Executive Summary

Q1 2025 delivered solid top-line and strong profitability: revenue $159.9M (+10% y/y), non-GAAP EPS $1.67, Adjusted EBITDA margin 47%; operating cash flow rose 28% to $109.6M (69% of revenue) .
Both revenue and EPS beat consensus; management raised FY25 revenue to $648–$657M and materially lifted FY25 GAAP EPS to $4.27–$4.57 and non-GAAP EPS to $6.00–$6.30, citing product momentum and operating discipline; Q2 2025 guidance implies 7–9% y/y growth with sustained profitability .
Go-to-market pivot toward partners continues to execute: channel represented 49% of revenue (up from 45% y/y), international grew 16% vs 6% U.S.; management remains prudent on upsell/new logos amid budget scrutiny and longer cycles .
Strategic catalysts: scaling mROC partner ecosystem, TotalAI enhancements for LLM security, and federal progress; management highlighted early ETM/ROC wins and confidence in platform-led consolidation as multi-year drivers .

What Went Well and What Went Wrong

What Went Well

Robust profitability and cash generation: Adj. EBITDA $74.8M (47% margin), OCF $109.6M (69% of revenue), free cash flow $107.6M (67% margin) as operating leverage and collections drove upside .
Channel and international outperformed: channel revenue +19% y/y to 49% mix; international +16% vs U.S. +6%, reflecting traction of partner-first strategy and broader execution outside the U.S. .
Product momentum across platform: Q1 highlighted ETM/ROC adoption, CNAPP (TotalCloud) wins, and new TotalAppSec launch; management sees platform consolidation and risk-led narrative resonating with CISOs .

Quotes:

“Our Q1 results reflect the success of new product initiatives and demonstrate customer demand for natively-integrated cybersecurity risk management solutions.” — CEO Sumedh Thakar .
“We are entering a new era for Cybersecurity Risk Management powered by real-time data, automation and AI… resulting in better-than-expected revenue growth, strong profitability and solid cash flow generation.” — CEO .
“Adjusted EBITDA… was $74.8 million, representing a 47% margin, in line with last year.” — CFO Joo Mi Kim .

What Went Wrong

Macro-driven upsell caution: Management cited pushback on expected upsells within renewals late in the quarter; no material deal slippage, but environment remains scrutinized .
New business softness risk: Guidance assumes continued headwinds for new bookings contribution to revenue growth in 2025 as partner-led motions scale and budget scrutiny persists .
Billings growth moderating with mix: Calculated current billings +7% y/y (vs revenue +10%), aligning with prior commentary that billings should mirror low-to-mid single-digit growth trajectory; company does not manage to billings .

Financial Results

Quarterly Revenue and EPS (trend and comps)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$153.9	$159.2	$159.9
GAAP Diluted EPS ($)	—	$1.19	$1.29
Non-GAAP Diluted EPS ($)	$1.56	$1.60	$1.67

Notes: Management reported Q3 2024 non-GAAP EPS on the call; GAAP EPS for Q3 not disclosed in the provided documents .

Margins and Profitability (prior quarter vs current)

Metric	Q4 2024	Q1 2025
GAAP Gross Margin %	82%	82%
Non-GAAP Gross Margin %	84%	84%
GAAP Operating Income ($M)	$49.4	$51.8
GAAP Operating Margin %	31%	32%
Non-GAAP Operating Income ($M)	$70.7	$71.2
Non-GAAP Operating Margin %	44%	45%
Adjusted EBITDA ($M)	$74.2	$74.8
Adjusted EBITDA Margin %	47%	47%
Operating Cash Flow ($M)	$47.7	$109.6

KPIs and Operating Mix

KPI	Q1 2025
Channel mix (% of revenue)	49%
International revenue growth y/y	+16%
U.S. revenue growth y/y	+6%
Operating cash flow as % of revenue	69%
Free cash flow ($M)	$107.6
Calculated current billings ($M)	$155.3; +7% y/y
Share repurchases ($M)	$39.6; ~292k shares

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	FY 2025	$645–$657	$648–$657	Raised (midpoint)
GAAP EPS ($)	FY 2025	$3.62–$4.02	$4.27–$4.57	Raised
Non-GAAP EPS ($)	FY 2025	$5.50–$5.90	$6.00–$6.30	Raised
Revenue ($M)	Q2 2025	—	$159.7–$162.7	New
GAAP EPS ($)	Q2 2025	—	$0.97–$1.07	New
Non-GAAP EPS ($)	Q2 2025	—	$1.40–$1.50	New
Tax rate assumption	FY 2025	GAAP: 22%; Non-GAAP: 21%	GAAP: 20%; Non-GAAP: 21%	GAAP lower

Management reiterated non-reconciliation of EPS guidance due to variability in SBC and amortization; non-GAAP effective tax rate assumed at 21% .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
ETM/ROC risk-led strategy	GA of ETM; strong POC interest; ROC narrative resonating with CISOs	Continued enthusiasm; packaging/bundling around ETM under evaluation	“New era” of cyber risk mgmt; more than 25 active POCs; layering on top of existing tools to quantify and remediate risk	Building momentum
Channel/partner-first (mROC)	Increasing partner deal reg and wins; early mROC framing	CEO to oversee sales with partner-first motion; mROC as partner service catalyst	Channel 49% of rev; mROC alliance launched; partners driving pipeline; no material gross margin impact expected	Structural shift to channel
Macro/budget scrutiny	Ongoing scrutiny; stabilization signs	Expect scrutiny to persist; cautious initial FY25 guide	Late-quarter upsell pushback; longer cycles; prudent outlook	Still a headwind
Cloud security (TotalCloud CNAPP)	Mid-6-figure upsell; displacement of incumbent; Gartner mention	TotalCloud 3.0 advances; cloud + federal multi-year growth drivers	Additional marquee wins; GigaOm leader; integration with ServiceNow	Expanding wins
AI security (TotalAI)	GA announced; customer interest; CISO SAB prioritization	“Point-and-shoot” LLM scanner use case; greenfield budgets	Major updates incl. internal LLM scanner; multimodal/jailbreak coverage	Strengthening offer
Federal	New 7-figure federal wins; IRAP progress AU	FedRAMP High targeted in 2025; building GTM	On track later this year; federal conference planned	Pipeline building
Margins/investment	Data center investments pressuring GM ~1%	FY25 GM contraction ~1% expected; invest in S&M/engineering	EBITDA margin low-to-mid 40s for FY25; S&M priority; minimal partner GM impact	Balanced spend, resilient margins

Management Commentary

Strategic positioning: “Enterprise TruRisk Management… redefines and empowers real cybersecurity stack consolidation, and strategically positions Qualys as a foundational risk management platform of the future.” — CEO .
Demand drivers: “Organizations are increasingly anchoring pre-breach cyber spend to quantifiable risk reduction… This requires centralized risk fabric that seamlessly unifies the underlying tools.” — CEO .
Profitability stance: “Demonstrating our ability to innovate and invest in our long-term growth initiatives while remaining capital efficient, EPS for the first quarter… was 1.67, and our free cash flow was $107.6 million.” — CFO .
Partner economics/margins: “From the pressure on the partner side… we don't expect it to be material… unless there is any meaningful change to pricing or incentives, which we don't foresee for this year.” — CFO .

Q&A Highlights

Macro and upsell dynamics: Management saw late-quarter upsell pushback within renewals but no material deal slippage; guidance prudently reflects longer decision cycles and scrutiny .
ROC/ETM customer journey: ETM layers over existing tools, quantifies business risk, and drives remediation and board reporting; customers can justify incremental spend via consolidation savings and avoided toil .
Billings outlook: Q1 calculated current billings +7% y/y aligns with prior commentary that billings growth should mirror revenue; company does not manage to billings .
Channel and gross margin: Channel mix rose to 49%; partner initiatives not expected to materially impact gross margin absent pricing/incentive changes .
Direct vs partner: 2025 emphasis is partner-first for both new and existing customers; no expectation to accelerate direct growth near term .

Estimates Context

Metric	Consensus (S&P Global)*	Actual	Surprise
Revenue ($M)	$157.1*	$159.9	+$2.8 (+1.8%)
Non-GAAP EPS ($)	$1.468*	$1.67	+$0.20 (+13.7%)
EBITDA ($M)	$68.2*	$74.8	+$6.6 (+9.6%)
# of Revenue Estimates	19*	—	—
# of EPS Estimates	21*	—	—

Values with an asterisk (*) are retrieved from S&P Global consensus via GetEstimates. Values retrieved from S&P Global.

Source details: Revenue/EPS consensus and estimate counts for Q1 2025 from S&P Global; reported actuals from the company press release and 8‑K .

Key Takeaways for Investors

Qualys posted a clean beat-and-raise: revenue and EPS exceeded Street, and FY25 EPS guidance was raised materially; profitability and cash conversion remain standouts, supporting durable FCF and buybacks .
The narrative is shifting from “scanning” to “risk orchestration”: ETM/ROC enables budget justification via quantified risk reduction and remediation; early 7‑figure wins and >25 POCs support multi-year adoption .
Channel-led GTM is scaling with limited margin drag: channel mix now 49% and growing, with mROC adding services-led pull; management expects no material GM impact from partner incentives this year .
Macro remains a tactical headwind: elongated cycles and upsell conservatism temper near-term bookings contribution; guidance prudently embeds these factors despite healthy pipeline signals .
Product velocity strengthens competitive moat: TotalAI LLM security updates, TotalAppSec, and TotalCloud wins broaden platform stickiness and cross-sell, reinforcing consolidation appeal .
Watch catalysts: Q2 execution vs 7–9% guide, ETM/ROC POC conversions, federal (FedRAMP High) milestone, and channel contribution trajectory; any acceleration here could drive estimate revisions upward .

Additional Detail

Drivers of the Beat and Raised Guide

Beat drivers: Better revenue linearity and channel execution, strong international growth, disciplined OpEx (S&M +15% y/y within plan), and robust cash collections (AR swing) supported OCF/FCF upside .
Raised FY25 EPS: After Q1 outperformance and refined OpEx growth plan (now +15–17% vs higher at start-of-year), management lifted EPS while maintaining investment in S&M, engineering, and federal .

Non-GAAP Adjustments

Non-GAAP excludes SBC, amortization of acquired intangibles, and certain tax effects; non-GAAP effective tax rate assumed at 21% for 2025; reconciliations provided in the press release .

QUALYS, INC. (QLYS)·Q1 2025 Earnings Summary