Q1 2020 Earnings Call

[music].

Isn't gentlemen, thank you for standing by and welcome to the Citrix first quarter 2020 earnings conference call. At this time all participant lines are not listen only mode. After the speakers presentation. There will be a question answer session. That's the question. During the session you wanted to press star one on your telephone.

Be advised of todays conference is being recorded if you require any further assistance. Please press star Zero I would now like Dan The conference over to your Speaker today, Traci Tsuchiguchi Vice President Investor Relations. Thank you. Please go ahead now.

Thanks, TJ and good morning, everyone.

Thank you for joining us for today's first quarter 2020 earnings call participating on the call will be David Henshall, President and Chief Executive Officer, and Arlon Shankman Executive Vice President and Chief Financial Officer. Please note do we have posted our first 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 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 as highlighted in todays earnings water and in the company's filings with the FCC.

He copies are available from the FCC or on our Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures as defined by the Fccs regulation G., a reconciliation that the differences between GAAP and non-GAAP financial measures discussed on today's call can be found at the end of our earnings later on the Investor Relations website Pedro website, now I'd like to turn it over to David.

Evident and Chief Executive Officer, David.

Good morning, and thank you for joining us I hope everyone is staying helping shape. During this time. So as you can tell we've moved our earnings call to occur before the market opens to decrease the scheduling conflicts that have been due to the concentration of companies. It took me reports after market close this week.

So what you saw in our earnings letter that we released early this morning, we had a very strong first quarter, reflecting the importance of citrix to our customers business continuity efforts.

There's really no doubt that our business benefited from the near term pickup in demand. That's resulted this unprecedented academic.

Remote work in general change from a nice to have to being truly mission critical for all businesses.

More importantly longer term, we believe that employees going employers will be the way in which we all worked through a very different like.

Over the long run we believed that the secular trends will be a tailwind door business that's organizations around the world or would be recognizing the benefits to employee productivity cost reduction and operational flexibility.

That said as we consider our guidance for the balance of 2020, we certainly remain cautious due to the under one financial impact the Kobin Nineteens gonna have on economic capital around the world.

However, based on the strength of our first quarter as well as visibility into the near term pipeline. We are raising the top end of our full year outlook for both revenue and easy.

So of course, we're going to continue to assess our outlook for the second half a year, it's more information on the scope of economic disruption comes to life.

So with that we're now happy to open it up for questions and talk through the first quarter.

As a reminder, chaska question you wanting to press star one on your telephone to withdraw your question for Us about King Please standby well, we compile the Q1 a roster.

Our first question comes from a line of Phil Winslow from Wells Fargo. Your line is now open.

Oh, yes excited for taking my questions I'm glad to hear that you all are healthy and that's wish the your families in your and your team.

Maybe just a question for you obviously, a strong first quarter results, what do you get some color into sort of what you're seeing out.

In the current month, you mentioned some of the visibility. They haven't Q2, you know just maybe compared for March to April 4th minutes, one quick follow up.

Sure Phil.

I'd say that if you step I can only get Q1, obviously you know March when everybody realizes that they were gonna have to put business continuity. The top unless there was a surgeon and in demand. So we did a few so we actually did these looking back into the latter part of January February to prepare for so in anticipation we created a number of you.

Unique offerings offerings for you know SMB customers to simplify access security et cetera.

Offerings for our installed base customers teachers ramp burst capacity very quickly with what color limited use nonrenewable licenses.

And a number of other things and so a lot of uptick clearly threw out throughout March and some continuing in taking from us.

It's a little bit by geography in terms of sub the rate and pace. If you look at our results based on the geology, you'll see that feel very strong results across the meal and see wash.

Hey pack was a bit more of a general and actually that one continuing over the course of this quarter as well.

And so overall I'd say you know when we look at the upcoming quarters are clearly business continuity and related activities continue to be incredibly important to businesses medium term I think a lot of companies are going to step back in to realize that the tree odds you. If you will that they put in place in Q1, not just citrix customers.

Companies in general.

It's really limited I mean, the ability to just give somebody a video chat app what connection email is really the basis and so we're having conversations now about people stepping back and realizing that their business runs on hundreds and hundreds of applications. So the need for a more complete infrastructure is going to continue to be important network.

Bottlenecks connectivity those types of things were also right. So you know the I'd say the focus will change modestly in Q2 and beyond but overall I'm just reinforces the critical position that citrix plays in our customers infrastructure.

Great. Thanks, David and then just a follow up on that maybe thinking about deployment type yeah. Obviously, one of things even talking about is over the last several years the shifted the cloud from your partnerships with Microsoft Yeah, We've heard that the crisis, taking place and maybe some of the strain on all fronts data centers do you see an acceleration and ship it to the cloud and how do you think that that is and will play out.

Two things Bill I mean, if you look at our business and specifically in Q1, we have such a large base that is still on promises we have over 7 million Licensors Macleod today, but you balance that against roughly 100 million like Iran.

So for our business, we saw a lot more expansion across not just sheer cheerful.

But in general I think that this current crisis is really going to accelerate the overall trends that we've seen them.

Whether that is the adoption of public cloud sosh remote flexible working these are trends that were already in place before this crisis. Yet I think this won't just served US an accelerant to continue to move those four because business is realized said this isn't a onetime about this is really a an example of just the overall.

Trends in the reasons they were adopting many of these new truck technologies and business.

Great. Thanks, David.

Thank you. Our next question comes from a line of Karl Keirstead from Deutsche Bank. Your line is now open.

Thank you, David and congrats on the quarter and for the collective company efforts to help.

So many customers through this crisis I wanted to ask you a couple of questions maybe one for you one for Ireland.

Dave for you and maybe you could describe mechanically how how to Q plays out as you phase out these limited use or burst capacity licenses I presume that.

A portion of customers taking advantage of those programs will have to come back to citrix, assuming they were going to continue operating at elevated capacity levels to negotiate new deals I presume a at more normalized price points. So maybe you could describe how that'll work obviously your twoq you read his guidance and.

Applies a D cell back down to a more normalized 3% growth rate, but maybe you could talk through mechanically how this end of the burst capacity will play out.

Sure Carl I mean against the backdrop of them very very uncertain economic environment is how I think everyone should view our forward guidance.

When you talk specifically about the mechanics, you're right a lot of companies around the world went into this crisis, assuming that the shelter in place orders were going to be you know a matter of weeks I think many people are stepping back now and realizing that you know, we're not going to get back to a more normalized environment Intel.

Exceeds our widely distributed around the globe, so that's becomes quarters or even years and with that as a backdrop. You know, we certainly believe that part of our operational execution over the next few quarters is about helping take some of these burst capacity licenses and really work to a transition them into more.

Permanent long term club licenses, that's going to be the right decision for customers. So we'll put programs in place to do that as well.

Okay, Great and then maybe for Arlon orland, despite the massive upside to reported revenues a few of the other metrics didn't get a quite the same list operating cash flow was solid but up only 6% reported or deferred revs was actually flat year over year I suspect.

Correct is that there's some cash collection payment term issues that might be causing this dynamic of huge revenue lift, but some of the other metrics not getting lift do you mind, describing those and if in your response you could confirm whether you still feel comfortable with the free cash flow target.

Of seven to $8 per share this year. Thank you.

Yeah. Thanks for the question you know as you said there. There's obviously a number of moving factors in the free cash flow and in some of the revenue. There. There's you know subscription mix and then there's the mix within subscription and as you highlight if you look at this quarter. We had you know on Prem was up a essentially perpetual license rub, 28% and.

As you also saw we had a pretty significant increase in on term flex licenses, which obviously also come up upfront. So that leaves the great opportunity to go renew those as you highlight but you're right those things do move within that and again, there's a number of factors involved but you know, we we feel comfortable with where we are insurance.

Our performance and obviously in terms of how we're thinking about our free cash left for the year.

Okay terrific. Thank you both.

[noise]. Thank you. Our next question comes from the line of Heather Bellini from Goldman Sachs. Your line is now open.

Great. Thank you and thank you David in Ireland for for taking the questions and hosting the call on the morning.

Quick couple of quick questions just on the line of what Carl was saying just about you know kind of what you're seeing in terms of payment terms is there anything you could tell us about you know from your existing customers, what you're seeing about their ability to pay bills on time are they asking for bango troms.

Also are people, who just happened to have renewals up in the quarter or even so far this quarter are you seeing them ask for gifts camps like like we're hearing from other vendors and then David I just wanted to follow up on on the limited use licenses you're mentioning if if they what is the term of goes it is it you know.

Is it variable is it no more than three month, so that if it wasn't that wasn't a bump license as you suggested people thought we would have.

Then in the situation for as long as we've done but can you share with us some specifics on how long does limited use license is what the what the duration of those are before we start to see whether or not people can convert and that I just got a follow up.

Sure Heather let me take the first part of that the second part of that question then Arlon once you jump in on the first part.

So overall the the license structure was somewhat customize based on.

What the customers needed at that point, but I'd say that overall, it was a year or less.

So it's certainly didnt, none of them extended beyond one year. They are non renewal the licenses and really just intended as burst capacity.

The the context again somewhere to what I said early is that once we come out of this you know regardless of how long that takes the expectation is that you know will land in a place that it's somewhere between where we are where we were when it comes to remote.

Most of the customers that I talked to are realizing the sea level low productivity benefits.

Cost savings and employee engagement that they had expect and so they're going back and questioning in some of their original assumptions whether that is realestate footprint.

Travel attendance at major conferences, so longer term I expect that these will be on this environment continued to be.

Secular change that's very good for our business.

Back to Gartner just released a survey a few days ago, pointing out that 74% of companies believed that they're going to expand promote work once that the crisis has passed I think it's it's a combination of both you know conversion of our short term licenses that we put in place to help customers through the pandemic as well as broad secular.

Our changes that will occur over the course, so no many quarters for years.

And then all one on the payments run.

Yeah on payment terms and there you know, we obviously kept our finger really on on the pool. So that is went through the quarter and I look back in a number of deals and frankly. It was it was pretty limited you know certainly we're we're sensitive to customers needs and we are responsive, but it was nothing really honestly out of the ordinary in terms of.

What we saw a in terms of discounting war or request for extended payment terms or click or collections.

And then David My only other question pretty was just long term deferred revenue just in this environment. Given people are trying to conserve cash should we expect you know what should we expect that's good but just start ticking down from here or do you have any color you could give us about that line item given people might not want to be.

Hang multiple years left from for quite sometime.

Yeah, it's hard to forecast at this point in time I mean, if you look at our our duration and obviously came down because of all the shorter term capacity that we think we put in place, but you know in general you step back and look at or or future committed revenue and it was up 19% year over year first you know versus 13, 15% growth in the back.

Half of last year, So we did see abroad acceleration.

I think it'll it'll it'll depend over the next couple of quarters in terms of how come the companys individual businesses are impacted but in general the in the importance of infrastructure to keep their rules that are effective remotely to keep those people engaged is going to continue to be you know very strategic and very high on the list of.

Customers, you're prioritizing show you know will come back and report on that when we have better visibility into what some of those dynamics or.

Thank you again.

Thank you. Our next question comes with a line of Mark Moerdler from Bernstein Research. Your line is now open.

Thank you and congratulations on the quarter and hope everyone on the call stays safe and healthy I've got two questions David.

Strong workspace beat was is predominantly due to existing customers buying more capacity, where are you seeing that uptick in new clients I'm buying works, they and implementing it and then a follow up question.

Sure Carl I'd say that the context for the answer is that Citrix has a footprint in just about every medium and large business.

We have hundreds of thousands of accounts right now so by definition most of our business does come from existing customers.

And however is you've seen in some of our earlier presentations were generally penetrated about 30% entity available knowledge workers and in those businesses. So we have a lot of room to continue to expand penetration. So that's where the bulk would come.

We did add you know well over a thousand net new customers in the quarter proposed tend to be more on the small medium sized business, yes, we have such.

Such broad distribution across large company.

Excellent and then on networking can you give us some more color on the networking.

Products were clients purchasing but the thing term licenses or hardware software was the special discounting any color would be appreciated. Thanks.

Sure.

Nokia's continuing the similar trends, we have talked about in in prior calls or the ability to deliver a pools capacity license, which allows customers to share oh actually share capacity across a whole bunch of different deployment models, whether that is on premise to cloud hybrid et cetera is a story the residents and.

So that's been the primary driver of of the business overall.

You look at Irene's letter, we will point out that software accounted for 44% of total networking revenue. That's you know that's continued to move up pretty pretty dramatically. So we've seen good results. There. We also pointed out that networking subscription in the first quarter increased over 130% year over year. So it's.

A continuation of the trends that we have seen before.

Excellent. Thanks, I appreciate and stay safe.

Alright, Thanks Mark.

Thank you. Our next question comes on the line a Walter Pritchard from Citi. Your line is now open.

Hey, David on the couple of questions for you on a on the products I just don't end plans as it relates to your phase out a perpetual how are you thinking about that this year, given what's been sort of a changing landscape and then a interested just on the strategic projects that you've highlighted things like trade up and so forth it.

Could weaken in the second half how did you see that type of business fair in a in the first quarter.

Sure on trade up trade up was de prioritized certainly in the first quarter I mean, our teams were working around the clock just to help customers focus on getting there you know getting their infrastructure up ramp you Bob et cetera. So we didn't have a whole lot of time to focus on that money will start to pick it back to that for the next couple of quarters.

And could you repeat the first part of your question. Please Oh just on the yeah on the perpetual licenses and how you're thinking about I mean, you were in a position I think for the year, where you were looking at ultimately facing those out.

How does that change at all given that given the environment right now.

Walter I think that I'm really no no real change I mean, as we've stated we expect to do so by the end of this year. We haven't tried an exact end of life to date.

Well, we've already started to make the changes in terms of sales compensation and others to de prioritize that and really continued driving our subscription transaction. We will of course be sensitive to customers in this unique environments, but I I'd say that our plans really haven't changed.

Great. Thank you thanks for taking the question.

Thank you. Our next question comes from the line of Sanjit Singh from Morgan Stanley. Your line is now open.

Thank you for taking the question that congrats on a really impressive Q1 had a couple of questions maybe maybe to start with our Lynn.

A number of your peers, how frankly.

Second the tax of withdrawing our full year guidance. So my first question is is what sort of gives you. The confidence obviously had a really strong Q1, but as I'm sorry, David mentioned, we are going to a more uncertain second half. So what are some of the underlying assumptions you guys made that gave you the confidence to to guide to the full year and how's that peaking.

Account people turning to work earlier versus later, just if you sort of walk through some of the fundamental assumptions all around giving guidance.

Thanks, I think what you know we feel good about the trend that we're in and I think you see that in terms of how we're thinking about the second quarter and as David said in terms of the relevance and the strategy. We've been executing upon so we see ourselves continuing to be part of an incredibly important conversation with our customers around remote work in any.

We think that'll continue that being said no the amount of uncertainty in the back half of the Irrs pretty significant. So we're I think we remain confident in terms of our near term execution, we understand our customers' needs and we understand where we are economically in the back half of your I think we frankly feel as if there's just a lot more.

Uncertainty in terms of the overall economic picture and wearable back.

Got it and then maybe David to to follow up on on Heather's question around the longer term opportunity on just recently stated that about you about 30% penetration coming into this crisis that information workers.

What has the sort of near term.

Surjit demand has what sort of incident that given you in terms of where that penetration could go ultimately well what are some sort of low hanging fruit in terms of what verticals or the bus underpenetrated coming in that could see the potential to it you know really adopt this technology, you're much more meaningful way going.

Board after we get pass these short term licenses.

Hi, good similar similar as sort of what Arlon. Just just articulated is that the conversation we're having with customers is really important we've been able to prove that a lot of rolls around the world can be performed remotely without a loss of productivity security engagement et cetera, and so well remote.

Access had been seen as a tool for a limited group of employees in some cases, even a park you know it becomes much more mainstream long term, it's company stepped back and rethink their real estate footprints their ability to access talent around the world in places where they don't have officers.

In many other real operational drivers the go well beyond realities of business called me when I.

I think this this situation where right now it's also increased the visibility of business continuity when it comes to people well beyond what it was historically, which tends to be more focused around systems and infrastructure.

And so this is now a board level conversation to make sure that businesses can continue to operate to nail the best of their abilities or regardless of situation. So I think that the overall conversation you know continues to be much more strategic overtime.

And for Ross It probably means that you know citrix has a vendor continues to increase and you know.

The strategic importance with all of our customers right. Now obviously, we've been focused on short term needs and helping companies be productive longer term. What this will expose is that you know the needs of employee engagement employee experience employee productivity and a lot of the you know overall value proposition that we talk about.

Our new solutions around the digital work space I think we'll also really increase because the need to make people as productive as possible is is very pronounced and it certainly impactful to businesses.

Appreciate the Pos David Thank you.

Thank you. Our next question comes from the line of rubber MAGEC from Raymond James Your line is now open.

Congrats on the strong quarter, you're benefiting from the shift to work from home, which is driving higher penetration rates, but the percentage on and put in U.S. is in the mid to high change right now how should we think about these two drivers and how it balances out for your results. This year I have one follow up question.

Robert when you look at the opportunity pool, we always sub sub segments. The total employee base that is operated by our customers into those that are you know knowledge workers or utilize compute as a critical part of their job. So we really tend to look at those roles, which can be performed remote.

Not just Holden.

And so you know well well, it's really unfortunate the segments of the economy that have been most impacted in the short term wouldn't have been they paid typical opportunity for centric seats and so there's a little bit of a balance there and that's an important one that we think through as well that said you know obviously were very sensitive to the.

I think environment and how that's going to play out over the balance of year, and how it's going to impact individual customers differently.

That's helpful and what's the price difference between unlimited use in the full licenses or have you started to see any customers upgrade from the limit used to the full license and what level of upgrades have you baked into the full your guide.

I'd say, it's there's no easy answer to the pricing question because a lot of speech so were customer specific a little bit bespoke, but you know if you look at the overall programs that were out there it was way less than half the price of <unk>.

Have a traditional license.

In terms of people upgrading its it's too early to have that conversation yet you know we'll talk about that once we have a couple of months under our belt.

Thanks, a lot.

Thank you. Our next question comes from the line of Ittai Kidron from Oppenheimer. Your line is now open.

Thanks, and I'd like to Echo some of my peers comments on you know the good work and keeping everybody safer we appreciate that.

A couple of questions for me.

First on the Oh unexplored years, all that maybe you could talk about how much of your business is tied into SMB.

Oh or perhaps to some of the more trouble verticals like travel hospitality and alike.

Yes, <unk>, we have obviously been through that analysis and look at and I think as you've seen over the years, either very very broad customer base and as David David just articulated we tend to have it very high school person knowledge workers. So you know what what I would say is obviously would you have some exposure that's baked in generally into our pitching the business isn't part of our analysis.

But it but it's not being overweight or or anything that you know you think it would have an impact on a business, it's as diversified and as far as often as ours, yes.

Got it and then as a follow up on looking at your networking business.

I think everybody's been talking about how cloud should benefit substantially from what's going on here.

Your yet U.S.P. revenue.

Didn't really a move on to your your year over year basis.

I know that visibility in this vertical is a little bit more complicated but is there any view on on weather dot business should pick up as well given everything thats going on.

The U.S.P. businesses, you know it is a choppy business.

As you mentioned it was a off a bit but honestly it represents about 2% of our revenue at this point and so it will continue to see RSP is also continue to buy product, but we'll continue to decrease as a percentage of her over already.

Hi, good good like us.

Thank you.

Thank you. Our next question comes from a line of Jason Adder from William Blair. Your line is now open.

Thank you I've got two questions first I want to understand the 111 million you guys pointed out in your letter.

On the business continuity, what is actually that mean and then second question, what what do you see as a competitive threat from a windows virtual desktop.

So in the first part of the question what we want him to do is just provide some incremental color in terms of the business drivers during the quarter and while business continuity has always been one up the core value propositions that we deliver as part of our solution in obviously increased and well. This is intended to be just.

I'm, a little bit more qualitative.

Have a metric is just giving people insights into how much of our business was specifically tagged around business gotten that doesn't mean that other other parts of our our quarter you know weren't influenced by that but when we look at it was certainly a higher concentration seen in prior periods. So we just wanted to get more specific guidance.

And then if you look at further down in the latter when we talk about a are you know we did exclude all of those a temporary burst capacity licenses from our a our calculation. They did not meet the traditional definition and so you know don't don't expect those to be in there as well you know we look at.

At Morris.

As number of people have said you know if we hear a successful in converting those few more permanent structures those will be additive to our our in future quarters.

Can you give us a quantification of how much of the.

If the bookings came from those limited use licenses.

Yeah, it's in the latter, but it's over $40 million worth it probably wouldn't period.

Okay, and then on the Windows virtual desktop.

Yes. So we continue to work very closely with Microsoft We continue to have a lot of joint engagement from a go to market standpoint around customers that are deploying everything from you know azure as a space capacity that are lucky that are looking at windows virtual desktop as a resource so on a that can be managed with Suntrust.

Cloud Oh, we saw a pretty good uptick in Citrix managed desktops in Q1 think of that as a turnkey daz off offering that sits on top of windows virtual desktop certainly off or not just ask your capacity, but all of the capabilities around to be fully functioning desktop.

We continue to have Oh, most conversations focused on customers that have a mixed use in bar customers that have resource owns that include things like citrix on Prem Citrix cloud Citrix on W.P.D. or even WB do you need to place I think that's going to continue to be the primary focus.

The next few quarters.

And Wtvd you can't serve is that sort of single pane of glass.

Well they are there different no different capabilities, that's different scope of technology and really a different focus and so up to this point, it's been attitude for most of our customers.

Thanks.

Thank you. Our next question comes from a line of Kirk matter from Evercore ISI. Your line is now open.

Hi, Thanks, very much in hope everyone's doing well, David you talked a little bit of outs or the broader shift.

Work from home, becoming more of a I think a board level.

The discussion as we get into broader digital transformation conversations.

You know obviously right now everybody is trying to sort of level sad and get their employees set up I guess, how many of your conversations. These days are really about the longer term versus just the near term and within that conversation. That's just kind of curious.

Our people thinking about sort of the transition from licenses to subscription or is it really just about look I I've got to rethink you know what's going on today and then called means six months and we can talk about sort of [laughter]. The future. Then once things have settled battle. That's just trying to get a sense on how much of your discussions. These days are focused more on just the here now versus sort of the longer term.

Our strategy of work from home. Thanks.

[noise]. It's good question Kirk I think obviously in the in the month of March or just about every conversation was focused on here in Dallas and frankly on a personal basis I was spending more time with hospitals and those types of organizations that just try to get them ramped up is as quickly as they possibly could so we were very very focused on customers.

I'd say overtime, though I mean discussions with my peers and other companies, it's really focused more on the longer term benefits of work from home realization that people are.

As productive as as they were in the office and in many cases more so there's a lot of conversations going on about real estate round travel around large conferences and those types of it I think it's too early to say that you know we've got Mehta trends that are in place, but I think its conversations with people are realizing that this is not yet.

A set of set of capabilities that should be available to a limited subset of your employee base, what can be looked out on a much broader much more broad basis, and and thought of it's just part of your overall infrastructure.

I'd say, it's it's relatively early but you know the trends that we talk about in the drivers long term I think are up or shortly in place.

[laughter] somewhat related to that just in terms of your expansion I think your relationships or some of the bigger GE has size.

And I think everybody was just trying to deal with again the here now, but we are there more inbound calls from those partners you know not maybe trying to set up deals for you know tomorrow, but you know it's starting to put together more I think comprehensive solutions that you all could go to market with in a bigger way, perhaps and 369 months whenever things normalize a little bit.

The Kirk we are of course working through a number of of opportunities was large partners or go to market and technology partners, but we're not a position to you know kind of pre announce anything let's wait till we get things completed and then we'll talk about.

Okay. That's fair thanks very much.

Thank you. Our next question comes from the line of Matt Hedberg from RBC capital markets. Your line is now open.

Oh, great. Thanks for taking my questions glad you guys are all well and helping all all of US out David I'm curious you know how long do you plan to sell some of these bespoke limited you seats and when looking across your your existing base at the end of the quarter give a sense for health or maybe prepare your basis in terms of I guess.

These business continuity seats.

Second part or the question that no I mean, we about subset of customers. Obviously that we have talked too I mean, we have a customer base that reaches into the hundreds of thousands I will say that specifically to the limited use licenses, we've announced that we will be phasing them out by the end of April so that.

Part of the program, we'll we'll we'll plays out of course, we're going to be focused on other initiatives across go to market things that have arisen and a lot of customer environments or have been recognized as a bottle that there's also a large set of customers out there maybe not customers of citrix, but just businesses in general.

So a very short term focused solutions like a VPN or something that you know they stepped back and realize that delivering the entire infrastructure over a more protracted period of time takes a more complete solution. So I think those are the kind of discussions that will transition into more of a complete digital workspace and then longer term it'll be fair.

Okay, just on employee engagement employee productivity benefits of cloud flexibility in the.

The same types of conversations we would've been having three months ago.

That's super helpful. And then you know I I found your comments are really really interesting, but noting that you know post coded you think seattle's will settle somewhere between where they were pretty cold and where they are today in terms remote workers. You know I guess, you know will feel that plays out how do you think that impacts a you know some of your other big.

This is like SD Lan you mentioned, VPN, but but maybe some of that those sorts of what are sales, saying about those sorts of businesses.

Well I'd I'd say that similar to my prior my remarks, the vis vis the secondary effect of some of these short term solutions as customers are going back and looking at overall performance looking at network capacity and capabilities, there and so we'll probably follow through with me.

Our opportunities Walter.

Great. Thanks Lucas.

Thank you.

Thank you. Our next question comes from a line of Brent sale from Jefferies. Your line is now open.

Good morning on the go to market or you can accelerate your quota carrying capacity. This year based on what you're seeing or do you do you leave your plan on change going into this.

Well I think we're looking at a number of different plans I mean, we we as an organization in general how are still hiring we are still hiring quota carrying capacity for still hiring engineering customer success and a number of other areas and we'll just balance that based on what the opportunities are in front of us given the a unique.

Circumstances around the corn environment, you know, we're obviously no replanting a few priorities and strategies and whatnot just focus on what is most important for customers and what can help them over the balance of 2020.

And just going forward on the deferred revenue line item can you just talk to the importance of that on I think then you've asked you know why we're not seeing faster growth do you anticipate that that will accelerate going forward.

I think you know as you as you think about how would go to this transition I think it's much more important focus on that future committed revenue number which is up 19% year over year. So we had about $400 million Unbilled and I think that's a much more important indicator, particularly as we talked about rent, which is you know do there's a lot of noise in our deferred number between prepayments.

Thanks. It happens so we think real placed the focus is on future committed.

Thanks very helpful.

Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your line is now open he thank you and I Echo the comments from my earlier on lists colleagues.

Two questions first and on the.

The emergency buying that Youre, an emergency situations that you saw in March.

David did that continue in April or is that you've mentioned to program for limited use is it got extended people, but are we kind of pretty much done with that in March or you still have more people, becoming Darren. That's question. One question too is on SMB like what are you hearing from a partners and what are you seeing in terms of SMB versus enterprise.

Behavior at the moment debt more stress on the SMB side versus enterprise already or and what are you seeing there. Thank you.

Yeah, SMB has actually been very resilient threw out throughout this period of time it but for US. It is a relatively small part of our overall business. So I won't move the needle in terms of the emergency buying I'm not sure I would exactly qualify it that same way but.

You know there was certainly a huge step up in the middle of a or middle of March that has come down from a level of intensity and then it becomes more of a.

Sector by sector Geo by Geo you know as I mentioned very at the early part of this call.

You didn't see quite the Spike in Asia Pacific Japan. It was more gradual over time is it just is a reflection of how quickly you know countries or regions went into a shelter in place work from home type type situation as you saw across Asia that was at a much different payoffs then you know the United.

Stage for example that pretty much moved into that mode over the course in a week or two but.

I think we'll we'll certainly not see that that level of first capacity purchasing but you know with its still obviously a high priority item for customers.

Okay. Thank you.

Thank you. Our next question calls on the line of Brad Reback from Stifel. Your line is now open.

Great. Thanks, very much couple of quick one David on the M&A front do you see this ur cobot situation is an opportunity to potentially get more aggressive as privates, maybe haven't seen financial stress.

Hard to tell I mean, it's a it's hard to know exactly what.

You know individual companies.

Thinking from an intent to point of view, but I will say when it comes to our our internal plans, we continued to be very aggressive and looking at the landscape looking at opportunities accelerate our [noise].

Our existing roadmap or you know very close to Jason sees and you know the backdrop. There is of course, we maintain a very disciplined filter looking for the right transaction at the right price and making sure that the benefits that we can bring to two that are demonstrably.

Great and then you've mentioned a few times your your expectation that kind of it may impact customer base.

Structurally setting yourself up going forward into the future. How does this impact citrix is structure going forward. How long do you think it would take to implement those types of changes. Thanks.

Well when it comes from our own business I mean, we're in a very fortunate position I mean, we have been delivering the future of work for 30 years. This is what we do and so you're way more prepared to be able to work remotely and so we've had a highly distributed workforce that said, we have been 100% work from home for you know the better part of.

Two months now and it raises visibility into you know certain practical challenges. There are a few roles that just can't be performed as efficiently remotely as they can in person and even though that's a very limited number for US you know it is more pronounced in other industries.

But we're going to take a step back and look at our own infrastructure our own work from home practices, and then probably balance somewhere in the middle I'd say that you know we had pretty good foresight into this and so in the January timeframe, we had gone through stress testing of our systems, some large scale drills and whatnot.

So as we moved into 100% work from home, we did it without you know without a hiccup.

We have already decided that we won't be.

Traveling on an internal basis for the balance of 2020 as you would expect we have cancelled most of our large scale events over the next few quarters and those are just to know the practical realities of where we are from an environmental standpoint, we'll step back and look at the most efficient way to go forward. There is certainly in person.

Meetings with customers and other things, though that are going to need to happen, but I think building up the skillsets to be as efficient digitally as you are in person if something that you know citrix as well as a lot of other companies are going to focus on going forward.

Great. Thanks very much.

Thank you at this time I'm showing no further questions I would like to turn the call back over to David Henshall CEO for closing remarks.

So thank you again, everyone for joining the call. This morning, you know as we look ahead to all this global economic uncertainty Brook course going to make the decisions operate our business in the best interest of our customers. Our employees are communities and our shareholders. We look forward to engaging with many of you virtually this quarter and talking to them get in three months.

Good day and up please stay safe.

Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.

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