Qualys, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the QALYS Fourth Quarter 2020 Investor Conference Call. At this time, all participants are listening on remote. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please press star then one on your telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to you, Mr. Vin Rao, Vice President of Corporate Development and Investment Relations. Sir, you may begin.

Good afternoon, and welcome to QALYS fourth quarter 2020 earnings call. Joining me today to discuss the results are Sumit Thakkar, our interim CEO, and Jumi Kim, our CFO. Before we get started, I would like to remind you that our remarks today will include forward-looking statements that generally relate to future events or our future financial or operating performance. Actual results may differ materially from these statements. Factors that could cause results to differ materially are set forth in today's press release and in our filings with SEC, including our latest Form 10Q and 10K. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of gap to non-gap measures is included in today's earnings press release. As a reminder, the press release, prepared remarks, and investor presentations are available on the investor relations section of our website. With that, I'd like to turn the call over to Sumit.

Thank you, Ben. Thank you and welcome everyone to our Q4 earnings call. Before we discuss our financial results, I wanted to say a few words about the separate announcement we issued this afternoon. As you have likely seen by now, we disclose that Philippe Coteau is taking a leave of absence due to health issues unrelated to COVID-19. Please join me in wishing Philippe a speedy recovery. In connection to this development, our board of directors has appointed me as the interim chief executive officer. As those of you who have been following Qualys know, I have been with Qualys for nearly 20 years. I was appointed chief product officer in June 2014 to lead the transformation of our platform and appointed president in October 2019. I have been working closely with Philippe for many years and we share the same vision of transforming the way our customers secure and protect their organization's IT infrastructure and applications with best-in-class cloud-based IT security and compliance solutions. I have deep appreciation for the tremendous platform we have built, and I'm honored to serve as Qualys' intern CEO. I look forward to working closely with the board and the rest of the Qualys team to continue building on our strong business momentum and driving the company forward while Philippe is out. Now, for my first task in this role, I will walk you through our earnings result for the fourth quarter and full year 2020. we are pleased to report another quarter of solid revenue growth and profitability. We also saw strong growth of our paid cloud agent subscription, which grew more than 80% over the year to 56 million. Very uniquely, our multi-function agent, lightweight cloud agent, provides visibility across the entire hybrid environment and is the underlying technology for a number of our IT security and compliance solutions that are natively integrated on our platform. As a result, Qualys customers can deploy VMDR, vulnerability management detection and response, multi-vector EDR, endpoint detection and response, policy compliance, file integrity monitoring, batch management, global IT asset inventory, and our upcoming XDR offering through a single agent, which differentiates us in our industry. In addition, we continue to expand our platform's capabilities to take response actions, enabling our customers to respond quickly to security issues in their environment. While the importance of vulnerability management for our customers remains high, for them to be able to mitigate the risk, they also are looking for ways to quickly respond to these risks and threats. As these organizations continue to increase their focus on discovering all the hybrid IT assets, mitigating the risk and detecting and responding to ongoing attacks, Qualys platform through single pane of glass uniquely provides our customers ability to do a complete asset inventory and CMDB synchronization, mitigate the risk of breaches with capabilities like VMDR and patch management, as well as at the same time detect and respond to attacks using our EDR and upcoming XDR solution. With the release of our container runtime production solution and the new SASDR offering, as well as our upcoming cloud response solution, we are now expanding similar capabilities in other infrastructure environments as well, giving customers additional opportunities to consolidate their security tools onto the Qualys Cloud platform. In terms of our newer paid solutions, we continue to see strong growth for our patch management solution. In Q4, a leading pharmaceutical firm selected our patch management application over several competing solutions, given its ability to easily and effectively patch remote endpoints without using the limited bandwidth available on their VPN gateways. They chose Qualys because of our ability to discover asset inventory, vulnerability management, and patch management through a single agent. This quarter, we also saw strong traction for our paid global IT asset discovery and inventory application with a large media conglomerate adopting the application to gain visibility of all their known and unknown assets across multiple environments, identify the end-of-life of their installed software, and synchronize with their ServiceNow CMDB. Finally, we again saw robust growth for our container security application with adoption from a large global IT services company that has already deployed our vulnerability management, patch management, global asset inventory, file integrity monitoring, and EDR solutions, further consolidating the security stack with Qualys. In terms of product innovation, we have continued to make strong progress on our product roadmap. Some key recent accomplishments include delivering a free 60-day integrated vulnerability management detection and response service to our customers to quickly assess devices impacted by SolarWinds Orion vulnerabilities, Sunburst Trojan detection, and stolen FireEye directing tools, and use the patch management capability to immediately fix their exposure with a single click using the same agent. We also enhanced Qualys container security response solution with the addition of deep visibility, runtime defense capabilities, and automated enforcement with delivery of policy runtime security. We recently introduced a brand new extension to our platform called SAS Detection and Response, SASDR, which provides a single console for IT and security teams to gain continuous visibility, security, and compliance of critical SAS applications like OG65, G Suite, Salesforce, as well as Zoom. The solution enables our customers to monitor the posture of their users and applications that have access to critical data in their SaaS environment, helping bridge the gap between on-prem as well as SaaS assets, again, through a single platform. We're also excited that we are expanding Qualys VMDR, Vulnerability Management Detection and Response, to enterprise mobile devices with the addition cloud agent support for Android and iOS devices. As part of their digital transformation, organizations continue to leverage more and more handheld mobile devices to conduct business with access to critical data from these devices. This expansion allows our customers to track vulnerabilities and misconfigurations on these devices and take appropriate response actions. built on top of our product accomplishments from earlier of 2020. Key amongst them are shipping of Qalis multi-vector EDR, which leverages the Qalis Cloud platform and Qalis Cloud agent to detect ongoing threats on endpoints, conduct threat hunting, and take appropriate response actions. It further correlates threats with vulnerabilities, providing unique capabilities for proactive mitigation from additional breaches. We also released a comprehensive inventory sync with ServiceNow, ServiceGraph, and Configuration Management Database, CMDB, as part of the new ServiceGraph connector program, a new designation within their technology partner program. With the strategic launch of VMDR early last year, which is a unique all-in-one cloud-based application that automates the entire vulnerability management lifecycle across on-premise, endpoints, and cloud environment, bringing vulnerability management, threat prioritization, and patching into a single end-to-end workflow with single agent. Looking ahead, we are enthused with the additional solutions that we plan to introduce in 2021. The XDR platform expansion, which seamlessly integrates and correlates data natively collected from all Qualys sensors with additional context from other third-party data sources. This powerful capability will let customers detect threats beyond endpoints. Qualys XDR will also orchestrate the various response actions and help our customers reduce cost and complexity of deploying and managing SIEM and source solutions. This capability is currently in private beta with select design partner customers who have been working with us. We also plan to expand support for patch management for Linux environments, so customers with cloud agents on these environments can also add Qualys patch management to these additional devices. We will continue adding additional capabilities to our multi-vector EDR, such as endpoint protection capability, EPP, as well as expanding EDR support into Linux environments. We are working on a major update to our passive scanning technology that will significantly expand our coverage of industrial control systems, operational technology environments, as well as detection of IoT devices. We showcase these solutions at our very well-attended QSC user conference, which was a 12-day virtual event held in November 2020. Over 5,000 people across our customer base, partners, prospects, analysts, and investors, and the media attended the event and we received very positive feedback. The development of these native solutions at such a rapid pace is possible because of the massive investment we've made in our cloud platform and our strong engineering talent base with over 900 employees now in Pune, India. These new initiatives open significant incremental market opportunity for us. They also allow our customers to easily and cost-effectively consolidate their stack of traditional enterprise security and compliance solutions while providing them with a single pane of glass view of all assets across on-prem, endpoint, cloud, SaaS, and mobile environment. In terms of go-to-market, we are expanding our relationships with existing partners. Our comprehensive platform with detection and response is becoming increasingly strategic for MSSP partners as they can now provide multiple services and easy upsells to their customers instead of focusing large amount of resources on building such a scalable platform themselves, having to integrate multiple other point solutions. Given the increased breadth of our product sweep, and the launch of VMDR and multi-vector ADR, we have now embarked on a few additional go-to-market initiatives that leverage the efficiency and effectiveness of our cloud platform. This is a key element of our profitable growth, driving value for our customers and shareholders. Our go-to-market activities in 2020 included leveraging our cloud platform for lead generation with free services. As an example, we launched our free remote endpoint protection solution to help enterprises secure remote workforces by providing instant security assessment, visibility, and remote patching when it was difficult for them to do this using enterprise solutions over VPN. We expanded our reach into China by establishing a private cloud platform with a partnership with Digital China, the largest value-added provider of integrated IT products solutions and support for enterprises in China. We launched the QALYS UAE cloud platform in Dubai, which further expands QALYS' operations across these continents in that region. We extended our partnerships with Deloitte Advisory, where Deloitte Advisory partnered with QALYS to integrate VMDR and our multi-vector EDR offering into Deloitte Hong Kong's cyber managed vulnerability services. Armor, a global MSSP, embedded Qualys VMDR into Armor Anywhere, an industry-leading cloud security platform. Our partnership with Armor also includes Qualys CloudView solution for compliance and security posture management of public cloud environments. We announced cloud agents' general availability on Google Cloud, providing customers with a one-click workload security visibility directly in Google Cloud. Additionally, we natively integrated our container security solution with Google Cloud Artifact Registry. We expanded vulnerability management integration with Microsoft to also include Microsoft Azure Arc to allow customers to perform vulnerability scanning on servers outside of Azure platform. We partner with Infosys, a global leader in next generation digital services and consulting to integrate Qualys VMDR and multi-vector EDR into its CyberNext platform a managed security service offering. While looking forward to 2021, we plan to meaningfully expand our sales and marketing efforts given our increased number of solutions, including our game-changing VMDR and multi-vector EDR, as well as upcoming XDR offerings. Similar to our efforts on the cloud platform, we are building a marketing platform. We have recently hired a CMO and are expanding our marketing awareness initiatives for the C-levels as well as our lead generation capabilities, leveraging our platform and increasing virtual events. On the sales front, we are expanding our quota-carrying sales headcount, or technical account managers as we call them, and have recruited an EVP of field operations for Americas, a VP of new business for the US, VP of strategic alliances for system integrators, and VP and GM for our SME, SME business. In addition, we are also planning to hire a CRO, Chief Revenue Officer, this year. We will also continue to invest in R&D and operations, as well as other support functions as we continue to scale the organization in anticipation of future growth. We believe these investments will set us up well for long-term and profitable growth. We believe the world after COVID-19 is going to be different. Companies are cloud-based solutions. Increasing adoption of our cloud agent and our passive scanning technology combined with the breadth of our solutions that span across the entire hybrid environment enables us to offer customers greater visibility, accuracy, and scalability. This position qualifies well to enable customers to consolidate their security IT and compliance facts with us, providing risk mitigation and threat detection and response on the same platform while also drastically reducing their overall spend. In conclusion, Qualys continues to clearly move well beyond vulnerability management and increases competitive advantage. We are optimistic that the adoption of our newer solutions, including patch management, multi-vector EDR, container security, and upcoming XDR, which solve meaningful problems for our customers, will provide us the opportunity to increase Booking's growth over the long term. In summary, We believe that we are now well positioned to expand our revenues with existing customers as well as continuing to expand our customer base for the years to come. With that, I will turn the call over to Jumi to discuss our fourth quarter financial results and the full year fiscal 2021 guidance.