Citrix Systems, Inc.
Q2 2021 Earnings Call Transcript
Published:
- Operator:
- Hello, and welcome to the Citrix Q2 2021 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today’s event is being recorded. I would now like to turn the conference to Traci Tsuchiguchi, Vice President of Investor Relations. Please go ahead ma’am.
- Traci Tsuchiguchi:
- Thanks, Keith. Good morning, and thank you for joining us for today's second quarter 2021 earnings call. Participating on the call will be David Henshall, President and Chief Executive Officer; and Arlen Shenkman, Executive Vice President and Chief Financial Officer. Please note that we have posted our second quarter earnings letter to our Investor Relations website. I'd like to remind you that today's conversation will contain forward-looking statements made under the Safe Harbor provision of the U.S. Securities Laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those anticipated. Additional information concerning these and other factors is highlighted in today's earnings letter and in the company's filings with the SEC. Copies are available from the SEC or on our Investor Relations website. On this call, we will discuss various non-GAAP financial measures as defined by SEC's Regulation G. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call can be found at the end of our earnings letter found on the Investor Relations page of our website. Now, I'd like to turn it over to David, our President and Chief Executive Officer. David?
- David Henshall:
- Thanks, Traci. Good morning, and thanks everybody for joining us today. As you see in the letter, our cloud transition is progressing well. Our success in migrating customers to the cloud has continued to gain momentum over the last three quarters and our organic SaaS ARR growth rate continues to accelerate, a 47% year-on-year, while total ARR was steady at 13% growth. However it’s clear that we’ve had some sales execution challenges in some areas that are reflected in our Q2 results and we believe that the cause of this has been really the increased complexity around managing this faster transition to the cloud while simultaneously managing all the different license model types and motion that are key components of our reported revenue in overall P&L So we believe we’ve identified the root causes and we are taking immediate actions to remedy these execution challenges. And this is including reorganizing our sales teams including sales leadership, realigning our customer-facing organizations to improve overall focus, as well as indirect channels. Reallocating resources to increase our capacity of quota-carrying sales reps to better support longer term growth and we are refining our channel focus to prioritize landing and growing new business activities.
- Operator:
- And today’s first question comes from Raimo Lenschow with Barclays.
- Raimo Lenschow:
- Hey. Thanks for taking my question. David, can you kind of link this - the comments from the first quarter to the second quarter now? So, if I do remember correctly, in Q1, we talked about term customers signing at the shorter duration et cetera and you were hoping that that would improve and now the second quarter sounds like differently. So, is there like a change in the story? Is it the same story? Just identify the issues better. Thank you very much for a little bit more clarity here. Thank you
- David Henshall:
- Sure, Raimo. Actually, two different issues. In Q1, just to remind everybody, we had a lot of very special business continuity type licenses, very short-term in nature. Things we put together back at the early stage of the pandemic that had impacted overall duration. These were really just unique ability to try and serve customers. Duration is not a factor in Q2. Duration has come back to normal levels as we anticipated. No change. You tend to see slightly longer duration in SaaS contracts and areas like that, but certainly a longer lines of expectation. I think you step back and think about Q2. We put it into context for just a minute. There is three main focus areas around go to market. First is, accurately forecasting the totals and the mix of different license types. Obviously, they have a different impact financially. Second is migrating the installed base to cloud and the third is driving net new business bookings. With mix, we’ve consistently come in much higher with the SaaS mix both in Q2 and in our forward guidance. Installed base migration as you see in the letter has been really positive.
- Raimo Lenschow:
- And the – as I listen to you, David, those issues kind of sound like they kind of evolved over time. Is this like – is this kind of the announcements that they ended discussion, a little bit the culmination of kind of a realization on the management team that something needs to change?
- David Henshall:
- Raimo, I think that’s fair. I think that, we obviously are coming off a record year in 2020 across many of the metrics of the business. COVID has certainly been a secular tailwind for the types of solutions that we sell. When you rattle off all the different transition metrics, I mean, we are not - we are doing extremely well on that part. We’ve just had problems with really managing and accurately forecasting a lot of these new business areas. And so that’s what we are focused on taking actions for - to really align not just to drive a lot more consistency, which has to be an outcome, but also really focus on where customers are going over the long-term and embracing that model.
- Raimo Lenschow:
- Okay. Thank you. Good luck.
- Operator:
- Thank you. And the next question comes from Mark Moerdler with Bernstein.
- Mark Moerdler:
- Thank you very much. David, this quarter total ARR, ex-Wrike grew 13%. Can you give us some more color on the moving parts that are driving your 10% total ARR growth guidance?
- David Henshall:
- Yes, Mark, it’s a good question and that’s one of the reasons why we keep focusing on SaaS ARR and total ARR. So, I think it looks through all of this noise with the business model transition and gives a better picture for what’s going on. What’s driving that is the Workspace in general. Just to give a couple of statistics there, workspace SaaS, in particular and consumption-based bookings up sharply on a year-over-year basis. From a mix, we don’t talk about bookings by product much, but I’ll tell you on a mix basis it’s about 70% of Workspace is now coming via SaaS, up from 50% or less a year ago. So we are pushing in that transition. Part of the complexity that we are calling out right now is I think that the teams have tried too hard to guide this mix one way or another versus really embracing how quickly it should be moving. And so, I am happy with that. And then, the second piece of that that’s really driving it of course is the installed base migration. I just mentioned that on Raimo’s question. But we are running 2x to 3x the rate that we were a year ago. We’ve increasingly seen customers migrating to Citrix Cloud and areas like the co-sell that I referenced just a minute ago, is really helping drive that. So I think we are getting better and better alignment on that motion. Those are the primary drivers behind the 13% total ARR growth for the business.
- Mark Moerdler:
- Okay. And for the full year itself, is – are you basically expecting that the reorg is going to slow things a little bit near-term as everyone moves into the new motion?
- David Henshall:
- Yes, we called that out in our guidance. If you look at the detail in our letter, we are assuming that total ARR could slowdown closer to 10% exiting the year. We want to be careful that we are contemplating potential disruptions that always come with go-to-market changes and things like this and not trying to get out in front of it. But being very thoughtful about our guidance for Q3 and Q4.
- Mark Moerdler:
- Okay. That makes sense. I appreciate. Thank you.
- David Henshall:
- Thanks, Mark.
- Operator:
- Thank you. And the next question comes from Brent Thill with Jefferies.
- Brent Thill:
- David, on the sales reorg, can you frame the extent of the change that you are making? Is this 30% of the sales force you are changing around? Is it 70%? Can you just give a sense of the magnitude of that shift?
- David Henshall:
- Yes, Brent, we are not necessarily changing the sales force. I mean, we’ve got a lot of good sellers. I think what we are doing is, we are more – adding in the areas that I think really matter. For example, discrete quota-carriers versus non-quota-carrying. We are doing more to make sure we’ve got alignments. There has been, in my opinion, kind of a mix message out in the field and that includes both our direct sellers and our channel in terms of what our priorities are, how we are balancing this transition. And that’s causing – that’s just causing execution, as well as forecasting inaccuracies. And so, a lot of this is about, how do we land new customers very cleanly and how do we do that with our channel. How do we have people prioritizing SaaS as the primary motion. How do we make sure that incentives line up in the field for example and in the channel to support that. Removing some of these, what I call complexity issues. So don’t think of it as a wholesale change, as much as just eliminating some of the things that are slowing us down and just getting much, much better alignments.
- Brent Thill:
- You mentioned the Microsoft relationship, but there has been a tremendous amount of questions with Cloud PC launched and the impact. Can you just speak to what you think that means to the business long-term and how does that impact the Microsoft relationship?
- David Henshall:
- Yes, so, let me back up for a minute and talk about Microsoft, just at a high level and then, specifically about Win 365. So, I think, as everybody knows, for the better part of 30 years, we have consistently embraced the Microsoft platform and extended it as part of our solutions. And that’s really what’s built this long-term partnership which we both benefit. That said, of course, we are always working to make sure we are educating the market, we stay aligned. And if you look online, I mean and look at what we are doing together, you are going to see an increasing volume of a lot of joint collateral, focused on joint migrations, how Citrix plus, AVD, for example, together is the lowest total cost of ownership as compared to, like, native AVD, while at the same time improving experience in security for customers. I called out our co-sell that we do. I mean, it’s up well over 100% year-on-year and we are now at the top or near the top of their co-sell deal registration process. And so, - and then, of course, a number of other things from a product strategy standpoint. So, we are working together on Windows 365 and looking at ways where we will potentially integrate and do more together.
- Brent Thill:
- Thanks, David.
- Operator:
- Thank you. And the next question comes from Karl Keirstead with UBS.
- Karl Keirstead:
- Thanks. I’ll ask one for David and one for Arlen. So, David, you’ve pinned the financial metrics changes today on largely internal sales execution. But I am just wondering if you could comment on what maybe, external demand factors you saw in the June quarter that may have contributed to the new business challenges? Did you see a greater appetite from your customer base to move away from on-premise deployments? Does it feel that maybe the Workspace product is getting fairly highly penetrated? Was it a little bit of competition maybe anything other than maybe internal sales execution? And then for Arlen, you did indicate that operating cash flow in 2021 would be below the levels of 2020. But for the first half, operating cash flow is down a full 50%. So, you might sort of get Street estimates all over the map in terms of interpreting what down means. Are you able to frame it for us? For instance, do you think that cash flow this year for Citrix could at least be above the 2019 level of 785? Much appreciated.
- David Henshall:
- Yes, so Karl, let me take the first part of the question. When you step back and look at the market, I mean, we’ve had a relatively isolated set of issues that we think have just impacted our overall execution. When we do research looking at our competitive analysis, win-loss, there has been no material changes on that front. Sales cycles have been generally consistent with where they are in the past. And overall, opportunity pipelines are where they need to be from our – to be able to hit our numbers. It’s just the execution items that we have highlighted there. If you look at the Workspace, it’s definitely not an issue of it being overly penetrated. These markets are actually accelerating. You can look at some of the industry analysts that point to market growth rates and Citrix grew sharply in Workspace technologies last year. We are the market leader in this area and we will be growing this year as well. An earlier answer to Raimo’s question, I think one of the things that will be really helpful for everyone is, providing more of an ARR by product at some point in the future, so that we can get a cleaner look past on these business model changes to be able to look at the underlying growth rates. And we are hoping to do that at our upcoming Analyst Meeting. Just so that we can normalize all of these business model shifts and give everybody a true picture. But similar to the way I answered Raimo’s question, what’s driving our SaaS ARR growth right now organically to accelerate three quarters in a row is Workspace. What’s really driving the total ARR in the low teens is Workspace. And so I don’t anticipate that mix changing materially over the balance of the year. But I do expect, though is our accuracy of whether it’s forecasting or execution to improve throughout the second quarter, I mean, the second half.
- Karl Keirstead:
- Got it. Thank you, David.
- Arlen Shenkman:
- Karl, excuse me, on cash flow, look, we feel very good about the long-term durability and growth in our cash flow. And, as you know there are a number of moving parts to hit any quarter. And in this quarter we had some payments around Cloud, hyperscalers and infrastructure. We had some changes and some payments around taxes. We had some impact from our accruals and our bonuses. So there is a bunch of moving parts. We are going to provide some more detail around how we are thinking about the transition as we go through our Analyst Day at the end of the third quarter. And we’ll provide you some additional insights about how to think about that and really think through some modeling and particularly about the long-term benefits of where we are going with the transition and the durability of that transition.
- Karl Keirstead:
- Okay. Terrific. Look forward to that.
- Operator:
- Thank you. And the next question comes from Sanjit Singh with Morgan Stanley.
- Sanjit Singh:
- Thank you for taking the question. I think a high-level question, David. One of the things I am still frankly a little confused about, just given that we’ve seen a number of transitions, cloud transitions in software. And typically, if you are going to miss revenue because your cloud business is accelerating and your mix is higher than expected, that’s typically a good thing. And so, going back to the motivation for the sales restructuring, is it because that the revenue is underperforming? Or is it more because, you think that the SaaS bookings mix should be higher or the SaaS ARR mix should be even greater than it was? If you could sort of comment on those three pieces?
- David Henshall:
- Sanjit, it’s a good question. I think, in general, we’ve definitely been under-forecasting mix for some time. I mean, we’ve seen this for a few quarters now. We are coming in higher and higher in SaaS. And you are right, that is a good thing, because that reduces volatility long-term and it creates a much higher uplift for economic value created. The changes that we are talking about are, we just think that there is more of a volume question, just in our overall bookings volume, the complexity around that the accuracy of our forecasting and things that we believe can be further streamlined and optimized. And so, that’s the - that’s really the genesis of a lot of these changes that we are talking about. The other one is, I think just recognizing where customers are going and how they are buying software and this general trend towards much more of a land and expand, consumption-based, different buying centers and we want to make sure that we are aligned to where that’s going in the future, as well. And then, lastly, it’s - when I referenced quota-carrying capacity, it’s one of those areas where it’s behind where I’d like it to be. And these don’t impact short-term much. But it really gives you much better flexibility and growth opportunities long-term. And so, reallocating resources in the way we are spending on go-to-market is an important one, because that just gives us a much broader reach.
- Sanjit Singh:
- Understood, David. If I could just sneak one more in related to that topic? As we think about the migration portion of the transition and getting the customer base to the cloud, the underlying unit economics that we did talk about at the end of 2019, and in terms of uplift and sort of the lifetime value of that cloud transition, is there anything about that transition or the unit economics of that transition, has that changed in any particular way versus what we talked about at the end of 2019?
- David Henshall:
- No, I don’t think so. I think we are still seeing that uplift that we had called out from a maintenance stream up to a SaaS stream. What we are seeing though is, as we are moving into more and more large deals strategic, we are seeing more opportunities, not just a transition like-for-like, but to actually address incremental use cases and expand the user base within those accounts and that’s obviously the goal long-term. And then, further beyond that, it’s how do we layer in some of these new innovations that we’ve brought to market over the course of the last few quarters, everything from analytics, Internet access, secure workspace access and all these other new solutions, which are still pretty nascent, but will be increasingly important as we go into subsequent quarters and years.
- Sanjit Singh:
- Appreciate the thoughts, David. Looking forward to the Analyst Day.
- David Henshall:
- Yes. Thank you.
- Operator:
- Thank you. And the next question comes from Kirk Materne with Evercore ISI.
- Kirk Materne:
- Hi, yes. Thanks very much. David, you mentioned execution a couple of times. But on the other hand you did have a good quarter. Workspace is accelerating on sort of a subscription basis. So, could you just maybe give us an example of what you are talking about on execution? It sounds like, at the end of the deal, there’s just too much variability around either the construction of the deal from a financial perspective, maybe the kind of data you are getting in from the channel isn’t as accurate as you’d like. I mean, it sounds like there is a number of things going on. But could you just maybe unpack that a little bit more, because on one hand, it seems like it’s not a demand issue, it seems like it’s more, I don’t know, it’s more structural or just like you are not having as much confidence in the pipeline frankly, going into the end of the quarter in terms of how that’s going to spit out financial results. So, I just want to see or maybe piece apart the demand element versus things that are - could be refined better, because it sounds like it’s more of a refinement of the processes versus a demand issue.
- David Henshall:
- Yes, Kirk, let me unpack it just a little bit. I mean, when we talk about execution, that’s obviously an inside out statement against our own expectations and where we believe we are doing well. And so, the way that will manifest itself is in a couple of areas. One of them is just accuracy in terms of forecasting. And that could be everything from the totals to the mix of license types to products and others - other areas. And that has been unfortunately much less accurate recently than we would like. And so, then you diagnose what is causing that. I mean, some of the root causes are just mixed messaging in both our direct and our indirect channels where what do we prioritize? Are we prioritizing duration? Are we prioritizing products or different license types? And those types of things are what caused unnecessary complexity and unnecessary volatility. And so we are using this really as an opportunity to address, not only that but some of the other areas that I called out, which are really focused more on medium and long-term. But I think overall, just stem to drive better alignment. When I call out the channel, I mean, I think one thing in my mind is important. I think the channel right now today and I – when I say channel, I mean more of our traditional VARs and VATs. I think they are overly focused on fulfillments. And there has been an inconsistent alignment with the field where they are operating as supporting cast or they are actually driving net new demand and servicing customers. And refinements like that are really important, because complexity just slows you down, makes it harder to do business within Citrix and all of those things impact our overall accuracy at and so that’s what we are trying to drive towards. And one of the reasons why we are pushing to a higher and higher mix of SaaS is that allows us to effectively not let our own internal execution impact the external financials, but it’s also the way we generate much higher lifetime economic value for Citrix investors and customers at anytime.
- Kirk Materne:
- And if I can just sneak in one follow-up, you’ve mentioned you are not – you d like to see more capacity from a quota-bearing rep perspective. Does that mean are you guys going to accelerate hiring in the back half of the year to try to get those people onboard and hopefully ramped up and ready to go for calendar 2022?
- David Henshall:
- We are, Kirk. I mean, it’s not an incremental expense. So, I wouldn’t look at it that way as much as a reallocation of some of the dollars that are being spent right now and areas that I think have yielded a lower result.
- Kirk Materne:
- Okay. That’s great. Thanks. Thanks, David.
- David Henshall:
- You bet.
- Operator:
- Thank you. And the next question comes from Matt Hedberg with RBC Capital Markets.
- Matt Hedberg:
- Hi, guys, great. Thanks. Hey, David. A lot of what you guys are talking about this morning is, it sounds like it’s disappointment with the new business process. I guess, I am wondering if you could talk a bit more about the retention in the conversion of some of the customers that took advantage of some of this bespoke license last year. Obviously, you are having a lot of success with SaaS ARR. It’s accelerating here. But, overall, I guess, are you on plan for sort of the conversion of these bespoke license and are you happy with the retention thus far?
- David Henshall:
- Matt, the bespoke licenses, you are talking about some of that short-term business continuity item from the early part of last year. That’s largely run its course. I mean, most of that was either focused on temporary capacity that was used in the early part of the pandemic or things that have moved into permanent capacity already and just expanded the overall base. And so, if I step back and I look at the - you mentioned retention and whatnot. The renewal rate is one way to look at that. I mean, we haven’t called those out specifically since an Analyst Meeting. But those have been trending positive for the last several quarters. So, we are probably right around as high as they’ve ever been in our history and that’s SaaS, as well as maintenance. The overall conversion of the installed base, as I said, I think we’ve really got a motion there that is resonating with the customers. The products and the product maturity and the product resiliency is where we need it to be and then the co-sell with Microsoft and the other hyperscalers is doing really well. And so, that’s why that pace is up 2x, 3x from where it was a year ago and I expect that install base migration to continue. You see that when we call out certain metrics like paid subscribers on Citrix Cloud, that’s another good metric. I think that was up more than 50% year-on-year. So, that’s part of the transition. Those things are going really, really well and one of that - just reminding everybody, what we are calling out here is, is optimizing more on the kind of new business execution side. So we can stop having as much volatility of total results as we’ve had over the last couple of quarters.
- Matt Hedberg:
- Yes. That makes a lot of sense. It’s good to hear the comment on renewal rates. That’s super encouraging. And, I guess, there has been a couple questions on specific changes from a go-to-market perspective. I guess, when you think about these dials that you can turn here, how much of it is just better alignment from marketing or is it sales comp plans need to change a bit more? Just maybe, because you guys obviously have a long history of a well-oiled sales machine. Just, what do you think are some of the most important aspects of this? And again, I guess, I am thinking more on sort of the inside out looking piece as opposed to the channel.
- David Henshall:
- Matt, it’s really all of the above. I think, alignment is an overused term, but it’s super accurate. And it’s just driving simplicity and removing some of the variability that creates complexity. Just imagine if you are a sales individual right now and you are tasked with managing duration and different products and license model types and conversion of the installed base, it’s just a lot. And so, we need to remove some of those moving parts and make sure that there is a simpler go-to-market model. I think that helps a lot. And then, just make sure those teams have all of the support that they need operationally to execute as quickly as possible. So, I mean, I think of that as refinement as much as anything else. But all those things you called out, whether it’s incentives or programs or individual sales strategies, those just need to be better aligned than they have been up to this point.
- Matt Hedberg:
- Got it. Makes a lot of sense. Thanks, David.
- Operator:
- Thank you. And the next question comes from Tal Liani with Bank of America.
- Tal Liani:
- Hi, guys. My question is along the lines over the last few questions. I want to talk about legacy. What are the trends in legacy? And the reason why I am asking is because, we see kind of renewed life with other companies and datacenters, whether it’s F5 that it’s seen like 13% and 17% growth in legacy hardware in appliances in the last two quarters. And I am just wondering what are the trends with the legacy parts and what’s the outlook for that?
- David Henshall:
- Yes, Tal, I think it’s dependent upon what you mean by legacy necessarily. But, I mean, if you mean hardware for example, I mean, we have - and I think as everybody knows, we’ve been driving more and more and more of our app delivery and security products to kind of be hardware-agnostic and less and less reliant on specialty hardware. And so, you are seeing that come out of subscriptions I think in the AD&S business, which is the proxy for networking. The second quarter increased, I think, 66% year-on-year in subscription and software represented just under half of that total. So that’s the direction that we’ve seen there. I think, in general, take a big step back. I mean, what’s going on in the market is, last year, the first two or three quarters was really focused on somewhat transactional COVID-related projects and whatnot. And over the last few quarters people are refocusing on longer term strategic more transformational-type projects. It’s one of the reasons why our installed base migration has picked up so much. And we expect that to continue. I think the type of project is becoming more and more strategic. I’m not sure if that’s what’s driving legacy necessarily. But certainly where we are taking those products is cloud-delivered platforms, simplicity of deployments, underlying simplicity and modernization of infrastructure, lot of those things just, I mean, drive them to the cloud, remove moving parts and then help them just have a more complete view of their infrastructure.
- Tal Liani:
- Right. So, many companies had gone or are going through the same transition. And generally we see great success, at least great growth on that part of the business. The business is transitioning, might be too small but, for some companies, but the growth rates are pretty high. And the question is now looking backwards, what went wrong in your preparation for the change that results in lower than expected growth rates, meaning, what could you have done differently in order to address, to better address the go-to-market or the positioning with customers? I think the main reason why I am asking this is that the question here is, is it about execution or is it about lack of demand, meaning, something that is wrong fundamentally with demand and not just about execution and that’s where I think all the questions are going about.
- David Henshall:
- Yes. No, it’s a fair question. I mean, if I step back and you talk about our growth rates and could they have been faster. In hindsight, yes, I think we had tried too hard to manage the business model transition between the pace of SaaS adoption and our short-term financial metrics. And these are goals that are obviously somewhat incongruous. And going forward, as we’ve talked about a lot this morning and some of the changes we are making is, is more lean into it, embrace the SaaS move more rapidly and then just drive lower complexity internally. We clearly haven’t always gotten this right and I think it’s caused more volatility than it should have. But if you take a big step back and then you talk about growth rates and it’s one of the reasons why we keep focusing everyone on ARR, because it is the right proxy to look at how the business model transition is going and our SaaS ARR growth has accelerated for the third quarter in a row. It’s somewhere close to $900 million, growing at nearly 50% year-on-year. We have $3 billion in total ARR growing in the low-teens and those are the leading indicators that we look at when we look at our – where we expect the overall business growth rate to eventually get to as we get through this transition. So the real message today is we are cleanly aligned on the execution issues that we have had and we are taking steps immediately to address those. We are focused on simplifying the overall business model and leaning into the transition, so that it becomes faster to get through this and really emerge to the other side in a model that I think is easier to understand, easier to predict and just frankly, easier to manage.
- Tal Liani:
- Thank you.
- Operator:
- Thank you. And the next question comes from Tyler Radke with Citi.
- Tyler Radke:
- Yes. Thanks. A question either for David or Arlen. Just mechanically trying to understand the mechanics of the revenue shortfall here in the quarter and the outlook. Obviously, that the SaaS number was pretty strong. But was this just new kind of on-prem subscription business that came in at a lower duration or that didn’t come in that was expected at a higher duration? Just trying to understand the magnitude of it just given the revenue recognition dynamics. Thank you.
- David Henshall:
- Yes, Tyler, let me take that. So, yes, I think you are right that there was a higher mix of SaaS to overall. But what we talk about today and what we talk about internally is just aggregate volume of new business. Those are the things that we are focused on changing. And I think it’s really a result of all the areas that we’ve called out here. The overall volume of getting deals closed that we anticipated with the right mix is where the execution items stem from. And that’s why we have a line of sight into all those things that can fix this very quickly and that’s what we are executing on. But I think I would focus - we are focused on volume more so than mix. We can embrace the mix, but that’s not our primary driver right now.
- Tyler Radke:
- Right. So it’s volume, but, I guess, the volume on, mathematically the SaaS business has more of a RASL recognition. So, I guess, the volume on new business that wasn’t necessarily SaaS to drive that a difference?
- David Henshall:
- Yes, I mean, Tyler, it’s both. I mean, when we say volume, we mean that in general terms. And then, it’s just exacerbated by the mix when it comes to translation into recognized P&L in a given quarter.
- Tyler Radke:
- Got it. Great. And then, just one follow-up. So, David, I know you’ve been at the company a while and seen a probably a fair number of kind of sales reorgs and realignments. So like, how long do you think this one will last? And I think in terms of the long-term targets you talked about potentially updating those in about three months from now. Do you feel like you’ll have better visibility to do that at the time just given the scope of this transition? Thank you.
- David Henshall:
- Sure. I think the changes we are addressing are immediate in some areas and immediate in driving simplification and accuracy and whatnot. As I think as everybody sees, we are contemplating some level of disruption in our - especially in Q3 from a guidance standpoint. We think that’s just the prudent approach that we should be taking right now. But, a lot of this is more about, not about wholesale rebuild, just simplifying the things that are causing too much complexity. Remove the moving parts and allow the teams to do what they do well. Couple areas are a little bit more medium and long-term that I’ve called out, increasing quota-carrying capacity. That doesn’t impact the Q3, but that sets you up for 2022 and beyond. So that you just have greater flexibility in both growth and predictability. So, I mean, I think it’s a combination of both, short, medium and long-term. But the most impactful, frankly is just getting to that point where we are, as much as possible, 100% SaaS and that will take some time because one of our core differentiators, of course is being customer-centric, being able to drive a hybrid model, being able to allow them to maintain some level of on-premise deployments and we will continue to do that. We are just doing it in a different rate and pace. Let’s put it that way. So I think we have contemplated the potential disruptions in Q3 and Q4. And we will emerge the rest of this year with more accuracy and I think set up for a more rapid recovery as we go into the subsequent years.
- Tyler Radke:
- Thank you.
- Operator:
- Thank you. And this concludes the question-and-answer session. I would like to turn the call to David Henshall for any closing comments.
- David Henshall:
- Thanks. Thanks everybody for joining us today. Let me just leave you with a few closing thoughts consistent with the Q&A session. The transition of our installed base to the cloud has continued to gain momentum. It accelerated again in the second quarter. I think we are very rapidly and decisively addressing a lot of these execution-related challenges we experienced in the second quarter and we are taking immediate action obviously to fix them. We intend to emerge, as I’ve said a couple of times, with a simpler, easy-to-understand structure that I think aligns objectives with more predictable results, obviously improving long-term results and our pace through this transition. Really look forward to speaking with everybody at our Analyst Meeting and again next quarter. Thank you very much.
- Operator:
- Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
Other Citrix Systems, Inc. earnings call transcripts:
- Q3 (2021) CTXS earnings call transcript
- Q1 (2021) CTXS earnings call transcript
- Q3 (2020) CTXS earnings call transcript
- Q2 (2020) CTXS earnings call transcript
- Q1 (2020) CTXS earnings call transcript
- Q4 (2019) CTXS earnings call transcript
- Q3 (2019) CTXS earnings call transcript
- Q2 (2019) CTXS earnings call transcript
- Q1 (2019) CTXS earnings call transcript
- Q4 (2018) CTXS earnings call transcript