Qualys (QLYS) 2 Nov 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Qualys Third Quarter 2022 Investor Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

would turn I to conference time, Mr. this like the to over At King. Blair Sir, please begin.

Good welcome afternoon, quarter Howard. you, Thank and call. XXXX to earnings third Qualys'

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

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

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

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

cash growth. call. and Thank and our while delivered generation again Qualys earnings to quarter executing everyone deliver another investment you, strong on quarter strategy profitable welcome growth flow Blair, third a further of revenue to focused

integrated through and cut reduction geopolitical and costs. optimize and to CIOs landscape, security both an growth threats macroeconomic to risk accelerated broadly security and response a and budgets fortify to continue scope reduce and in their cyber and agents of solutions posture the of times Given prioritize natively complexity CISOs uncertain

down customers, As the by clear and of competitive included momentum strength in significant of Qualys' The garnishing has multiple wins market which Qualys Forbes the recognition. deployed in VMDR another and experienced quarter now in the worldwide. market XX% steady XXXX. industry customers a both quarter of adoption, is solution VMDR our Key is VMDR result,

voted We vendors practitioners recently management the evaluates input Qualys' best the from based award XXXX application As and at esteem. on Awards. SC VMDR placement one is held This customer believe security vulnerability announced, the standard solution platform the solution number worldwide in was vulnerability represents investments Qualys validates management in high our environments the as in today and securing future. for and further the

share successes growth platform With customers in our to we I of the multiple moment seeing business, term early to are take long and some drivers broaden partners. a will with adoption

and front, selecting agency VMDR EDR, transform customer entered as win part highly Management to a with the large expand architecture. seven IT government figure its security competitive Policy entered an and to Cybersecurity asset government strategic its of large count On a Asset Management, agency and into agreement a -- initiative a upsell after Compliance in Patch Multi-Vector

agent technical Malware future vulnerabilities, defend to available to today asset because Qualys the multiple environments. a FedRAMP lightweight platform and and that aware the Ransomware context fidelity we security authorized across utilizes high selected enable debt, proactively in mapping stack to with customer and telemetry reduce prioritize endpoints monitor compliance against patching and and events This market single continuously only automate offer full visibility

agents key significantly monitoring console, mid were this with with context, program Cybersecurity engagement external enhance with while on upsell. single differentiators QX, ticketing comprehensive In alerting built-in customer competitive and selected we capabilities win. Compliance prioritization integration consolidating and security all accurate CMDB compliance and figure company Management The internal the Asset ability in six asset a response and VMDR to a our in its capabilities. This also XXX Fortune expanded Qualys' Policy

Cybersecurity adopt and customers Vulnerabilities, new VMDR. see to a tool new produce continued to of and these dimensional being list Asset we Patch not help wins one used Management Instead competitive also detect a much platform. This alongside is seek risk Management Qualys' to remediating wins, ability the customers faster of across just these but Beyond as while stronger siloed customers macroeconomic proposition all of solutions. alternative vulnerabilities only single assets out a than even value and offerings current environment prioritize becoming detect, security multiple in increasingly an Qualys underpin capabilities

the to using company quarter, TrueRisk. into a with to partner with MSSPs be in our with cyber customers our relationships security for agenda. go-to-market reduced premiums partnership in a insurance enable ecosystem key new VMDR their several continues and we Investing pillar entered our expanded In a

zLinux We Qualys this accurate also institutions, Through several capabilities highly are key Qualys for solutions positioned extended the our mainframe IBM. vulnerability IBM’s platform infrastructure same agent. world's securing compliance bring and to financial strategic collaboration, the detection while alliance to of being largest utilizing as with

Additionally, of our we the We deal May strengthening brand since in reflects and position launch continue to strategic see the our believe expansion an program in partner new awareness increase registrations partners. in its customer market. our by

challenge The to and engineering is ourselves partner we of lead our with day cornerstone the every innovation strategy industry.

and platform on cloud VMDR detection and FlexScan While platform reduce environments by and we and now enabling remediating touch the power runtime. and flexes pairing agentless further customers vulnerability some risk by secure organizations view of have cloud and the TotalCloud launch extend container continuously to vulnerabilities attack native of for been our zero recent efficacy, assets options to their helping with by prioritization can surface preventing misconfigurations entire the very time rapidly with visualize our build high agent all from external focused capabilities, assessment now, cloud

believe securing solution container already holistic, and modern market cloud, and this workloads the in in most available flexible cloud we billion the approach accurate the to XX over provides security agents Qualys today. With

FlexScan, have agenda and to at and TotalCloud Las in registered XXX already of showcase will We qualys.com. all from you November access the to Vegas we We people X upcoming register to Conference with Security XX. Qualys over our attend welcome

innovation our program able customers and a costs unified they their platform agent. our showcase about on in will moving teams conference, single with Qualys their to Qualys by how At save talk conversation focused including with this security to Qualys, product and will platform success have the engineering on been

vulnerabilities an pace now With of architecture growing in than skills the ever a unprecedented gap, matters. proliferating more face cybersecurity at

recently what and announced Blue highly and environments and XX that acquisition can XX data from cloud, With Hexagon, rapidly undetectable and in to Qualys agents, invisible network collected and makes discover the million in XXX,XXX predict and its more of points Intelligence Qualys ability capabilities scanners patterns now over and significant over anomalous Platform apply activities trillion than security Learning Machine Cloud Artificial data are traditional customer this lake so identify scale, the it's integrated to our cloud to within solutions. combination relationships detect

capability threat is security assets powerful time will the including environments. AI active detection the to this advanced to and ML This all pleased zero Qualys minds the integration, associated detect Qualys welcome we of to upon enable exploitation, innovations uniquely allow customers new a in and best across identify addition real vulnerability some network day Cloud Platform are and family. threats to Qualys applications Specifically risk mitigation, adaptive and and

in security a In solve category with summary, challenges. opportunity multiple front define to engines cloud large of between our we generate that and market security initiatives term, to And us growth invest and modern gap to in we continue given cash in the pioneer will and at key extend continue that the business, anticipate long the competition. we further grow built Qualys scale can

quarter the the With that, fourth results third our will Mi outlook Joo for in turn I and to discuss XXXX. to year call and quarter over detail more full

Thanks, Sumedh, and afternoon. good

strong financial all pleased Before generation. I'd unless of growth for XXXX XX% growth the ago Revenues are for like comparisons flow cash XX% and and in I quarter based prior revenue We're grew otherwise. start, on $XXX.X that quarter the million, to revenue, are the figures healthy year year growth period, period. up except another announce rates of to to from to third non-GAAP note stated

LTM $XXX QX, the of dollar land a model on calculated platform was rate expansion currency And expand rate constant and over from a net year $XXX, grew our year-over-year dollar and expansion billings increases to up improving past current several ago. power driving XX%. sales basis quarters. In the speaks a net

turn deal that the superior security cloud, aggregate effects challenges as deploy to manage. operate platforms cloud to are in data leverage size to web simple at produce to analyze outcomes, LTM to native Qualys and solve easy increased through XX% modern Our organizations network continued average and to scale, and

Qualys’ Vulnerability remediation management be their agent. an enabling solutions continues differentiates discovery, rapid integrated risk on to itself approach detection, asset comprehensive including programs and reporting single of of platform real security unified visibility only customer by from prioritization capabilities, vulnerability time posture. other security through combination a a of cornerstone

contributed ago. year products from year. QX, from VMDR total Management Security QX, was Asset Management. products In over with and our of on customer We're continued pleased combined Patch XX% up both a for of adoption the to two XX% at newer XX% In basis, X% also an of bookings XX%, like growing Cyber LTM bookings last applications penetration with total new and the

strategic spend Continued and customers to spending XXX adoption ago growth customers role digital increased Qualys us. or in with transformation more period solutions, year a of our initiatives. XX% are This customer with speaks the large from XXX,XXX we playing represents

quarter was for drive leveraging $XX.X of cash of third on was the margin and representing for cash a focused the XXXX million of and remain to EBITDA margins to Year-to-date XX%. continue Adjusted our margin. scalable quarter superior flow model representing XXXX for $X.XX platform XX% the significant We XXXX XX%. a our $XX.X third million was EPS flow. third free quarter was

demonstrated generated to XXX,XXX uncertainty Qualys growth $X.X $XX plan volatility, invest continued capital we the repurchase million shares. our outstanding of return of continue In long on million from times a profitable QX, into expenditures of we history to With we operations to cash cash shareholders. excess and through and back including to strong to

share quarter, the $XXX million end repurchase in As program. of remaining of our we the had

Shifting quarter now guidance the for fourth and year. full to

top and bottom the our full ends raising revenue are and We XXXX guidance. year EPS of

this reflect budgets guidance outlook remain continues the a macroeconomic pragmatic uncertain to regarding While unchanged, global cyber backdrop. security largely

losing reflects growth. term investments optimization Our while planned the importance we as in year, not committed driving guidance the also profitable remain long of of increase sight to this

marketing capabilities capacity leverage Specifically, distribution Alongside our relationships this, these management will and to digital as and sales well our investments functions. invest in expand continue to include networks. product of and their partner expansion as to large support programs continue initiatives we enhancing

touched after we is Hexagon. de results. a of as announced on the shortly full year on impact This have earlier, minimis to quarter end, Blue acquisition Sumedh expected Additionally,

revenue million full million. growth. prior to year full This $XXX to $XXX.X $XXX.X now representing to $XXX.X compares of that, the in year With million of range revenue million be is guidance a expected XX% to

of range to implies $X.XX to our of are $X.XX profitability, EPS raising mid-XXs. the $X.XX. the in the year In full range we in terms of margin guidance prior This to EBITDA $X.XX. now an From be

For million the be we expect XX% of to $XXX.X range represents to fourth $XXX.X growth. quarter, which to revenues in the XX% million

EPS expect $X.XX. be in $X.XX of to to range the We

Our million. million to the expenditures QX capital expect million approximately planned full of investments $X.X range in $XX in for million the we year XXXX, and is to $X.X $XX

Qualys of In levels value strong cash cost leading flow us agent on interest our long conclusion, differentiation that leveraging edge vendors we and that top of their believe and while with competitive believe continue see model conscious dynamic our drive spend, highly and see consolidating enable security scrutiny for growth, industry a single becoming will We higher the of improve maintain associated term. heightened more to to product we scalable a playing with customers profitability. line with will durable proposition to well customer

With questions. to happy are answer your of that, and Sumedh I any

line or the from first Instructions] [Operator Joshua Our of comes from question Research. Wolfe Tilton comment

open. is Your line

Is the billings before? what for maybe any can question. [indiscernible] guys. taking from the the there growth chance just in quarter off on caused and Thanks Hey, calculated start the my with you commenting maybe quarter

Yes.

QX, and billings current quarter by grew XX%. this So

us, of the business, most billings our be multiple there reasons for are current bookings, it For may different differ. indicative but time of could why

FX I revenue. by impact as that to deals quarter multi-year translating ran think is was well this not was off billings full impact impacted as some that prepaid there for that So specifically, current example,

trying just also kind guess that. seemed to just maybe this remarks, slowing the I'm a as understand but I billings any on are to impact you guys prepared So you not positive growth. Are of you guys follow-up have pretty seeing or macro yet?

up? you are just the and those help what not guys us showing macro are understand where seeing So maybe impacts from or

Yeah.

the I think that we are of seeing seeing macro, the uncertainty. impact are the we

from the materially terms the different billing FX I In think last current the most not it's of impact of though (ph) that adjusted, -- of quarter. is majority

greater this bookings FX impact well. is on We So both an negative the headwind and FX than or excluding the have billings. the a current quarter even because last from prepays multiyear that impact did as headwind have impact from quarter and does

couple negative So basis of think balance you can current points it hundred quarter. as of head this to

you Thank much. very

Thank you.

from question open. is Hedberg your next comment from the Markets. Capital or RBC Our line line comes Matt Hedberg, Mr. of

This hiring Anusha on my Hi. front. taking question. Hedberg. is the for Maybe for just if the you Thanks Matt on hiring, update us could just

You How is sales in out headcount XXXX. thinking that and XXXX, how your priorities talked And about double-digit about have in you looking growth are then set hiring? Yeah. progressing? at budgets, you

the think that investment year that so -- This making. progress year track. with we're been happy And very I was we've We're us. an on far, Yeah. for

We've this sales marketing achieve growth double-digit I we think mark. that year. and earlier shared that headcount that in had the at already the

we we're to turning kind and now, can of where optimize that right so look focus see on to And return.

although, invest on will marketing well in functions, to the as optimization. and more year, sales be as next continue will other we the So focus

and And channel. marketing? Maybe of think you're it. more mix headcount, follow-up investment if about on that. the should the channel It that. around on digital of kind Got just how like we you seems about maybe could XXXX, into we a leaning elaborate then think When

thoughts our Yes. share The still little we've we'll at for in I the satisfied think earnings. early the And QX that we're this a far, to year. been but early, It's able channel started so new it's progress too making phase. investment so be more with around us

you. Thank it. Got

you. Thank

from question comes of or the next comment JMP Trevor Securities. from line Walsh Our

I'm Just Mr. is – say line to your sorry. Walsh,

Our or your Morgan Saltzman, Saltzman from Matt next comes is open. question comment Mr. from Stanley. Mr. line

Hey, team. Thanks for taking the question.

increase how of the understand So growth, is base just forward? penetration need the And Thanks. base part going that of existing the impact second new continues coming new more channel as the versus to how growth from margin into you is, first going to business are trying and question to much then VMDR structure question, further incentives net customers? for existing

Yeah.

has primarily rate. net the been I coming existing -- think growth demonstrated historically dollar as strong our our expansion base from that by a customer

I The remains successful to existing still our we've very think into in very customers. selling retention be that been strong.

and unit with and pricing business front, thinking could there's terms in quarter new how channel business of think work we're We the be to On I on this executed to the have better done. the economics, new especially respect about partners. side incentives,

profit overall we early, So are that the little as about through going now we increase well to to pricing pricing think right we're working too are how think sharing because in seeing through as the competition.

Got so Thanks much. it.

you. Thank

Our Mr. JMP the of open. is your line or Walsh next comes Trevor comment Securities. line from Walsh, from question

you guys can Hey, hear me?

Yeah.

network the My could question. great. Sumedh, curious the the part. my for through a I maybe Okay, for you around you, if taking was most of Hexagon walk us for acquisition. that's more Blue type thought detection offering Thanks process response understanding

you've behind kind of just partnering, actually you're us seeing logic buying building there? what as And other special help or picture with you in probably how XDR help what the that got kind maybe kind or players. more network the integrations to was centric kind flesh might them and of about as broader Can that? far of relatedly then out some your Thanks. So understand offering importantly given and of

Great Yeah. question.

really understands team very to the more machine brought they strong Hexagon, Blue in in AI a security specifically platform and space. that So us and a learning

of of XX large so that points. amount platform And data, having the have you trillion with Qualys a when kind data the

security can applications telemetry they machine platform many we that created from We get. from are about different the sort we that data relevant that. perspective can talked that the very have that we of be that combining So that see to There's we and that with a learning index have.

able the data exploits, first exploitable, that sort of a year that sort we quarters of see malware And environment, about sort detection the or and over broader applications to to learning around machine and application one environment provide will we'll the cetera. we you we be aspects for to most over that et application see to ability to of network we leveraging will are intrusions our next that cloud be able cloud the that's into different into mentioned next integrate help different in data that total cetera. in of targeted we so vulnerabilities bubble ML including the But macro-based the be will announced application from that the patching where to is the detect few that matured our our the of looking we ones be more zero be using that more integrate actually to up the et platform model going

just to as providing to then help as our learning remediation insight And with as bring analyzing our for on modules capabilities well machine prioritize well EDR more the our customers on and what data. those into to capabilities XDR additional

about able And more so, as integration EDR Hexagon risk Qualys need then inventory, to holistic we platform mitigate of need they to really devices, management to benefit the where and asset continue XDR it from able think customers combination VMDR their be build to monitor a Blue need stack. know and branch be to to into the they is as is of threats going and the from our then to plus that's plus we

Great. Thank you.

queue no the today's I'm participating showing in would at questions time. call. this for program. to like This everyone Thank in concludes the I additional you. thank

a may disconnect. Everyone have wonderful You now day.

Goodbye.