Qualys, Inc.

Good day, and thank you for standing by. Welcome to the 2024 Second Quarter Qualys Investor Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you'll need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference has been recorded. I'd now like to hand the conference over to your first speaker today, Blair King, Investor Relations. Please go ahead.

Thank you, Marvin. Good afternoon and welcome to Qualys' second quarter 2024 earnings call. Joining me today to discuss our results are Sumedh Dakar, our President, CEO, and Jumi Kim, our CFO. Before we get started, I'd like to remind you that our remarks today will include forward-looking statements that generally relate to future events or 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 our filings with the SEC, including our latest Form 10-Q and 10-K. Any forward-looking statements that we make on this call are based on assumptions as of today, 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. Reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. And as a reminder, the press release prepared remarks and investor presentation are all available on the investor relations website. With that, I'd like to turn it over to Sumit.

Thank you, Blair, and welcome to our second quarter earnings call. In Q2, we witness organizations increasingly optimize spend within an already tight IT spending environment. Given this dynamic, organizations are standardizing on trusted platforms to consolidate security stacks, leverage automation, and achieve expedient remediation of risk. Qualys has a unique, organically-built platform to address this need. Nevertheless, crisp execution is required to fully capitalize on this opportunity. While we have made meaningful progress on several fronts, including growing our sales and marketing team, building momentum with partners, and growing our new business, we have work to do in addressing our upsell execution in the current environment, which resulted in lower than expected bookings growth this quarter. With the upcoming departure of our chief product officer later this month, I plan to directly oversee the product and marketing teams to position us for forward success. I am confident in our ability to re-accelerate growth in the long term, which sharpen execution of product-led growth and improve alignment between our product messaging and marketing activities to drive operational efficiencies in our go-to-market motion. At this time, I'd like to thank Pankaj Shah, our Chief Product Officer, for his contribution during his tenure at Qualys. Although Q2 was a challenging upsell quarter for us, with continued increase in deal scrutiny, we are fortunate that many of our customers have already begun a long-term transformation journey with us Through the conversations I've had with many CISOs over the past several quarters, their message is clear. They are looking to pivot to a natively integrated risk management solution. In the face of sluggish macro, escalating threat environment, and cybersecurity skill gap, organizations need to reduce complexity and cost while presenting measurable risk reduction initiatives to boards and C-level executives. Against this backdrop, Q2 was another quarter of rapid innovation for Qualys, reflecting on our ongoing commitment to technology leadership and customer success. Qualys' mission has been to bring innovative new security solutions to market fueled by customer insights. As a result, we have established a strong track record of converting operational challenges into structural competitive advantages while maximizing lifetime value, ensuring frictionless outcome at scale, and driving immediate ROI on security spend. For example, Qualys pioneered a patching category for security teams. Building on this success, we commenced development of our TrueRisk eliminate capability several quarters ago. I am now pleased to announce that some of these increasingly popular solutions amongst our beta customers will soon enable organizations to respond to zero-day threats and mitigate top exploitable vulnerabilities even when a patch is non-existent or cannot be deployed. This new subset of our broader TrueRisk eliminate roadmap which we call True Risk Mitigate and True Risk Isolate, and power security teams to apply fixable, automated, and intelligent risk-based response solutions to address cybersecurity risk based on an organization's own unique operational characteristics, remediation timelines, and business objectives. With these new capabilities soon going GA, strong customer support, and over 45 million patches deployed year-to-date on callless agents, we are increasingly confident that We are once again transforming our customer security operations while further magnifying our competitive differentiation in the market. Continuing our innovation to help our customers address risks coming from the use of latest technologies like AI LLM, we are pleased to announce our newest capability, which we call Qualys Total AI. As organizations rapidly deploy AI LLM technologies, the security teams are looking for help to quickly find and comprehensively assess vulnerabilities in these models. With seamless AI security posture management integration, these new adaptive capabilities discover AI LLM usage within customer's environment, scan for vulnerabilities, and prevent data leakage for comprehensive risk assessment prioritization and remediation across the entire attack surface with a single click of a button. In addition, we are pleased to announce an extension to our total cloud CNAP platform, which now discovers and assesses the risk of all known and unknown in-use Kubernetes container images. Leveraging our own AI and ML technology, we are establishing a baseline for normal behavior for each host container, serverless function, and other objects. Now, through real-time observation of file system processes and network activity, our newest runtime security tools provide organizations with a predictive and threat-based protection to actively detect anomalous activities, prevent zero-day attacks, automate response, and help ensure PCI 4.0 compliance in both containerized and legacy environments. These new container runtime insights combined with toxic risk factors within a unified actionable dashboard allow for immediate threat qualification, prioritization, and remediation from code to cluster. We believe this new capability uniquely sets us apart to enable secure and compliant cloud consumption at scale. Turning to our federal agenda, we recently reduced FedRAMP moderate certification for our TotalCloud, CNAP, and EDR solutions, marking another key milestone for the company. We continue to expect our pending FedRAMP high certification for several key applications later this year, making Qualys the only modern alternative to legacy on-prem scanners for federal, state, and local government agencies at the high impact level. Our investments to establish a public sector presence are starting to yield results, supporting our confidence to address this new vertical and drive incremental growth in the business over time. Finally, with respect to our upcoming enterprise first management solution, we remain on track for GA later this year. This extension to our platform is currently in private beta with select few design partners. The ability to bring first- and third-party data into our platform to holistically detect, quantify, prioritize, and remediate vulnerabilities with automated workflows on a unified dashboard across on-prem cloud and multi-cloud environments is evolving into the go-to risk management solution for enterprises, especially in the context of a tight spending environment. The early customer feedback we are receiving is very positive, and it's great to see CISOs from around the world actively attend and engage in the many risk quantification workshops we have been conducting over the past several months. These innovative new approaches to cybersecurity risk management, along with several others we have showcased at Black Hat this week, allow our customers to reduce complexity and cost, and of equal importance, create multi-dimensional paths for durable long-term growth in our business. Moving to our business update. We believe that with continued due scrutiny comes larger opportunity for Qualys over the long term as our natively integrated risk management platform helps customers consolidate technologies and achieve better outcomes within fewer resources and immediate ROI. With many of our customers already embracing Qualys to help re-architect and consolidate their stack, Qualys VMDR solution has translated into an enviable customer base, deep penetration, and significant industry recognition. As recently announced, Qualys' VMDR with true risk was voted the best vulnerability management solution at the 2024 SE Awards Europe for the second consecutive year. We believe Qualys' placement as the number one VM solution further validates our investments in the platform and continue to represent the gold standard for securing customer environments today and in the future. Given Qualys' blueprint for delivering greater value to our customers, our VMDR solution with true risk not only fueling new logo lands but also helping increase platform adoption especially in the areas of cyber security asset management with easm patch management and cloud security let me share a couple of recent wins with new customers which illustrates why companies turn to qualis to help consolidate their tool security tools and improve their security posture in q2 a large federal government agency became a customer of qualis this new customer was previously using multiple legacy and next-gen solutions to manage a variety of risk management use cases across their security IT and DevOps teams. In addition to the complexity of using multipoint products, this government agency was frustrated with increasing costs associated with on-prem deployments. Looking to migrate into a natively integrated cloud-based FedRAMP high-impact level-ready solution that met the CISA BOD guidelines, They replaced two of their existing vendors in a high six-figure bookings phase one deployment using multiple Qualys modules right out of the gate. These initial deployments include cybersecurity asset management with ESM, VMDR with TrueRisk, and patch management. Through this highly strategic and competitive way, this customer is now able to leverage unified dashboards that provide them with greater insights and automation than many of the competitive products they evaluated while taking full advantage of the speed and scale of an integrated platform. This win is a further testament to the investments we're making to expand our federal business, and we are also very pleased with the turnout and encouraging feedback from many large government agencies at our first public sector cybersecurity conference that we held in May. In a second new high six-figure customer win, a hyper-growth cloud-native SaaS business standardized on Qualys' enterprise-based platform. This company's security team struggled with managing multiple consoles, lack of integration, complex workflows, misdetections, and extended remediation times, which restricted their ability to protect themselves. This customer is now consolidating on the Qualys Enterprise True Risk Management platform, replacing several competing vendors through a natively integrated multi-product solution, including cybersecurity asset management with EASM, VMDR with True Risk, patch management, and our total cloud CNAP solution. Now, with a comprehensive multi-sensor solution, single user interface, and single platform, they have complete visibility and automated remediation across their endpoints and multi-cloud environments. With seamlessly integrated solutions delivered natively on our platform to solve modern security challenges, more and more Qualys customers are beginning to understand how cybersecurity transformation drives better security outcomes, saves time, and costs less. As a result, customers spending $500,000 or more with us in Q2 grew 18% from a year ago, 299. Beyond these wins, we are also increasingly gaining leverage from our partner ecosystem. Our pipeline of business opportunities with partners continues to grow, and our partner-led win rates increase again in Q2. As our market perception and brand awareness continue to strengthen, we anticipate partner integration with our platform will continue to increase, further strengthening our strategic position, expanding our ecosystem, and broadening our reach. In summary, our rapid innovation engine underscores our growing thought leadership and the value proposition we deliver to customers seeking to transform, consolidate, and fortify their security posture. Given the large market opportunity, in front of us and multiple growth drivers in our business, we anticipate that we can grow at scale long-term, generate cash, and invest in key initiatives that will further extend the gap between Qualys and the competition. With that, I'll turn the call over to Jumi to discuss in more detail our second quarter results and outlook for the third quarter and full year 2024.