Qualys (QLYS) Q1 2025 Earnings Call May 06, 2025 05:00 PM ET Speaker0 Ladies and gentlemen, thank you for standing by, and welcome to Qualys First Quarter twenty twenty five Investors Call. At this time, all participants are in a listen only mode. After the speaker presentation there will be a question and answer session. And to ask a question during this session you would need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. If your question has been answ ...

Qualys (QLYS) Q1 2025 Earnings Call May 06, 2025 05:00 PM ET Company Participants Blair King - Vice President of Investor Relations & Corporate DevelopmentSumedh Thakar - President and CEOJoo Mi Kim - CFOTrevor Walsh - Director - Equity ResearchJoshua Tilton - DirectorYun Kim - Managing DirectorOscar Saavedra - Equity Research Associate - Software Conference Call Participants Jonathan Ho - Research AnalystPatrick Colville - Lead Equity Research AnalystKingsley Crane - Director, Senior AnalystRudy Kessinger ...

Qualys Enterprise TruRisk Platform - Qualys is transforming its focus to deliver desired business outcomes leveraging risk analytics with the Qualys Enterprise TruRisk Platform[10, 12] - The Qualys Enterprise TruRisk Platform offers comprehensive risk reduction by eliminating cyber risk, saving time, reducing MTTR, and consolidating the IT-security stack[20, 21] - The platform provides one view across the entire global hybrid-IT environment, allowing customers to consolidate their stack for better security outcomes, with no hardware to buy or manage[31] Market Opportunity and Customer Base - Qualys estimates its current total addressable market at $55 billion in CY2025E, expanding to $79 billion in CY2028E[35] - Qualys has a blue-chip global customer base of over 10,000 subscription customers[37] - 72% of the Forbes Global 50, 55% of the Forbes Global 500, and 33% of the Forbes Global 2000 are Qualys' subscription customers[37] Financial Performance - Qualys' 2024 revenues reached $608 million, with an adjusted EBITDA of $283 million, representing a 47% adjusted EBITDA margin[45] - The company's Q1 2025 revenues were $160 million, with an adjusted EBITDA of $75 million, maintaining a 47% adjusted EBITDA margin[45] - Qualys generated $232 million in free cash flow in 2024[50] - The company's adjusted EBITDA margin of 47% in 2024 is higher than the peer median of 25% for select security and SaaS companies[53]

Financial Performance - Revenues for Q1 2025 increased by 10% to $159.9 million compared to $145.8 million in Q1 2024[3] - GAAP net income for Q1 2025 rose by 20% to $47.5 million, or $1.29 per diluted share, compared to $39.7 million, or $1.05 per diluted share, in Q1 2024[6] - Operating cash flow for Q1 2025 increased by 28% to $109.6 million, representing 69% of revenues compared to 59% in Q1 2024[8] - Non-GAAP net income for Q1 2025 was $61.4 million, or $1.67 per diluted share, compared to $54.7 million, or $1.45 per diluted share, in Q1 2024[6] - GAAP operating income for Q1 2025 increased by 16% to $51.8 million, representing 32% of revenues compared to 31% in Q1 2024[5] - Net income for the same period rose to $47,534 thousand, representing a net income margin of 30%, up from 27% in the prior year[33] - Basic net income per share increased to $1.30 for the three months ended March 31, 2025, compared to $1.08 in the same period of 2024[35] Guidance and Expectations - The company raised its full year 2025 revenue guidance to a range of $648 million to $657 million, reflecting a growth of 7% to 8% over 2024[12] - The company expects Q2 2025 revenues to be in the range of $159.7 million to $162.7 million, representing 7% to 9% growth over Q2 2024[11] Cash Flow and Assets - Non-GAAP free cash flows for the three months ended March 31, 2025, were $107,550 thousand, compared to $83,454 thousand in the same period of 2024[37] - Cash and cash equivalents increased to $290,671 thousand as of March 31, 2025, up from $232,182 thousand at the end of 2024[29] - Total assets reached $996,471 thousand as of March 31, 2025, compared to $973,537 thousand at the end of 2024[29] - Total liabilities were $498,436 thousand as of March 31, 2025, slightly up from $496,421 thousand at the end of 2024[29] Revenue and Deferred Revenue - Current deferred revenue as of March 31, 2025, was $366,824 thousand, compared to $332,128 thousand in the same period of the previous year[39] - Revenues for the three months ended March 31, 2025, increased to $159,899 thousand, a growth of 10% compared to $145,805 thousand in the same period of 2024[27] Adjusted Metrics - Adjusted EBITDA for Q1 2025 increased by 8% to $74.8 million, maintaining a margin of 47% of revenues[7] - Adjusted EBITDA for the three months ended March 31, 2025, was $74,752 thousand, maintaining 47% as a percentage of revenues, consistent with the previous year[33] Stock-Based Compensation - Stock-based compensation totaled $18,820 thousand for the three months ended March 31, 2025, down from $19,031 thousand in the same period of 2024[35] New Initiatives - The company introduced the Managed Risk Operation Center (mROC) to help partners expand revenue streams through a unified managed service[15] - Qualys launched TotalAppSec, a comprehensive application risk management solution, enhancing its cybersecurity offerings[15]

Core Insights - The rapid adoption of AI is leading organizations to implement solutions without adequate security controls, raising concerns about potential security breaches, with 72% of CISOs expressing worry about generative AI risks [1] - Qualys TotalAI is designed to address AI-specific security challenges, ensuring that only trusted models are deployed, thus balancing innovation with risk management [2][3] Group 1: Qualys TotalAI Features - TotalAI goes beyond basic assessments by testing models for vulnerabilities such as jailbreak risks, bias, and sensitive information exposure, aligning with OWASP Top 10 for LLMs [2] - The platform provides visibility, intelligence, and automation to protect AI workloads throughout their lifecycle, enhancing operational resilience and brand trust [3] - TotalAI detects 40 different attack scenarios, including advanced jailbreak techniques and bias amplification, to strengthen model resilience against exploitation [6] Group 2: Availability and Resources - Qualys TotalAI is now available for a 30-day trial, allowing organizations to explore its capabilities [4] - Qualys, Inc. is a leading provider of cloud-based security solutions, serving over 10,000 subscription customers globally, including many from the Forbes Global 100 and Fortune 100 [5]

Industry Overview - Cybersecurity has transitioned from a back-office concern to a boardroom priority due to the increasing frequency and sophistication of cyberattacks, with global cybercrime costs projected to rise from $9.22 trillion in 2024 to $15.63 trillion by 2029 [1] - The global cybersecurity market is expected to grow from $193.73 billion in 2024 to $562.72 billion by 2032, reflecting a compound annual growth rate (CAGR) of 14.3% [2] - The growth in the cybersecurity market is driven by increasing enterprise IT complexity, rising regulatory scrutiny, and the need for real-time protection of data, identities, and infrastructure [2] Technological Advancements - Artificial intelligence (AI) is revolutionizing the cybersecurity landscape, enabling more efficient detection, prevention, and response to cyber threats [3] - AI can analyze large volumes of data, detect anomalies, and identify potential breaches in real time, providing a proactive approach to security [3] Company Highlights - Companies like Fortinet, Zscaler, Okta, and Qualys are heavily investing in AI-driven security solutions to enhance their capabilities and position themselves for long-term growth in the expanding cybersecurity market [4] - Okta specializes in identity and access management (IAM) and is ramping up its AI capabilities to address the complexities of digital identities [6] - Qualys focuses on vulnerability management and cloud security, integrating advanced AI models into its platforms for faster detection and remediation of security threats [10][11] - Fortinet offers a comprehensive suite of cybersecurity solutions, differentiating itself with high-performance security at lower costs, and has integrated AI-driven analytics into its services [13][14][15] - Zscaler is a pioneer in zero-trust security, enhancing its platform with AI-powered security analytics to improve threat detection and response [16][17][18] Financial Performance - Okta reported 19,650 customers at the end of fiscal Q4 2025, with a 7% year-over-year increase in customers with over $100,000 in Annual Contract Value (ACV) [8] - Qualys' AI-powered platform is expected to drive customer adoption and revenue growth, positioning it well in the market [12] - Fortinet has consistently delivered profitability and strong free cash flow, reflecting its growing market share and demand for AI-enhanced security solutions [15] - Zscaler has maintained robust financial performance with expanding revenues driven by demand for its AI-enhanced offerings [18]

Enterprises are grappling with an increasing compliance burden, with nearly 70%* of service organizations subject to at least six frameworks or more regulatory mandates that stretch resources and drive-up costs. Misconfigurations further complicate compliance, often leading to non-compliance and regulatory penalties. Time-consuming tasks like auditing, reporting, and system remediation are prone to human error, underscoring the urgent need for a more efficient, automated approach to managing compliance chal ...

Core Viewpoint - Qualys, Inc. will report its financial results for Q1 2025 on May 6, 2025, after market close [1] Group 1: Financial Reporting - The financial results for the first quarter of 2025 will be announced after market hours on May 6, 2025 [1] - A conference call and live webcast will be held at 5:00 p.m. Eastern Time on the same day to discuss the results [2] Group 2: Company Overview - Qualys, Inc. is a leading provider of cloud-based security, compliance, and IT solutions with over 10,000 subscription customers globally, including many from the Forbes Global 100 and Fortune 100 [3] - The company offers a platform that automates security and compliance solutions, leading to improved agility and cost savings for organizations [3] Group 3: Product and Technology - The Qualys Enterprise TruRisk Platform utilizes a single agent for continuous security intelligence and automates vulnerability detection and compliance across various IT environments [4] - Qualys has established strategic partnerships with major cloud service providers like Amazon Web Services, Google Cloud Platform, and Microsoft Azure [4]

Core Insights - Qualys, Inc. has become the Major Partner and official Cybersecurity Partner of the San Francisco Unicorns for the 2025 Cognizant Major League Cricket season, highlighting its commitment to community engagement and support for local sporting events [1][3][5] Group 1: Partnership Details - The partnership includes the Qualys logo prominently displayed on the Unicorns' matchday and training jerseys, as well as branding opportunities across various media assets [4] - Qualys aims to reflect its values of innovation and determination through this partnership, aligning with the Unicorns' mission to promote cricket in the U.S. [3][5] Group 2: Team and Event Information - The San Francisco Unicorns debuted in Major League Cricket in 2023 and are set to play their first three games of the 2025 season at the Oakland Coliseum, starting with a match against Washington Freedom on June 12 [6][9] - The team features top international cricket talents, including Cooper Connolly, Jake Fraser-McGurk, and Matt Short, promising exciting performances for fans [3][9] Group 3: Company Overview - Qualys, Inc. is a leading provider of cloud-based security, compliance, and IT solutions, serving over 10,000 subscription customers globally, including many from the Forbes Global 100 and Fortune 100 [10] - The company specializes in automating security and compliance solutions, offering significant cost savings and improved business outcomes for organizations [10][11]

Industry Overview - The cybersecurity industry is experiencing significant growth, driven by complex attacks such as credential theft and social engineering. The market is projected to grow at a CAGR of 12.63% from 2025 to 2030, with a robust CAGR of 9.4% expected during the same period [2]. Company Analysis: Palo Alto Networks (PANW) - Palo Alto Networks is a leader in cybersecurity, offering a comprehensive suite of solutions including network security, cloud security, and endpoint protection [4]. - The company is focusing on innovative product offerings, such as the enhanced Prisma Cloud platform with Prisma Cloud Copilot, which utilizes generative AI to improve security analysts' efficiency [6]. - PANW's strategic expansion in the APAC region and its focus on Zero Trust and private 5G security solutions are expected to drive growth [5][7]. - The Zacks Consensus Estimate for PANW's 2025 earnings is $3.22, reflecting a year-over-year increase of 13.4% [7][8]. - Over the past year, PANW shares have returned 14%, and the stock is trading at a forward sales multiple of 10.01X, above its three-year median of 9.35X [14][15]. Company Analysis: Qualys (QLYS) - Qualys specializes in Vulnerability Management, Detection, and Response (VMDR) solutions, with 73% of its customers using four or more modules, up from 63% the previous year [9]. - The company has launched several new products, including the Risk Operations Center and Qualys TotalAI, which focus on enhancing cloud-based offerings [10]. - The Zacks Consensus Estimate for Qualys' 2025 earnings is $5.75, indicating a year-over-year decline of 6.2% [12][13]. - Qualys shares have lost 29.8% over the past year, and the stock is trading at a forward sales multiple of 6.43X, significantly below its three-year median of 11.41X [14][15]. Comparative Analysis - Palo Alto Networks is viewed as a stronger investment opportunity due to its leadership position, robust growth prospects, and strong financial execution, despite its premium valuation [18]. - In contrast, Qualys faces challenges from increased competition and a declining growth trajectory, raising concerns about its ability to capitalize on the cybersecurity market [17][18]. - Currently, Palo Alto holds a Zacks Rank 3 (Hold), while Qualys has a Zacks Rank 4 (Sell), indicating a more favorable outlook for PANW compared to QLYS [19].