“This guidance assumes continued deal scrutiny and no improvement to our net dollar expansion rate through the back half of this year.”

In context

“Joo Mi Kim (CFO): Thanks, Sumedh, and good afternoon. Before I start, I'd like to note that, except for revenues, 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 8% to $148.7 million with channels continuing to increase their contribution, making up 46% of total revenues compared to 43% a year ago. As a result of our continued commitment to leverage our partner ecosystem to drive growth, we were able to grow revenues from channel partners by 17%, outpacing direct, which grew 2%. By geo, 14% growth outside the U.S. was ahead of our domestic business, which grew 5%. U.S. and international revenue mix was 58% and 42%, respectively. As for calculated current billings, we would like to note that our Q2 calculated current billings were negatively impacted by the sunset of our embedded solution for Microsoft Defender as of May 1. Earlier this year, we announced that we would be retiring our integration on Microsoft Defender and transitioning to a BYOL model. Since this went into effect in Q2, we have been fielding inbounds from former Qualys on Microsoft Defender users and working closely with them to ensure that they understand the value of our Cloud Security solution, TotalCloud CNAPP. Normalized for this change, our calculated current billings growth would have been 1%. In Q2, with a continued challenging spend environment resulting in lower performance in upsell, our net dollar expansion rate declined to 102% from 104% last quarter. Conversely, we continue to see strong returns on our new business initiatives and achieved double-digit new bookings growth for the fourth consecutive quarter. With this momentum in new customer bookings growth, we believe we're building a stronger foundation to drive expansion and share gains over time. In terms of product contribution to bookings, Patch Management and Cybersecurity Asset Management combined made up 13% of LTM bookings and 22% of LTM new bookings in Q2. Cloud Security solution, TotalCloud CNAPP, made up 4% of LTM bookings. Turning to profitability, reflecting our scalable and sustainable business model, adjusted EBITDA in Q2 was $69.9 million, representing a 47% margin compared to a 48% margin a year ago. Operating expenses in Q2 increased by 10% to $59.0 million, primarily driven by a 22% increase in Sales and Marketing investments aimed at capturing the market opportunities in front of us. As we continue to increase our investment intensity and focus on Sales and Marketing enablement, customer success, and productivity, we believe we will be able to drive wallet share and long-term returns. EPS for the second quarter of 2024 was $1.52, and our free cash flow was $48.8 million, representing a 33% margin compared to 37% in the prior year. In Q2, we continued to invest the cash we generated from operations back into Qualys, including $1.0 million on capital expenditures and $35 million to repurchase 233,000 of our outstanding shares. As of the end of the quarter, we had $230.7 million remaining in our share repurchase program. With that, let us turn to guidance, starting with revenues: For the full year 2024, we are now expecting our revenues to be in the range of $597.5 million to $601.5 million, which represents a growth rate of 8%. This compares to revenue guidance of $601.5 million to $608.5 million last quarter. For the third quarter of 2024, we expect revenues to be in the range of $149.8 million to $151.8 million, representing a growth rate of 5% to 7%. This guidance assumes continued deal scrutiny and no improvement to our net dollar expansion rate through the back half of this year. Shifting to profitability guidance, for the full year 2024, we expect EBITDA margin of 43% to 44%, and free cash flow margin in the mid-to-high 30s. We expect full year EPS to be in the range of $5.46 to $5.62, up from the prior range of $5.06 to $5.30. For the third quarter of 2024, we expect EPS to be in the range of $1.28 to $1.36. Our planned capital expenditures in 2024 are expected to be in the range of $12 million to $16 million; and for the third quarter of 2024, in the range of $4 million to $7 million. Consistent with prior guidance, for the remainder of 2024, we intend to align our product and marketing investments to focus on specific initiatives aimed at driving more pipeline, supporting sales, including enhancing our partner program, and expanding our federal vertical. As a percentage of revenues, we expect to prioritize an increase in investments in Sales and Marketing as well as related support functions, systems, and people with more modest increases in engineering and G&A. With that, Sumedh and I would be happy to answer any of your questions.”