思杰系統 (CTXS) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Citrix Systems, Inc. Third Quarter 2020 Conference Call. (Operator Instructions)

I would now like to hand the conference to your speaker today, Traci Tsuchiguchi, Vice President of Investor Relations. Please go ahead, ma'am.

Thanks, Joel. Good morning, and thank you for joining us for today's third quarter 2020 earnings call.

Participating on the call with me is David Henshall, President and Chief Executive Officer; and Arlen Shenkman, Executive Vice President and Chief Financial Officer.

Please note that we have posted our third quarter earnings letter to our Investor Relations website.

I'd like to remind you that today's conversation will contain forward-looking statements made under the safe harbor 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 the SEC's Regulation G. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call can be found at the end of our earnings letter found on the Investor Relations page of our website.

Now I'd like to turn the call over to David, our President and Chief Executive Officer. David?

Thanks, Traci, and good morning, and welcome, everyone. Thanks for joining us today.

I'm pleased to report another really strong quarter of results even with a mix of subscription bookings that's running higher than anticipated. The transition clearly accelerated over the last quarter, and we now expect the year to finish with 85% to 90% of total bookings coming from subscription bookings in the fourth quarter. Regardless of this, for the full year, we're still raising the midpoint of our revenue guidance and, of course, raising our operating margin and EPS expectations considerably.

So the Citrix Workspace is really what's driving these results with total revenue up 12%, including subscriptions, which are growing north of 50%. As companies have spent the last 7 months largely working from home, this concept of back-to-the-office is really moving beyond a discussion of one location versus the other. I think there's a broad realization going on that a hybrid work style blends, really, together the best attributes of a physical office environment with, of course, the flexibility that individuals need to be productive and really do their best work. And all of this is dependent upon technologies like those provided by Citrix to ensure a safe, secure and productive work experience across any location people choose to work.

And so we leave with that as a backdrop. We're really well positioned to achieve our longer-term targets that we outlined at this time last year and, of course, despite the uncertain environment that we're all operating in. Today, we're also going to provide some early headlights into our initial expectations for 2021.

So with that, let's open up the call and take some questions. Operator?

(Operator Instructions) Our first question comes from Ittai Kidron with Oppenheimer.

Guys, good numbers. Maybe you can talk about the bounce back in the cloud subscribers. How much of that was that one customer that you were missing last quarter? And how much of that was truly quarterly momentum?

And then as a follow-up, on the regional breakdown, I was kind of a little bit surprised to see the Americas not showing any growth. I think last quarter, you said that since openings in the U.S. we're lagging that in Europe, you would expect kind of the Americas to be a quarter behind Europe as far as recovery, but it sound like -- it looks like no year-over-year progression in the Americas while Europe remained very strong for, I guess, 3 quarters in a row now. Help me reconcile your business with your -- with the regional commentary.

Let me take a few of those questions, and then, Arlen, feel free to jump in here. So if you take a step back and you look at paid subscribers, you're right, we had really good sequential growth from Q2 to Q3. The -- there was an anomaly last quarter, which is taken out of the denominator for -- obviously, going forward. So this is just net increases of about 800,000 new paid subscribers on a sequential basis. And it tracks very well to everything that we've talked about over the last 6 months.

First half of the year was very focused from a customer point of view and, frankly, a Citrix point of view on really helping customers move into the pandemic period, enable work from home, everything that was a high priority. Back half of the year, as I've stated a few times, is really focused on getting back to driving more of the strategy of the company, migrating existing users to the cloud, focusing on net new users in SaaS and in some cases, on-prem subscriptions. And so we're just executing against what we've said before. Happy with the progress on that side. And you clearly see it when you look at subscription ARR, which is now over $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 geos being at different phases of the overall transition of subscription. That's really been led out of the Americas, and it's the thing, more than anything, that has influenced the year-on-year growth rates.

EMEA, frankly, has had outstanding execution on again. Both across our teams and the way we're operating from a solution standpoint in the various markets, they've just had really nice, steady progress. A little bit further behind in the overall subscription transition per se, but I'm just -- I'm very happy with the way that team has delivered.

Our next question comes from Phil Winslow with Wells Fargo.

Congrats on another great quarter here. David, just to follow-up on that last comment, how are customer conversations changing now in the second half? I mean, obviously, the first half was sort of about triage as you mentioned, but what are you hearing from customers about the role of cloud and hybrid cloud and the Citrix -- the value that Citrix can provide to them? And then just one follow-up for Arlen.

Yes, Phil. I think the conversations are tracking as we have anticipated. Again, it's becoming more strategic. You're seeing a larger number of large deals, for example, as we get into the back half of the year. They would take on a bent that feels more transformational in nature. People, let's face it, have been operating in this pandemic rate for 7 months now. They've gone through this period of realizing that hybrid work is actually more productive than the model that they had before. And so people have gone back and they're reassessing what is the new normal need to look like. And so 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.

If you -- to talk about broader kind of transformational things, I was just going through the large transactions over the last quarter, and there's a few that really stood out to me. And one, for example, is one of the world's largest natural resource companies. This is one we're partnering with both Microsoft and Amazon together. This customer is streaming applications out of AWS. They're using elements of multiuser desktops out of Microsoft. And the entire thing is being managed with Citrix also managing some on-prem footprint. And what they're really trying to do is just transform the entire employee experience, their real estate footprint and how they plan to work long term. Just examples like that, that are coming more and more at the forefront. I think you'll see that more in the Q4 time frame as well.

Great. And then just a follow-up for Arlen. Arlen, I know there are a lot of moving parts right now, but thinking for the early look at 2021, wondering if you could also just give us some color on cash flow? I know you're not guiding there, but obviously, cash flow has been running ahead of EPS and net income. How should we think about that next year?

Yes. I mean look, Phil, there's a lot of seasonality and there's a lot of moving parts around cash flow on a quarter-to-quarter basis. We obviously feel good. And we have over $1 billion of cash flow for the trailing 12-month period, so we feel good about where we are.

You also, from our investor presentation, know that we've put out some views around 2022. And I think that you'll continue to see us feel good about what we said in October around this year and around '22. But obviously, we're not going to guide free cash flow as we go on a year-to-year basis. But we clearly feel good about what we showed last year and how we presented our growth and our trajectory around our Investor Day last year.

Got it. So still on track for '22. All right.

Our next question comes from Walter Pritchard with Citigroup.

David and Arlen, wondering how you're thinking about a couple of things into '22 with that higher growth, I think, than people are expecting. One is around the NetScaler business. And you're talking about some pressure on the hardware side, just wondering how that factors in.

And then also on these temporary licenses, sort of what degree of success of conversion are you assuming there? And any other factors we should be thinking about in terms of that 4% number for next year?

Yes. Let me take the first part. And then, Arlen, you can talk about the conversion of temporary capacity licenses.

So I mean if you step back and you think about how we're looking at really this year but leading into '21 and beyond, I mean, you've seen that the Workspace is really what's driving the business overall. I mean Workspace is up 16% in total revenue this year. That's more than double what it was last year. In fact, I just saw that IDC's market share data came out showing Citrix with an increasing share of a growing market. So I'm really happy with the performance of the Workspace that we've seen over the last 6 quarters. 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 -- when they've got strategic importance and it's higher than where it had been.

In terms of networking, there's clearly been a large shift there from the way we're delivering software. You saw a sharp decline in hardware sales year-over-year, and that's been offset by a really big decline in subscription and software. So that's the direction that we're taking the overall portfolio, but I don't think that's different than the way we have talked about it from a category standpoint. The category is flat to low grower. And what we're doing to transform that to really help customers separate this idea of delivering networking services, security services, Workspace, optimization services and what we can do to use those to power a differentiated and sensible Citrix-integrated Workspace over a long period of time. And so for us, it's kind of playing in the category, but also using them to really augment and create an amazing user experience for our broader Workspace, which is still 80% of the company.

And Walter, just to put a finer point on what Dave was saying when you think about the growth rate that you were talking about, when we think about the conversion of the licenses that you asked about, we're thinking of those as SaaS. So we obviously are driving towards a longer-term relationship with those customers and migrating those customers to our SaaS solutions, which obviously has its own transition.

And then -- and as David mentioned, the networking business, the only thing I'd highlight for you is, and we obviously took this into account when we thought about our growth rate going into '21, is the acceleration of the mix, right? And the acceleration of the mix in the networking business this quarter looks a lot like what you would have seen Workspace a couple of years ago, which is it went from 29% to 66%. So we're talking about very significant moves in that business. And obviously, that's all baked into how we thought about our growth trajectory and how we're going to go into '21.

Our next question comes from Mark Moerdler with Bernstein Research.

Congratulations on the good quarter. I think people should be surprised at how well that's going. Can you give us an up -- 2 questions, I guess. Can you give us an update on the economics of the subscription cloud transition? Are you seeing -- you talked last year about a revenue lift from a license moving to a subscription versus license to SaaS. Is that still how you're thinking about that?

And then as a follow-up, can you give us a little more color on the Microsoft expanded partnership? I know that's still early. You mentioned a win. How do you think that's going to impact that shift and the speed of the shift to SaaS?

Yes, Mark. Let's start with the Microsoft piece. As we've talked about really for 20 years, I mean, this has been an amazing partnership and what we do to embrace and extend the Microsoft set of technologies. Earlier this year, we obviously took that to a more strategic level than we've ever had in the past, the overall objective of helping our customers transform. And in this case, it means transforming the Citrix Cloud and Azure. And so I'd say that we're continuing to operationalize some of the new elements of that, the areas where we're selling together, where we're developing joint solutions, but in terms of the overall execution, it's going really well.

I called out to Phil's question a big natural resources company, but there's also a lot of other examples already in Q3: A big state university where it is a WD plus Citrix to address students, in fact, of the use cases. One of the biggest stock exchanges around the world, which was a long-time Citrix customer, going through that exact migration. They're working on the cloud migration to Azure, and we're doing that together.

And so I think the benefit of bringing together multiple partners just helps abstract away a lot of the complexity for customers. So the closer we can work together with a lot of 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. So we're going to continue to operationalize throughout Q4. And we'll just -- each quarter, we'll talk about some of these great wins we're doing together.

Can you repeat the other parts of your question?

Sure. Absolutely. The -- we had talked about last year about the revenue lift you thought over time would occur from the shift from a perpetual license to either term subscription or SaaS. Can you give any update on how you're thinking about that now that we're further in and now that you're going to be more aggressively -- with the end of sale of licenses, how that lift is going to be -- how big that lift is going to be? Any data would be appreciated.

Sure, Mark. There's really 2 aspects of that, that I think are important to understand. The first one is when we're talking about installed base customers, the traditional Citrix customers that are moving from where they were to a Citrix Cloud, that uplift from their ongoing maintenance requirements are -- it's roughly 30%, 40%. That hasn't changed, that number has been very consistent, and that's what we have been able to execute against.

In terms of the overall economics, no change. Pricing has actually been remarkably stable over the last 2, 3 quarters across our various platforms. And so we don't -- the breakeven from an economic standpoint for us, whether we're selling a subscription cloud service or we're selling a perpetual license, remains just under 3 years from a time frame. But probably more importantly, from a strategy point of view, what that allows us to do is not only ensure customer success to a higher level, but it gives us a lower friction when we're starting to layer on incremental innovations like our analytics services, for example, performance and security analytics, where 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.

Our next question comes from Heather Bellini with Goldman Sachs.

David, I just had a couple of questions. I wanted to follow-up on what you were just saying to Mark about security and analytics. Is there any data you could share with us thus far on what upsell has looked like of those types of offerings, and how you see it kind of helping, I guess, ARPU, if you will, on a per customer basis?

And then also, just in terms of the pace of the conversion from the burst licenses or the short-term capacity licenses that you guys had in the beginning of the year, when you're thinking about your forecast for calendar '21, which you gave from a revenue perspective, how much does that play into it? And are there expectations that you can share with us about the conversions?

Yes. I'd repeat something that Arlen said just a minute ago, and that was that we are running programs, of course, that will start at the end of this year, but it's really more of a Q1, Q2 phenomenon. And the intent there is to convert those licenses to SaaS. And so those would have less of a recognized revenue impact into 2021, but we certainly expect that we'll be able to convert a good portion of those, and that's just based on early conversations, customer usage data, et cetera. But again, because they're converting from what had been largely recognized upfront to a longer-term subscription, it's a relatively muted benefit that will just flow in over time.

Okay. Great. And just the uptake of the analytics and security stuff that you've seen thus far?

Yes. I think it's really interesting. I mean it's an early model. It's been in the market now for a few months. And so we've done more of a limited release, just trying to learn and grow. The business is still immaterial from a dollar standpoint. It's doubling sequentially. I think it's really driving, from a model standpoint, what we've laid out. It's the opportunity to go back is to, frankly, anybody that is -- that is a long-time Citrix customer, but the most value being added, of course, those that have converted to the cloud and layer on unique insights, not just as one more monitoring tool, but as things that are really driving more autonomous actions to help drive a better security model, better performance model and all the contextual attributes that we've talked about.

So you can see the pricing out there and kind of draw a picture back to what the overall TAM is. But over time, this could be a really material business, and that's how we're looking at it. It's just early on right now, so I'm just a little bit cautious in putting out early-term expectations.

Our next question comes from Raimo Lenschow with Barclays.

Congrats from me as well. And I wanted to ask a slightly more bigger picture question again. David, if I look at how customers can solve this new working environment of being -- having to be a lot more flexible what they -- in terms of what they offer their employees in terms of where to work and how to work, et cetera, like can you just kind of remind us, like, what would be the solutions that are available there? To me, that seems like just Citrix and one more competitor, but like maybe I'm missing something. Just kind of remind us on how this can be achieved, and then where are customers on that journey towards that?

Sure, Raimo. I think it's a bigger picture question that's worth talking about just from that. I mean when we entered this pandemic period, there was a large narrative in the marketplace about how long it was going to last. And I think that those had anticipated the lockdown being 2, 3, 4 weeks at a time employed a number of different solutions to just allow people to connect remotely, simple VPN probably being the most obvious one.

As it persisted over a period of time, 2 things happened. One is that a lot of companies stepped back, and they realized that a VPN, for example, is just not a great solution. It's not a great security picture and it's not a great user experience from a performance point of view. And so many of those have stepped back and thought about what do we need to do longer term.

The other thing that's been really interesting is just that the view that remote working is actually way more productive than people anticipated. And so now you see all these different studies, including those by our Citrix research arm, that will point to 2/3 or 3/4 of companies that are planning on adopting a more flexible model for a few reasons. One, it's better for individuals, drives higher engagement, higher productivity. It's better for companies because they can reduce real estate footprint, reduce absenteeism and all these great attributes that 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 enabling productivity wherever people happen to be. And the one common denominator there to make sure that, that experience from a user standpoint is secure, it's managed, it's available and it's consistent, is a digital workspace.

And so a lot of the pivot that we're driving in our conversations and our positioning, of course, is 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 believe that the digital workspace-type technologies have a real strategic importance going forward. And that's one of the reasons why you've seen the growth rate of that business 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 that idea forward to make sure that it's not just about virtualization, for example, but really creating that holistic Workspace platform that allows us to deliver applications in a virtual way directly or actually made it mobile. And that's the benefit of what we've been building.

Our next question comes from Sanjit Singh with Morgan Stanley.

Congrats on a really solid Q3. David, as we look into 2021 and beyond and you guys make your push to the cloud, can you sort of frame out for us what are the initiatives that you guys have in place to drive that adoption of cloud? Essentially, what do you feel is under your control versus what's more left to the customer in terms of thinking about moving to cloud as they think about their broader cloud migration strategies? Like, if you could sort of address the initiatives you have in place versus what you're up against in terms of the broader priorities customers are facing?

Sanjit, I'd say there's kind of 2 ways to look at that. One is a more short-term tactical answer and one is the broader strategic direction of Citrix. And on the tactical side, when you're working with a customer, it's really predicated on a number of different things: The level of skills they have, really what they're trying to achieve from business outcomes point of view, their capital and operational constraints, et cetera. And so it's one of the reasons why we work with great partners like Microsoft and others to try and make that migration as easy as possible, to come up with ways so that we can simplify the technical migration, but also the business side of it, the commercials and the economics and try to just help them on that journey.

Along with that, we've been investing in higher-level architectural guidance and the types of customer success and business value engineering that allow customers to think about these things more strategically. Tactically, we're also investing in our customer success teams that help customers get up and running quickly, ensure usage and ultimately renewal long term, as well as engineering investments that I talked about over the last couple of quarters, continuing to drive as quickly as possible on things like migration tools, on anything that we would perceive as a blocker or an area that is just hard. And so some of that is just work, and we just need to keep working through it.

Longer term, the strategic answer is that all of our new innovation is coming via cloud. Heather asked a question about Analytics, which is a really cool new platform service that we're delivering. That is only going to be really available to customers that are on the cloud as well as the level of intelligence that we're building into the Workspace over time to automate simple common workflows today, but over time, much more complex AI-driven workflows that will focus on driving a new level of user engagement, user productivity and ultimately output. And so that's kind of how we address it both short term and long term.

That's super helpful. And just as a follow-up, coming off of that last question. On the earnings letter, you talked about having -- you guys are -- sort of have confidence in your longer-term targets, and we've been talking about 2022. As we think about, on one hand, greater seat penetration, a higher priority to promote work versus what you guys have acknowledged as a slower pace to cloud, can you sort of give us your latest thinking versus a year ago on sort of the path to that -- to those longer-term targets? Like, what gives you the confidence that you are on track today versus a year ago?

Well, the simple answer is that 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 an initial guidance for 2021. It's probably $50 million, $60 million higher than the current consensus. And so we are continuing to bump up our expectations. That's against the backdrop of a really uncertain economic environment around the world.

So we're looking at it just based on the success that we have had, the pipelines and the execution that we have delivered over the last few quarters and then these broader, let's call them, secular trends that are going on in the market. So nothing happens in a straight line, of course, but obviously, our confidence, based on our results and our execution continues to move forward.

When it comes to the pace of cloud transition and where we're focused and where our customers are focused, they're really tactical quarter-to-quarter items. Nothing has changed from a longer-term strategic path.

Our next question comes from Karl Keirstead with UBS.

Arlen, I've got a couple for you, a little bit more modeling questions. First, if you could maybe help define what sharply negative means when you're talking about Q1? Are we talking down 5%, 8%? Just -- that's not typical language you guys use for revenues. They're normally quite steady, so maybe you could help us there.

And then secondly, just on the operating margin front, there's, as you're aware, a fairly healthy debate among investors about whether COVID and the crisis has fundamentally changed the margin structure of software companies as reps don't need to be flying every day and conferences can be virtual, et cetera. You didn't explicitly provide margin guidance for 2021, but your revs and EPS guide look, maybe I'm wrong, but it feels like up 75, 100 bps, something like that. Where do you land on that question of whether the crisis we're in has changed the margin outlook of Citrix in the broader sector?

Sure. Thanks, Karl. I think when you think about '21, obviously, we had 20% growth rate in the first quarter. And there's work for us to do in terms of how we think about the business. And we're certainly not in a position to provide quarter-by-quarter guidance when we think about '21 at this point. But I think we just wanted to help you in your model to start to get your arms around the concept that it's going to be challenging because we're going to be writing SaaS licenses for these converted customers. And so there will be a headwind. We, obviously, as we go into fourth quarter, we'll be able to provide more guidance. But David and I thought it was important just to make sure that everyone has recalled the significant growth rate we had in the first quarter last year, and obviously, we take that into account as we think about normalization and acceleration through '21.

On the second question around op margin, I think my 2 cents are, obviously, you're going to have decreases in travel, but you're going to have increases in other areas in terms of enablement and employee empowerment and helping your employees make the right decision for them based upon their role and where they can be most effective in getting their jobs done. As we think about that as a company, that's what we do. And so we, as a company, will continue to invest in our business to ensure we have the right processes, tools and infrastructure in place to make our customers successful.

So I don't see it fundamentally changing our business. I think that there will be a lot of companies that have to address the needs of their employees by moving money from one portion of their P&L to another. There certainly could be, from a real estate and from other areas, longer-term benefits. But when I look at our business, I think David and I see great opportunities to grow this company, and I think you'll continue to see us invest towards those growth opportunities.

Our next question comes from Jason Ader with William Blair.

I have 2 quick ones. First, for fiscal '21, the 4% growth, can you quantify the headwind from the shift to subscription for us?

And then secondly, just on the networking side, David, can you talk about some of the demand in that space? I know you have the shift to subscription that's also creating some headwinds to top line to revenue from networking, but what's the demand in that space? And how do you see that evolving from here?

Why don't I take the second part of that first, and then Arlen can talk more about the '21 number.

So networking is an interesting market. I mean it's clearly one that's in transition for a number of reasons, and some of those are things that we're trying to accelerate. When I see hardware in the networking area down 20%, 30%, 40% in a quarter, there's a big shift going on. And clearly, in our business, that's 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 tweener right now. It's just every big customer I talk to is focused on some level of hybrid execution. There's really nobody that is 100% on-prem or 100% in the cloud anymore. It's always somewhere in the middle. And what we can do with our networking assets, of course, is help bridge that fort, being able to deploy networking services across any different form factors, to have a management plane on top of it, which we call ADM, that allows them to run those resources in a public cloud, on-premises and any form of hybrid they want to yet still control it with a common infrastructure. And that's something makes us unique. And that's one of the reasons why when I look at our networking business -- and let's exclude the big hyperscalers for a minute. But I look at our networking business over the last few quarters, we have likely outperformed the underlying market. So we're helping drive that transition.

And something I said earlier about we'll continue to do that, but we're also really focused on leveraging networking services in a tighter, more integrated way with the integrated Workspace to ensure Workspace security, Workspace delivery, Workspace performance. And so we're kind of working both sides of that strategic equation. And I'd say the overall dynamics in the market should track relatively closely to the types of business outcomes that we're showing.

And to build off of David's comments 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 SaaS -- from perpetual to turn to SaaS on the Workspace business, but as you think about that networking business, you also have not only the significant uptick we saw this quarter from 29% mix to 66%, but you also have, as David articulated, software and hardware. So now we're at 48% of software. So you have these transitions happening simultaneously, which obviously is embedded in our forward -- in our guidance and our thoughts around how we'll get through that transition and continue to grow through '21.

And on the 4% for '21, Arlen?

I mean it's embedded in our transition. No, I think...

You can't quantify that?

It's far too complicated. I think there's way too many parts in that to be able to draw a percentage conclusion and equate that to a revenue line, particularly as you think about the networking business with software and hardware, that transition, and then the transition across SaaS and on-prem and perpetual and maintenance. I think it's just -- 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 recognized revenue standpoint, plus the 20% growth in future committed revenue. Next year, our guidance is, right now, 4% growth in the top line, and I would expect future committed to also continue to expand.

Our next question comes from Robert Majek with Raymond James.

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?

Yes, Robert. I'd say 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 we're doing individually to deliver high-quality, resilient, feature-rich solutions. That's just a given. Second thing is how do we look at their environment and make it easier. And that includes the work that we're doing around migration tools, around customer success programs, around architectural guidance, and we'll continue to execute on that. And then the work we do with partners like Microsoft and Google and Amazon and others to try and help them migrate not just the Citrix component, but the underlying workloads in a more holistic approach. We're going to keep pushing on all 3 of those.

We are making some adjustments as we look into the future around internal incentives to make sure that we're putting a higher importance on transition of the installed base. I think we're at that point where we can do that, and we should do that now, aligning that -- not only across our field-facing resources, but across the entire company. So it's those types of incentives that we'll do internally. And then externally, it's just about delivering product.

Our next question comes from Brad Reback with Stifel.

Great. Maybe touching on some more on the calendar '21 guide. I know there are a lot of moving parts, Arlen, 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.

Yes. I think we consider it to be down. And there -- when you think about the hyperscalers, we've been successful in moving them to longer-term subscription contracts. That's been reflected in some of the mix over the last few quarters. We continue to expect to see the percentage of contribution, which is at 3% this quarter, continue to decline as we have those larger hyperscaler providers go to subscription contracts and represent a smaller proportion of our revenue.

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 into the Americas number? So if you exclude that, it was actually up 3%, 3.5%?

Without doing the math, I think the first part of the question is absolutely correct. Almost 100% of it would come in the Americas.

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 our quarter.

First one is the subscription model transition is progressing really well. It's clearly ahead of where we thought entering this year. And I think it's reflected in both our third and our fourth quarter revenue mix between product and license and subscription. That's point number one.

Point number two is that our Workspace Solutions are really what's driving the business. They're continuing to gain market share and mind share. We've seen great acceleration moving from even Q2 to Q3.

And then lastly, we continue to believe we're very well positioned in the long term, both from a strategic market presence point of view and against delivering our longer-term targets.

So with that, let me just say again, thank you very much. I look forward to speaking to everybody at the end of the quarter. Have a good day.

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