $ 103,323 $ 11,981 $ 22,247 $ 91,342 $ (10,266)
Restructuring expenses increased during 2021 compared to 2020, primarily due to the 2021 Restructuring Program, which resulted in increases in employee severance and related costs of $63.9 million and right-of-use asset impairments of $12.0 million. Also contributing to the increase are other asset impairments of $15.4 million in 2021.
For more information regarding restructuring programs, see Note 17 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Interest income
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Interest income $ 1,232 $ 3,108 $ 18,280 $ (1,876) $ (15,172)
Interest income primarily consists of interest earned on our cash, cash equivalents and investment balances. The change in interest income during 2021 as compared to 2020 was not significant. For more information regarding our investments, see Note 5 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Interest Expense
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Interest expense $ (91,793) $ (64,687) $ (45,974) $ (27,106) $ (18,713)
Interest expense primarily consists of interest paid on our 2026 Notes, 2027 Notes and 2030 Notes, 2021 Term Loan Credit Agreement, Term Loan Credit Agreement and our credit facility. When comparing 2021 and 2020, the increase is primarily due to the debt incurred in connection with the Wrike acquisition.
For more information regarding our debt, see Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Other income, net
Year Ended December 31, 2021 vs. 2020 2020 vs. 2019
2021 2020 2019
(In thousands)
Other income, net $ 21,088 $ 7,651 $ 1,076 $ 13,437 $ 6,575
Other income, net is primarily comprised of gains (losses) from remeasurement of foreign currency transactions and non-designated hedges, sublease income, realized losses related to changes in the fair value of our investments that have a decline in fair value and recognized gains (losses) related to our investments.
The change in Other income, net when comparing 2021 to 2020 is primarily due to recognized gains on our strategic investments of $16.9 million, partially offset by losses from remeasurement of foreign currency transactions of $5.3 million.
Income Taxes
We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial statements. We maintain certain strategic management and operational activities in overseas subsidiaries and our foreign earnings are taxed at rates that are generally lower than in the United States.
Our effective tax rate generally differs from the U.S. federal statutory rate primarily due to tax credits and lower tax rates on earnings generated by our foreign operations that are taxed primarily in Switzerland.
Our effective tax rate was approximately (84.0)% for the year ended December 31, 2021 and 9.1% for the year ended December 31, 2020. The decrease in the effective tax rate when comparing the year ended December 31, 2021 to the year ended December 31, 2020, was primarily due to an income tax benefit of $120.4 million due to final rulings issued by the Swiss taxing authorities that provided revised guidance related to certain provisions of the Federal Act on Tax Reform and AHV Financing (“TRAF”).
We are subject to tax in the U.S. and in multiple foreign tax jurisdictions. Our U.S. liquidity needs are currently satisfied using cash flows generated from our U.S. operations, borrowings, or both. We also utilize a variety of tax planning strategies in an effort to ensure that our worldwide cash is available in locations in which it is needed. We expect to repatriate a substantial portion of our foreign earnings over time, to the extent that the foreign earnings are not restricted by local laws or result in significant incremental costs associated with repatriating the foreign earnings. See Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for income tax information.
Liquidity and Capital Resources
Cash, Cash Equivalents and Investments
December 31, 2021 vs. 2020
2021 2020
(In thousands)
Cash, cash equivalents and investments $ 541,933 $ 891,373 $ (349,440)
Our principal sources of liquidity are our cash, cash equivalents and investments. The decrease in cash, cash equivalents and investments at December 31, 2021 as compared to December 31, 2020, is primarily due to cash paid for the Wrike acquisition, net of cash acquired of $2.02 billion, repayment of Wrike acquired debt of $190.0 million, cash dividends paid on our common stock of $183.8 million, repayment on the Term Loan Credit Agreement of $150.0 million, cash paid for tax withholding on vested stock awards of $115.5 million and cash paid for the purchase of property and equipment of $83.4 million, partially offset by cash received from debt offerings of $1.74 billion and cash provided by operating activities of $671.7 million.
As of December 31, 2021, $327.9 million of the $541.9 million of cash, cash equivalents and investments was held by our foreign subsidiaries. The cash, cash equivalents and investments held by our foreign subsidiaries can be repatriated without incurring any additional U.S. federal tax. Upon repatriation of these funds, we could be subject to foreign and U.S. state income taxes. The amount of taxes due is dependent on the amount and manner of the repatriation, as well as the locations from which the funds are repatriated and received. We generally invest our cash and cash equivalents in investment grade, highly liquid securities to allow for flexibility in the event of immediate cash needs. Our short-term and long-term investments primarily consist of interest-bearing securities.
Cash Flow Activities
During 2021, we generated operating cash flows of $671.7 million. These operating cash flows related primarily to net income of $307.5 million, adjusted for, among other things, non-cash charges, including depreciation and amortization expenses of $347.0 million and stock-based compensation expense of $346.8 million. Partially offsetting these changes was a change in operating assets and liabilities, net of effects of acquisitions of $216.4 million and a deferred income tax benefit of $160.8 million. The change in our operating assets and liabilities, net of effects of acquisitions was primarily the result of outflows from accrued expenses and other current liabilities of $127.8 million, mostly from net decreases in employee-related accruals of $76.2 million and payments on leases of $59.7 million. Also contributing to the change in operating assets and liabilities, net of effects of acquisitions were outflows from other assets of $105.5 million, primarily due to an increase in capitalized commissions, and income taxes, net of $68.2 million, mostly due to decreases in income taxes payable of $32.7 million and increases in prepaid taxes of $29.8 million. These outflows were partially offset by an inflow from deferred revenue of $101.8 million and an inflow from accounts payable of $64.2 million due to the timing of payments. Our investing activities used $2.00 billion of cash consisting primarily of cash paid for the Wrike acquisition, net of cash acquired of $2.02 billion and cash paid for the purchase of property and equipment of $83.4 million, partially offset by net proceeds from investments of $118.3 million. Our financing activities provided cash of $1.09 billion, primarily consisting of net proceeds from the 2021 Term Loan of $997.9 million and 2026 Notes of $741.4 million, partially offset by repayment of Wrike acquired debt of $190.0 million, cash dividends paid on our common stock of $183.8 million, repayment on the Term Loan Credit Agreement of $150.0 million, and cash paid for tax withholding on vested stock awards of $115.5 million.
During 2020, we generated operating cash flows of $935.8 million. These operating cash flows related primarily to net income of $504.4 million, adjusted for, among other things, non-cash charges, including stock-based compensation expense of $307.7 million and depreciation and amortization expenses of $207.9 million. Partially offsetting these changes was change in
operating assets and liabilities, net of effects of acquisitions of $88.7 million. The change in our net operating assets and liabilities, net of effects of acquisitions was primarily a result of an outflow in accounts receivable of $151.8 million mostly due to an increase in sales, an outflow in other assets of $119.8 million mostly due to an increase in capitalized commissions from higher subscription sales and an outflow from income taxes, net of $51.5 million. These outflows were partially offset by an inflow in accrued expenses of $161.5 million, primarily due to increases in employee-related accruals and an inflow in deferred revenue of $106.8 million. Our investing activities used $138.3 million of cash consisting primarily of net purchases of investments of $88.3 million and cash paid for the purchase of property and equipment of $41.4 million. Our financing activities used cash of $595.2 million, primarily for stock repurchases of $1.29 billion, cash dividends paid on our common stock of $172.0 million and cash paid for tax withholding on vested stock awards of $121.7 million. These outflows are partially offset by net proceeds from the issuance of our 2030 Notes of $738.1 million and net borrowings from our Term Loan Credit Agreement of $248.8 million.
Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to continue in 2022. Our 2022 operating cash flows could be impacted due to incremental cash outlays related to the 2021 Restructuring Program and expected transaction costs related to the pending Merger. We believe that our existing cash and investments together with cash flows expected from operations will be sufficient to meet expected operating and capital expenditure requirements and service our debt obligations for the next 12 months.
Term Loan Credit Agreements
On February 5, 2021, we entered into the 2021 Term Loan Credit Agreement, consisting of a $1.00 billion 2021 Term Loan. We borrowed $1.00 billion on February 26, 2021 under the 2021 Term Loan, and the loan matures on February 25, 2024. The proceeds under the 2021 Term Loan were used to finance a portion of the purchase price for the Wrike acquisition.
On January 21, 2020, we entered into a $1.00 billion Term Loan Credit Agreement, consisting of a $500.0 million 364-day Term Loan facility (the “364-day Term Loan”), and a $500.0 million 3-year Term Loan facility (the “3-year Term Loan”). During the year ended December 31, 2020, we used borrowings from the Term Loan Credit Agreement to enter into an aggregate $1.00 billion accelerated share repurchase program. During the year ended December 31, 2021, we repaid $150.0 million under the 3-year Term Loan. As of December 31, 2021, $100.0 million was outstanding under the 3-year Term Loan.
Senior Notes
On February 18, 2021, we issued $750.0 million of unsecured senior notes, or the 2026 Notes. The 2026 Notes accrue interest at a rate of 1.250% per annum, which is due semi-annually on March 1 and September 1 of each year beginning on September 1, 2021. The net proceeds from this offering were $741.4 million. During the year ended December 31, 2021, we used the net proceeds from the 2026 Notes to fund a portion of the purchase price for the Wrike acquisition.
On February 25, 2020, we issued $750.0 million of unsecured senior notes due March 1, 2030 (the “2030 Notes”). The 2030 Notes accrue interest at a rate of 3.300% per annum, which is due semi-annually on March 1 and September 1 of each year. The net proceeds from this offering were $738.1 million.
During the year ended December 31, 2020, we used the net proceeds from the 2030 Notes and cash to repay $500.0 million under the 364-day Term Loan and $250.0 million under the 3-year Term Loan.
On November 15, 2017, we issued $750.0 million of unsecured senior notes due December 1, 2027 (the “2027 Notes”). The 2027 Notes accrue interest at a rate of 4.500% per annum, which is due semi-annually on June 1 and December 1 of each year.
Credit Facility
On November 26, 2019, we entered into a $250.0 million five-year unsecured revolving credit facility under an amended and restated credit agreement (the “Credit Agreement”). We may elect to increase the revolving credit facility by up to $250.0 million if existing or new lenders provide additional revolving commitments in accordance with the terms of the Credit Agreement. As of December 31, 2021, no amounts were outstanding under the credit facility.
Bridge Facility and Take-Out Facility Commitment Letter
On January 16, 2021, we entered into a bridge facility and take-out facility commitment letter (the “Commitment Letter”) pursuant to which JPMorgan Chase Bank, N.A. (1) committed to provide a senior unsecured 364-day term loan facility in an aggregate principal amount of $1.45 billion to finance the cash consideration for the Wrike acquisition in the event that the
permanent debt financing was not available on or prior to the Closing Date and (2) agreed to use commercially reasonable efforts to assemble a syndicate of lenders to provide the necessary commitments for the senior term loan facility. The commitments under the Commitment Letter were permanently reduced to zero on February 18, 2021, as a result of (i) the effectiveness of the 2021 Term Loan Credit Agreement and (ii) the completion of the issuance of the 2026 Notes.
See Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for additional details regarding our debt.
Stock Repurchase Program
Our Board of Directors authorized a stock repurchase program, of which $1.00 billion was approved in January 2020. The objective of the stock repurchase program was to improve stockholders’ returns and mitigate earnings per share dilution posed by the issuance of shares related to employee equity compensation awards. At December 31, 2021, $625.6 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased were recorded as treasury stock.
During the year ended December 31, 2021, we did not have any open market purchases under the stock repurchase program. While the Merger Agreement is in effect, we are prohibited from repurchasing shares of our common stock, including under the stock repurchase program.
See Note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for additional details on our share repurchase program.
Shares for Tax Withholding
During the year ended December 31, 2021, we withheld 870,057 shares from equity awards that vested, totaling $115.5 million to satisfy minimum tax withholding obligations that arose on the vesting of such equity awards. These shares are reflected as treasury stock in our consolidated balance sheet included in this Annual Report on Form 10-K for the year ended December 31, 2021 and the related cash outlays do not reduce our total stock repurchase authority.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
The following table summarizes our significant contractual obligations at December 31, 2021 and the future periods in which such obligations are expected to be settled in cash. Additional details regarding these obligations are provided in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 (in thousands):
Payments due by period
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Operating lease obligations(1)
$ 244,199 $ 64,014 $ 104,186 $ 55,472 $ 20,527
Total long-term debt(2)
3,350,000 - 1,100,000 750,000 1,500,000
Purchase obligations(3)
975,082 107,973 52,904 - 814,205
Transition tax payable(4)
232,086 27,304 119,456 85,326 -
Total contractual obligations(5)
$ 4,801,367 $ 199,291 $ 1,376,546 $ 890,798 $ 2,334,732
(1)The amount above represents the value of our operating lease obligations. See Note 18 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
(2)The amount above represents the balances to be repaid under our senior notes and term loan credit agreements. See Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
(3)Purchase obligations represent non-cancelable commitments to purchase inventory ordered as of December 31, 2021 and contingent obligations to purchase inventory. It also includes a remaining purchase commitments for our use of certain cloud services with third-party providers. See Note 10 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
(4)Represents transition tax payable on deemed repatriation of deferred foreign income incurred as a result of the 2017 Tax Act.
(5)Total contractual obligations do not include agreements where our commitment is variable in nature or where cancellations without payment provisions exist and excludes $103.5 million of liabilities related to uncertain tax positions recorded in accordance with authoritative guidance, because we could not make reasonably reliable estimates of the period or amount of cash settlement with the respective taxing authorities. See Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
As of December 31, 2021, we did not have any individually material finance lease obligations or other material long-term commitments reflected on our consolidated balance sheets.
We do not have any special purpose entities or off-balance sheet financing arrangements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. The analysis methods we used to assess and mitigate risk discussed below should not be considered projections of future events, gains or losses.
We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates that could adversely affect our results of operations or financial condition. To mitigate foreign currency risk, we utilize derivative financial instruments. The counterparties to our derivative instruments are major financial institutions. All of the potential changes noted below are based on sensitivity analyses performed on our financial position as of December 31, 2021. Actual results could differ materially.
Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 14 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.
Exposure to Exchange Rates
A substantial majority of our overseas expense and capital purchasing activities are transacted in local currencies, including Euros, British pounds sterling, Japanese yen, Australian dollars, Swiss francs, Indian rupees, Hong Kong dollars, Canadian dollars, Singapore dollars and Chinese yuan renminbi. To reduce the volatility of future cash flows caused by changes in currency exchange rates, we have established a hedging program. We use foreign currency forward contracts to hedge certain forecasted foreign currency expenditures. Our hedging program significantly reduces, but does not entirely eliminate, the impact of currency exchange rate movements.
At December 31, 2021 and 2020, we had in place foreign currency forward sale contracts with a notional amount of $387.7 million and $317.9 million, respectively, and foreign currency forward purchase contracts with a notional amount of $129.1 million and $149.7 million, respectively. At December 31, 2021, these contracts had an aggregate fair value liability of $0.8 million and at December 31, 2020, these contracts had an aggregate fair value asset of $2.6 million. Based on a hypothetical 10% appreciation of the U.S. dollar from December 31, 2021 market rates, the fair value of our foreign currency forward contracts would increase by $26.0 million. Conversely, a hypothetical 10% depreciation of the U.S. dollar from December 31, 2021 market rates would decrease the fair value of our foreign currency forward contracts by $26.0 million. In these hypothetical movements, foreign operating costs would move in the opposite direction. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates quantified above, changes in exchange rates could also change the dollar value of sales and affect the volume of sales as the prices of our competitors’ products become more or less attractive. We do not anticipate any material adverse impact to our consolidated financial position, results of operations, or cash flows as a result of these foreign exchange forward contracts.
Exposure to Interest Rates
We have interest rate exposures resulting from our interest-based available-for-sale investments. We maintain available-for-sale investments in debt securities and we limit the amount of credit exposure to any one issuer or type of instrument. The securities in our investment portfolio are not leveraged. The securities classified as available-for-sale are subject to interest rate risk. The modeling technique used measures the change in fair values arising from an immediate hypothetical shift in market interest rates and assumes that ending fair values include principal plus accrued interest and reinvestment income. If market interest rates were to increase by 100 basis points from December 31, 2021 and 2020 levels, the fair value of the available-for-sale portfolio would decline by approximately $0.3 million and $0.6 million, respectively. If market interest rates were to decrease by 100 basis points from December 31, 2021 and 2020 levels, the fair value of the available-for-sale portfolio would increase by approximately $0.2 million for both periods. These amounts are determined by considering the impact of the hypothetical interest rate movements on our available-for-sale investment portfolios. This analysis does not consider the effect of credit risk as a result of the changes in overall economic activity that could exist in such an environment.
We are also exposed to the impact of changes in interest rates as they affect our Term Loan Credit Agreement and the 2021 Term Loan Credit Agreement, both of which bear interest at a rate equal to either a customary base rate formula plus an applicable margin or LIBOR plus an applicable margin. As of December 31, 2021, we had $100.0 million outstanding under the Term Loan Credit Agreement and $1.00 billion outstanding under the 2021 Term Loan Credit Agreement. Because interest rates applicable to the Term Loan Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affects our interest expense. A hypothetical increase of 100 basis points in interest rates would result in an increase in interest expense of $11.0 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, together with the report of independent registered public accounting firm, appear at pages through of this Annual Report on Form 10-K for the year ended December 31, 2021 and are incorporated by reference into this item 8.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2021, our management, with the participation of our Interim Chief Executive Officer and President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Interim Chief Executive Officer and President and our Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Interim Chief Executive Officer and President and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the three months ended December 31, 2021, except for the acquisition of Wrike described below, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On February 26, 2021, we completed the acquisition of Wrike. Pursuant to the Securities and Exchange Commission's guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at December 31, 2021 does not include Wrike. We are finalizing our evaluation and implementation of our internal control structure over Wrike operations, which we expect to be completed during fiscal year 2022; however, we do not anticipate implementation will materially affect our internal controls over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. As permitted by SEC guidance for newly acquired businesses, management’s assessment of our internal control over financial reporting did not include an assessment of internal control over financial reporting of Wrike. Wrike accounted for approximately 1% of total assets as of December 31, 2021 and approximately 3% of revenues for the year ended on December 31, 2021. These percentages were derived using amounts related to Wrike that have not yet been integrated into our internal control environment as of December 31, 2021. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, or the COSO criteria. Based on our assessment we believe that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears below.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Citrix Systems, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Citrix Systems, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Citrix Systems, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Wrike, Inc. and its subsidiaries, which is included in the 2021 consolidated financial statements of the Company and constituted 1% of total assets as of December 31, 2021 and 3% of revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Wrike, Inc. and its subsidiaries.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 16, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boca Raton, Florida
February 16, 2022

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A filed with the Securities and Exchange Commission with respect to any 2022 annual meeting of shareholders that is held.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A filed with the Securities and Exchange Commission with respect to any 2022 annual meeting of shareholders that is held.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A filed with the Securities and Exchange Commission with respect to any 2022 annual meeting of shareholders that is held.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A filed with the Securities and Exchange Commission with respect to any 2022 annual meeting of shareholders that is held.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A filed with the Securities and Exchange Commission with respect to any 2022 annual meeting of shareholders that is held.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)1. Consolidated Financial Statements.
For a list of the consolidated financial information included herein, see page.
2. Financial Statement Schedules.
All other schedules have been omitted as the required information is not applicable or the information is presented in the Consolidated Financial Statements or notes thereto under Item 8. The following consolidated financial statement schedule is included herein:
Valuation and Qualifying Accounts
3. List of Exhibits.
Exhibit No. Description
2.1** Separation and Distribution Agreement, dated as of July 26, 2016, by and among Citrix Systems, Inc., GetGo, Inc. and LogMeIn, Inc. (incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on July 28, 2016)
2.2** Amended and Restated Tax Matters Agreement, dated as of September 13, 2016, by and among LogMeIn, Inc., Citrix Systems, Inc. and GetGo, Inc. (incorporated herein by reference to Exhibit 2.3 to the Company’s Annual Report on Form 10-K filed on February 16, 2017)
2.3** Agreement and Plan of Merger, dated as of January 16, 2021, by and among Citrix Systems, Inc., Wallaby Merger Sub, LLC, Wrangler Topco, LLC and Vista Equity Partners Management, LLC, as the representative (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 19, 2021)
2.4** Agreement and Plan of Merger, dated January 31, 2022, by and among Citrix Systems, Inc., Picard Parent, Inc., Picard Merger Sub, Inc. and TIBCO Software, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 31, 2022)
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 29, 2013)
3.2 Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 12, 2018)
4.1 Specimen certificate representing Common Stock (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 33-98542), as amended) (P)
4.2 Indenture, dated as of November 15, 2017, between Citrix Systems, Inc. and Wilmington Trust, National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 15, 2017)
4.3 Supplemental Indenture, dated as of November 15, 2017, between the Company and Wilmington Trust, National Association, as Trustee (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on November 15, 2017)
4.4 Form of 4.500% Senior Notes due 2027 (included in Exhibit 4.3)
4.5 Second Supplemental Indenture dated as of February 25, 2020 between Citrix Systems, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 25, 2020)
4.6 Form of 3.300% Senior Note due 2030 (included in Exhibit 4.5)
4.7 Third Supplemental Indenture dated as of February 18, 2021 between Citrix Systems, Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 18, 2021)
4.8 Form of 1.250% Senior Note due 2026 (included in Exhibit 4.7)
4.9 Description of Securities (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K filed on February 14, 2020)
10.1* Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 5, 2010)
10.2* First Amendment to Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 28, 2010)
10.3* Second Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 2, 2011)
10.4* Third Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 2, 2011)
10.5* Fourth Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 31, 2012)
10.6* Fifth Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2013)
10.7* Sixth Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 29, 2013)
10.8* Form of Restricted Stock Unit Agreement For Non-Employee Directors under the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2011)
10.9* Form of Long Term Incentive Agreement under the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed on February 19, 2015)
10.10* Citrix Systems, Inc. Executive Bonus Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed on February 20, 2014)
10.11* Citrix Systems, Inc. Second Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 5, 2020)
10.12* 2015 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-Q filed on August 7, 2015)
10.13* Amendment to 2015 Employee Stock Purchase Plan, dated October 27, 2016 (incorporated herein by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed on February 16, 2017)
10.14* Amendment to Citrix Systems, Inc. 2015 Employee Stock Purchase Plan, dated December 10, 2018 (incorporated by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K filed on February 15, 2019)
10.15* Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 27, 2017)
10.16* Amendment to Citrix Systems, Inc. 2014 Amended and Restated Equity Incentive Plan (incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2018)
10.17* Second Amendment to Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 6, 2019)
10.18* Form of Indemnification Agreement by and between the Company and each of its Directors and executive officers (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2011)
10.19*† Form of Executive Agreement of Citrix Systems, Inc. by and between the Company and each of its executive officers (other than CEO)
10.20* First Amendment to Executive Agreement, dated March 3, 2021, by and between Citrix Systems, Inc. and Antonio G. Gomes (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 5, 2021)
10.21* First Amendment to Executive Agreement, dated March 3, 2021, by and between Citrix Systems, Inc. and Donna Kimmel (incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2021)
10.22*† Form of Amendment to Executive Agreement of Citrix Systems, Inc., dated October 13, 2021, by and between the Company and each of its executive officers (other than CEO)
10.23* Benefits Continuation Agreement, dated as of April 30, 2019, between the Company and Robert M. Calderoni (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2019)
10.24*† Employment Agreement, dated October 5, 2021, by and between the Company and Robert M. Calderoni
10.25*† Global Restricted Stock Unit Agreement under the 2014 Plan, dated as of October 6, 2021, by and between the Company and Robert M. Calderoni
10.26* Employment Agreement, dated July 10, 2017, by and between Citrix Systems, Inc. and David J. Henshall (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 10, 2017)
10.27* First Amendment to Employment Agreement, dated March 3, 2021, by and between Citrix Systems, Inc. and David J. Henshall (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 5, 2021)
10.28*† Second Amendment to Employment Agreement, dated October 5, 2021, by and between Citrix Systems, Inc. and David J. Henshall
10.29*† Second Amendment to Employment Agreement, dated November 12, 2021, by and between Citrix Systems, Inc. and Paul J. Hough
10.30* Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan (Time Based Awards - 2018 Annual Awards) (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2018)
10.31* Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan (Performance Based Awards - 2018 Annual Awards) (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2018)
10.32* Form of Global Restricted Stock Unit Agreement (Long Term Incentive) under the Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan (Interim Performance Period) (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on July 31, 2020)
10.33* Form of Global Restricted Stock Unit Agreement (Long Term Incentive) under the Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on July 31, 2020)
10.34* Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on July 31, 2020)
10.35* Form of Global Restricted Stock Unit Agreement (Long Term Incentive) under the Citrix Systems, Inc. Second Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2021)
10.36* Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Second Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2021)
10.37* Wrike, Inc. Amended and Restated 2013 Stock Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-253686) filed on March 1, 2021)
10.38* Form of Stock Option Agreement Under the Wrike, Inc. Amended and Restated 2013 Stock Plan as Assumed by Citrix Systems, Inc. (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (File No. 333-253686) filed on March 1, 2021)
10.39* Wrangler Topco, LLC Second Amended and Restated 2018 Equity Incentive Plan (incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 (File No. 333-253686) filed on March 1, 2021)
10.40* Form of Non-Qualified Stock Option Agreement Under the Wrangler Topco, LLC Second Amended and Restated 2018 Equity Incentive Plan as Assumed by Citrix Systems, Inc. (incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (File No. 333-253686) filed on March 1, 2021).
10.41* Form of Global Restricted Stock Unit Agreement Under the Wrangler Topco, LLC Second Amended and Restated 2018 Equity Incentive Plan as Assumed by Citrix Systems, Inc. (incorporated by reference to Exhibit 99.5 to the Company’s Registration Statement on Form S-8 (File No. 333-253686) filed on March 1, 2021).
10.42* Citrix Systems, Inc. 2021 Inducement Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-253689) filed on March 1, 2021)
10.43* Form of Global Restricted Stock Unit Agreement (Long Term Incentive) under the Citrix Systems, Inc. 2021 Inducement Plan (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (File No. 333-253689) filed on March 1, 2021)
10.44 Amended and Restated Credit Agreement, dated as of November 26, 2019, by and among Citrix Systems, Inc., the initial lenders named therein, and Bank of America, N.A., as Administrative Agent. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 27, 2019)
10.45 Term Loan Credit Agreement, dated as of January 21, 2020, by and among Citrix Systems, Inc., the initial lenders named therein, and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 22, 2020)
10.46 Master Confirmation between Goldman Sachs & Co. LLC and Citrix Systems, Inc., dated January 30, 2020 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 31, 2020)
10.47 Master Confirmation between Wells Fargo Bank, National Association and Citrix Systems, Inc., dated January 30, 2020 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 31, 2020)
10.48 Bridge and Take-Out Facility Commitment Letter, dated January 16, 2021, between JPMorgan Chase Bank, N.A. and Citrix Systems, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 19, 2021)
10.49** Term Loan Credit Agreement, dated as of February 5, 2021, by and among Citrix Systems, Inc., the initial lenders named therein, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K filed on February 8, 2021)
10.50 First Amendment to Term Loan Credit Agreement, dated as of February 5, 2021, by and among Citrix Systems, Inc., the lenders named therein, and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K filed on February 8, 2021)
10.51 First Amendment to Credit Agreement, dated as of February 5, 2021, by and among Citrix Systems, Inc., the lenders named therein, and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K filed on February 8, 2021)
10.52*† Employment Agreement, dated November 12, 2021, by and between the Company and Michael Arenth
21.1† List of Subsidiaries
23.1† Consent of Independent Registered Public Accounting Firm
24.1 Power of Attorney (included in signature page)
31.1† Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2† Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
32.1†† Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
101.SCH† Inline XBRL Taxonomy Extension Schema Document
101.CAL† Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF† Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB† Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE† Inline XBRL Taxonomy Extension Presentation Linkbase Document
104† Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
* Indicates a management contract or a compensatory plan, contract or arrangement.
** Schedules (or similar attachments) have been omitted pursuant to Item 601 of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules (or similar attachments) upon request by the SEC.
† Filed herewith.
†† Furnished herewith.
(P) This exhibit has been paper filed and is not subject to the hyperlinking requirements of Item 601 of Regulation S-K.
(b) Exhibits.
The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2021, the exhibits listed in Item 15(a)(3) above. Exhibits which are incorporated herein by reference can be accessed free of charge through the EDGAR database at the SEC’s website at www.sec.gov.
(c) Financial Statement Schedule.
The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2021 the consolidated financial statement schedule listed in Item 15(a) above, which is attached hereto.