Citrix Systems, Inc.

Good morning, everyone, and welcome to the Citrix Q3 2021 conference call. All participants will be in a 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 and one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Tracy Tucci-Gucci. Please go ahead.

Good morning, and thank you for joining us for today's third quarter 2021 earnings call. Participating on the call will be Bob Calderoni, Chairman and Interim Chief Executive Officer, and Arlen Shankman, Executive Vice President and Chief Financial Officer. Please note that we have posted our third 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 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 Bob Calderoni, our Chairman and Interim Chief Executive Officer. Bob?

Thanks, Tracy. Good morning, and thank you for joining us. For those of you whom I've not yet met, I'm Bob Calderoni, Chairman of the Board and Interim CEO. And as you know, I stepped into this new role just a few weeks ago. And while I will need some time before I can share with you my views on 2022 and beyond, I thought I would give you some of my early observations on the business. Today, I see a business with very strong assets and a solid foundation. Citrix, as you know, is a leader in its markets. We're number one in the VDI DAS market, and we're number two in the ADC market, and those market positions are supported by strong technology advantages. The markets we participate in are healthy and growing, and our important VDI DAS business has some strong secular tailwinds with trends supporting secure remote hybrid work. We have a strong and loyal customer base across the globe, and we have a strong presence in every industry vertical. And from a business perspective, we've proven success in our transition to the cloud with over $1 billion of SaaS ARR, and we have largely transitioned our model to recurring revenues with over $3 billion of ARR. I believe the overall health and velocity of our business is best demonstrated by the fact that we expect our total AR to grow nearly 10% this year on an organic basis. And I remind you, this growth is following a rather extraordinary year in 2020 that benefited from an unusual COVID demand. Another important metric signaling the health of any recurring revenue business is renewal rates. And while we do not disclose our renewal rates, I can say the rates are both strong and improving. There's lots of points on the positive side, but I think it's fair to say there have also been some missteps along the way, which is clearly overshadowing our success. These missteps are largely in our go-to-market motion and in our own forecasting, and I'm confident they're all fixable. We need to shore up our channel programs and put in place the right incentives for our channel partners. and we need to focus sales investments on direct selling quota-carrying individuals and eliminate excess investments in overlays and shared commissions. We're going to address all of these issues as part of our planning for 2022, and I will share more of that with you as part of our Q4 earnings call. Much of this work is underway, but not yet complete. I can say, however, the objectives for this work are very clear. we strive to be more predictable, delivering solid growth again in our total AR, along with better margins and cash flow. My priority is to set us on a course that deliver the long-term sustainable growth and profitability I know we are capable of achieving. I'm very happy to be in this role. I look forward to working with the rest of the management team to achieve these objectives, and I look forward to talking with many of you over the coming months. With that said, let me now open the call for your questions.