Qualys (NASDAQ:QLYS) Reports Q1 In Line With Expectations But Quarterly Guidance Underwhelms

Adam Hejl /
2024/05/07 4:13 pm EDT

Cloud security and compliance software provider Qualys (NASDAQ:QLYS) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 11.6% year on year to $145.8 million. On the other hand, next quarter's revenue guidance of $145.8 million was less impressive, coming in 3.1% below analysts' estimates. It made a non-GAAP profit of $1.45 per share, improving from its profit of $1.09 per share in the same quarter last year.

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Qualys (QLYS) Q1 CY2024 Highlights:

  • Revenue: $145.8 million vs analyst estimates of $145.8 million (small beat)
  • EPS (non-GAAP): $1.45 vs analyst estimates of $1.31 (11.1% beat)
  • Revenue Guidance for Q2 CY2024 is $145.8 million at the midpoint, below analyst estimates of $150.5 million
  • Gross Margin (GAAP): 81.3%, up from 79.4% in the same quarter last year
  • Free Cash Flow of $83.45 million, up 158% from the previous quarter
  • Market Capitalization: $6.29 billion

"We delivered another quarter of healthy revenue growth and strong profitability," 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.

Vulnerability Management

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 mediocre over the last three years, growing from $96.76 million in Q1 2021 to $145.8 million this quarter.

Qualys Total Revenue

This quarter, Qualys's quarterly revenue was once again up 11.6% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $1.24 million in Q1 compared to $2.57 million in Q4 CY2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Qualys is expecting revenue to grow 6.3% year on year to $145.8 million, slowing down from the 14.4% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 9.2% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Qualys's free cash flow came in at $83.45 million in Q1, up 32.9% year on year.

Qualys Free Cash Flow

Qualys has generated $256.5 million in free cash flow over the last 12 months, an eye-popping 45% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Qualys's Q1 Results

Strong free cash flow was a big positive for Qualys this quarter, on the other hand its revenue guidance for next quarter missed analysts' expectations and so did billings. Overall, this was a mediocre quarter for Qualys. The stock is flat after reporting and currently trades at $165 per share.

Qualys may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.