Aug 5, 2013
Executives
Don McCauley - CFO Philippe Courtot - Chairman and CEO
Analysts
Lauren Choi - JPMorgan Philip Winslow - Credit Suisse Robert Breza - RBC Capital Markets Rob Owens - Pacific Crest Erik Suppiger - JMP Securities Craig Nankervis - First Analysis Michael Kim - Imperial Capital Sanjit Singh - Wedbush Steven Ashley - Robert W. Baird
Operator
Good day everyone, and welcome to the Qualys Second Quarter 2013 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 and 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.
Don McCauley
Welcome to the Qualys second quarter 2013 investor conference call. I'm Don McCauley, CFO and I am here with Philippe 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 our 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 that 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 the most directly comparable GAAP financial measures are included in our earnings press release that is available on our website. Finally, one housekeeping item I'd 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 broke 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.
Philippe Courtot
Thanks 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 U.S., 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.
Don 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, with the guidance range we provided last quarter, and marks 18% growth over 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 sales of our Web Application Scanning and Policy Compliance solutions, both of which continue to show strong growth. Our investments in building the security and compliance cloud platform, upon which we can deliver enhancements and new solutions are paying off, and we think thsee will enable Qualys to stay ahead of our competition.
During our last call, we discussed our Virtualized Private Cloud platform. In 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 are 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 SMEs to protect themselves against Internet attackers and simplify compliance with PCI and regulatory mandates. This new package allows Qualys and its partners to target small businesses more effectively, and to provide them with a solution that meets their needs and budgetary requirements.
We released the QualysGuard Private Cloud Platform on the VCE Vblock as mentioned, where we are providing managed security service providers and government entities with a complete and integrated turnkey solution, in which data resides on premise, which can be critical to this organization. Yet, it does also all the performance and scalability of the Qualys public platform.
It stays on the same cloud base, and shares the same update mechanism. We introduced 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 the web applications running in the cloud or on premise against known and emerging threats across their entire global networks.
And 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, is we are continuing to invest in expanding our cloud platform to include significant functionalities such as continuous perimeter scanning and global assets, inventory discovery and tagging; which is in addition [to adding] new and improved capabilities including secure web gateway, web application log analysis and mobile agent technologies, which we currently expect would be released for Beta (inaudible) later this year.
One other significant item is that we are pleased to welcome 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 & Phillips, LLP. She replaces Yves Sisteron, who led our last 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 would now turn the call over to Don.
Don McCauley
Thanks Philippe. Qualys continue to deliver on our key financial and reporting metrics, and we are 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. Full 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 partner's 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 full quarter bookings metric, then the full 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 full quarter's booking 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 the small adjustments to normalize full 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, and 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 is 16%. As we have discussed previously, the decrease in gross margin percentage are related to increased depreciation resulting from higher level 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 U.S.
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 was $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.
And just to repeat our previously stated intention, we plan to average approximately $3 million per quarter 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 per share to $0.02, and non-GAAP EPS is expected to be in the range of $0.03 to $0.05. This third quarter EPS estimates are based on approximately $36.1 million weighted average diluted share 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
(Operator Instructions). We will take our first question coming from Sterling Auty from JPMorgan.
Sir, please go ahead.
Lauren Choi - JPMorgan
Hi, this is Lauren Choi for Sterling Auty. Just first question around, I guess, your international business.
Can you just talk about maybe your business in Europe, as well as -- I guess, how it came in relative to what you expected? Thank you.
Don McCauley
Yes, hi Lauren. We had a solid quarter in Europe, actually a little better than our first quarter in fact.
So we had talked about Europe two quarters, it being weak, but it came back well in Q1, and even a little better in Q2.
Lauren Choi - JPMorgan
Great. Just another question, in terms of the new customer additions -- in terms of I guess, whole number or average deal size, could you just talk about how that payment is relative to your expectations?
Thanks.
Don McCauley
I think we had a pretty much as-expected quarter as you can see, from our kind of top to bottom line metrics. So, I think we have seen consistent performance compared to our expectations, both in the number of customers and the size of the deals.
Lauren Choi - JPMorgan
Okay great. Thank you very much.
Don McCauley
You're welcome.
Operator
Thank you. And our next question is coming from Phil Winslow from Credit Suisse.
Phil, please go ahead with your question.
Philip Winslow - Credit Suisse
Thanks guys and congrats on a good quarter. Just had a question on -- as you start to build your plan for the second half and then as you look at the next year, sort of just where you are and sort of the go to market strategy with sales and then with the channel, and in particular in terms of just starting to cross-sell a broader portfolio, just what are your key -- your focus points?
Then also, just on the Web Application Firewall side, just speaking of the expanded product portfolio. Just any sort of customer data points or (inaudible), that would be great.
Philippe Courtot
Well, what I can say is that these products are truly well received by our customer base, small and large. I think with the web application firewall we have really a fantastic architecture.
It's all virtualized images, you could have -- protect your web application on Amazon. You could protect them on your global enterprise, and I think we are very happy to have been able now to put the entire solution in Beta on both, on the enterprise and for Amazon.
So it's quite a big announcement for us.
Philip Winslow - Credit Suisse
Great. And then also just focus on the go-to-market side, just sort of where you kind of stand in terms of the channel preparedness, your salesforce for selling these larger products?
Then sort of what the plan is for the second half and as you sort of put the initial plan together for next year too?
Philippe Courtot
Yeah. So one of the big advantage that you have assumed -- as you know is that we have an extremely customer base of loyal customers.
It's very easy for them to try the product, thanks to our Cloud Platform model. Same thing with the partners.
In fact, we are spending significantly with our partnerships everywhere, (inaudible), and now within from the -- if you prefer from the prevention to the protection. Prevention has faster adoption rate in general than protection, because with prevention, you need to do something about it, when protection is almost like a deal 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 is really doing very well, as soon as we uncover vulnerabilities on the web application, then we can now firewall that application. We currently by the way have integrated with Imperva, and with that by providing similar service here, the big advantage is that everything we did out of the same platform, the same [console] and also being capable of doing that on the global scale, as we already do with our Web Application Scanning.
Philip Winslow - Credit Suisse
Great. All right.
Thanks guys.
Operator
Thank you. And we will take our next question from Robert Breza from RBC Capital Markets.
Robert, please go ahead.
Robert Breza - RBC Capital Markets
Hi. Thanks for taking my questions.
Don, I note the key three EPS numbers were lower than what we had thought. Obviously you guys maintained the full year numbers.
I was just wondering if this is kind of the second half change or how we should think about the kind of the ratable nature as we look out into next year? Thanks.
Don McCauley
Hi Rob. Nothing special.
The rounding here, you know (inaudible) pretty small numbers in these differences. Q3 is a more active marketing quarter for us than Q2, and we are also adding more folks to our salesforce and so forth.
So we are just -- it's just the way the projections work out. But we are totally on plan for the year.
Robert Breza - RBC Capital Markets
Perfect. Maybe as a follow-up.
Philippe as you look out there from a hiring perspective, Don kind of noted, are you seeing much of a change from hiring, where you are able to hire people from competitively by geography? Any insight could be helpful.
Thanks.
Philippe Courtot
Yes in fact, what we are finding, we have been hiring quite a few persons from consistent companies, you know, like Accenture, which we find has a really good understanding of how to set at a higher level, and also (inaudible) the technology understanding, as well as that service understanding, which is what Qualys is all about. And also, as we are expanding our partnerships adding these individuals, they know also how to talk very well with partners.
So this is working very well for us.
Robert Breza - RBC Capital Markets
Perfect. Thank you.
Operator
Thank you. And our next question is coming from Rob Owens from Pacific Crest.
Please go ahead Rob.
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 just what you are seeing from a competitive standpoint, and any change in win rates?
Philippe Courtot
What do you mean by being more aggressive, in which sense?
Rob Owens - Pacific Crest
Seems like the market is being a little aggressive maybe in the pricing in some instances?
Philippe Courtot
We see the same. I think we see the same.
I think we see, as you very well know nCircle (inaudible), which essentially for us is good news, as it adds more complexity. We have been replacing nCircle in many of their large accounts, and are continuing doing so.
We did see a great [decrease] in terms of pricing the low end. After all vulnerability management is fundamentally initial deployment.
We need to be capable of deploying and operating. We are going to make interesting announcements, where there will be soon strengthening of vulnerability management application.
So we have seen 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 are very 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 possibly doing something about, that's our next frontier, if you prefer.
Rob Owens - Pacific Crest
Then Don, can you give us a sense of where your renewal rates are running, both on an apples to apples basis, and the one with upsell?
Don McCauley
I think our renewal rates are, as good or better as they were last year, and at the enterprise level, we renew 95% or better of those accounts, probably about 10% less than the SME space, that's pretty consistent with a year ago. And we have been doing very well on upsells, especially with -- not just upsells of existing products, but taking the new products, that has been the real driver there.
We are seeing more and more, like, Web Application Scanning upscales to VM customers, that kind of thing. So I'd say its picking up.
Philippe Courtot
And one thing is that the -- very recent introduction of QualysGuard Express Lite for SME, for very small businesses, which has been by the way, very well received. This gives us the opportunity to make our SMB and SME sales force to be more efficient, as we have been able now to separate between attacking the SME marketplace, and with attacking the SMB marketplace with different teams, and different product packaging.
Rob Owens - Pacific Crest
Great, and if you look at web application scanning in particular, are you seeing success with new customer acquisition on that front, or is basically most your success into the install base? Thanks.
Philippe Courtot
Both. In fact, Web Application Scanning definitely has become a new ramp for businesses that -- we start with Web Application Scanning and the rest will follow.
Don McCauley
Are you still there Rob?
Rob Owens - Pacific Crest
That's it for me. Thanks.
Operator
Thank you. Our next question is from Erik Suppiger from JMP Securities.
Erik, please go ahead.
Erik Suppiger - JMP Securities
First off, just in terms of your growth, I think you are working towards returning to a long term growth rate of 20%. In the current quarter, it looks like your -- if you look at your full quarter bookings, it looks like its relatively leveled with where you were in the prior quarter.
Can you talk a little bit about maybe time horizon to get back to 20% growth, or can you give us a little color on that?
Don McCauley
Yes so Eric, you are right, the full 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 I would say, they didn't tap in yet, but we are working very hard on that subject.
Erik Suppiger - JMP Securities
Okay. As I look at on an individual quarter basis, it does look as though your third quarter is seasonally strong.
Are the trends an indication that you would expect normal seasonality strengthen in the third quarter?
Don McCauley
Yeah, very much so. In fact, just to remind others that may not know, but 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 our pipelines are very good and fully diluted to the strength of Web Application Scanning and so forth. So yes, I would say, that's all in place to at least be similar to the past, that now that might be better.
Erik Suppiger - JMP Securities
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?
Philippe Courtot
It's going very well. In fact, we are expanding our relationship with both, as we discussed.
They are really now standardizing with other partners, they are standardizing on Qualys and really pushing Qualys this year. So it's a very strategic platform for them, as we can deliver not only VM, but a suite of new strategies.
They are all very engaged with the development of our new strategies as well, so this is going very well.
Don McCauley
Not only that Erik, but one of the largest deals, one of those names on that list that Philippe read off earlier, was actually a Verizon deal, and is early fruit from the relationship we signed last January.
Erik Suppiger - JMP Securities
Great. Were you, Philippe, were you referring to Accenture and Verizon when you were speaking, or was that specific to Verizon?
Philippe Courtot
No, both. We are significantly expanding our relationship with Accenture as well.
Erik Suppiger - JMP Securities
Then lastly, what was the headcount at the end of the quarter?
Don McCauley
The headcount at the end of the quarter? We have to do a quick lookup, Erik, I didn't have that right in front of me.
Erik Suppiger - JMP Securities
That's all I got, thank you.
Don McCauley
We will say it on the call here.
Philippe Courtot
376, I was right.
Operator
Thank you. Our next question is from Craig Nankervis from First Analysis Securities.
Craig, please go ahead.
Craig Nankervis - First Analysis
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?
Don McCauley
Well I think it's still a work in progress, Craig. If everything was perfect, I think the bookings then would be higher.
So we are seeing good engagement by some of the good ones we hired early, with still people coming up the curve. Remember it's a long sell cycle business, but we are seeing increased pipelines, and we are 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.
Craig Nankervis - First Analysis
Okay, helpful. Then, Philippe, I just 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 just give a flavor for how much is customers that are asking you to be delivering these products, versus specific opportunities you guys see yourself, that you can exploit in the market, and that makes sense for you to add on?
If you could just provide a little flavor there?
Philippe Courtot
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 large customer base, that we connect very well with them, or (inaudible) spent time with them. Every project that we started with design partners, typically are two or three.
They are kind of -- they are quite significant partners, their expertise. And 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 are going to do that, we go back to our customers, and we disclose what we are doing, we get their feedback.
So we really start everything on a very steady ground. The thing which would be frustrating for us today, as I think we discussed, is that security applications, you don't build them in one day, it requires 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 we already do, and of course our platform approach significantly help us, achieving these two things, which we already have demonstrated with -- we have done that with VM.
We have done that with Web Application Scanning; we have done that with policy compliance. We did that also with the CI and now of course it's about doing it again for -- continuing doing it for our Web Application Firewall; for our web gateway, for our malware protection service, for our continuous (inaudible); all of these services that we are bringing to market, will all share that same characteristic, quality and scale.
Craig Nankervis - First Analysis
Okay, thanks. That's helpful, and well done.
Philippe Courtot
Thank you.
Operator
Thank you. So our next question comes from Michael Kim from Imperial Capital.
Michael, please go ahead.
Michael Kim - Imperial Capital
Hi, good afternoon guys. Just wanted to get a little more color on your expectations for opportunities in the Federal Government sector, in particular with the availability now with the virtualized private cloud and the appointment of your new director Kristi Rogers.
Any specific opportunity that you are targeting in your conversations with some of the system integrators? Thanks.
Philippe Courtot
Yes, in fact. Yes.
Let me say that, now with the VCE Vblock that we mentioned earlier, with all the things we are doing, with the continuous monitoring of the perimeter, all these things that we are doing today, give us the opportunity to now come to have a meaningful dialog with the Federal Government. So we are in discussion with all of the major partners, and of course as you know, it takes time, to -- in Federal, to start to get some revenues.
I think we are 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, plays very well in our favor, because we eliminate a lot of the manual work with the automation we gain through scale and quality, that's exactly what the federal space needs.
We are also continuing our penetration at the state level as well, so we already have quite a very strong foothold in state.
Michael Kim - Imperial Capital
Great, and then Don, one question for you. It was the -- I don't know if you mentioned this, but with the growth pretty balanced in the quarter between existing customer and new customers and same for bookings?
Don McCauley
Yes it was. We are seeing -- I think it was pretty balanced.
It's just -- we are starting to see more and more upsells of those new services and new products into customers, but basically balanced.
Michael Kim - Imperial Capital
And same for bookings and --?
Don McCauley
Yes.
Michael Kim - Imperial Capital
Okay. And between web app scanning and policy compliance, it sounds like web application scanning maybe getting a little bit, or outpacing policy compliance, is that a fair assessment or are they pretty similar as well?
Don McCauley
Well we don't like to choose between our two favorite children. These two services continue to grow at a 50% plus rate, and they are both doing very-very well.
So we don't really separate numbers on them, but they both continue to do very well. The reason we emphasize 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.
So that's a couple of extra bonus features of web application scanning. With compliance, it's largely an upsell product to enterprise customers, but they are both doing very-very well.
Philippe Courtot
And I would add that, with the Web Application Firewall which works hand in hand with Web Application Scanning. That probably will boost also our web application scanning business.
Michael Kim - Imperial Capital
And so specific to web application firewall, how are you feeling about the product maturity at this point in the Beta, relative to maybe the competitive offerings, and can you talk about timing for commercial availability?
Philippe Courtot
I think today what we have is the fantastic architecture, which is (inaudible), where they demonstrated that. As you may recall, we put forward the engine in beta, to make sure that we have a very strong and solid engine.
Now it's the full application in Beta. So we are because it's all virtualized images.
We do not depend on specialized hardware, we can do multiple images, if you prefer for very large size. So the thing -- I think in terms of functionality, in terms of where we are, I think we have done a very good job here.
We naturally as well, coming into the market, we will have to expand the content, or if you prefer, the malware signatures, which is something that we are working on. I think we are in a pretty good shape, to be capable of releasing the product to production before the end of the year.
Michael Kim - Imperial Capital
Great. Thanks very much.
Operator
Thank you. (Operator Instructions).
Our next question is from Sanjit Singh from Wedbush Securities. Sanjit, please go ahead.
Sanjit Singh - Wedbush
Thank you for taking my questions. Regarding the VC opportunity, do you have any sense of potential timing on when we could see the initial impact, in terms of contribution of bookings?
Philippe Courtot
We don't (inaudible) an impact today to place a few orders for the VC block, so we are on the process of shipping them. As you may know, in terms of revenue and bookings, we don't take anything until we really have shipped and have that product accepted.
So that causes a lag, because we still need to ship them, install them, but we will -- the momentum is starting.
Sanjit Singh - Wedbush
Thank you. And regarding the percentage of customers with more than one product, is that still around 20%, could that tick up or tick down this quarter?
Don McCauley
Yes Sanjit, so it's still around 80-20. Then one of the reasons is, more and more customers keep buying additional parts, but we have most new customers buy one product on the way in the door, because usually we are solving one problem initially.
So it's still 80-20 as a metric.
Sanjit Singh - Wedbush
That makes sense. And probably on the competitive environment, is there still any opportunity in terms of legacy IBM customers to potentially displays.
How do you view, maybe IBM versus some of the smaller competitive place of opportunities like Rapid7 and nCircle?
Philippe Courtot
The way we look at IBM essentially -- IBM has two products today, one is the VM product, which is -- we don't compete any more with them. There is 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 adversity.
IBM has a strong presence with the AppScan, with their -- what you call AppScan product line, and now we are starting to replace them. As we do replace by DynamicS and WhiteHat and a few of these other competition.
Rapid7 is still essentially an SMB business. They have done a good job of penetrating that market, with the new offering that we have, I think we are going to be significantly competitive with them on the very low end of the marketplace.
And in the main market Qualys is very strong, and we anticipate to continue being very good there.
Sanjit Singh - Wedbush
I appreciate the color. My last question, I apologize.
On Web Application Firewall again, is there a target customer that's going to be more of an SMB offering, versus large enterprise or just cut across the entire --
Philippe Courtot
This is what is interesting with our approach, because of a virtual image. If you are for example, your installation, at Amazon, then you will take the Web Application Scanning, a virtual image on Amazon, we are also the VM, Vulnerability Management, virtual image, you will also add the web application scanning, the virtual image, and then you will have the web application firewall image.
So that's for the Amazon platform. We are also now looking at porting all of that same picture resolution to Azure and other platform.
This is just essentially forcing that to a different virtual environment. Then the SMB versus -- the small businesses versus the large businesses, essentially the number of virtual images, that (inaudible), and SMB will have one virtual image, and then if you are a much larger company, then you will have multiple virtual image, that you will essentially integrate into your own balances, and we will also provide you with the ability to have a toolbox to totally manage, like we manage everything as well, which load balancers are included into it.
So the same virtual image, in a way that we clone for performance, and then it's all out of the same Qualys platform, totally central management. That again is a very big advantage, especially for very large corporations.
Sanjit Singh - Wedbush
I appreciate. Thank you for the answer to the question.
Operator
Thank you. We will take our next question from Steve Ashley from Robert W.
Baird. Steve, please go ahead.
Steven Ashley - Robert W. Baird
Great. I am going to start with a couple of housekeeping questions, and I apologize if I missed this.
Did you give the percentage breakdown of revenue between Americas and International?
Don McCauley
No we didn't Steve, but it's 70-30.
Steven Ashley - Robert W. Baird
Great. Then also just another housekeeping.
In the past, you provided a growth rate of VM year-over-year and the new SKUs year-over-year. Do you have those records?
Don McCauley
Yes. Those have -- we didn't provide them in what we said, but VM has continued to grow at about a 15% rate, that's vulnerability management, and the new services policy compliance and web app scanning have continued to grow at greater than a 50% rate, as they were last quarter.
Steven Ashley - Robert W. Baird
Then, in terms of the web application firewall, are there any other fast or cloud based web application firewalls in the market today?
Philippe Courtot
Not the way Qualys has done. There is a few web application firewall on the Amazon platform that we know, but the way Qualys has done, in implementation, as I mentioned earlier, with these various virtual images all that managed from a central point, I think we are essentially the only ones with that approach; because again, the fact, essentially we are the only one who have such a platform.
So it was a little bit easier for us, difficult for our competitor, which have boxes, essentially.
Steven Ashley - Robert W. Baird
Yes. I am assuming the classics fast or cloud value proposition is that, you will offer a lower total cost of ownership solution for web application firewall, than the current client-server solutions in the market.
Does that sound right?
Philippe Courtot
Absolutely.
Steven Ashley - Robert W. Baird
Is there a real time or other advantage that comes from you being cloud-based?
Philippe Courtot
The big advantage we have is essentially the way that we can share much more easily. First of all, it's managed from the central place, like with all of our applications that allows us to tie again, Web Application Scanning and Web Application Firewall as one entity.
Also by the way, working at building large analysis. So as soon as we discover a vulnerability, we can immediately file a question into the log that we will have aggregated and find out if that vulnerability has not already been exploited.
Again, all of that out of the same platform, one single console, accessible from anywhere in the world, which is the advantage of the cloud. In terms of speed, the big advantage we have here is that we can throw multiple virtual images and standard hardware to get the performance.
You don't have to go to the route of specialized chip, which is obviously a significant cost advantage, and simplification. So that's inherent to our platform essentially.
Steven Ashley - Robert W. Baird
Great. Thanks so much.
Operator
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.
Philippe Courtot
So thank you again all of you for joining us today. We are really pleased with our progress so far, and we are very excited about our upcoming new products and features 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, then the application that we are building on the top of it. So if 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.
Operator
Okay. Ladies and gentlemen, this does conclude your conference.
You may now disconnect, and have a great day.