Qualys Inc (QLYS) 2013 Q2 法說會逐字稿

Good day, everyone, and welcome to the Qualys second-quarter 20130 investor conference call. This call is being recorded. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions for asking a question will be given at that time. I would now like to turn the call over to Don McCauley, CFO of Qualys. Please go ahead, sir.

Welcome to the Qualys second-quarter 2013 investor conference call. I'm Don McCauley, CFO; and I'm here with Phillippe Courtot, our Chairman and CEO.

Before we get started, we would like to remind you that during this call, Management expects to make forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements generally relate to future events or future financial or operating performance. Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance and expectations for future periods; our expectations regarding capital expenditures, including investments in our cloud infrastructure; our expectations regarding the introduction of new solutions and enhancements to existing solutions; and our expectations regarding customer adoption of these solutions.

Our expectations and beliefs regarding these matters may not materialize and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission, including quarterly report on Form 10-Q that we filed on May 10, 2013. The forward-looking statements in this presentation are based on information available to us as of today and we disclaim any obligation to update any forward-looking statements, except as required by law.

We also remind you this call will include a discussion of GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles. A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to most directly comparable GAAP financial measures are included in our earnings press release that is available on our website. Finally, one housekeeping item I would like to point out is that I will be presenting at the Oppenheimer Technology Conference in Boston on August 14 at 3.45 PM Eastern Time, earlier than the 4.25 time that was previously announced.

Now to begin the discussion, Philippe will provide an overview of the Company's performance for the second quarter of 2013. Then I will cover our financial results and factors that drove the quarter in more detail, as well as our outlook for the third quarter of 2013. Finally, we will open the call up for your questions. With that, I'd like to turn the call over to Philippe.

Thank you, Don, and welcome to all of you that are joining us today. The second quarter of 2013 was another solid quarter for Qualys and we are pleased to discuss our results with you as we continue to make substantial progress in all aspects of our business.

In the quarter we added many new important accounts, including Administrative Office of the US Courts, Airbus, CBS Corporation, C.R. Bard, Graybar, InBev, Lufkin Industries, Maroc Telecom, Mayo Clinic, Northern Trust, Pearson PLC, Regeneron Pharmaceuticals and State Street Bank. John will go into the details of the quarter, but let me give you the financial highlights. Qualys generated revenues of $26.3 million in the second quarter of 2013, a figure that is near the top of our guidance, of the guidance range we provided last quarter, and marks 18% growth out of the second quarter of last year.

While our Vulnerability Management Solution continues to be the largest component of our business, we continue to make meaningful progress in diversifying our revenue base. VM comprised 84% of total revenues for the second quarter of 2013, compared to 87% in the second quarter last year. This is primarily the result of the continued sale of our Web Application Scanning and Policy Compliance solution, both of which continue to show strong growth. Our investments in building a security and compliance cloud platform, upon which we can deliver enhancements and new solutions, are paying off. We think these will enable Qualys to stay ahead of our competition.

During our last call, we discussed our virtualized private cloud platform. The second quarter of 2013 we continued enhancing the product by integrating it with the VCE Private Cloud Vblock, which allows us to more quickly ship and deploy our private cloud platform to large customers and partners all around the world. We're getting very positive reactions to this innovative deployment option from customers and partners. I would like to share now a number of important new product announcements that we made in the second quarter.

We introduced QualysGuard Express Lite, as an all-in-one, easy-to-use and affordable IT security and compliance package for small businesses, allowing assemblies to protect themselves against internet attackers and simplify compliance with PCIs and regulatory mandates. The new package allows Qualys and customers to target small businesses more effectively and to provide them with the solution that meets their needs and budgetary requirements. We released the QualysGuard Private Cloud Platform on the VCE block, as mentioned earlier, providing managed security service providers and government entities with a complete and integrated turn-key solution in which data resides on premise, which can be critical to these organizations.

Yet it does also all the performance and scalability of the Qualys public platform. It stays on the same code base and shares the same update mechanism. We introduce the QualysGuard Questionnaire as a cloud-based customizable solution to help automate vendor risk management and certification processes. We also announced the availability of the QualysGuard Web Application Firewall, WAF, in Beta for Amazon EC2, as well as for on-premise deployments, which we expect to deliver to customers shortly. This is a new generation distributed WAF, allowing customers to protect their web applications running in the cloud or on premise against known and emerging threats across their targetable networks.

We released integration with FireMon in an effort to deliver real-time network risk visibility and remediation. In addition, we discussed in our last call we are continuing to invest in expanding our cloud platform to include significant functionality, such as continuous perimeter scanning and global asset inventory, discovery and tracking. This is in addition to all the new and improved capabilities, including Secure Gateway, web application log analysis and mobile agent technology, which could currently expect will be released on beta testing later this year.

One other significant item is that we are pleased to welcome on our new Board member, Kristi Rogers, who is a Defense and Homeland Security expert and is the Managing Director of Federal and Government Affairs for Manatt, Phelps and Phillips, LLP. She replaces Yves Sisteron, who led our large venture financing round in 2004 and served on the Qualys Board for many years. You will see that we filed a Form 8-K on this subject today. For a review of our second-quarter financial performance and third-quarter guidance, I will now turn the call over to Don.

Thanks, Philippe. Qualys continues to deliver on our key financial and reporting metrics and we're pleased with our second-quarter 2013 results, as they reflect continued momentum in the business. Revenues grew in the second quarter to $26.3 million, which represented 18% growth over the same quarter last year. Four-Quarter Bookings were $109 million at June 30, 2013, compared to $94 million at June 30, 2012. This increase of $15 million represented a year-over-year growth of 16%.

You may recall that during 2012, there was an increase in our current deferred revenues related to a partners conversion of a number of legacy subscriptions from monthly to annual billing. If we were to subtract out this increase to normalize last year's Four-Quarter Bookings metric, then the Four-Quarter Bookings a year ago would have only been $93 million. And the indicated growth rate now would be 17%. There will be a similar normalization effect in the remaining two quarters of 2013 as well. To be more specific, our estimate of this normalization effect on the indicated Four-Quarter Bookings growth rate of the remaining quarters of 2013, will be approximately 0.8% for the third quarter and approximately 0.4% for the fourth quarter. We believe that these small adjustments to normalized Four-Quarter Bookings provide a fair view of our current bookings momentum.

GAAP gross profit increased to $20.4 million compared to $17.6 million for the second quarter last year. GAAP gross margin was 77% for the second quarter of 2013 compared to 79% in the same quarter last year. Non-GAAP gross profit increased to $20.5 million compared to $17.6 million for the same quarter last year and non-GAAP gross margin was 78% for the second quarter compared to 79% in the same quarter last year. For both of the gross profit measures, the year-over-year growth was 16%. As we've discussed previously, the decrease in gross margin percentage are related to increased appreciation resulting from higher levels of capital expenditures and other operating costs to support our growth with new solutions and functionality we are developing, as well as the expansions of our data centers in the US and Europe.

Adjusted EBITDA for the second quarter increased by 82% to $4.5 million compared to $2.5 million in the second quarter of 2012. As a percentage of revenues, adjusted EBITDA increased to 17% in the second quarter compared to 11% in the same quarter last year. Moving on to earnings per share, for the second quarter we had a GAAP net income per diluted share of $0.02 versus a net loss of $0.05 per diluted share in the second quarter last year. Second-quarter non-GAAP EPS was $0.06 net income per diluted share compared to $0.02 net income per diluted share in the second quarter of last year. Turning our focus to the balance sheet, we have a strong cash position with $126 million in cash and investments and less than $1.5 million in debt.

In the second quarter, spending on capital expenditures $2.6 million compared to $3.1 million in the second quarter of 2012. In addition, we completed a licensing arrangement of approximately $2.45 million in the second quarter to lock in fixed licensing costs on database software for the next several years. Just to repeat our previously-stated intention, we plan to average approximately [$3] million per quarter (technical difficulty) in capital expenditure spending for the balance of this year and next year as we enhance our Cloud infrastructure to support more customers and add more solutions and functionality to our platform.

Now, turning to our outlook for the third quarter of 2013, we expect revenues to be in the range of $27.1 million to $27.6 million. GAAP EPS for the third quarter this year is expected to be in the range of $0.00 to $0.02 and non-GAAP EPS is expected to be in the range of $0.03 to $0.05. These third-quarter EPS estimates are based on approximately 36.1 million, weighted average diluted shares outstanding.

Our full-year guidance for 2013 remains unchanged, as we continue to expect revenues to be in the range of $106 million to $108 million. GAAP EPS is expected to be in the range of $0.02 to $0.06 per diluted share, and non-GAAP EPS is expected to be in the range of $0.16 to $0.20 per diluted share, based on approximately 35.8 million weighted average diluted shares outstanding for the full year. With that, Philippe and I would be happy to answer any of your questions. Operator?

(Operator Instructions)

Sterling Auty, JPMorgan.

Hi, this is Lauren Choi for Sterling Auty. First question around your International business. Can you talk about your business in Europe, as well as how it came in relative to what you expected? Thank you.

Yes, hello, Lauren. We had a solid quarter in Europe, actually, a little better than our first quarter, in fact. We had talked about Europe two quarters ago as being weak, but it came back well in Q1 and a even a little better in Q2.

Great. And another question, in terms of the new customer additions. In terms of whole number or average deal size, could you talk about how that came in relative to your expectations? Thanks.

We had a pretty-much-as-expected quarter, as you can see from our top-to-bottom-line metrics. I think we've seen consistent performance compared to our expectations, both in the number of customers and the size of deals.

Okay, great. Thank you very much.

You're welcome.

Phil Winslow, Credit Suisse.

Thanks, guys, and congratulations on a good quarter. Just had a question, as you started to build your plan here for the second half and then as you look into the next year, where you are in the go-to-market strategy with sales and with the channel. Particularly in terms of starting to cross-sell a broader portfolio, what are your key focus points? And also on the Web allocation Firewall, I'm speaking of a expanded product portfolio, any customer data points or feedback would be great.

What I can say, Phil, is that these products are extremely well-received by our customer base small and large. I think with the Web Application Firewall, really fantastic architecture, full virtualized images. You could have, protect your web application on Amazon. You could protect them on your global enterprise. And I think we're very happy to have been able now to put the entire solution in beta on both the [whole] enterprise and for Amazon. So this is quite a big announcement for us.

Great. Then also focus on the go-to-market side, where you think you stand in terms of the channel preparedness, your sales force, for selling this larger product, and what the plan is for the second half, and as you put the initial plan together for next year, too.

Yes, so one of the big advantages that you have, as you know, is that we have an extremely large customer base of loyal customers. It's very easy for them to try the product, thanks to the applied platform model. Same thing with the partners. In fact, we're expanding significantly our partnerships everywhere in the world. Now we're moving from the, if you prefer, from the prevention to the protection.

Prevention has a faster adoption rate in general than [prevention], because with prevention you need to do something about it. With protection, it's almost like a pill that you take, so we anticipate very strong adoption of that Web Application Firewall. Which, let me remind, works hand-in-hand with our Web Application Scanning, which we do well. As soon as we uncover vulnerabilities on the web application, then we can now follow that application. We can see, by the way, tasks integrate with Imperva and with SVAR, providing similar service. Here the big advantage is that everything will be out of the same platform, the same concert, and also being capable of doing that on the global scale as we already do with our Web Application Scanning.

Great, all right, thanks, guys.

Robert Breza, RBC Capital Markets.

Hell, thanks for taking my questions. Don, was the Q3 EPS number a little lower than we had thought. Obviously you guys maintained the full-year numbers. I'm wondering if this is a second-half change or how we should think about the ratable nature as we look out into next year. Thanks.

Hi, Rob. Nothing special. The rounding here, you're down into pretty small numbers here in these differences. Q3 is a more active marketing quarter for us than Q2, and we're also adding more folks to our sales force and so forth. That's just the way the projections work out. We're totally on plan for the year.

Yes, perfect. As a follow-up, Philippe, as you look out there from a hiring perspective, down-time noted, are you seeing much of a change from hiring of where you're able to hire people from competitively by geography? Any insight could be helpful. Thanks.

Yes, in fact, what we're finding, we've been hiring quite a few person from consulting companies, like Accenture, which we find has a really good understanding of how to sell at a higher level. And also a really bold technology understanding, as well as service understanding, which is what quality is all about. And also, as we are expanding our partnerships, I think as individuals they know also how to talk very well with partners. So, this is working very well for us.

Okay, thank you.

Rob Owens, Pacific Crest.

Great, and thank you very much. With other private companies in the vulnerability management sector getting a little more aggressive or appearing to, can you talk about what you're seeing from a competitive standpoint and any change in win rates?

What do you mean by being more aggressive? In which sense?

Seems like the marketing's been a little more aggressive, and maybe even the pricing in some instances.

We see the same. I think we see, as you very well know, nCircle was acquired by Tripwire, which essentially for us is good news, as it adds more complexity. We have been replacing nCircle in many of their large accounts and now continuing of doing so. We still see aggressiveness in terms of pricing the low end. After all, vulnerability management, it's fundamentally an issue of deployment. You need to be capable of deploying and operating, we'll make interesting announcements relatively soon, strengthening our Vulnerability Management Application.

So we see not much difference. We continue our market penetration both at the high end and at the low end. It's a relatively slow process, but still we're going well. Because again, vulnerability management, as we discussed last time, is not good enough to identify the vulnerabilities you need to do something about. So we are really working on facilitating doing something about. Next frontier, if you prefer.

Don, can you give us a sense of where your renewal rates are running both on an apples to apples basis and along with up-sell?

Yes, I think our renewal rates are as good or better as they were last year. At the enterprise level, we renew 95% or better of those accounts, probably about 10% less in the SMB space. That's pretty consistent with a year ago. We've been doing very well on up-sells, especially with not just up-sells of existing products, but taking the new products. That's been the real driver there. We're seeing more and more of Web Application Scanning up-sells to VM customers, that kind of thing. I'd say it's picking up.

Yes, and one thing is that with the very recent introduction of our QualysGuard Express Lite for SMB, for some very small businesses, which has been, by the way, extremely well received. This has give us the opportunity to make our SMB and SME sales force more efficient. We have been able now to separate between attacking the SME marketplace and attacking the SMB marketplace with different teams and different product packaging.

Great. If you look at Web Application Scanning in particular, are you seeing success with new customer acquisition on that front? Or are you seeing most of your success in to the installed base? Thanks.

Both. Both. In fact, Web Application Scanning definitely has become a new on ramp for businesses that we start with Web Application Scanning and the rest will follow.

Are you still there, Rob?

That's it for me. Thanks.

All right, thank you.

Erik Suppiger, JMP securities.

First off, in terms of your growth, I think you're working towards returning to a long-term growth rate of 20%. In the current quarter, it look like you're, if you look at your four-quarter bookings, it looks like it's relatively level with where you were the prior quarter. Can you talk a little bit about time horizon to get back to 20% growth? Or can you give us a little color on that?

Yes, so, Erik, you're right. The four-quarter bookings stayed about level with the prior quarter. The pace of our Business is actually quite good. Our pipelines are good. You are correct. We are targeting higher growth rates. And all I can tell you is they didn't happen yet. (laughter) But we're working very hard on that subject.

Okay. If I look at it on an individual quarter basis, it does look as though your third quarter is seasonally strong. Are the trends and indications that you would expect normal seasonality strength in the third quarter?

Yes, yes, very much so. In fact, just to remind others who may not know this, the split of our first and second half is approximately 42% of our business bookings come in the first half and about 58% come in the second half. So, yes, and we definitely see that in place now. As I said, our pipelines are very good and Philippe alluded to the strength of Web Application Scanning and so forth. Yes, I would say that's all in place to at least be similar to the past, if not, who knows, it might be better.

Okay, and then finally, you talked about some of your Managed Services partners developing in the past. Any comments on how it's going with Verizon or Accenture?

Well, it's going very well. In fact, we're expanding our relationship with both, as we discussed. They already have standardizing, they are standardizing, we see that with other partners. They are standardizing on qualities and pushing qualities. They see us as a very strategic platform for them, as we can deliver not only VM but the suite of new services. They are all very engaged with the development of our new services, as well. So this is going very well.

Not only that, Erik, but one of the largest deals, one of those names on that list Philippe read off earlier, was actually a Verizon deal and is early fruit from the relationship we signed last January.

Philippe, were you referring to Accenture and Verizon when you were just speaking, or was that specific to Verizon?

No, both, both. We are significantly expanding our relationship with Accenture, as well.

Okay, and then lastly, what was the head count at the end of the quarter?

The head count at the end of the quarter -- I'll have to do a quick look-up, Erik. I didn't have that right in front of me.

That's all I got. Thank you.

Well, we'll say it on the call here.

376. I was right.

Okay, thank you. Craig Nankervis, First Analysis Securities.

Thanks. Good afternoon. Nice quarter. Any color on the sales head productivity for the new hires that you brought aboard, especially the first part of last year? Are you starting to see what you'd like to see? Are they contributing at a rate that you were aiming for them to contribute at this point? Any commentary on that would be helpful.

Well, I think it's still a work in progress, Craig. If everything was perfect, I think the bookings number would be higher. So we're seeing good engagement by some of the good ones we hired early. We're still -- people coming up the curve. Remember, it's a long sales cycle business. But we are seeing increased pipelines and we're seeing some of those folks have some interesting deals on the table here for the back half of the year. So, I'd say it's still a work in progress.

Okay. Helpful. And then, Philippe, I wonder if you could very briefly review, or at least refresh for me, how much your ample new product portfolio and the various things you have going on in the pipeline that are supposed to come to market pretty soon. Can you give a flavor for how much it's customers that are asking you to be delivering these products versus specific opportunities you guys see yourselves that you can exploit in the market and that make sense for you to add on? If you could provide a little flavor there, it would be --

Yes, this is a very interesting question, in fact. Everything we do at Qualys is driven by customer. Fundamentally we have such a fantastic customer base and our customer base, that we connect very well with them. Our engineering team spends time with them. Every project that we start is with design partners, with typically two or three. They are quite significant partners. They are expertise. So every project that we have today, we have two or three major corporations engaged and really looking for the service.

And then of course what we do, once we have decided that we're going to do that, we go back to our customers and we disclose what we're doing. We get their feedback, so we really start everything on very steady ground. The thing which would be a little frustrating for us today is what, as I think that we discussed, is that Security Applications, you don't build them in one day. It requires a certain maturity level to bring the quality that we need. And in our case, we work very hard at the scalability. So we bring quality and we bring scale. These are two things which are not easy to do.

And of course our platform approach significantly help us achieving these two things which we already have demonstrated. We've done that with VM; we've done that with Web Application Scanning; we've done that with Policy Compliance. We did that also with the CI and now, of course, it's about doing it again or continuing doing it for our Web Application Firewall, for our Secure Web Gateway, for our Malware Protection Service, for our Continuous Monitoring of the Perimeter. All of these services that we're bringing to market will all share that same characteristic, quality and scale.

Okay, thanks. That's helpful. I'm all done.

Thank you.

Michael Kim, Imperial Capital.

Hi, good afternoon, guys. Wanted to get a little more color on your expectations for opportunities in the federal government sector, in particular with the availability now of the Virtualized Private Cloud and appointment of your new director, Kristi Rogers. Any specific opportunity that you're targeting in your conversations with some of the system integrators? Thanks.

Yes, in fact, yes. Let me say that we have now, with the VCblock that we mentioned earlier, with all the things that we're doing with the Continuous Monitoring of the Perimeter, all of these things that we're doing today give us the opportunity to now start to have a meaningful dialogue with the Federal Government. So we're under discussion with all of the major partners. And of course as you know, it takes time in Federal, to start to get some revenues. I think we're very well positioned, and now focused at generating more revenues from the Federal market space.

The budget contraction that we can see happening almost everywhere, it plays very well in our favor, because we eliminate a lot of the manual work through the automation, again through scale and quality. That's exactly what the Federal space needs. We're also continuing our penetration at the State level, as well. So already have a quite a strong foot hold in State.

Great. Then, Don, one question for you. I don't know if you mentioned this, but was the growth pretty balanced in the quarter between existing customers and new customers and same for bookings?

Yes, it was. Although we're seeing -- yes, I think it's pretty balanced, pretty balanced. If it tipped a little bit, I would say we're starting to see more and more up-sells of those new services and new products into customers. But basically balanced.

And same for bookings, then?

Yes.

Okay. Between Web App Scanning and Policy Compliance, it sounds like Web Application Scanning may be gaining a little bit or outpacing Policy Compliance. Is that a fair assessment, or are they pretty similar as well?

We don't like to choose between our two favorite children.

(laughter)

These two services continue to grow at a 50% plus rate. They're both doing very, very well. We don't release separate numbers on them, but they both continue to do very well.

The reason that we emphasise Web Application Scanning is because It really cuts across our entire customer base from the smallest customers up to the largest. And as Philippe mentioned, several hundred brand new customers have come to us, buying that as their first thing. That's a couple of extra bonus features of Web Application Scanning, where Policy Compliance is largely an up-sell product to enterprise customers. But they're both doing very, very well.

Yes, and I would add that with the Web Application Firewall, which works hand in hand with the Web Application Scanning, that probably will boost also our Web Application Scanning business.

Philippe, specifically your Web Application Firewall, how are you feeling about the product maturity at this point in the beta relative to competitive offerings? Can you talk about timing for commercial availability?

I think typically what we have is the fantastic architecture, which is proven, was demonstrated there, as you may recall, with the engine in beta to make sure that was a very strong and solid engine. Now it's a full application in beta. So we have, because it's all virtualized images, we do not depend on specialized hardware. We can put multiple images, if you prefer, for very large sites.

So the thing -- I think in terms of functionalities, in terms of where we are, I think we've done a very good job here. We, naturally, as we are coming in to the market, we will have to expand the content, or if you prefer, the malware signatures, which is something that we're working on. I think we're in pretty good shape, to be capable of releasing the product before the end of the year.

Great. Thank you very much.

Thank you.

(Operator Instructions)

Sanjit Singh, Wedbush Securities.

Thank you for taking my questions. Regarding the VC opportunity, do you have any sense of potential timing on when you can see the initial impact in terms of contribution to bookings?

We are starting, in fact, today, to place a few orders for the VCblock, and so we're on the process of shipping them. So you may know, in term of revenues and bookings, we don't take anything until we really have shipped and that product accepted. So, of course there's a lag, because we still need to ship them, install them. The momentum is starting.

Thank you. And regarding the percentage of customers with more than one product, is that still around 20%? Did that tick up or tick down this quarter?

Yes, Sanjit, it's still around 80%/20%. And one of reasons is, of course, more and more customers keep buying additional products. But we have most new customers buy one product on the way in the door, because usually we're solving one problem initially. So it's still 80%/20% as a metric.

That makes sense. And finally, on the competitive environment, is there still any opportunity in terms of legacy IBM customers to potentially displace? How do you view IBM versus some of the smaller competitive opportunities, like Rapid7 and nCircle?

The way we look at it is IBM essentially, IBM has two products today, which one is the VM product, which is we don't compete anymore with them. There's not many. We still replace some of these old ISR solutions in Asia. But this is not a lot of revenues that still IBM has on the VM side. So it's not much. Now, conversely, IBM has a strong presence with the AppScan, with their, what you call, AppScan product line. And now we're starting to replace them.

As we do replace [byte and annix] and WhiteHat and a few of these other competition, Rapid7 is still essentially an SMB business. They've done a good job at penetrating the market. With the new offerings that we have, I think we're going to be significantly competitive with them on the very low end of the marketplace. And on the mid market, quality is very strong, and we anticipate to continue being very good there.

I appreciate the clarity. My last question, and I apologize. On Web Allocation Firewall again, is there a target customer that's going to be more of an SMB offering versus large enterprise? Or cuts across the entire --

No, it cut across. This is what is interesting with our approach, because it's a virtual image. If you have for example, your installation, at Amazon. Then you would take the Web Application Scanning, a virtual image on Amazon, where also the VM, the vulnerability management, virtual image, you would also add the Web Application Scanning, virtual image, and then you will have the Web Application Firewall image. So that's for the Amazon platform. We are also now looking porting all of that same picture resolution to Azure, another platform. This is just essentially porting that to a different virtual environment.

And then the SMB versus -- the small businesses versus the large businesses, essentially the numbers are virtual images that you're going to [average for]. In SMB you will have one virtual image, and then you're a much larger company, then you will have multiple virtual image that you will essentially integrate into your balancers. And we will also provide you with the ability to have a full box totally managed, like we manage everything as well, which a load balancer is included into it.

So the same virtual image in a way that we clone for performance and then it's all ours, the same Qualys platform, totally central management. that's, again, a very big advantage, especially for very large corporations.

I appreciate it. Thank you for answering the questions.

Steve Ashley, Robert W. Baird.

Great. I'm going to start with a couple housekeeping questions. I apologize if I missed this. Did you give the percentage breakdown of revenue between Americas and international?

No, we didn't, Steve, but it's 70%/30%.

Great. And then also, just another housekeeping. In the past, you provided the growth rate of VM, year-over-year and new SKUs year-over-year. Do you have those metrics?

Yes, we didn't provide them in what we said, but VM has continued to grow at about 15% rate, that's Vulnerability Management. And the new services, Policy Compliance and Web App Scanning have continued to grow greater than a 50% rate. As they were last quarter.

Great. And then in terms of the Web Application Firewall, are there any other SaaS or cloud-based web application firewalls in the market today?

Not the way Qualys has done it. There is a few web application firewall on the Amazon platform that we know, but the way Qualys has done, our implementation, as I mentioned earlier with these various virtual images or that managed from the central point. I think we're essentially the only one to do that approach. Because again, the platform, essentially we're the only one with such a platform. It was a little bit easier for us to do than for our competitor, which have boxes, essentially.

So I'm assuming the classic SaaS or cloud value proposition is that you will offer a lower total cost of ownership solution for Web Application Firewall than the current client service solutions in the market. Does that sound right?

Absolutely.

And there is a real time or an other advantage that comes from you being cloud-based?

The big advantage we have is essentially the way that we can share much more easily. First of all, it's managed from a central place. Like with all of our applications, this allows us to tie, again, Web Application Scanning and Web Application Firewall as one entity. Also by the way, working as building a log analysis, so as soon as we discover a vulnerability, we can immediately fire a question into the log that we'll have aggregated, and find out if that vulnerability has not already been exploited. And again, all of that out of the same platform one single console, accessible from anywhere in the world. This is the advantage of the cloud.

In term of speed, the big advantage we have here is that we can throw multiple virtual images on standard hardware to get the performance. We don't have to go the route of a specialized chip, which is obviously a significant cost advantage and simplification. So that's inherent to our platform, essentially.

Great. Thanks so much.

Okay. Thank you, ladies and gentlemen. This does conclude our Q&A session so I would like to now turn it back to Philippe Courtot for any concluding remarks.

So thank you again for all of you for joining us today. We are really pleased with our progress so far in the year. And are very excited about our upcoming new product and feature, as we discussed. We believe that we are very well positioned to deliver best-of-class security and compliance solutions to our customers and partners, as we continue to expand our cloud platform on one hand and then the application that will be on the top of it. Should you have any follow-up questions, Don and I are always available. And we look forward to speaking with you next quarter. Thank you very much.

Okay, ladies and gentlemen, this does conclude your conference. You may now disconnect and have a great day.