Q3 2020 Qualys Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Qualys third quarter 2020 Investor Conference call at this.
Time, all participants are in a listen only mode. After the speaker presentations will be a question answer session. That's good question during the session you'll need to press star one on your telephone please be advised that today's conference maybe recorded.
So if you require any further assistance. Please press star Zero I would now like the conference over to your Speaker today being Rao Vice President corporate development and Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to Qualys third quarters, Wendy Wendy Kahn.
Joining me today to discuss Oh, So you could do a chairman and CEO and Julie Kid not feasible.
Before we get started I would.
Let me remind you that there must be willing to forward looking statements that generally relate to future events or future financial or operating performance.
Actual results may differ materially from DC.
Factors that could cause them to differ materially affect food into these betsy.
The filings with the SEC, Intuity elite and form 10-Q and Becky.
Any forward looking statement that we make on this call a based on assumptions as of today.
The D. no obligation to update these statements as good of new information or future events.
During this call they present, GAAP and non-GAAP financial measures.
Reconfiguration of GAAP to non-GAAP measures is included in todays somebody physically.
As a reminder, the but you did beat them up and in this presentation are they.
I live in one of its site.
With that I'd like to end the going to be like keeping the yadkin. The wavecom everyone through our Q3 earnings call.
Let me begin by saying that we all hope you and your families or is it safe.
The ongoing COVID-19 pandemic, our workforce continues to operate for both <unk> and.
And our top priority remains providing support for employees partners and customers.
We're fortunate that the nature of our business allows us to successfully appraised. This dynamic work environment would be able to adapt to the current challenges and that he does the reserves with it.
The reason, we set out to accomplish a lot score.
Julian I I'm pleased to report another good quarter in terms of revenue growth and profitability.
We also had strong growth you know paid called age or subscription with 50 million now representing nearly 80% growth from the prior year's quarter.
These multi function lightweight qualys cloud agent provides visibility across the entire hybrid environment and is the underlying technology for seven of the security compliance and they just solution that on natively integrated on old platform that is.
The MTR for Bernstein management detection response.
Thank you Victor ideal endpoint detection and response policy compliance.
Integrity monitoring bunch management globalized system adventure and the upcoming certainly became management and more to come.
What is the NDRC converged punishment. The next levered by providing the power to continuous did you take for the Ritchie said Ms configuration of course, the entire global energy environment and respond in real time to remediate assets that older number already compromised.
A single platform with bidding orchestration currently approximately 1250 customers have adopted which.
Which includes over 350 new customers.
What is the deal has not only been a huge obsessed with customers, but is also driving further penetration of our cloud agents.
Because of our global nights as I said in century, which is blended in it.
Since with yours as bloody three don't cloud agent. It Didnt turn sets the foundation for further upsides or other data peak issue.
This quarter, we announced the general availability of pharmacy Victor E D L submission.
This murky Victor solution unifies different context, specter like I said discovery Vernon Geez.
Exports this configuration.
That's an pointed imagery and network Richard Richard reach and ability, we don't powerful back 10 <unk>.
Assistant detection and response or even a single cloud base.
I said that the nitty gritty on the quality scale platform almost see victory. He our leverage is power scale and accuracy to core to billions of global events with threat intelligence and analytics and machine learning.
To provide unprecedented context, and real time insight into the endpoint to carry out rapid spread unseen in response.
Quite is in fact bulky Victor NDR goes beyond traditional email solution by providing comprehensive response capabilities such as getting purposes, the corn talking five more endpoints.
While also uniquely preventing future attacks for orchestrating responses suggest that Chamberlain is removing exploits fixing this group this configurations and starting software before endpoints or compromise.
Since our murky Victor Youre encompasses the tower attack lifecycle. It makes it easier to automate the response and dramatically reduce the number of whats because she's.
The combination of quality video and multi victory deal allows us to provide a seem to end to end workflow that adds company greatly reduce the time to respond.
That was for the consequence in addition of the security stack.
Also while not providing a comprehensive to wait inventories synchronization with Servicenow service for US service Rob CMDB.
Followed their new service go after an extra program.
These new integration, that's customer too quickly easily and reliably load there competing contextualize I sitting in for mission into service now and they're bigger concern the consistent capacity did they did a set of course I've read I chip environment.
Those providing with an always up to date source of truth I Cross there I'd be confirmed that.
Issue.
We continue to see good adoption of our cloud based remote endpoint protection solution, which leverages the consolidation and this cloud based architectures that he for instance, a continuous visibility of remote computers as well as their installed application.
Data real time view of all Creek are sort of in season, this configuration and remotely deploy missing patches for pretty concerted jeez.
We currently have approximately 700 companies, including 300 customers prospects.
Using this free service.
Offering.
In terms of our new newer based solution. We saw solid growth. This quarter, we don't pay that little bit excess inventory. That's a discovery in century application in fact a.
Large managed care organization I did a real good I, just said discovery and even treat baseball here this quarter in order to gain visibility of all that known and unknown assets across multiple environment I didn't find the end of life, There's four software and synchronize with their service now see a need.
Such management continued to see strong customer adoption, both in the mid market as well.
With the launch customers in.
In Q3.
A leading financial services firms selected patch management application over several competing solution given its ability to easily and effectively.
Touch remote endpoints without using the limited bandwidth if it had been on VPN gateways.
Finally, we also saw robust growth for container security application with the adoption of a respected region financial institution that is already deployed cmdr pretty cycle times.
Now on the go to market front, while expanding our relationship with the next generation of managed security service providers and Mississippi even.
Given the increased breadth of fall product suites with the addition of the MTR and but TV victory deal. These emissive speaker leverage the Qualys cloud platform to fully address the security needs of small and midsize customers that like in house resources to secure the RBS environment as well as addressing the needs.
For most companies.
We were pleased to announce that Infosys a global leader in next generation does your services and consulting is integrating both via deal and multi Victor DDR.
Into southern next platform and that it should be sort of yourself.
Powered by the collapse pipe by the Qualys platform, what is video and multi victory for.
For the vast amount of telemetry from the cloud.
The call is called Aegion and multiple sensors to combined with networking for mission for broad view of the overall.
Women going beyond just the endpoint.
The significantly reduced latchford movement of security breaches to spread across from the initial point of compromise Infosys customers can also extend the use of the globe.
Agent to patch management file integrity monitoring and other functionalities.
In addition, they look Canada is now offering Qualys MDR Yates cyber risk services offering you know kind of the clients now have access to the Quals video App. That's part of it was this tick solution to meet their vacancy threat management VTM requirement and provide visibility across it.
I agree its involvement.
Well he's got agents are embedded and fully integrated with the Deloitte Cyber intelligence center VIP eyes to that either acid discovery and its very very easy assessments, including computers and control threat participation and touched it takes into the loads customer.
Finally last week, we announced an expanded integration of Qualys words management with Microsoft as your park, allowing customers to perform burden just Kenny on server outside of the as your platform, including on premise and multi cloud server is.
These capabilities available to all customers are fuzzier defender full service at no additional cost.
We continue to invest in expanding the capabilities of our platform and aggressively developing additional solutions.
Looking ahead, we are enthused about the additional solution that we.
Two interviews in the next few months that is.
Continuous continued runtime security, which provide runtime defenses and protection capabilities for containerized application now in G.H. bass.
Additional detection and response offering that we called de arms.
Such as suddenly our cloud and mobile deal, which are also coming out a bit.
Revenue to access control module or an extension to our global excess inventory.
Murky victory D.R., we'd be also available for Linux environment. In addition, an endpoint protection platform DPP extension to our multi Victor EDI our solution will be available in Q1 2020.
Major update to all passive scanning capabilities that would significantly expand our coverage of industrial control system I see yes operational synergy OTI has what I see.
Internet of things devices and finally.
Analytics slash analytics like seen or what we now call. It what is now called the all platform.
Which seamlessly will integrate or our current and forthcoming detection and response solutions or the D. ours. As has now entered beta with thin design partners and we're planning for it to go live by the end of Q1 2021.
The development of these solutions has been possible because of the massive investment we've made in our platform and our strong engineering talent base and today, we've ever now 900 employees located there.
These new initiatives up and significant incremental market opportunity for us and allow customers to easily and cost effectively consolidate their stock of traditional security and compliance solutions.
By providing them a single pane of glass view on all assets across on premise endpoint cloud and mobile environment.
Similar to our efforts on the cloud platform, France, while also building a marketing platform that combined with increased that combined with increased investment in sales management and sales capacity will drive shoot.
Shoot your profitable growth.
We would showcase this new solution that are upcoming Q Aseel Qualys Security conference now.
I would like to personally invite you to attend this conference, which would be a 20 day pictured event from the vendor nine to 24 and you could also listen to the presentation that you only last year.
And we currently have more than 5000 people registered you can access the agenda and register for the conference at Www Dot Qualys Dot Com Slash you Assi slash Twentytwenty slash richer.
As mentioned earlier replays of decision it would be a bit of an argument at the end of it.
End of <unk>.
Dave when they are presented.
The conference, our president and Chief for Covisint, Semitic always because the evolution of our cloud platform as well as our recently launched multi victory solution and forthcoming data Lake Slash analytics, that's seen initiative for X the arm cut.
Form extension attendees without any opportunity to listen to customers such as the head of products that your kids Ooma manager of information security operation at JBT and the senior security engine.
Engineers at Informatica and would also present, our risk based approach to Burns management, providing forthcoming updates to our cloud and container security solution should our view on risk management and compliance and discuss on next generation web application security.
Security solutions.
Our focus remains our focus continues to remain on balancing growth with profitability.
The Qualys cloud platform serves other distribution channels are enabling us to grow while maintaining industry League leading margins Inc.
Incremented future growth will be driven by our strong partnerships with msps as well as further investments in sales and marketing as mentioned earlier. We the addition of highly qualified and taking could individually.
On the ARINC front, we're pleased to welcome back maybe trenches GDP for the Americas field operation, maybe that as expected extensive expense in sales and business development and with an important role in driving continued growth for the company.
Finally.
M&A continues to be a part of our growth strategy as we seek to accelerate our product development and expand into H. isn't markets.
Acquisitions over the past couple of years I've been complemented as a complement to our organic.
Product innovation, expanding expand your truck platform to provide more comprehensive security compliance coverage as well as visibility across all grew up with Ikea sits across on again on premise endpoint mobileye clout containers and that OTI and CIT farm it out.
Platform has now reached the level of maturity, where we can potentially explore acquisitions to expand our customer base.
Disciplined manner as well as continued to acquire small companies with innovative technology in conclusion, increasing the adoption of our cloud agent and the breadth of solution across environments enable us to offer customers greater visibility occurs since getting BG.
Ultimately, enabling them to consider that the security and compliance stack and dramatically reduce their orders that we that we turned the corner over to Joo Mi to discuss our financial results and guidance for the fourth quarter and full fiscal full year fiscal 2020.
Exactly.
Good afternoon before I start I would like to note that except for revenue all financial figures are non-GAAP and growth rates are based on comparison to the prior year period right, David I don't want me.
We're delighted with their increasing how to eat and subscription and multi product penetration as like a strong adoption at the MTR.
Which lays the foundation for future revenue growth and industry leading profitability.
Our Q3 financial and operational highlights include.
Revenue for the third quarter of 2020, good 13% to 93.1 million.
Please note. Our Q3 2020 calculated current drilling is negatively impacted by the timing and amount of prepaid multi year subscription billings request for shorter duration in Boise.
Our average deal size increased 7%.
Pete it's fiction in FY 250 million over the last 12 months.
43 million for the 12 month ended in Q2 2020.
Threemillion Paddington, we're purchasing whatever bank customer.
34% at the end customers up for renewal in the quarter. When you think about the MTR friction from 90 cents GPU and 4% in Q1.
Our scalable platform model continues to drive superior margins and generate significant cash flow.
Adjusted EBITDA for the third quarter of 2020, with 45.1 million, representing a 40% margin versus 47%.
Q3, EPS grew 19%.
Our free cash flow for the third quarter of 2020 with 48.4 million.
I think we mentioned lighting up 21%.
In Q3, we continue to invest to cash we generated from operations back into play including.
11.2 million on capital expenditures for operation, including principal payments under capital lease obligation.
And 37.7 million to repurchase 352000 of outstanding shares.
Okay.
We remain confident in our business model children dying foundation of nearly 70% recurring revenue expanding suite of application.
We were delighted to be raising our full year 2020, siting at both revenue and earnings.
We are raising the bottom and top end of our revenue guidance for the full year to now to be in the range of 352.423 53 million and the Kyrie 359 to 360.5 million.
We are raising our full year non-GAAP EPS guidance to now be in the range of 2.85 to 2.87 from the prior range at 2.60 to two point decline.
We expect to meet industry, leading margins in 2020 and continued to produce strong cash flow.
And in Q4 guide into revenue is 94.2 to 94.8 million.
For non-GAAP EPS <unk> 0.692 0.71.
For the fourth quarter, we expect capital expenditures to be in the range of seven to 8 million, which includes approximately 1 million for the build out of our 21 area.
Excellent mentioned, we're very excited by the robust adoption at the AMDR and the launch of a multitasker TDR solution I remain optimistic about the company's future.
We feel very well positioned during this period of uncertainty due to the value provided by our cloud platform and our 20-F.
As long as our underline highly scalable and profitable operational model.
With that sleep and I are happy to answer any other questions.
Thank you.
Reminder, taski collection will need to press star one on your telephone.
A question press the pound key please stand by we compiled the Kunar Oscar.
Our first question comes from you came with loop capital markets. You May proceed with your question.
Thank you so much congrats on solid quarter Filippin Jimmie.
Can you discuss just a high level question from.
Last year.
Yes. It grew conference can you update us on the partnership that you that you guys announced last year with Microsoft Dior, especially in regard to the integration with the New York City Center.
I think we call the attendance to that particular session well, especially genpact. Thanks.
No. This is this partnership is doing very well what we've done here is a remarkable because this is the integration of hard toward cloud platform. We as your cloud platform and as I mentioned in my prepared remarks here is that we've now expanded that to move into Microsoft as your art, which is if you prefer.
Is there a plot is their private cloud initiative as well and so this is a game to punish it goes very well, you're microservices it'd be quite as customer as well so I think.
Turning to respect the engineering team as importantly, doing the work to fully integrate seamlessly out to sort out our solution is very unique and well of course working with other cloud providers to do the same.
Okay, Great and then.
Philip obviously.
You guys have added.
Expanding your product portfolio.
It's beyond your core VM.
Product today, but just wondering on like when you're adding new customers. Today are you beginning to see more and more new customer add without the core VM product.
<unk> a day.
Uh huh.
Get access to some of these more cloud based products.
Yes. This is a this is a very good question if I could we see clearly with our large customer.
Is that.
Was that we're becoming more strategic this start to readout isn't lots of these lots just wait for what it's called on all of the same platform.
And also the older. The d. odds are that but announced what we have done very uniquely.
Really saved very uniquely instead, what fusing detection and response into this into eight A. went up so you have humidity that easy to take.
And immediately the ability to respond all of that in real time, and so our ideal solution would do all the analytics is using all these different yard that we have and just to repeat your webdam. It via MDR now, whether TDR, which competes against Quad strike and then of course there's.
Suddenly, our which really allows you to have full visibility of your SaaS applications like office, three 385, Salesforce Dot com.
The the cloud DVR, which will allow you to for example to not only identify this is three three buckets Ms configuration and also the ability to fund the same the same pain of dust and fix it.
So that's the key of security today, and you can and is all that information with all the work flow down for you. So you realize how much cost we eliminate and so we as I mentioned earlier, our ex deal platform now is entering beta with 10, very large customers, which had been our design part news and.
Why don't you go in bid up to.
The early at the early part of Q1, and then of course looking at this going GA by the end of Q1 and what is interesting with that platform is that not only to address the needs of the very large companies, but it's also address the needs of the very small company. Our platform is told is scalable so we see more and.
It's becoming very strategic to to to answer your question with our large customers, which of course once stood up more solutions from qualys and as well as really the RIDEA or looking at that.
Yes. So this should that's is really coming up pretty soon and then on the low end of the marketplace of course again simplifies everything so we have absolutely an offering that cuts across the entire spectrum and then of course, because now what multiple application where multiple.
Arrows in our quiver to attract new customers. So the global crisis venture is becoming also very very into.
Interesting for many companies and that of course, we have that.
More solutions when we bring for example, these new SaaS deal, which isn't in few weeks in fact says yard club deal that's a totally new ability for us to go and generate additional new customers and then grow the platform because once you put the platform into a customer and that has been our strategy or our.
Agency. If you prefer then suddenly we kind of said and it's sold there. The sword everything is centrally managed assets of dating and then of course is becoming our marketing form and we are as you would see if you can register to the user conference are really now building a market so it'd be a cloud platform, which is.
It should be the distributions et cetera, and now were building a marketing platform to essentially bringing our solutions to many many more companies worldwide.
That makes it so much yes. Thank you so much for that detail phillippe.
Julie I had a quick.
Question for you on the 7% ASP increase.
Is that ASP increase.
Broad based or is that mainly driven by large customers.
And then also just a 34% of the customers who admitted to me MDR into quarter.
Did that contribute much to the ASP increase thank you.
Yes, so 7% average deal size increase it it's more broad based not just concentrate on the larger customers and in terms of the MTR adoption and we are very pleased with the increase in adoption with increasing from 90% what are to 34%, but that said on as expected you know the impact to wrap.
And you know broadly neutral for the year to date and this is due to the same reason I stated before where you might see as the only customer spending on that a bit more when given you went to the MTR birthday, Tina offset by customers, who used to have gotten multiple public relations they might be thinking about that overall. This year, we are seeing I probably rather.
Let me try and tank however, going forward, we really believe that this lays the foundation for continued upside I really tried and bookings growth with an increase in the countries that we expect to come and when it next year and then we got to one thing from the product side. The two Jimmy says is that what you have to understand about the MTR. This is not only the really next generation.
Management, but as the management in a box, but this is also.
The application that collects all the telemetry and all the data, which is absolutely very or IDR, which is important for many other solution and that's what gives us the context. So if you did if you deploy cmdr you have already all that data, which is there and that's a couple of course is going to be very significant for in our equity.
Our platform because now we bring you the inventory the context that central side you know.
The status of any devices that can take some of the network and so this is absolutely significant so as you can see some major torturing the whole strategy that we embarked when we package our energy management solution become detection and response, but behind you had that global license in the venture you pushes the agent there also.
Makes a lot of today.
And this is also combined with our passive scanning which looks at the network analysis and Thats why by the way to give you some ideas of the scale at which we operate.
Seven months ago, where indexing three trillion data point or that six or clusters, which where data, which we were collecting seven months later, where indexing no nine trillion. So.
Significant.
Scale at that.
Which is again makes a significant.
Any of the other solutions.
Okay, great. Thank you so much.
Thank you. Our next question comes from Anyhow.
She with Northland Capital you May proceed with your question.
Right Yeah. Thank you for taking my question.
Couple of question.
Yeah, 4.3 million QQ, increasing revenue I think it's the largest over the past six seven years it's.
It's just simply the MTR adoption or is there something more going on here.
Yes, it's ignorant on attributable GDP MPR, because he'd be MPR adoption, it's great long term strategy and we believe that it will try that bookings growth and revenue growth.
Our next year. This year, it's been broadly neutral. So if you can go look at the revenue growth. We did outperform on B. Our high end of our revenue guidance. Because you know bookings came in better than what we had expected we are seeing that the momentum over are now integrated the AMDR with it with the bookings coming in at the US closing on the book.
Thank you and now it's about.
Maintaining our strong retention rate.
So I guess, what I'm finding out that is why did bookings come in stronger than expected can you point to.
Some sort of broad themes that you would expect to continue or was at one time in nature.
I think it's onetime in nature.
You deals came in better than what we had expected. So typically when we guide to revenue we do if we take a look at the pipeline and play with respect it both new customers as well I guess upselling scant attention with their existing customer, making a point that when you look at our coming out and so it just happened that this quarter, we had better linearity, we had better and you Buck.
And then what we had anticipated and so and we are seeing that growth and this is part of the reason and what Weve always said with that you know if you take a look at our revenue it might not necessarily be in mine ore and that current billings might not be indicative of that business momentum because if you take a look at current filling and we indicated that was at 8% year over year, but.
Revenue, we outperformed growing 13% year over year, Yeah ended which is also driving you more specifics about that.
One of the patch management for example is doing very well.
Well consider security officers movie failure, what and again you know mentioned you know we are very optimistic about our cloud youre coming off of some of the upcoming so we have all these your solution and what is very unique again is that they'll know additions solution in other words, if you look at the other solutions grew about.
The company is then to buy every 456 different cancers to essentially.
Access all the different application that they have acquired whether they're up although not cloud.
With us Mr.
I missed the it's a one single platform one single you I once regions and so you essentially have a lot of our at your fingertips and older workflows, our integrated so it's coming from multiple or if you prefer rather.
Yes, and no one can say that.
Right, Chris speak reverse.
[noise] great. Thank you.
Thank you. Our next question comes from Shelby say Rocky with FBN Securities. You May proceed with your question.
Yes, thank you very much and congrats on the strong results.
You said that.
Jimmy you set that up bookings were better than expected, but you know you get your current billings grew by 8% down from double digits, a few quarters ago.
First of all can you say whether bookings grew by a double digit percentage I think you also mentioned in your script that there were changes in duration a multiyear.
Do you expect those metrics to rebound soon.
Yeah. So great question. So we don't guide to bookings and we haven't shared with you previously you know when we can be 28 year typically we had some negative impact from up here. The answer to that one example that I mean forgive me if you have them up here at Ti.
And the second here because there is no change in the current affairs you the crane billings the waste reflected it's not indicative of booking and so that's why we think that that we expect to continue because actually course multiyear deals in our contract length increases, we do expect that and that impact to continue with respect to shorter duration.
And we can reflect we've seen an uptick in that in Q3, we are seeing less of it in Q4. It this quarter and we expect that.
I'm kind of diminish or decrease over time, and so there will be I can can you put any another reason why crankiness might not be on chunking or be indicative that bookings are indicative how can it be kite.
We don't manage put everything and kind of the content that we have in North America, not I never see I finish OCTEON forgot might be another negative or potentially a pocket is intact.
Part of the reason like that hard to perfectly nice growth rate counterparties different scenarios and the shorter billings are essentially is to is to cover the related thing where people are asking some payment terms and so forth and what we do is we very specifically mentioned that this is only for the current year or so.
This is doug to be repeated other.
The revenue or time, right and when people just after and if you take a look at our customary three typically what we've seen historically it with a multiyear deal right and we've seen you know over 60% might have been creeping up brand offering here and now we're seeing because of the ku band at one time, the release, including maybe I read a concession and.
We're seeing my centered on that and so on and right. Now we are seeing good and kind of concurrent billings I now ask a cash flow margin that we don't expect that to continue into next year.
Okay and also can you talk about the puts and takes on the gross margin line, which declined sequentially and year to year.
Yes, so gross margin is impacted by not too different factories that okay, and when it's basically we're expanding our data centers and the timing in which I think are putting a survey that doesn't have DNA. If you take a look at our depreciation line.
Thanks for staying on quarter over quarter and into category with a tiny we are expanding into new data center I think if I ever see again and you know we do expect some headwind as we transition over to likely it is that in the longer term, we will see that benefit right because it is cheaper or more connected and one that we have.
Currently in California, and so that has to do with the gross margin contraction.
Okay. Thank you.
Thank you. Our next question comes from Alex Henderson with Needham you May have.
Proceed with your question.
Thank you very much.
I wanted to just delve into the commentary that you said about you.
You built out your platform and now you're.
Building out your oil.
Capacity to go into the market and aggressively sell that's somewhat of a change.
Tone around the strategy of Boulder.
Tolling sales capacity is I as I hear it.
Certainly some of that has to do with the MSS Peas, and then Paul says type stuff, but can you talk about what capacity additions you're doing a little bit more granularity.
Yes, so first of all it is not a change you know strategy our strategy as always.
Woods.
The cart before the horse words, we always and they always say that we need to really get the platform get all this solution related that's a lot of work and there's no.
Pushing sales if you defer until you've got this solution really mature enough. So today, we have reached a point where the much richer of the platform is such and of course once we should take your I would say that we have really really completed our first go to <unk>.
All of these are.
Our solutions Division.
There would be further expansion into more education market.
Form is the revenue engineering months or the platform scales I mean, absolutely as I mentioned today that number did I read that it's impressive well nothing more than that as well, but the nine provides its absolutely incredible the scale at which we operate so today no up now the good thing.
Yes.
The joint decided not to interrupt software.
The cloud platform is the Shannon so today, we see shifts happening today.
More and more emphasis throughout two quality, because we carried a platform to kind of build anymore.
Before that we're building all the.
And of course, they have their own distribution.
And also to the platform itself is becoming or.
A distribution.
We're going to provide more content more rich ardmore degeneration more these more that and in fact if you.
<unk>.
You know.
As you listen that.
Register into our user conference because see.
That plus which now distribute can vary.
Very cost effectively.
The <unk> has been in fact, I always knew that.
The center has been very very.
Before that of course very.
Fortunately, but is.
Zoom zoom zoom everywhere and the cost so we'll see.
Is that a user conference the quality of the content <unk> presentation now of course, we can now slice and dice.
Your child to advertise our solution I used to say it is not good enough to be good.
Ted Fig.
Figures that you don't want to read too early and you don't want to take.
Well the Thomas comment I've always said at that time would call.
So specifically what we're doing now to answer your question about the expansion. So we are now of course, we're beefing up our strategic alliance team. So we could now essentially embark and they'd be more Mississippi. This is our focus as we discussed earlier the second.
As management.
But now a VP of EMEA venture manager for you yes.
You know for the Americas.
Well also added significant what do we call executive VP is our VP for by product line.
Only be there to look at that.
So the the go to market.
So we're also spending on marketing capabilities, so the <unk>.
Because of our highly but platform.
Who need to also spend the amount of dollars.
Sure.
Which have more of an enterprise if you prefer a structure.
Go spend it or.
50%.
In marketing so that's where we are so that's what that's what I call. It now were building the marketing.
And of course is much easier and much quicker.
To be the marketing on that it used to be and engineering.
If I could follow up can you talk a little bit about what.
When you say.
Moving into a protecting cloud platform or cloud application workloads.
Are you seeing that predominantly around what I would describe is.
The more traditional applications when they move to the cloud on digital transformation or are you seeing it.
Coming in from more modern applications cooking that is driven a deficit.
If I was to go away. So that's a good point as infrastructure to them yes.
No. Good morning, the fact that now funny I don't know if you recall the inside LNR acquisition that we made it took us a bit longer than what we have thought you to fully integrate the fuses.
You can take this.
And so that's really when you look at application today, you know continuing to control decision is really what allows you to distribute it.
Michael Services continued mission. So we are all set has made a huge step ups.
Favre change on our entire platform, which was absolutely have the scale at which we do so well one of the.
Today, which are really upgrading theyve ups, Dave you should for so yes.
Both ways. So you have in fact, when you look at the web education do you have to take care of the of the existing ones you have to take care of now more and more the eyes and of course, all that alternative station of the application.
It is that we make today, which is absolutely differentiators from every other continuous security solution. Because now we can do section. So again, the same philosophy that notion of D.R. detection, we analyze.
He was with that.
Sponsorship for sure. So that's today, we've got so that's another deal.
Thats it.
That said.
His voice.
So those were.
Correcting it you cannot really protect their protection is a very complex or very costly what's the purpose of detecting so.
So, but if you can automate the detection that response.
It's really allowed.
Say that of course, sitting there and of course protection.
Point that this is enough she always need between diagnostics and Q.
So isn't the answer to that Youre seeing.
Cloud first.
Pulling in the cloud customers coming to you as well as.
Mark the additional customers coming to you all for cloud I'm not sure I understood. The yeah, the exact answer it.
Clearly if he could they legacy Guy comes there is going to eventually move to two more modernized casualties, but youre also seeing cloud customers can you talk about the penetration of born in the cloud companies that are moving to you know your.
Your system in your your your technologies your platform.
That are starting from a kubernetes centric viewpoint.
Only a is that a meaningful percentage of your adoption no and that is that a meaningful percentage I wonder would be.
No it's not.
Okay, that's pretty new there, but with the big Big Big.
Big.
Most of the Google et cetera, which we're working.
Working with that remember they are using currency our agent that goes.
Platform, so a number as well.
Okay and on and on so already the big fish in that thing is of course.
It's coming it to Oh, that's shouldn't.
Sure.
The Sun.
It's changing there's no question about that and works to position for that change be.
Take care of the old and of the new into one single platform and of course, while moving what's you know GE as well as with the announcement that just done on the Lcs and were very unique to having servers.
So all of it.
Now you're teaching rebid.
Teamworks true.
Because of.
Major investment that.
Not.
Recreate it of the AR platform.
No.
The today as that.
Some companies will not be doing it.
In time to do that and the scale of into that.
Be happy to be fair.
Become ex any disruptive.
Great. Thank you very much.
Thank you. Our next question comes from Hamza Fodderwala with Morgan Stanley You May proceed with your question.
Hey, guys. Thank you for taking my question Felipe maybe first question for you. So it seems like you know the platform is really coming together and there has been good traction will be MDR, but from a go to market perspective, you've obviously brought on David now the.
The new ERP the Americas I'm wondering you know are there any for broader restructuring of the sales or that have to be done to a line that the field organization, two or more to selling multiple products are selling a broader platform or do you expect maybe.
Tweaks around the edges that you as you try to expand on this platform story.
So it's not you know this is the junket that this is a very good question is that some are just the just the just the sales force. So why did well essentially doing with the sales force is essentially.
Strengthening the management of that sales force. So we can now essentially you speak more weapons sitting by them up in the past we have a technical sales force that remains no change in that but we're really now in a position to really speak with the sea level a much more because we have more to offer then of course in the past when we're just for energy management.
Because quite frankly, the sea level. It is not that much interested in for the G. management. They in their view they got bigger fish to Fry.
The digital transformation for example, paragould buys them significantly more so.
So we have now all these pieces coming together. So we have essentially expanded the management of I'll say small set of course, we're going to add a few more we see that that model of hunters and farmers that no change what we're doing around that.
Is that now that we've got a much broader distribution white spending what do we call our subject matter experts people don't specialize in the D. auspicious Fisher as it does which are there to support all partners and of course, our sales force and then we'll also be stuck from the engineering standpoint, as I mentioned briefly.
My in my prepared remarks, with having now people in charge of the product line. So we have got attracted somebody now today.
Which is in charge of the NGL prototype and what attracted somebody was now is in charge of the video product line somebody who's in charge of the global rights its adventure product line summary.
Somebody is in charge of the policy compliance product line and you walk into a few more like that so what they have and do them is of course, the product managers as well as the subject matter experts and their mission is lives. Its just not to ensure that we do the right thing from an engineering standpoint. The data. We also they are they are in.
The reason I'm sorry, Richard the go to market. So that's the more important unstructured change here that we're doing in the company as we know today I've essentially a very again as I mentioned again, very broad and very disruptive platform and this is going to to show.
We believe very soon.
Right and then maybe just a follow up.
For do you mean by May you mean, so I appreciate the commentary on billings versus booking.
You mentioned that booking in Q3 impact.
Improved sequentially and you're seeing a pretty healthy pipeline in Q4, so far but just if you could maybe from a qualitative standpoint give us any color that you know how we should think about the pace of revenue growth going forward right because it seems like obviously you some of the.
The investment book.
Look we made from a sales perspective.
Likely to be pushed out into next year, and that's going to continue to generate strong bookings from FBR and some of the newer product that you guys have had but from a revenue growth perspective, how do you think about the pace of that going forward.
Thank you for it and entry topic.
Hey.
Hey, Jimmy I think you're breaking up on my end.
Okay.
So here now.
In terms of our new product adoption, it's hard to tell and that's sad when the impact on that and you won't be so typically when we guide we think it's prudent for us to be a little bit caution. It's a we don't take into account revenue guidance can you kind of production and that contribution to revenue that we expected to have.
For example for Q4, we assume that her from the M.D. aren't it won't be similar ask now where and when he must be revenue neutral how about their next year every year that we really think that you know with all the new product adoption and product launches that we're seeing this year at March going into Q1 in the first half of next year, we do expect some.
A meaningful contribution to revenue and acceleration in bookings to come from new products. In addition to the continued.
Business growth is turning sticking cosmetics line new opportunity.
Got it thank you.
Thanks.
Thank you. Our next question comes from Brian Essex of Goldman Sachs. You May proceed with your question.
Hi, good afternoon, and thank you for taking the question Philippe I Wonder if maybe if you could give us a little bit more color around and SSP and the traction that you're seeing in that market anyway quantify the percentage of revenue associated with that channel and how might we anticipate.
You know customer adoption as you go through that channel as you know, particularly as you may add more kind of smaller customers onto your platform versus the large enterprise customer.
Customers that maybe in your installed base.
Yeah, no. So that that's a good and broad question. So these are limited. So we essentially you mentioned essentially that we have about Oh, yeah. We haven't agreed model whereby we sell directly and who also sell through channels, which essentially I don't remember exactly the mix will be about 60% 60, 40 60 per.
<unk> direct and 40% China now within this goes is the amount of Mrs piece.
40% Iweb were what I can tell you and that probably at some point in time, you know we could so.
We see is that your the traditional channels.
More the reason.
So the two of course be under significant pressure and <unk>.
These are added value added value today is essentially there is no more tons to push.
And then there really.
Added value is it should be passing part of the margin there.
The the vendors getting them to the customer.
That's not really sustainable for the large from last year's would rather have.
And it's on the direct relationship with the customer with a vendor.
Surely is that vendor due dates multiple application you have to read.
Judge consolidate seven other eight.
Thats quite significant very important for that is because they kind of small with all regions. So what we can see today. Some of these companies, which were in fact surge by satirists coming direct to us.
And then up.
We would now to see that the msps are more coming to us as well because.
We cannot with EM, which significant.
Essentially we reuse today they can.
Finding that and all of that he'll be looks like you're a little bit of this year, Libya that putting all these pieces together.
Don't work anymore.
We foresee always well looking at back of these.
That next generation as I call. It a managed security service providers.
The decision and we see that already somebody cigarettes or is far to say that's not anymore. A good business for us So why don't we become.
Likewise, so we've seen some company.
During that but do we see the mass majority of the Mrs. Vsix. Both applaud you know quite is coming here and now we can focus on our customers and the value added that we provide especially that qualys allows us to do the detection and response the problem of the managed security service providers in the past as big as it.
Is it going to be that huge platform.
Which they are not really equipped for but then they can really do well there.
So then you need to ask Jeeves in these companies that they provide the services.
No that this company needs to I've worked with all.
All that a mission to well providing now the response, we're really answering what these managed security service provider. So the bottom line here is that we anticipate to see our revenues from these traditional if you do that.
STENDRA is shrinking and then of course the revenues coming from the managed security service providers is actually the Best example of that is what we did announce is essentially infosys. It she's now which has been building a managed security service.
No adopting GMCR and E. R. Together, replacing these are more a issue for sure published this company on the video side because it's.
We on the Lloyd's et cetera, So we have more mississippi's knocking on our doors and so you will see more announcement you comp that's the bottom line.
Great. That's very helpful. Thank you for that and maybe just maybe just a follow up you.
Just playing with the model looking at you know triangulating to guidance range. It looks like you know similar to last quarter.
To get to guidance, we need a pretty steep ramp up in spending for opex, but I understand that you know I guess, you know last quarter. It seemed as though that there are some element of a return to normal operating environment baked into that guidance that similar for Fourq, you and if so where where might some of that flexibility you know for upside.
To to margins or or maybe you know lower than expected spending might come from is that mostly sales marketing or or is it kind of across the board.
Yeah and for Q4, it's mostly on the sales and marketing side and so.
Q3, some of the spend or investment opportunities and we we thought that we would incur in Q3 was pushed out to Q4 and thank you for we have to I see even though it's very choppy had some additional one time expenses that that's going to be occurring in Q4 as well at the upcoming expansion like pushed out to Q4, we had thought that we would be moving into the clinic.
Okay. Thank you three but unfortunately that had to be put stuff on there.
There are some other one off on expenses related 10 plays including the lead and you know reimbursement that we expect to happen in Q4 over aren't you know that in high margin and EBITDA margin for Q4 is in the mid point he on any front ending the year, we expect to end the year, but EBITDA margin above that mid 40 on it.
So you know we anticipate there's always an upside to margin given our scalable business model, but with that said, we did hire some that's a new leader and everything else, including D. that frankly, we expect to continue to invest in a fight right and great employees and two on point and we can effectively trying to you. This morning.
Got it Okay. That's really helpful color. Thank you.
Thank you. Our next question comes from Sterling Auty with JP Morgan You May proceed with your question.
Hi, guys. This is Matt on for Sterling, Thanks for taking a question.
You talked about expanding the relationships with NSS piece wondering if you could give any more additional color on what geographies.
You're you're really focused on expanding for for that relationship. Thanks, well that's yeah no that's it.
Hey, Hey, Felipe <unk> I I can't I can't hear you Oh, Okay. So this is a is that they're now.
Yep Yep, Okay shows or whatever when it was saying is that you have to kind of in Mississippi, the global ones into more reach into one so really our you know we see all of them you know coming to it whether there are regional or global anywhere and were told you a global company. So we have already for example, a lot of that Didnt tell.
Goes, which all customers worldwide and of course, we have a lot of locally Mrs pieces, while so whether it's a significant portion of indices. There's no they were not generating that much doors in the past because it was just all about the IDR, we have pretty good idea, but it's a very good.
This is because some are for qualys, so, but now today with the platform into all these are the things that we have they are even more interested in quality speak only of the consolidation, which reduce their cost to upgrade and on and on and on the fact that they can generate more revenues make there could be more sticky and as a result of that because.
We are not providing deep the response capabilities. They can offer a better service and therefore gain get a business, which is becoming more profitable at the end of the day because the problem of the Mrs. Piece has been this is not a very profitable business because of the human cost that you need to up and if you cannot remote.
You know respond then it's very difficult to send people. So then the company.
Locally that can respond.
Cost effective for both.
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With a plan that would be then we knew.
Since the beginning except that to put the pieces together at the scale at which we need to put that was just not a walk in the park, which also give us a significant barrier to entry that we've created for ourselves.
Great. That's very helpful. And then I want one last question from our side. So you talked about the dynamics between the billings and bookings growth I was wondering if you know obviously not not really asking for you know committed guidance on 2021, but how how should we think about.
Some of the targets that you lead.
With regards to revenue growth you know do you think that the trends that you're seeing here would indicate that you know revenue you.
Could accelerate in 2021 thanks.
Yeah, we're we're very optimistic given the new product launches and what we're seeing in terms of the momentum and we do think of next year as an investment year. We do expect some 10 times EBITDA and Todd on cooking, and then you kind of lunches, including to the MTR cuts, we really believe that lays the foundation for increased retention, it's nice cross sell in Uptown.
Opportunity and of course once it back it up into Capex Kodak and with that said, we will be providing more color next quarter and when we get into full year guidance for 2021.
Great. Thanks, guys.
Thank you and.
And I'm not showing any further questions at this time I would now like to turn the call back over to Felipe Cohen for any further remarks.
Okay. So that thank you very mature to you for attending or in the school and then for your questions.
Despite the very challenging environment that we are all in unfortunately, we do feel fortunate that we are very well positioned us as we discuss with our cloud platform and the apps fully integrated and we're very pleased with our progress this quarter.
We're also looking at next year in a very positive way as we just discussed again.
Essentially our broad suite of executing for bonus applications.
Including the MTR merger victory dealer et cetera, et cetera, our forthcoming xdr ugly.
We we believe position us extremely well so I again encourage you to really attended our user conference I guarantee you. The big advantage is that we have really scheme that got in many many different sessions that you don't need even to attend or when they run because you get out of the <unk>.
The link to you know to the recording so you can really select what you want and again you will look at that as the beginning of a marketing platform that were really creating a which will allows us to distribute you know not only training, but also the continent, triers et cetera et cetera and of course. This is as you would.
See very effective it's very good for the customers for everybody. So everybody wins here and that's again, that's what we see in the broad market you know with what is happening today with the way you buy things that you do in my house today, No I put the luck good automatically door lock on my door. So when somebody is delivers a package I can open.
In the door with my figure that's the response, so that's essentially what Qualys is doing for security so with that.
Again, thank you very much and I'm looking forward to continue the discussion.
Sure Okay. Thank you.
Thank you ladies and gentlemen, good today's conference call. Thank you for participating you may now disconnect.
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