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No Surprises In Qualys's (NASDAQ:QLYS) Q2 Sales Numbers, Provides Encouraging Quarterly Guidance


Kayode Omotosho /
2021/08/09 4:18 pm EDT
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Cloud security and compliance software provider Qualys (NASDAQ:QLYS) reported results in line with analyst expectations in Q2 FY2021 quarter, with revenue up 12.2% year on year to $99.7 million. Qualys made a GAAP profit of $21.1 million, down on its profit of $26.3 million, in the same quarter last year.

Is now the time to buy Qualys? Access our full analysis of the earnings results here, it's free.

Qualys (QLYS) Q2 FY2021 Highlights:

  • Revenue: $99.7 million vs analyst estimates of $98.9 million (small beat)
  • EPS (non-GAAP): $0.79 vs analyst estimates of $0.68 (16.1% beat)
  • Revenue guidance for Q3 2021 is $104.1 million at the midpoint, above analyst estimates of $102.9 million
  • The company reconfirmed revenue guidance for the full year, at $406.7 million at the midpoint
  • Free cash flow of $47.6 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 78.3%, up from 77.5% previous quarter

"We delivered solid results for the second quarter reflecting the power of the Qualys Cloud Platform and its associated apps to uniquely help customers secure their digital transformations and the modern work from anywhere environment," said Sumedh Thakar, president and CEO of Qualys.

Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ:QLYS) provides organizations with software to assess their exposure to cyber-attacks.

The demand for cybersecurity is growing as more and more businesses are moving their data and processes into the cloud and are becoming exposed to attacks and malware. The growing complexity of corporate IT systems, applications and internet connected devices makes it difficult for teams to be monitoring network security manually. Employees working remotely have also made it harder for companies to keep their networks secure, thereby increasing demand for software that helps protect from breaches.

Sales Growth

As you can see below, Qualys's revenue growth has been solid over the last year, growing from quarterly revenue of $88.8 million, to $99.7 million.

Qualys Total Revenue

This quarter, Qualys's quarterly revenue was once again up 12.2% year on year. We can see that the company increased revenue by $2.94 million quarter on quarter. That's a solid improvement on the $1.95 million increase in Q1 2021, so shareholders should appreciate the re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 10.7% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Qualys's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 78.3% in Q2.

Qualys Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.78 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a good gross margin that allows companies like Qualys to fund large investments in product and sales during periods of rapid growth and be profitable when they reach reaches maturity.

Key Takeaways from Qualys's Q2 Results

With market capitalisation of $4 billion Qualys is among smaller companies, but its more than $360.2 million in cash and positive free cash flow over the last twelve months give us confidence that Qualys has the resources it needs to pursue a high growth business strategy.

It was good to see Qualys provide next quarter revenue outlook exceeding analysts’ expectations. And we were also glad to see the improvement in gross margin. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was a good quarter, showing the company is staying on target. The company is flat on the results and currently trades at $105.11 per share.

Should you invest in Qualys right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.

One way how to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.