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Citrix Systems Inc  (NASDAQ:CTXS)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 4:45 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

My name is Jemaria and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems Third Quarter Earnings Conference Call. (Operator Instructions) After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) Thank you.

I would now like to introduce Ms. Dawn Morris, Manager of Investor Relations. Ms. Morris, you may begin your conference.

Dawn Morris -- Manager of Investor Relations

Thank you. Good afternoon, everyone, and thank you for joining us for today's third quarter 2018 earnings presentation. Participating on the call will be David Henshall, President and Chief Executive Officer; Andrew Del Matto, Executive Vice President and Chief Financial Officer.

This presentation is being webcast on Citrix Systems Investor Relations website, and the webcast replay will be posted immediately following the call.

Before we begin, I want to state that we have posted product specification and historical revenue trends related to our product groupings 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 US securities law. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Obviously, these risks could cause actual results to differ from those anticipated.

Additional information concerning these and other factors is highlighted in today's press release and in the Company's filings with the SEC. Copies are available from the SEC or on our Investor Relations website.

Furthermore, we'll discuss various non-GAAP financial measures as defined by SEC's Regulation G. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call can be found at the end of today's press release and on the Investor Relations page of our website.

Now, I'd like to turn it over to Drew, our EVP and CFO. Drew?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

Thank you, Dawn, and welcome to everyone joining us today. Our transition to the cloud continues to gain momentum, driving our Q3 revenue growth rate, which about doubled over last year. Financial highlights include: revenue grew 6% year-over-year, led by subscription revenue growth of 37% year-on-year. Our adjusted operating margin was 32%; adjusted EPS was $1.40 per share, up 16% versus last year; and cash flow from operations was $301 million, a record -- a Q3 record growing 18% over last year.

Q3 was a typical back-end loaded quarter due to summer time seasonality around the world. This impacted the timing of revenue from cloud and subscription transaction, both of which closed in late September. The result was a deceleration in the subscription revenue growth rate from our second quarter. We expect subscription revenue to reaccelerate in Q4 as we'll see a full quarter of revenue from our September transactions, plus the benefit of the typically more linear bookings quarter.

Our Q3 Enterprise business was solid, as we closed 55 $1 million-plus transactions with concentration in healthcare, technology and government sectors. We saw strength in our cloud and subscription offerings across our portfolio, particularly in Workspace services as customers embrace our future of work vision, driving higher productivity and employee engagement. All of our geographies grew at a consistent rate with the transition of Enterprise to our subscription offerings strong across all regions.

Citrix's cloud simplified hybrid-cloud adoption, providing the same infrastructure on-premise or in the cloud. Customers are realizing the value of reduced infrastructure complexity, better overall user experience, increased security, faster access to innovation and flexibility to align with their business initiatives.

Next, let's take a closer at Q3 results within our primary businesses. Workspace services maintained its momentum, growing 7% year-over-year to $462 million. This was driven by a continuation of recent trends toward our unified Workspace and CSP offerings. Within Workspace services, subscriptions were roughly half of the total Workspace product bookings mix in Q3.

We also saw stable results in the Networking business. Networking revenue increased 5% year-on-year to $195 million in Q3, with subscription revenue increasing 95% over the last year. This reflects the strength of our hybrid cloud offerings, providing the flexibility and performance and visibility as Enterprise would anticipate and execute their cloud strategy.

Our content collaboration revenue increased 12% year-over-year to $47 million in the quarter. As we discussed over the past year, ShareFile is becoming more of an integrated file sync and sharing solution for our Enterprise Workspace customers, moving away from its prior focus on just stand-alone [ F&B ] space. As such, the reporting of the content collaboration results will be integrated within our Workspace business during 2019. We'll provide more details on our Q4 '18 earnings call.

Let's now turn to operations. Our adjusted operating margin was 32% in Q3. We'll continue to balance, expanding our profitability with the investments needed to support growing pipeline and sales capacity as we transition the business model. As mentioned, cash flow from operations was $301 million, up 18%, bringing our trailing 12-month cash flow to $1.1 billion. Deferred and unbilled revenue combined grew $187 million or 11% over last year. Unbilled subscription revenue grew nearly 330% or $140 million versus Q3 of last year. Deferred revenue was $1.68 billion in Q3 of '18.

Please note that the adoption of the new revenue accounting standard ASC 606 creates about a 300 basis point headwind that you will need to adjust for when comparing deferred and unbilled revenue for Q3 '18 to Q3 '17.

At the end of Q3, we have approximately $2.5 billion in cash and investments, and repurchased approximately 1 million shares in the period. Today, we announced that our Board of Directors authorized an additional $750 million for share repurchases. This brings our total current authorization for repurchases to approximately $1.1 billion. Since we announced our $2 billion share repurchase program in November 2017, we've repurchased approximately $1.6 billion at an average price of approximately $91 per share. We expect to complete the remaining $370 million in share repurchases during our Q4.

As you can see from our announcements, Citrix's Board of Directors also declared a dividend of $0.35 per share to be paid this quarter. Additional details can be found in today's release.

Now turning to guidance for Q4 '18 and the full year. In line with our multi-year strategy, we expect to see continued momentum in the adoption of our cloud services and subscription-based offerings. As such, we are increasing our full-year guidance for 2018 to include revenue between $2.95 billion and $2.97 billion, adjusted operating margin of 30.5% to 31.5% and adjusted EPS of $5.55 to $5.60 per share.

We'd also like to provide an initial view into our expectations for FY '19. Please note that while we are still working through our planning cycle, which is typical at this point in our fourth quarter, in 2019, we plan to continue investing in go-to-market capacity, demand generation, innovation and the infrastructure areas necessary to scale our cloud services.

At a high level, as we now, we are currently looking at FY '19 revenue growth to be about 4% and adjusted EPS of about $6. Very important to note that behind these numbers, we are assuming that the mix of subscription as a percent of product bookings increases from 40% this year to between 50% and 55% next year. This incremental mix shift will create a 1 to 2 percentage point headwind to the revenue growth rate for next year.

For quarterization, I would encourage you to look back at the historical seasonality of our results for the ramp of margins and EPS throughout the year. 2018 results were skewed due to our 2017 restructuring and the adoption of ASC 606. 2019 operating margin expansion to EPS growth will be skewed toward the second half due to normal seasonality, our continued shift to subscription revenue and our recent investments in building sales capacity. We'll provide more detail on our next earnings call in January.

And now I'd like to turn the call over to David to give further color on the quarter and our areas of focus moving forward. David?

David Henshall -- President and Chief Executive Officer

Welcome, everyone, and thanks for joining us today. As Drew noted, Q3 was just another good quarter outside the financial expectations, while we continue to execute on the transformation across the Company. More importantly though, customers and partners embracing our strategy will be driving a multi-year plan. Despite the headwind from the ongoing mix shift, reported numbers were once again really solid, largely due to the strength of new product bookings for Citrix Workspace. As you heard, our reported revenue growth doubled over last year, while at the same time, the contribution from subscriptions increased from 12% to 15% of total revenue. (inaudible) of cost discipline, and we delivered a lot of upside against both [ margin ] and EPS goals. It's good performance for Q3, which, as Drew pointed out, historically has some seasonality due to the summer holidays around the globe.

In the quarter, our Workspace business continue to lead our execution. What's happening here is that the vision we laid out last year for delivering a general-purpose digital workspace is resonating. Customers are seeing that Citrix adds a lot of value in long-term initiatives in terms of simplifying hybrid cloud environments, improving security and accelerating the adoption of new innovation.

Additionally, due to the support of all major platform providers, we give customers the flexibility to migrate workloads to and among the clouds of their choice. In total, Citrix Cloud now includes more than a dozen services with options for SaaS and hybrid models as well as services for those customers with only on-premises implementations to help them manage and monitor their infrastructure much more effectively.

As we talked about last quarter, customer momentum has really stepped up after our Synergy sales conference in May. We've had great feedback regarding the alignment and clarity of our strategy as well as the record volume of new innovations and announcements that we made with great partners like Microsoft, Google, ServiceNow and Samsung.

Our message has been focused on the future of work and how we help lower IT infrastructure costs while delivering higher employee productivity and engagement. The current cloud mobile era of technology has created really unprecedented flexibility in compute and in work style opportunities. However, most of our customers we see need to deploy a variety and discrete point product solutions to help manage this; an approach that frankly is just really complex and very expensive. Our focus has been to help them extract away as much of the complexity associated with these niche products as possible and highlight the benefits of our complete integrated solutions.

As we promised, all the new innovations that we unveiled at synergy were released for general available during Q3. And over the next few quarters, we'll be working with customers on the adoption of the Workspace app, providing access to all of their applications and content needed to be productive across all users in the Enterprise. This includes differentiated capabilities such as federated identity, unified experience, out-of-the-box integration with leading SaaS apps, a broad approach to universal endpoint management and if required, access to Citrix virtual access desktops from an easy-to-use all-in-one interface.

Most importantly, we're now delivering a digital workspace for general-purpose use, which is assuring that every employee has access to everything they need to be productive, all-in-one package. Every employee, every app on any network. This translates into greater value and productivity for customers and expanded market opportunity for Citrix. And in September, at Microsoft Ignite, we announced the development and planned release of a new cloud-based desktop-as-a-service offering, positioning us to gain share in the fastest growing segment of virtualization market. This Citrix DaaS offering developed on top of Windows virtual desktop and hosted on -- with Microsoft Azure enables businesses to deliver services and a turnkey end-to-end solution built with our market-leading HCF technology to provide maximum performance. So stay tuned for further announcements on the future launch dates. Lots of excitement from innovation across the Board.

So turning back to Q3, let me talk about a couple of large transactions that highlight the discussions that we're driving with both new and with our existing customers. The first is a 150-year-old banking organization operating in the Western US. They've been a longtime XenApp and XenDesktop customers, delivering virtualized applications, VDI. They stared evaluating Citrix cloud earlier this year as part of their corporate hybrid cloud strategy. But after Synergy, they started looking at the new workspace app as a potential way to unify existing branch office applications and widely used SaaS-based applications into a single access and user experience.

As their our evaluations progress, they also embraced Citrix content collaboration as a way to deliver secure content to branches and Citrix analytics to provide an enhanced visibility and security with their allocation usage. This evaluation concluded with a roughly $1 million of subscription transaction for our cloud service using the current customer transition program we put in place several quarters ago.

Ultimately, we are not only modernizing the management of their virtual apps and desktops, we are expanding to new users with improved experience and security with additional use cases in SaaS, web and mobile apps.

Second example I want to highlight is a global food and beverage company. This company was hit hard by malware outage last year, impacted a large number of employees for over two weeks. They asked Citrix to propose a solution that supported existing BPO projects using as-a-cloud, while at the same time new use cases of BYOD and mobility, all from a single platform. And, of course, security was a paramount concern.

Final solution we landed on was a three-year agreement for the Citrix cloud access, providing high availability to applications with an evergreen infrastructure that's continuously managed and updated. Additionally, secure global access and two-factor authentication to be enabled with our virtual networking, allowing them to also retire the current VPN solution for simplification and cost reduction.

Here's a couple of examples of how our focus on delivering experience, security and choice are proving to be so valuable for both new and existing customers and why we're winning these types of opportunities. In this example, we also demonstrate how our customers are committing to us for multiple years, fully validating the direction as part of our current and future roadmap.

So let's talk about networking for a minute as revenue in this area was stable in Q3. However, on a bookings basis, the hyper-scale SSP segment was actually relatively weak, down about 20% year-on-year with the Enterprise segment growing in double-digits. In total, the mix for SSP was 21% compared to 27% of mix a year ago. As we've been discussing over many quarters now, the SSP business is highly concentrated and therefore can be pretty volatile on a fourth quarter basis. Our strategy has been to invest in the larger enterprise market, addressing traditional ADC use cases, hybrid multi-cloud and DevOps as data center architectures are gradually shifting more toward micro-services. Our software-based approach here to networking gives us strong flexibility to help customers migrate to this evolution.

Another good example of this in the third quarter was a European mobile network operator and a current ADC customer. Historically, their use of ADC has been fairly simple and pretty straightforward. However, as they look forward, they've requested a proposed solution that was not just an at-the-ready, but really more future proof from an architectural standpoint. The final solution that we delivered and closed as a $2 million contract will include both physical and virtual networking products integrated with full capacity licensing to enhance their mobile network and provide additional capabilities like TCP optimization, content filtering and others.

This exemplifies how our shift to software-based networking and more (inaudible) scalable licensing is a step in the right direction and helping grow preferences in this market.

Finally, there's several new SD-WAN wins in a variety of areas, including cross-sell to existing workspace customers to improve the performance of remote sites, optimize HDX traffic and other capabilities. While still relatively small part of the overall business, SD-WAN is growing pretty rapidly right now. We've launched a number of products in go-to-market initiatives to help support managed service providers, Microsoft virtual WAN and Office 365 as well as deeper integrations into our Workspace service.

So as we exit this year, I feel really good about our momentum and purpose. We are more aligned and more focused on the customer success than ever before. Clearly, the financial results are well ahead of our multi-year targets and proving that we can drive a cloud transition and accelerate both revenue and margins. So a really powerful combination. It's clear that our customers are looking to operate in a multi-cloud, hybrid-cloud world, and Citrix is clearly positioned to provide simple, secure and unified solutions to help them address these challenges and simplify their roadmaps. We're excited about the future and confident of progress we've made so far in 2018.

Thank you very much. As always, we look forward to your questions.

Questions and Answers:

Operator

(Operator Instructions) Philip Winslow.

Philip Winslow -- Wells Fargo Securities -- Analyst

The question to the team just on Workspace services because obviously you saw another quarter of a mix shift toward subscription. I think you said 57% versus 34% in the year ago quarter and then 50% last quarter. It's obviously we're seeing that shift there, but if I look at just the revenue numbers that you're putting up as well, continued strength there even just with the shift toward more ratable (inaudible) sort of on a balance sheet and unbilled. So I guess the question is if you look at the past few quarters, what sort of, I guess, just driving that overall strength and reacceleration in the Workspace services business? Is it going back to some of these big customers you have engaged with a while, like the example you gave, and sort of, I guess, catching up on demand there? Just maybe sort of color on what's driving that mix should be great.

David Henshall -- President and Chief Executive Officer

Sure, Phil, it's David. So a couple of things. Overall Workspace bookings on a ACD basis are up double digit this year. So we've seen the underlying business dynamics really move up. And what's driving that is a combination of a couple of things. For those customers that are focused on virtualization and VDI, that side of the house, I mean, we just continue to develop against our underlying strikes, the best performance, the best security, the best manageability. So all that is continuing to move forward. Citrix Cloud is a real driver though. I mean, it not just get allows for -- even traditional install -- on-premises customers to have a number of services that help optimize the underlying infrastructure, provide health checks, just give them much more flexibility, much more simplification and then the ability to stay current and adopt our new innovation. The bigger strategic direction though is as we talk about the future of work and we talk about the Workspace and everything that, that's going to be able to address, we're unlocking non-virtualization use cases. You'll hear me talk a lot about general purpose, and what that means is it's really the idea of creating more of a general-purpose workspace platform that is now applicable to every user in every enterprise regardless of whether you need virtualization or not because of new capabilities to deliver security to SaaS, deliver security to mobile apps and really provide an integrated experience across any device. So it's a broader -- the overall broader strategy and articulation that's really helping uptick the market overall.

Philip Winslow -- Wells Fargo Securities -- Analyst

Got it. And then just one follow-up to that. I mean, obviously, in Q2, you had substantial big wins, but just $1 million and the megasize wins. So this quarter seemed to be a bit broader in terms of where the strength came from. Just wondering if you give us some color on sort of what you're seeing on the sort of the big deal upfront, particularly in terms of pipeline as well as just the sort of the breath, I guess, for strength, it seems to be coming back as well.

David Henshall -- President and Chief Executive Officer

Yes. Big deals in general where good. They're down a little bit sequentially from Q2 to Q3. It's always our seasonally weakest quarter and almost back-end loaded quarter, so that's nothing unexpected there. I would -- wouldn't be surprised if we see a record number of large deals coming out of Q4 really across all geo's and all enterprises. You saw in the reported numbers, we've got good balance across the three geo's right now. So it's not really concentrated, it's just general strength.

Operator

Michael Turits. Excuse me, Michael, your line is open.

Michael Turits -- Raymond James -- Analyst

Sorry, I was on mute there. A question for you, David. I just wanted to get a better sense on NetScaler and SD-WAN space and kind of what the traction has been like? And then in particular, who you're going up against, is it's Cisco and VMware mainly?

David Henshall -- President and Chief Executive Officer

Well, I talked a little bit about networking overall in my prepared comments. You know, SD-WAN, it's a pretty crowded market space right now, it's fairly nascent. So it's not moving the needle too much and therefore the growth rates are large, but it's off a small base. What we're focused on there is a couple of things. Optimizing the work space where we can just continue to help with delivery to branches, optimizing HDX traffic and more things that we're doing fairly recently though, haven't really impacted the numbers yet. With Microsoft around the Virtual LAN, optimizing O365, providing solutions for MSPs, a number of those are really future investments. So I'd say stay tuned on the SD-WAN piece. It's a little bit more of a future at this point. Going back to the big business on the rest of the networking, it's really a tale of two segments, more than anything else. The SSP segment, as everyone knows, is highly concentrated and therefore, it is always really volatile quarter-to-quarter. Q3 was one of those quarters that it was down pretty sharply, it was actually down about 20% year-on-year when I look at -- underlying bookings represented just 21% of the overall mix versus the Enterprise, which was up about low-double-digits in terms of demand. So that's been a function of our strategy though as well. I mean, we knew that the SSPs when concentrated for a long time, so we've been investing much more broadly around expanding capacity in the Enterprise, making sure that we have a really strong story around hybrid-multi-cloud, the ability to really be flexible with licensing across physical and virtual environments, a number of those initiatives that we've talked about many times. So I'd say competitively, the landscape hasn't changed too much. It's a lot of F5 in the traditional ADC category and then a number of vendors when you talked about emerging markets like SD-WAN.

Michael Turits -- Raymond James -- Analyst

Got it. And then one other thing I want to touch upon. Just as you increased that mix shift to subscription, just any update you can provide on the channel and the go-to-market strategy there would be great.

David Henshall -- President and Chief Executive Officer

Yes. I mean, the overall strategy doesn't change that much. I mean, we've obviously been going through a lot of work with our channel that really help them understand what -- where we want the channel focused in, let's call it, the Cloud First World as you look forward to a number of years. So I'd say channels in transition in a lot of ways. Those partners that had made the transition toward being CSPs and really embracing subscription and such as cloud are doing extremely well. They have -- heard reported growth rates that are much, much stronger than maybe even our overall business. Those partners, however, that are more historically focused and oriented toward renewing maintenance agreements, that's more of a challenging transition. We've certainly put the incentives behind the strategic direction of the Company, and we're going to keep pushing there over the next couple of years. We are doing more direct touch as you'd imagine as we sell more cloud services, and we have been continuing to build out our direct go-to-market now for a few years. And so you'll see us continue to do that as well.

Operator

Raimo Lenschow.

David -- Barclays -- Analyst

This is actually David on for Raimo. First, thanks for clarifying the subscription revenue bookings linearity this quarter, that makes sense. Maybe more of a high-level question, first for David. Since the Microsoft announcement about entering the desktop-as-a-service market, I'm curious to see what you heard from customers so far? And maybe longer term, how do you see that relationship with Microsoft evolving?

David Henshall -- President and Chief Executive Officer

Yes. The relationship with Microsoft overall continues to be great. I mean, we do so many things across Azure, across Citrix Cloud, across inter-operability, whether it's on the networking side, on the mobility side and then obviously on the Workspace side. So as Microsoft continues to evolve their platforms, it used to be called RDS, now it's as a remote desktop, we'll continue to build on top of those platforms and just extend the service for customers. The thing we announced, however, just at Microsoft Ignite was two important points. One was we'll effectively become a Microsoft's CSP in some dimensions. Really what that means is that we can now provide more turnkey complete solutions, bundling in Microsoft capabilities along with Citrix, native dash service built on top of Azure. We haven't announced exactly when that product is going to be GA, so stay tuned for that as well. But it's just you know a continuation of the relationship we've had for a couple of decades now. Feedback from customers has been, "love to see it, anxious to get our hands on it", and that's pretty much where we are. We'll, of course, be doing that on a white-glove basis over the next quarter or so and then talk much more about GA as we go forward.

David -- Barclays -- Analyst

That makes sense. And maybe if I may, a quick follow-up on the transition. In the previous calls you mentioned that the first half of '18 will be focused more on net new customers and net new Whitespace for Citrix's Cloud and Subscription and that TTU motions would kick-in in the second half of the year. Just curious what you're trending here and what kind of the split between net new customers versus existing base you've seen this quarter?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

Yes. TTU continues to be a small minority in the overall number, and that's by design. And so when you -- if you step back and think about it strategically, we wanted to make sure that we're generating a lot of momentum in net new accounts and net new use cases. It maybe an existing customer, but just outside of what I would consider there, traditional virtualization deployment. So that's how you should think about where we've had the focus. Now as we go forward though, I mean, TTU is a Trading up and Transitions, what the acronym stands for. It's just a combination of helping those customers today that have a virtual deployment, operate it much more efficiently and give them the ease to adapt hybrid-cloud in their own environment and give them the ease to adopt hybrid cloud in their own environment, but also start to expand into much more of these general purpose capabilities that I talked about before. So that will be a bit more gradual motion, and we'll start to ramp that in Q4 and then of course into next year.

Operator

Nikolay Beliov.

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

David, I just spend some time talking to customers while you're hearing in terms of the micro environment, emerging economies, Brexit, Italy, all the moving pieces globally going on. What's customer sentiment?

David Henshall -- President and Chief Executive Officer

Yes, Nikolay, I'd say overall the general environment is pretty good still. I mean, there's a little bit of noise out there, and we've seen a bit of volatility in the last couple of weeks. But in general, the underlying demand drivers for most people remains strong and so therefore that translates into a pretty good spending environment. Of course, there are discussions going on about mid-term elections, interest rate, Brexit, not the normal things, but I think people are taking them in stride. And we haven't seen a material change in the demand environment.

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

Got it. And Drew, just wanted to get a sense for, do you say the unbilled DR for 3Q was $140 million or $240 million?

David Henshall -- President and Chief Executive Officer

Unbilled for Q3 was $243 million.

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

$243 million? What was it last year same quarter?

David Henshall -- President and Chief Executive Officer

$216 million roughly.

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

No, that was last quarter.

David Henshall -- President and Chief Executive Officer

I'm sorry. Yes, I'm off. It's 50, yes, looking through our color, $57 million.

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

Okay. You provided in the supplemental numbers last quarter, different numbers. So I guess -- I'll guess we can go from this offline, but going forward, how do you expect -- talk to us about the seasonality of unbilled DR. Is Q4 going to be the highest and then it tapers down in Q1 and starts building up in 2019. I think that's important for us to help us model subscription revenues using the waterfall.

David Henshall -- President and Chief Executive Officer

Nikolay, let me jump in there because I don't think we have talked about the duration of unbilled revenue yet. We'll provide -- because that's the one piece you just need to really triangulate what you're getting out. So unbilled, just to remind everybody, our typical cloud contract is three years TCV with annual billings. So we build that first one upfront and the other two going to unbilled. As Drew said, unbilled is nearly $250 million right now versus $50 million a year ago. So, I mean, we've had a huge increase in unbilled as we've been driving this transition. So you really should look at that in concert with the actual deferred revenue numbers as well.

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

As the mix increase, it continues to increase. That's how to think about it. It follows the mix.

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

Yes. And going back to my question about the seasonality, is Q4 going to be the peak in unbilled DR and then it's going to taper down in Q1 and build out throughout the rest of 2019?

David Henshall -- President and Chief Executive Officer

Nikolay, we're not in a position where we're going to give a lot of forward guidance on unbilled at this point in time. So we will talk about it coming out of Q4 and much more seasonality. We've got four quarters of actuals right now and they've all been pretty strong growth. The strongest of the year of course was Q2 this year. We just had blow-out quarter last quarter, and so we wanted to get a little bit more history under our belt before we start forecasting some of these off balance sheet items.

Operator

Heather Bellini.

Mark Grant -- Goldman Sachs -- Analyst

This is actually Mark Grant on for Heather. Just a couple of quick ones from me. Drew, given the revenue and the earnings forecast for next year, and I know we're going to get a lot more detail on this on 4Q, but can you give us a sense of how you're feeling about free cash flow next year? And then, any potential updates on churn metrics given the subscription transition?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

Sure. Well, it's still -- we're still in the middle of -- we're early in Q4, so we're still early in the planning process. And so the first -- in terms of operating cash flow, you could see that it's clearly going -- yes, its still -- its clearly following the revenue, right, as we continue to build the mix up. If the revenue goes up, it's going to follow that, and obviously, the other dimension is as we expand margins, then that just falls to the bottom line. So I think you can get a sense for how we guide in terms of the 4% revenue growth and about $6 a share in EPS should give you some level of guidance and that should pop some number out of the bottom. But I mean, right now, operating cash flow for the quarter was up 18% year-on-year. That's operating cash flow, and then again, we've seen a nice uptick kind of following this trend of the revenue being up along with the margin expansion where we are now. Roughly, I think through Q3, the trailing 12 months is about a little north of $7.50 per share on a free cash flow per share basis. And so we obviously expect that, that should continue to go up as we move toward our 2020 targets, progress against those targets.

Mark Grant -- Goldman Sachs -- Analyst

Great. And then any update on the churn metrics?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

No, nothing new there.

Operator

Keith Weiss.

Sanjit Singh -- Morgan Stanley -- Analyst

This is Sanjit Singh for Keith. I was -- I wanted to do a little bit of a status check relative to some of the initial milestones you laid out last year in terms of your 2020 targets. You talked about hitting, I think you said 50% to 55% of subscription bookings mix in 2019. Does that sort of put you on track in terms of your overall 2020 goals when it comes to subscription ratable mix as well as top line growth? Would you say that you guys are sort of tracking to plan or ahead of plan relative to the framework you introduced last year?

David Henshall -- President and Chief Executive Officer

No, we're well ahead of plan versus the plan that we laid out. In fact, if you look at on our revenue basis, we'll exit this year based on current guidance, better part of a $100 million ahead a plan. Cash flow -- as Drew just pointed out, cash flow from (inaudible) per share is already at $7.60 or so trailing 12. So I'd say we're executing very well. We are going to exit this year at about 40% mix, up from mid 20s last year, mix of subscription versus perpetual bookings. And we will continue to drive that next year. If we can get up north of 55% while it's still a couple of 100 basis point headwind to revenue growth, that's well on the way to our overall goals. I think it's fair that after we exit this year, we'll come back, and going into 2019, update our multi-year goals just -- once we close out the full year. I think it's a good time to do it.

Sanjit Singh -- Morgan Stanley -- Analyst

That makes sense. And then just one quick follow-up. The perpetual license business has been stronger than certainly we've expected the last couple of quarters. And -- any sort of comments that you have on what's driving that strength for the license business given that you've seen some weakness from the cloud service providers and NetScaler? So are we seeing more sort of on-prem Workspace deployments than maybe you guys have initially expected? Any sort of color there would be helpful.

David Henshall -- President and Chief Executive Officer

Yes, I'd say it's two things. Not just client service providers, but we had strength in NetScaler enterprise. And so that part of the business is largely perpetual license, and that's the primary driver there. Workspace, it's well over half subscription these days, but since the overall business is growing so nicely, that means perpetual is growing at the same time. So I'd say it's basically just moving from strength-to-strength.

Operator

Walter Pritchard.

Drew Foster -- Citi -- Analyst

This is Drew Foster on for Walter. You've seen some good progress in terms of large Citrix cloud deals book so far this year. And I'm curious to what extent those wins are serving as references to other customers in your pipeline?

David Henshall -- President and Chief Executive Officer

Yes. I mean, as you'd imagine, big cloud customers always want to talk to other ones. So we'll -- on the the public references, we'll talk about publicly, but most of them are private. So we'll connect CIO to CIO. Top 10 deals for cloud in Q3 were all over $1 million each.

Drew Foster -- Citi -- Analyst

And then, just trying to get a better idea of the CSP business in terms of scale. How does that compare in scale relative to the larger (inaudible) cloud business?

David Henshall -- President and Chief Executive Officer

I'm sorry, did you say the SSP business?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

CSP.

Drew Foster -- Citi -- Analyst

Yes, CSP, sorry.

David Henshall -- President and Chief Executive Officer

CSP business. Yes, CSP is a minority now. I think CSP business runs $120 million a year roughly. Is that right, Drew?

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

That's right. Yes.

David Henshall -- President and Chief Executive Officer

Yes, versus the overall number.

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

(inaudible) quarter of the Subscription service.

David Henshall -- President and Chief Executive Officer

Yes.

Operator

Kirk Materne.

Peter Levine -- Evercore ISI -- Analyst

This is Peter Levine in for Kirk. So I just have one here. Your initial guide for '19, you talked about capacity and infrastructure investments in '19. Can you kind of provide a little more color on what those investments will look like? And then the second parts to that is in the second half of '18 versus the first half of '18, I think you're capacity, your headcount was somewhat flat. Can you talk about the new heads you're bringing on and how do you plan on deploying, is it geography, product-based, and how that would look in '19 as well?

David Henshall -- President and Chief Executive Officer

Yes, as Drew pointed out, we're investing in capacity and the infrastructure needed to ramp our cloud services. So think about that in three big buckets: capacity, (inaudible) and customer-facing people that will be across the globe. As we see opportunity, we'll continue to invest there. Second area would be around the customer success. Those folks will be more responsible for picking up a customer after the initial sale, making sure that they're doing the correct level of enablement, ramping new services, et cetera, just really making sure they're successful. That'll ramp up. And then the third is around just cloud operations, the typical things to manage the clouds. These are already big teams, but I'm sure we'll continue to invest behind that. The one area that we didn't really talk or you didn't ask about is around innovation. That's been a combination of both remixing the types of skills that we've had. We've had a lot of that over the course of last year, but also we're continuing to invest in innovation capacity. As you see, R&D starts to tick up a bit as well. So those types of things, we'll continue to do into '19.

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

Operator, any further questions?

Operator

There are no more questions in queue.

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

Great. Well, thanks everybody for joining us. We'll talk to you again in three months.

Operator

This concludes today's conference call. You may now disconnect. Have a good day.

Duration: 43 minutes

Call participants:

Dawn Morris -- Manager of Investor Relations

Andrew Del Matto -- Executive Vice President and Chief Financial Officer

David Henshall -- President and Chief Executive Officer

Philip Winslow -- Wells Fargo Securities -- Analyst

Michael Turits -- Raymond James -- Analyst

David -- Barclays -- Analyst

Nikolay Beliov -- Bank of America Merrill Lynch -- Analyst

Mark Grant -- Goldman Sachs -- Analyst

Sanjit Singh -- Morgan Stanley -- Analyst

Drew Foster -- Citi -- Analyst

Peter Levine -- Evercore ISI -- Analyst

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