From time to time, information provided by us or statements made by our employees contain "forward-looking" information that involves risks and uncertainties. In particular, statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements concerning our pending acquisition by affiliates ofVista Equity Partners andEvergreen Coast Capital Corp. , our strategy and operational and growth initiatives, our 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 the transition, our transition to a subscription-based business model, changes in our product and service offerings and features, financial information and results of operations for future periods, revenue trends, the impacts of the novel coronavirus (COVID-19) pandemic and related market and economic conditions on our business, results of operations and financial condition, expectations regarding remote work, customer demand, seasonal factors or ordering patterns, stock-based compensation, international operations, investment transactions and valuations of investments and derivative instruments, restructuring charges, reinvestment or repatriation of foreign earnings, fluctuations in foreign exchange rates, tax estimates and other tax matters, liquidity, our debt, changes in accounting rules or guidance, acquisitions (including our acquisition ofWrike, Inc. ), litigation matters, and the security of our network, products and services, constitute forward-looking statements and are made under the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are neither promises nor guarantees. Readers are directed to the risks and uncertainties identified in Part I, Item 1A, "Risk Factors", in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , for additional detail regarding factors that may cause actual results to be different than those expressed in our forward-looking statements. Such factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form 10-Q or presented elsewhere by our management from time to time. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
Pending Merger
OnJanuary 31, 2022 , we entered into an Agreement and Plan of Merger (the "Merger Agreement"), withPicard 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 ofVista Equity Partners ("Vista"). Vista is partnering withEvergreen Coast Capital Corp. ("Evergreen"), an affiliate ofElliott 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. At a Special Meeting of Stockholders held onApril 21, 2022 , the Company's stockholders approved the Merger Agreement. The Merger is expected to close mid-year 2022, subject to customary closing conditions, including receipt of regulatory approvals.
Overview
Management's discussion and analysis of financial condition and results of operations is intended to help the reader understand our financial condition and results of operations. This section is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for the three months endedMarch 31, 2022 . The results of operations for the periods presented in this report are not necessarily indicative of the results expected for the full year or for any future period, due in part to the seasonality of our business. Historically, our revenue for the fourth quarter of any year is typically higher than our revenue for the first quarter of the subsequent year.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.
We market and license our solutions through multiple channels worldwide, including selling through resellers and direct over the Web. Our partner community comprises thousands of value-added resellers, or VARs, known as Citrix Solution
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Advisors, value-added distributors, or VADs, systems integrators, or SIs, independent software vendors, or ISVs, original equipment manufacturers, or OEMs, and Citrix Service Providers, or CSPs.
Executive Summary
As described above, onJanuary 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 acquireCitrix in an all-cash transaction valued at approximately$16.5 billion , including the assumption ofCitrix debt.
Impact of COVID-19 Pandemic
The COVID-19 pandemic did not have a significant impact on our results of
operations for the three months ended
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 our Annual Report on Form 10-K for the fiscal year endedDecember 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 three months ended
•Total net revenue increased 6.4% to
•Subscription revenue increased 35.5% to
•SaaS revenue increased 58.7% to
•Product and license revenue decreased 24.7% to
•Support and services revenue decreased 15.7% to
•Gross margin as a percentage of revenue increased from 81.5% to 82.8%;
•Operating income increased 4.2% to
•Diluted net income per share decreased from
•Deferred and unbilled revenue increased
Also, operating cash flows increased
Our Subscription revenue increased primarily due to continued customer cloud adoption of our solutions delivered via the cloud and an increase in on-premise license demand, mostly from our App Delivery and Security offerings. Our Product and license revenue decreased primarily due to lower sales of our perpetual App Delivery and Security solutions as well as our perpetual Workspace solutions, as customers continue to shift toward our subscription offerings. The decrease in Support and services revenue was primarily due to decreased sales of maintenance services, primarily across our Workspace perpetual offerings, as more of the revenue is reported in the Subscription revenue line commensurate with our subscription model transition. The increase in gross margin as a percentage of revenue was not significant. The increase in operating income was 33 -------------------------------------------------------------------------------- primarily due to an increase in gross margin. The decrease in diluted net income per share was primarily due to an increase in income taxes due to the first quarter of 2021 including a tax benefit, as well as a decrease in recognized gains on our strategic investments.
2021 Business Combination
OnFebruary 26, 2021 (the "Closing Date"), we completed the acquisition ofWrangler 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 was subject to certain adjustments as provided for under the related Agreement and Plan of Merger datedJanuary 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. We incurred$20.1 million of expenses related to the Wrike acquisition, of which$0.3 million and$15.5 million were expensed during the three months endedMarch 31, 2022 and 2021, respectively, and are included in General and administrative expense in the accompanying condensed consolidated statements of income.
See Note 6 to our condensed 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 condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe 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. For more information regarding our critical accounting policies and estimates, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , or the Annual Report, and Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. There have been no material changes to the critical accounting policies disclosed in the Annual Report. 34 --------------------------------------------------------------------------------
Results of Operations
The following table sets forth our unaudited condensed consolidated statements of income data and presentation of that data as a percentage of change from period-to-period (in thousands other than percentages):
Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 Revenues: Subscription$ 463,637 $ 342,129 35.5 % Product and license 33,297 44,235 (24.7) Support and services 328,404 389,402 (15.7) Total net revenues 825,338 775,766 6.4 Cost of net revenues: Cost of subscription, support and services 107,026 110,745 (3.4) Cost of product and license revenues 17,527 21,715 (19.3) Amortization of product related intangible assets 17,343 11,009 57.5 Total cost of net revenues 141,896 143,469 (1.1) Gross profit 683,442 632,297 8.1 Operating expenses: Research and development 147,905 144,158 2.6 Sales, marketing and services 292,951 293,284 (0.1) General and administrative 109,059 94,990 14.8 Amortization of other intangible assets 19,221 7,532 155.2 Restructuring 18,078 - * Total operating expenses 587,214 539,964 8.8 Income from operations 96,228 92,333 4.2 Interest income 442 321 37.7 Interest expense (22,076) (24,360) (9.4) Other (expense) income, net (1,077) 12,896 (108.4) Income before income taxes 73,517 81,190 (9.5) Income tax expense (benefit) 13,285 (8,858) (250.0) Net income$ 60,232 $ 90,048 (33.1) % *Not meaningful 35
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Revenues
We generate revenue from sales of our Subscription, Product and license and Support and services offerings.
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. InOctober 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. Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (in thousands) Subscription$ 463,637 $ 342,129 $ 121,508 Product and license 33,297 44,235 (10,938) Support and services 328,404 389,402 (60,998) Total net revenues$ 825,338 $ 775,766 $ 49,572 Subscription Subscription revenue increased during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to continued customer adoption of our solutions delivered via the cloud of$100.4 million , primarily from our Workspace offerings, which includes the Wrike acquisition. There was also an increase in on-premise subscription license revenue of$21.1 million , primarily from our App Delivery and Security offerings, mainly from pooled capacity. Product and license Product and license revenue decreased when comparing the three months endedMarch 31, 2022 to the three months endedMarch 31, 2021 primarily from lower sales of our perpetual App Delivery and Security solutions of$6.2 million and perpetual Workspace offerings of$4.8 million , as customers continue to shift toward our subscription offerings. 36 --------------------------------------------------------------------------------
Support and services
Support and services revenue decreased during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to a decrease in sales of maintenance services across our Workspace perpetual offerings, 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 condensed 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 condensed 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): March 31, 2022 compared to December March 31, 2022 December 31, 2021 31, 2021 Deferred revenue$ 1,938,081 $ 2,037,593 $ (99,512) Unbilled revenue 1,324,105 1,300,048 24,057 Deferred revenues decreased$99.5 million as ofMarch 31, 2022 compared toDecember 31, 2021 primarily due to decreases in deferred maintenance and support revenue of$63.6 million , mostly from Workspace perpetual software maintenance, and deferred subscription revenue of$35.9 million . Unbilled revenue remained consistent when comparingMarch 31, 2022 toDecember 31, 2021 . 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 ofMarch 31, 2022 , 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 outsidethe United States ) accounted for 48.7% and 50.4% of our net revenues for the three months endedMarch 31, 2022 and 2021, respectively. The decrease in our international revenues as a percentage of our net revenues for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily due to a decrease in the EMEA region as it shifts away from perpetual licenses and related support offerings toward subscription offerings. See Note 10 to our condensed consolidated financial statements for detailed information on net revenues by geography. 37 --------------------------------------------------------------------------------
Cost of Net Revenues Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands)
Cost of subscription, support and services revenues
$ (3,719) Cost of product and license revenues 17,527 21,715 (4,188) Amortization of product related intangible assets 17,343 11,009 6,334 Total cost of net revenues$ 141,896 $ 143,469 $ (1,573) 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 decreased during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to a decrease in the cost of providing our support and services offerings of$6.7 million , consistent with the related revenues, partially offset by an increase in the cost of providing our subscription offerings of$3.0 million , in line with related revenues.
Cost of product and license revenues decreased for the three months ended
Amortization of product related intangible assets increased for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to acquired intangible assets in connection with the Wrike acquisition.
Gross Margin
Gross margin as a percentage of revenue was 82.8% for the three months endedMarch 31, 2022 , and 81.5% for the three months endedMarch 31, 2021 . The change in gross margin as a percentage of revenue was not significant.
Operating Expenses
Foreign Currency Impact on Operating Expenses
The functional currency for all of our wholly-owned foreign subsidiaries is theU.S. dollar. A substantial majority of our overseas operating expenses and capital purchasing activities are transacted in local currencies and are therefore subject to fluctuations in foreign currency exchange rates. In order to minimize the impact on our operating results, we generally initiate our hedging of currency exchange risks up to 12 months in advance of anticipated foreign currency expenses. Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from our hedging contracts. Conversely, if the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond the time frame for which we hedge our risk.
Research and Development Expenses
Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) Research and development$ 147,905 $ 144,158 $ 3,747 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 the three months ended
38 -------------------------------------------------------------------------------- other employee-related costs of$2.2 million as a result of higher headcount, in part due to the Wrike acquisition, partially offset by decreases in professional fees of$1.1 million .
Sales, Marketing and Services Expenses
Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) Sales, marketing and services$ 292,951 $ 293,284 $ (333) 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. The decrease in Sales, marketing and services expenses during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily due to decreases in stock-based compensation of$5.6 million and compensation and other employee-related costs of$4.8 million . These decreases were partially offset by increases in variable compensation of$7.3 million and marketing programs of$5.9 million , primarily demand generation.
General and Administrative Expenses
Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) General and administrative$ 109,059 $ 94,990 $ 14,069 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 the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to increases in professional fees of$15.6 million , primarily for the pending merger transaction, credit loss expense of$11.3 million and compensation and other employee-related costs of$3.0 million . These increases were partially offset by a decrease of$15.5 million due to Wrike acquisition costs incurred in the first quarter of 2021.
Amortization of Other Intangible Assets
Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) Amortization of other intangible assets$ 19,221 $ 7,532 $ 11,689 Amortization of other intangible assets consists of amortization of customer relationships, trade names and covenants not to compete primarily related to our acquisitions. Amortization of other intangible assets increased for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to acquired intangible assets in connection with the Wrike acquisition. 39 --------------------------------------------------------------------------------
Restructuring Expenses Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) Restructuring$ 18,078 $ -$ 18,078 Restructuring expenses increased for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to the 2021 Restructuring Program, which resulted in increases in employee severance and related costs of$11.6 million , right-of-use asset impairments of$3.4 million , and other asset impairments of$3.1 million .
See Note 16 to our condensed consolidated financial statements for additional details regarding our restructuring programs.
Interest Expense
Three Months Ended March 31, Three Months Ended March 31, 2022 2021 2022 vs. 2021 (In thousands) Interest expense$ (22,076) $ (24,360) $ 2,284 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. Interest expense decreased for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily due to financing costs incurred in the first quarter of 2021 in connection with the Wrike acquisition. See Note 11 to our condensed consolidated financial statements for additional details regarding our debt. Other (expense) income, net Three Three Months Ended Months Ended March March 31, 31, 2022 2021 2022 vs. 2021 (In thousands) Other (expense) income, net$ (1,077) $ 12,896 $ (13,973)
Other (expense) 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 (expense) income, net during the three months ended
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 condensed 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 inthe United States . Our effective tax rate generally differs from theU.S. federal statutory rate primarily due to tax credits and lower tax rates on earnings generated by our foreign operations that are taxed primarily inSwitzerland . Our effective tax rate was 18.1% and (10.9)% for the three months endedMarch 31, 2022 and 2021, respectively. The increase in the effective tax rate when comparing the three months endedMarch 31, 2022 to the three months endedMarch 31, 2021 , was primarily due to tax items unique to the period endedMarch 31, 2021 . These amounts included stock-based compensation deductions and a tax benefit related to a favorable foreign tax ruling in the period endedMarch 31, 2021 . We are subject to tax in theU.S. and in multiple foreign tax jurisdictions. OurU.S. liquidity needs are currently satisfied using cash flows generated from ourU.S. operations, borrowings, or both. We also utilize a variety of tax planning strategies in 40 -------------------------------------------------------------------------------- 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 13 to our condensed consolidated financial statements for additional details regarding our income taxes.
Liquidity and Capital Resources
Cash, Cash Equivalents and Investments
December 31, March 31, 2022 March 31, 2022 2021 compared to December 31, 2021 (In thousands) Cash, cash equivalents and investments$ 750,992 $ 541,933 $ 209,059 Our principal sources of liquidity are our cash, cash equivalents and investments. The increase in Cash, cash equivalents and investments when comparingMarch 31, 2022 toDecember 31, 2021 , is primarily due to cash provided by operating activities of$274.9 million , partially offset by cash paid for tax withholding on vested stock awards of$43.7 million and purchases of property and equipment of$18.8 million . As ofMarch 31, 2022 ,$544.7 million of the$751.0 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 additionalU.S. federal tax. Upon repatriation of these funds, we could be subject to foreign andU.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 the three months endedMarch 31, 2022 , we generated operating cash flows of$274.9 million . These operating cash flows related primarily to net income of$60.2 million , adjusted for, among other things, non-cash charges, including depreciation and amortization expenses of$84.6 million , stock-based compensation expense of$79.4 million , and a change in operating assets and liabilities, net of acquisitions of$33.1 million . The change in our operating assets and liabilities, net of acquisitions was primarily the result of inflows from accounts receivable of$274.6 million , primarily due to collections from prior period sales. These inflows were partially offset by outflows from deferred revenue of$99.5 million , outflows from accrued expenses and other current liabilities of$82.9 million , mostly from decreases in employee-related accruals. Also contributing to the change in operating assets and liabilities, net of acquisitions were outflows from accounts payable of$29.9 million , primarily due to the timing of payments, and outflows from other assets of$21.2 million , primarily due to an increase in capitalized commissions. Our investing activities used$17.3 million of cash consisting primarily of cash paid for the purchase of property and equipment of$18.8 million , partially offset by net proceeds from investments of$4.1 million . Our financing activities used cash of$42.5 million , primarily due to cash paid for tax withholding on vested stock awards. During the three months endedMarch 31, 2021 , we generated operating cash flows of$212.9 million . These operating cash flows related primarily to net income of$90.0 million , adjusted for, among other things, non-cash charges, including stock-based compensation expense of$86.9 million , depreciation and amortization expenses of$63.9 million and a change in operating assets and liabilities, net of acquisitions of$38.8 million . The change in our operating assets and liabilities, net of acquisitions, was mostly the result of an inflow from accounts receivable of$302.8 million primarily due to collections from prior period sales. These inflows were partially offset by outflows in accrued expenses and other current liabilities of$190.8 million , mostly from employee-related accruals of$133.6 million and payments on other accruals of$27.1 million , primarily from acquisition-related costs. Also contributing to operating outflows were changes in deferred revenue of$92.1 million , income taxes, net of$38.0 million , primarily due to an increase in prepaid taxes, and other assets of$27.5 million , primarily due to an increase in capitalized commissions. Our investing activities used$1.94 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$23.9 million , partially offset by net proceeds from investments of$107.0 million . Our financing activities provided cash of$1.46 billion , primarily net proceeds from the 2021 Term Loan of$997.9 million and 2026 Notes of$741.4 million , partially offset by the repayment of Wrike acquired debt of$190.0 million , cash dividends on our common stock of$45.5 million and cash paid for tax withholding on vested stock awards of$42.3 million . 41 -------------------------------------------------------------------------------- Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to continue for the remainder of 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
OnFebruary 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 onFebruary 26, 2021 under the 2021 Term Loan, and the loan matures onFebruary 26, 2024 . The proceeds under the 2021 Term Loan were used to finance a portion of the purchase price for the Wrike acquisition. OnJanuary 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"). As ofMarch 31, 2022 ,$100.0 million was outstanding under the 3-year Term Loan. These amounts are due inJanuary 2023 and included in Short-term debt in the accompanying condensed consolidated balance sheet.
Senior Notes
OnFebruary 18, 2021 , we issued$750.0 million of unsecured senior notes dueMarch 1, 2026 (the "2026 Notes"). The 2026 Notes accrue interest at a rate of 1.250% per annum, which is due semi-annually onMarch 1 andSeptember 1 of each year beginning onSeptember 1, 2021 . The net proceeds from this offering were$741.4 million . The net proceeds from the 2026 Notes were used to fund a portion of the purchase price for the Wrike acquisition.
Credit Facility
OnNovember 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 ofMarch 31, 2022 , no amounts were outstanding under the credit facility.
See Note 11 to our condensed consolidated financial statements for additional details regarding our debt.
Stock Repurchase Program Our Board of Directors authorized an ongoing stock repurchase program. 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. AtMarch 31, 2022 ,$625.6 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased were recorded as treasury stock. While the Merger Agreement is in effect, we are prohibited from repurchasing shares of our common stock, including under the stock repurchase program.
During the three months ended
See Note 14 to our condensed consolidated financial statements for additional details on our share repurchase program.
Shares for Tax Withholding
During the three months endedMarch 31, 2022 , we withheld 427,382 shares from equity awards that vested, totaling$43.7 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 condensed consolidated balance sheets. Other Purchase Commitments InMay 2020 , we entered into an amended agreement with a third-party provider, in the ordinary course of business, for the use of certain cloud services throughJune 2029 . Under the amended agreement, we are committed to a purchase of$1.00 billion throughout the term of the agreement. As ofMarch 31, 2022 , we had$825.8 million of remaining obligations under the purchase agreement.
In
42 --------------------------------------------------------------------------------$24.0 million in fiscal year beginning 2022,$24.0 million in fiscal year beginning 2023 and$20.0 million at any time over the three-year term. As ofMarch 31, 2022 , we had$46.1 million of remaining obligations under the purchase agreement. Contractual Obligations There have been no material changes, outside the ordinary course of business, to our contractual obligations sinceDecember 31, 2021 . For further information, see "Contractual Obligations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 .
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing arrangements.
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