Cloud security and compliance software provider Qualys (NASDAQ:QLYS) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 9.7% year on year to $159.9 million. Guidance for next quarter’s revenue was better than expected at $161.2 million at the midpoint, 0.8% above analysts’ estimates. Its non-GAAP profit of $1.67 per share was 13.8% above analysts’ consensus estimates.

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Qualys (QLYS) Q1 CY2025 Highlights:

Revenue: $159.9 million vs analyst estimates of $157.1 million (9.7% year-on-year growth, 1.8% beat) Adjusted EPS: $1.67 vs analyst estimates of $1.47 (13.8% beat) Adjusted Operating Income: $71.22 million vs analyst estimates of $63.8 million (44.5% margin, 11.6% beat) The company slightly lifted its revenue guidance for the full year to $652.5 million at the midpoint from $651 million Management raised its full-year Adjusted EPS guidance to $6.15 at the midpoint, a 7.9% increase Operating Margin: 32.4%, up from 30.7% in the same quarter last year Free Cash Flow Margin: 67.3%, up from 26.3% in the previous quarter Billings: $155.3 million at quarter end, up 7.6% year on year Market Capitalization: $4.66 billion

"Our Q1 results reflect the success of new product initiatives and demonstrate customer demand for natively-integrated cybersecurity risk management solutions," said Sumedh Thakar, Qualys' president and CEO.

Company Overview

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.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Qualys grew its sales at a 13.3% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.Qualys Quarterly Revenue

This quarter, Qualys reported year-on-year revenue growth of 9.7%, and its $159.9 million of revenue exceeded Wall Street’s estimates by 1.8%. Company management is currently guiding for a 8.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Qualys’s billings came in at $155.3 million in Q1, and over the last four quarters, its growth was underwhelming as it averaged 5.6% year-on-year increases. This alternate topline metric grew slower than total sales, meaning the company recognizes revenue faster than it collects cash - a headwind for its liquidity that could also signal a slowdown in future revenue growth.Qualys Billings

Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

It’s relatively expensive for Qualys to acquire new customers as its CAC payback period checked in at 64.7 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

Key Takeaways from Qualys’s Q1 Results

We were impressed by how significantly Qualys blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. On the other hand, its billings missed. Overall, this print had some key positives. The stock remained flat at $126.82 immediately following the results.

Sure, Qualys had a solid quarter, but if we look at the bigger picture, is this stock a buy? 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.

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