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COMMITMENTS AND CONTINGENCIES
 6 Months Ended
Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of, or a range of, the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of any pending claims, suits, assessments, regulatory investigations, or other legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such determination is made. In addition, in accordance with the relevant authoritative
guidance, for matters in which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, the Company will provide disclosure to that effect.
Due to the nature of the Company's business, the Company is subject to patent infringement claims, including current litigation alleging infringement by various Company solutions and services. The Company believes that it has meritorious defenses to the allegations made in its pending litigation and intends to vigorously defend itself; however, it is unable currently to determine the ultimate outcome of these or similar matters or the potential exposure to loss, if any. In addition, the Company is subject to various other legal proceedings, including suits, assessments, regulatory actions and investigations generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcomes of these matters, the Company believes that outcomes that will materially and adversely affect its business, financial position, results of operations or cash flows are reasonably possible but not estimable at this time.
On November 19, 2021, a putative securities class action complaint was filed in the United States District Court for the Southern District of Florida, naming the Company and certain of its current and former officers and directors as defendants. On April 22, 2022, an amended complaint was filed, naming the same defendants and alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, based on allegedly false or misleading statements made between January 22, 2020, and October 6, 2021, regarding the Company’s transition from selling on-premise, perpetual licenses to cloud-based subscriptions. The amended complaint seeks, among other things, an award of compensatory damages and the plaintiffs’ reasonable costs and expenses, including attorneys’ fees, experts’ fees, and other costs and disbursements. The Company believes that it and the other defendants have meritorious defenses to these allegations; however, the Company is unable to currently determine the ultimate outcome of this matter or the potential exposure or loss, if any.
Merger Actions
In connection with the Merger Agreement, eleven complaints have been filed as individual actions in United States District Courts. Six complaints have been filed in the United States District Court for the Southern District of New York and are captioned Stein v. Citrix Systems, Inc., et al., 22-cv-1864 (filed March 4, 2022), O’Dell v. Citrix Systems, Inc., et al., 22-cv-1892 (filed March 4, 2022), Bell v. Citrix Systems, Inc., et al., 22-cv-1925 (filed March 7, 2022) (the “Bell Complaint”), Messiha v. Citrix Systems, Inc., et al., 22-cv-2094 (filed March 14, 2022), Rodriguez v. Citrix Systems, Inc., et al., 22-cv-2925 (filed April 8, 2022), and Finger v. Citrix Systems, Inc., et al., 22-cv-2976 (filed April 11, 2022). Three complaints have been filed in the United States District Court for the Eastern District of New York and are captioned Whitfield v. Citrix Systems, Inc., et al., 22-cv-01317 (filed March 10, 2022), Shumacher v. Citrix Systems, Inc., et al., 22-cv-1453 (filed March 16, 2022), and Lee v. Citrix Systems, Inc., et al., 22-cv-1504 (filed March 18, 2022). One complaint has been filed in the United States District Court for the Eastern District of Pennsylvania and is captioned Waterman v. Citrix Systems, Inc., et al., 22-cv-917 (filed March 10, 2022). One complaint has been filed in the United States District Court for the District of Delaware and is captioned Gould v. Citrix Systems, Inc., et al., 22-cv-359 (filed March 21, 2022). The foregoing complaints are referred to as the “Merger Actions.”
The Merger Actions generally allege that the definitive proxy statement filed by the Company on March 16, 2022 with respect to the special meeting of Citrix’s stockholders held on April 21, 2022 (the “Definitive Proxy Statement”) or the preliminary proxy statement filed by the Company with the SEC on March 3, 2022 misrepresent and/or omit certain purportedly material information relating to the Company’s financial projections, the analyses performed by the financial advisor to the Citrix Board of Directors in connection with the Merger, potential conflicts of interest of the Company’s officers and directors, and the events that led to the signing of the Merger Agreement. The Merger Actions assert violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against all defendants (the Company, its Board of Directors and certain officers) and violations of Section 20(a) of the Exchange Act against Citrix’s directors and officers. The Bell Complaint also asserted a breach of fiduciary duty against the individual defendants. The Merger Actions seek, among other things, an injunction enjoining the consummation of the Merger, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the court may deem just and proper.
While the Company believes that the disclosures set forth in the Definitive Proxy Statement comply fully with all applicable law and denies the allegations in the pending Merger Actions described above, in order to moot plaintiffs’ disclosure claims, avoid nuisance and possible expense and business delays, and provide additional information to its stockholders, the Company made certain disclosures that supplement and revise those contained in the Definitive Proxy Statement (the “Supplemental Disclosures”). These Supplemental Disclosures were filed with the SEC in a Current Report on Form 8-K and under Schedule 14A. Nothing in the Supplemental Disclosures shall be deemed an admission of the legal merit, necessity or materiality under applicable laws of any of the disclosures set forth therein. To the contrary, the Company specifically denies all allegations in the Merger Actions described above that any additional disclosure was or is required or material.
In the second quarter of 2022, eight of the Merger Actions, including the Bell Complaint, were voluntarily dismissed. The Company cannot predict the outcome of the remaining Merger Actions. The Company believes that the remaining Merger Actions are without merit, and the Company and the individual defendants intend to vigorously defend against the remaining Merger Actions and any subsequently filed similar actions. If additional similar complaints are filed, absent new or significantly different allegations, the Company will not necessarily disclose such additional filings.
Books and Records Demands
The Company has received demand letters pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”) from stockholders seeking disclosure of certain of the Company's records relating to the Merger. The Company has responded to those demands, stating its belief that the demand letters fail to fully comply with the requirements of Section 220 of the DGCL. On April 20, 2022, two stockholders filed a complaint in the Delaware Chancery Court captioned Liebenthal, et al. v. Citrix Systems, Inc., C.A. No. 2022-0349, seeking to compel inspection of books and records pursuant to Section 220 of the DGCL. The Company believes the claims are without merit and intends to vigorously defend against them.
Guarantees
The authoritative guidance requires certain guarantees to be recorded at fair value and requires a guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote. For those guarantees and indemnifications that do not fall within the initial recognition and measurement requirements of the authoritative guidance, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such estimable loss would be recognized. The initial recognition and measurement requirements do not apply to the provisions contained in the majority of the Company’s software license agreements that indemnify licensees of the Company’s software from damages and costs resulting from claims alleging that the Company’s software infringes the intellectual property rights of a third party. The Company has not made material payments pursuant to these provisions. The Company has not identified any losses that are probable under these provisions and, accordingly, the Company has not recorded a liability related to these indemnification provisions.
Other Purchase Commitments
In May 2020, the Company entered into an amended agreement with a third-party provider, in the ordinary course of business, for the use of certain cloud services through June 2029. Under the amended agreement, the Company is committed to a purchase of $1.00 billion throughout the term of the agreement. As of June 30, 2022, the Company had $798.4 million of remaining obligations under the purchase agreement.
In May 2021, the Company entered into an amended agreement with a third-party provider, in the ordinary course of business, for the use of certain cloud services through May 2024. Under the amended agreement, the Company is committed to purchase services under this agreement totaling $100.0 million over the term, with commitments of $32.0 million in fiscal year beginning 2021, $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 of June 30, 2022, the Company had $37.4 million of remaining obligations under the purchase agreement.