Qualys (QLYS) 10 Aug 212021 Q2 Earnings call transcript

Thank you for standing by, and welcome to the Qualys Inc Second Quarter 2021 Investor Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instruction will follow at that time. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Blair King. sir. ahead, go Please

Good call. welcome Grace. quarter Qualys' XXXX earnings afternoon, you, to and second Thank

today discuss Kim, me and Joining to CEO; our Sumedh and President Thakar, Joo Mi our our CFO. results are:

press remarks materially events statements. started, may I differ our or statements differ Actual results release set that and today, to make on XX-K. that a forward-looking Before we Factors as financial events. statements in cause today's today and SEC, to in or to based would include future our future filings get new these will of we latest relate Any we result with results these that of the undertake future that forth remind could on materially like are you including are as from our and or this no generally call Form performance. obligation statements information XX-Q operating assumptions update forward-looking to

non-GAAP both website. a reminder, section included During in on presentation as available press And this release, is call, release. reconciliation and our today's Relations measures present we the are earnings GAAP the of GAAP financial non-GAAP A Investor will remarks to investor and prepared of press measures.

So to call I'd to now with that, Sumedh. turn the like over Sumedh?

end turning operate everyone, us Thank reduced the integrate delighted faster paired effectively our malware posture, security and increase company. increasing We're to VMDR, and cyber costs. to earnings through fortify call. with cloud legacy you, deployment Faced quarter and attacks and continued to management we second are points. their our the with customers that of in the scrutiny, welcome, Blair, and to in government customers heightened patching on upgrading IT latest pandemic ransomware changes QX respond agents with and the grow quarter to to was more have another our share solid

trillion than XX the us billion data agent, on currently scalable industry. clusters. pumping handle ElasticSearch X our a on than Our of bus Cassandra cloud-based over on deploy points multiple second using us applications to differentiates and clusters, X to scalable which over platform our per highly enables indexing enterprises data million in single more Furthermore, petabytes messages day platform allows Kafka XX rights our a moving more our

result, a Agent collecting remediate XX% rely don't detect, point turn, year-over-year from acceleration and to threats. grew user solutions to in and As continued respond The and security subscriptions, to our approach which need agent on to underpins products single better the Cloud $XX our data million. security experiences of provides disparate

to continue penetration our with agent We expand gain traction of in market QX. customer the solution, ubiquity with to continues as the of VMDR our which XX%

approach, solution number started but additional of Patch Multi-Vector our solutions Additionally, and EDR, Management, File a consolidation Security. gate out the purchased in Qualys not with top QX Monitoring, only also with VMDR, application new Container as Policy validating Compliance our scanning customers such of Management, Integraty Asset

the security the management amounts enriches data desire with data financial application OT top-tier packaging and its discovery new and financial ideal agent and on across after UpToDate pursuit passive asset challenge categorizes Despite and block of it organizations workflows cybersecurity. given these our view Exhibitor resource is that application By Accurate a to an recently to businesses. environment. We and customers agent-based management the reception in cybersecurity the challenge. of remains institution a entire security IoT virtually Qualys scanning select collection, Qualys this asset rebuilds major small simplified collects active of this, on-prem see continuously days fundamental were including was provides large drive visibility asset by with see just combining and hybrid at a now security-centric to application. launch particularly is this container expect remediation. in for solution multiple as and the during asset Hat, struggle context consolidation, for strategic Cloud our SMB CSAN large tool to with have integration, risk-based Cloud focused rational add vulnerability for of adoption back platform, initiative, infrastructure compliance of It the building a single We We comprehensive announced end robust the being cloud introduced. CMDB VMDR with in the customers our and that and a reduction introduction with gaps, very enterprise pricing is institutions' encouraging provides capabilities. agentless changing for the requirement, smaller work APIs scrap to Management architecture the and believe infrastructure, environment hybrid the and Platform overwhelming sensors response scalable we to alerting large that segment which and recently correlates management, the worldwide. pleased modern comprehensive IT and CSM built-in Black Asset for we And of further

customer producing We pro set agents see interest and with management a response. continue risk for in single to solution

application customer a web Policy hygiene cloud to together So management, purchased and an over example, QX, security, point on multiple security new as solution Compliance, in VMDR agent a scanning continued best-of-breed security solutions. XXX single standardize Fortune match

solutions, our solutions, remote over gateways. quarter, our newer management Security in well agent. to positive existing natural ability solution. customer finally, Container terms In quickly patch and Management enterprise effectively as using paid VPN and customers of given of as interest large platform EDR feedback support bandwidth patch application available the limited a new we on endpoints is for And are our easily the cloud a our strategically This scalable our vision its we In without receiving aligns solution our single continued and highly and selected application. extension several saw to application customer competing other Patch

natural which and across response detection correlate extended is introduce security of and remainder the analytics into and end-to-end beta like plan and feedback security been extension our several EDR, is next-generation getting natively another This solution platform an in we very which platform. solution, the encouraging. insurance with Looking and the for are stack response customers XXXX, our we and design has private security partner to XDR, integrates currently telemetry to

of adoption perfect the in solutions. cloud continues focus industry, security to to continue As applications on our we cloud-native enhancing the

targeted expanding of several integrated including acquisitions cloud security enable today the platform innovation will to We into our total power posture to this application soon continue cloud are acquisition our in through we be workflows CloudView platform capability easily and our management rapidly cloud will solution of integration. modules, organic upcoming automated The area. rapid -- and our users cloud and create XDR strengthen announced for

I execution. strategy our addition, earnings key call, and another is as outlined In our last go-to-market for sales area of on focus on me

our R&D great in his we and continue investments to adoption of for a efforts, paired our In We quarter of the off I major team, results we in will performance to continuing speed And financial With to and innovation we runway competitive Alan making activity. are we It's has guidance start. investments contributor appropriate go-to-market looking have that, profitability to has that summary, enablement advantages and in pleased make for new legacy superior Here, point replacing our say CRO, him recently to with for customers full company turn XXXX. as view Qualys are favorable revenue the who is to for business. benefited believe from provides our over as deployments. call that leadership. growth growth product Peters, to the environment momentum third long-term that our supporting Mi as position an I'm a while and to forward our of industry-leading great year under a second Qualys our quarter these joined Joo discuss already a the and sales competitive and part

Thanks, Sumedh, afternoon. good and

pleased figures another the rates comparisons non-GAAP, XXXX second million. Before consistent and report the I to and revenue, profitability I'd based and operational for financial grew of start, stated quarter following or We're of otherwise. that $XX.X highlights. period are to in note to financial are year the XX% all quarter growth prior reflected on unless to like Revenues growth excess

was XXXX calculated QX As quarter, current were impacted this billings and on this negatively billings. calculated reverse to quarter impact a expected our reminder, current last positive a have to

total for with excited alliance by up customer vulnerability now of quarter. nonstrategic VMDR management period in of growth up XX%. LTM XX% with continued adoption current QX, the was quarter renewal $XX subscriptions our at solution, a XX QX We're last VMDR, million As of the And in last to increased XXXX. ended for billings calculated XX%. the Cloud million XX-month from $XX Agent Paid customers up XX% from penetration months, over purchased the

XXX,XXX growth was in in XXXX from generate $X.X Year-to-date XX% capital XX% quarter QX, $X.XX, business versus drive we're to into the period was a which of we $XX.X expenditures We drive model Our significant second cash EPS XX%, in $XX.X solutions last of invest EBITDA the cash flow. quarter seeing representing XXXX year. year. XX% and $XX.X free we to the quarter XXXX confident deal flow scalable million, repurchase newer shares. given the up million, outstanding model, last to margin from was and back average $X.XX and Adjusted margin platform year. of our versus weighted QX and in flow second remain of $XX.X million, our continue for XX% The from for for outstanding last traction was fuel was is operations our for the In million Non-GAAP the same we're well last margin year. to overall cash year, last million including generated Qualys, that million continues a the representing $XX.X free XX% momentum. positioned a margins superior shares down cash business second

our earnings. the million, year the range to range from million of now for be the top XXXX guidance end We are for and We're guidance revenue $XXX.X to full revenues our be year the raising reaching million prior and $XXX of $XXX.X in to full million. to bottom of both delighted $XXX.X

range raising our of of to rate growth in revenue to of to million, non-GAAP $X.XX $X.XX. guidance the for $X.XX third now expect prior quarter, from range $XXX.X full $XXX.X of $X.XX be the XX%. the a to which represents year million EPS in are to We be the we And range

be range $X.XX expenditures to questions. expect any that, in to Sumedh EPS I happy $X of are expected capital With and $X.XX. $X are non-GAAP your be QX We of of million. to in to the range the to answer million

of from Your from Hamza question Fodderwala Instructions] comes [Operator the Stanley. first line Morgan

Calvin on Hamza. for This is

any anticipate start progress improvements? further kind like into Peter Have you've now tell with, us out you I'd businesses quarter, Can sales seen there? to do first, role. Alan of is months last focus. the know think, much mentioned made you how productivity you I of enablement new I And or you X and

Alan come working out mean the right on, what working in Yes. we've I need has Alan. figuring together been to make are investments with that we on

productivity prospecting, on of architects. to focus more continued on process have sales We solution bringing enablement in improvements, terms

and have provided. that -- So some you the guidance indications in of of early we see our can that

are the are things rest year. these through think on. will be of right working investments, the I focus as So continue And making we we that those we to the the

for talk And means Deep the then Watch more about recently kind of and you can go-to-market and potential question, second the with bit motion? little partnership company what for kind that announced my of a

the Yes. We've provides cybersecurity get signed focusing posture. advantage like a qualities platform modernize want being as and what the their Deep security top information, of able fully vulnerability have asset this they are these they perspective, service provide platforms. to providers that's that of they be the that past to them. service the providers tools look benefit have And which which mitigation platforms, for themselves, lot we more them been on to evolving talked on intelligence. already and looking that managed to the a at managed providing a They where expertise look top working the we more watch, the obviously been forward which whether changing the can partnership of MSSPs to more from keep with, and able context, assessment risk not with using it's as about of on provide to able building their in

visibility. focus that the stack looking are capabilities so their stack their the this providing so provide their expertise Qualys leverage build rather trying that solutions We can own than resources consolidate can they then on they spending and with own security disparate to and more point resources to into customers

perspective, bear more go-to-market management to taking core solution customers customers a we're continue as as that their from are perspective, leverage Qualys from they security, they -- going of existing to to So sort platform. they be as well be to together on working us as will on automation-focused bring availability

question Essex next the from line Sachs. of your Goldman from And comes Brian

Your line is open sir.

This is Brian for Essex. Velásquez on Hannah

on and up us previous Perhaps rather, quota-bearing reps marketing one, can that year? following sales question the Just you maybe on in of how an you first grow idea to this particular? plan much headcount give

Yes.

we ended year, sales headcount the last XXX. in So year and approximately the with marketing

We quota-carrying are Peter's new Allan planning a haven't with CMO onboard board, rep this we later disclosed month. the headcount. And to and on

members to the and the We will team. to profiles of be team reassessing right kind add the

and marketing have don't that a number So planning although target, specific professionals expand and we are -- team. we to sales our grow we

there. follow-up guess another then And I

in S&M grew XX% about quarter year-over-year. So the

plan a after quarters in growth? to similar trajectory declines know, do past, X This X the quarter, follow or don't of you I

a investment We still much we and to when timing is do are very With the Allen It's increase the CMO, to impact but terms said, on including of have the the not say into just also we and executives, in will since And that for. other our difficult bit margins. translate of planning CIO looking that in are that our actually little new. P&L marketing. sales investment

out CEO, position together with is men and of and that year. things current work And year about the optimistic what to the trend so that the With one to we business is timing in at continue this are to are as rate Sumedh right an the then closely his of invest planning executive helm next team new figure a as very the on we very momentum. in is said, the when

the on our the the implies momentum. guide our can very can guidance, And trajectory XX% the best quarter billings we're reacceleration business that you to is guiding is always than increasing optimistic of now annual revenue revenue for we've a also can at And see that faster growth. XX% is next see growth -- with of year-over-year revenue. revenue QX what kind said As guidance And see, potential annual bookings. about current our you in XX%. will to increasing We're that rate proxy current with quarter, And at you XX%. be the

Loop Our Yun line from the Markets. next Capital question of comes from Kim

Your line is open.

terms Sumedh VMDR, and just VMDR Mi. Congrats strong I'm of for the on Can much rate that an a was I a solid mean, quarter, talk upgrade is quarter. Joo uplift sorry, to you about whether in there seeing of multiproduct overall kind when you're seeing VMDR size overall adoption you're when in customer the uplift VMDR? deal of that to the upgrades a upgraded someone any and

operationalize those as customer, think some them to those. But I and VMDR see take lot and environment So we absorb for kind additional does a the looking it is of also patching at what integrated at time or enables capabilities for of cybersecurity looking other. at those of to are do asset are their part asset or management some out management, the looking of the examples looking way file They're there monitoring. they in who VMDR in some at

So we solutions of I customers, VMDR. they purchasing call, the are you're that. -- these in our also on bringing part as additional look mentioned as at new as They board,

them they in then see. opportunity management, continue other and board, we And existing they're us encouraging just not now but with potentially portfolio looking deploy customers, bringing starting product open on they actually to are think that's does different see traction agents bat that customers work as solutions. the multiple you start agents to agents And with look for looking that the those the actually and at for us patch for the deploying to operationalize are at the to straight bring at I get and EDR definitely that so go and they from off capabilities. when of to kind the who interest we existing VM, And new environment, even up the and

see the examples mentioned as of do call well. we in that that earlier So in the some we

us Can earnings your just in in MSP release. MSP press your mentioned you traction market? you Sumedh, the update on

-- are different why single and with why yes. XX, get they can that provide see look, mean, their reason they they a Qualys to to services are uses that leveraging of I see So XX looking they they is Qualys the platform, X, We because security that information at need customers.

through going work to be getting work So with services as we There's that time platform, invested that. onboarded. part Qualys these as of they get build around we their partnerships a them,

as some work definite the into service And us we and integrated is with that so up we're signed interest see is potential, today, providers these there through and that to with managed recently them we what we stack. of get working

customer So that and right take of move the And more as way, will much provide additional forward, to there managed be into now. And they their services are expect more from service kind that. see us seamless leading can that we around base we traction we providers. that's where

you. Joo quarter? question increase qualitatively for in Mi, our favorite talk ASP you any about at the Can least

Yes.

really what grew historically it's of we've a so course, deal was, does last if year-over-year. faring and we've it average our you fluctuate indicative that not shared of size, to at tend shared So that how take with But really the X% the quarter, us. customers look are

in QX, that was However, percentage XX% year-over-year.

that But this in that's include positive. didn't or it we that the was not time. we indicative earnings to So it script think meaningful because obviously, decided

of How was growth then FX-driven? lastly, international strong. revenue came And just in that very much

as not just for hedge a because we business huge, expenses. that revenues Some is impact FX and our but both whole

line of the Cikos Mike & from Co. comes next Your Needham question from

Needham. here Mike have Cikos line the from on You

just and in If determine, QX the we 'XX? out of hiring lower-than-expected thinking Can think like looks calendar R&D team? about I'm I whether buckets. trying guidance your for most Are about this you should put your behind in to upside guys it's engineers here, sales results us ramping of from And larger a you we different help Just expenditures, up anticipate a it or to force you ramp coming is for the had look as OpEx. expense any I'm those you. question guess,

to. Happy

little set when guidance, So annual as bit guidance earlier first and as different. year, the know, were the review had EPS as well we share a you this out things

some going been change recent. We new CRO, through that's haven't in as decade. Alan, Sumedh, for are before management, a been fairly the obviously, CEO. a we he's a But role us he who's for the with with in CRO including had the year, joined person and this a And

CMO, joining month. new will this who Our later be

with so sure a of the into And margin terms team, And investment as the that little P&L out. that in pushed and not said, we're working been timing a we're contraction. bit exactly will of together has translate when impact actual as

I around next fair by year the were and in turn So to or without bookings current keep our that significant think or indicated business year. kind of But are marketing on it we is for R&D investments and sales to be revenue say planning momentum some of the also investment billings has that to pushed seeing that cost or matter. it in of a growth been whether G&A expenses, out that we this mind make even

I to say continue an year next it year for that that think us. to But we so don't will be And fair is see changing. investment

could. I if questions, other X just And

think above guys running uptake, know that which recent I you is you quarters. were your cited was guys XX%, in mid-XXs adoption that on first the The the VMDR I

of first just seems there question still I'm the your driving I or And can item, just you're the it's competing And But there. are wondering adoption vendors? what's it you effectively in VMDR, the customers about few second with on rates improved overall then if you beta a like XDR thinking the the more us players other on there market, versus differentiating your how real anticipate there? understand solution. guys early XDR help some days, And I'm so solution know

to So address with first. let me that respect VMDR,

customers that in specific rate penetration the the what that said, we've previously have we disclosing renewal are percentage what for of been up quarter. VM So

at Just of VMDR because last we launched year. end the QX

up sense subset were focused VM in customers specific renewal adopt we that that makes really customers, see, it which take for them what So look on quarter of at VMDR. are to for is and a

So that would percentage we knew from quarter-to-quarter.

lower us that than higher slightly know is XX%, were actually expecting. sure some being to disclose wasn't I that's that which because really that customer. the XX%, did and which VMDR, expecting than some to percentage percentage the is of quarter that of a that full necessarily people So penetration, It hitting people is I'm this were up we first customer it's kind what reasons of And XX%. one surprise

and has different a customers XX% because is number now track. last that for XX%. been total also quarter, that metric to it's which to has XX%, trending slightly a we ad meaningful So that's up, us at And been of that have, was up

been of towards do it's out renewal, And in secure, that pushing attack And definitely who you are get from the and that it's we're is as coming for the is -- the that The changes that ability that SMB some being get remediation perspective. faster perspective. of, are been we year. some also more are from And with other we quicker who doing Is them is this -- to that have it will and and talk used an Customers VM. seeing somewhere obviously, for down. malware remediation VMDR unique see very industry much combined seeing that able attack VMDR to folks how of up that the combines packaging are to they're a quite they combination are to the I has there good trending. VMDR with happy a we adoption as quarter, add are way that,

the upsells XDR they our or renewals think which just hope variation a the we into the deploy a a us customer about biggest adoption the their And the able can data to see solution. VMDR will TDR multiple continue data those what a typically as are that's different so customers data And quicker to to data additional telemetry have from collected They pushing agent as see require are still for some them the it's but taking we positive other a take being sort bring from just SIM, other customers going maybe solutions we're that they're big has some value by some we differentiator should and DR moving of part of customers see I that we do infrastructure firewall as context lot few deploy cities, non-IT focus and to you seeing and those put are forward there. we required and to to of where for the about And about continue combination differentiator points that's otherwise from different are That's unlike then the of the current we been on to information get as it's SIM containers, a to now things platforms and a few get the HDI customers. from same collecting value printers, of of I we're that combine is out, them customer being data from aspect, on vendors, this to with versus side, and of cannot budgeting solutions. to cloud longer then So feedback where is enable the XDR to deploy on they be agent for solutions we collection because able to capability it's lot scanning, solution. in so up. lot for file solutions mostly, they by solutions are a And really of platform. all market VMDR perspective. a really all additional be that those that we other say that than is other single the into And collection about be most as already assets that in inventory, kinds lot different for one do see multiple having -- the a information EDR, us require to solutions into going standardize try all devices, platform are quality ourselves Qualys see the they a quickly deploying integrity and about of would an coming the for adoption have as getting budgeting IoT But Qualys. much done that

line And your comes of question from Jonathan from Ruykhaver Baird. next the

Your open. is line

Sumedh, case? does seen of an lend uptick customers? in of in, Yes. so, vulnerability announcements if around not demand trends you that I And within expansion wondering have barrage in the can talk you about constant renewal? guess, if I'm itself volumes vulnerabilities enterprise particularly light the -- known scope management, the of in regarding scanning And to opportunities at Or that is

think the and that asset, asset, owned that And is not had we So are surprised think what question. are have there's while surprised would visibility with they've a ransomware the multiple had they That's see way different always right organizations they've Yes, I everybody apply. happening. great attacks, in I things that reason was they they surprise right? now,

properly, they know they was inventory assets did were, these So the the have prioritized that they asset not or were were not cash or that asset there, they have clear properly. vulnerabilities not of if were did they or their they then

conversations our having And We're is of to how as a evaluated so looking risk say, reason I the get lot big with lot. a customers that do being I they're think why a that's visibility.

patch prioritizing more they does are knee before is getting just or are more how of fix it of the are provide these those, that attackers visibility, visibility So how I lead and Qualys vulnerabilities into can but conversations, And end a their them to their their conversation what those setup they to in with customers VMDR, and Qualys, see our that And actively not case able lot be at these Patch cases. What does we to some a just nimble. conversations assets, life, to happening. reaction of jerk do are with push more right? either holistic better going is in next this a of that. them are on IT they're CSAM, Management teams. a some should tools I looking rearchitect immediately and combined, go on their being that. through being with you more of new top multiple ahead VM of much issues try do of more being again, than automated, to so buy the don't that and where VMDR with cases, attacked traditional to quicker that them And much is really that, months. And are we be over architecture obviously, have In And customers, a scope to lot working to their deploy expand few choose programs with out

the are EDR, more, off getting few understand. they the are MDR so a that new those that getting right the But I are like I they CSAN, on of Qualys, bat. said of examples And that one to in customers coming

in off are at that as see because value solution we getting we looking having architecture, platform. a So new of the a they customers from new we -- are few that single things of do Qualys buying all right see the are and back looking

drive the value So sounds. really you're in a of platform, it because ACV the seeing broader the to opportunity higher

anything I growth, since think lagged you question, the or would competition around the the about difference? you beginning that -- specific other Can just for reasons of at talk XXXX international, look there highlight? Is relative it's execution so the that if you So U.S.

It's kind being numbers as reps and land highlight penetrate smaller there as APAC well particular. expand their of there. really smaller a and our to customers driven total to is sales of percentage versus No, with and ability And new our EMEA notable our but existing. nothing Americas, law in of by a still nothing business

Just driving that suggesting to clarify new customer internationally? more the that strength year fleet that's growth it's

existing. It's no. both No, and new

territories. the or different U.S., a law across emerging nothing that this Americas there's more but say And to pretty or highlighting that still a haven't new So positioning smaller It it's do compared what EMEA that penetrated has is point. the with there to like fully see numbers we competitive across countries both we I or advantage fact upsell board, really a in of territories renewal -- and really is I would notable of there. at terms bookings and was like regions our there's

Yes. also the have And seeing customers the entrenched architecture in that large as over we're U.S., years. the very

to are can able to much when in bit tend make to so the we so, as entrance tend and these execute whereas they architectures, things. all an U.S. legacy between they So that to of modern sometimes times happen faster to internationally, have move they some change of want architecture be see and actually lag towards not working that more at a little when they it more on

see. that different combination So of it's a we things

am CEO, you. at Thank for would this I questions Thakar Sir? closing our to Sumedh turn no showing to further back time. now Mr. the like I conference remarks. any

integrated increasing our believe to detect an your call customers' issues Thank positioned and you All to We our earnings pace. rapid questions. for increasingly and very at platform remediate well is need to respond attending right.

you continued our encompassing focused customers Thank value we're our shareholders. growth to and executing on ahead, strategy and advancing our increased motion innovation for driving growth go-to-market again. reaccelerate Looking while

Thank you. all joining. today's conference this concludes Ladies call. Thank you and for gentlemen,

may You all disconnect.