Good day, everyone. Welcome to the Qualys second quarter 2015 investor conference call. This call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions for asking a question will be given at that time. I would now like to turn the call over to Don McCauley, CFO of Qualys. Please go ahead, sir.
Welcome to the Qualys second quarter 2015 investor conference call. I'm Don McCauley, CFO. I'm here with Philippe Courtot, our Chairman, President, and CEO on this call. We would like to remind you that during the call, we expect to make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements in this presentation include, but are not limited to, the following list. Statements related to our business and financial performance and expectations for future periods, including the rate of growth of our business. Trends related to the diversification of our revenue base. Our ability to sell additional solutions to our customer base and the strength of demand for those solutions. Our plans regarding the development of our technology and its expected timing. Our expectations regarding the capabilities of our platform and solutions.
The anticipated needs of our customers. Our strategy, the scalability of our strategy, our ability to execute our strategy, and our expectations regarding our market position. The expansion of our platform and our delivery of new solutions. The expansion of our development operations and support teams in India. The expansion of our partnerships and the related benefits of those partnerships. Our ability to effectively manage our costs. Our plans to expand our sales force. Our plans to explore strategic acquisitions. Finally, our expectations for the number of weighted average diluted shares outstanding, and effective GAAP and non-GAAP income tax rates for the third quarter and the full year 2015. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
These risks include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q that we filed on May 7th, 2015. The forward-looking statements in this presentation are based on information available to us as of today, and we disclaim any obligation to update any forward-looking statements except as required by law. We also remind you that this call will include a discussion of GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release issued earlier today. To begin the discussion, Philippe will provide an overview of the company's performance for the second quarter 2015. I will cover our financial results and factors that drove the quarter in more detail, as well as our outlook for the third quarter and full year 2015. We will open up the call for your questions. With that, I will now turn the call over to Philippe.
Thank you, Don, and welcome to all of you. The second quarter 2015 was an excellent quarter. It included a number of strategic product releases, as well as continued growth and success across all aspects of our business. While Don will cover the financial details of our performance for the quarter, I will share with you why I think these are exciting times for Qualys from both a growth and strategic perspective. I will start off with an overview of key highlights that are driving the momentum in our business and discuss in more detail our new product releases. As I mentioned on last quarter's call, we launched our Qualys Cloud Agent platform at the RSA Conference in April.
This is a disruptive extension of our cloud security and compliance platform as it expands our offerings to provide real-time, continuous security and compliance across all enterprise IT assets, ranging from on-premise devices and mobile endpoints to elastic cloud environments. In addition, this new technology liberates customers from the many challenges they face with conventional scanning solutions, such as scan time windows, credential management, and batch reporting, and allows them to build continuous monitoring programs more effectively. We have seen significant interest from our customers and have an impressive number of trials underway. As a result, we anticipate a more rapid adoption than we have seen in the past for other new offerings. The product is now shipping for the Windows platform and will be available on Mac and Linux this month.
We will be adding additional capabilities in the near future, such as file integrity monitoring and indication of compromise detection capabilities. We're also making good progress with our new other solutions currently under development, including the log management and analytics back-end, as well as the malware detection and prevention, both of which we expect to release in beta this year. Let me give you key highlights on the state of our business. In the second quarter, we added a number of important new accounts, including AbbVie, Advanced Micro Devices, British American Tobacco, EADS, Airbus, cybersecurity, Holland America Line, LifePoint Health, the National Football League, NFL, Prudential Financial, Reed Elsevier, technology services, Saudi Telecom, T homas Cook , Tractor Supply, and VeriFone Systems. We continue to see approximately 50% growth from our newer services, which include web application scanning, policy compliance, continuous monitoring, and web application firewall.
We again saw approximately a 19% growth from our industry-leading vulnerability management solution. This is despite some headwinds that we have seen from currency fluctuation during the past six months. An indication of our continuing success in diversifying our cloud platform offering is that 60% of our customers have now purchased more than one solution. This is another data point on our land and expand trend line. The metrics, if you recall, stood at 30% at the end of 2013 and 54% at the end of 2014. It also underscores the success of our cloud platform and its adoption. We continue to see strong demand for our private cloud platform, which allows customers to use our full suite of security and compliance solutions while keeping all the data on-premise. Demand is particularly strong outside the U.S. due to the data sovereignty requirements from our partners and customers.
We can deliver the platform in a fully virtualized manner within elastic cloud environments. Notably, during the quarter, we delivered our first deployment on the Amazon EC2 platform for Amazon. We continue expanding our strategic alliance. In Q2, we signed additional strategic partnerships with leading managed service providers, including AT&T and Solutionary and NTT Group security companies. For the review of our financial performance and our guidance, I will turn the call over to Don.
Thanks, Philippe. As previously mentioned, our second quarter 2015 results were very good. Revenues grew in the second quarter to $39.9 million, which represents 23% growth over the second quarter of 2014. Our current deferred revenue balance is $87.4 million as of June 30th, 2015, which is 22% greater than the balance was one year ago. A quick review of some other revenue metrics. For the second quarter, the U.S. represented 70.5% of revenues compared to 70.0% a year ago. We derived 79% of second-quarter revenues from subscriptions to our vulnerability management solution. That compares to 82% in the second quarter of last year. GAAP gross profit increased by 26% to $31.7 million in the second quarter of 2015 compared to $25.1 million in the prior year. GAAP gross margin was 79% for the second quarter of 2015 compared to 78% a year earlier.
Non-GAAP gross margin was 80% for the second quarter of 2015 compared to 78% in the second quarter of last year. Adjusted EBITDA for the second quarter of 2015 increased by 81% to $13.1 million compared to $7.2 million a year earlier. Adjusted EBITDA as a percentage of revenues increased to 33% in the second quarter of 2015 compared with 22% in the same quarter of 2014. Net cash from operations in the first six months of 2015 increased by 68% to $25.6 million compared to $15.2 million in the first six months of 2014. Free cash flow this year increased by 74% to $15.0 million compared to $8.7 million in the first six months of last year. In the second quarter of 2015, capital expenditures were $4.3 million compared to $2.7 million in the second quarter last year.
In the third quarter, we expect capital expenditures to be in the range of $4.5 million-$5.5 million as we expand our cloud infrastructure to support more customers and add more solutions and functionality to our platforms. Moving on to earnings per share. For the second quarter of 2015, GAAP EPS was $0.09 per diluted share versus $0.04 a year ago. Non-GAAP EPS was $0.16 per diluted share in the second quarter of 2015 compared to $0.11 in the second quarter of 2014. Turning to our guidance, starting with revenues. For the third quarter, we expect revenues to be in the range of $42 million-$42.5 million. At the midpoint, this represents 23% growth over third quarter 2014 revenues. For the full year 2015, our revenue guidance is unchanged, as we expect revenues to be in the range of $165 million-$166.5 million.
At the midpoint, this represents 24% growth over 2014 revenues. On to earnings per share. We expect GAAP EPS for the third quarter of 2015 to be in the range of $0.04-$0.06, and Non-GAAP EPS is expected to be in the range of $0.12-$0.14. Our third quarter EPS estimates are based on approximately 38.9 million weighted average diluted shares outstanding. For the full year 2015, we continue to expect GAAP EPS to be in the range of $0.22-$0.27, and Non-GAAP EPS is expected to be in the range of $0.50-$0.55. Our full-year EPS estimates are based on approximately 38.6 million weighted average diluted shares outstanding. In summary, we remain very excited about the future of Qualys.
We continue to work to drive growth within our current solutions and are seeing significant traction and interest with our new offerings, such as our Cloud Agent platform. Over time, we expect to continue to leverage the power of the Qualys Cloud Platform to further drive shareholder value. Before we open up the call for Q&A, I'd just like to note for everyone that we will be holding our second Qualys Investor Day meeting on October 7th. It will be held in Las Vegas on the afternoon before the Qualys Security Conference, which is our annual user conference. That conference is being held on October 8th and 9th. The investor meeting will include presentations from management focusing on our current platform and products, as well as our exciting product pipeline for 2016 and beyond.
Investors are also invited to attend our user conference, which is a unique opportunity to connect with current and prospective customers and partners, along with our engineers as well as industry experts. With that, Philippe and I would be happy to answer any of your questions. Operator?
Thank you. Ladies and gentlemen, if you have a question at this time, please press star then the one key on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. One moment for questions. Our first question comes from the line of Sterling Auty with JPMorgan. Your line is open. Please go ahead.
Hi, this is actually Ken Talanian on for Sterling. Thank you for taking my question. I was wondering, is the rollout of the continuous monitoring product causing any pause in vulnerability management as customers decide which product to go with?
Not at all. This is Philippe speaking. Not at all. In fact, the continuous monitoring is a natural extension of our vulnerability management solution. What it does is that it allows now to have alerts instead of just reports when you turn on the continuous security module, which is an add-on. What it does is that it allows you to essentially have alerts that you can directly integrate or send to your incident response system. They're totally complementary.
Okay. Just another one. I was looking at the 3Q guidance, the growth looks a little bit shy of where the Street was, I was wondering if there's any FX in that estimate.
Well, like every software company, we've had kind of FX headwinds this year, and Q3 will be another quarter. There's such a large difference between the rate of the euro a year ago and today. Yes, there are some headwinds in Q3.
Okay, great. Thanks, guys.
Thank you. The next question comes from the line of Philip Winslow with Credit Suisse. Your line is open.
Hi. Thanks for taking my question. I wonder if you could just give some more color on what you're seeing in the VM market. Obviously, on the last call, this was a big point of discussion. Sort of anything you may point out this quarter versus where your head was 90 days ago. Also as you look at some of the newer products, maybe just give us more color there as well as sort of now that we're halfway through the year, just the trends that you're seeing versus the beginning of the year. Thanks.
On the VM side, we see still the same. Qualys, we continue essentially expanding our market penetration on the VM space. What we see is the fact that companies now are realizing more than ever that you have to really know the assets that you have, that you need to understand who own them, and as well as, of course, looking at their vulnerability. Today, I think this is the cornerstone of security, and I think companies are understanding that very well. What we see is that with our Cloud Agents, we see, in fact, a further expansion of both our vulnerability management and as well as our policy compliance, because now we can go to the endpoint. One of the limitations of Qualys in the past was that we could not effectively address the security and compliance posture of the endpoint.
Now with these agents, we can do that very effectively, this is essentially a continuation of the vulnerability management application.
Got it. Thanks, guys.
Thank you. The next question comes from the line of Steve Ashley with Robert W. Baird. Your line is open. Please go ahead.
Thank you very much. I remember, I understand that you focus on trailing 12-month current billings, but if you were to look at the way that a lot of us folk out here look at quarterly billings, last quarter, that number was up 29%. I remember, Don, you saying you really didn't think that was representative of the trends in your business, that 29%. That comparable number this quarter is up like 19% or 20%. I was just wondering if you had any comment on whether you thought that was representative of the growth rate of your business.
Yeah. Thanks, Steve. To remind everyone what the point we were talking about here is that we felt that the opening deferred revenue balance at December 31st was on the light side because we saw a lot of Q4 short period upsells from our customers, which we kind of characterized as budget flush. That apparent one quarter bookings metric that you all calculate came out. My point was that it was overstated the kind of quarter that we had. I think sometimes it understates a little bit, too. It's more in the ballpark this time, Steve.
Okay. I was just wondering, in terms of sales reps and hiring in general, if you could just update us on maybe headcount and how the hiring process went in the period.
In terms of hiring, we've done a few things. One is, as you recall, we have a very highly leveraged model with the very strong partnership that we have. We added, as I mentioned earlier, AT&T and Solutionary. We continue expanding our partnerships extremely well. In fact, we have beefed up our strategic alliance team. In terms of our direct sales force, we are expanding our headcount. We have just essentially, by the way, hired a VP and general manager for Europe. We're adding middle management as well as the EVP for worldwide sales. We are absolutely actively recruiting and hiring. We have, in fact, quite a few offers which we have expanded. Typically, as you can see in the pattern of Qualys, we do most of our hiring in the second half of the year.
We anticipate to maintain the 20% to 25% additional headcounts that we mentioned, I think, in the last earnings call that we're planning for the year. We're continuing expanding. With all the new services that we have, this is really the time for us to expand our sales force. We always have been careful of not expanding the sales force too early, because at the end of the day, you end up with people which you pay a lot of money, and they don't necessarily deliver. We have always had a balanced approach between the channels, between the direct sales force. You see that in the really highly scalable model that we have built.
Great. Thank you.
Our next question comes from the line of Rob Owens with Pacific Crest. Your line is open. Please go ahead.
Great, thanks for taking my question. Don, I think you may have partially answered this, but in around the deferred revenue being down sequentially, I guess, given the new products that you have, given how security spending appears to be picking up as we look at other companies' results, can you speak to that? I know seasonally this has always been kind of a one-off quarter where sometimes it's flat from deferred revenue, sometimes it's up a little bit. What are the trends you're seeing there? Is this the aberration that you saw Q4 to Q1 kind of playing out in Q2? Maybe help us understand that a little bit.
Yeah. Q2 was a pretty normal quarter, Rob, in terms of the pace of the quarter and the composition of it. Last year, deferred revenues were up just slightly. I think the year before they were down just slightly in Q2. Q2 is usually about a flat quarter on deferred revenues, just the way it works out. Nothing unusual. I think we're kind of seeing normal patterns in the business.
I think you answered Steve's kind of 20%. This is more the normalized growth rate, if you will. Does that mean, once we get beyond expectations for this year, we should see some slowing? Realizing you're not guiding to 2016 at this point, it does take a while for that to transition out in the model. If 29 was a little too hot and 20 is more like it, do we see things come down from the 23%-24% that you're looking for this year?
Well, we don't want to get ahead of ourselves guiding beyond this year, Rob. Our pipelines are really strong. Philippe was talking about the number of new products that are hitting this year. We're optimistic about the business, we're not getting ahead of ourselves guiding for next year yet.
Fair enough.
The other thing that I would add to what Don said here is that today we are doing some very big upsells. We talk to multimillion-dollar accounts. Of course, timing is becoming, we're not anymore kind of a business where the orders were coming $50,000, $100,000. We really do very significant upsells and all that has a timing effect, if you prefer. That's the nature of our business. What I can say is that we have absolutely significant new businesses coming our way, as well as very big upsell from our customer base. As you can see, our platform is really today playing. We are, in fact, not anymore that one distribution product company. We consolidate many applications. If you look today at VM, policy compliance, web application scanning, web application firewall, we are going to introduce file integrity monitoring, indication of compromise.
That's six vendors, essentially, that Qualys can consolidate, which of course creates significant value for our customers. As you know, one of the challenges of security is that there's far too many vendors, and companies really would prefer less vendors. The fact that we have that cloud platform where everything is centrally managed and starts updating is a significant advantage.
Great. Last one, if I may. Did you give a customer count or are you willing to give a customer count to close quarter?
We update that once a year, Rob, since it's not directly comparable for revenues. I'll tell you, we're on the same kind of pace we were last year.
All right. Thanks, guys.
Our next question comes from the line of Matthew Hedberg with RBC Capital Markets. Your line is now open.
Yeah. Hi, it's Daniel Berg for Matthew Hedberg. Following up on Phil's question, just curious how pricing is holding up in the core VM and then emerging products.
Pricing is holding very well, in fact. We have, of course, a long-standing relationship with all of our customers and we're winning a lot of deals. I think there is our competition, in fact, today, try essentially to compete with us against on price, and we're holding extremely well.
Thanks. Any changes in upsell trends this quarter? I know they're trending higher.
Same. Our business is not anymore as uniform as it used to be, as I've mentioned earlier. We do sometimes very big upsells.
Yeah.
I speak about half a million, a million dollar upsells. Of course it's changing, but upsells are, generally speaking, extremely strong. We see an adoption desire if I look at the number of trial accounts that we have on our policy compliance application, for example, that has really picked up.
Don, any large deals that came into the quarter much earlier or later than expected?
No, we saw normal patterns this quarter.
Thank you.
Thank you. Our next question comes from the line of Michael Kim with Imperial Capital. Your line is open. Please go ahead.
Hi, good afternoon, guys. Can you talk a little about the MSP channel? Are you starting to see some acceleration contribution from some of these partnerships and a little greater sales leverage? Do you see this going forward as an area that where you anticipate expanding your focus?
Yes. This has been a continuous trend. We have today quite a few MSSP partners. Today we can see now starting the Indian outsourcers, HCL, Tata, Wipro, et cetera, are starting to bring business to us. The trend continues, and again, we're adding a few more partners. Some are global, some are more local. I think that the partnerships works very well because what we provide to our partners is the ability to essentially be in business without having any expenses, really. They can immediately be capable of delivering vulnerability management services, policy compliance services, web application security services. That's a very unique advantage that we have against the traditional enterprise software solutions, where people have to install, they are not multi-tenant. We still have a huge advantage here and are a very natural fit for all these managed security service providers.
Great. Just on private cloud platform, is this a deployment model that you're seeing preferred by the majority of the non-U.S. customers at this point, and are you seeing more demand in the U.S. for private cloud?
We are seeing more demand for the U.S. in private cloud with a very large organization, with the banks, as we are now starting to do more with them. We are also, at the same time, further virtualizing. I mentioned that we have been capable of totally virtualizing our platform, which we deliver on the EC2 platform for Amazon themselves. Now we are essentially putting more efforts, so we could essentially distribute that cloud platform, that private cloud platform, very easily. The federal government is the natural customers for that in the U.S. and very large companies. We also have now our fully disconnected private cloud, which we mentioned last quarter, has been now delivered, accepted by Siemens.
It's operational. We are now focusing essentially now with the federal government, where we are anticipating to be FedRAMP compliant this month, as well as now having that disconnected private cloud that happens to be on the marketplace for us. We're now gearing, in fact, we're actively looking for a VP of federal operations, which will report to our newly hired EVP of global sales operation. We are, in fact, counting on that private cloud as a beachhead in federal and in large organizations. Outside of the U.S., what it does is that it really eliminates all the issues about the sovereignty of the data, and that's again, combined with the fact that we can enable, like we did with Orange Cyberdefense, Airbus, cyber defense, Saudi Telecom, et cetera, many companies, with Telstra in Australia. They can absolutely provide sovereign cloud services to the marketplace.
In that sense, we are in a very unique position.
Great. Thank you very much.
Our next question comes from the line of Robert Breza with Wunderlich Securities. Your line is open. Please go ahead.
Hi. Thanks for taking my questions. Just quickly, as you think about salesforce and the capacity here and moving further out with the new additional products, do you feel like you're on pace with the added capacity, given the dilution that comes from new products as the existing salesforce has to learn those products? How do you balance that relative to your growth projection? Thanks.
Could you repeat the question? I'm not so sure that I understood the question.
The question is, given the new product growth, how do you judge the capacity within the sales force to absorb the existing new products, maintain their focus on core VM, and then yet drive 20% plus type growth for the industry?
Okay. Very good question. In fact. What we're doing is, first of all, what you have to understand is that what is, again, very unique with our model is that everything is centrally managed, everything is self-updating. You have all these different solutions out of the same platform. This is what McAfee tried to do with ePO, that kind of central console where everything comes at your fingertips. That's what we have, and our model allows us to do that extremely well. That's for the platform itself. Of course, we have different modalities which are built on the platform. What we do, we approach that two ways. We have what we call a solution architect.
In fact, we have hired quite a few of them recently, who are the experts on modalities and are helping our sales force to essentially learn, present these various modalities as we increase. We have that kind of specialist, if you prefer, which are supporting the sales force in that effort, as well as the partners. In term of the sales force, we have divided our sales force into groups. We have a group which is the new business, and we're in fact increasing our sales force recently here in the U.S. We have, of course, the farmers. Now, it's much easier for the farmers to essentially present the new services to our customers because it's already in the system. They're also part of the same platform, and the customer can try. It's already, everything is enabled in our back end.
This is what gives us, at the end of the day, the leverage that you see in our financial numbers. We eliminate a lot of costs, not only for ourselves, but also for our customers and partners. We have that highly leveraged model, and all of these applications that we present are already enabled in the platform, and it's very easy for our customers, either they are prospective customers or they are existing customers.
Thank you.
Our next question comes from the line of Srini Nandury with Summit Research Partners. Your line is open. Please go ahead.
Thank you, Don and Philippe, for taking my call. I appreciate this. I have a couple of questions on the guidance. First and foremost, on the FX headwind seems to be pretty pronounced this quarter. Can you give us some color, how much of a constant currency growth is for the next quarter?
Well, the kind of headwinds we saw this in the last quarter was about just about 1.7% on revenues and about 2.8% on deferred revenues. In Q3, I think we expect a similar effect in Q3, then it should start to dissipate after that.
Okay. I'm starting to understand for modeling purposes on the AWS, you're assuming pretty much no revenue this year. Is that fair? It looks like it's a little bit conservative.
What do you mean on the AWS?
You guys are assuming no revenues from the AWS platform this year. Is that what it is?
No. With AWS, Amazon is a Qualys customer. This, of course, we have a big Qualys customer for their own need. On the AWS platform, we have, in fact, our customers are essentially for those who are using AWS, we have virtual images that also provide the scanning and the vulnerability management and the web application scanning. We don't, today, differentiate these revenues. They are essentially, it's another, if you prefer, scanner appliances that our customers use. It happens that they are virtualized, and it happens that they are certified to run on AWS. We are not using AWS as a platform for our services. We have built our own back end.
Oh, I see. Okay, understood. Thank you so much for taking my call.
Thank you. The next question comes from the line of Mike Cikos with Macquarie. Your line is open. Please go ahead.
Hi, guys. I don't know if I missed it in your earlier comments regarding the sales reps. Typically, we get a number regarding how many new hires there have been or what's the total capacity at this point. Did you guys give us an update regarding the number of sales reps you finished the quarter with?
No, we didn't give an update. We finished the quarter, I think, at 139 people today forward.
Okay. With the new sales reps that you are hiring, has anything changed with the process just regarding selling back into the existing customer base, or where are the new hires going? Are they out hunting new customers or going back to the existing base and trying to upsell them with new solutions at this point?
It's a combination of both. We are expanding both our new business teams as well as our existing customer team because, of course, we're getting more and more customers, and you need to service them. As I'm sure you realize, serving a customer which is doing $1 million a year or $2 million a year, you don't need two people. We have a significant leverage there with our renewal, as we call them, our renewal teams.
Okay. Just one more question, if I could. Regarding the, call it $0.05 of upside delivered in the second quarter, I was just interested in the EPS guidance that you guys maintained for full year. Just wondering where the incremental expenses will be coming in the second half.
It's essentially sales. We're expanding our sales force and our product marketing teams and our marketing efforts. We are essentially going to be much more active in term with these new services, advertising them and doing some reach-out campaigns. That's where the additional expenses are coming from.
Okay, thank you.
Thank you. Again, if you would like to ask a question, it is star and then the number 1 key. Our next question comes from the line of John Lucia with JMP Securities. Your line is open. Please go ahead.
Hey, guys. Thanks for taking my questions. First question, you noted 60% of new customers have purchased more than one solution by the end of Q2. That's good when you compare it to the end of 2013, that's only a 2% increase from 58% in Q1. A year ago, I think the increases were more like 6%-7% each quarter. If you look at these metrics, it seems like cross-selling has slowed to a degree over the last 6-9 months. My question is, has the low-hanging fruit been picked at this point and now cross-selling has become a little more difficult, or are you just going deeper in with those existing customers? I'd just like to get more flavor on your expectations for cross-selling going forward.
No, we see cross-selling still very strong. In fact, with all the new services that we're coming with, that will continue to increase. What is happening here, I believe, and that's something we may want to look into in more detail, is because we have three businesses in Qualys. We have essentially the enterprise business, we have the mid-market business with Express, as we call it. We have Qualys Enterprise, Qualys Express, and then we have Qualys SMB, which is very small companies. There's much less upsell, if you prefer, in the SMB type of market than there is, of course, in the larger enterprise. We have also that phenomena here of the mix of customers. Of course, the larger customer base is more on the SMB side than it is on the enterprise.
On the enterprise side, we have a still very strong demand for more services.
Okay. I have one follow-up. Last quarter, you guys talked about the VM business slowing to 19%, and it sounds like the growth remained at that level in Q2. Can we think of 19% as the new normal, or would you expect the growth to decline or increase from these levels?
No, I personally believe that our VM business is going to continue growing more. This is because, again, as I mentioned earlier, with our Cloud Agents, we can now go to the endpoint. The endpoint is really where you have the volumes. This is where you have significantly more endpoints than you have servers. We see today, both for the VM and for the policy compliance, we see the potential big lift from these Cloud Agents. Again, they've been very well accepted by our customers. We see that these new services are ramping up faster than we have ever seen any new product.
Okay, thank you.
Thank you. I am showing no further questions at this time. I would like to turn the call back to Philippe Courtot for any further remarks.
Thank you, operator. Let me share with you another key milestone for Qualys, as I'm in fact speaking with you today from the Black Hat conference in Las Vegas, where we are launching and showcasing a revolutionary new service that we call AssetView that gives IT and security teams real-time visibility and actionable data across millions of IT assets in seconds. AssetView is based on our cloud agent platform, which we just discussed, and we're providing it as a free service. With AssetView, IT and security teams can deploy our cloud agent at no cost for doing asset inventory and to get a complete picture of their global IT assets and query them in real time. In summary, with the launch of AssetView, IT and security teams can now answer the following questions, and on a global scale, such as, how many assets do we have?
What are the attributes? Who uses them? Who manages them? Where are they located? And of course, with our vulnerability management, policy compliance, et cetera, and how secure are they, or are they being already compromised? This is all delivered from the single solution where everything is centrally managed and self-updating our cloud platform. Now customers can also integrate the data from these new services with their configuration management database tools, CMDBs, and asset management solutions. As you can see, with the expansion of our platform and the well-received launch of our new services, we continue to invest and expand our sales and marketing efforts, growing our partnerships globally, accelerate the build-up of our development, operation, and support teams in India, where we are today more than 100 people.
I think we're now close to 120 people, and are actively looking for strategic acquisition to further accelerate the enhancement of existing services and the development of new services, as well as to enter new adjacent markets. Thank you for attending our earnings call today. Should you have any follow-up questions, John and I are available to you, and we are looking forward to speaking with you the next quarter and hope you can make it to our user conference in Las Vegas in October. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program, and you may all disconnect. Everyone have a great day.