Release Date: August 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exceeded expectations across all metrics in Q2 2026, with non-GAAP operating income of $28.9 million and free cash flow of $31.9 million.
- Detection and Response business, which is approximately 55% of total ARR, grew approximately 5% year-over-year.
- Strong balance sheet with $702.6 million in cash and investments, positioning the company to repay its $600 million convertible notes due in March 2027.
- Announced restructuring to achieve 20% non-GAAP operating margins in Q4 2026, up from 13.7% in Q2, demonstrating commitment to operational efficiency.
- Leadership team strengthened with new Chief Financial Officer, Chief Commercial Officer, and Chief Product and Technology Officer, bringing experience in scaling and turnarounds.
- Healthy adoption of Exposure Command solution, driven by new customers and upgrades from older vulnerability management products.
- Raised full-year 2026 non-GAAP operating income guidance to $129 million to $133 million, reflecting improved profitability outlook.
Negative Points
- Total ARR declined sequentially to $824 million, with non-core products driving the decline and overall ARR growth not yet at desired levels.
- Exposure Management business is not yet where it needs to be, offsetting growth in Detection and Response within core platform solutions.
- Total revenue declined approximately 1.5% year-over-year in Q2 2026, reflecting weakness in non-core product ARR.
- Non-GAAP gross margins decreased approximately 215 basis points year-over-year due to increased staffing and cloud usage costs.
- Restructuring impacts approximately 12% of the workforce, leading to severance costs that will offset cash benefits in the near term.
- Third-quarter 2026 revenue guidance implies a year-over-year decline of approximately 4%, indicating continued pressure on top-line growth.
- Core platform solutions grew only approximately 1% year-over-year, highlighting slow progress in the company's key strategic areas.
Q & A Highlights
Q: As you look across the product set, and in particular your Exposure Management platform, is the issue a function of coverage, or is it lacking functionality that your customers are looking for? And what are customers doing in this environment, especially those that haven't moved to your more comprehensive capability?
A: Wael Mohamed (CEO): The decline is mostly in the non-core, but there is work to do on the core side. For Exposure Management, the issue is focus; we were spread too thin. We are now shifting focus and investment to the core to increase our win rate. Customers are not in a "wait and see" mode; they are buying every day. They want solutions that not only identify issues but also fix them, and they are looking for vendors moving in the right direction with AI.
Q: Can you help us understand the opportunities to reaccelerate growth and the balance between showing operating leverage while trying to reaccelerate growth?
A: Wael Mohamed (CEO): We are in two big categories with a strong position and the right to win. The path to growth is a sequence over multiple quarters: first, generate cash to demonstrate operational precision; second, clear the non-core; third, stabilize the core; and fourth, return to growth. The categories we are in will allow us to get there.
Q: Is the eventual end game for the non-core product portfolio to deprecate most of it on a standalone basis, or is there an opportunity to migrate customers to the core?
A: Wael Mohamed (CEO): We are focusing energy and investment on categories where we are already a leader. Some non-core technologies will service our customers from the platform's vantage point. We are not going to chase races where the pure-play game is not ours to win. We need to defend our turf in MDR and Exposure Management, where we have the right to win, and may deemphasize some subcategories to make those choices.
Q: What are you seeing in the pipeline? Are you seeing an acceleration, and how are conversion and win rates transpiring?
A: Wael Mohamed (CEO): Customers are exploring more than buying as they figure out which vendors to bet on. They are asking about our vision for Agentic AI and the connection between Exposure Management and Detection and Response. We have over 10,000 customers and the confidence to give them answers, but we need to sharpen our story. Rafe Brown (CFO) added that sales productivity per rep is up, the team is focused on selling core platform solutions, and we are winning competitive deals against well-known competitors.
Q: How are the current changes different from the restructuring in 2023, and what is the environment for attracting and retaining talent?
A: Corey Thomas (Executive Chairman): The biggest change is clarity. We have a completely revised leadership team with experience doing turnarounds and driving growth. We enter this with a clear understanding of where to focus and a very inspired view of the work we can do for customers. Wael Mohamed (CEO) added that the team has embraced the change because of the conviction that we can serve customers the way they want to be served.
Q: Can you talk about go-to-market refinement? Are more changes expected there, and how are you embedding the job impact into guidance?
A: Wael Mohamed (CEO): We have been careful to protect the customer journey, both pre- and post-sales. We need to protect our customer base and show up when invited. Alan (CCO) is laser-focused on improving our win rate. Rafe Brown (CFO) added that every group participated in the reorganization, but there was a big focus on protecting frontline customer-facing roles. This was considered when forming guidance.
Q: When should we think of judging milestones for the products in Exposure Management and MDR, and what is the pricing commentary in the MDR market?
A: Wael Mohamed (CEO): We have done a lot of work on the product over the last year, and it's showing in our win rate. In D&R, price is rarely the differentiator; customers are looking for a partner with references and the ability to evolve into the AI world. For Exposure Management, it's about focus and making it a priority to complete the customer journey. Dan (CPTO) is managing priorities around AI-first design, vendor neutrality, and connecting exposure management with detection and response.
Q: You mentioned asking investors to judge you on cash generated and how you reinvest. What would be different about the period of time where you are investing once you get to that point?
A: Wael Mohamed (CEO): It was clear there was a core and non-core component in our book. I was pleasantly surprised that most of the decline was in the non-core. The appetite of customers to talk to us and work with us was surprising. We have the right to win in MDR and Exposure Management, and we are invited. This made me feel stronger about accelerating the restructuring to redirect energy into these two important subcategories.
Q: Can you provide more quantification around the restructuring, what hits in Q3, what is incremental in Q4, and the cash cost of the restructuring?
A: Rafe Brown (CFO): Q3 will not see much of the benefit since the restructuring is happening partway into the quarter. Q4 will provide a much cleaner view, driving the big increase in operating margin. On the cash side, severance costs will fall in Q3 and Q4, offsetting the savings from the restructuring. We are maintaining our free cash flow guidance of approximately $130 million for the full year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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