QUALYS, INC. Q4 FY2024 earnings call

• 2024 was marked by significant product innovation and rebranding. Qualys enhanced its platform with features like Trulicity Eliminate, improved cybersecurity asset management, and added new capabilities to its total cloud and risk operation center solutions. • Business updates included notable customer wins, such as a global 100 multinational insurance company and a global shipping conglomerate, which leveraged Qualys' platform to unify security stacks and quantify cyber risk. • Executive team update: Chief Revenue Officer Dino DiMarino departed, and CEO Sumedh Thakar will oversee the sales organization while focusing on a partner-first GTM strategy and federal market expansion with a FedRAMP high-ready platform.

For the full year, Qualys achieved revenue growth of 10% to $607.6 million. In the fourth quarter, revenues grew 10% to $159.2 million. The channel's contribution to total revenues increased to 48% (up from 44% the prior year). US revenue made up 58% and international revenue 42% of total revenues. Patch management and cybersecurity asset management combined accounted for 15% of total bookings and 24% of new bookings in 2024. Cloud security solutions, Total Cloud CNA, constituted 4% of 2024 bookings.

• Full-year 2025 revenue is expected to be in the range of $645 million to $657 million, representing 6%-8% growth. • First quarter 2025 revenue is projected to be between $155.5 million and $158.5 million, a growth of 7%-9%. • For full-year 2025, EBITDA margin is expected to be in the low 40s, with full-year EPS ranging from $5.50 to $5.90 and first quarter EPS from $1.40 to $1.50. • 2025 capital expenditures are estimated to be between $8 million and $13 million, with first quarter expenditures in the range of $2 million to $4 million. • Gross margin is anticipated to contract by approximately 1% in 2025 due to investments in data centers for operational efficiencies.

• Uncertainty in the federal vertical market due to administration changes, which may impact the realization of opportunities. • Potential execution adjustments related to the departure of the Chief Revenue Officer. • Uncertainty in the evolution of AI security opportunities, including how much budget will be allocated and how it will impact revenue.

Q: Any thoughts on creative packaging opportunities over the next year?

A: Sumedh Thakar noted that customers are focused on anchoring cybersecurity spend to business risk. Qualys will continue to review packaging around ETM based on early customer feedback from ETM adopter customers.

Q: Updated plans on bandwidth and hiring after Dino's departure?

A: Sumedh Thakar stated he will focus on execution, working closely with partners on a partner-oriented go-to-market strategy, and the sales leadership below is strong with dedicated leaders.

Q: Changes in sales motion due to Dino's exit?

A: Sumedh Thakar explained that the focus is on a partner-oriented go-to-market, working with partners to increase deal registers and close deals, and focusing on federal business with significant growth potential.

Q: Early customer feedback on Total AI?

A: Sumedh Thakar said early feedback on Total AI is positive, but there is uncertainty regarding budget allocation and risk assessment for AI security investments.

Q: What was better than expected in Q4 relative to guidance?

A: Joo Mi Kim mentioned better linearity in deal closures and renewal rates positively impacted Q4 revenue.

Q: Thoughts on the federal vertical market opportunity?

A: Sumedh Thakar expressed excitement about the federal opportunity, focusing on FedRAMP high certification and investing in the federal team, though the impact on 2025 is currently hard to determine.

Q: ETM's go-to-market and cloud environment deployment?

A: Sumedh Thakar said ETM provides unique risk quantification capabilities, and its go-to-market strategy evolves to avoid replacement conversations, working with cloud service providers and partners for cloud deployment.

Q: Investments and bundling uplift?

A: Sumedh Thakar said focus is on go-to-market investments with partners, and ETM allows layering of capabilities, with feedback on bundling and pricing to be gathered later.

Q: Channel investments and top-line growth?

A: Sumedh Thakar said it's a multiyear program, focusing on partner-oriented go-to-market, tracking deal registers and win rates, and investing in partner training and services.

Q: Conservatism in guidance?

A: Joo Mi Kim explained that guidance considers NRR sustaining at 103%, light new bookings in Q4, and uncertainty in realizing upside opportunities from initiatives like ETM