QLYS - NASDAQ

Good day and thank you for standing by. Welcome to the Qualys Third Quarter 2023 Investor Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today’s conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Blair King. Sir, please go ahead.

Thank you, Chris. Good afternoon, and welcome, everyone, to our Qualys' Third Quarter 2023 Earnings Call. Joining me today to discuss our results are Sumedh Thakar, our President and CEO; and Joo Mi Kim, our CFO. Before we get started, I would 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-K. Any forward-looking statements that 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 now over to Sumit.

Thank you, Blair, and welcome to our third quarter earnings call. In Q3, we continued to deliver strong financial results, reflecting our ongoing commitment to rapid innovation and customer success. We experienced another quarter of steady VMDR adoption, which is now deployed by 54% of our customers worldwide. Key competitive VMDR wins in Q3 included a leading multinational conglomerate, several global financial services, technology and manufacturing companies, a large government agency and multiple new and other existing customers, both down market and in the Global 2000. Adding to these wins, I will take a moment to share a couple of examples of how our customers and partners are expanding their use of Qualys capabilities to further consolidate the security side. On the customer front, a Fortune 100 biotech company was overwhelmed by the number of security tools it deployed and needed a solution to not only provide better security outcomes, but also consume fewer point products, agents and resources through a unified dashboard in a mid-six-figure booking upsell this customer who already deployed cybersecurity asset management with External Attack Surface management and VMDR expanded its use of VMD TrueRisk to over 290,000 assets, while adding our web application scanning, task management and total cloud CNAP solutions. In doing so, this customer consolidated three competing vendors across on-prem, cloud and multi-cloud environments through an organically integrated platform with our innovative technologies, unmatched platform, effect and focus, reducing our focus on reducing risk and friction. This win underscores Qualys ability to eclipse pilot solutions and advance our leadership in the industry. Specifically highlighting the momentum we're seeing with our total cloud CNAP solutions in a highly strategic and competitive mid-6-figure booking cross-sell for its 200 existing VMDR and patch management customers selected for the cloud to scale their container deployments in over 50,000 assets monitoring millions of containers images daily. through its evaluation of competing cloud security promoters, this customer determined that alternative point solutions added complexity to their operations lack integration and missed detections, which hindered the ability to assess the risk and consolidate the security tools. Today, through a highly scalable, natively integrated CNAP solution, the Qualys Cloud Platform provides complete visibility of this customer's attack surface with advanced AI/ML technologies to uniquely detect zero-day malware while prioritizing and remediating risk at scale in real time. Our early wins in cloud and container environment are a testament to the extensibility of the Qualys Cloud platform with unified dashboard and our adaptive subscription model. Today, we have over 31 million agents already supporting workloads in the cloud, while this is well armed with organically integrated total cloud CNAP solution that unifies cloud workload protection Cloud Security Posture Management, CSPM, cloud detection and response, infrastructure score and container security powered by AI Threat Detection and Insight Total Cloud was recognized by coupling or -- as a strong technology leader in cloud security ahead of several competing modern cloud point solutions and next gen platforms. I'm quite pleased by the early momentum we are experiencing in the market with our total cloud and increasingly encouraging customer feedback. Additionally, new customers continue to adopt cybersecurity asset management with external attack surface management and patch management alongside the VMDR right out of the gate. We believe this further highlights Qualys' ability to help customers not only detect but also quantify prioritize and remediate risk across all environments much faster than alternate siloed solutions. On the partner front, in Q3, we continued to advance our evolving ecosystem with two leading global managed service providers, which also expanded their offerings beyond VMDR to include our cybersecurity asset management and patch management capabilities. These partners have indicated they chose Qualys over competing solutions due to the ease of orchestration natively integrated platform and single agent approach to simplify their operations and significantly reduce remediation times for their customers. In addition, we expanded our relationship with another leading cloud provider, which is now taking the Qualys Cloud platform available in its marketplace. With wins such as this one, I have shared today customers spending 500,000 more with us in Q3 grew 15% from a year ago to 174. With more and more customers beginning to perceive 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 especially in light of the recent IDC study highlighting a 403% ROI for customers choosing to partner Qualys with a platform approach. As I have said before, a cornerstone of our strategy is engineering innovation and with the customer-first product-led growth focus, we challenge ourselves every day to lead the industry. Executing against this agenda we will unveil our new platform approach at our upcoming Qualys Security Conference in Orlando from November 6 to November 9. This new approach will seamlessly integrate any number of third-party security tools in the Qualys Cloud platform. Regardless of the variety of when we utilized within an organization's infrastructure Qualys will soon harness automated insights into critical areas of risk spanning on-prem cloud and multi-cloud assets to uniquely enable comprehensive remediation wise risk posture assessment with new groundbreaking remediation capability. At this conference, our product and engineering teams will further showcase additional innovations on the cloud platform, including our advancements in delivering ML and AI-based predictive insights, first-party vulnerability and discontinuation detection response, the integration of software supply chain security into continuous integration and delivery CI/CD pipelines and more. Additionally, you can hear our customers speak first time about how our continuous innovation on the platform enables organization simultaneously reduce complexity and risk in their environment as they standardize our trusted platform that delivers an immediate ROI and lower total cost of ownership relative to siloed traditional detection-only technologies. We have over 900 people registered to attend and look forward to seeing many of you there. In summary, we are delivering strong profitability and cash flow while building business momentum in both our core and cloud expansion market, as companies uniformly recognized security transformation is fundamental to combat in today's heightened threat and regulatory environment. As a result, customers are increasingly looking to reduce their risk exposure through the adoption of until integrated risk management platform spanning all environment instead of deploying a collection of disparate point solutions for different environments and hiring more people to manage those. We believe that our organically integrated cloud-native platform built to solve modern security challenges, Qualys is laying a foundation for future growth and well positioned to drive long-term shareholder value with a balanced approach to growth and profitability. With that, I will turn the call over to Joo Mi to further discuss our third quarter results and outlook for the fourth quarter and full year 2023.

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. Turning to third quarter results. Revenues grew 13% to $142 million, with growth from channel partners outpacing direct at 17% versus 10% growth from direct. Channel revenue contribution remained the same as last quarter at 43%. By geo, growth in the U.S. of 14% was ahead of our international business, which grew 11%. U.S. and international revenue mix remained the same as last quarter at 60% and 40%, respectively. In Q3, we started to see some indication of stabilization in the selling environment with customers confirming their prioritization of security with an IT budget, but believe ongoing budget scrutiny will linger for the foreseeable future. Reflecting the sentiment, our gross retention rate has remained largely unchanged at approximately 90%, and but our net dollar expansion rate came in lower at 106%, down from 108% last quarter. While there continues to be room for improvement from smaller customers, larger customers spending $25,000 or more with us, grew 15%. In terms of new product contribution to bookings, cost management and cybersecurity asset management combined made up 11% of LTM bookings and 19% of LTM new bookings in Q3. In addition, we're pleased to share that we're seeing an increase in interest net cloud security solution, TotalCloud CNAPP. Cloud Security Solutions made up 5% of LTM bookings in Q3, showing a return on the acquisition of TotalCloud and Blue Hexagon. Since 2021, we acquired TotalCloud, a cloud workflow management and no-code automation platform and Blue Hexagon, AI ML innovator, a cloud threat detection and response solutions to augment our cloud security solutions. It's exciting to see our continued innovation and investment in our platform is driving adoption are starting to change the market perception of Qualys as a risk management platform that can help customers consolidate multiple security point solutions. We look forward to serving as a strategic partner to our customers as they evaluate their security vendor consolidation strategy. Now turning to profitability, reflecting our scalable and sustainable business model, adjusted EBITDA for the third quarter of 2023 was $58.8 million, representing a 48% margin compared to a 44% margin a year ago. We roughly maintained our operating expenses in Q3 only up by 2% to $55.1 million. Sales and marketing was up by 9%, same growth as what we saw in Q2. While we believe some investments in response to the business climate and arrival of our new CRO in July, we achieved greater operational efficiency through focused efforts on optimizing investment. This led to EBITDA margin exceeding our expectations in Q3 and further demonstrates our ability to maintain high operating leverage, remain capital efficient while continuing to innovate and invest in our long-term growth initiatives. With this strong performance, EPS for the third quarter of 2023 was 1.51%, which came in higher than expected, partly due to the change in our tax estimates. In Q3, we recorded a 15% tax rate, but if the tax rate has remained unchanged by 24%, EPS would have been 1.37. Our tax rate guidance for both Q4 and full year 2023 is 21%. Our free cash flow for the third quarter of 2023 was $98.6 million, representing a 64% margin in the quarter and 50% year-to-date. In Q3, we continued to invest the cash we generated from operations back into quality, including $1.8 million on capital expenditures and $38.9 million to repurchase $273,000 of our outstanding shares. As of the end of the quarter, we had $106.8 million remain a share repurchase program. With that, let's turn to guidance, starting with revenue. For the full year 2023, we expect revenues to be in the range of $554 million to $555 million, representing a growth rate of 13%. For the fourth quarter of 2023, we expect revenues to be in the range of $144.1 million to $145.1 million, representing a growth rate of 10% to 11%. With respect to margins, factoring in the better-than-expected profitability to date, we expect full year 2023 EBITDA margin in the mid-40s and free cash flow margin in the mid-30s with full year EPS in the range of $5.04 to 5.14%, up from the prior range of $4.50 to $4.6. For the fourth quarter of 2023, we expect EPS in the range of $1.18 to $1.28. In Q4, we expect to spend $2 million to $3 million in capital expenditures, implying approximately $9 million to $10 million in total for the full year. We remain confident in our differentiated technology and ability to deliver on our growth opportunity long term while investing to maximize shareholder value. With that, Sumedh and I would be happy to answer any of your questions.

Thank you. [Operator Instructions] One moment, please, for our first question. And our first question will come from Mike Walkley of Canaccord Genuity. Your line is open.

Great, thanks for taking my questions and congrats on the strong profits. I guess with 54% of your customers now adopting VMDR, can you just help us think about net dollar retention trends going forward? I know it's early, but maybe you can share how some of your customers are reacting to your new solutions such as context XDR and TotalCloud that could help drive net dollar in the future?

Thanks for that question and as we talked about earlier, I think we're pretty excited about some of the things that we are releasing, especially with cloud, et cetera. Of course, the environment continues to be challenging today. And so as our customers that we are working with, they look at a platform, of course, they look at their current optimization of what they're buying from different vendors from Qualys. We continue to have great conversations. We continue to see opportunities. We continue to be happy with how CSAM patch management are becoming part of the bookings and entering new bookings. And the opportunities that we see in the future with, especially as everybody's sort of moving into the cloud and the opportunities for a truly natively built cloud platform to be an area where customers will continue to work with us to deploy our solutions to expand their VMDR offerings. So VMDR customers as they move into the cloud with all the Cloud CNAPP capabilities get not only VMDR but additional capabilities to really have one single pane of glass view for their entire cloud security. And this is the driving factor of many conversations that we are having now as they look forward to 2024 and looking into cloud security. And some of the early events that we are seeing is encouraging. And so I think the customers adopting VMDR and that is a pleased to see that continue to pick up and get to 54%. And that of course gives us the ability to have our agents deployed in more environments. And those agents being deployed does give the opportunity for us to do additional ops on CSAM, patch management, EDR, et cetera. But also now with 31 million agents running in the public cloud environments. The opportunity for us to work with them on total cloud is something that we're excited about.

Great. Thanks. Just a follow up question. Oaybe on OpEx, just with the new CRO, I know you paused as you revisited the go-to-market strategy. How should we think about with your strong margins, maybe starting to invest in sales capacity as we exit this year or into next year, I guess, another way that I'm trying to balance the macro-backup with the opportunity to maybe add sales capacity?

With

Great. Thank you very much.

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

Hi. This is Anuskha from Matt Hedberg. Thanks for taking my questions here. Maybe just to start with, can you talk about your high-level thoughts on 2024? And what you think would be the building blocks there? And then could revenue growth potentially accelerate in 2024, given easy comps and the investments you've been making over the past year?

I think it's a little early for us right now. We are going through the planning cycle. And I think taking a look at what we do today, Q4 is a huge quarter for us. So what we're trying to do is understand the current dynamics and what it will translate to our Q4 bookings, and then we'll be able to share more color in 2024, in terms of where we think that we'll be able to land for revenue growth. And -- but right now, what we see is if you take a look at our trajectory and the growth, we do see that even though the environment has stabilized, the market appears to be challenging for us. So with our net dollar expansion rate at 106%, we do see room where that could tick up a few percentage points in the coming quarters, but it's a little too early.

Got it. And then can you talk about the federal vertical a little bit. I realize it's a small vertical for you, but it looks like you've been seeing traction with it over the past few quarters. So just given the federal year end, how did that vertical perform in the quarter?

Yes. Great question. We do have increasing focus on our federal side of the business. As you said, it's not a big part of our business today. But what we're seeing is the federal agencies are also looking for a refresh or really looking for a new approach to managing the risk there, having the same challenges that through any vulnerability findings coming their way. And so when they kind of look at the Qualys platform and the ability for us to showcase the inventory, one of the management, risk management and then remediation capabilities -- those are really resonating well with them. And so as we recently got on a federal leader, we're getting through the process of getting out of a rent high certification completed, which makes us one of the only program high ready platforms for vulnerability and patch management, we do see -- as we continue to make our investments in the federal going to market, we do see a good opportunity for us in the next couple of years really to accelerate the growth for our federal business from where we are today.

Got it. Thank you.

Thank you. And one moment, please for our next question. The next question will come from Jonathan Ho of William Blair. Your line is open. Pardon me, Jonathan Ho, you're line is open. If your phone is no mute, please un-mute your line. If you are using a headset, please put on your headphone ahead phone. Hello? Mr. Ho, your line is open.

Can you hear me?

Yes. You're allowed and clear.

Okay. Sorry. Just in terms of your channel partner progress, Can you talk a little bit about what you're seeing there? And maybe what some of the lower-hanging fruit can be just given the hiring of your new CRO?

Look, we started down this sort of investment about a year -- a little bit over a year ago, taking a different approach lead to how we're working with partners. So we're pleased with the early feedback we're getting, you see some of the mix of our business also changing a bit to the partner side. And I think we do see that there is a good amount of opportunity for us to invest and increase how we work with all partners. So right now, as we look at the low-hanging fruit in terms of better deal registration, better incumbency protection that we have provided is showing some of the early impact of partners building the trust with us and working with us on some of these deals that we are working on. But then as we have Dino come on board and through the rest of the year, we look through what are the more specific opportunities for the short term with certain partners to work on investing with them so that we can get that benefit not only in the short term, but then also sort of continued focus on the partner strategy for the longer term as well. So this is definitely an area that Dino and I are very much in line with and looking forward to continuing our focus and investment on the partner side of the house.

Got it. And just as a follow-up, I guess, I'm a little bit confused because in the prepared remarks, you talked a little bit about indications that more and more customers are taking on a platform view of Qualys and sort of buying into the broader vision, but then we're seeing sort of the net retention shrink a little bit. So is this sort of customers are buying in, but because of budget constraints, they're just sort of renewing what they have, are they sort of reducing assets? I'm just trying to understand sort of how those -- those two data points align? Thank you.

Great question, and I think it continues to be challenging for our customers as well in terms of managing their spend and managing their security spend and optimizing that. And so today, we were -- we continue to be happy with our overall retention rate, which is healthy. And so the customers are pretty excited to continue to work with Qualys, and then there are definitely opportunities with -- that we work with our customers in terms of maybe they want to optimize some of their spend on a certain area of the product and then bring on other Qualys products on a platform approach, while not maybe significantly increasing their spend in this year, but creating opportunity for in the future when those budgets open up to buy additional licenses of -- additional new capabilities that we deploy with them in the current deployment that they have. And so in some cases, they are adding additional and in some cases, they are -- leverage creating new opportunities for the newer products to be deployed right now in small quantities instead of maybe some of the existing products that they have. But the conversations are definitely more on the positive side of working towards bringing more Qualys solutions and then creating opportunities for us in the future as their budgets open up a little bit so that they can expand on those additional licenses as well.

Great. Thank you.

Thank you. And again, one moment, please for our next question. Our next question will come from Brian Colley of Stephens. Your line is open.

Hi. Thanks for taking my questions. Can you just talk about how the competitive environment and how win rates as well as pricing trended this quarter?

I don't think you saw much of a change from what we have seen in the last couple of quarters. I think we definitely continue to see the similar players that we've always seen in the VM space. I think we see tremendous opportunity in the cloud security space where we are looking at and we talked a couple of examples, so we're displacing some cloud point solutions that are out there. So we see opportunities there as well. I think overall, win rates roughly a more stable sales from the last quarter. So we see opportunity as customer budgets open up and our execution also continues to improve with Dino coming on Board to be able to do better on that side as well. And I think we continue to see that similar discounting from competitors to try to get business. And that's where the opportunity for us to go back and then sort of just driving the price down, bundled capabilities like cybersecurity asset management, Patch Management that our competitors don't have is, again, creating opportunities for us where -- which is reflected in a way in the LTM 11% of overall bookings that already have CSAM and Patch Management, but also the fact that the new business, the bookings that are coming from new business, LTM looking there, over 19% of that is coming from these additional capabilities. So we are being able to take advantage of the broader platform play in competitive and discounting situation. So we can compete effectively.

Got it. Thank you. And then Joo Mi, maybe one for you. You had talked about billings kind of staying in a similar range as you saw last quarter, and obviously, you came in above that at 14% growth. I'm curious kind of where -- what areas kind of surprised you the most there? And then also, how should we think about billings growth in the fourth quarter?

Yes. As far as billings, it does have a tendency to fluctuate there are multiple different reasons why it might not exactly align with our bookings or business trajectory. But looking at it on an LTM basis, you're looking at -- it was 11% on an LTM basis growth last quarter, and it picked up to 12%. And I think it barely reflects what we're seeing in the market today in terms of our business. And for next quarter, we don't see a materially changing from that rate.

Got it. Thank you.

Thank you. And one moment for our next question. The next question will come from Yun Kim of Loop Capital Markets. Your line is open. Pardon me, Yun Kim, your line is open. [Operator Instructions] Yun Kim your line is open. You may proceed. One moment please I will go to the next question. The next question will come from Rudy Kessinger of DA Davidson. Your line is open.

Hey, guys. Thanks for taking my questions. Joo Mi, I just want to go back and clarify, I heard your prepared remarks. You said free cash flow for the full year in the mid-30% range. I just want to make sure that's accurate. That imply breakeven cash flow to negative $15 million cash flow in Q4. Did you mean mid-30s for Q4

No, it's about mid- to high 30s. So I'm expecting about only a few million in free cash flow for Q4. So you're looking at about like maybe $205 million range for the full year. And that's primarily due to deferral of the tax payments to Q4.

Okay. Got it. Okay. And then just trying to understand the puts and takes of your Q4 revenue guide, I mean, with the Q3 guide prior full year guide, you had implied a Q4 revenue guide before. And you beat revenue by about $1 million in the quarter. You saw current calculated billings reaccelerated a few points to 14%. And then you effectively lowered the Q4 implied revenue guide by about $0.5 million. And so did just what drove the outperformance in Q3 and why isn't it reflected in a higher Q4 revenue guidance?

Yes. The outperformance in Q3 and small outperformance if you take a look at it from the bookings trajectory, because I think our bookings performance is more fairly reflected by the LTM current billings growth. So you're looking at 11% to 12%. And that was better than what we had expected from basically on the new and that definitely helps with our current billings in terms of the 14% that we posted in Q3. With respect to revenue, it's not that much of a decline. If you take a look at the difference in terms of what was implied in Q4 versus the outperformance in Q3. And then there's really nothing more to within that.

Okay. Got it. Thanks for taking the questions.

Thank you. One moment please for our next question. The next question will come from Joshua Tilton of Wolfe Research. Your line is open.

Hey guys. Can you hear me?

Yes.

Great. I apologize if somebody addressed this already have kind of bounced around in the few tonight. But I remember last quarter you kind of gave like some soft guardrails around what you thought 3Q current billings growth could be based off of what 2Q was. So I'm wondering if you can kind of give us some soft guard rails on what you think 4Q current billings could be based off the strong performance you saw in 3Q.

Yes. We take that could more or less in line with Q3, so what we tend to look at is, I mean, current billings, we understand is a proxy for bookings performance and there -- it tends to be monthly. So where you're looking at it as of Q2 LTM current billings growth was 11%, Q3 trended up a little bit higher than what we had expected and landing at 12%, and we expect it to be approximately that range ending the year in Q4 for the current billings growth for the full year to be around that 12% range.

Sorry, just to confirm, you expect the -- you expect Q4 to land in a way that the LTM current billings growth is in the 12% range?

Right. So what that basically means is that Q4 around the same like maybe 13% to 14% current billings growth for Q4.

Okay. Super helpful. And then my second question is kind of a follow-up to this, but based off of what you just said, I feel like it's sort of vertigo the answer. It's been kind of a weird year. Deals have been delayed. Sales cycles are elongated scrutiny, whatever you want to call it. How do we think about -- like how do we think about the quarter's benefit for maybe some deals that slipped into -- from Q1 and Q2 driving some of the strong performance we saw. Would you really characterize that 14% growth as true 3Q performance? Does that make sense?

Yes. So I think the current billings, what's really true from our business performance perspective because billings is also impacted by the timing of enforcing. I would point to the LTM growth rate and that fairly reflects it. So as of Q2, it was 11% and Q3 was slightly better at 12%. And we think that, that barely reflects what we're seeing in the market today, and we don't see any material improvement for Q4. It will be a large quarter for us. But based on what we see today, we expect continued challenging environment, and we'll wait to see how that plays out to better understand what we think that we'll be able to achieve in 2024.

Super helpful. Thank you so much, guys.

Thank you. And again we have Yun Kim of Loop Capital Markets. Your line is open. Yun Kim, your line is open. [Operator Instructions] The next question will come from the line of Brian Essex of JPMorgan. Your line is open.

Hey, this is Doug on for Brian. Thank you so much for taking the question. Maybe just one from me. Any details that you can give on net new logo growth in the quarter?

Net new growth, it did come in better than what we had expected, but it still remains to be challenging. So, our customer count still is kind of flat. And so what we're trying to do -- so instead of for the next year is to make sure that we leverage our channel partnerships, we focus on the new business growth.

Okay, great. Thank you so much.

Thank you. Our next question will come from Matt Saltzman of Morgan Stanley. Your line is open.

Hi. Thanks for taking the question. Sumedh, a quick one for you. It's a bit of a philosophical one. But when you think about the cloud security and CNAP opportunity, there's a fair amount of debate among security practitioners around what's the best way to tackle the cloud security issue, whether it's agent base, whether it's agentless. I'm just curious if you can talk a little bit about the benefits you see from the agent-based approach that Qualys leads? Thanks.

Well, that's the beauty that we are not taking one or the other. Actually, that's the part of what we have released with our total cloud CNAP solution is this ability for us to do FlexScan, which actually allows customers to use either an agent-based or an agentless approach. And so we don't get into this debate about what's better because I think if you look at the history of Qualys, we know cloud better than anybody given that we've actually been in the cloud for 20 years. And so we understand that really well. And we went from an agent-less scanning solution for many years to adding agent-based capabilities and not replacing the agentless scanning. And so today, if you're really being honest about what is needed for a security perspective, it is a combination of agent-based wherever you want to get a lot more details and then agent-less where it's an operational impact where you want to reduce the operational impact in trading off by doing an agent-less assessment. But with our TotalCloud CNAPP Solution, we give our customers the ability to pick whichever works the best for them. And firstly, look for the most important for our customers is to understand that nobody is a cloud-only company. Everybody has cloud. They have some on-prem. They have office environments. They have laptops. So focus for everybody is how big, do I get a single unified view of cloud, non-cloud or everything together. And for that, today's cloud solutions really need to be truly cloud-native and truly organically developed. And so instead of going out and acquiring multiple different cloud solutions, I'm trying to switch them together and calling it Cloud-native. What we are focused on is really expand what we have done for all these years in the cloud platform. Our own cloud platform and then expand that into a truly organically natively integrated solution that does both agent-based, agent-less, snapshot, everything in a single platform. So customers don't have to pick and choose and have to sort of suffer conversation every time.

Great. Thanks. That's super helpful.