Qualys, Inc. (QLYS)
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Earnings Call: Q1 2025

May 6, 2025

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Qualys First Quarter 2025 Investors Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session, and to ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. If your question has been answered, to withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Blair King, Investor Relations. Please go ahead, sir.

Blair King
Investor Relations, Qualys

Thank you, Michelle. Good afternoon and welcome to Qualys' First Quarter 2025 Earnings Call. Joining me today to discuss our results are Sumedh Thakar , our President and CEO, and Joo Mi Kim, our CFO. Before we get started, I'd like to remind you that our remarks today will include forward-looking statements that generally relate to future events or future financial operating performance. Actual results may differ materially from these statements. Factors that could cause results to differ materially are set forth in today's press release and our filings with the SEC, including our latest Form 10Q and 10K. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. As a reminder, the press release, prepared remarks, and investor presentation are all available on the investor relations section of our website. With that, I'll turn the call now over to Sumedh.

Sumedh Thakar
President and CEO, Qualys

Thanks, Blair, and welcome all to our First Quarter Earnings Call. We are entering a new era for cybersecurity risk management powered by real-time data, automation, and AI. Against this backdrop, we executed well in this quarter, resulting in better-than-expected revenue growth, strong profitability, and solid cash flow generation. Fueled by customer insights, Qualys' mission is to bring innovative new security solutions to the market. With over 25 years of evolving our platform to meet the next generation of modern security challenges, we have established a strong track record of converting operational challenges into secular competitive advantages while maximizing lifetime value, ensuring frictionless outcomes at scale, and driving immediate ROI on security spend.

In doing so, we believe we have built a new security industry paradigm, which today leverages our powerful real-time data processing capabilities across more than 18 trillion data points on a natively integrated platform to help organizations streamline their cybersecurity risk management program with the Risk Operations Center, ROC. While a Security Operations Center, SOC, is used for detection of threat actors after a breach, the ROC is needed by organizations for proactive risk management to reduce the chance of breaches by deploying the cyber budgets where the highest risk of loss is. Unlike other CTEM solutions that only reveal exposures without providing effective remediation, Qualys' cloud-native enterprise risk management ETM solution is purpose-built to deliver a single comprehensive AI-powered orchestration layer unifying security findings from multiple Qualys and non-Qualys sources to implement an effective ROC.

By unleashing the scale of the Qualys platform, we ingest data from multiple sources, including Tenable, CrowdStrike, Wiz, normalize risk signals enriched with threat intelligence, analyze adversary behavior, and provide organizations with actionable enterprise-wide insights to prioritize and remediate cyber risk through a common language of business context and financial impact. This holistic approach uniquely ensures organizations not only understand their cyber risk in quantifiable terms but can take immediate action to reduce the risk that matters the most. With prospects of POCs more than doubling from last quarter and over 25 active POCs already underway since launching of GA a short while ago, we continue to see many parallels between this new market opportunity and the early days of VMDR launch, including significant greenfield opportunity and a growing demand. Embracing this momentum in the market, we further evolved our ETM solution through an expanding ecosystem of remediation solutions.

In doing so, we have advanced our TruRisk eliminate agenda by enabling organizations to amplify third-party remediation tools with security insights from Qualys to prioritize patching or activate other compensating controls available through the Qualys platform. With this latest innovation, organizations can soon leverage a unified Qualys workflow with end-to-end automation, CMDB, and ITSM integration to prioritize rapid remediation across all environments from their patching vendors of choice. This is a strong competitive differentiator for Qualys, further neutralizes IT and SecOp procurement friction, and significantly expands our market opportunity by going well beyond Patch Management. Continuing this rapid pace of innovation, we're expanding our Qualys TotalAI and TruRisk capabilities to help organizations address the evolving threats associated with LLMs.

With this latest release, TotalAI brings full visibility across ML supply chain, data applications, and pipelines to detect malicious code, policy violations, and advanced multinodal exploits hidden within images, audio, and video files. By enhancing our AI security posture, AI SPM with native internal LLM scaling expands jailbreak detection and seamless integration into MLOps pipelines. We're equipping security teams with the agility and insight needed to protect modern AI-driven workloads from development all the way through runtime while building what we believe is the most advanced AI security solution available in the market. In addition, with the launch of Policy Audit and Audit Fix, we are now providing organizations of all sizes with the ability to streamline audit operations by providing audit readiness reporting and automated evidence collection across 450-plus technologies and over 1,000 out-of-the-box audit processes for frameworks like PCI, NIST, DORA, HIPAA, etc.

This solution addresses a growing area of focus and cyber spend for CISOs as they are under pressure to ensure their organizations don't fail audits while at the same time reducing their spend in audit readiness with automation, not only detecting the gaps but automation and also fixing them. Moving to our business update, we have hosted several risk quantification workshops attended by many of the most forward-thinking CISOs around the world in recent quarters, and the message is clear. Organizations are increasingly anchoring pre-breach cyber spend to quantifiable risk reduction in their business, which is easily articulated to boards and business partners. CISOs want a platform that speaks a unified language of risk while letting their teams choose their own tools with various components of the stack rather than trying to consolidate multiple vendors into a single platform.

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