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spk10: 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 be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Tracy Tsuchiguchi, Vice President of Investor Relations. Please go ahead, ma'am.
spk09: Thanks, Joelle. Good morning, and thank you for joining us for today's third quarter 2020 earnings call. Participating on the call with me is David Henshaw, President and Chief Executive Officer, and Arlan Shankman, 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 provisions of the U.S. securities law. 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 the 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?
spk03: Thanks, Tracy, 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 these 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 that a 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 believe 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?
spk10: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from It's high kid drawn with Oppenheimer. Your line is now open.
spk07: 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. were lagging that in Europe, you'd expected kind of the Americas to be a quarter behind the Europe as far as recovery, but it looks like no year-over-year progression in the Americas. Well, Europe remained very strong for, I guess, three quarters in a row now. Help me reconcile your business with the original commentary.
spk03: Let me take a few of those questions, and then, Arlan, feel free to jump in here. Sure. 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. There was an anomaly last quarter, which is taken out of the 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 really helping customers move into the pandemic period and able to work from home, everything that was a high priority. Back after 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 a billion dollars 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 their 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 very happy with the way that Tim has delivered.
spk10: Next question. Our next question comes from Bill Winslow with Wells Fargo. Your line is now open.
spk11: Hey, thanks, guys, for taking my question. Congrats on another great quarter here. David, just to follow up on that 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 the value that Citrix can provide to them? And then just one follow-up for Arlan.
spk03: Yeah, Phil, I think the conversations are tracking as we have anticipated. Again, it's becoming more strategic. You're seeing 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, you know, what is the new normal need to look like? And so, you know, that has taken on a number of, you know, 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. You know, to talk about broader kind of transformational things, you know, I was just going through the large transactions over the last quarter, and there's a few that really stood out to me. And, you know, one, for example, is one of the world's largest natural resource companies in This is one where partnering with both Microsoft and Amazon together, you know, this customer is streaming applications out of AWS. They're using elements of multi-user desktops out of 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. There's just examples like that that are coming more and more to the forefront. I think you'll see that more in the Q4 timeframe as well.
spk11: Great, thanks. And then just a follow-up for Arlan. Arlan, I know there are a lot of moving parts right now, but thank you for the early look at 2021. I wonder 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?
spk06: Yeah, I mean, look, Phil, there's a lot of seasonality and there's a lot of moving parts around cash flow on a quarter-to-quarter basis. We obviously feel good. I mean, we have over a billion dollars of free cash flow for the trailing 12-month period, so we feel good about where we are. You also, from our investor presentation, know that we've put out some some views around 2022. And I think that, you know, you'll continue to see us feel good about what we said in October around this year and around 22. 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 shared last year and how we, you know, presented our growth and our trajectory around our investor day last year.
spk11: Got it. So still on track for 22. All right. Thanks, guys. Thanks, Bill.
spk06: Thank you.
spk10: Thank you. Our next question comes from Walter Pritchard with Citigroup. Your line is now open.
spk13: Hi, thanks. David and Arlen, wondering how you're thinking about a couple things into 22 with that higher growth I think that 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.
spk03: Yeah, let me take the first part, and then Arlan can talk about the conversion of temporary capacity licenses. So, I mean, if you step back and you think about, you know, how we're looking at really this year, but leading into 21 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 market 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. And I think it really demonstrates the value that customers seeing these types of technologies and post-pandemic for everything that we've talked about, why they've got strategic importance that 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, but I don't think that's different than the way we have talked about it from a category standpoint. The category is, you know, a flat to low grower and what we're doing to transform that to really help customers separate this, this idea of delivering networking services, security services, workspace optimization services, and what we can do to, you know, use those to power a differentiated and defensible 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.
spk06: Okay. And Walter? Just to put a finer point on what David was saying, when you think about the growth rate you were talking about, when we think about the conversion of the licenses that you asked about, we're thinking of those as SaaS. So, you know, we obviously are driving toward a longer-term relationship with those customers and migrating those customers to our SaaS solutions, which obviously has its own transition. And then, 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 the networking business this quarter looks a lot like you would have seen Workspace a couple 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.
spk13: Great. Thanks. That's helpful. Appreciate it.
spk10: Thank you. Our next question comes from Mark Mordler with Bernstein Research. Your line is now open.
spk05: Thank you, and congratulations on the good quarter. I think people should be surprised at how well that's going. Can you give us an update? Two questions, I guess. Can you give us an update on the economics of the subscription cloud transition? You talked last year about a revenue lift from a license moving to a subscription versus a 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.
spk03: Yeah, Mark, let me start with the Microsoft piece. You know, as we've talked about probably for 20 years, I mean, this has been an amazing partnership and what we do to embrace and extend the Microsoft set of technologies and 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, in this case, it means transforming Citrus 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, where we're developing joint solutions. But in terms of the overall execution, it's going really well. You know, I called out to Phil's question, a big natural resources company. But, you know, there's also a lot of other examples already in Q3, you know, a big state university where it is a WD plus Citrix to address students and faculty use cases. One of the biggest stock exchanges around the world, which was a longtime 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 a win-win for everybody when we do that. So we're gonna 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?
spk05: 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 SAS. Can you give any update on how you're thinking about that now that we're farther in and now that you're going to be more aggressively with the end of the sale of licenses, how that lift is going to be, how big that lift is going to be? Any data would be appreciated.
spk03: Sure, Mark. There's really two aspects of that that I think are important to understand. The first one is when we're talking about install-based customers, the traditional Citrix customers that are moving from where they were to a Citrix cloud, that uplift from their ongoing maintenance requirements, 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 break-even 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 the timeframe. 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, you know, incremental innovations like our analytics services, for example, performance and security analytics where, you know, it just becomes an add-on sale. And, you know, that's just one example of how over time we expect to be able to, you know, drive higher value per customer.
spk04: Beautiful. Very much appreciate it. Thank you and congrats.
spk10: Thank you. Our next question comes from Heather Bellini with Goldman Sachs. Your line is now open.
spk01: Great, thank you. David, I just had a couple questions. I wanted to follow up on what you were just saying to Mark about security and analytics. Is there any data you can share with us thus far on what upsell 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 the conversions, you know, from the burst 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 21, 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. Yeah.
spk03: I'd repeat something that Arlen said just a minute ago, and that was that, you know, we are running programs, of course, that will start near the end of this year, but it's really more of a Q1, Q2 phenomenon. And, you know, the intent there is to convert those licenses to SAS. And so those would have less of a recognized revenue impact into 2021. But, you know, we certainly expect that we'll be able to convert a, you know, a good portion of those. And that's just based on early conversations, customer usage data, etc. But again, because they're converting from, you know, what had been largely recognized upfront to a longer term subscription, it's a relatively muted benefit that'll that'll just flow in over time.
spk01: Okay, great. And just the uptake of the analytics and security stuff that you've seen thus far.
spk03: Yeah, I think it's really interesting. I mean, it's an early model. It's 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. You know, 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 into frankly, anybody that is a longtime CISRS 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 as things that are really driving more autonomous actions to help drive a better security model, better performance model, and all the contextual attributes 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.
spk01: Okay, great. Thank you.
spk10: Thank you. Our next question comes from Raymond and Charlotte Barclays. Your line is now open.
spk08: Hey, thanks, and congrats from me as well. I wanted to ask a slightly more bigger teacher question again. David, so if I look at how customers can solve this new working environment of 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, can you just kind of remind us what would be the solutions that are available there? To me, that seems like just Citrix and one more competitor, but maybe I'm missing something. Just kind of remind us on how this can be achieved. And then where are customers on their journey towards that? Thank you.
spk03: Sure, Emil. 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, you know, those that anticipated the lockdown being, you know, two, three, four weeks at a time, employed a number of different solutions to just allow people to connect remotely. You know, simple VPN probably being the most obvious one. You know, as it persisted over a period of time, two things happened. One is that, you know, a lot of companies step back and they realize 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, you know, many of those have stepped back and thought about, you know, what do we need to do longer term? The other thing that's been really interesting is just 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'll 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, you know, in productivity, where would 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, you know, a lot of the pivot that we're driving in our conversations, our positioning, of course, is, you know, 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, you know, we really believe that the digital workspace type technologies have a real strategic importance going forward. And that's one of the reasons why you've seen the growth rate of that business take 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, you know, directly, or actually made it mobile. And that's the benefit of what we've been building.
spk08: Perfect. Very clear. Thank you very much. Congrats.
spk10: Thank you. Our next question comes from Sanjay Singh with Morgan Stanley. Your line is now open.
spk15: Thank you for taking the question. Congrats on a really solid Q3. As we look into 2021 and beyond and you guys make your push to the cloud, can you sort of frame out for us what are the initiatives that you guys have in place to drive that adoption of cloud? Essentially, what do you feel is under your control versus what's more left to the customer in terms of thinking about moving to cloud as they think about their broader cloud migration strategies? If you could sort of address that. the finishes you have in place versus what you're up against in terms of the broader priorities customers are facing.
spk03: Sanjeev, 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, the level of skills they have, really what they're trying to achieve from business outcomes point of view, their capital and operational constraints, et cetera. And so it's one of the reasons why we work with great partners like Microsoft and others to try and make that migration as easy as possible, to come up with ways so that we can simplify the technical migration, but also the business side of it, the commercials and economics, and try to just help them on that journey. Along with that, we've been investing in higher-level architectural guidance and the types of customer success and business value engineering that allow customers to think about these things more strategically. Tactically, we're also investing in our customer success teams that help customers get up and running quickly, ensure usage, and ultimately renew long-term. as well as engineering investments I talked about in the last couple of quarters, continuing to drive as quickly as possible on things like migration tools, on anything that we would perceive as a blocker or an area that is just hard. And so some of that is just work, and we just need to keep working through it. Longer term, the strategic answer is that all of our new innovation is coming via cloud. You know, uh, Heather asked a question about analytics, which is a really cool new platform service that we're delivering. And that is only going to be really available to customers that are on the cloud, as well as the level of intelligence that we're building into the workspace over time to automate, uh, you know, simple common workflows today, but over time, much more complex, uh, you know, AI driven workflows that'll focus on driving a new level of user engagement, user productivity, and ultimately output. And so that's kind of how we address it both short-term and long-term.
spk15: 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 know, you guys are sort of have confidence in your longer-term targets, and we've been talking about 2022. As we think about, on one hand, greater seat penetration, a higher priority for remote 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 those longer-term targets? Like what gives you the confidence that you are on track today versus a year ago?
spk03: Well, the simple answer is that, you know, a year ago when we were talking about longer-term targets, I mean, today we're running roughly $100 million higher revenue than the expectations entering this year. We just provided initial guidance for 2021 that's probably $50 million, $60 million higher than the current consensus. And so we are continuing to bump up our expectations. And 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, you know, based on our results, our execution, you know, continues to move forward. When it comes to the pace of cloud transition and where we're focused and where customers are focused, those are really tactical quarter-to-quarter items. Nothing has changed from a longer-term strategic path.
spk15: Understood. Thank you very much, David.
spk10: Thank you. Our next question comes from Carl Kersted with UBS. Your line is now open.
spk12: 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%? That's not typical language you guys use for revenues. They're normally quite steady revenues. 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, etc., 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 BIP, something like that. Where do you land on that question of whether the crisis we're in has changed the margin outlook of Citrix and the broader sector? Thanks so much.
spk06: Sure. Thanks, Carl. I think when you think about 2021, obviously, you know, 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 21 at this point. But I think we just wanted to help you and 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 SAS licenses for these converted customers. And so there will be a headwind. We obviously, as we go into the fourth quarter, will be able to provide more guidance But David and I thought it was important just to make sure that everyone recalled 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 21. On the second question around op margin, I think my two cents 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 the needs of their employees by moving money from, you know, one portion of their P&L to another, there certainly could be from a real estate and from other areas, you know, longer-term benefits. But when I look at our business, I think, you know, David and I see great opportunities to grow this company, and I think you'll continue to see us invest towards those growth opportunities.
spk12: Okay. Very helpful. Thanks, Marlon. Thank you, Carl.
spk10: Thank you. Thank you. Our next question comes from Jason Ader with William Blair. Your line is now open.
spk16: Yeah, thank you. I have two quick ones. First, for fiscal 21, 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 headlines to top line to revenue from networking. But what's the demand in that space and how do you see that evolving from here?
spk03: Why don't I take the second part of that first and then Arlene can talk more about the 21 number. So, you know, 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 being 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 that are in this tweener right now. 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 for them. 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 that 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 three 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 that we're showing.
spk06: And to build off of David's comment 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 perpetual to term to SaaS on the workspace business, but as you think about that networking business, you also have not only the significant uptick we saw this quarter from 29% mixed 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 21.
spk16: And on the 4% for 21, Arlan? I mean, it's embedded in our transition.
spk06: No.
spk16: You can't quantify that? No.
spk06: It's far too complicated. I think there's way too many parts in that to be able to draw a 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 there's no easy line of sight to that.
spk03: Yeah, Jason, I'd add just, you know, look at what we've done this year from a recognized revenue standpoint, plus the 20% growth in future committed revenue. You know, next year, you know, our guidance is right now 4% growth on the top line, and I would expect, you know, future committed to also continue to expand.
spk16: Understood. Thank you.
spk10: Thank you. Our next question comes from Robert Magic with Raymond James. Your line is now open.
spk14: Thanks. You touched on it 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?
spk03: Yeah, Robert, I'd say it's less about customer incentives and more about internal things that we're doing. And so, you know, really 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. And 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 installed base. I think we're at that point where we can do that and 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.
spk12: Thanks a lot.
spk10: Thank you. Our next question comes from Brad Reback with Stifel. Your line is now open.
spk02: Great. Maybe touching once more on the calendar 21 guide, I know there are a lot of moving parts, Erlin, but any sense from a high level on the SSP contribution specifically? Do you expect it to grow in 21, be flat, down? Anything would be helpful. Thanks.
spk06: Yeah, I think we consider it to be down. 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 at 3%, this quarter continue to decline as we have those larger hyperscaler providers go to subscription contracts and represent a smaller proportion of our revenue.
spk02: 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 in to the Americas number? So if you exclude that, it was actually up 3%, 3.5%?
spk03: Without doing the math, I think the first part of the question is absolutely correct. Almost 100% of it would come in the Americas.
spk02: Okay. Thanks very much.
spk10: Thanks, Brett. Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to David Henshaw for closing remarks.
spk03: Thanks. Let me just thank everybody again for joining us this morning and leave you with a few closing thoughts as I think about a quarter. First one is the subscription model transition has progressed really well. It's clearly out of where we thought entering this year. I think it's reflected in both our third and our fourth quarter revenue mix between product and license 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 mind share. 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. I look forward to speaking to everybody at the end of the quarter. Have a good day.
spk10: Ladies and gentlemen, this concludes today's conference call. Thanks for participating. You may now disconnect.
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