Cloud security and compliance software provider Qualys (NASDAQ:QLYS) beat analyst expectations in Q2 FY2022 quarter, with revenue up 20.2% year on year to $119.8 million. The company expects that next quarter's revenue would be around $124.8 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Qualys made a GAAP profit of $26.5 million, improving on its profit of $21.1 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 FY2022 Highlights:
- Revenue: $119.8 million vs analyst estimates of $117.5 million (2% beat)
- EPS (non-GAAP): $0.89 vs analyst estimates of $0.79 (12.2% beat)
- Revenue guidance for Q3 2022 is $124.8 million at the midpoint, above analyst estimates of $124 million
- The company reconfirmed revenue guidance for the full year, at $488.7 million at the midpoint
- Free cash flow of $30.3 million, down 57.5% from previous quarter
- Gross Margin (GAAP): 79.1%, in line with same quarter last year
"We are pleased to report another quarter of strong revenue growth and cash flow generation," said Sumedh Thakar, president and CEO.
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, which along with a major increase in employees working remotely, has increased their exposure to attacks and malware. Additionally, the growing array of corporate IT systems, applications and internet connected devices has increased the complexity of network security, all of which has substantially increased the demand for software meant to protect data breaches.
As you can see below, Qualys's revenue growth has been mediocre over the last year, growing from quarterly revenue of $99.7 million, to $119.8 million.
This quarter, Qualys's quarterly revenue was up a very solid 20.2% year on year, which is above average for the company. On top of that, revenue increased $6.47 million quarter on quarter, a very strong improvement on the $3.64 million increase in Q1 2022, which shows acceleration of growth, and is great to see.
Guidance for the next quarter indicates Qualys is expecting revenue to grow 18.9% year on year to $124.8 million, improving on the 12.7% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.4% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
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, licenses, technical support and other necessary running expenses was at 79.1% in Q2.
That means that for every $1 in revenue the company had $0.79 left to spend on developing new products, marketing & sales and the general administrative overhead. 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 maturity. It is good to see that the gross margin is staying stable which indicates that Qualys is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Qualys's Q2 Results
With a market capitalization of $4.96 billion Qualys is among smaller companies, but its more than $419 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 outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is up 3.14% on the results and currently trades at $131.47 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 actionable report which you can read here, it's free.
One way 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.