Q4 2024 Qualys Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by welcome to quality fourth quarter 2024 Investor Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: 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 one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again, please be advised that today's conference is being Rick.
Speaker Change: I would now like to hand, the conference over to your Speaker today Blair King. Please go ahead.
Thanks, Gigi good afternoon, and welcome to call US This fourth quarter 2024 earnings call.
Joining me today to discuss our results are submit the car, our president and CEO and Julie Kim our CFO.
Speaker Change: Before we get started I would like to remind you that our remarks. Today will include forward looking statements that generally relate to future events or our future financial or operating performance.
Speaker Change: Actual results may differ materially from these statements factors that could cause results.
Speaker Change: To differ materially are set forth in today's press release.
Speaker Change: Our filings with the SEC, including our latest Form 10-Q and 10-K.
Speaker Change: 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.
Speaker Change: During this call we will present, both GAAP and non-GAAP financial measures.
Speaker Change: Conciliation of GAAP to non-GAAP measures is included in today's earnings press release and as a reminder, the press release prepared remarks investor presentation.
Speaker Change: Available on the Investor Relations section of our website.
Smith: So with that I'd like to now turn the call over to Smith.
Speaker Change: Thank you Blair and welcome to our fourth quarter earnings call looking back to last year I can truly say about 2024, whether Europe incredible product innovation and rebranding of callers as we celebrate our 20 <unk> year anniversary.
Speaker Change: One of the first draft security companies in the World, we have continuously strive to exceed market expectations and <unk>.
Speaker Change: Service the leader when it comes through disruptive technology and cyber security.
Speaker Change: The message is clear today that he sold one to anchor cyber security conversations that our business with a production of the impact of the cyber security spend.
Speaker Change: The market wants a platform that enables them to speak unified language of risk to their board and business partner, while letting their teams speak to the underlying platform and best of breed solutions for specific areas in cyber security rather than an aspirational goal of consolidated encrypted different cyber security vendors into one.
Speaker Change: Recognizing the difficulty and complexity of implementing and utilizing multiple security solutions from numerous security vendors. We have evolved our platform previously focused on liberty scanning into Liberty collection to become a full feature risk analytics and quantification platform, bringing data analytics and insights with embedded air models to customers why do you.
Speaker Change: Giving them the flexibility to continue to leverage their existing security tools. The net result for customers is a vendor neutral orchestration layer that provides full visibility and risk scoring for an organization like that or attack surface agri.
Speaker Change: Aggregate and correlate all security findings leveraging over 25 feet and power single AI, driven workflows that centralizes quantifies articulates prioritizes intermediate cyber risk, while delivering the efficiencies of consolidation.
Speaker Change: The rebranding and continuous enhancement of our platform as a result of our unwavering focus on prioritizing our customers need and are addressing their challenges with innovative new solutions.
Speaker Change: In 2024, this collaboration led to a significant platform enhancements that bolstered our strategic relevance and further expand our market opportunity we can.
Introduced risk eliminate to extend out and radiation capabilities beyond benchmark shrink, we enhanced our cyber security efforts measurement capability.
Speaker Change: <unk> technologies Carne previously unknown internal and external facing efforts into security manage assets in real time, we brought the micro attack prioritization matrix into the call as tourists platform to uniquely predict identify and respond to critical risk with Anadarko centric view.
Speaker Change: With total AI, we delivered groundbreaking new capabilities to find and secure applications in large learning models.
Speaker Change: We organically unified cloud infrastructure and battery management CIM container runtime protection converted exposure management, SaaS security posture management, and our AI powered tourists inside capabilities into our Coca Cola, Florida.
Speaker Change: <unk> seen a platform with might be cloud I'd.
Speaker Change: Integration strengthening our market position and further fixing the power of our platform.
Speaker Change: Went GA with our enterprise risk management solution.
Speaker Change: So I think a new gold standard in the industry for proactive cyber risk management and planting the flag for organizations to operationalize, our Martin risk Operation Center rock at scale.
Speaker Change: In less than a quarter students going GAA with ATM, we have seen strong interest with currently over 50 active prospects for POC. Our ATM solution goes beyond current continuous threat exposure management CPM platforms with our ability to speak business language effect mediation actions and partner with fiber.
Speaker Change: Insurance underwriter, we believe these innovations will allow our customers to standardize on a trusted platform like qualities layering on top of their other existing cyber security solutions.
Speaker Change: With a long track record of solving the most challenging cyber security challenges.
Speaker Change: New use cases for our customers quality pioneered the cyber security patching category seamlessly integrating it into our platform and bridging the gap between it and security teams last year, we successfully deployed over 100 million packages with Qantas Adrian and in current eliminated over $100 million potential incidents in our customer environment.
Speaker Change: Despite this achievement our journey has shown that marching alone is simply not enough that is why we introduced two risk eliminated which revolutionized dispatching by empowering organizations to isolate critical assets are implement compensating controls protecting against the really one liberty's endless configurations, when budgets aren't available or fever.
Speaker Change: Able to deploy this as a major competitive advantage.
Speaker Change: Our innovation doesn't stop there we recently introduced tourists uninstall as a forward component to our tourists eliminate package tourists uninstall allows organizations to hunt for detect and uninstall end of life software misuse, our unused application and other forms of Baghdad, while removing one of the most highly exploratory attack, but available to anniversary with <unk>.
Speaker Change: Simple click of a button.
Speaker Change: In cloud our innovation engine continues to execute at a high level. We believe we are increasingly well positioned to expand our share of the evolving cloud market <unk> look to evolve risk based approach into multi cloud environments as well advancing our competitive differentiation. We are recently brought many new capabilities into our agent and <unk>.
Speaker Change: <unk> solution, including comprehensive backpack analysis enhanced risk quantification, leveraging our touristic insight capability and automated no code low code cloud workflow remediation. This latest release, which required global cloud unleashes an organizations ability to easily visualize the end buyer.
Speaker Change: <unk> assets are backed by <unk> and.
Speaker Change: Systematically identify prioritize in Brazil.
Speaker Change: And our resolve critical threats for three runtime Android and protection.
Speaker Change: As a result, Olga <unk> streamlining operations with an unparallel outside in an inside out perspective of an organization's cyber.
Speaker Change: Cyber security posture for secure cloud consumption.
Speaker Change: In our view of global Lottery is one of the most comprehensive <unk> solutions available in the market today.
Speaker Change: Growing momentum as the.
Strong testament to the assurance customers place and quality everyday.
Speaker Change: Finally, with the introduction of Wallace's total apps like we are now providing customers with the ability to expand their apps like assessments and to expanding our back surface would be use of API for <unk> to be in mobile apps.
Speaker Change: <unk> includes comprehensive inventory impact assessment of their web applications, and Apis with unified malware detection and automated response.
Speaker Change: Moving onto business update over the past several months I personally met with many customers prospects and partners. These conversations all center around the same topic customer required a holistic view of the cyber risk when that is quantified and prioritize articulated in terms of risks to their business and remediated to an acceptable level.
Speaker Change: Integrated workflow on top of that existing solutions.
Speaker Change: Given causes blueprint for delivering these requirements with greater value to customers. Our technologies are not only fueling new local lines, but also helping to increase broader platform adoption, especially in the areas of the MTR cyber security asset management patch management cloud security in and out.
Speaker Change: Our risk operation Center delivered by quality ATM with thousands of customers consolidating on wireless enterprise risk platform. Let me again shared a couple of recent wins with illustrate why these companies are turning to quality to help unify their solution security tools quantify cyber risk and better environment and fortify their security operations.
Speaker Change: First an existing global 100 multinational insurance companies security team with multiple tools in their environment faced increasing personnel costs and struggling with limited visibility into the overall risk profile through a highly competitive RFP process. This customer chose qualities and launched <unk> and.
Speaker Change: Initiated with the collapse of security stack and just data from other cyber secured decrease through the quality platform and rich asset contextual business information.
Speaker Change: By the CFPB integration and centralized our remediation.
Speaker Change: This included the purchase of eight quality modules and deploying ATM.
Speaker Change: B to begin orchestrating a rocket, resulting in a seven figure annual bookings T V.
Speaker Change: We are now quickly migrating numerous data sources to the Polish platform and delivering the outcome of consolidation and quantifiable risk and automate their response aligned with business priorities.
Speaker Change: Turning to the momentum we see with global growth seen absolution in a mid six figure booking upside with the global for taking longer right.
Speaker Change: <unk> really affect matters around the web application scanning.
Speaker Change: And customer assets, one of them aviation customer launched initiated before the unified security stack and replace with incumbent cloud only secured demand.
Speaker Change: Through its evaluation discussed some great good luck with that alternative.
Speaker Change: <unk> point solutions.
Speaker Change: <unk> operations, selecting litigation and Mr connection, which hindered our ability to assess risk and consolidate their security tools.
Speaker Change: Today through a highly scalable natively integrated in App solution. This customer is leveraging the quality <unk> platform to combine insights from breakthrough run bandwidth proactive risk management, while actively detecting anomalies, preventing zero day attacks closing security gaps and remediated risk with IBM integration through a single dashboard.
Speaker Change: Sure.
Speaker Change: Across it on Prem hybrid and multi cloud assets.
Speaker Change: These capabilities provide delivery regain automation necessary to defend against who leads our groceries and represent a significant long term opportunity for quality.
Speaker Change: With seamlessly integrated solutions.
Speaker Change: Delivered natively on our platform to solve Marlin security challenges more and more quality customers are beginning to understand how cyber security transformation drive better security outcomes saves time and cost less as it is our customer spending $500000 or more of a dose in Q4 grew 13% from a year ago to 207.
Speaker Change: Consolidating workloads isn't just happening with customers.
Speaker Change: So embrace and prioritize our partners underscore by interestingly strong mix of new business and significant growth as we can.
Speaker Change: Continue to endorse our partner first sales motion partner led deal registration and win rates increased in Q4.
Speaker Change: In addition, with the launch of <unk> in many of our managed security service providers are now deeply engaged for the first time in delivering new manage risk operations Amrok services encompassing risk quantification <unk> integration risk monitoring and watching similar to how MSB with modern.
Speaker Change: Sock for post the breach response to the <unk> is now the new frontier for MFS is to capitalize on the franchise and automated.
Speaker Change: Approach to pre breach risk management partner proactively spearheading these new initiatives we call it.
Speaker Change: As the MLR platform of choice.
Speaker Change: Turning to our executive team update I would like to congratulate Dino Dina.
Speaker Change: Chief revenue Officer, who has decided to accept the CEO role at another company average Dino well and thank him for his contributions during his tenure at air quality as we continue to focus on executing our product.
Speaker Change: Growth vision and partner first strategy I plan to oversee the sales organization, while continuing to grow in scale.
Speaker Change: Group, we're fortunate to have a talent David next lower team of regional sales leaders, who are energized by our umbrella to position in the market and ready to drive our business forward.
Speaker Change: Without a fed ramp highdaddy platform anticipating fed ramp certification in 2025.
Speaker Change: And our continued interest in <unk> really been excited about the <unk> opportunity as the federal government looks to change the way things have been done in the past with concur costly on premise solutions and move to cloud based smart and effective and cost efficient solutions for cyber security risk management.
Speaker Change: In summary, I couldn't be more confident in our market position and opportunities for growth over time, our leadership as a trusted security platform is a clear reflection of quality for their dedication to continuous innovation delivering value to customers and transforming cyber security risk management looking ahead to 2025, we will continue our disruptive and.
Speaker Change: Aviation for the elements of our go to market investments and execute our strategic vision.
Speaker Change: Balanced approach to long term growth and profitability with that I will turn the call over to Julie to further discuss our fourth quarter results and outlook for the first quarter and full year 2025.
Julie: Thank you, Matt and good afternoon.
Julie: 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.
Julie: We're pleased to report a healthy finish to the year, highlighting our continued execution financial discipline and scalable business model.
Julie: First of all year, we grew revenues by 10%.
Julie: $7 6 million and achieved adjusted EBITDA margin of 47%, even with continued 14% growth in investment in sales and marketing.
Julie: Net income and EPS grew 16% to 229 million and $6 three per diluted share respectively.
Julie: And free cash flow reached $231 8 million or 38% of revenue all of which exceeded our expectations for the year.
Julie: Turning to fourth quarter results.
Julie: <unk> grew 10% to $159 2 million.
Julie: <unk> will continue to increase its contribution taking a 48% of total revenue compared to 44% a year ago.
Julie: As a result of our continued commitment to leverage our partner ecosystem to drive growth, we were able to grow revenue from channel partners by 18%.
Julie: <unk> direct which for 3%.
Julie: 15% growth outside the U S with ahead of our domestic business, which grew seven per ton.
Julie: No listen international revenue mix, with 58% and 42% respectively.
Julie: With customer confirming their prioritization of security with an it budget, we anticipate the selling environment in 2022 remains stable with ongoing budget scrutiny foreseeable future.
Julie: Reflecting this gentlemen, thank you for aggregate retention rate remained approximately 90%.
Julie: Dollar expansion rate came in at one 3% unchanged from prior quarter.
Julie: In terms of product contribution to bookings.
Julie: And then on cyber security asset management, combined made up 15% of total bookings and 24% of new bookings in 2024.
Julie: Our cloud security solutions total Crutsinger made up 4% at 2024 talking.
Julie: We attribute this success to our customers' needs for products like awareness.
Awareness of their attack surface with natively integrated risk management and remediation workflows across all environments on a single platform.
Turning to profitability adjusted EBITDA for the fourth quarter of 2024 was $74 2 million, representing a 47% margin compared to a 46% margin a year ago and 44, 45% last quarter.
Julie: The stronger than expected performance with off take from our targeted optimization efforts, which was part of our 2025 planning part time.
Julie: Consequently, operating expenses in Q4 remained relatively flat to last quarter, while sales and marketing investments grew modestly by 5% from last quarter.
Julie: EPS for the fourth quarter of 2024 with $1 69, and our free cash flow was $41 9 million, representing a 26% margin compared to 22% in the prior year.
Julie: Thank you for it we continue to invest the cash we generated from operations back into colleagues, including $5 8 million on capital expenditures and $42 3 million to repurchase 312000 of our outstanding shares.
Julie: I think I ended the quarter, we had $143 4 million remaining in our share repurchase program.
Julie: Please note that our board has authorized another increase of 200 million to the share repurchase program, bringing the total available for share repurchases to $3 $43 4 million.
Julie: Okay.
Julie: With that I'd like to turn to guidance starting with revenue.
Julie: For the full year 2025, we expect revenue to be in the range of $2 $45 million to $57 million.
Julie: Represent a growth rate of 6% to 8%.
Julie: For the first quarter of 2025, we expect revenue to be in the range of $155 five to $158 5 million, representing a growth rate of 79%.
This guidance assumes no material change in our net dollar expansion rate with moderate growth contribution from new business in 2025.
Julie: We also realized that there may be some near term adjustments to the plan given the upcoming Cri departure ambition update as we make progress throughout the year.
Julie: Shifting to profitability guidance for the full year 2025, we expect EBITDA margin to be in the low 40, <unk> climbed 18% to 20% increase in operating expenses and free cash flow margin and a low to mid 30.
Julie: We expect full year EPS to be in the range of $5 three zero to 590.
For the first quarter of 2025, we expect EPS to be in the range of one point to 150.
Julie: Our planned capital expenditure in 2020 time expected to be in the range of eight to 13 million for the first quarter of 2025, and the range of $2 million to $4 million.
Julie: In 2025, we anticipate with Morgan contract by approximately 1% given certain investments. We are currently making in some of our data center to achieve greater operational efficiency and reduce medium to long term margin comp.
Julie: With respect to operating expenses, we plan to align our product and marketing investments to focus on specific initiatives aimed at driving more pipeline accelerating our partner program and expanding our federal vertical.
Julie: As a percentage of revenues, we expect to prioritize and increasing investments in sales and marketing.
Julie: <unk> with a more modest increase in G&A.
Julie: With that Matt and I will be happy to answer any of your questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced towards draw. Your question. Please press star one one again please.
Julie: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Kingsley Crane from Canaccord Genuity.
Kingsley Crane: Hi, Thanks for taking the question.
Speaker Change: Congrats on a great quarter so.
Speaker Change: When you have so many great products in the portfolio, we've seen some others in this space for more of a consolidated consumption plan that simplified pricing and get more products in the hands of the customers. So any thoughts on creative packaging opportunities.
Speaker Change: Over this next year.
Speaker Change: Yes, that's a great question I think for US as I mentioned in my script really customers are looking at ways that they can.
Speaker Change: Hum.
Speaker Change: How theyre looking at their cyber security spend by looking at their the business risk and how they are able to articulate that spend by reducing business risk and there is a combination of bringing quality modules wherever available bringing data from third party solutions that are available and so as we are early in the journey right now with <unk>.
Speaker Change: And the amazing feedback that we're getting right now from the early adopter customers for <unk> that we are going I think that that evolution of that we continue to look through the year at getting feedback from these early customers on how we can help them adopt the BARDA platform. Both in terms of the integration, but also pricing and if there is something there.
Speaker Change: We will be.
Speaker Change: But then you do review.
Speaker Change: A review throughout the year to see where we have opportunities for packaging.
Speaker Change: <unk>.
That sort of a model anchored around the adoption of etfs, rather better than individual modules.
Speaker Change: Okay, that's great to hear Internet with Dino his departure it sounds like youre going to oversee sales efforts, but more hands on your recently.
Speaker Change: Taking on a bit more with product and marketing as well. So I'm just wondering any updated plans on or thoughts on your bandwidth and if youre looking to hire any key leaders across the business and just how you plan to balance your time, yet coming year. Thanks.
Yes. Thank you I have done this.
Speaker Change: A couple of times in the past and I'm happy to jump in periodically to help as needed.
Speaker Change: Again, we think below for being part of the team but.
Speaker Change: <unk> been working on this for a while with the broader team not just the CRO.
Speaker Change: And our 2025 planning is in a good place. So now it is really about focusing on execution and as you'll see key part of our execution.
Speaker Change: Celebrating the success that we're seeing with our engagement with the partners how can we pivot more towards a partner oriented GDN strategy, which mean factor that focuses a little bit less on direct.
Speaker Change: Growing direct and more on how do we partner with with our partners both from.
Speaker Change: Lead Gen pipeline gender as well as execution on closing deals et cetera. So I think we continue to focus on executing that working closely with partners.
Speaker Change: And aligning our sales leadership with that the good news is that.
Speaker Change: Our sales leadership below Dino has very strong many of them have been here, even before I joined us and Theyre very connector dedicated to the mission and so I look forward to continuing to do that I think on the product side we.
Speaker Change: We have great.
Speaker Change: Reverse on that with our CTO daily by 'twenty as well as our SVP of product management and both have been here for over 10 years.
Speaker Change: Do you need driving working with me the execution that is needed on the product side again aligning to our vision of delivering capabilities like <unk>, which will encourage our partners to do more with us not just from the <unk> side as well, but also from the product side. So.
Speaker Change: Again, we for US now it is really more about finding the right leader, who understands our partner focus and we'll be leaders, who will be working with us.
Speaker Change: On making sure that we are not necessarily focusing on the direct side of growing the business, but more around focusing on how do we pivot our.
Speaker Change: Partner focus.
Speaker Change: And make sure that all the different aspects of the business are going in that direction.
Speaker Change: Makes sense.
Speaker Change: Thanks for the time.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Matthew Hedberg from RBC capital markets.
Speaker Change: Hey, guys. This is Mike Richardson on for Matt. Thanks for taking my question here.
Speaker Change: Maybe I wanted to go back to Dana his departure and appreciating that you probably already had your sales kickoff here.
Speaker Change: You have to plan for the year, but what are some of the changes that maybe we can expect or higher than that.
Speaker Change: Thank you really improved the sales motion this year.
Speaker Change: Yes, Kevin given as Agnes.
Speaker Change: You've taken the reins here.
Speaker Change: Yes, we really finished our planning for 25 towards the end of last year and now it's about executing on the sales growth with our.
Speaker Change: Safe.
Speaker Change: We think thats, helping essentially manager facing globally SVP of Paulette SVP of partnerships and then our VP of.
Speaker Change: Of sales ops and innate.
Speaker Change: Enablement and so.
Speaker Change: As I talk a little bit about this and as you saw the release of Embraco, which is our partner focused managed services platform as well as really focusing on working with our partners on how do we increase the deal Reg is how do we leverage essentially lower margin to make sure that we are able to balance.
Speaker Change: <unk> customers to these partners, but also how these partners can actually create revenue for themselves with services that they can anchored around the <unk> platform with consolidation of multiple different capabilities with risk.
Speaker Change: Quantification remediation et cetera, and so for us really focusing on the pillars of how are we going to make sure that we.
Speaker Change: Last year as we said that our focus was partner leg for new business we started.
Speaker Change: End of last year and this is our key execution. This year is how do we also work on our existing business, which has a direct customers to leverage that relationship with our partners to potentially bring them some of our direct customers, while working with them on a partnership where they bring us new logos. So that we can execute to.
Speaker Change: Good evening more opportunities for ourselves. So there are multiple different things that we're focusing on that as.
Speaker Change: As well as.
Speaker Change: Our focus on our federal business, which is something that we are excited about the potential opportunity. So we will continue to execute on divestment as well because our current contribution to build business from February is extremely small and so there continues to be a much larger opportunity. There. So it's really about how do we pivot our execution, which has been a mix of.
Speaker Change: Of direct and indirect but reduce the friction that is there and then build the confidence with our partners by northern you're giving them the confidence of the business. We can bring them that are direct with us, but also giving them a potentially significant revenue stream by adding services in order to manage the rock capability, which we are seeing a lot of.
Speaker Change: Global enterprises gravitate towards.
Speaker Change: Even that it adds a layer on top of that existing groups as well.
Speaker Change: Great and then I just wanted to ask on totally I mean, it seems like there is such a big opportunity there.
Speaker Change: Maybe stepping back.
Speaker Change: Has there been any early customer feedback on total AI.
Speaker Change: How are you thinking about it in terms of a growth driver for next year or maybe just picking up steam and then.
Speaker Change: I know, it's all a greenfield, but who else are you seeing when youre going in and talking about totally is there anyone else kind of doing what you're doing here.
Speaker Change: Anything else on just competitive dynamics there.
Speaker Change: Great question I think if you look at the journey of AI itself over the last couple of years.
Speaker Change: <unk> 23, a lot of people started looking at that <unk> 24 lots of plc.
Speaker Change: They took place in many companies around leveraging Llm's and then as we get into 'twenty five, but we are going to start to see.
Speaker Change: Deployment of a more and more AI llm's into actual production environments, we saw little bit of that starting to happen at the end of Q4.
Speaker Change: So the quest.
Speaker Change: Questions from customers really are about how what are the things that they can do to secure their AI.
Speaker Change: <unk> and the first question. They ask is well how many do you have.
Speaker Change: And already one answer that and so in that sense, the total AI capability.
Speaker Change: You probably saw a recent blog, we pointed out close to gilead to deep sea getting found a whole bunch of issues.
Speaker Change: It is really about helping customers get a debt level of conferred by what they were they are putting out in the production environment is not something that could be jailbroken is not something that is leaking information that it should not.
Speaker Change: It is.
Speaker Change: It is our following compliance guidelines.
Speaker Change: As well as deducting one liberty than defensible in that sense. The way we see it is totally I is fairly unique because we are actually able to leverage our existing footprint in the customer environment to first help discover that AI workloads. So they don't have to deploy another solution to discover AI in the first place and then once we discovered build AI workload.
Speaker Change: We're actually able to scan them using the scanners the Adrian debate already how from callers and then provide them that visibility. So early feedback has been very good.
Speaker Change: <unk> in fact in our strategic Advisory Board when we ask our <unk> Advisory Board <unk>.
Speaker Change: The area that is top of mind for them for 25, AI security came up the most so we look forward to those engagements.
Speaker Change: Turning into paid.
Speaker Change: Opportunities however.
Speaker Change: So that also going through this right now trying to figure out how are they going to pay for this where does that come from do they get additional budget are they going to get additional bridge for security or are they going to move some of the money around from the existing budget given the overall increase in fiber spend is not that significant.
Speaker Change: And I anticipate it to be that significant so.
Speaker Change: I think right now it's a little bit early for us to know what kind of impact is going to have but the opportunities that we are starting to see buildup are definitely encouraging and positive data and in that sense that the way. We are scanning EIA, we feel that it's pretty unique.
Speaker Change: That's the feedback that we're getting from customers is this is a great way because they look at it as like the Ehi litigation right like the security will scan that.
LLM before it goes into production and then give a thumbs up thumbs down so that they can go back and see it and again, if you want to see.
Speaker Change: The kind of things that our scanner is able to detect you can veto or blah blah blah and when we wanted it to deep seek one of the things that we found around that so we're excited about that we just don't know right now and monetarily, how that opportunity is going to evolve.
Speaker Change: And yes. It is greenfield, but also depends on how much additional <unk> will be able to get from the CFO. This year versus next year in terms of investing more in.
Speaker Change: AI security and we expect that to start this year and have a good.
Speaker Change: Nigel will ramp into next couple of years.
Speaker Change: Great. Thanks again congrats.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Rudy Kessinger from D. A Davidson.
Speaker Change: Hey, Thanks for taking my questions.
Speaker Change: The last two quarters now you guys have had.
Speaker Change: Pretty good outperformance on both revenue and <unk>.
Speaker Change: Alright calculated billings I guess, particularly in Q4, just relative to your guidance expectations what came in.
Speaker Change: Specifically better than expected I know you said you had a weaker Q4 pipeline going into the quarter, but again.
Speaker Change: Pretty strong revenue current calculate billings in the quarter and then just as I look at the guidance for Q1 in next year it doesn't seem like.
Speaker Change: You really.
Speaker Change: Expecting that to continue particularly in Q1.
Speaker Change: The revenue decline expected. So added on was there anything maybe one time in Q4 that drove the upside on just China.
Speaker Change: Put together the strength in Q4, and Q3, but not really seeing that continue into guidance that youre providing.
Yes, the second half of 2024 current billings. If you were taking a look at that it was higher than the bookings per format.
Speaker Change: Partly due to the invoicing cycle, but if you take a look and let the revenue in Q4 in particular, we did have better linearity.
Speaker Change: A little bit better on the renewal in terms of how that deal closed in the quarter that did have an impact on the revenue that we booked in Q4 looking into Q1, one of the reasons why Q1 looked a little light.
Speaker Change: I mean, we're not taking into any consideration from the linked when you all slippage into Q1, and then plus the fact that that the number of days in Q1 is lower by two relative to Q4, and then looking at the full year one of the assumptions that we kind of made was if.
Speaker Change: If you take a look at our net dollar expansion rate currently at 103%, which is great from that perspective.
Speaker Change: It has stabilized.
Speaker Change: However, if you take a look at a year before or even two years ago.
Speaker Change: Down so taking that into consideration and looking at the trajectory of the business. We are assuming no improvement in net dollar expansion rate going into 2025, and then also the fact that we are taking a partner first approach right, which means that with our partner business currently making up 48% of revenue.
Speaker Change: Q4 relative to 44% a year ago, we are expecting that trend to continue into 2025, which could have a shorter term negative impact did occur.
Speaker Change: Okay.
Speaker Change: The new logo front I know for the first half of quarters and 24, you've caught out.
Speaker Change: Double digit year over year growth in new logo bookings I know Q4 was a tougher comp or where did that land in Q4 and.
Speaker Change: I know, you're keeping that expectation on DBS yard or remain steady one out of three like what is your expectation that odd new logo bookings growth in 2025, it would seem to be it's expected to be weaker growth in 'twenty four.
Speaker Change: Yes that is the assumptions that we're making right now because thank you for.
Speaker Change: Last quarter earnings we had called out the fact that Q4 look to be on that that lead from the new bookings.
Speaker Change: Back to you and it actually turned out to be but we were a little bit disappointed with our new bookings performance and the amount that it added to the revenue growth rate. So we're kind of assuming that they will continue on that path enter 2025, where we're not expecting meaningful growth and then your business, especially particularly just because the <unk>.
Speaker Change: Im more focused on landing new logos through our partners and we will be working with them very closely to see what kind of incentives that we can offer them. So that they can really go out and co marketing.
Speaker Change: Help us to get new customers.
Speaker Change: Okay. That's all very helpful. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Shred Nick.
Hardy: Hardy from Baird.
Speaker Change: Sure Nick.
Speaker Change: Your line is now open please check your mute button.
Shannon: Again Shannon your line is open. Please go ahead.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Josh Tilton from Wolfe Research.
Speaker Change: Mark can you take on for Josh Tilton.
Speaker Change: Just one quick question, we've heard several vendors talk about conservatism related to the federal vertical and the administration change and we just wanted to ask how are you thinking about that for the coming year in terms of a potential opportunity and how it's factored into the guidance. Thanks.
Speaker Change: Yes, we're super excited about the opportunity and I think what exactly the arguments or some will do on a day to day basis I think for us.
Speaker Change: <unk>, who is good as mine right now with all of the things that are changing however, I think the narrative from the New administration has definitely been about.
Speaker Change: Not doing things the old way and really bringing more efficiency and everything that the federal government is doing and so.
Speaker Change: We look at that as opportunities for us because.
Speaker Change: Many federal agencies for many years have been using on Prem vulnerability assessment capabilities that are.
Speaker Change: Arcane that are costly to maintain need a lot of hardware need a lot of people.
Speaker Change: So as we await our fed ramp.
Speaker Change: Certification, which will then make our platform is one of the only fed ramp high our platforms.
Speaker Change: Liberty management patch management.
Speaker Change: Edr.
Speaker Change: Risk manager and all in a single platform.
Speaker Change: We are excited about the Boardman shop, our desired can bring we continue to invest in our federal team that is the one of the things we're focusing on this year focusing GPM.
Speaker Change: The team is well on the federal side.
Speaker Change: And with that and just a little bit hard right now to know when we will get by President <unk> certification this year with diagnostics and changes, but we are hopeful for that and once we get back that can open up quite a bit of opportunities for us.
Speaker Change: Hard to tell right now what impact it will have on 2025, so we're not factoring that.
Speaker Change: Anything majorly in it right now, but overall, given the narrator with being able to bring efficiencies and being able to modernize their infrastructure and moving in a positive direction.
Think we're well suited to capitalize on bag versus.
Speaker Change: On Prem older on Prem solutions that have been incumbent there for a while.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Jan Kim from loop capital markets.
Speaker Change: Okay, great. Thank you.
Speaker Change: Quick question on the enterprise Chew risk management or Etfs. It seems like that's a clear differentiator for you guys out there and it's definitely something that.
Speaker Change: At least I'm keeping an eye on if you could just talk about the.
Speaker Change: Overall go to market motion around ATM the competitive landscape.
Speaker Change: Obviously, we're heavily leveraging the channel just sure is this a product that could be leveraged into the channel not just direct thanks.
Speaker Change: Yes, that's a really good question, especially if you if you look at right now.
Speaker Change: We don't we believe we don't see any other solution in that space that has that comprehensive hours. Because you have you have some aggregation solutions delivery focused on liberty aggregation.
Speaker Change: But they don't do risk quantification there are some that do some risk quantification, but they don't the degradation BARDA as well and definitely we don't see anybody who is kind of doing that also doing a good job at remediation and so if you look at the quality ATM platform and the concept of <unk> collaboration center, which a lot of our CSR Super excited about because they don't want to go to the board.
Speaker Change: Our next year strategy in favor of bagels wanted to implement on a better solution for multi factor authentication of the strategy. They want to be able to say we are building our <unk> operation Center, just like 10 years ago, We built our security Operation Center for trade reduction, we wanted to do proactive risk management and the EDM platform enables bringing out this competition.
Speaker Change: <unk>.
Speaker Change: And Thats why because it provides better quantification. It provides the ability for the system to be able to have a conversation today. They say, we fixed that so many things and we had so many issues, but that doesn't mean anything to the business ECM allows them to go out and be able to say look our $500 million business as a potential loss of $10 million a day and currently.
Based on risk signals from multiple different products the possibility of that happening is high and if we invest $500000. We can bring that down to an acceptable level and and so now it is a much better conversation that the <unk>. The CFO to say look we can invest $500000 in this particular area of cyber security.
Speaker Change: Bring down the potential of losing $10 million a day by 80%.
Speaker Change: As a much better conversation as to how they look at it investor feedback that we've gotten in and we don't see other platforms out there right now.
Speaker Change: Enabling that I think <unk> definitely evolved for us this year as ETF com, sorry, because now it's less about a replacement conversation about your existing where Liberty management solutions. So our new business sellers can really go out there and say that's okay. You can keep the current solutions that you have if you have this global provider in that Liberty provider.
Speaker Change: And that identity provider, we are not here to highway and immediate replacement conversation, we can easily take the data from all of them and we can show you a consolidated view of the risk coming from all of these existing solutions, which makes it a little bit easier for the C zone at the heart of Gulfport, a fight with their internal teams to replace a tool that is already working well for them just because.
Speaker Change: We're getting some additional uninsured discount so.
Speaker Change: <unk> means our new business sellers any customer that has any cyber security tools side becomes a potential customer for us.
Speaker Change: Adding new logos and doesn't have a big back along as it would if you're replacing another solution or post sales team.
Speaker Change: They get an opportunity for existing customers that might have some other.
Speaker Change: Solutions for cloud security for Edr to then go and layer that on top and you already had one customer that has a well known cloud security provider just for the cloud has stayed but then they put their purchasing the EDM capability paying less additional revenue on top of what they are being the cloud provider.
Speaker Change: To consolidate those findings into one right. So it gives us the opportunity to make revenue on top of any.
Speaker Change: Any investment that the customer might have made in another tools as well.
Speaker Change: But also from a partner perspective as.
Speaker Change: As we work with partners of course, the partners have been selling order competitor solutions for certain margin and you can give them a little bit more margin here or there, but that doesn't move the needle as much. However, many of the providers, who are resellers et cetera are moving to figuring out how they can increase revenue significantly with the.
With managed services the services, where they can make a lot of business and so today with the deployment of ETF, we're really largest customers are actually the ones. We're looking at deployment they need services our own back end services for risk quantification service for aggregation service for risk monitoring service for.
Speaker Change: Our risk.
Speaker Change: <unk> elimination and these are brand new services. So these partner store layout in the MTR market, which is a card protein market and at the Mds services provided by many people, but the reason why partners are excited and can potentially bring even more business to call us because every business.
Speaker Change: Purchasing wireless products that they bring and add additional services for them on top of callers.
Speaker Change: They can generate revenue on it so that as we are a key part of what we're doing and you saw the release that we did with <unk> is really about enabling <unk> to be delivered to our partners for the most part so that our partners are excited about larger deals, bringing those to us and also they don't have to constantly get into conversations of replacing.
Speaker Change: Tools to make additional revenue, so and a little bit of a longer answer, but it's something that is definitely an interesting way for us to.
Speaker Change: <unk> GPM and have less replacement conversations and more about consolidation and letting them was the existing we've said that they have because honestly when we talk to see source very few of them if I pull out actually thinking that they're going to replace all of their tools with a single vendor.
Speaker Change: Well I can tell that you're very excited about the opportunity around etfs. So.
Speaker Change: Just another question around the investments that you're making around the indirect channels you already talked about the opportunity around and Thats S piece, but what about the hyper scaler and CSP.
Speaker Change: Is this something that could be also.
Speaker Change: Deployed on the cloud environmental as well, meaning does CSP environment.
Speaker Change: Yes for sure right I think today, if you look at.
You can have this cloud security solution that is either provided by the <unk> provided by the cloud only solution.
Speaker Change: When I asked diesels I think that that's great. So now you know you have 75 buckets that are open but how does that impact your business do you know how much you will stand to lose because of these but just open and then they cannot answer that question because a lot of times the risk may not be in the cloud directly what the risk might be coming from a malware that is on the laptop of the argument was looking to access that particular cloud.
Speaker Change: Comp and a cloud only provider cannot pick that up but then edr provider will pick up there is how do you tie. These two things together and Thats, where something like ADM can be useful and as our larger customers. They are working with different cloud providers and they have edp credits.
Speaker Change: Different cloud providers and they can leverage those we continue to work with them to find ways that we can essentially map customers that can be.
Speaker Change: But how other tools, but can actually use their credits to purchase things like ATM as well or working with partners, who can then transact to some of these cloud providers for their creative So I think those are all sorts of opportunities that we are continuing to explore we recently had a conversation with the guard provider exactly around that and so.
Speaker Change: That's an area that we continue to push forward this year as well.
Speaker Change: Okay, great. Thanks, and good luck with the ATM this year.
Speaker Change: We showed the bank around that.
Speaker Change: Thank you very much.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Jonathan Ho from William Blair.
Jonathan Ho: Hi, good afternoon, and congrats on the strong results I just wanted to understand sort of relative to your guidance, how we should be thinking about the level of investments that you're making this year and maybe where you see the most opportunity to leverage that either relative to your go to market comments or on the product side. Thank you.
Jonathan Ho: I think for US we continue to evolve the product and so there are opportunities for us to work with our partners on things like <unk>.
Jonathan Ho: Our focus continues to be on GPM.
Jonathan Ho: Investments, that's where it is.
Jonathan Ho: We are again tracking returns.
Jonathan Ho: Speaking of our clothes, we're seeing with partners and so it's really going to be about how do we continue to find ways with our partners to do investing GPM.
Jonathan Ho: More towards working with partners to bring them business and so that they can bring those business doing co marketing joined marketing etcetera investing in roadshows around Amrok et cetera, and then investments in the federal business, which is something that we'd want to continue to do so.
Jonathan Ho: So those are essentially the area that we're looking to do anything I think the product.
Jonathan Ho: Development area is something that we do well and we do very efficiently as well and so we will continue to add it capably be veterans and of course, there will be certain investments in solution architects and.
Jonathan Ho: The functions around.
Jonathan Ho: The surround the sales team with success, we're being able to go out and <unk> that O&M Brock.
Jonathan Ho: The ATM et cetera, but thats really how I see where we're going to be continuing our investment and not necessarily so.
Jonathan Ho: So much on our engineering and product increases.
Speaker Change: Got it got it and just as a quick follow up I mean, I think we've seen a lot of emphasis around true risk in total cloud and our conversations how do you think about this approach of selling on the bundling side and potentially what that uplift looks like from a revenue standpoint, maybe not immediately but over time and how do we think that.
Speaker Change: Of that especially along the axis of adding additional product versus adding additional assets. Thank you.
Speaker Change: Yes, we are actually excited about the opportunity we see that at the ATM.
Speaker Change: <unk> becomes a layer on top of the difference.
Speaker Change: Cyber security capabilities that.
Speaker Change: The company has an and EQM becomes the layer through which the thesis really interact with the platform and so the way we see that is that.
Speaker Change: Those who wanted to adopt EQM the platform play becomes actually quite interesting because now for Etfs. They can actually adopt inventory. They can adopt vulnerability management cloud security. Some of these modules from callers as they need and then also bring data from other third parties as well and so as we get feedback from our customers we.
Speaker Change: Do see that EQM can allow us more conversations around while here's a platform that is going to essentially full in the things that you. The basic things that you need for your initial risk management and then you can layer on by using additional spend for third party data coming in and as we learn through these conversations with.
Speaker Change: Our initial customers I think that is going to inform blade.
Speaker Change: Later this year on how we come up with the packaging and bundling around ATM that includes multiple quality modules today, we are already seeing.
Speaker Change: Recessions, so with our existing customers, where they are actually.
Speaker Change: Looking to buy additional quality modules, just because they are integrated into a singular score right. That's the idea is that and sort of getting all these big lift and when I talk to seasonal then ask them what is the risk posture viewed per day.
Speaker Change: Surely 10 different dashboard from 10 different pools, but that doesn't say anything about how much risk are particular, MTBE and that environment has because every single pool.
<unk> is reporting a different set of findings so true risk anchors.
Speaker Change: Say, well why should I buy upset from quality versus somebody else because the quality subsectors already built into the platform and there is no additional cost right now to use that is within the ETF. So it's like you can bring abstract data from a third party. If you would like so we are open to that but then they pay for the day transition or.
Speaker Change: They use the <unk> module, which we already have that they don't have to pay for the ATM.
Speaker Change: In addition license as an example.
Speaker Change: That is an incentive potentially for them. So as we roll. This out we will get feedback from customers and see how that increases our attach rate for additional products and then how do we come up with the pricing that allows them to adopt more capabilities as part of Etfs.
Speaker Change: Without having to create purchase orders every time they wanted to try something new so in a way how do we find a way to give them.
<unk> to bundle.
Speaker Change: Or at least to have access to multiple capabilities from wireless with the spend that they have with those so these are things that we are working through right now and that we are excited about getting feedback from our customers and that should inform how we rollout bundling and pricing at some point later this year.
Speaker Change: Okay.
Speaker Change: Excellent. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Sure.
Speaker Change: Our next question comes from the line of Brian Essex from J P M.
Thank you we will be back on for Brian FX quick question I guess.
Speaker Change: You've now provided your revenue guidance for the year, how should we think about billings, especially with the strong billings, but you had the last two quarter should it follow a similar trajectory to what you provided for revenue guidance.
Speaker Change: Overall like how should we think of that going.
Speaker Change: Calling throughout the year. Thanks.
Speaker Change: Yeah, Craig Billings, we ended the year at 9% and total revenue growth rate of 10% for 2024.
Dan: This is Dan for now since we don't provide guidance.
Speaker Change: Guidance, you can assume the same of cross selling.
Speaker Change: Growth rate in 2025 of our revenue guidance, which is six to eight.
Speaker Change: Got it thanks, and I ask a quick follow up.
Speaker Change: Can you help me understand like what do you think Tony to happen.
Speaker Change: And the channel to see investments translate to top line growth.
Speaker Change: Overall.
Speaker Change: And the channel can be alive, and vice versa as Joseph Andrew asked at what point do you think.
Speaker Change: You've invested but you need to do is it just that you need to continue with product knowledge overall like what needs to happen.
Speaker Change: Yes, I know this is a multiyear program that we launched couple of years ago, and initially was just repairing our relationship with partners and bringing building confidence.
Speaker Change: Getting initial deal dredges, we evolve that strategy into going for lead.
New business partner first which was sort of the next step this year, we're focusing on.
Working to see how we can take some of our direct customers to the partners and have been bring us additional.
Speaker Change: Net new logos so for having this partnership the evolution next evolution of that is.
Margins in the percentages are fine, but how can we help them make $10 of services revenue on top of a boatload of product revenue potentially right, that's where the evolution of <unk> is and so I think we internally of course, we continue to track or de ratios. We continue track our win rates with partners. It is pretty clear, but we're having good <unk>.
Speaker Change: Excess with our strategy, so far and so now it is about pivoting towards that end.
Speaker Change: I think you have done a pretty good job of going from a 60 40 to.
Speaker Change: <unk> 50, 248 split the wild.
Speaker Change: It is really maintaining our margin and so I think that's a customer into the way that we are.
Speaker Change: Thoughtfully tracking or investments and working with those partners. So we continue to.
Speaker Change: To work with our partners and continue to improve over the ratios.
Speaker Change: Sure.
Speaker Change: So OLED partners and part of that is.
Speaker Change: We're doing a lot of investment spending time scales.
Speaker Change: Scales, providing them opportunities for upsell, so with collateral and material and then also a lot of training that we're doing with these partners. So they become aware of the quality capabilities and and how to pitch some of the planet's capabilities. So that those are all areas that we have been investing in and we continue to invest there.
Speaker Change: Yeah.
Speaker Change: Thanks, Thanks for taking the question.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Hamzah fodder Waller from Morgan Stanley.
Speaker Change: Hi, This is Oscar suffered at all for Hamzah. Thank you for taking my question and congrats on solid results in the quarter.
Speaker Change: Going back to guidance.
Speaker Change: Last quarter, you noted expectations for ongoing budget scrutiny to proceed going forward.
Speaker Change: Today, you expected NR to sustain at around 103%.
Speaker Change: And if I heard correctly earlier, you noted expectations for <unk>.
Speaker Change: Near term potential adjustments to guide to incorporate the CFO transition.
Speaker Change: So can.
Speaker Change: Can you can you help us bring all that together and how should we think about the level of conservatism.
Speaker Change: Thank you.
Speaker Change: Yeah, I think our guidance for this year takes into consideration all the points that you just laid out I think thats the biggest growth drivers in our business. It's still early.
Speaker Change: <unk> customer so if you take a look at our net dollar expansion rate having kicked off consistently for the last couple of years.
Speaker Change: Cause of where we ended in 2024 at one three are assuming no improvement to that 1% to 3% entering 2025 and given the late in bookings.
Speaker Change: Performance in Q4, and we're assuming that will kind of continue into 2025 that informed our guidance of 6% to 8% and this is what we see today and we thought it was prudent birth to guide based on what we see today versus.
Speaker Change: Thanks, Tim I talked about there's a lot of opportunity in the business and upside within your product like ATM working very closely with partners to drive new local land as well as expense, but again thats the timing of realizing that in recognizing into revenue, it's a little bit uncertain.
Speaker Change: Got it very helpful. Thank you very much for Tiffany.
Speaker Change: Thank you.
Speaker Change: At this time. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.