Q3 2020 Citrix Systems Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to stand by thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Citrix systems Inc. third quarter 2020 conference call.
I'll bet, you said and I know this and only mode. After the speakers presentation. There will be a question and answer session to ask a question.
Ask a question during the session you want need to press star one on your telephone if you acquire any brothers and she's got Star zero.
I would now like to hand, the conference your speaker today Jim.
Did she Gucci Vice President of Investor Relations. Please go ahead ma'am.
Thanks, John Good morning, and thank you for joining us for today's third quarter 2020, earning call.
Participating on the call with me is David Henshall, President and Chief Executive Officer, and Ireland shape, and executive Vice President and Chief Financial Officer.
Please note that we have posted our third quarter earnings water to our Investor Relations website at <unk>.
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. security glass.
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 water and in the Companys filings with the FCC copies are available from the FCC or on our Investor Relations website.
On this call we will discuss various non-GAAP financial measures as defined by assay by the Fccs regulation G. a reconciliation.
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 what are found on the Investor Relations page of our website now I'd like to turn the call over to David <unk>, President and Chief Executive Officer David.
Thanks, Tracy and good morning, and welcome everyone. Thanks for joining us today.
I'm pleased to report another really strong quarter bridge, even with a mix of subscription bookings that's running higher than anticipated.
Oh, 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.
It was the best for the full year were 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 a lot of southern launch largely working from home. This concept of back to the office is really moving beyond a discussion of one location versus the other I think there's a broad realization going on the hybrid workstyle blends really together the best attributes are much physical office environment with of course, the flexibility that any of individuals.
Need to be productive and really do their best work in.
Oh 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.
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. The role operating then they were also going to provide some early headlights into our initial expectations for 2021.
So with that let's open up the call can take some questions operator.
Thank you as a reminder to ask a question you will need to cut star one on your telephone let's try.
Let's try your question comes to Punky. Please standby, we compile the <unk> roster.
Our first question comes from Ittai Kidron with Oppenheimer.
The line is now open.
Thanks, guys. Good numbers, maybe can talk about the bounce back into cloud subscribers, how much of that was that one customer that we're missing last quarter and how much of that was truly.
Quarterly momentum and then as a follow up on the regional breakdown. It was kind of a little bit surprised to see the Americas not showing any girls I think last quarter, you said that since openings into U.S. were lagging docking Europe, you would expect to kind of the Americas to be.
Third quarter behind to Europe, as far as recovery, but it sounds like it looks like there's no year over year progression in the Americas, While Europe remained very strong for I guess three quarters in a row now get help me reconcile your business with your dog, which original commentary.
Let me take a few of those costs.
A few of those questions and then rolling you don't feel free to jump in here. So if you take a step back and you look at page subscribers, you're right. We had a really good sequential growth from from Q2 to Q3. The there <unk> there wasn't anomaly last quarter, which is taken out of the denominator for you know for obviously going forward. So this is just net increases of about 800000 new paid.
I was on a sequential basis and it tracks very well to everything we've talked about over the last six months first half of the year was very focused from a customer point of view frankly, citrix point of view on really helping customers move into the pandemic period enable work from home and everything that was a high priority back half of the year as I've stated a few times is really for.
Focused on getting back to driving with the strategy of the company.
Migrating existing users to the cloud focusing on that new users and in fast and in some cases on Prem subscriptions and so we're just executing against what we've said before happy with the progress on the outside you clearly see it when you look at subscription they are which is now over $1 billion and continuing to grow north of.
50% year on year.
In terms of the Geo mix I'd say that there's just a little bit of noise going on in there because of the geography that different phases of the overall transition to subscription that's really been let out of the Americas and that's the thing more than anything it's influenced or you're on your growth rates a meal frankly has had outstanding execution on.
Both across our teams and the way we're operating from so.
Solutions standpoint in the various markets a fix yourself really nice steady progress little bit further behind than the overall subscription transition.
Per se, but I'm, just I'm very happy with the way that tends to limit.
Next can you.
Our next question comes from Phil Winslow with Wells Fargo. Your line is now open.
Hey, Thanks, guys, you're taking my questions. Congrats on another great quarter here, Yeah, David just to follow up on that last comment how are customer conversations changing now and in the second half.
I mean, obviously the first half was sort of a battery eyes as you mentioned, but what are you hearing from customers about the role of cloud and hybrid cloud and the Citrix is about the by the city wide.
You are to them and then just one follow up for Arlon.
Yes, so I think the conversations are tracking as we have anticipated you know 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 band that feels more transformational in nature, you know people, let's face it have been operating in this pandemic courage.
Or 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 in their reassessing it or what is the new normal need to look like.
So you know that has taken on a number of larger projects around transforming all aspects of their business, how they engage with customers partners employees et cetera, and that's where we come in you know Steve to talk about broader kind of transformational thing John I was just going through that the large transactions over last quarter and there's few that really stood out to me one.
For example, a job you know one of the world's largest national resource companies. This is one where partnering with both Microsoft and Amazon together you know this customer is streaming applications I think that the wash their using elements a multi multi user desktops on the Microsoft and the entire thing is being managed with Citrix also managing some on prem footprint to.
And what they're really trying to do is just transformed me the entire employee experience there with every new state footprint and how they plan to work long term.
Just examples like that that are coming more and more the fourth one I think you'll see that more in the Q4 timeframe as well.
Great. Thanks, and then just a follow up for Arlon, you know Arlon, you're right I know that a lot of moving parts right right now, but thank you for the the early look at 2021 Wonder if it also just give us some color on capital I know, you're not guiding there, but obviously cat who's been running ahead of of a of EPS and net income how should we think about about that next year.
Yeah, I mean look you know Phil there's a lot of seasonality and it's a lot of moving parts around cash on a quarter to quarter basis. We obviously feel good and we have over a billion dollars of free cash flow for the you know for the trailing 12 month period. So we feel good about where we are you also know from tomorrow investor presentation, though that we put out in some sense.
Use around 2022, and I think that you'll continue to see us feel good about what we said in October around this year and and around 22, but obviously, you're not going to guide free cash flows as we go on a year to year basis, but we really feel good about what we shared last year and now weve presented our growth and our trajectory around.
Our Investor day last year.
Got it so still on track for 22, alright, thanks, guys.
Thanks, Phil Thank you.
Thank you. Our next question comes from Walter Pritchard with Citigroup. Your line is now open.
Hi, Thanks, David and Arlon wondering how you're thinking about a couple of things into 22 with that higher I think than people are expecting one is around the netscaler.
The netscaler business and you're talking about some pressure on the hardware side, just wondering how that factors in and then also on on these temporary licenses sort of what degree successive conversion are you assuming there and any other factors, we should be thinking about in terms of that that 4% number for next year. Thanks.
[noise] Yeah. So let me take the first part and then earlier you talked about the conversion of temporary capacity licenses. So I mean, if you if you step back and think about how we're looking at a really this year, but leading into 21 and beyond I mean, you you've seen that though the workspace is really what's driving the business overall I mean work spaces.
16% in total revenue this year, that's more than double what it was last year. In fact, I just saw that idcs market share data came out showing citrix west you know an increasing share of the growing market. So I'm really happy with the performance of the workspace than we've seen over the last six quarters and I think it really demonstrates the value that customers see in these types of.
Technologies and post pandemic for everything that we've talked about why they've got a job you know what when it got strategic importance of this hardware than where it had been.
In terms of networking, there's there's clearly been a large shifts there from the way we're delivering software you saw a sharp decline in yen in hardware sales year over year, and you know that's being offset by a really big decline in subscription and software. So that's the direction that were taking the overall portfolio, but I don't think that's differ.
And the way we have talked about it from a category standpoint, the category as you know flat to low grower and what we're doing to transform that to really help customers separate. This this idea of delivery networking services security services workspace optimization services and what we can do to use those to power a differential.
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 and create an amazing user experience for a broader workspace, which is still 80% of the company.
Okay, and Walter just put a finer point on what they were saying you think about the growth rate. You were you were talking about when we think about the conversion of the licenses that you asked about we're thinking of those OSAT. So you know, we obviously are driving toward a longer term relationship with those customers and migrating those customers who are SAS solutions was obvious.
He has its own transition and then and it as David mentioned the networking business I think I'd highlight for you is we actually took that into account when we thought about our growth rate going into 21 is the acceleration of the mix right and the acceleration of the nicotine networking business. This quarter looks a lot like you would have seen works takes a couple of years ago, which is it went from 29% to 66.
You were 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.
Great. Thanks, that's helpful. Appreciate it.
Thank you. Our next question comes from Mark Wardlow with Bernstein Research. Your line is now open.
Thank you and congratulations on the good quarter I think people should be surprised at how well that's going on can you give us an uptick two questions. I guess can you give us an update on the economics of the subscription cloud transition are you seeing.
Look last year about a revenue lift from a a licensed moving to subscription versus license to SaaS is that.
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 still early you mentioned to win.
How do you think that's going to impact that shift and the speed of the shift to SaaS. Thanks.
Yeah, Mark let's start with the Microsoft piece, you know as as we've talked about probably for 20 years. I mean, this has been an amazing partnership, but what we do to embrace and extend the Microsoft set of technologies earlier this.
Earlier this year, we obviously took that to a more strategic level than we've ever had in the past and you know the the overall objective of helping our customers transform and in this case it means transformed citrix cloud and Azure and so I'd say that you know, we're continuing to operationalize some of the new elements about the areas where.
Our 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 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 W.D. plus citrix to address.
Students and faculty use cases, one of the biggest stock exchanges around the world, which was a long time citrix customer.
Going through that exact migrations are working on the cloud migration Alger and where do we not 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 about you know great partners like Microsoft It makes their journey easier and so I think it's really.
It's a win win for everybody when we do that we're going to continue to operationalize throughout throughout Q4, and we'll just you know each quarter, we'll talk about somebody's, great, which we're doing together.
Can you repeat the other parts of your question sure absolutely that we had talked about last year about the revenue lift you thought over time would occur.
Shifting from a perpetual license to either term subscription or SaaS can you give any update on how you're thinking about that now that will fall the rent and now that you're going to be more aggressively with the end of the sale of licenses, how how that how that lift is going to be how big that lift is gonna be any data would be.
Appreciate it.
Sure Mark this there's really two aspects of that that I think are important to understand the first one is you know when we're talking about an installed base of customers you know the traditional citrix customers that are moving from where they were two ways. They citrix cloud you know that uplift.
From from their ongoing maintenance requirements or no. It's roughly 30, 40% no that hasn't changed now that number has been very consistent and that's what we have been able to execute against in terms of the overall economics, yeah. No change pricing has actually been remarkably stable over the last you know two three quarters.
Across our across our various platforms and so we don't break even from an economic standpoint for us whether we're selling they subscription cloud service worsening. The perpetual license remains just under three years come a time frame, but probably more importantly from a strategy point of view what that allows us to do is to not only ensure customer success.
A level, but it gives us a lower friction when we're starting to layer on incremental innovations like our analytic services for example performance and security out analytics, where you know it just becomes an add on sale and that's just one example of how over time, we expect to be able to drive higher value per customer.
Very much appreciate it thank you and congrats.
Thank you. Our next question comes from Heather Bellini with Goldman Sachs. Your line is now open gray.
Great. Thank you David I, just had a couple of questions I wanted to follow up on what you were just staying to market that security and analytics is there any data you can share with us thus far on what up sell hasn't looked like of those types of offerings and how you see it you know kind of helping I guess ARPU if you will.
On a on a per customer basis, and then also just in terms of the the pace of the conversion.
You know from the from the burst of 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 how much does that play into it never their expectations that you can share with us about it conversions.
Thank you yeah, I I'd I'd repeat something that Ireland said, just a minute ago not was that.
We are running programs of course that will start.
The end of this year, but it's really more of a Q1 Q2 phenomenon and you know the intent there is to convert those licenses to hsas and so those would have less of a recognized revenue impact or into 2021, but 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 convert.
Nations customer usage data et cetera, but again, because they are converting from what had been largely recognized upfront to a longer term subscription. It's a relatively muted benefit that'll that'll just flow in overtime.
Okay, great and just the uptake of the analytics and security stuff that you've seen thus far.
It's really interesting I mean, it's an early some 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 jump to learning and grow the business is still immaterial from a dollar standpoint doubling sequentially I think it's it's really driving from a from a model standpoint, what we've laid out that's the opportunity to go back into.
To frankly anybody that is that is a longtime sensors customer, but the most value being added of course those are converted to the cloud and layer on unique insights not just as you know one more monitoring tool, but as things that are really driving more autonomous actions to help drive a better security model or performance Mark.
All in all the contextual attributes we've talked about so you can see the pricing out there.
Kind of draw draw a picture back to what the overall Tam is but overtime this could be a really material business in China.
Looking at it. It's just it's just early on right now so I'm just a little bit you know a little.
You know a little bit cautious in putting out early term expectations.
Okay, great. Thank you.
Thank you. Our next question comes from Raimo Lenschow with Barclays.
Your line is open.
Hey, Thanks, and congrats from me as well I wanted to ask a slightly more bigger picture question again, David So if I look at how customers can solve this new working environment of being having to be a lot more flexible what the in terms of what the offer to employees in terms of where its work how to work et cetera, like <unk> can you just kind of.
Remind us like what would be the solutions that are available there to me that seems like just six weeks in one more competitor, but like maybe I'm missing something just kind of remind us on the on how this can be achieved.
And then whereas where customers on their journey towards that thank you.
Sure Raimo I think it's a it's a bigger picture question that's worth talking about just for a minute 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's you know those than anticipated the lock down being you know 234 weeks at a time employed a number of different solutions to just allow people to conduct.
<unk>.
Simple VPN, probably being the most the most obvious one you know as it persisted over a period of time two things happen. One is that you know a lot of companies step back and they realize that the VPN. For example is just not a great solution not a great security picture and it's not a great user experience from a performance point of view.
So you know many of those have stepped back and thought about you know what do we need to do longer term the.
The other thing that's been really interesting it's just the.
The view that promote 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 Middle 0.22 thirds or three quarters of companies that are planning on adopting a more flexible model you know for a few reasons one it's better for individuals drives higher engagement higher productivity.
No it's better for companies because they can reduce realistic 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 maybe only productivity, where when people having to be and the one common denominator there to make sure that that excuse.
Variance from a user standpoint is secure its managed its 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 and our position and of course as 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 we really.
He believes that the digital workspace type technologies, you know have a real in the strategic importance going forward and that's one of the reasons why you've seen the growth rate of that business you know tick up as strongly as it has throughout Q1 Q2 and Q3 of this year and what we believe to be a nice tailwind going forward, we have to keep driving.
I'd afford 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 were actually made of mobile and that's the benefit of what we've been building.
Perfect very clear thank you very much congrats.
Thank you.
Our next question comes from Sanjay sang with Morgan Stanley.
Your line is now open.
Thank you for taking the question thinking about on a really solid Q3. It is as we look into 2021 and beyond and you guys need to push to the cloud you sort of frame out for us.
What are the initiatives that you guys have in place to drive that that 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 migrations that you'd like it.
If you can sort of address the initiatives you have in place.
These initiatives you have in place versus what I'm, what you're up against in terms of the broader priorities customers are facing.
Sorry, but I'd say, there's this kind of a two two ways to look at that one is a more short term tactical answer and one is the broader strategic direction of some traction on the technical side.
When you're working with a customer it's really predicated on a number of different things the level of skills. They have you know really what they're trying to achieve from business outcomes point of view there their capital on 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 though 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.
To to think about these things more strategically.
Basically we're also investing in our customer success teams that help customers get up and running quickly it'll ensure usage and ultimately renewal long term.
As well as engineering investments I talked about in the last couple of quarters, you know continuing to drive as quickly as possible on things like migration tools on anything that we would perceive as a blocker or any 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 you know all of our new innovation is coming via cloud you know 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 club as well as now the level of intelligence, we're building into the workspace overtime to automate.
Simple common workflows today, but over time much more complex.
Revenue workflows that will focus on driving a new level of user engagement user productivity and and ultimately outlet and so that's kind of how we address it both short term and long term.
That's super helpful and just as a follow up on that.
For that last question.
On the earnings letter you talked about having you guys are sort of a confidence in your in your longer term targets. We've been talking about 2022, as we think about on one hand greater seat penetration higher priority from a word.
Versus what you guys have acknowledged as a slower pace. The cloud you sort of give us your latest thinking versus a year a year, though on sort of the path to that to that to those longer term targets like what gives you. The confidence that you are on track today versus versus a year ago.
The simple answer is that you know a year ago. When we were talking about longer term targets. I mean today, we are running roughly $100 million higher revenue than the expectations entering this year. We just provided initial guidance for 2021, that's probably 50 $60 million higher than the current consensus and so we are continuing to bump up our.
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 you know the pipelines and the execution that we have delivered over the last few quarters and then these broader must come 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 and our execution continues to move forward when it comes to the pace of cloud transition.
On and where we're focused and where customers are focused literally tactical quarter to quarter items nothing has changed from a longer term strategic Uh huh.
Understood. Thank you very much.
Thank you.
Next question comes from Karl Keirstead with you beat your line is now open Oh, thanks, very much Arlon I've got a couple for you.
A little bit more modeling questions first if you could maybe help define what a sharply negative means when you're talking about Q1 are we are we talking you know down five 8% just that's not typical language you guys use for revenue is there normally quite steady so maybe you could help us there.
Help us there and then secondly, just on the operating margin front, there's a as you're aware fairly healthy debate among investors about weather.
Cove it in the crisis has fundamentally changed the margin structure of software companies as you know reps don't need to be flying everyday in conferences can be virtual et cetera, you didn't explicitly provide margin guidance for 2021, but your reps and EPS guide looked maybe I'm.
Maybe I'm wrong, but it feels like up 70, <unk> hundred bips, something like that where do you land on that question of of a weather. The crisis. We're in has has changed to the margin outlook of a of citrix and the broader sector. Thanks, so much.
Sure. Thanks Girl.
When you think about it when you think about 21.
Mostly you know, we've got 20% growth rate in the first quarter and this works for us to do in terms of how we think about the business and we're certainly not 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 in your model to start to get your arms around the concept that it's going to be challenging because we're gonna be writing SAS licenses for these converted.
Customers and so there will be a headwind we obviously as we go in Fourq, where they'll be able to provide more guidance, but David and I thought it was important just to make sure that the you know everyone was 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 acceleration through 21.
On the second question around op margin.
I think my two cents are obviously, you know you're gonna 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 beginning their jobs done as we think about that as a company that's what we do.
And so we 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 one portion of their other PML to another.
There certainly could be from the real estate and from other areas you know longer term benefits, but when I look at our business I think you know deeper than I see great opportunities to grow this company and I think you'll continue to see us invest towards these growth opportunities. Okay very helpful. Thanks Harlan.
Thank you Chris.
Thank you. Our next question comes from Jason Ader with William Blair. Your line is now open.
Yes. Thank you I have two quick ones first for fiscal 21 are the 4% growth can you quantify that.
The headwind from the shift to subscription for us and then.
And then secondly, just on the networking side Dave.
David can you can you talk about some of the demand in that space. I know you have the shift to subscription that's also creating some headwinds to top line.
<unk> revenue from networking, but what's what's the demand in that space and how do you see that evolving from here.
What do I take the second part of that first and then Arlington talk more about the the 21 number. So you don't network industry 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 you know when I when I see hardware in the networking area down you know two.
2030, 40% in the quarter, there's a big shifts going on and you know clearly in our business. That's been offset by software software is growing well over 50% year on year, but that's a lot of the outcome of strategy and so what we're doing is really helping customers that are in this business Tweener right. Now just every every big customer I talked to is.
Focused on some level of hybrid execution, there's really nobody that is 100% on prem or 100% of the cloud anymore. It's always somewhere in the middle and what we can do with our networking assets of courses is help bridge that for you.
And able to deploy networking services across any different form factors to have a management plane on top of it which we call you know ATM that allows them to run those resources in a public cloud on premises in any form of hybrid they want to get still control. It with you know with a common infrastructure and that's something that makes us.
As a 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 net.
When I look at our networking business over the last few quarters, you know we have likely outperform the underlying market. So we're helping drive that transition and something I said earlier about you know 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 works.
Based delivery workspace performance and so we're kind of working both sides of that strategic equation, but I'd say the overall dynamics in the market should track relatively closely to you know the types of business outcomes that we're showing.
And the building to build off of.
The build up 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 sat from from perpetual to term psas on the workspace business, but as you think about that networking business. You also have not only a significant uptick we saw this quarter from 29% mix is 66.
But you also have the the as David articulated software and hardware. So now we're at 40% of software. So you have these transitions happening simultaneously, which obviously is embedded in our form in our guidance and our thoughts around how we will get through that transition and continue to grow through 21.
And on the 4% for 21 Arlon.
I mean, its embedded in our transition.
No I I think do you quantify that I.
I far too complicated I think there's way too many parts in in that to be able to drive you know percentage conclusion, and equate that to a revenue line, particularly as you think about the networking business software and hardware that transition and then the transition across an on Prem perpetual and maintenance I think it's just there's there's no easy line of sight to that.
Yes, Jason I'd add just look at what we've done this year from a from recognize revenue standpoint, plus the 20% growth and then in future committed revenue next year you know our guidance is right now 4% growth on the top line and I would expect future committed to also continue to expect.
Understood. Thank you.
Thank you.
Our next question comes from Robert Magic with Raymond James Your line is now open.
Thank 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.
Yeah, Robert I'd say, it's it's less about customer incentives and more about internal things that we're doing and so really the probably the most important most pronounced of course is engineering and innovation and things that were doing individually to deliver high quality resilience you know a feature rich.
Options, that's just to give it second thing is how do we look at their own 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.
Mike rate not just the citrix component, but the underlying workloads in a more holistic approach and we're going to keep pushing on 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 worth.
That point, where we can do that we should do that now aligning that not only across our field facing resources, but across the entire company. So it's those types of incentives that will do internally and externally, it's just about delivering product.
Thanks, a lot.
In Kenya.
Our next question comes from battery back with Stifel. Your line is now open.
Great maybe touching once more on the calendar 21 Guy that I know there are a lot of moving parts arlon, 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.
Yes, I think we consider to be down and do you know when you think about the hyperscalers. We've been successful in moving into longer term subscription contracts. That's been reflected in some of the mix over the last few quarters. We continue to expect to see that you know the percentage of contribution which is a 3%. This quarter continued to decline as we have those.
Larger hyperscaler providers go to subscription contracts and represent a smaller portion of our revenue.
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 three 3.5%.
It without doing the math I think the first part of the question is absolutely correct almost 100% of it would come in the Americas.
Okay. Thanks very much.
Brent. Thank thank you I'm not showing any further questions. At this time I would now like to turn the call back over to David Henshall for closing remarks.
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 is progressing really well. It's clearly ahead of where we thought entering this year I think is reflected in both our third in our fourth quarter revenue mix between product.
And and license and subscription that's that's point number one point number two is that our workspace solutions are really what's driving the business, they're continuing to gain market share and mindshare, we've seen great acceleration moving from even Q2 to Q3 and then lastly, we continue to believe we're very well positioned in the long term both from a strategic market presence point of view and again.
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.
Ladies and gentlemen, this concludes today's conference call.
Bidding you may now disconnect.
[music].