Citrix Systems, Inc.
Q3 2020 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by, and welcome to the Citrix Systems, Inc. Third Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will a question-and-answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, Traci Tsuchiguchi, Vice President of Investor Relations. Please go ahead ma’am.
- Traci Tsuchiguchi:
- Thanks, Joel. Good morning, and thank you for joining us for today’s third quarter 2020 earnings call. Participating on the call with me is David Henshall, President and Chief Executive Officer; and Arlen Shenkman, Executive Vice President and Chief Financial Officer. Please note that we have posted our third 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 the call over to David, our President and Chief Executive Officer. David?
- David Henshall:
- Thanks, Traci, and good morning, and welcome, everyone. Thanks for joining us today. I'm pleased to report another really strong quarter of results even with a mix of subscription bookings that's running higher than anticipated. The transition clearly accelerated over the last quarter, and we now expect the year to finish with 85% to 90% of total bookings coming from subscription bookings in the fourth quarter. Regardless of this, for the full year, we're still raising the midpoint of our revenue guidance and, of course, raising our operating margin and EPS expectations considerably. So the Citrix Workspace is really what's driving the results with total revenue up 12%, including subscriptions, which are growing north of 50%. As companies have spent the last seven months largely working from home, this concept of back to the office is really moving beyond a discussion of one location versus the other. I think there's a broad realization going on the hybrid work style blends, really, together the best attributes of a physical office environment with, of course, the flexibility that individuals need to be productive and really do their best work. And all of this is dependent upon technologies like those provided by Citrix to ensure a safe, secure and productive work experience across any location people choose to work. And so we leave with that as a backdrop, we're really well-positioned to achieve our longer-term targets that we outlined at this time last year and, of course, despite the uncertain environment that we're all operating in. Today, we're also going to provide some early headlights into our initial expectations for 2021. So with that, let's open up the call and take some questions. Operator?
- Operator:
- Thank you. [Operator Instructions] Our first question comes from Ittai Kidron with Oppenheimer. Your line is now open.
- Ittai Kidron:
- Thanks guys, good numbers. Maybe you can talk about the bounce back in the cloud subscribers, how much of that was that one customer that you were missing last quarter, and how much of that was truly quarterly momentum? And then, as a follow-up, on the regional breakdown, I was kind of a little bit surprised to see the Americas not showing any growth. I think last quarter, you said that since openings in the U.S., we're lagging that in Europe. You would expect that kind of the Americas to be a quarter behind Europe as far as recovery, but it sounds like -- it looks like no year-over-year progression in the Americas, while Europe remained very strong for, I guess, three quarters in a row now. Help me reconcile your business with your original commentary.
- David Henshall:
- Let me take a few of those questions. And then, Arlen, feel free to jump in here. So if you take a step back and you look at paid subscribers, you're right, we had really good sequential growth from Q2 to Q3. The -- there was an anomaly last quarter, which is taken out of a denominator for, obviously, going forward. So this is just net increases of about 800,000 new paid subscribers on a sequential basis. And it tracks very well to everything that we've talked about over the last six months. First half of the year was very focused from a customer point of view and, frankly, a Citrix point of view, on really helping customers move into the pandemic period, enable work from home, everything that was a high priority. Back half of the year, as I've stated a few times, is really focused on getting back to driving more of the strategy of the company, migrating existing users to the cloud, focusing on net new users in SaaS and in some cases, on-prem subscriptions. And so, we're just executing against what we've said before, happy with the progress on that side. And you clearly see it when you look at subscription ARR, which is now over $1 billion and continuing to grow north of 50% year-on-year. In terms of the geo mix, I'd say that, there's just a little bit of noise going on in there because of the geos being at different phases of the overall transition of subscription. That's really been led out of the Americas, and it's the thing more than anything that has influenced the year-on-year growth rates. EMEA, frankly, has had outstanding execution all year, both across our teams and the way we're operating from a solution standpoint in the various markets. They've just had really nice, steady progress. A little bit further behind in the overall subscription transition per se, but I'm just -- I'm very happy with the way that team has delivered. Next question?
- Operator:
- Thank you. Our next question comes from Phil Winslow with Wells Fargo. Your line is now open.
- Phil Winslow:
- Hey. Thanks guys for taking my question. Congrats on another great quarter here. David, just to follow up on the last comment. How are customer conversations changing now in the second half? I mean, obviously, the first half was sort of about triage, as you mentioned. But what are you hearing from customers about the role of cloud and hybrid cloud and then Citrix -- the value that Citrix can provide to them? And then, just one follow-up for Arlen.
- David Henshall:
- Yes. Phil, I think the conversations are tracking as we have anticipated. Again, it's becoming more strategic. You're seeing a larger number of large deals, for example, as we get into the back half of the year. They would take on a bent that feels more transformational in nature. People, let's face it, have been operating in this pandemic period for seven months now. They've gone through this period of realizing that hybrid work is actually more productive than the model that they had before. And so people have gone back and they're reassessing what is the new normal need to look like. And so, that has taken on a number of larger projects around transforming all aspects of their business, how they engage with customers, partners, employees, et cetera. And that's where we come in. If you -- to talk about broader kind of transformational things, I was just going through the large transactions over the last quarter, and there's a few that really stood out to me. And one, for example, is one of the world's largest natural resource companies. This is one we're partnering with both Microsoft and Amazon together. This customer is streaming applications out of AWS. They're using elements of multiuser desktops at Microsoft and the entire thing is being managed with Citrix, also managing some on-prem footprint. And what they're really trying to do is just transform the entire employee experience, their real estate footprint, and how they plan to work long-term. Just examples like that, that are coming more and more in the forefront. I think you'll see that more in the Q4 timeframe as well.
- Phil Winslow:
- Great. Thanks. And then just a follow-up for Arlen. Arlen, I know there are a lot of moving parts right now, but thinking for the early look at 2021, wondering if you could also just give us some color on cash flow? I know you're not guiding there. But obviously, cash flow has been running ahead of EPS and net income. How should we think about that next year?
- Arlen Shenkman:
- Yes, I mean look, Phil, there's a lot of seasonality and a lot of moving parts around cash flow on a quarter-to-quarter basis. We obviously feel good, and we have over $1 billion of cash flow for the trailing 12-month period. So, feel good about where we are. You also, from our investor presentation, know that we've put out some views around 2022 and I think that you'll continue to see us feel good about what we said in October around this year and around 2022. But obviously, we're not going to guide free cash flow as we go on a year-to-year basis. But we clearly feel good about what we showed last year and how we presented our growth and our trajectory around our Investor Day last year.
- Phil Winslow:
- Got it. So, still on track for 2022. All right. Thanks guys.
- David Henshall:
- Thanks Phil. Thank you.
- Traci Tsuchiguchi:
- Thank you.
- Operator:
- Our next question comes from Walter Pritchard with Citigroup. Your line is now open.
- Walter Pritchard:
- Hi thanks. David and Arlen, wondering how you're thinking about a couple of things into 2022 with that higher growth, I think, than people are expecting. One is around the NetScaler business, and you're talking about some pressure on the hardware side, just wondering how that factors in. And then also on these temporary licenses, sort of what degree of success of conversion are you assuming there? And any other factors we should be thinking about in terms of that 4% number for next year? Thanks.
- David Henshall:
- Yes. Let me take the first part. And then, Arlen, you can talk about the conversion of temporary capacity licenses. So, I mean if you step back and think about how we're looking at really this year but leading into 2021 and beyond, I mean, you've seen that the Workspace is really what's driving the business overall. I mean Workspace is up 16% in total revenue this year. That's more than double what it was last year. In fact, I just saw that IDC's share data came out showing Citrix with an increasing share of a growing market. So, I'm really happy with the performance of the Workspace that we've seen over the last six quarters. I think it really demonstrates the value that customers see in these types of technologies and post-pandemic for everything that we've talked about, why they've got a -- when they've got strategic importance and is higher than where it had been. In terms of networking, there's clearly been a large shift there from the way we're delivering software. You saw a sharp decline in hardware sales year-over-year and that's been offset by a really big decline in subscription and software. So, that's the direction that we're taking the overall portfolio. I don't think that's different than the way we have talked about it from a category standpoint. The category is flat to low grower and what we're doing to transform that to really help customers separate this idea of delivering networking services, security service, Workspace, optimization services and what we can do to use those to power a differentiated and sensible Citrix-integrated Workspace over a long period of time. And so for us, it's kind of playing in the category, but also using them to really augment and create an amazing user experience for our broader Workspace, which is still 80% of the company.
- Arlen Shenkman:
- Okay. And Walter, just put a finer point on what Dave was saying, when you think about the growth rate you're talking about, we think about the conversion of the licenses that you asked about, we're thinking of those as stat. So we obviously are driving towards a longer-term relationship with those customers and migrating those customers to our SaaS solutions, which obviously has its own transition. And then -- and as David mentioned, the networking business, the only thing I'd highlight for you is, and we obviously took this into account when we thought about our growth rate going into '21 is the acceleration of the mix, right? And the acceleration of the mix in networking business this quarter looks a lot like Workspace a couple of years ago, which is it went from 29% to 66%. So we're talking about very significant moves in that business. And obviously, that's all baked into how we thought about our growth trajectory and how we're going to go into '21.
- Walter Pritchard:
- Great. Thanks. That’s helpful. Appreciate it.
- Operator:
- Thank you. Our next question comes from Mark Moerdler with Bernstein Research. Your line is now open.
- Mark Moerdler:
- Thank you and congratulations on the good quarter. I think people should be surprised at how well that's going. Can you give us up -- 2 questions, I guess. Can you give us an update on the economics of the subscription cloud transition? Are you seeing -- you talked last year about a revenue lift from a license moving to a subscription versus license to SaaS. Is that still how you're thinking about that? And then as a follow-up, can you give us a little more color on the Microsoft expanded partnership? I know that's still early. You mentioned a win. How do you think that's going to impact that shift and the speed of the shift to SaaS? Thanks.
- David Henshall:
- Yes. Mark, let's start with the Microsoft piece. As we've talked about really for 20 years, I mean, this has been an amazing partnership and what we do to embrace and extend the Microsoft set of technologies. Earlier this year, we obviously took that to a more strategic level than we've ever had in the past and the overall objective of helping our customers transform it. In this case, it means Transform Citrix Cloud and Azure. And so I'd say that we're continuing to operationalize some of the new elements of that, the areas where we're selling together, we're developing joint solutions. But in terms of the overall execution, it's going really well. I called out to Phil's question, a big natural resources company. But there's also a lot of other examples already in Q3, a big state university where it is a WD plus Citrix to address students, in fact, of the use cases. One of the biggest stock exchanges around the world, which was a long time Citrix customer going through that exact migration. They're working on the cloud migration to Azure, and we're doing that together. And so I think the benefit of bringing together multiple partners just helps abstract away a lot of the complexity for customers. So the closer we can work together with a lot of the great partners like Microsoft, it makes their journey easier. And so I think it's really -- it's a win-win for everybody when we do that. So we're going to continue to operationalize throughout Q4. And we'll just – each quarter, we'll talk about some of these great wins we're doing together. Can you repeat the other parts of your question?
- Mark Moerdler:
- Sure. Absolutely. We had talked about last year about the revenue lift you thought over time would occur from the shift from a perpetual license to either term subscription or SaaS. Can you give any update on how you're thinking about that now that we're further in and now that you're going to be more aggressively with the end of sale of licenses how that lift is going to be -- how big that lift is going to be? Any data would be appreciated.
- David Henshall:
- Sure, Mark. There's really 2 aspects of that, that I think are important to understand. The first one is when we talk to install based customers, they're traditional Citrix customers that are moving from where they were to a Citrix Cloud. That uplift from their ongoing maintenance requirements are – it's roughly 30%, 40%. That hasn't changed. That number has been very consistent, and that's what we have been able to execute against. In terms of the overall economics, no change. Pricing has actually been remarkably stable over the last two, three quarters across our various platforms. And so the breakeven from an economic standpoint for us, whether we're selling a subscription cloud service or we're selling a perpetual license, remains just under three years from a time frame. But probably more importantly, from a strategy point of view, what that allows us to do is not only ensure customer success to a higher level, but it gives us a lower friction when we're starting to layer on incremental innovations, like our analytics services, for example, performance and security analytics, where it just becomes an add-on sale. And that's just one example of how, over time, we expect to be able to drive higher value per customer.
- Mark Moerdler:
- Beautiful. Very much appreciate it. Thank you and congrats.
- Operator:
- Thank you. Our next question comes from Heather Bellini with Goldman Sachs. Your line is now open.
- Heather Bellini:
- Thank you. David, I just had a couple of questions. I wanted to follow up on what you were just saying to Mark about security and analytics. Is there any data you could share with us thus far on what up-sell has looked like of those types of offerings? And how you see it kind of helping, I guess, ARPU, if you will, on a per customer basis? And then also, just in terms of the pace of conversions from the first licenses or the short-term capacity licenses that you guys had in the beginning of the year, when you're thinking about your forecast for calendar 2021, which you gave from a revenue perspective, how much does that play into it? And are there expectations that you can share with us about the conversions? Thank you.
- David Henshall:
- Yes. I'd repeat something that Arlen said just a minute ago, and that was that we are running programs, of course, that will start the end of this year, but it's really more of a Q1, Q2 phenomenon. The intent there is to convert those licenses to SaaS. And so those would have less of a recognized revenue impact into 2021, but we certainly expect that we'll be able to convert a good portion of those, and that's just based on early conversations, customer usage data, et cetera. But again, because they're converting from what had been largely recognized upfront to a longer-term subscription, it's a relatively muted benefit that will just flow in over time.
- Heather Bellini:
- Okay. Great. And just the uptake of the analytics and security stuff that you've seen thus far?
- David Henshall:
- Yes. I think it's really interesting. I mean it's an early model, been in the market now for a few months. And so we've done more of a limited release, just trying to learn and grow. The business is still immaterial from a dollar standpoint. It's doubling sequentially. I think it's really driving from a model standpoint what we've laid out. It's the opportunity to go back is to, frankly, anybody that is – that is a long time Citrix customer, but the most value being added, of course, those that have converted to the cloud and layer on unique insights, not just as one more monitoring tool, but there's things that are really driving more autonomous actions to help drive a better security model, better performance model and all the contextual attributes that we've talked about. So you can see the pricing out there and kind of draw a picture back to what the overall TAM is. But over time, this could be a really material business, and that's how we're looking at it. It's just early on right now, so I'm just a little bit cautious in putting out early term expectations.
- Heather Bellini:
- Okay. great. Thank you.
- Operator:
- Thank you. Our next question comes from Raimo Lenschow with Barclays. Your line is now open.
- Raimo Lenschow:
- Thanks and congrats from me as well. I want to ask a slightly more bigger picture question again. David, if I look at how customers can solve this new working environment of being -- having to be a lot more flexible in terms of what they offer their employees in terms of where to work and how to work, et cetera, like, can you just remind us, like, what would be the solutions that are available there? To me, that seems like just Citrix and one more competitor, but like maybe I'm missing something. Just kind of remind us on how this can be achieved. And then where are customers on that journey towards that? Thank you.
- David Henshall:
- Sure, Raimo. I think it's a bigger picture question that's worth talking about just from that. I mean when we entered this pandemic period, there was a large narrative in the marketplace about how long it was going to last. And I think that those had anticipated the lockdown being two, three, four weeks at a time employed a number of different solutions to just allow people to connect remotely, simple VPN probably being the most obvious one. As it persisted over a period of time, two things happened. One is that a lot of companies stepped back, and they realized that a VPN, for example, is just not a great solution. It's not a great security picture, and it's not a great user experience from a performance point of view. And so many of those have stepped back and thought about what do we need to do longer term. The other thing that's been really interesting is just that the view that remote working is actually way more productive than people anticipated. And so now you see all these different studies, including those by our Citrix research arm, that will point to two-thirds or three-quarters of companies that are planning on adopting a more flexible model for a few reasons; one, it's better for individuals, drives higher engagement, higher productivity, it's better for companies because they can reduce real estate footprint, reduce absenteeism and all these great attributes we've talked a lot about. And so this idea that it's not about working either in a physical office or at-home, it's just about enabling productivity where were people happen to be. And the one common denominator there to make sure that that experience from a user standpoint is secure, it's managed, it's available and it's consistent, is a digital workspace. And so a lot of the pivot that we're driving in our conversations, our positioning, of course, is really removing this idea that it's either work-from-home or work in the office. But really, it's about working anywhere. And that's why we really believe that the digital workspace type technologies have a really strategic importance going forward. And that’s one of the reasons why you've seen the growth rate of that business tick up as strongly as it has throughout Q1, Q2 and Q3 of this year and what we believe to be a nice tailwind going forward. We have to keep driving that idea forward to make sure that it's not just about virtualization, for example, but really creating that holistic workspace platform that allows us to deliver applications in a virtual way directly or actually made it mobile. And that's the benefit of what we've been building.
- Raimo Lenschow:
- Perfect. Seem very clear. Thank you very much. Congrats.
- Operator:
- Thank you. Our next question comes from Sanjit Singh with Morgan Stanley. Your line is now open.
- Sanjit Singh:
- Thank you for taking the question, and congrats on a really solid Q3. As we look into 2021 and beyond and you guys make your push to the cloud, can you frame out for us what are the initiatives that you guys have in place to drive that adoption of cloud? What do you feel is under your control versus what's more left to the customer in terms of thinking about moving the cloud, as they think about their broader cloud migration strategies, like if you could sort of address the initiatives you have in place versus what – what you're up against in terms of the broader priorities customers are facing.
- David Henshall:
- Sanjit, I'd say there's kind of two ways to look at that. One is a more short-term tactical answer and one is the broader strategic direction of Citrix. And on the tactical side, when you're working with a customer, it's really predicated on a number of different things
- Sanjit Singh:
- That's super helpful. And just as a follow-up, coming off of that last question. On the earnings letter, you talked about having – you guys are – sort of have confidence in your longer-term targets, and we've been talking about 2022. As we think about, on the one hand, greater seat penetration, a higher priority promote work versus what you guys have acknowledged as a slower pace to cloud, can you sort of give us your latest thinking versus a year ago on sort of the path to that – to those longer-term targets? Like what gives you the confidence that you are on track today versus a year ago?
- David Henshall:
- Well, the simple answer is that a year ago when we were talking about longer-term targets, I mean, today, we are running roughly $100 million higher revenue than the expectations entering this year. We just provided an initial guidance for 2021. It's probably $50 million to $60 million higher than the current consensus. And so we are continuing to bump up our expectations. That's against the backdrop of a really uncertain economic environment around the world. So we're looking at it just based on the success that we have had, the pipelines and the execution that we have delivered over the last few quarters and then these broader, let's call them, secular trends that are going on in the market. So nothing happens in a straight line, of course. But obviously, our confidence, based on our results, our execution continues to move forward. When it comes to the pace of cloud transition and where we're focused and where customers are focused, there are really tactical quarter-to-quarter items. Nothing has changed from a longer term strategic path.
- Sanjit Singh:
- Understood. Thank you very much, David.
- Operator:
- Thank you. Our next question comes from Karl Keirstead with UBS. Your line is now open.
- Karl Keirstead:
- Thanks very much. Arlen, I've got a couple for you. A little bit more modeling questions. First, if you could maybe help define what sharply negative means when you're talking about Q1, are we talking down 5%, 8%? Just -- that's not typical language you guys use for revenues. They're normally quite steady. So maybe you could help us there. And then secondly, just on the operating margin front, there's, as you're aware, a fairly healthy debate among investors about whether COVID and the crisis has fundamentally changed the margin structure of software companies as reps don't need to be flying every day and conferences can be virtual, et cetera. You didn't explicitly provide margin guidance for 2021, but your revs and EPS guide look, maybe I'm wrong, but it feels like up 75, 100 bps, something like that. Where do you land on that question of whether the crisis we're in has changed the margin outlook of Citrix in the broader sector? Thanks so much.
- Arlen Shenkman:
- Sure. Thanks, Karl. I think when you think about 2021, obviously, we had a 20% growth rate in the first quarter. And there's work for us to do in terms of how we think about the business. And we're certainly not in a position to provide quarter-by-quarter guidance when we think about 2021 at this point. But I think we just wanted to help you in your model to start to get your arms around the concept that it's going to be challenging because we're going to be writing SaaS licenses for these converted customers. And so there will be a headwind. We, obviously, as we go into fourth quarter, we'll be able to provide more guidance. But David and I thought it was important just to make that everyone recalls the significant growth rate we had in the first quarter last year, and obviously, we take that into account as we think about normalization and acceleration through 2021. The second question around op margin. I think my two sense are, obviously, you're going to have decreases in travel, but you're going to have increases in other areas in terms of enablement and employee empowerment and helping your employees make the right decision for them based upon their role and where they can be most effective in getting their jobs done. As we think about that as a company, that's what we do. And so we, as a company, will continue to invest in our business to ensure we have the right processes, tools and infrastructure in place to make our customers successful. So I don't see it fundamentally changing our business. I think that there will be a lot of companies that have to address needs of their employees by moving money from one portion of their P&L to another. There certainly could be from a real estate and from other areas longer term benefits. But when I look at our business, I think David and I see great opportunities to grow this company, and I think you'll continue to see us invest towards those growth opportunities.
- Karl Keirstead:
- Okay. Very helpful. Thanks Arlen.
- Arlen Shenkman:
- Thank you.
- Operator:
- Thank you. Our next question comes from Jason Ader with William Blair. Your line is now open.
- Jason Ader:
- Yeah, thank you. I have two quick ones. First, for fiscal 2021, the 4% growth. Can you quantify the headwind from the shift to subscription for us? And then secondly, just on the networking side, David, can you talk about some of the demand in that space? I know you have the shift to subscription that's also creating some headwinds to top line to revenue from networking, but what's the demand in that space? And how do you see that evolving from here?
- David Henshall:
- Why don't I take the second part of that first, and then Arlen can talk more about the 2021 number. So networking is an interesting market. I mean, it's clearly one that's in transition for a number of reasons, and some of those are things that we're trying to accelerate. When I see hardware in the networking area down, 20%, 30%, 40% in a quarter, there's a big shift going on. And clearly, in our business, that's been offset by software. Software is growing well over 50% year-on-year. But that's a lot of the outcome of strategy. And so what we're doing is really helping customers in this 'tweener right now. It's just every big customer I talk to is focused on some level of hybrid execution. There's really nobody that is 100% on-prem or 100% in the cloud anymore. It's always somewhere in the middle. And what we can do with our networking assets, of course, is help bridge that fork, being able to deploy networking services across any different form factors, to have a management plane on top of it, which we call ADM, that allows them to run those resources in a public cloud, on-premises in any form of hybrid they want to yet still control it with a common infrastructure. And that's something makes us unique. And that's one of the reasons why when I look at our networking business, and let's exclude the big hyperscalers for a minute. But I look at our networking business over the last few quarters, we have likely outperformed the underlying market. So we're helping drive that transition. And something I said earlier about, we'll continue to do that, but we're also really focused on leveraging networking services in a tighter, more integrated way with the integrated workspace to ensure workspace security, workspace delivery, workspace performance. And so we're kind of working both sides of that strategic equation. And I'd say the overall dynamics in the market should track relatively closely to the types of business outcomes we're showing.
- Arlen Shenkman:
- And to build off of David's comments there, I think what's important to think about in terms of that transition is not only do we have the transition that's continuing from SaaS – from perpetual to turn to SaaS on the Workspace business. But as you think about that networking business, you also have not on the significant uptick we saw this quarter from 29% mix to 66%, but you also have, as David articulated, software and hardware. So now we're at 48% of software. So you have these transitions happening simultaneously, which obviously is embedded in our guidance and our thoughts around how we'll get through that transition and continue to grow through 2021.
- Jason Ader:
- And on the 4% for 2021, Arlen?
- Arlen Shenkman:
- I mean it's embedded in our transition. No, I think...
- Jason Ader:
- Can you quantify that?
- Arlen Shenkman:
- It's far too complicated. I think there's way too many parts in that to be able to derive percentage conclusion and equate that to a revenue line, particularly as you think about the networking business with software and hardware, that transition and then the transition across SaaS and on-prem and perpetual and maintenance. I think it's just – there's no easy line of sight to that.
- David Henshall:
- Yes. Jason, I'd add, just look at what we've done this year from a recognized revenue standpoint, plus the 20% growth in future committed revenue. Next year, our guidance is right now 4% growth in the top line, and I would expect future committed to also continue to expand.
- Jason Ader:
- Understood. Thank you.
- Operator:
- Thank you. Our next question comes from Robert Majek with Raymond James. Your line is now open.
- Robert Majek:
- Thanks. You touch on in an earlier question, but can you elaborate further on any recent changes you've made to incentivize and encourage customers to shift to the cloud offering?
- David Henshall:
- Yes. Robert, I'd say it's less about customer incentives and more about internal things that we're doing. And so really the – probably the most important, most pronounced, of course, is engineering and innovation and things that we're doing individually to deliver high quality, resilient, feature-rich solutions. That's just a given. Second thing is, how do we look at their environment and make it easier. And that includes the work that we're doing around migration tools, around customer success programs, around architectural guidance and we'll continue to execute on that. And then the work we do with partners like Microsoft and Google and Amazon and others to try and help them migrate not just the Citrix component, but the underlying workloads in a more holistic approach. We're going to keep pushing on all three of those. We are making some adjustments as we look into the future around internal incentives to make sure that we're putting a higher importance on transition of the install base, I think we're at that point where we can do that we should do that now, aligning that not only across our field facing resources but across the entire company. So it's those types of incentives that we'll do internally, and then externally it's just about delivering product.
- Robert Majek:
- Thanks a lot.
- Operator:
- Thank you. Our next question comes from Brad Reback with Stifel. Your line is now open.
- Brad Reback:
- Great. Maybe touching some more in the calendar 2021 guide. I know there are a lot of moving parts are aligned. But any sense from a high level on the SSP contributions specifically be expected to grow in 2021 be flat, down anything would be helpful? Thanks.
- David Henshall:
- Yeah. I think we consider it to be down and when you think about the hyperscalers we've been successful in moving them to longer term subscription contracts. That's been reflected in some of the mix over the last few quarters. We continue to expect to see the percentage of contribution, which is a 3% this quarter continued to decline as we have those larger hyperscaler providers go to subscription contracts and represent a smaller proportion of our revenue.
- Brad Reback:
- Great. And then just one quick follow-up. Dave on the Americas comment being down 1% year-over-year, is it right to assume that most of the SSP contribution comes into the Americas number, so if you exclude that it was actually up 3%, 3.5%?
- David Henshall:
- Without doing the math, I think the first part of the question is absolutely correct, almost 100% of it would come in Americas.
- Brad Reback:
- Okay. Thanks very much.
- David Henshall:
- Thanks, Brad.
- Operator:
- Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to David Henshall for closing remarks.
- David Henshall:
- Thanks. Let me just thank everybody again for joining us this morning and leave you with a few closing boxes I think about a quarter. First one is the subscription model transition is progressing really well. It's clearly out of where we thought entering this year, I think its you know reflected in both our third and our fourth quarter revenue mix between product and in licensed and subscription, that's point number one. Point number two is that our workspace solutions are really what's driving the business, they're continuing to gain market share and mindshare we've seen great acceleration moving from even Q2 to Q3. And then lastly we continue to believe we're very well-positioned in the long-term, both from a strategic market presence point of view, and against delivering our longer term targets. So with that, let me just say again thank you very much and look forward to speaking everybody at the end of the quarter. Have a good day.
- Operator:
- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Other Citrix Systems, Inc. earnings call transcripts:
- Q3 (2021) CTXS earnings call transcript
- Q2 (2021) CTXS earnings call transcript
- Q1 (2021) 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