“Our planned capital expenditures in 2026 are expected to be in the range of $8 million to $12 million, and for the first quarter of 2026 in the range of $1.2 million to $2.6 million.”

In context

“Joo Mi Kim (CFO): 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. We're 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 $669.1 million and achieved adjusted EBITDA margin of 47%, even with continued 14% growth in investments in sales and marketing. Net income and EPS grew 13% and 15% to $257.8 million and $7.07 per diluted share, respectively. And free cash flow reached $304.4 million, or 45% of revenues, all of which exceeded our expectations for the year. Turning to fourth quarter results. Revenues grew 10% to $175.3 million. The channel continued to increase its contribution, making up 51% of total revenues compared to 48% a year ago. Revenues from channel partners grew 17%, outpacing direct, which grew 4%. As a result of our strategic emphasis on leveraging our partner ecosystem to drive growth, we expect this trend to continue. By geo, 15% growth outside the U.S. was ahead of our domestic business, which grew 6%. U.S. and international revenue mix was 56% and 44%, respectively. With customers confirming their prioritization of security within IT budgets, we anticipate the selling environment in 2026 to remain similar to last year with a low to mid-single-digit growth in security spend persisting for the foreseeable future. Reflecting this sentiment, our gross dollar retention rate remained comfortably above 90%. We saw a modest sequential decline in Q4, with our net dollar expansion rate at 103%, down from 104% last quarter. In terms of product mix, our differentiated new products continue to drive growth with all three of the following increasing contribution to bookings in 2025. First, Cybersecurity Asset Management, combined with ETM made up 10% of total bookings and 13% of new bookings in 2025, up from last year's 8% and 9%, respectively. Next, Patch Management made up 8% of total bookings and 16% of new bookings in 2025, up from last year's 7% and 16%, respectively. Lastly, TotalCloud made up 5% of total bookings in 2025, up from 4% a year ago. We believe that these differentiated products combined will continue to increase contribution to bookings in 2026, given our opportunity to increase market share and maximize share of wallet. Turning to profitability. Adjusted EBITDA for the fourth quarter of 2025 was $82.6 million, representing a 47% margin, same as last year's. Operating expenses in Q4 increased by 11% to $68.9 million, driven by investments in sales and marketing, which grew 18%. With this strong performance, EPS for the fourth quarter of 2025 was $1.87 per diluted share, and our free cash flow was $74.9 million, representing a 43% margin compared to 26% in the prior year. In Q4, we continued to invest the cash we generated from operations back into Qualys, including $724,000 on capital expenditures and $44.7 million to repurchase 328,000 of our outstanding shares. Since commencing our share repurchase program in February of 2018, we've repurchased 10.7 million shares and returned over $1.2 billion in cash to shareholders. As of the end of the quarter, we had $160.5 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 $360.5 million. With that, let us turn to guidance, starting with revenues. For the full year 2026, we expect revenue to be in the range of $717 million to $725 million, which represents a growth rate of 7% to 8%. For the first quarter of 2026, we expect revenues to be in the range of $172.5 million to $174.5 million, representing a growth rate of 8% to 9%. This guidance assumes no material change in our net dollar expansion rate with moderate growth contribution from new business in 2026. Shifting to profitability guidance. For the full year 2026, we expect EBITDA margin to be in the mid-40s, implying mid-teens increase in operating expenses, and free cash flow margin in the low 40s. We expect full year EPS to be in the range of $7.17 to $7.45. For the first quarter of 2026, we expect EPS to be in the range of $1.76 to $1.83. Our planned capital expenditures in 2026 are expected to be in the range of $8 million to $12 million, and for the first quarter of 2026 in the range of $1.2 million to $2.6 million. In 2026, 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 with more modest increases in engineering and G&A. With that, Sumedh and I would be happy to answer any of your questions.”