QUALYS, INC. (QLYS)·Q4 2024 Earnings Summary

Executive Summary

• Q4 revenue grew 10% year over year to $159.2M, with non-GAAP EPS of $1.60 and Adjusted EBITDA of $74.2M (47% margin), reflecting stronger-than-expected profitability and disciplined OpEx; operating cash flow rose 41% to $47.7M.
• Results exceeded the company’s prior Q4 guidance (issued Nov. 5): revenue came in above the $154.5–$157.5M range and non-GAAP EPS beat the $1.28–$1.38 range, driven by better renewal linearity and upsell strength; Wall Street consensus data via S&P Global was unavailable at the time of this analysis.
• Mix and go-to-market pivot continued: channel contributed 48% of revenue (up from 44% a year ago), international grew 15% vs 7% in the U.S., and customers spending ≥$500K rose 13% to 207. Management emphasized a partner-first strategy and ETM/mROC to drive consolidation and services attach.
• FY25 outlook guides 6–8% revenue growth ($645–$657M), low-40s EBITDA margin and low-to-mid 30s FCF margin; Q1 FY25 revenue guided to $155.5–$158.5M, with non-GAAP EPS $1.40–$1.50. Gross margin is expected to contract ~1% on data center investments.
• Capital return remained a support: Board authorized an additional $200M share repurchase, lifting total available to $343.4M—a potential stock catalyst alongside the Q4 beat vs guidance and continued high margins.

What Went Well and What Went Wrong

What Went Well

• Platform and product momentum: ETM (Enterprise TruRisk Management) GA with 50+ active POCs, TotalCloud 3.0 CNAPP launch, and TotalAppSec unveiled; CEO highlighted the pivot from vuln scanning to a full-feature risk analytics and quantification platform with embedded AI.
• Profitability resilience: Adjusted EBITDA margin improved to 47% (vs 46% a year ago and 45% in Q3), with OpEx relatively flat q/q despite a 5% q/q increase in sales and marketing; free cash flow reached $41.9M (26% margin).
• Channel and large accounts: Channel revenue mix rose to 48% (+400 bps y/y), international growth outpaced domestic (15% vs 7%), and customers spending ≥$500K grew 13% to 207, reflecting traction for partner-first and consolidation narratives.

Management quote: “We have evolved our platform… to become a full feature risk analytics and quantification platform… [providing] a single AI-driven workflow that centralizes, quantifies, articulates, prioritizes and remediates cyber risk.” — Sumedh Thakar, CEO.

What Went Wrong

• New logo bookings softness: Q4 new bookings were “a little bit light,” and management assumes no meaningful growth for new business in 2025 as the company leans into partner-led motions.
• Net retention and pipeline caution: DBNER stabilized at ~103% but remains lower than 1–2 years ago; Q4 benefited from better renewal linearity, while Q1 guidance is lighter due to fewer days and no assumed late-renewal slippage.
• Margin outlook headwind: FY25 gross margin expected to contract ~1% due to data center investments, with OpEx up 18–20%; CRO departure adds near-term execution risk (CEO to oversee sales temporarily).

Financial Results

All figures except revenue are non-GAAP where noted (per CFO).

Cash flow and capital return

KPIs and mix

Product contribution to bookings (LTM/FY2024)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We have evolved our platform… to become a full feature risk analytics and quantification platform… [providing] a single AI-driven workflow that centralizes… and remediates cyber risk.” — Sumedh Thakar, CEO.
• “Revenues grew 10% to $159.2 million… Adjusted EBITDA margin of 47%… Free cash flow reached $231.8 million… all of which exceeded our expectations for the year.” — Joo Mi Kim, CFO (Q4 and FY context).
• “We recently brought many new capabilities into our… TotalCloud CNAPP… including comprehensive attack path analysis… and automated no-code, low-code cloud workflow remediation… TotalCloud 3.0…” — Sumedh Thakar.
• “We expect EBITDA margin to be in the low 40s… free cash flow margin in the low to mid-30s… gross margin to contract by approximately 1%… and 18% to 20% increase in operating expenses [in FY25].” — Joo Mi Kim.
• “With mROC, CISOs have access to an ecosystem of partners who operationalize the ROC and serve as strategic risk advisors… For MSSPs, mROC unlocks a valuable revenue opportunity…” — Sumedh Thakar (press release).

Q&A Highlights

• Packaging and pricing anchored around ETM: Management exploring consolidated consumption models to simplify adoption and pricing, informed by early ETM customer feedback.
• CRO transition: CEO to oversee sales; stronger partner-oriented GTM and deep bench below CRO aiming to reduce direct/indirect friction.
• TotalAI opportunity: Unique approach leveraging existing footprint for discovery and scanning; adoption likely paced by budget availability as AI moves into production.
• Billings and linearity: Q4 revenue upside aided by better renewal linearity; guidance assumes no late-renewal slippage into Q1 and fewer days in Q1 vs Q4.
• Federal vertical and macro: Opportunity remains compelling; anticipating FedRAMP High certification, but timing and admin change inject uncertainty; not embedded materially into FY25 guidance.
• ETM GTM and partner services: ETM enables consolidation without replacements, partners monetize mROC services (risk quantification, aggregation, monitoring, remediation).

Estimates Context

• S&P Global consensus for Q4 was unavailable due to request limits at the time of retrieval; accordingly, consensus comparisons cannot be shown. Values retrieved from S&P Global.*
• As a proxy, company guidance was exceeded: revenue ($159.2M vs $154.5–$157.5M guided) and non-GAAP EPS ($1.60 vs $1.28–$1.38 guided). This suggests upside vs the company’s own expectations, though may differ from street consensus.

Key Takeaways for Investors

• High-margin compounding: 47% Adjusted EBITDA margin and strong FCF remain differentiators; FY25 margin guide moderates (low-40s EBITDA, low–mid 30s FCF) as data center investments and GTM spend ramp.
• Beat vs guidance: Q4 revenue and non-GAAP EPS beat the company’s prior guidance ranges, aided by better renewal linearity; watch for potential estimate revisions and how Q1’s lighter seasonality is digested.
• Channel-first pivot: Rising channel mix (48%) and mROC services can compress near-term top-line growth but expand long-term reach and services monetization; track partner win rates and services attach.
• ETM as consolidation catalyst: ETM/ROC positions Qualys above point solutions; early POCs and bundling/packaging under review could lift attach rates and ASPs over time.
• Federal optionality: FedRAMP High certification could open material new TAM; timing remains uncertain—don’t model outsized FY25 impacts yet.
• AI security runway: TotalAI addresses a greenfield need as LLMs enter production; adoption likely staged by budgets, but unique discovery/scanning advantage could drive incremental wins.
• Capital return: Additional $200M buyback authorization (total $343.4M) provides downside support; monitor pace of repurchases against cash generation.

Footnote: *S&P Global consensus values were unavailable at the time of retrieval; if/when available, we will update the comparisons.