Qualys Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 3, 2023

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Qualys Second Quarter 2023 Investor Call. At this time, all participants are in a listen only mode. After speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Blair King. Please go ahead.

Speaker 1

Thanks, Victor, and good afternoon, and welcome to Qualysys' Q2 2023 earnings call. Joining me today to Our results are Sumit Thakkar, our President and CEO and Jumi 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 our future financial or operating performance. Actual results may differ materially from these statements. The factors that could cause results to differ materially are set forth in today's press release and in our filings with the SEC, including our latest Form 10 Q and 10 ks.

Speaker 1

Any forward looking statements 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. And as a reminder, the press release, prepared remarks and investor presentation are all available on the Investor Relations section of our website. So with that, I'd like to Turn the call over to Smed.

Speaker 2

Thank you, Blair, and welcome to our Q2 earnings call. We're pleased to announce that we delivered another quarter of healthy revenue growth and Leading profitability, demonstrating our increasing leadership in cybersecurity risk management and firm foundation to drive future growth. Q2 remained a tough period with customers continuing to scrutinize deals and delay project start dates. Nevertheless, the combination of today's uneven macro and heightened threat environment Our risk management platform positions us well to deliver these outcomes to our And we feel fortunate that many of them are on a long term transformation journey with us. This was evidenced in Q2 by the steady adoption of our VMDR solution, which Now deployed by 52% of our customers worldwide.

Speaker 2

Key competitive EMDR wins with true risk include multiple customers both down market and in the Forbes 1 Qualys' VMDR solution continues to garner significant industry recognition. As recently announced, Qualys' VMDI with TrueRisk was voted the best risk management solution at the 2023 SC Awards Europe. This award evaluates vendors based on We believe Qualysys placement as the number one vulnerability management solution further validates our investments in the platform and represents the gold standard for securing customer environments today and in the future. Leveraging our VMDR and single agent approach, We have built a blueprint for delivering greater value to our customers with multiple long term drivers in our business. Let me highlight a couple of Early platform success we're seeing to broaden adoption with our customers.

Speaker 2

In Q2, a Fortune 300 global Manufacturing company chose Qualys because of our reputation to deploy across large complex environments quickly. Their existing Patch Management solution was unable to effectively Patch OS, iOS and 3rd party software, and they became victim to malicious activity. This customer needed to deploy a Patch Management solution quickly Over 40,000 assets to prevent a breach. The ability to deploy our solution the same day using the same agents they had already deployed for VMDR and without the need Through this brief but urgent engagement, Qualys built additional trust with the customer by demonstrating our As a result, this customer is now evaluating our cybersecurity asset management solution with external attack surface visibility to further streamline their security stack. With the Qualys Cloud Platform, they are eliminating legacy tools and have considerably improved their response times and security posture.

Speaker 2

In another example of continued adoption of cybersecurity asset management and external attack surface management, We also expanded our engagement with the Forbes 1,000 Food manufacturer in Q2. The customer expanded its deployment of VMDL with can select Qualysysybersecurity Asset Management and Patch Management as additional solutions. The ability to enhance This security program with comprehensive internal and external asset context risk scoring, CMDB integration and fast remediation on a single Console, while consolidating agents on an integrated platform, were all key differentiators in this win. Further broadening our platform capabilities, you may recall in February of this We announced Polkad Cloud, a unified and extensible cloud native CMAP solution featuring agent and agentless 0 touch Scanning options along with CSPM, CWPP and cloud detection and response capabilities to simplify workflows and help With over 30,000,000 cloud agents already supporting workloads in the cloud, we're Cloudtoploudwin, a cybersecurity company seeking better security against advanced threats in multi cloud and container environments shows our solution over competing cloud security providers given its flexible scanning options, rapid detection and unparalleled remediation capabilities from Development to run time, all uniquely supported through our new adaptive subscription model, frictionless platform deployment and unified dashboard.

Speaker 2

The wins I have shared here today along with several others like them on this call is the ability to help customers not only detect, but also prioritize risk across all assets and environments, while remediating vulnerabilities much faster than alternative siloed solutions. In today's current macroeconomic environment, we believe our value proposition becomes even stronger as With more and more customers beginning to pursue Qualys as a leading risk management platform That consolidates multiple security point solutions across all environments, we remain confident in our ability to drive long term growth and gain market share. This confidence is again bolstered in Q2 as customers spending $500,000 or more with us grew 21% from a year ago to 168. Continuing our disruptive innovation, I'm pleased to announce today our groundbreaking launch of 1st party software risk management solution. With nearly every organization today becoming a software development house, most of them lack proper tools to detect prioritizing immediate Hi, risk vulnerabilities and risk configurations within their own proprietary code base.

Speaker 2

This new capability now allows organizations to leverage their existing polished VMD are through its platform deployment to not only detect CVEs in 3rd party software, but also manage risk in their own first party software using a single platform. Additionally, given high prevalence of embedded open source software like Log4Shell in these applications, This new capability allows customers to manage risk from these components and get a complete picture of their true risk. This new capability will be demonstrated at BlackHat next week. Encouraged by the early adoption of Cogicloud, we have further harnessed technology from our recent acquisition of Blue Hexagon to extend our cloud scale deep identify relationships and patterns within our own highly integrated data lake. We are now enabling organizations to rapidly predict, detect, prioritize and remediate A novel of activities that are invisible and undetectable in traditional signature based solutions in the cloud.

Speaker 2

This latest advancement empowers our customers capability is already in action with some of our customers, helping transform their security operations center, magnifying our competitive differentiation in the market. Looking ahead, we are further integrating our deep learning AI and ML technologies into our true risk management and remediation solutions to provide Predictive insights of unknown vulnerabilities in misconfigurations and instances of active exploitation. And with the algorithmic expertise already in house, Over the next few quarters, we expect to further extend these capabilities to transform the user experience on the Qualys Cloud platform, Harvesting trillions of data points and rich investigation and remediation using generative AI. In terms of our go to market initiatives, investing in our partner continues to be a key priority. In Q2, we expanded our relationship with several key cloud providers, including AWS, which Now making our new product bundles aimed at SME SMB available in its marketplace.

Speaker 2

Additionally, we entered into a new relationship with a leading Global MSSP, which shows Qualys over a competing detection only solution given our ease of orchestration, natively integrated platform and single agent This simplifies operations and significantly reduce remediation time for its customers. Finally, I'm pleased to highlight that Dino Di Marino has joined Qualys as our new CRO. Dino has an established track record in driving new business development and leading channel partnerships in high growth SaaS, Cloud and Cybersecurity Companies, most recently with Snee. He will be responsible for all aspects of revenue performance with a focus on delivering The leadership of the worldwide sales and partner organization and accelerating Qualysys' Growth with both new and existing customers. Denon has over 20 years of sales executive sales experience and demonstrated success in bringing out the most in the teams, which successfully aligned sales with the product organization in support of the customer.

Speaker 2

He shares in our passion for product led growth and we are looking forward to his contribution to Qualys. In summary, our leadership as a trusted risk management platform traditional vulnerability management technologies with cyber risk posture assessment and response prioritization capabilities. With a unique opportunity in this environment to further strengthen our strategic position as a partner of choice for customers looking We believe we can continue to grow long term, maintain best in class profitability and invest in key It is further extending the gap between Qualys and the competition. With that, I will turn the call over to Jimmy to discuss In more detail, our Q2 results and outlook for Q3 and the full year 2023.

Speaker 3

Thanks, Suneet, 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 comparison to the prior year period unless stated otherwise. Turning to 2nd quarter results. Revenues grew 14% to 137,200,000 Revenues from channel partners grew 17%, continuing to outpace direct, which grew 12%. Channel revenue contribution remained the same as last quarter at 43%.

Speaker 3

By GEO, growth in the U. S. Of 16% was ahead of our international business, which grew 12%. U. S.

Speaker 3

And international revenue mix remained the same as last quarter at 60% 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 remain 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, Cash management and cybersecurity asset management combined made up 10% of LTM bookings and 19% of LTM new bookings in Q2. We attribute the success to our customers' needs for broader contextualized awareness of their task surface to immediately integrate their risk management and remediation workflows across all environments on a single platform.

Speaker 3

Reflecting our scalable and sustainable business model, Adjusted EBITDA for the Q2 of 2023 was $65,800,000 representing a 48% margin compared to a 45% margin a year ago. Operating expenses in Q2 increased by 6% to $53,400,000 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 Q2 of 2023 was $1,270,000 and our free cash flow for the Q2 of 2023 was $50,100,000 representing a 37% margin.

Speaker 3

In Q2, we continue to invest the cash we generated from operations Back into Qualys, including $1,400,000 on capital expenditures and $42,300,000 to repurchase 346,000 of our outstanding shares. As of the end of the quarter, we had $145,700,000 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.

Speaker 3

With that said, given our ratable SaaS subscription model, Our guide for revenue growth for the full year 2023 remains largely unchanged at 13%, with a revised range of $553,000,000 to $555,000,000 the high end of the range down from $557,000,000 last quarter. For the Q3 of 2023, we expect revenues to be in the range of $140,500,000 to $141,500,000 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 on specific initiatives aimed at driving pipeline growth and supporting 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.

Speaker 3

As a result, We expect the full year 2023 EBITDA margin to be in the mid-forty percent s with full year EPS in the range of $4,500,000 to 4.65 up from the prior range of $4,130,000,000 to $4,280,000,000 For the Q3 of 2023, We expect EPS in the range of $1,100,000 to $1,150,000 Our planned capital expenditures in 2023 Participants in the range of $10,000,000 to $15,000,000 and for the Q3 of 2023, in the range of $2,000,000 to $4,000,000 In conclusion, in Q2, we delivered a healthy top line growth and industry leading profitability and remain confident in our ability to deliver on our growth maybe long term, while investing responsibly to maximize shareholder value. With that, Sunez and I would be happy to answer any of your questions.

Operator

Our first question comes from the line of Jonathan Ho from William Blair. Your line is open. Hi, good morning. Good afternoon. Just wanted to maybe dig a little bit into your guidance.

Operator

Can you maybe help us understand some of the assumptions that you've now baked in? And maybe what's changed relative to your macro expectations particularly around sort of the new customer ad side?

Speaker 2

Yes. I think, I mean, Jumia A little bit more color, but overall, I think we feel like based on what we see right now, the guide is appropriate. And we're not assuming any improvement in the macro given kind of what We see the way customers are working through in some cases pushing out deals etcetera. So We did see additional scrutiny on the upsells this quarter, which was which is something that we work through with customers. And While our win rates are down, we are excited about the pipeline that has been generated with some of the investments that we've made in making in the last couple of quarters.

Speaker 2

And Now with Dino coming on board, of course, like with any executive coming on board, we're looking forward to the contribution he's going to make in the long term. And There probably will be some disruption in the short term there. And so taking all those factors into consideration really, We feel at this point, we believe the guide is appropriate for what we see.

Speaker 3

Yes. To add a little bit of additional color to what Sumit just said, If you take a look at our annual revenue guidance, it hasn't really changed all that much. We've been consistent in emphasizing that we believe that we'll be able to achieve 13% revenue growth. And to underline that is our belief that our net dollar expansion rate isn't going to materially change. It has ticked down by a percentage this quarter And it could continue to do so, but we don't think that even with that, our current billings was able to reaccelerate back up to 11% from 9% And we don't see that to change in the second half of this year.

Operator

Great. And maybe just to dig into that Last comment a little bit more around the net dollar expansion. Is there a way you could make a little bit more color in terms of what's impacting the net dollar Manchin, is there anything on the churn side or is there anything on your ability to sort of upsell product that's impacting this? Thank you.

Speaker 3

Yes. So our retention continues to be strong. So the 1% downtick is primarily due to the headwind and Now that Sumit commented earlier, we are seeing additional deal scrutiny, extended deal cycles on with existing customers, we are looking at revisiting Potential cross sell and upsell opportunity and that contributed to the percentage down quarter over quarter.

Speaker 4

Great. Thank

Operator

you. One moment for our next question. Our next question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

Speaker 3

Hi. This is Anushta for Matt Hedberg. Thanks for taking my question here. It's good to see current billings accelerate versus last quarter back to double digit growth. Maybe how should we think about billings growth in the second half of the year?

Speaker 3

Should we expect billings growth to continue to accelerate? And if so, could it accelerate back to mid to high teens growth given comps ease in the back half of the year? Yeah. We typically don't guide to correct billings because we don't actively manage through that number. And it could fluctuate due to the billing terms for the customer.

Speaker 3

But with that said, what we're seeing right now in the business is 9% to 11%, we don't see that materially In the next quarter, I think it will be more or less the same assuming that there are no significant changes in the billing terms of existing and new customers coming in. Q4 is a little too early to tell. And but at the same time, we don't see it going down to single digits right now. Got it. And then, you significantly outperformed in profitability with 48% EBITDA margin, which is a significant step up from last quarter.

Speaker 3

Can you talk about what's driving that outperformance and improved leverage? It's finally due to the fact that we've always taken a very disciplined approach to investing and we've been very flexible because So the way we look at investment opportunities, we take a look at initiatives that we have set plans for the full year And then we tend to prioritize based on the returns that we see from each of the investments that we've already made. And Right now, we just didn't see that there was a reason for us to accelerate and increase investments in multiple different areas. And especially because We knew that we're looking for a new CRO. We had planned on finding the right person this year and we're very fortunate to have Gino on board.

Speaker 3

So within onboard with us right now, we'll be reassessing all the initiatives to understand maybe it makes sense for us to increase investments in Q3 3 or Q4, but based on what we see right now, we think that the most likely scenario is ending the full year at EBITDA margin in the 45% range. Got it. Thank you.

Operator

One moment for our next question. Our next question comes from the line of Rudi Kessinger From D. A. Davidson, your line is open.

Speaker 4

Hey, guys. Thanks for taking my questions. Jimmy, I just want to maybe clarify on the current calculated billings and maybe the revenue guide. I know last quarter, you said you expected current calculated billings growth to accelerate throughout the rest of the year. Obviously, it popped 2 points here in Q2 over Q1.

Speaker 4

So just to be clear, you I expect current tax rate billings growth to remain roughly flat in Q3 and Q4. I just want to make sure that's what you're saying. And On the guide, again for the full year growth about the same at the midpoint, but I think exiting the year, the guide now implies growth closer to about 11% Probably 13 ish percent previously, so it does appear to be a step down in the growth exiting the year. Just want to make sure that there's nothing I'm missing there.

Speaker 3

Yes. So in terms of the calculated billings, we knew that even though we don't manage to it, we knew that 9% Q1 was an anomaly. It wasn't really representative of the business momentum that we were seeing. So that's why we had indicated that it would be higher for the remainder of the year. Looking at 11% in Q3, I don't think that will be materially different.

Speaker 3

I don't see it kind of ticking down from that 11% right now. Q3 and Q4, I think it will probably be more in line with that 11% achievement that we had in Q2 or potentially higher.

Speaker 4

Okay. And then maybe just one last one, the models. Gross margin stepped up good amount Q2 versus Q1 and I think just Probably the highest you've shown at least several years. Is that kind of a new go forward bar for gross margins? Was there anything that you benefited from one time in the quarter?

Speaker 3

Nothing to call out. I think that one change that we This year is employee PDP merit cycle was done a little bit later, so that will hit in Q3 versus Q2. But if you take a look at the gross margin of 82%, we will we expect to hover around the 81% to 82%. We are getting some cost savings just because we are taking a disciplined approach making sure that we're getting the efficiency where we think that we can. So Nothing material to call out there.

Speaker 3

We think that it will hover around that range.

Speaker 4

Great. Thanks for taking my questions.

Operator

One moment for our next question. Our next question will come from the line of Mike Walkley From Canaccord Genuity, your line is open.

Speaker 4

Great, thanks. I wanted to ask maybe about the GovCloud introduction. How is the early feedback from the Fed and government customers? And are you seeing the maybe Fed customers might be more or less willing to work towards vendor Consolidation in your enterprise space?

Speaker 2

Yes, that's a great question. It's really been exciting for us to see the Conversations that we are having with the federal customers, I think these are one of the best conversations I have seen since I've taken over. And so I think that's very encouraging for us. We had a couple of good wins last quarter. We highlighted that as well from the federal side and we have a good pipeline that's developing, And primarily because when you talk about FedRAMP High, Redi and the fact that the platform can do Patch Management and Vulnerability Management all of it in one.

Speaker 2

There's no other vendor right now that has that front ramp, Patch Management as an example. And so the engagement really comes very comprehensive. It's not just about can you scan and give me a FedRAMP high scanner. So those conversations become more holistic in nature. And what's also interesting is that the FedRAMP high and the GovCloud conversation is also driving Commercial customers that want to also provide FedRAMP high services to the government to have these conversations with us because they want their clouds to be And their solutions to be FedRAMP high.

Speaker 2

So it's not just the pipeline building from the federal government, but also the pipeline that we're encouraged to see the early signs from Commercial customers who are saying we need to go FedRAMP amortize FedRAMP High and Qualys is one of the only platforms that is providing that kind of a risk management side of the house, which has the 5G lymphocytes.

Speaker 4

Great. That's good to hear and helpful. And just for my follow-up question, congratulations on Adding Dino Maria to the team, just to clarify on OpEx, is it area you slowed in the near term as you wait for him to kind of formulate a plan and That's the higher profitability or is it just overall cautious given the macro backdrop? Thank you.

Speaker 3

It's more the former, because we really believe that we are focused on balancing growth and profitability. We think that there is a huge upside and opportunity ahead of us. But then again, we want to make sure that we time it so that we maximize the return. So right now, we are just reassessing, regrouping to Make sure we understand and we can justify some of the investments that we're going to double down on.

Speaker 4

Great. That makes sense. Thank you.

Operator

Thank you. One moment for next question. Your next question will come from the line of Yoo Kim from Loop Capital Markets. Your line is open.

Speaker 5

Okay, great. Thank you. Just following up on that question, congrats on the hiring of the new CRO. Should we expect any change to the go to market motion in second half of the year. And what are some of the investments around go to market that you are initially planning in second half Are you planning on delaying into next year?

Speaker 2

I think one of the reasons why we were So excited to have Dino as we have that product led growth mindset. And so I think which really gels well with the culture here at Qualys given all the capabilities that we have On the platform and so many opportunities that we have as you saw today even with the 1st party risk assessment capability. And so I think If you look at some of the investments that we have been driving even before Geno came on board, pretty excited to see that some of those investments that we have and partner are actually showing some good early signs with a strong pipeline, very good interaction with our partners, etcetera. And There are other areas where sales enablement etcetera where we're continuing to invest and those some of those are going to continue because I think we have strong conviction in the go to market notion around building that pipeline. And then as Dino comes on board and he is sort of looking at how the sales team is structured and how we're going to Address larger accounts that are spending $25,000 or more versus the smaller accounts of $200,000 or less.

Speaker 2

There are certain areas where we are Where do we make the investments? Where do we optimize the investments that we already made, right? So we have a good growth in investments last year relative to the year before. And some of those investments you need to optimize them to make sure we're getting the value out of those. And so, Dino will come and as he's on board now, he will look at some of those areas as well and then We'll formulate an overall thesis, but I'm involved on a day to day basis every day with the business.

Speaker 2

And so Tim and I are going to partner to make sure that we Continue our focus on growth and profitability and balancing those, while looking at additional opportunities to improve our execution in sales as well as the rest of the GTM and improvement in partner motion etcetera, so that we can set ourselves up for The longer term growth that we believe that we can bring.

Speaker 5

Great. Thank you for that. Jimmy, There's a huge sequential increase in the long term deferred revenue. Is there like a concerted effort to Sign longer duration deals or was that just a couple of larger deals that just tend to have a bigger deal in the quarter?

Speaker 3

It's latter. We're happy to have multiyear prepaid, but it's not something that we were actively seeking.

Speaker 5

Okay, great. So it's not something that changed this past quarter, the strategy around those deal contracts. Okay, great. Thank you.

Operator

One moment for our next question. Our next question will come from the line of Josh Tilton From Wolfe Research, your line is open.

Speaker 4

Hey, this is Patrick on for Josh. Thanks for taking my question. First on the billings in the quarter, linearity seems strong. Did you all see any benefit from deals that may have slipped out of 1Q and into 2Q? And then with the adjusted EBITDA commentary moving up to 45 percent

Operator

range for

Speaker 4

the full year, does that change the commentary around The low to mid-30s free cash flow margin expectations for the full year? Thanks.

Speaker 3

Yeah. I'll answer the EBITDA margin and the free cash flow margin guide. We're guiding to midpoint of 40 For the EBITDA and then free cash flow will be in the mid-30s now not low-30s because of that.

Speaker 4

Okay, great. And then on the billings, did you all see any benefit from deals that may

Speaker 6

have slipped out of 1Q?

Speaker 3

Not particularly. We typically call out if there's a large deal that impacted current billings. We didn't really see anything in Q1 or Q2 to call out. But naturally, there's always slippage, right? Sometimes we have some benefits and we have some ticks.

Speaker 4

Okay, great. Thank you.

Operator

One moment for our next question. And our next question will come from the line of Matt Salzman from Morgan Stanley. Your line is open.

Speaker 6

Great. Thank you. So I'm just curious around any potential contributions from the MoveIT hack Intra quarter, I know you mentioned still a tough period with deal scrutiny and delayed starts. But I'm curious if you saw kind of any incremental demand related to the hack? And if so, if you're Are you able to maybe quantify what the potential benefit was?

Speaker 2

No, nothing meaningful changed from that perspective. And I mean, it's the same pattern that we saw And back with SolarWinds or whatever it is, our customers typically, they and prospect they engage to understand and Come out with a more long term strategy around addressing these things rather than a jerk reaction of having to find and deploy Immediately more licenses, etcetera. So we really didn't see any impact in Q2 of that. Of course, it continues to highlight the Importance of vulnerability management and patching these vulnerabilities in time, because that was one of the biggest thing was not just that the vulnerability was there, it was actually being exploited pretty rapidly. And the conversation from our customers that we had were more around, hey, can you help us fix it and patch it, not just can you detect that with a scanner?

Speaker 2

And I think what we're seeing is just continued engagement. We have run the management and risk management around that is a strong Focus for customers, but nothing to call out from our contribution in this quarter.

Speaker 6

Got it. Thanks. And just as a quick follow-up on the announcement around risk assessment for 1st party apps. I'm curious if The plan is to directly monetize this and that it will have an incremental ASP uplift? Or is this more about just bolstering the overall VMDR And making it sticky or making it more attractive for customers to adopt multiple solutions.

Speaker 6

Thanks.

Speaker 2

Yes. I think that's always what I dream of every night I go to sleep and wake up is continued adoption and how all of these things will contribute towards Better retention of the MDF. However, the way we look at this is the 3rd party risk assessment with CVEs has been something that Qualys and others have been providing for a while. But today, over half the software running on servers, etcetera, is homegrown software and that does not have a good way to Create signatures and find vulnerabilities that are very specific to each individual customer. And so this for us, providing this Additional capability will be an add on to the VMDR platform that customers will have to purchase.

Speaker 2

But what we do see is that Because it then brings their 3rd party and first party vulnerabilities and misconfigurations into a single view and with the initial conversations that I've had with about 7 CISOs in the last couple of days. We're quite excited about the initial feedback that we are getting where they really don't have good tools right now, whereas a lot of them are writing their own scripts by hand. And so if they could just leverage the deployment of that they already have on the same asset to also look for their own custom vulnerabilities. A lot of them really want to take a look at it and evaluate it and it will be a Additional revenue that we will look for. However, it's too early at this point to call out for how that traction of Embracing that will be from our customers and adoption, etcetera.

Speaker 2

But we'll continue to look at it and monitor it. And just like we've Then for Patch Management and Cybersecurity Asset Management, we will continue to look at this and Total Cloud as the additional newer areas that we're getting good feedback on and see They will start to contribute towards the ASV.

Speaker 4

Got it. Thank you.

Operator

Thank you. And with that, we'll end our Q and A session. This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator

Everyone, have a great day.

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