“As a percentage of revenues, we expect to prioritize an increase in investments in sales and marketing, and engineering with a more modest increase in G&A.”

In context

“Joo Mi Kim (CFO): Thanks, Sumedh. 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 comparison to the prior year period unless stated otherwise. We are pleased to report a healthy finish to the year, highlighting our continued execution, financial discipline, and scalable business model. For the full year, we grew revenues by 10% to $607.6 million, netting an adjusted EBITDA margin of 47%, even with continued 14% growth in investments in sales and marketing. Net income and EPS grew 16% to $229 million and $6.13 per diluted share, respectively, and free cash flow reached $231.8 million or 38% of revenue, all of which exceeded our expectations for the year. Turning to fourth quarter results, revenues grew 10% to $159.2 million. The channel continued to increase its contribution, making up 48% of total revenues, compared to 44% 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 18%, outpacing direct, which grew 3%. Fifteen percent growth outside the US was ahead of our domestic business, which grew 7%. US and international revenue mix was 58% and 42%, respectively. With customers confirming their prioritization of security within IT budgets, we anticipate the selling environment in 2025 to remain stable with ongoing budget scrutiny persisting for the foreseeable future. Reflecting this sentiment, in Q4, our growth retention rate remained approximately at 90%, and our net dollar expansion rate came in at 103%, unchanged from the prior quarter. In terms of product contribution to bookings, patch management and cybersecurity asset management combined made up 15% of total bookings and 24% of new bookings in 2024. Our cloud security solutions, Total Cloud CNA, made up 4% of 2024 bookings. We attribute this success to our customers' needs for broader contextualized awareness of their attack surface, with natively integrated risk management and remediation workflows across all environments on a single platform. Turning to profitability, adjusted EBITDA for the fourth quarter of 2024 was $74.2 million, representing a 47% margin, compared to a 46% margin a year ago and 45% last quarter. The stronger-than-expected performance resulted from our targeted optimization efforts, which was part of our 2025 planning process. Consequently, operating expenses in Q4 remained relatively flat to last quarter. Our sales and marketing investments grew moderately, by 5% from last quarter. EPS for the fourth quarter of 2024 was $1.60, and our free cash flow was $41.9 million, representing a 26% margin compared to 22% in the prior year. In Q4, we continued to invest cash we generated from operations back into Qualys, including $5.8 million on capital expenditures and $42.3 million to repurchase 312,000 of our outstanding shares. As of the end of the quarter, we had $143.4 million remaining in our share repurchase program. We are pleased to announce that our board has authorized another increase of $200 million to the share repurchase program, bringing the total available amount for share repurchases to $343.4 million. With that, let us turn to guidance. Starting with revenue, for the full year 2025, we expect revenues to be in the range of $645 million to $657 million, which represents a growth rate of 6% to 8%. For the first quarter of 2025, we expect revenues to be in the range of $155.5 million to $158.5 million, representing a growth rate of 7% to 9%. This guidance assumes no material change in our net dollar expansion rate, with moderate growth contribution for new business in 2025. Also, realize that there may be some near-term adjustment to the plan, given the upcoming CRO departure. We will be sharing updates as we make progress throughout the year. Shifting to profitability guidance, for the full year 2025, we expect EBITDA margin to be in the low 40s, implying an 18% to 20% increase in operating expenses and free cash flow margin in the low to mid-30s. We expect full-year EPS to be in the range of $5.50 to $5.90. For the first quarter of 2025, we expect EPS to be in the range of $1.40 to $1.50. Our planned capital expenditures in 2025 are expected to be in the range of $8 million to $13 million. For the first quarter of 2025, in the range of $2 million to $4 million. In 2025, we anticipate gross margin to contract by approximately 1%, given certain investments we are currently making in some of our data centers, to achieve greater operational efficiencies and reduce medium to long-term marginal costs. With respect to operating expenses, we plan to align our product and marketing investments to focus on specific initiatives aimed at driving more pipeline, accelerating 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, and engineering with a more modest increase in G&A. With that, I'll turn it over to Ned, and I would be happy to answer any of your questions.”