Q2 2022 Qualys Inc Earnings Call
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Okay.
Good day, and thank you for standing by and welcome to the quality second quarter 2022 Investor call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded I.
I would now like to hand, the conference over to your Speaker today Blair King. Please go ahead.
Thank you Crystal and good afternoon, and welcome everyone to close the second quarter of 2022 earnings call joining.
Joining me today to discuss our results are Smith, our president and CEO and Jimmy camera CFO .
Before we get started I would like to remind you that our remarks. Today will include forward looking statements generally relate to future events or future financial or operating performance.
Results may differ materially from these statements factors that could cause results to differ materially are set.
Fourth in today's press release, and our filings with the SEC.
<unk>, our latest Form 10-Q, and 10-K any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and <unk>.
As a reminder, the press release prepared remarks Investor presentation are all available on the Investor Relations section of our website.
So that I would like to now turn the call over to Smith.
Thanks, Blair and welcome everyone to our second quarter earnings call. We're pleased to report another quarter of continued revenue growth acceleration and cash flow generation as we drive a focused investment strategy for innovation and go to market scale.
Despite global macroeconomic challenges and geopolitical uncertainty growing cyber threats are driving CIO <unk> within organizations of all sizes to modernize their security platforms to reduce agents cyber risk response times operational complexity as well as costs or.
Our continued strong growth reflects the come with my customers are making to the quality cloud platform to help drive these objectives.
In Q2, there was a steady adoption of our one Liberty management detection and response, our <unk> solution, which is now deployed by 43% of customers worldwide.
Key component of the MTR wins in the quarter include a leading multinational chain of retail convenience stores, several global financial service companies and public sector agencies, along with multiple new and existing customers down market as well as in the fortune 500.
Further exhibiting our broader platform approach and expanding market opportunity I will take a moment to share some of the successes, we have seen with our customers and partners.
First on the customer front and existing Europe based Forbes 500 customer entered into a seven figure compared to up sell agreement with us to expand its asset count with <unk>.
Alec patch management across their environment.
This was chosen over the competition given the platforms unified interface across public hybrid and multi cloud assets ease of use superior performance Ddos protection and automated patching capabilities without the need for VPN.
Next a leading financial institution in the Middle East electric quality cyber security asset management, the MTR and patch management duties in a mid six figure new customer win.
Ability to significantly enhance the security program with complete asset complex seem to be integration alerting and accurate response capabilities on a single integrated platform, while consolidating agents were all key differentiators compared to one number detection only solutions in the market.
We are executing our go to market agenda well.
Which includes our evolving partner ecosystem.
Since launching our new partner program in May.
Already signed up two new larger regional MSS partners in Europe , and North America to further expand our ability to deliver managed so cyber security services.
Additionally, we're seeing an increase in new customer deal registrations by our partners.
Our market share and brand awareness continues to strengthen we are anticipating an increase in partner integrations with our platform.
That will further strengthen our strategic position expand our ecosystem and broaden our reach.
On the platform side. This year has already been a strong year of innovation equality.
At our <unk> event in San Francisco attended by over 700, Registrants, we showcased our coffee leadership through the launch of the <unk> with true risk.
Our differentiation in the market to the next level.
With comprehensive risk, scoring and at DSM integration customers can now focus on quickly identifying it as gifts along liberties on critical assets and helping immediate with speed.
While Liberty management continues to be a cornerstone of customer security programs as they focus on improving the risk posture.
While this is a unified platform approach differentiates itself from other rollover day reporting only solutions by rapidly introducing risk are the most exploitable vulnerabilities with integrated practice management with the same agent.
Our recent research shows that customers, who scanning patch with quality as opposed to passing with alternate solution can experience as much as 60% reduction in the meantime to remediate for the most exploitable, while liberty's identified by yourself.
While this is these are and have deployed over $130 million purchase for our customers.
Leading our customers desire to leverage vulnerability management platforms that help remediate, what liberties and sort of just reporting on them.
At Black hat. This week, we are featuring an organic extinction dollar cyber security asset management with regard to application to include our recently announced external attack surface management capability.
New capability provides security and ideal operational teams with unprecedented insights into blind spots and risk posture with a complete 360 degree view of all the known and unknown Internet explorer assets.
Deeply integrated with the MTR this capability and the external asset visibility to the already comprehensive internal asset visibility, we provide on the platform and sort of just adding another point solution for this feature.
While many security.
Software providers claim to offer a platform because they assemble assortment of products through acquisitions that are difficult to integrate we don't see anyone coming close to the offering.
Integrated capabilities of our cloud based platform, especially in the current macroeconomic environment. We believe our organically developed and natively integrated platform that is also the immediate thing introducing this can bring value to our customers as they get more security out of a single quality platform.
In summary, given our market opportunity extensible platform for cyber risk protection.
Aviation and prevention and speed of innovation. We believe we can continue to grow our scale generate cash and invest in key initiatives that will further extend the gap between quality and the competition.
With that I will turn the call over to Julian to discuss in more detail, our second quarter results and outlook for the third quarter ex full year 2022.
Thank you, Matt and good afternoon.
I'd like to note that except for revenue all financial figures are non-GAAP and growth rates are based on comparisons to the prior year period unless stated otherwise.
Firstly announced their continued consistent and strong financial performance with double digit growth in both revenue and earnings per share.
Revenues for the second quarter of 2022 grew 20% to $119 9 million upfront talk with some growth in the year ago period.
Our team calculated current billings grew 20%.
In Q2, our patch management solution contributed to over 5% of bookings for the first time with over 50% growth from last year.
In addition to strong adoption by existing products customer management.
Management contributed 9% of bookings from new customers, demonstrating our ability to drive growth with distinct product differentiation.
Our LTM average deal size continue to increase for both new and existing customers as organizations trying to qualify to secure a wider range of network connected devices and associated application spanning unplanned.
Container and mobile environment.
Okay and average deal size increased by 17% from 7% a year ago.
Please proceed with integration of workflows on testing our colleagues is helping organizations efficiently respond to threats Fannie methylene realtime visibility of their security posture.
As such customers are increasingly looking to clients to help solve them not cutting security needs at the legacy point solutions are Fargo fifth.
To operationalize and significantly extend from aviation pine struggled to deliver value to the customer.
This quarter was no different and we are excited by the continued adoption at the MTR, but total customer penetration now at 43% from 28% a year ago.
And continued adoption of collaborations increased large customers with 139 customers spending 500000 or more with that.
This represents a 23% growth from a year ago period.
Our pipeline of single agent approach is resonating with customers, while strengthening our market position.
With CIO CSO looking to cloud platforms that are agile easy to deploy and easy to manage organizations are increasingly phasing out legacy point solution and adopting cloud needed Goldstock security and compliance coverage to meet the demands of today's threat landscape and reduce costs.
We remain focused on leveraging our scalable platform model to continue to drive superior margins and significant cash flow.
Adjusted EBITDA for the second quarter of 2022, with $54 1 million, representing a 45% margin.
EPS for the second quarter of 2022 was <unk> 89.
And our free cash flow for the second quarter of 2022 with $30 3 million, representing a 25% margin.
Year to date margin was 44%.
In Q2, we continued to invest the cash we generated from operations back into <unk>, including $3 5 million on capital expenditures.
And $71 2 million to repurchase 561000 of our outstanding shares.
The resilience of our sustainable and scalable business model has been proven over time that is currently demonstrated by our strong profitable growth during the time of uncertainty and volatility.
With over $500 million buses to repurchase shares over the last four years and 354 million remaining authorized for future share repurchases.
Turning to continue to leverage our excess cash to return capital to shareholders.
Shifting now to guidance for third quarter and the rest of the year, our strong year to date performance continued to bolster our confidence in both our strategic agenda and business environment.
We are raising the bottom and top end of our revenue guidance for the full year to now be in the range of 488 million to $489 5 million, representing a 19% growth.
This compares to prior full year revenue guidance of $4 84 to $4 $86 5 million.
In terms of profitability, we are raising our full year EPS guidance to now be in the range of 350 to 355 from the prior range of three three to $3 97.
This implies an EBITDA margin in the mid 40.
This revised guidance reflects the planned increase in investments in the second half of this year.
Partners remain strategic to our growth strategy.
Our focus is on further investing in our partner programs and enhancing our relationships to leverage our large distribution network to drive profitable growth in the business.
Alongside this we will continue to increase our investments in digital marketing initiatives and expand product management capability as well as sales capacity and support function.
For the third quarter, we expect revenues to be in the range of $124 5 million to $125 1 million, which represents a 19% growth.
We expect EPS to be in the range of 85% to 87.
Our planned capital expenditures in Q3 is approximately $2 5 million to $3 5 million for the full year 2022, we expect investments in the range of $16 million to $18 million.
In conclusion, we are pleased with our Q2 results and believe we are well positioned to drive durable top line growth on the back of a large and growing market opportunity, while leveraging our highly scalable model to maintain strong cash flow and industry, leading profitability over the long term.
We remain conscious of macroeconomic and geopolitical situation, particularly in Europe , I believe that offsetting that is the upside on our product differentiation and with customers, becoming more cost conscious with their security budget. We will continue to see higher levels of customer interest associated with the value proposition of consolidating vendor and a single agent.
We see that dynamic playing rafa.
With that Matt and I are happy to answer any of your questions.
Thank you and as a reminder to ask a question. Please press star one one.
One moment, while we compile the Q&A roster.
And our first question will come from Dan Bergstrom from RBC capital markets. Your line is open.
Hey, it's Dan Bergstrom for Matt Hedberg, Thanks for taking our questions.
Platform adoption driving higher customer spend I think that's a real impressive.
Location that $500000 customer spend could you drill down into those does the trends you are sitting around those larger customers and maybe the partnership that you have with them.
Yes, that's a great question I think right now we're seeing that as these customers they get deployed with the MTR, which is sort of what we are focused on the last.
A few years.
And I gave the example of one of those customers are in Europe .
We are expanding our additional licenses with quality for via <unk>.
Additionally, also adding patch management looking at cyber security asset managing their lighting overall.
Helping them get additional value other callers and also able to be able to position.
Sort of differentiate us in the VM space, we are actually able to now deploy additional capabilities that we right now don't see upward.
And the market by the other the Embraer sorry, sorry.
Customers continue to expand.
Upsell of existing vehicle license will also add additional products for quality. So we're pretty excited about what that can move in terms of these <unk>.
<unk> overall.
Overall that also.
Essentially it makes us strategic partners with these large customers because at this point is very well integrated into their cyber security stack and very strategic to the successful they are.
Programs, so as we get gain more visibility.
It's more opportunity for us to have conversations with our customers on what value we can bring to these large customers.
That's great and then maybe for Jim you touched on this a little bit in the prepared remarks, but.
But over the second half year into 'twenty three can you talk about how you're weighing kind of the mix.
And head Count channel and digital marketing, there's a lot of talk about the channel on the on the call here in the prepared remarks are you leaning more into that perhaps than previously.
We are we did announce a new partnership program and the new initiatives that we were thinking earlier this year and we are seeing early indicators thats working well for us and in terms of our partners.
We are seeing growth that we can definitely leverage and accelerating in the shorter term and balancing out with our investments in the direct business and so for US we are investing in all areas. As we said before if you take a look at our guidance for the EBITDA margin that does indicate a healthy growth and that happens to be an increase in investment in partnerships.
Increasing the head count as well as the digital marketing and product marketing on file.
Thank you.
Thank you.
And we'll take our next question from Joel Fishbein from <unk> Securities. Your line is open.
Hi, Joe Hi, Jimmy I have a quick follow up question to that you had also initiated.
To accelerate some hiring sales can you give us an update on where you are with that not just the investment in channel and also love to just get your confidence in the visibility for the guidance for the back half of the year.
Yes happy to address that I think that at the beginning of the year, we had as far to increase spend a faster and more this year I think that we're a little bit behind on the hiring with that that we've made some progress definitely better than what we see last year and I think.
As demonstrated by our increase in spend so for example, just as our non-GAAP sales and marketing if you take a look at that Q2 year over year span at 28% growth is the highest we've seen in recent years, even taking a look at year to date growth at 20% growth versus 7% for the same period last year and I think the two years prior.
Yet two that we've been decreasing so last year I note that the sales and marketing head count is only up by net ton were up by more than that.
First half of this year. So we are optimistic in our ability to continue to increase in spend and hire more people going forward.
Thank you that was great and then just given your visibility into the guidance.
Yes, I think that our visibility into the guidance right now is similar to how we look at that business the trajectory of our business momentum. It's informed by our current billings current deals in play and our discussion with our customers. We recognize that uncertainty that a lot of our peers have in other companies with that said I think that the momentum is there.
We are optimistic in our ability to continue to accelerate.
You take a look at our revenue guidance, what that implies is 19% growth in the second half after achieving healthy life.
Healthy acceleration in revenue in the last year, and we feel confident in our ability to deliver that and then in terms of the investing.
Investments.
As you can tell by the increase in non-GAAP EPS is really informed by our taking a look at the initiatives that we had at the beginning of the year and finding that right balance and thinking through in the next six months, what we think that we'll be able to really realize in terms of investment and that's informed our guidance.
Great. Thank you so much.
Thank you.
And our next question will come from the Hall Chachi from Northland Capital markets. Your line is open.
Yes can you hear me.
Yes.
Okay great.
Congrats on a strong quarter short term billings that was up 18% year over year is that correct.
That's right.
Okay and that represents.
Slight deceleration.
What's the narrative behind up slight deceleration short term billings.
Finally, billings tend to fluctuate from quarter to quarter and that happens to do with our renewal time timing of the geos and the duration of the delay but without that even on the LTM basis Youll see that slight tick down part of the reason is because we do have some headwinds that all the other companies are seeing right now.
When the certainty and the business that said what that what that means for us.
I think in the near term, especially in this volatile market I would point to our revenue that's more normalized just because we do hedge on the top side on the revenue and Thats not reflected in our current billings.
Okay and then Jimmy you also mentioned that you remain cautious on macro economic.
Concerns out there, especially in EMEA, but are you actually seeing.
That play through in terms of.
Your bookings or billings.
We do see in our discussion.
A little bit cautious briefly so I think that all companies are but.
No.
Based on our discussions with our customers. We don't think that it's going to be a significant impact on our business. We still see a high demand I think that the security budget as a whole is not decreasing although the companies are looking at their standard scrutinizing their spend to make sure that they have the right vendor and prioritizing the spend and investments accordingly.
And that's reflected in our guidance.
Okay, great. Thank you.
Thank you.
And our next question will come from Rudy Kessinger from D. A Davidson your line is open.
Great guys. Thanks for taking my questions.
The revenue in terms of the beat versus your guide one of the largest piece I think you've put up in the last several years. If you could just maybe bucket out where you saw the upside in the quarter.
More specifically was it more so from new customers existing customers.
Spansion and capacity management some of the other products as opposed to maybe the MBR.
What really drove the solid upside in the quarter despite the macro.
Yes.
Yes, I think right now we're seeing the early indicators of signed I think this is the first time that we provided some color into our newer products like cash management, we have.
Always known that there is an upside to our newer products, we're seeing that kind of.
Adoption happening as we speak right now. So this was the first first quarter, where we saw patch management be material to the business.
By that I mean, more than 5% of our bookings and even more encouraging for US is the fact that 9% of our new bookings came from cash management as well so that contributed to our net dollar expansion rate, which remains at 110%. We are seeing strong retention in the business and that existing customers as well as on Upselling Cross sell.
Opportunity.
With that said that 5% of patch management.
So very small and so that's why we think that there's a huge upside. It's just starting now and given the current situation I do think that customers are more focused on starting to view us as a cloud security provider and it does increase our opportunity to consolidate other security vendors out there with more customers looking to call it for multiple solutions.
Got it and then just circling back on the sales hiring I know you had said previously.
To hit double digit growth in SMN head count this year certainly it sounds like from your commentary youre leaning a bit more towards channel versus direct but you still think you'll hit that double digit growth in SMN at count the sharing now.
Yes, yes. So we are still on target for that we are targeting the still growing our sales and marketing head count by double digits, but we are looking into other avenues as well to make sure that we have a balanced approach to investment.
Okay got it thanks for taking my questions.
Thank you.
And our next question will come from Hamzah <unk> from Morgan Stanley . Your line is open.
Hey, guys. Thanks for taking my question and good evening.
Thanks Sumit.
Question for you just call us has broadened out portfolio across it security and compliance over the last few years are there any areas within within that portfolio, where youre seeing more of a prioritization and others I'm thinking like maybe asset discovery seeing more demand versus vulnerability management advisory brokerage.
Any color you can give there would be really helpful.
Yes, that's a great question I think if you look at today and we continue to have healthy growth in <unk>, but I think as we have provided the color with patch management is not just from what we see the business from bookings, but also the fact that quality agents have deployed $130 million purchase for our customers see in our release.
The customer into the fact that we are becoming a very critical for these customers to help reduce the vulnerabilities.
Just sort of work on ancillary Wonderberry management traditionally is just focused on if you are telling me the asset I'll tell you what issues are on the asset you have to go figure it out.
With the broadening of the platform across multiple different aspect has really helped.
Customers, bringing the asset management, while Liberty management, and Bot management together.
And those really go hand in hand, and so they actually do help each other in terms of customers who are looking to get.
<unk> are more likely.
Hoping to go with quality when they see that they can also leverage patch management then they see that external attack surface is baked into that solution or cyber security asset management is bringing them a lot of visibility into the Africa inventory. So as Liberty management continues to be critical surrounding functions as I would call them two plus five.
All your assets and fixed all goodwill number do you start to become more and more important vendor, especially conversations with our customers in the current macroeconomic environment that we see they are looking for how they can get additional value how they can get.
Out of the solutions that they already have and so that's why we are quite excited and we kind of do see that fiber is a good asset management and patch management are starting to do.
The ABL focus for customers that are looking to.
<unk> reduced the amount of time it takes for them to find an answer to actually fix it which today with multiple tools.
And multiple teams it takes quite a bit of requirement and that was demonstrated in the some of the research that you've put out there where we were able to take.
Customers, who are using <unk> and some other tool to patch versus those who are using quality scanner quality to patch delivering marked difference in the top 10, most exploitable vulnerabilities that sets up without we are helping them really reduced the amount of time. It takes indebted when theyre doing a broader platform adoption. So.
Those are the areas within the platform that we see so of course, we have other things that customers buy like file integrity monitoring and few other things, but cyber security asset management and agile management tend to really kind of go with that.
BMD purchase and which is also reflected in our new business, where we are seeing the deal sizes.
Take into account.
<unk> purchased directly off will be MBR patch management, and cyber security asset management, and sort of just coming and getting onto the MTR. So hopefully that answers your question.
Yes that was super helpful. Maybe just for Jimmy on FX.
Wanted to understand the.
The negative then in potential positive impacts there because I understand 24% of the revenue I believe is priced in local currency, but that exposure is hedged.
And then on the Opex side.
And about 29% of your Opex, which is local currency just was there any headwind on the revenue side that we should be aware of or the billing side and then on the Opex side, how should we think about maybe the stronger dollar benefiting you.
You on the margin front over the next 12 months. Thank you.
Okay.
Yes, because of the hedging program, we have four contracts in place just like you said on both the revenue and expense side and so what we're seeing right now is we don't.
The part that we had were seeing some benefits and cost of gains or losses that are offsetting year to date, it's really not material for us on the revenue it could become greater in the second half of this year, but with that said I still don't see it on an annual basis, it will be significant because of our hedging program.
And how it's working right now on the expense side same thing.
The INR, which is about like 15% of our expenses.
We see the benefits benefits and losses offset each other more or less and so that's why on our margin.
It hasn't been material for us in the last couple of years don't Cfe material for us in the next 12 months either.
Okay. Thank you.
Thank you.
And our next question will come from young Kim from Loop capital. Your line is open. Thank you congrats on that.
Another solid quarter assume that Jimmy.
Obviously <unk> strategy continues to play out very nicely.
Especially with existing customers.
So Matt you kind of mentioned some data points regarding new customer acquisition front, but can you give us.
Update on how your <unk> strategy and your overall extended product portfolio.
Helping you in terms of new customer acquisition.
It has been the trend around you and you had some new customer acquisition that especially among the large global 2000.
Yes, I think just to add color at a high level. We are very pleased with what we're seeing with the new business side.
We have been making changes and investments in that area over the last few quarters and so.
With new business right now, we're seeing that our.
Bookings in this quarter, we are amongst the highest that we have seen.
Along with increasing the average deal size right, so which is quite interesting and exciting for us because.
What that tells US is that when we are in a competitive situation with.
And we are talking to these customers, who are actually able to bring them show them the value of the combined solution. So that they can purchase multiple things together.
Which ends up becoming a lot more cost effective for them in terms of deploying and operationalized this programs and.
So it's not we haven't they wanted to buy the MBR initially and then say okay. We will take a look at some of these things later right off the bat that able to see the value coming out of that and thats, reflecting the average deal size going up reflecting and patch management being 9% of our.
The new business as well for this quarter and then.
The other side of that is just a reduction of point solutions is very helpful. For these customers and being able to really be able to.
Not have to take on the cost of deployment and deploying these things. So overall I think.
Early days, but quite pleased with the momentum that we're seeing on the new business side.
Okay, Great and then.
Just.
Trying to understand whether or not the P. M.
BMD on penetration.
Potentially.
Certain point or slowed down obviously your penetration rate has increased 4% sequentially fairly consistently every quarter for the past couple of years.
Now that you're kind of entering the third year anniversary of <unk> relief.
Is there is there any expectation <unk> adoption rate maybe perhaps.
Hello update I'll just hit on the.
The customers for.
The MBR second or third time around this time.
And then also if you can just give us some sense on how much of a mix of your renewals isolated in second half parts with Christoph.
Yes, Great question I think the MBR in our opinion continues to be a significant differentiator in the market and we really have been <unk> been quite significantly.
Exactly for that purpose, we want to continue to stay ahead of.
Where everybody else is in terms of the capabilities, we bring <unk> to the VM market, which is why within two years of launch of the MBR.
Launched <unk> dot or recently, which was really well received by our customers, bringing additional capabilities on our risk rating risk ranking and really focusing on remediation along with the ability to leverage <unk> tools to really.
We significantly reduced the time for remediation so.
I think as we MBR and then the rest of the capabilities that they can purchase on together with not really kind of make up that cohort of capabilities that our customers look at not just the MBR. So the MBR adoption strategy has been to get to the MBR and get them to see the value of the adjacent capabilities get more agents, which make it easier for them to.
Adopt some of these additional capabilities and continue to innovate with them.
As we did with <unk> to add these additional capabilities and we're excited to see our customers can benefit from external attack surface management, but also that you are launching which we just launched this week so that they can bring additional assets into their <unk>.
MDF reviews, so I think.
You see that that is.
Customers, who have adopted the MDI early adopters we are seeing.
So I think.
We see that that is.
Customers, who have adopted the MDI early adopters were seeing some customers who are on the sidelines started off being that we are working towards more innovation to get the rest of them onboard and then theres, obviously, a cohort of customers.
David.
You may not be bolus for the Ameren deleveraging for our web application scanning so that remains an upside opportunity for us to look forward, but we continue to look at it from different angles.
Okay, great. Thank you so much.
Thank you.
And we will take our next question from.
Brian Essex from Goldman Sachs. Your line is open.
Hi, This is Charlie on for Brian .
A quick question. So I know you mentioned that essentially FX.
Wasn't it wasn't a huge impact on the top line, but can you talk about impact of FX on and pricing outside of the U S D.
For instance are getting more expensive just because of the strength of the dollar like how has that impacted like yourselves and marketing as a whole is there more discounts associated.
Any color would be great. Thank you.
Yes.
We obviously are aware of the macroeconomic conditions and we continue to be cautious about where things are heading but we are having positive conversations with our customers, especially around the ability to add value because of the different capabilities that are integrated into black home rather than being waterflood.
Oh, placer dome soft comp predictive conversations.
When customers are being.
Poised to make sure that they get the maximum value out of the budget that they have been given both positive on restrictions have increasingly helping them for us and in Europe .
Continue to stay excited about the opportunity, but it can really help us show the customers or additional value and sort of getting into discounting conversations right. So that way. We can now provide the customer. In addition to the MBR cyber security asset management patch management. These are going to help them reduce their overall cost of other than.
Point solutions that only do one thing where they have been focused more on discounting. So again, we continue to monitor and see how the environment evolves, but we feel well positioned with the overall stack that we have that we have multiple things at our disposal to work through with these customers to show additional value rather than focusing on.
Joe's discounting.
Got you. Thank you for the color and I guess another question if you could expand it.
Cash from operations decline.
Decently over Q2 or Q is that just the seasonality thing just any color regarding that would be great. Thank you.
Yes, our cash flow tends to fluctuate and so that's why we look at what are they also provide the color on the year today and tomorrow have been two years ago, where our cash flow and with one quarter might be 60% or down 30% of our year to date it does normalize.
Due to the fluctuation whether it be from Prepays or the.
Operating cash flow from <unk>.
Understood.
Thank you so much.
Thank you.
And we will take our last question from Alex Henderson from Needham <unk> Company. Your line is open.
Great. Thanks.
Actually I have two different questions there.
Kind of related one is can you talk a little bit about <unk>.
The degree to which your new product portfolio has allowed you to overcome.
Pretty tough.
Economic environment.
The context of.
How much of a delta I know this is obviously a impossible question to ask but how much of it how harsh has the environment gotten and how it might have looked had you not seen that benefit.
Having this much better product portfolio <unk>.
Firstly can you talk a little bit about.
When you were getting these additional wins.
Who are you displacing in that environment, and how are they reacting relative to their pricing.
Against that.
Macro environment, there was expressed in the last quarter or last question E.
Pricing down significantly.
In Europe in order to to bring it into a tolerable range for.
Foreign companies that are struggling under a 20% currency translation.
Great question or questions.
So the possible ones first so I think that.
Going in the trend of what we've talked about in terms of the new product portfolio, especially focused on cyber security asset management and patch management.
Additions to <unk> I think.
For us that has been really positive and our vision for a couple of years ago. The market was going to go into the direction that you win a couple of years ago, and we introduced patch management.
There are players were not looking at that price you mentioned, that's something that should be part of Liberty management I think of $130 million purchase later, we're very proud of what we have been able to achieve and providing value to our customers, saying, we look at our innovation on the platform very similar to the way we run our company in terms of being very focused on bringing value and so when we.
Talk to our customers and we are able to get into conversations to showcase them.
They are able to reduce the risk rate at the end of the day, while the number of products on the cost of the products is one aspect of it when we are able to showcase that.
The end up leveraging the combined solution with the MBA and the new capabilities together with asset management unmatched management the time to the immediate for the most critical vulnerabilities is reducing by.
By half in many cases right.
A security practitioner and assist them being able to do that reducing the amount of exposure that they have with the number of days by that kind of quantity I think is really helping us with these conversations to showcase that yes, we displaced point solutions we displaced.
Alright.
Platforms revenues together with acquisitions.
The combined integrated platform capability really helps them reduce the risk and that's really at the end of their focus for all security beams right that is of course the financial.
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An example of.
One of our customers for cyber security for external hard surface management.
Looking at a pure play externally.
Back management company.
Their product.
Low six figure that they have to pay for that.
Wallace on do you have the conversation with bandwidth external expert. This is now part of our pharmacy asset management for about the same amount of money, we can give them significantly more value because we are not just giving them the external visibility overdoing in cyber security asset management capabilities that include things like internal visibility.
End of life software et cetera, so that innovation in terms of making sure that we are staying ahead and then providing this as a bundle with the MBR is not helping customers see the value to say where do I go with this beautiful vendor that's only giving me. The list of what is the scored but is not integrating into what I need to scan et cetera or.
I gave that example, so the same amount of money. They could actually then loaders cyber security asset management from quality and then competitively.
Competition when they tried to look at the price drop it smart.
Don't have that your management they are going to have cyber security asset management, because our offset that right. So that's some examples of course, we continue to see some things here and there, but I think that's the conversations that we have and why we are seeing the increase in the deal size the metric pension as well as Oh.
Match management, becoming.
Strategic to us.
Where do you see your incremental growth coming from in terms of competitive displacement or are you displacing.
It's a different combination many times is internal security teams homegrown products, sometimes it's a better.
Pure play products that are just giving you a list of lung liver disease in some cases match management standalone products that don't have the context of what needs to be patch, so just different and different customers, sometimes we see that they buy us as a supplemental apache solution to their existing flash management because management.
Management is an IP capably be meant for upgrading software. So if you need new features in Java or youre going to do that batching. Once every two months after a lot of testing security teams needed ability to patch for security issues much faster than that and thats, where the friction constantly so for us to be able to go and say you're a security team.
IGT and can continue to use that approaching blue forward at a more sort of new feature by bus capability.
The ability for quality with existing solution that they already have to go in and say in the case of cyber related issue. We can actually grow quickly go and do a targeted focused patch of this.
In most cases it helps them also buy that capability. In addition to maybe FCC them or something like that that they may already have.
Great. Thank you so much for the detail.
Sure.
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Okay.
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