“For the third quarter of 2023, we expect revenues to be in the range of $140.5 million to $141.5 million, representing a growth rate of 12% to 13%.”

In context

“Joo Mi Kim (Chief Financial Officer): Thanks, Sumedh. And good afternoon. Before I start, 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. Turning to second quarter results, revenues grew 14% to $137.2 million. Revenues from channel partners grew 17%, continuing to outpace direct, which grew 12%. Channel revenue contribution remained the same as last quarter at 43%. By geography, growth in the U.S. of 16% was ahead of our international business, which grew 12%. U.S. and international revenue remained the same as last quarter at 60% and 40%, respectively. Although customer dollar retention was largely unchanged in Q2, the selling environment was challenging, with new business down and our net dollar expansion rate on a constant currency basis at 108%, down from 109% last quarter and 110% last year. While there continues to be room for improvement from smaller customers spending less than $25,000 with us, we remain pleased with the continued strong revenue growth of 17% from larger spend customers. In terms of new product contribution to bookings, patch management and cybersecurity asset management combined made up 10% of LTM bookings, 19% of LTM new bookings in Q2. We attribute this success to our customers’ needs for broader contextualized awareness of their attack surface, mainly integrated risk management, and remediation workflows across all environments on a single platform. Reflecting our scalable and sustainable business model, adjusted EBITDA for the second quarter of 2023 was $65.8 million, representing a 48% margin compared to a 45% margin a year ago. Operating expenses in Q2 increased by 6% to $53.4 million, primarily driven by investments in sales and marketing, including headcount. Although we remain focused on driving growth, with our disciplined approach to investing, we are being mindful of where to further increase investments while optimizing returns in others, which resulted in EBITDA margin exceeding our expectations in Q2. This demonstrates our ability to maintain high operating leverage and remain capital efficient while continuing to innovate and invest to support our long-term growth initiatives. With this strong performance, EPS for the second quarter of 2023 was $1.27, and our free cash flow for the second quarter of 2023 was $50.1 million, representing a 37% margin. In Q2, we continued to invest the cash we generated from operations back into Qualys, including $1.4 million on capital expenditures and $42.3 million to repurchase 346,000 of our outstanding shares. As of the end of the quarter, we had $145.7 million remaining in our share repurchase program. Before turning to guidance, I’d like to provide a few comments. We continue to foresee a challenging environment for new customer growth, although we have been successful in building our pipeline and sales force. With the impact of the macro economy still unfolding, we are closely monitoring the business environment and shifting our priorities accordingly. With that said, given our ratable SaaS subscription model, our guidance for revenue growth for the full year 2023 remains largely unchanged at 13% with a revised range of $553 million to $555 million, the high end of the range down from $557 million last quarter. For the third quarter of 2023, we expect revenues to be in the range of $140.5 million to $141.5 million, representing a growth rate of 12% to 13%. Considering the long-term growth opportunities ahead of us and our industry-leading margins implying further room for investment, we intend to continue to make responsible investments to align our product and marketing strategy. In doing so, we expect to prioritize these investments and specific initiatives that drive pipeline growth and support sales. However, with our new CRO having just joined us this quarter, we naturally expect to revisit planned initiatives, which may push out some investments by a few quarters. As a result, we expect the full year 2023 EBITDA margin to be in the mid-40s, with full-year EPS in the range of $4.50 to $4.65, up from the prior range of $4.13 to $4.28. For the third quarter of 2023, we expect EPS in the range of $1.10 to $1.15. Our planned capital expenditures in 2023 are in the range of $10 million to $15 million, and for the third quarter of 2023 in the range of $2 million to $4 million. In conclusion, in Q2, we delivered healthy top line growth and industry-leading profitability and remain confident in our ability to deliver on our growth opportunity long term while investing responsibly to maximize shareholder value. With that, Sumedh and I would be happy to answer any other questions.”