Citrix Systems, Inc.

Hello, and welcome to the Citrix Q2 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. I would now like to turn the conference over to Tracy Tsuchiguchi, Vice President of Investor Relations. Please go ahead, ma'am.

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 Henshaw, President and Chief Executive Officer, and Arlen Shankman, Executive Vice President and Chief Financial Officer. Please note that we have posted our second quarter earnings letter to our Investor Relations websites. 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 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 websites. On this call, we'll 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 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?

Thanks, Tracy. 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, up 47% year-on-year, while total ARR was steady at 13% growth. However, it's clear that we've had some sales execution challenges, some areas that are reflected in our Q2 results, execution challenges, some areas that are reflected in our Q2 results. And, you know, we believe that the cause of this has been really the increased complexity around managing this faster transition model types and motions that are key components of our reported revenue and overall P&L. So we believe we've identified the root causes and we're taking immediate actions to remedy these execution challenges. And this is including reorganizing our sales team, 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're refining our channel focus to prioritize landing and growing new business activities. While our SaaS transition metrics obviously are progressing really well, we acknowledge that many of our 2021 guidance ranges, as well as the financial modeling guideposts we provided back at our analyst meeting in 2019, are going to take us longer than anticipated to achieve. So taking into account our year-to-date results and the changes we're making organizationally and with our overall go-to-market activities, recalibrating the shape and the path of the overall business model transitions. At our financial analyst meeting in October, which we'll have in conjunction with our third quarter earnings results announcement, we plan to provide an updated framework to more simply model our faster transition to SAS and the expected business and financial outcomes. So through this, we, of course, continue to encourage investors to really focus on annualized recurring revenue, as we believe this continues to provide the most accurate measure of the underlying business performance as we go through this business model transition. So with that, let's stop and open it up for questions. Operator?