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Citrix Systems Inc (CTXS)
Q2Â 2020 Earnings Call
Jul 23, 2020, 8:15 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by and, welcome to the Citrix Systems Inc Second Quarter 2020 Earnings Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]
I would now like to introduce your host for today's conference, Ms. Traci Tsuchiguchi. You may begin ma'am.
Traci Tsuchiguchi -- Vice President of Investor Relations
Thanks, Kevin. Good morning, everyone, and thank you for joining us for today's second quarter 2020 earnings call. Participating on the call will be David Henshall, President and Chief Executive Officer; and Arlen Shenkman, Executive Vice President and Chief Financial Officer.
Please note that we will have posted our second 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 US 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.
Furthermore, 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 will be found at the end of our earnings letter 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?
David J. Henshall -- President and Chief Executive Officer
Thanks, Traci, and good morning, and thank you everyone for joining us today.
Our second quarter results reflect our position in the market as the leading workspace company, empowering employees with a secure and consistent work experience wherever it is the work needs to be done: In the office, on the road whereas we've all recently experienced at home. Even when geographies and economies began to reopen, this concept of back to the office is moving beyond the discussion of just one mode versus the other. I think there is a realization at many companies, but a hybrid work style blends together the best attributes from a physical work environment with the flexibility that individuals need to be productive and do their best work.
All of this will be dependent upon technologies like those provided by Citrix to ensure safe, secure and productive work experience across all locations. I'm really proud of our team and the commitment to customer success that I've seen throughout 2020.
So with that, I'd like to open it up for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Phil Winslow with Wells Fargo.
Phil Winslow -- Wells Fargo Securities -- Analyst
Hey, guys, congratulations on another strong quarter. David, a question for you on penetration, obviously we've seen I call it more people that haven't been able to work remotely start to work -- be able to work from home now and it seems like a permanent work and flexible work to your point, is just here to stay. How do you think about the ability to drive up if you get the number of users that have access the Citrix, but as usage of Citrix also goes up, more people using it concurrently, how do you think about penetration of that, call it that user base with licenses. So call it the total user base growing and then your license penetration of that and then I'll just have a one follow-up for Arlen?
David J. Henshall -- President and Chief Executive Officer
Sure, Phil, thanks. I think the big takeaway coming out of this great work from home experiment is that remote work is really in fact working and so I don't think perceptions of remote work have shifted more quickly than it has right now. I mean, you take a step back and as you mentioned, you have over 40% of the US workforce now working from home, delivering somewhere over 60% of total economic output.
So it's fascinating to us to see that leaders in general are really realizing the benefit that remote work is bringing to their organizations. And so it's really becoming clear that hybrid work models are going to be here to stay and you've seen a lot of these statistics and we've talked about some of them or CFOs, who are talking about reduction in everything from real estate, portfolios to non-essential travel trade shows, etc. And so when we take a step back, I mean, now that we effectively cross the chasm for remote work not being seen as a perk or a unique attribute for a select few, it's become -- it's going to become much more mainstream and for us that just means our ability to accelerate penetration across our installed base, as well as tapping into net new customers.
So from a long-term standpoint, I think all the trends that we've seen up at this point should really benefit this idea that work is truly an activity from about driving output, it's not a place. And the one constant in all that is the need for a digital infrastructure that is flexible, that is secure, that is providing that level of engagement, regardless of where people choose to work. So I see there's definitely a long-term positive for the business.
Phil Winslow -- Wells Fargo Securities -- Analyst
Got it. And then just a follow-up, obviously the other big announcement this month with is -- the extension of the partnership with Microsoft, obviously that's long-standing back to the LEA late '90s and Bill Gates talked about network computers. What if you just comment on just sort of the evolution of the partnership from '97, '98 with Network computers and MetaFrame, to now with Windows Virtual Desktop and then Citrix Cloud and sort of how that symbiotic relationship sort of still applies?
David J. Henshall -- President and Chief Executive Officer
Yes, Phil so if you take a step back and you think about, this is what the long as partnerships across all the technologies that I can certainly remember. And the reason it's worked so well for all these years is that Citrix is largely about embracing and extending the Microsoft platform for a number of our technologies and that's one of the reasons why it works so well throughout the '90s and 2000s, but where we are right now is really announcing a more holistic and programmatic approach and anything we've seen it over a decade. We're creating joint SKUs, joint road maps and a really comprehensive approach to give our customers a much clear understanding of Microsoft Technologies and Citrix Technologies together that road map to know how we're adding value and then the infrastructure to really help them simplify the move to the Cloud, make it easy to adopt Citrix Cloud, make it easy to adopt Microsoft Azure, and I think that's going to be really powerful combination as we go into the next couple of years.
Phil Winslow -- Wells Fargo Securities -- Analyst
Great, thanks guys.
David J. Henshall -- President and Chief Executive Officer
Thanks, Phil.
Operator
Our next question comes from Heather Bellini with Goldman Sachs.
Heather Bellini -- Goldman Sachs -- Analyst
Great, thank you so much for taking the question. David, I wanted to ask a little bit to follow-up on the question that Phil was just asking. Again, you talked about this having a higher penetration rates. But when your -- one of the questions we get asked a lot is when companies -- what are you hearing from CIOs, when companies do go back to work, there are some people that are afraid that this -- that it's a big push for VDI or DaaS is actually going to go away and people might migrate back to how they were doing things before.
If you can share with us some of the conversations you've had with people that may be thought this work from home was going to be a short-term situation at first from now turned into something that's going to be much longer. How will those conversations progressed in terms of how they feel about this permanently altering instead of just temporarily altering how they're delivering compute to their employees?
David J. Henshall -- President and Chief Executive Officer
Yes, Heather I think it is a combination, both from a CIO's standpoint, as well as executive leadership. And on the executive leadership side, there is a perception pre-pandemic that remote working wasn't necessarily working. I think it's been that, it's probably been the single biggest eye opener for a lot of people is the recognition that remote work is actually way more productive in some instances. And so when you look at the research that our research team has done, Stanford Economic Institute, a number of different organizations, the conclusion is that most businesses are looking at adopting a much more programmatic approach to flexible work anywhere from one day a week, three days a week, you see it significantly higher than it has has been.
And again, the one constant there is that the need to provide a level of infrastructure that gives people the resources, the access, the securities, the visibility etc, that they need regardless of where they happen to be working, and then you kind of take a big step back and you think about what we have been discussing for the last couple of years around the future of the work and how we as an organization and our workspace can help remove a lot of the noise that comes with work, automating and simplifying -- simple past, engagement with your underlying systems of record, so that we can help from everything from a deployment standpoint to employee productivity standpoint and everything in between. So I think it's going to be a material change for quite some time.
Heather Bellini -- Goldman Sachs -- Analyst
Great, thank you so much.
David J. Henshall -- President and Chief Executive Officer
Thanks, Heather.
Operator
Our next question comes from Mark Moerdler with Bernstein Research.
Mark Moerdler -- Bernstein Research -- Analyst
Thank you very much and congrats on the strong quarter. If you don't mind, I'm going to ask a couple of related questions. Your SaaS ARR is up nicely Q-over-Q, while your paid subscribers' ex the healthcare organization was up modestly. Are you seeing an increase in revenue per SaaS subscriber and then follow-up?
David J. Henshall -- President and Chief Executive Officer
Yes, Mark. We really haven't broken out revenue by paid subscriber, it really depends on the solution that they're adopted. Longer term what we're obviously looking for is strategically to get people on to the workspace platform that is really the horizontal platform layer that is applicable to every single user in the enterprise, regardless of whether there are power user and they need all of the capabilities to come with a full virtual infrastructure or whether they're just using a couple of SaaS applications and Office 365, we can provide value and an incremental capabilities.
And then once we're in that platform, it allows us to better segment users to be able to add on incremental capabilities like analytics, like different forms of connectivity and contextual items. And so strategically that's really where we're driving much more of a better segmentation of users versus just trying to put everybody on the most expensive SKU.
Mark Moerdler -- Bernstein Research -- Analyst
That makes sense. Question, we've seen some software companies having COVID impact on their cash from operations and yet yours is quite strong. Are you seeing any delay with payment terms or payment delays or anything else? Or given the criticality clients just paying us normal?
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Hey, Mark, it's Arlen. I think we haven't seen anything out of the ordinary, you certainly -- we had a very strong cash flow for the quarter and I think that's really reflective of the breadth and the scope of our customer base. Obviously, geographically, as well as across the industries and we've had -- what I would say a handful of requests around extended payments, but generally we've had pretty much business as usual in terms of our cash flow and our ability to collect.
Mark Moerdler -- Bernstein Research -- Analyst
Perfect. Apologize one last one. Are you seeing any conversion of the short-term term licenses to perpetual or longer-term term or anything yet? Or is that in the future?
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
I think that's in the future. That's, you know, certainly as you know in the first quarter we had a fair number of those that obviously tailed off in the second quarter to an immaterial amount. And as we exit the year and approach the beginning of next year will be very focused on converting those customers.
Mark Moerdler -- Bernstein Research -- Analyst
Beautiful, really appreciating again, congrats.
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Thanks, Mark.
David J. Henshall -- President and Chief Executive Officer
Thanks, Mark.
Operator
Our next question comes from Raimo Lenschow with Barclays.
Raimo Lenschow -- Barclays -- Analyst
Hey, congrats from me as well. And David, can you talk a bit -- a little bit about the dynamic you've pointed out in your letter around people just maybe taking that in between step of on-premise term, and then only later going to like to the pure cloud-cloud. In terms of like, is that just kind of to sweat the asset on their -- on premise side, what are the drivers there? And talk a little bit about the implications that you highlighted on the revenue side as well in your letter?
David J. Henshall -- President and Chief Executive Officer
Sure, Raimo. I think it's less about sweating the assets and more just a recognition 90-plus percent of our installed base is still on-premises. And it was the easiest thing for a lot of them to do, to just expand as they were making a rush to put people into our remote work environment back in the end of Q1 timeframe. So I think it's just a -- it's an interim step that's the way we're looking at it right now. I mean, those customers that have already made the move to cloud. We have one large financial institution, for example that came to us, and said, I have no idea what we would have done with our tens of thousands of individuals had we not made those investments in the cloud already.
So there is a recognition that cloud consumption -- Citrus Cloud, public cloud, etc. We'll continue to increase and probably accelerate, due to this environment and the flexibility that affords. But for us, it's just a matter of individual steps. As we talked about last quarter, customers were focused on more of the triage mode in Q1 and early Q2. And because of that we've seen a number of projects, the larger projects like the cloud conversion. It just gets pushed out a little longer. And so, no change directionally, just a matter of sequencing.
Raimo Lenschow -- Barclays -- Analyst
And -- OK, one follow-up, like, if I look at the geographic split like it looked like Europe, Asia was doing a lot better than the Americas. Like is that kind of like where we are with COVID, or is that kind of -- more, kind of subscription in the US versus more on-premise in the other regions like, can you talk to that a little bit. Thank you.
David J. Henshall -- President and Chief Executive Officer
Raimo, I think the primary driver there was just a fact that the Americas had to a blowout Q1, they were up well over 20% in the first quarter. And so probably pulled business out of Q2 into Q1, I mean, the largest indicator. And then there is mix underneath that, but I would look at it more from a first half performance across all the regions.
Raimo Lenschow -- Barclays -- Analyst
Good. Perfect, thank you, congrats.
Operator
Our next question comes from Walter Pritchard with Citi.
Walter Pritchard -- Citigroup -- Analyst
Hi, Arlen and David, wondering how you're thinking about the fact that you're end of -- you're stopping the perpetual sales on October 1. What impact that have on Q3, Q4 perpetual license? Obviously, Q4 fall off quite a bit, even in the past, sort of, a pull-forwards, when the base moves. Curious on that and then I had a follow-up.
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Yes. Well, so we obviously planned for this for the year and felt very comfortable announcing this is an October 1 timeline. So, our guidance reflects what we expect in terms of activity from our customer base as we transition off of perpetual plus maintenance business model. I think in the fourth quarter, obviously we've taken that into account, right? So when you think about the fact that we're going to no longer offer perpetual plus maintenance licenses to customers in the fourth quarter, it's reflected in how we're thinking about the business and obviously that creates somewhat of a headwind, depending on the mix and how we think about the performance through that quarter.
Walter Pritchard -- Citigroup -- Analyst
And then just a question on the networking side, I'm curious if you're seeing any uptick in attach around NetScaler and related products to Workspaces just given what's been really heavy activity in that area. A little bit of color there would be helpful.
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Yes, I mean.
David J. Henshall -- President and Chief Executive Officer
Walter, if you step back and think about networking. I mean, I think, yes, you're seeing more and more attach to the Workspace. And part of that is just the way the architecture of the underlying solutions is going. As we move to much more of a software approach, much more of an as a service approach, it just gives us a lot more flexibility to reposition many of these technologies, for example as Workspace connectivity, Workspace performance, Workspace security and the story around better together is absolutely real.
In the broader networking area as you saw in our letter, we had a really pronounced uptick across some of the amount of subscription versus on-prem or hardware revenue. And that's just a trend that's been in place for a while and it's continuing right now. And I think that's something that we should expect on the straight line, but directionally up and to the right for quite some time.
Walter Pritchard -- Citigroup -- Analyst
Okay, thank you.
Operator
Our next question comes from Sanjit Singh with Morgan Stanley.
Sanjit Singh -- Morgan Stanley -- Analyst
Thank you for taking the question. I wanted to ask about the VPN replacement opportunities, which seems to be a focus for the company in Q2. David, is there any way, you could sort of size that opportunity for us? As COVID hit and customers move to remote work posture, how much of that sort of real-time demand was or customers sort of leaned into that option for remote work? And what do you see as the opportunity, whether it's from a devices or users or the customer perspective to convert those VPN connections on to it's remote desktop?
David J. Henshall -- President and Chief Executive Officer
Yes. Sanjit, I think it's actually, it's a much longer opportunity. It's probably still the predominant way that people access their network and even though it's somewhat of an old technology, it's in place. And so, VPN replacement with a more modern approach to a digital workspace that provides a different level of -- not just connectivity, but a different level of productivity and engagement and kind of a holistic nature of delivering resources to employees is the broader way to think about this over a period of time.
And so I think that a lot of companies that have had VPN in place or just extended that. It's easy, it's relatively cheap. But now they're coming back and recognizing the constraints on that whether it's performance or just some of the other attributes we've talked about that are necessary to give people access to everything they need to do their job and then continue to be productive. So I wouldn't look at it as a benefit in the short-term, but much more of a -- I guess we call a secular change over time.
Sanjit Singh -- Morgan Stanley -- Analyst
Understood. And then as my follow-up question is sort of goes back to on the conversation on cloud, you seem to hit that right now there is some app modernization projects or cloud initiatives that are just frankly tough to do in the current environment. But as you look at the Citrix customer base, what are their key friction point in terms of moving to cloud, what are some of the considerations that they have to deal with, the obstacles that they have to get through to more aggressively move to a cloud posture?
David J. Henshall -- President and Chief Executive Officer
I think it's just a combination of looking at the other projects in the broader economic situation. Clearly most enterprises have been somewhat distracted over the last three, four months and so large digital transformation type projects have just been pushed out a little bit. So just a timing activity in my mind, I mean, when you look at the things that we are doing as an organization, both by ourselves and with great partners like Microsoft. The idea there is just to make it as easy as we can for customers to migrate the existing infrastructure and adopt public cloud and Citrix Cloud. And so that will be a combination of individual tools that help use migration, as well as the simple things like joint packaging and others just to remove the friction across the entire project space.
Sanjit Singh -- Morgan Stanley -- Analyst
I appreciate. Thank you, David.
Operator
Our next question comes from Brent Thill with Jefferies.
Brent Thill -- Jefferies -- Analyst
Good morning, The number of paid subs on the cloud declined 3% sequentially in Q2. And you noted that the customers trading up to the cloud offering is not progressing at the rate you anticipated coming into the year. What do you think is holding that back? And is there anything you need to do from your side, or is this more just the burst of perpetual that's helping right now?
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Brent I think if you think about the decline in paid users that's clearly the reflection of a customer, who is not in a position to make a very harsh transformation of the environment and I think that's also reflected a bit of what David had said in the letter around our TTU motion. And so, while I think we continue to know that business resiliency and continuity are incredibly important to our customers, many of those customers are continuing buying what they've deployed, because it works and it's utilized and engaging for their employee base.
And ultimately, they will get there at their own rate and pace, but it will take them some time. And I think that's what's reflected in kind of our guidance and what you're seeing in terms of the conversation about the number of users.
Brent Thill -- Jefferies -- Analyst
Great, thanks.
Operator
Our next question comes from Matt Hedberg with RBC Capital Markets.
Matt Hedberg -- RBC Capital Markets -- Analyst
Hi guys, thanks for taking my questions. I wanted to go back to the expanded relationship with Microsoft. I guess, maybe Arlen for you. When you think about your guide this year, are you guys just assuming more run rate business with that obviously long-standing relationship? Or I guess, what I'm trying to get it is, you talk about Microsoft leading sales of Citrix Cloud, is there any assumption in that guide that we might see a bit of a -- bit more of a tailwind from Microsoft?
David J. Henshall -- President and Chief Executive Officer
So I think Matt when you think about the relationship for this year. We're really focused and frankly end of '21 about making sure that we're holistically approaching our customers and we're part of that conversation, as they think about the transition to the cloud. And I think a fair amount of this discussion about TTU and about customer landscape transformation is much better addressed with Microsoft and Citrix together at the table in a way that is multifaceted and holistic around our relationship in terms of road maps and selling motions and things of that nature.
So I think that it's clearly part of our long-term strategy is to be close to Microsoft. And I think it has a long-term positive impact in our business, but I wouldn't look at it in this quarter-to-quarter or year-to-year in terms of, it's going to be a separate driver.
Matt Hedberg -- RBC Capital Markets -- Analyst
That's helpful, and then obviously you talked about the spoke license offerings. Not really impacting the quarter ending, I think in April. Could you talk about though how business progressed through the quarter. Obviously, you guys are coming off a strong Q1. But just did things sort of trend normally this quarter from a month-to-month basis?
David J. Henshall -- President and Chief Executive Officer
Yes, I'd say it was actually better linearity, then I've seen in a while. It was a relatively straightforward quarter, I mean it was less back-end loaded than you see in a traditional enterprise software model and it's just back to the fact that customers are looking at their environment or looking at all this work from home we've talked about it and they're focused on high priority projects. And it's one of the reasons why some of these big transformational type things are pushed out into the second half of the year. But business was very stable and probably more so than it's been in the last year or two.
Matt Hedberg -- RBC Capital Markets -- Analyst
That's great. Super helpful. Thanks, David.
Operator
Our next question comes from Jason Ader with William Blair.
Jason Ader -- William Blair -- Analyst
Yes, thank you. I had a couple of modeling questions. As you shift away from a perpetual model, should the support and services line see further deceleration from here in terms of year-over-year declines? And then secondly, how does the impact from the perpetual change effects Q4 and Q1 sort of normal seasonality for Citrix, where we've seen that the significant positive impact in Q4 and negative impact in Q1?
David J. Henshall -- President and Chief Executive Officer
So I would think, Jason, in terms of the modeling. I think you can think of this as a decline, I think that's pretty clear. And if you look at our trend on product and licences over the past several quarters, we were down 8% this quarter. But we've been -- had a larger acceleration in other quarters. So I think you definitely should think about that as being down. I think that the issue in the fourth quarter as we articulated in terms of our exiting the perpetual plus maintenance business, obviously the real revenue outcome is highly dependent on the mix of that business and the impact of 606. So I think again you should think of that in terms of how we guided and thought about our quarter and the headwind that would represent for us as we exit the year.
Jason Ader -- William Blair -- Analyst
On the seasonality?
David J. Henshall -- President and Chief Executive Officer
Again, it's included in our guidance. And seasonality is essentially, obviously fourth quarter tends to be a large quarter for us. And then you should keep in mind, the impact of that business model change, which is included in kind of when you extrapolate how we're talking about the year. And then secondarily, obviously, I think that just have to look at the [Indecipherable] claims, this morning's numbers. And you can see that there is still economic uncertainty as we go from quarter-to-quarter. And as this environment changes on all of us.
Jason Ader -- William Blair -- Analyst
Thank you.
Operator
Our next question comes from Kirk Materne with Evercore ISI.
Kirk Materne -- Evercore ISI -- Analyst
Thanks very much and congrats on the quarter. I guess just two quick ones. I realize you all talked about this one healthcare client that wasn't able to serve shift over to the SaaS model. But could you just talk about renewal rates in general on the cloud, are they basically trending in line with what you would expect better? I know you're not going to provide anything quantitative, but maybe just any qualitative color on that?
And then secondly, you all are obviously in a work from home profile as well. Just wondering how you're thinking about sort of sales and marketing efficiency longer term, now that you've been in sort of more of a virtual selling model for a couple of quarters. Are there some opportunities for efficiency on that front as you think back toward a more normalized environment hopefully in '21? Thanks.
David J. Henshall -- President and Chief Executive Officer
Sure, Kirk. Let me take two parts of that. So I mean, just to be clear on the paid users part. I mean, we had probably our largest Workspace customer in the world, you know, look for a bespoke transaction where they had a time-bound opportunity to move to the cloud, relatively short, and based on their own priorities that period has lapsed, so those licenses reverted back to being a traditional on-premise perpetual license. We'll work to trade them up into Citrix Cloud when they're ready in the future. So I think that was all pretty straightforward.
When I think about the productivity of the sales organization, maintaining the established relationships and expanding those is relatively easy on a remote basis. And we like a lot of other companies have spent a lot of time and effort, focused on how to be as engaging as productive as in a physical mode. And so I think we're getting pretty good at that. We're doing a tremendous number of remote executive briefings and the same types of things we would be doing in a physical construct. And so we haven't seen a whole lot of change from a sales productivity standpoint.
When you look at our renewals of the underlying subscriptions, our gross renewal rates have actually been increasing across any type of recurring revenue. And I think a lot of that is just is probably talked about in the last several quarters is just a renewed focus on the underlying programmatic side of things, the focus on customer success, driving active use and whatnot. So our underlying renewal rates have been increasing across the board.
Kirk Materne -- Evercore ISI -- Analyst
Thanks, David.
Operator
Our next question comes from Ittai Kidron with Oppenheimer.
Ittai Kidron -- Oppenheimer -- Analyst
Thanks, guys, a couple of questions from me. First, Arlen I think last quarter you talked about 1,000 new customers in the quarter. Any chance you can give us some sort of a benchmark, what was the performance this quarter? And then as a follow-up also the SSP customer that moved to subscription, what are the odds we see the third one moving as well, and if so how do we think about timeline there?
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
So on the third SSP. I think it's a matter of their decision. Obviously, we're actively engaged with them. I think it will happen over time, I don't think I can give you a quarter for that. Obviously we've taken into account, we think about how we guide the business and provide a mix of subscription. But I think we will get there, it will just take some time and we'll continue to work on that. On the new customers, I think last year, we are -- I think it's consistent, I would think of it as [Indecipherable] a little bit of a quarter. I think last year, we're in that five to eight. I mean so think of it as a similar type business. Obviously, we have 400,000 customers. So in terms of adding new logos, we have a very broad and diverse and global customer base.
Ittai Kidron -- Oppenheimer -- Analyst
Yes. Good luck, guys.
David J. Henshall -- President and Chief Executive Officer
Thanks.
Operator
And our next question comes from Robert Majek with Raymond James.
Robert Majek -- Raymond James -- Analyst
Thanks. As you start to convert some of the enterprise seats from discounted short-term licenses to longer-term contract deals. Can you just help us understand what the uplift could be on a per seat basis?
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
I think that would be consistent with what we've articulated in terms of that 35% uplift in a seat license to the cloud. And I think that the way to think about that, Robert is obviously we want to convert those customers to be SaaS customers, and to get them to have the additional functionality around security and analytics and engagement with their employees if they get being on our SaaS platform. So I think that's consistent and that will be our selling motion, and obviously that will start to happen as we come into the beginning of next year and think about those users.
David J. Henshall -- President and Chief Executive Officer
And Robert, I also think it's important to point out that if you remember, we excluded a lot of those tens of millions of dollars from our ARR calculation. And so when those are converted to permanent licenses. Those will come back in and be a tailwind to ARR.
Robert Majek -- Raymond James -- Analyst
Thank you.
Operator
And I'm not showing any further questions at this time, I'd like to turn the call back over to David for closing comments.
David J. Henshall -- President and Chief Executive Officer
Great. Well, thanks everybody for joining us. So I just want to leave you with a few parting thoughts, Citrix is a Workspace company, we're enabling employees with a secure and consistent work experience wherever work needs to get done, whether that's at home, in the office or really any place in between. Our subscription business model is obviously on track and it's been supported by a great first half of 2020.
As we've talked about here, today the pace of customers moving the bid large workloads from on-premise to the cloud is likely impacted by economic conditions and shifting priorities. So our focus along with strong relationships with partners like Microsoft is going to be on aligning and making this transition as easy as successful as possible for these customers. So I'll leave it at that and we look forward to speaking with many of you throughout the course of the quarter and on our third quarter earnings call. Have a great day.
Operator
[Operator Closing Remarks]
Duration: 42 minutes
Call participants:
Traci Tsuchiguchi -- Vice President of Investor Relations
David J. Henshall -- President and Chief Executive Officer
Arlen Shenkman -- Executive Vice President and Chief Financial Officer
Phil Winslow -- Wells Fargo Securities -- Analyst
Heather Bellini -- Goldman Sachs -- Analyst
Mark Moerdler -- Bernstein Research -- Analyst
Raimo Lenschow -- Barclays -- Analyst
Walter Pritchard -- Citigroup -- Analyst
Sanjit Singh -- Morgan Stanley -- Analyst
Brent Thill -- Jefferies -- Analyst
Matt Hedberg -- RBC Capital Markets -- Analyst
Jason Ader -- William Blair -- Analyst
Kirk Materne -- Evercore ISI -- Analyst
Ittai Kidron -- Oppenheimer -- Analyst
Robert Majek -- Raymond James -- Analyst
