Q4 2019 Earnings Call
Good day, everyone and welcome to call. This fourth quarter 2019 earnings conference call.
<unk> is being recorded at this time all participants on the listen only mode.
Later, we'll conduct a question and answer session and instructions for asking the question will be given at that time.
I like to turn the call.
<unk>, Vice President corporate development and Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to call its fourth quarter 20, like the earnings call.
Joining me today to discuss it does.
Let's go to a chairman and CEO and Melissa Fisher CFO.
Before we get started I would like to remind you that dimmock. Today will include forward looking statements that generally relate to future events or a future financial and operating performance.
Actual results may differ materially from de statement.
Factors that could cause results to differ materially set forth in today's press release and enough filing today to see including a lead us form 10-Q, and then kit.
Any forward looking statement that we make on this call.
Based on assumptions as of today.
And we undertake no obligation to update these statements and seldom news commission or future that.
During this call is present, both GAAP and non-GAAP financial measure.
Reconciliation of GAAP and non-GAAP measures is included in todays earnings press release.
At the combined to the press release prepared remarks, investor presentation, and supplemental historical financial spreadsheets are available outside.
With that I like it and according to sleep.
Thank you have in Iraq, and welcome everyone to do all Q4 earnings score.
Medicine.
Please to report another good quarter in terms of revenue growth and profitability.
We also very pleased to report continued acceleration in old paid cloud agent subscriptions.
Almost 31 million, though.
90 person growth from prior year from the prior year quarter.
We continue to see good adoption of our freak Robert I just its inventory.
Discovered in century application with almost 6000, new companies signed up and that was 600 using the service.
We now I've, I've or 300 to existing customers using it as what.
We saw strong growth this quarter from bulk paid ideas that discovered inventrust traditions and truck leading hours to based company procure the solution this quarter in order to gain visibility afford they're known and unknown to us it's across multiple informant <unk> as well as the end of life of the installed software.
In terms of fault other newer solutions. We also saw robust growth against again from container security and speed fight integrity monitoring.
Large software company.
Yep.
So they did quite as fast.
That's what it's probably still applies to score in order to be to this could be reaches into that develops and called environments.
Which they could not do with competitive products in deployments and the deployments with supernus utilize existing for energy management, our existing management cloud agents.
In addition, it's worth noting that touch management assumed the highest.
Customer, Rob I'm out our newest application.
With particular strength in the mid market segment now, let's look at all product innovation in Q4, we continue to make strong progress you know goal of achieving ubiquity fall cloud agent Oh traditions that technology platform for seven security compliance and I just solutions, namely towards your management.
Policy compliance fought integrity monitoring indication a compromise.
Management I sit in Vetri and the upcoming that's sort of if he could management and with more to comp.
Our key accomplishments this quarter to Dwight.
Cloud agent adoption in crude.
On the winning.
Bernstein management detection and response, which we call the and deal I know user conference Intuit's C.
The MTR takes Bernstein management to the next lever by providing the power to continuously do take remedies and missed configuration across the entire global hybrid I tend garments.
And respond in real time to mitigate or remediate assets that Alberta bird already compromise.
The mdrs bands does.
So discover in inventory in front of just this month and actually addiction as a single up its effortless to deploy on a global scale and price as a fully bundled solution drastically sipping deep deep deployment administration itself with subscription cost.
The with of course, how real time lightweight called agents in the future scanners that off that's a dating and easy to deploy as what.
Well, so I don't see good partnership with Microsoft and bedding, Qualys, where just the management.
And Qualys container security into Microsoft does your Sigrity center, providing real time visibility to secure cloud workloads provisioning and they've ups orchestration.
And also partnering with go with Google Cloud to provides customers with one click <unk>, yes. This month for seamless integration of the Qualys cloud agent with the Google Cloud platform Jeep GCP.
Bringing building security to Google cloud customers with essentially no software to store or maintain.
Additionally.
Well good cloud customers would have access to Qualys VMD youre.
To be the streamlined work flow to create their global I just did vetri continuous. Good then you probably gonna be does that cause them toward Guam, privatized and remediate those would reduce the clique uppermost drastically reducing again the threat exposure.
This bid on no other product release earlier.
In 2019, including the battery management up and they being I did say clubs teams to quickly target. The critical government very easily exposure than the probably the patches across and points on premise cloud Oh, God assets, and 35 remediation or from one single console.
You will see 2.2 up which provides a quantum leap in those gd addiction with new detection investigation of response capabilities that identify the nearly real time, not only known I use sees that also suspicious devices.
The theme is 2.2 up.
Where we have now why the incidence reporting <unk> integration reward bays enriching other backwardation capabilities, but also created a light version of doing for customers that require compliance only like with <unk> requirements and finally, the college engage with service up and importantly.
Thanks, Trued up or cloud agent platform, enabling customers to securely connect qualys cloud agent from since Stephen Volkmann like DMZ is well also drastically reducing the bandwidth demands of large scale deployments.
Now, let's look at all go to market initiatives.
Given the increase breadth and fall product suites, and the launch of the MTR during ours there.
We have now embark on a few additional go to market initiative that leverage the efficiency and effectiveness of our cloud platform.
This is in fact, a key element if all profitable growth.
The value for both our customers and shareholders.
Our go to market activities in 2019 included.
Leveraging our cloud platform 40 generation, we know it's all good I just didn't country.
I said discovery battery up as a free service has as you remember football platform to generate meaningful demand.
All paid up.
With a single agent subscribing to additional labs is friction of us.
He's driving lucky product, the adoption, which naturally increase the stickiness of all platform and led and that make us im trying to convert to our competition.
Do not offer the same breadth of solution.
Also launching new targeted campaigns, which should they be prospective customers too easy to click and create their own trade accounts.
Creating a new team of Stickney could account representative which we called cars.
On board and support customers utilizing all three.
ER applications.
Well, so building the Qualys Canadian cloud, which expand Qualys global operation into eight location on three continents.
And.
Expanding partnerships.
Core fossey's them. So they did qualys, where do you management that could you just monitoring capabilities to integrate into those secure cloud automation services.
Prophy show an award winning global managed security service providers services provider.
Choose to put integrated the quite a suite of cloud based solutions with Brookfield. She was management detection and response capabilities and finally, the center for Internet security see I guess detected qualys to provide its member.
Beginning visibility of the externally facing web sites would you be gates and it's just that yeah. This configuration.
Additionally, with the MTR, well now increasing I'll focus on the small and medium enterprise market segments, and I'll delighted to announce the promotion of micro settlement to be piece, what did medium enterprises for the Americas any EMEA, Michael it's been a quality since 2016 and it was previously running our new.
At this stage steam for them in bucket.
And I'm also happy to welcome back done borrowing huh.
Our Chief Marketing Officer was now significantly expanded the marketing team.
Looking forward to 2020, we plan to meaningfully expand our sales and marketing efforts, giving all increased numbers of solutions.
Being our game changing the MTR, which was recently highlighted the report but often.
Market, leading the that research and consulting firm and you can get the report on our website.
Very easy to find the you know just to look for all of them on the reports Dennis in essence.
The MTR uniquely provides customers with full visibility across them talk little bit like <unk> and government and combined these with state of the outbreaks addition, and you.
Also take into consideration missed configuration.
Newsprint.
So if you could see creed exposure.
That's the MTR provides the real foundation for comprehensive risk based management program that does not solely rely on CB days variabilities, an arbitrary risk score, which unfortunately, he can give a four cents of security.
You can learn more about India as well as though are the planned initiatives solution that our user conference you're always say at the fourth season.
Seven seas. Good again, you can register for that that Dave, which welcome to showcase really did you all as well as somebody new innovation or we'd be bringing to market in 2000.
20.
And again you can go to the website to register at the conference. We would also provided that they don't know transformational data Lake Indeed, yell solution that will leverage our rubs scary, but back in the salary of sensors, which already collect and rich normalizing correlates trillions of data points across on premise cloud and soon.
More by which you know huge environment.
This is an important new opportunity for company in our industry.
Scott incidence response solutions are quite complacent costly.
Requiring organization to use multiple vendors to connect the data.
It is needed and bring it and bring it into the Sims with food sexual information.
Resulting as we all know is what is called the alerts fatigue.
Too many false positive. Additionally.
We will also not at least an investor luncheon on Friday February on February 26. These events will include administration, if our newest application in a discussion on our Twentytwenty product Road map, our president and Chief product Officer Sumit the car.
And the financial update by our Chief Financial Officer, Ms., Stephanie shirt and again, you can register on our website.
These were happy to have you there.
With that I will turn the cold you may decide to discuss our financial results.
Thanks, Felicia and good afternoon.
Before I start I baking at that except for revenue.
All financial figures our non-GAAP.
Growth rates are based on comparisons to prior year period unless stated otherwise.
We're delighted with our increasing calling subscriptions and not that product adoption, which lays the foundation for future revenue growth and industry leading profitability.
Our Q4 financial and operational highlights include.
Revenues for the fourth quarter 2019 grew 14% to 84.7 million.
Platform adoption continues to increase as a percentage of enterprise customers with three or more quality solutions rest of 48% from 41%.
And the percentage of enterprise customers with form or college tuition increase to 20% 21%.
Pete cloud agent subscriptions accelerated to 30.7 million over the last 12 month.
From 27.9 million for the 12 months ended in Q3 2019.
[noise] new products really since 2015, contributing approximately 35% of total annual bookings in the quarter up from 26%.
And our average deal size continues to increase prescribing 9%.
Our scalable platform model continues to drive superior margins can generate significant cash flow.
Adjusted EBITDA for the fourth quarter, 2019, with 37.69, representing a 44% margin versus 39%.
Q4, EPS grew 25%.
And our free cash flow for the fourth quarter, 2019, or 25.1 million up 9%.
Excluding onetime capex related to the Buildout of our pending headquarters and M&A related payments, our free cash flow grew 32%.
In Q4, we continue to invest Mcafee generated from operations back into quality, including 5.3 million and capital expenditures for operations, including principal payments under capital lease obligations.
Well, it's 3.2 million on capital expenditures for the Buildout of our pruning had flutter.
And 12.5 million to repurchase hundred 45000 never shares.
Looking back on the air we're proud to have continued our product leadership bombing meaningfully growing earnings and cash flow for our shareholders.
In 2019 would be really several new products features and enhancements.
A number of customer spending $500000 remark salaried.
Cloud agent adoption grew almost 90% from 16 point your mind cloud agent subscriptions to 30.7 million.
New products really since 2015 sharply increased to approximately 30% of 2019 up from approximately 20%.
We achieved record EBITDA margins of 44% error free cash flow, 30%, even as we continue to invest for growth.
Excluding onetime capex related to the Buildout of our Penny headquarters and M&A related payments, our free cash flow increased 35%.
And we utilized 86.4 million of our cash to repurchase approximately 1 million of our outstanding shares offsetting dilution to our shareholders from equity grant.
[noise] looking to 2020, we are excited about the revenue growth opportunities from our new solutions, including the upcoming the MTR.
Because our BMD our solution packages the ability to detect vulnerabilities with response in a single App, we see an opportunity to further drive cloud agent appointment as well as increase our strong renewal rate.
Adoption of our cloud agent is important because it is the technology platform for seven of our security compliance Nike solutions and lays the foundation for future revenue growth.
We expect full year revenue and 20 tried to be in a range of 364 million 369 million, which represents a growth rate of 13% to 15%.
Our Q4 2019 calculator crime billings did benefit from a few Archie on separate Invoiced in Q4, this year rather than after anniversary in Q1 2020.
In terms of 2020 profitability, we expect to maintain industry, leading margin leveraging our highly profitable operational model, while preserving the ability to further invest to drive future revenue growth.
We expect full your GAAP EPS and 20 trade me in a range of 160 to 165, and we expect full year non-GAAP EPS of 2020 to being a range up to 57th Street 62.
We expect capital expenditure from operations and 2020 to be in a range of 25 to 30 million I'm expected spend an additional 5 million in the first half of 2020 for the Buildout Rpone headquarters.
For the first quarter of 2020, we expect capital expenditures to be in a range of eight to 10 million, which included 3 million for printing headquarters.
Athlete might seem to be the forward looking many of you at the analyst and Investor Luncheon, John Arsene San Francisco.
With that belief and I are happy to answer any of your questions.
Thank you as a reminder to ask a question you would need to press star one on your telephone.
Question first Apache.
Please standby we've compiled acumen.
I sure. My first question comes from Danielle even from Wedbush. Please go ahead.
Yeah, Thanks solid quarter ended the year.
Show.
Maybe you can just talk specifically about <unk> when you think about.
What we're seeing on.
He'll scope and size them you started to see more just strategic deals in the pipe I know you don't guide to larger deals maybe you can you just talk about that.
Just maybe difference where we are today versus 612 months.
Yeah, I know, we're clearly as you know whether there's significant penetration has a very high end to the market with about a about 70% of the fortune 100, whichever George is not a dozen qualys.
And so with these companies are we all see well as seen by them sites more and more strategic.
Not only Verde B G.
And now people realize that you've got to absolutely Pegintron Jupiter bid season, but just not only.
Cross your traditional servers, and so for but across the entire spectrum and that's really what makes a significantly strategic and of course, all the ability to create a global it's yes, its inventory, which is a foundation.
It's also very attractive for them, so where else we are reducing as more and more and more strategic and of course with which was what is it you know roadmap like of course, you know the seem the next generation see many deal which were currently building and then hoping to Delever two markets is.
Some time at the end of is your that's also makes us even more strategic so as a result of more deployment then of course, we become more strategic for them at the time also what they have to consolidate the the the their stock they cannot continue without will that many disjointed enterprise traditional security solution.
And at the same time moving aggressively to the word of did you should know submission and the word of Dev ops and our product line fits absolutely perfectly the devops environment. Now in addition to that would we see today, especially I'd be mdrs been received of course, what presented BMD already too many of our customers and it's extremely well.
<unk>.
Because it simplified note on the consolidate even further everything into a lot of these education to one single up with the what we called transponder orchestration Sue you don't have to add another solutions like sort sold them for you it's sold integrated sold stimulus.
But also.
Of course, the fact that now we probably is that on the trusted business, which is much more interesting for large corporation, which have a very complex.
The environment.
Robert what we see also very clearly is the MTR make us extremely competitive today at the lower end of the marketplace because again the packaging, but also if its pricing goes away. So we see also.
Big demand for being Youre from all mid market and the yes, MBS it'd be business as well.
Okay, Great and just a question here for your Melissa.
Yeah in terms of just spending.
Obviously, you've done a great job on margins and just containing costs.
Which is well known but as you look ahead, just talk about that balance going to this year terms, a plug in more into sales and marketing and well continue to focus on obviously margins just talk about that balance and is it different now you're just given some of the opportunities where maybe you just talked about that thanks.
Yes, heavy implied margin guy from our EPS guidance is out not of contraction a little bit over 100 basis points and we're proud of the fact that we can we have a highly profitable operation a model that allows us to continue to further invest as well as me yeah, while filming maintaining strong margins. So we expect.
To be investing frankly, you know probably on the technical side as well as Philippe mentioned in his prepared remarks, expanding sales and marketing efforts.
And we'll be able to do that will sell holding margins trial.
And this is because of the modest since I've been whoever the advantage would be a pure cloud based solution.
Is that of course, we can make whole solution available for trials et cetera, the minimum cost and that's what we're putting a lot of investment, including a lot of lead generation degeneration campaigns or try and buy.
Of course, you not installation everything you said the dating so you don't need no significant expensive you'd only patrician services et cetera et cetera. So all of that a deanne makes that and the additional growth.
A big chunk of it comes back it comes down into the bottom and that's essentially the modern.
That will build and proven another time is not something new.
Awesome. Thanks.
Thank you.
Our next question comes from Nick Yakov from Cowen and company. Please go ahead.
Great. Thanks for taking my questions. Please you mentioned increasing your focus on the Midmarket going forward. Just wondering if you expect to be leveraged the channel community or or partners more so than than you have in the past.
Well, that's a good question because well today as you very where no one knew when when you have the a major.
Computing shift the child's other one which thinks it's understood and other change first adept to adjust or where do we see today is that a significant renewed interest from some of these tradition of child or to really move and becoming a Mississippi and so quite is in that sense, we can enable them to becoming a managed security service providers.
Absolutely very quickly because they don't have to worry about building all the solution. We did do for them or made so yes in that sense. You answered. Your question do we see a huge reporting to you with my there. She grew service providers to bring L. solution to the mid markets a they have the customer base typically, especially.
It is larger companies and so it's just a question of bringing all solution, which are already a visit burden ready made.
To that market, so that we see that.
Absolutely.
Okay. That's helpful and most of <unk> could you maybe remind us of the revenue and customer mix between enterprise and Midmarket today.
Yeah.
Yeah. It hasn't moved significantly it's roughly 20% other customers and you know 80% of the revenue.
The enterprise.
Right just figured dollar.
Okay, great. Thank you.
Okay.
Thank you.
Our next question comes from Melissa Frenchie from Morgan Stanley. Please go ahead.
Yes. Thanks, Thanks for taking my question I wanted to ask on the M.D.R. you you noted that there.
Its potential within the Midmarket low end enterprise, but it seems like it could be compelling for the enterprise space as well and so what.
Are you expecting in terms of enterprise adoption and then I know it's early but.
What kind of uplift do you get from the the M.D.R. versus just a regular VM sale.
So let me answer the first question first the seconds it'd be more complex and I will explain that the first one is well absolutely significant interest from both the midmarket and as well as the large enterprise.
It's exactly what they wanted they have been asking does that for a long time and what you have to realize it for us that he would that it was not that easy.
That's an image significant good engineering effort because on one hand, we had to expand all platform to scale significantly as we mentioned many times. We currently index a three trillion data point only last week search returning results in hundred milliseconds.
So and expanding to cover not only just the traditional network, but also the cloud that and then continues and everything so that was a huge technological effort. In addition to that building. These best of breed because today, we consider that the application that we have our best of breed because then they have.
The benefit of being able to essentially received data from multiple sources that accordingly, but the that's a weekend essentially eliminated better than anybody for supposed to Steven for its negative which is really what makes a security application best of breed.
And so and now we had been it all of that and now what we're doing with the MTR is now 70, bringing them all together into one single application with the workflow.
All integrated that's what we're that's what we'll do against finishing as we speak.
And those two out now that once you get a platform that allows you to one and devise that connect instantly we picked it up second we can build from there the global I just venture automatically then from there we cannot be fiber to be just across that entire hybrid environment. Then what made significant extension to all parts of mission engine, which I'd like.
'cause it mentioned in my talk they said that solely.
Relating to on the old depending on CBS that some kind of scores that though.
Made up I would say now we have a lot of information we can correlates to essentially we prioritize those when it reaches which must be absolutely mitigated or lead me to a first and then of course during the remediation, which today, we do that with batch management and the mediation very soon with the ability to it's not.
As required tying the device, which is about to come in a few weeks and so we have the complete end to end solution for energy management, well beyond what anybody else on the market.
So that's appealing significantly to both markets.
So different nature, so for the lodging Reits that packaging that ease of deployment.
Of course that they can do that's what we want to and I said based price. So they don't have to count the number of agent that isn't isn't a bad and for them in market is the fact that now to that it goes unnoticed and one which as you know there's very little resources and it's also very well price at the launch.
So that's for the adoption, which we know today, it's going to be significant in fact, we will be reporting on the adoption of the MTR both for now existing customers and the new and the new customers now in term of what did we do.
In term of a potential upsides if on one hand, we'd vendor you know in VR things like Threatprotect, which is the offer decision engine.
The other and we can see already did that it will absolutely arpus Supergrid IDH went everywhere.
Therefore.
Now increasing their ability to upsize the endpoint to upsize seem to have said all these other services, which of course depend on the agents.
And so the net net to follow that would believes that the MTR is the foundation.
Fundamentally change the games are totally game changer, and really make Virgin matters much what you chewed up.
[laughter], that's been a long long road.
Today, we have the solution that we believe is going to allows us to displays as you know that burden to management market is the displacement market essentially to displace much more easily because we're being more value to the customers would simplify their lives.
And as well that's expanding all our market into into the mid market, which is where we typically historically isn't always competing against you know the tenant burden on the Rapidseven, which of course were more low one solution. When we were in fact, the one I being the solution that scale. So today, we cover with one single.
Solution view you all from the very very low end of the marketplace to this very large markets.
This is significant.
Okay, Yes sounds like it well. Thank you for that Melissa I just wanted to follow up on your comments on investing in and sales and marketing next year I'm wondering if you could.
Talk about how you're investing in the sales part versus marketing and particularly what you're expecting in terms of sales had growth next year. Thank you.
Yes, so we're happy with our sales force as we discussed last quarter be promoting l'oreal, our VP of North America to head of worldwide sales. You know we have a lot of people in place where I always like to add you know here and there, but you know not significant there's not significant needs to the salesforce and so you know we left for the right people.
Yes sleep mentioned, we've just added significantly in them on the marketing side and so you know they'll be a few placed on the sell side can fill in but nothing significant.
Yeah, and you will see more partnerships, though so essentially you are really becoming a ivy where really the ideal solutions for partners I mentioned, the Mississippi is because today you know they and also because while moving into response and that's the thing that I missed this be absolutely needs to where you provided with applications. Debbie did you not only to detect the to respond.
So we have expanded significantly l. capabilities of responding or could you do more oh as now our agent force number should we love the capabilities to also being cubic root being intervention. The list by all depends on the everything there is so you could sort of t. remotely removed.
Processes.
To sum up some processes and you could really do micro surgery remotely which is very important.
As you want to automate things. So I think we see today and are these the partners web already and then there's quite a few more which are coming our way because the say you know we need the scale, we need all of the adult for US. We don't have the time to build all of that and so and we all know competing with them because unlike other companies.
Very well no like for example, Rapidseven, which other managed security service providers, we don't and what would never I want to continue because it's not really probably did very well as profitable I should say.
So they don't see us as a cause a competing or you know solution. That's so they can deliver their service and the additional added value and what do we see also is that they're all looking a two hour steam because the problem. There what I would just Jim is that they are using existing slim, Jim W. dimension, which I'm very very exposed.
I see for them and do not scale. So we haven't bulk already having few of them as all design partner and I think all seemed would be another game changer as well.
The ability to do also it very very scary, but do you all solution at a much lower caused them to existing solution today all of that isn't that making as you know we have built a significant engineering.
Force in India were with more than 750 people now moving in May and June Brian you at quarter, which was going to allows us.
We are the process by the way of expanding to go to be specific expanding our marketing capabilities, what I called that well building a marketing platform. So wed be the technical platform now where begun marketing platform in part out of India. So we could really scale that business.
And really Leverages, all all with the new media in fact, we just hard the director of New media platform well looking we're about to heart of VP of dish and marketing in India as well. So we already know gearing up I've always that I've mentioned, that's in so many times that instead of trying to grow at any cost before you.
The solutions I've always thinking the a portion of the company have made which all have been extremely profitable for that reason I'd be always careful not to put the cart before the horse and so we've got the whole snow we've got different does it cause now we're putting the horse and us more on that.
Cutting but when you do that you don't have to spend as much money because the product package and on and on and you got the delivery mother and that's why we can't continue showing good very good margin, while expanding our sales and marketing efforts.
And I'm going to right.
Document above that so so through I didn't want to do that until were where there, but I'm going to explain to power. The model that we've really been today leveraging the cloud of caustic knowledge.
<unk>.
Great. Thank you very much.
Thank you. My next question comes from Gur Talpaz from Stifel. Please go ahead.
Okay. Thanks for taking my questions. Please I actually want to follow up with some of your commentary just offered you you're pushing into 70 E R and make it through very large and breaking that can markets in the enterprise, we kind of across security in general when you think about your push into these new markets. How do you think about your differentiation, but you're going to bring bid table that's off.
Really different than what's already out there.
Oh, so it's yeah. This is a very good question and it's a differentiation on multiple levels. So the first one is the scalability the unique Scully BG that we are what do we have done. So instead of for example of depending on you know and they w. as backend.
And so forth, which of course gives you.
Of course instant scalability in a way you won't have to below that infrastructure, you'll see the problem. It gives you. The now you'll certainly see more much more dependent on them and the and the and the pricing structure. So when we do get the other routes a really building essentially our own issue for sure.
In the U.S.
Going at micro services bare metal huge scalability.
Absolutely building everything else, that's using open source engine.
And so.
That give us as offered us a unique capabilities and as you can see because of that that the reasons why Google Microsoft Oracle.
I'm as on the old using us to secure their own platform.
So and what so we can also spoke with all data centers. If we all platform. He does your in Amazon anywhere without being dependent as much of their their solution. So we have much more flexibility, which is very important when you look on the global scale.
So that's one element is the scalability were far above anybody that we know.
The second element is the fact that unlike anybody.
We have much more information we collect the data that they don't do you get somebody else solution. The only thing that no is the endpoint. They have no idea of the arrest the context and the rest of the involvement and that's lens into more for supposed to achieve et cetera. And then you are the challenge of course of skate and the challenge for media.
And so qualys as always taken the longer ward.
Architecting things the right way instead of trying to find the short cuts and that's why it took us so much time to get there, but now today, we almost there and just talk walking to discuss that in more detail as well as all yesterday.
And again, we're very confident that we all go into that you've heard this two major new applications. If you prefer which are essentially extension of the platform. When you look today I don't need the all solution for us it's an application on the <unk> on the Qualys platform is not another point solution and that's the problem with all of these other solution the old points.
We shouldn't who can got one single element when watch who very broad platform.
That's a that's very helpful policing thanks for that color.
Just one question for you know last quarter you touched upon the notion of some changes in competitive pricing dynamics and your ability to sort of that's a match on renewal did you see any changes this quarter on out on that front.
I, Yeah, we talked about last quarter was the fact that it sounds cases, where we're leveraging our positions me more aggressive I think.
The MTR pocketable itself is going to.
Make us more impenetrable because we're providing all these solutions bundled and they seem to like really the way I can give it as the end to end lifecycle of honorable in management through remediation. So yeah. We think that will provide us a lot of strength. It does and we see that already and that will not use the term bundle because yes. Its mother, there's more than bundle as you will see.
Well understood that the rapid says it all integrated and once you get a lot.
So it's not really bonding and putting together these different apps that already have and then you are giving you a mall you know a better price, but it's it's essentially putting all of that as one single up and that's where we coli transparent orchestration of building orchestration it should be sure. It's all building so you.
Moved from one after the next it's all one single thing and that's the big differentiator and that you will see that for yourself and once the customers, which already you have seen some of you could one was thought to really market that youre going to see videos.
Very big marketing effort to show because the the solution, which sells itself at the end of the day when you because there was I.
I mean this is absolutely what we need not only to I've added one application and that screenshot and go. These years go there. It's all done for you and so that's very very important. So again didn't come just like that this is the work of many many many years of effort.
Trying to expand the platform as I said earlier and building best of breed solutions and now would what doing is integrating them all of that.
Into one secret solution.
It makes a lot of sense. Thank you very much free for all the color.
Thank you next question comes from Matt Hedberg from RBC capital markets. Please go ahead.
Hey, it's Dan Bergstrom for Matt Hedberg, Thanks for taking my questions [noise].
So you had a number of large agent purchases by the cloud providers in the past you mentioned the recent partnership with Google to embed the cloud agent into GCP on the call you talk a little bit more about that partnership.
How did it originate what are you looking for from at what does it mean from a validation perspective, and then I guess as it did that live in the marketplace.
Currently.
Yes, so it's not very simply that both the Google Microsoft Amazon.
Et cetera.
We're already using the quite as agent for their own needs for securing their own platform.
So from there of course.
That means whether right architecture I mean, you don't did this kind of company at the scale at which the appraised of course, you have to have the right platform. The the right architecture and.
So as you speak of millions of agency or at the end of the day. So for US now what we didn't do now go to their customers and doing exactly what we're doing for them now for their customers. So the answer is yes, I think today is well integrated with Microsoft I don't know exactly where we are with with Google, but I think it's done but if you know.
Dumb now it's very it's <unk> will be done that it would need to check I don't remember and while discussing with many other vendors as well to the cloud because.
Today, there is nobody was the architecture, that's what he's gone and again remember these agents and weather patterns by the way around decisions. So that we believe these agents they didn't come to again just a few weeks ago that it was there's been a longtime either me that making it to get this the scale.
The sector dating capabilities. The fact that they also need to be very secure.
All of that is just not is you work and we're being working at that for many many many years now.
And starting to US 30 million agent is already of course, our goal is to have an agent on every endpoint and now we have now the agent, which well now reporting out.
On to the envoys the mobile platform and while our agent up today very soon though when you go and continues as what so our agent architectures you prefer again, that's the way we look at it it's essentially spans across all these different environment and also to deal with GE, which involvement as well so what just that.
Beginning that's what I speak about ubiquitous you're far agent or just at the very very beginning but we all do want to really be is agent technology better than anybody else and again you have been working of that I don't remember exactly the time, but at the Gulf decision what 2000.
So even though I don't remember.
So long time ago history, So long time ago, so that we build these agent.
Great. Thanks, Melissa gross margins were impressive here this quarter above 82%, they've trended higher sequentially through the year four quarters in a row now can you talk about what's driving that and then maybe any thoughts about how we should think about gross margins with the with them on evolving model here and enter county or 20.
Yeah, absolutely, yes, so yeah, we're very proud of our robust gross margins you never we did benefit from Nextshares Sandia, We got a lot more investment going forward looking at adding some shared platform potentially in other parts of the world. So I would expect there can be more more investment in a cost of revenue.
I'm paying some downward pressure on gross margins because it is at very high level. You know, we don't guide for gross margins have not going to give me arrange but you can imagine that it'll stay you know like best of class, but not necessarily the current levels.
Yeah, we do I mean, most once you know so the fact that web rearchitected well benefiting also up significant cost reduction for example, whoever the mid 70% of Harvey him, where a layers and to go bear admits and with Mike Your with containers and micro services. So that's the beauty also that ever for engineering driven issue for sure.
We will compete on the whats Facebook did and what all these big guys don't so we have not invented anything here, but we had been very good the student of out the Google Facebook et cetera did scale their platform and reduce our cost and so that said we have done own develops the digital transformation in quite a significant.
And so that's a big advantage that we are looking forward and when a lot of fall competition, that's not even started.
Great very helpful. Thank you.
Thank you.
Next question comes from Howard Smith from first analysis. Please go ahead.
Yes. Thank you for taking my questions just wanted to follow up.
Prepared comments regarding the technical account reps for towers, which is kind of new for you last year.
Yes, how do you assess where you are in their development and you know the progress theme today, just some commentary about that would be appreciated.
Oh very much a howard so that yeah. This is something that we really again, that's that's something that I personally I'm very much involved because it's about scaling not only just every aspect of our business. So the sticking it could account representative for those who minutes remember we realize that today, it's all about making life easy for people to it too.
To adopt to make your solution not only easy but that you have all the information at your fingertips. So we'd build a team of thank you could account representative in India, which are people that we har very junior people, but yet from the highly hi, good technical schools.
And of course, because whether huge and you're doing.
I've got team there we trade them. They are they have all the technical resources and their job is not to sell their job is via what we call the quality skew agent you're like in the like India, James Bond movies, Mr. QC, yet, but you agent who comes in immediately and is there too.
He went behind you have the tallest sticky could account representative because where there's a huge pool of talent in India that we can attract and cost is absolutely we paid about $700 a month and but we give them more than that we give them a carrier path. So whoever highly skilled motivated.
Good technical people, which are there to help the customer onboard and that's all they do and now we're putting the systems around in place. So we could automates a lot of that as much as possible get older feedback, which goes back into into engineering and marketing to understand what the difficulty customers me I've been.
Deploying the agent for snap or whatever that studies. So all that information is essentially more and more automated. So we have today, if that's the guy running but team.
That team will not report to say is because we don't want to have them being assays deeper but they also are helping us to qualified leads and then we passed that then.
Medically to our technique to all well why did we call I'll take you get account managers, where the pre and post salespeople, which I'll now the one which engage the customers to.
Selling them more upside.
So that's the that's the system again were put in place. So again in India, we can scale, whether about today about the group of about 10 people already and we can bring it to 102 200, whatever the number is.
There is that the the manpower is they're trying to do that in the U.S., it's almost impossible, but in in California. It's impossible you couldn't regiment keep them. Even if you would build that you know your later that we'd be gone.
So I think doing that out of India is there no. This is very good now it doesn't cover the entire word because you have the issue of the of the language.
But it covers a lot of English speaking countries. So what we do for Europe.
So we do it kind of an hybrid solution, where we made do that function with a partner Europe.
Which of course is a managed security service and essentially so but they could benefit of into our machine that we that were put in place.
Got it and make sorry.
Yeah, I haven't realized a full distinction between them and failed and how they they generate leads so that's helpful color congratulations.
On a solid yeah.
Thank you. Thank you.
Thank you Sir our next question comes from Sterling Auty from JP Morgan. Please go ahead.
Hi, guys. This is Matt on for Sterling. Thanks for taking my question. So looking at the March Guide for revenue, you know that 14% 14 half percent grounds.
You know the midpoint of the range is about the same as this past quarter.
So does that mean that the seasonality throughout the year is expected to be even quarter to quarter.
Yeah, I don't think they're actually related I, there's nothing in our business. That's chains that are actually going out even if they're fine necessarily at Empire Air.
Okay and.
And we don't have much seasonality anyway in the.
Well, if somebody is really not really minimum and and remember you know for US you know we take always worked very pure essentially do not sprinkle.
We do not sprinkled in our projection any kind of perpetual license, we don't up profession services, either so there's none of that she's on its own recur and 100% recurrent.
And which of course as you know it should be the harder to really grow recur in models, but on the other and it's a much more predictable and more profitable model, then the pushing and having a kind of a mixed bag I don't think it's it's very misleading for the investors, but that's not dockets.
Great. Thanks, guys.
Well.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone.
So what's your question first Apache.
Our next question comes from Patrick Coville from Arete Research. Please go ahead.
Hi, there. Thank you for taking my question I'm, telling you about crowd strike and tenable I mean, they articulating more aggressively about that.
Management features and I'm just wondering what are you know.
You make those guys and what do you see them this competition or whether they are kind of complementary to serve to call. It. Thank you.
Okay very good question, so, let's let's start with that said the mill, which is more for direct competitors as many many years. So the the big difference between turnover and Qualys is that essentially they have a they have a very disjointed.
Architecture. So they have the tangible value, which is a cloud based solution and they have the security center, which is an on premise and other solutions and these are very different solutions. So for them essentially their biggest challenge that we see a head for them is is essentially that we'll have to really three all these.
Different solutions together once you can platform, which is going to read the of course take time and a very expensive.
Today, I mean, essentially as many people know they've been essentially pushing tw into the existing customer base at the very good customer base with misuse the lawyers.
And they're pushing try to push that ability or they're harder loves <unk> be put it in marketing that's what they do.
So for US I think the Mdrs absolutely.
Again, a game changer.
So we can anticipate that.
We are now going to be able to compete very well at the lower end of the market because we see that already happening and as I've mentioned earlier on the high end of the marketplace.
Now, we'd becomes very difficult to displays and you kind of played some of the tick tactics that the did which is dumping the price because now we offer so much more into one single application. So I think it makes us more inoculated you should refer against this kind of viruses.
So that's what's in there but.
So where companies are with them head to head and we offer significant more than what they do as the world. So does for that quite striking is a little bit difference. So quite strike as you all know I've done a very good job at essentially are coordinating that easy all market, which there's so many players but I.
Things are really did a very good job that especially differentiating themselves from these other player a combination of having a very good strong technical team, which really understand the problem and then also creating a managed security service of the top of its which has been the problem for lot of these other solution.
And.
Because the problem with the D.R. is that you have all these endpoints, which all roaming the words into seven seas on the Internet and then suddenly you discovered that one of these endpoint is compromised.
I too am in the morning or local time.
No that devices in Singapore, So how do you mitigate remediate to prevent quarantined. The device. So you need to have people watching devices very few companies or kibler do follow their own endpoints everywhere in the word and so by Overwatch, They really essentially it's a matter.
I couldn't quite sorry to managed security service in disguise.
And they have of course it gives them very good revenues growth the problem with that is that southern see it's very expensive to both on one hand develop your own platform and on the other one do you ever managed security services on the top of it. So you become very dependent on people, which is of course do not skate.
They know sold at a backend is essentially all need of U.S. So they have essentially the view as they have splunk and they have Cassandra.
As the backend so all of that again to make scale across its very hard to do we again do not dependent on all of that in fact today, we'll use the Cassandra backend what pumping a million widespread second in Dhaka central backend.
We have elasticsearch gained three stringent data points, so all of that its own technology.
So now the the advances so yes. They also want to move they all of course, they can do for the management on the endpoint by just knowing what is the the application that you out but that's not enough.
And so of course, you did you have more context about that endpoint to really eliminate all the potential jeez on that device. So what is in fact would we see today opting in many of our large customers, which is interesting is that they have to agents today on their importance. The other quite is agent.
And they have the crowd struck engines.
They don't need any other agent because the cross luggage and of course provides essentially also on two hours and all these other capabilities now we are today working very hard at delivering exactly all the functionalities that quite strike I was on the endpoint you already have without it was 2.22 0.0 west <unk>.
In capabilities et cetera, So what are we missing what I'm missing in that you've always solution and a few other things, but we have also the backend.
To our advantage because you talk context. So that's essentially you are working to differentiate themselves, but I would say that will be followed by fall into their choice for before they can come into ours.
And this is thought to acquire companies would do what we do but then there would have to enter with all of that's which is another walk in the park. So I think a this is where well so we're all working towards providing that additional functionality to our customers and I'll go to market would be very different is that we do not want and we will not I've.
Managed security service walking to leverage all that partners that we haven't where most of the managed security service providers all today Qualys customers.
And so they all the one which orange busy for the service. So we will enable them. So this is fundamentally the difference so does that make sense.
Yeah.
Very clear and then I can asked a question for Melissa. Please the the current billings in the quarter was very impressive a 15% growth based on my numbers you mentioned in your prepared remarks, there was a small benefit from launch deals closing in the quoted the.
May have typically closed in the first quarter I mean can you give us an idea of what the impact on gross dollars those loans deals could.
Contributed.
Yeah, So that's correct.
But it's not in my prepared remarks, what's the fact that somebody else brand licensing for that said about their anniversary in Q1, I guess as me Ben.
What's coming when you asked about acquirer, we wanted to be transparent my Nielsen event.
Given that there's multiple scenarios when there are no happened and doesn't happen at the same time is the anniversary anonymous somebody else, it's really hard to normalize for comparison purposes, and that's why they point to the trajectory of our revenue our annual revenue guidance as the best proxy for business on that yeah, and I would add one thing because Melissa is using the.
The chart that deals slip out of the quarter. This is that that requires turban does not apply with it with US we really were clearly for us either it well driven by the customers. So is the customer sometimes and with some of these deals which had been slipping from December 31st of January 1st at the depending on.
The budget cycle of the customer, which may have changed so they all the one requesting that to us and for US we don't care because it does impact the revenue.
And that's the reason why we're always said the way, we all buildings or not really really representative.
What is happening in the quarter. So did so what happened here as mentioned and that's why we disclose when they put one of the beans already strong of a week. We explain you know this is what happens sometimes the customers may move the deal for example, the early renewal or the there's so many viable doesn't change though.
But it's absolutely change the bidding cycles. So that's the very way, we've built the border, which again, it's an element of our profitability because when we go at the end of this quarters and you've got procurements, saying, Okay guys you know.
If you want me to to close the deal.
You did you give me a better price Susan sorry, guys. You know the renewals is now so we could either shut down the service has been one that like that but by the way, we don't really care. So.
Whether we close now you know as long as you review and we don't care. So because it doesn't really impact on revenues and that's what makes us very different from quite a few other companies.
Great. Thank you taking the questions and you are say.
Okay. Okay. Thank you and then.
Thank you I show no further questions in the queue at this time I like to turn the call over to Felipe.
<unk> Chairman and CEO for closing remarks. Please go ahead Sir.
Okay. So thank you very much an instructor. Thank you very much for attending already codes and for your questions. And then again you know one of the thing that that I mentioned earlier is that would be really happy or the next or any color you know to discuss about the the adoption of the MTR from our existing customers.
All from the as well as from a new customers. So looking forward that you see you all of you I hope. So if you can make it the yards said the forces and there's a beautiful hotel is much less knows there that RC.
And ER and we have our customers. They're also if you could attend or is that you would see VMD yard in action and a and you could also speak with our customers directly and youre more more than welcome to do that okay. So thank you very much. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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