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Qualys (NASDAQ:QLYS) Q4 Sales Beat Estimates, Growth To Accelerate Next Year


Radek Strnad /
2022/02/10 4:40 pm EST
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Cloud security and compliance software provider Qualys (NASDAQ:QLYS) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 15.8% year on year to $109.7 million. Guidance for next quarter's revenue was $112.8 million at the midpoint, 2.91% above the average of analyst estimates. Qualys made a GAAP profit of $21.8 million, down on its profit of $23.8 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) Q4 FY2021 Highlights:

  • Revenue: $109.7 million vs analyst estimates of $108.4 million (1.2% beat)
  • EPS (non-GAAP): $0.84 vs analyst estimates of $0.80 (5.5% beat)
  • Revenue guidance for Q1 2022 is $112.8 million at the midpoint, above analyst estimates of $109.6 million
  • Management's revenue guidance for upcoming financial year 2022 is $483.5 million at the midpoint, beating analyst estimates by 4.06% and predicting 17.5% growth (vs 13% in FY2021)
  • Free cash flow of $35.5 million, down 13.9% from previous quarter
  • Gross Margin (GAAP): 78.3%, in line with same quarter last year

"We delivered strong operating results for the fourth quarter, reflecting a year of early progress advancing our go-to-market initiatives, significant platform innovation, and strong momentum heading into 2022," 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, 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.

Sales Growth

As you can see below, Qualys's revenue growth has been moderate over the last year, growing from quarterly revenue of $94.8 million, to $109.7 million.

Qualys Total Revenue

This quarter, Qualys's quarterly revenue was once again up 15.8% year on year. Looking at the last couple of quarters, we can see that revenue increased by $4.84 million in Q4, which was a bit less than the $5.23 million revenue add in Q3 2021. This steady quarter-on-quarter growth shows the company is able to more or less maintain its paced growth trajectory.

Guidance for the next quarter indicates Qualys is expecting revenue to grow 16.5% year on year to $112.8 million, improving on the 12.1% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $483.5 million at the midpoint, growing 17.5% compared to 13% increase in FY2021.

There are others doing even better than Qualys. 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 150% since the IPO last 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, licenses, technical support and other necessary running expenses was at 78.3% in Q4.

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. 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 Q4 Results

With a market capitalization of $5.29 billion Qualys is among smaller companies, but its more than $405.2 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.

We were impressed that Qualys guided for revenue growth to accelerate next quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, revenue growth is overall a bit slower these days. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. But investors might have been expecting more and the company is down 1.23% on the results and currently trades at $133 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.