Qualys Focuses on Product Expansion for Growth

Earlier this month, cloud services security provider Qualys (Nasdaq: QLYS) announced its fourth-quarter results that surpassed market expectations. The company is continuing to invest in product development as it tries to expand its market reach.

Qualys’ Financials

For the fourth quarter, Qualys’ revenues grew 16% to $109.8 million, surpassing the market’s estimates by 1.16%. GAAP net income decreased to $21.8 million from $23.8 million a year ago. Non GAAP EPS was $0.84, compared with the market’s estimates of $0.80.

For the year, Qualys’ revenues grew 13% to $411.2 million. GAAP net income increased to $129.3 million, or $3.22 per share from $117 million, or $2.87 per share a year ago.

For the first quarter, Qualys forecast revenues of $112.5-$113.1 million and adjusted earnings of $0.51-$0.53 a share. The market was looking for revenues of $108.7 million and EPS of $0.80 for the quarter. Qualys expects to end the year with revenues of $482-$485 million and EPS of $1.59-$1.64. The market was looking for revenues of $465.31 million and EPS of $3.45 for the year.

Overall, Qualys delivered a strong quarter. It ended the year with 20% billings growth compared with the market’s estimates of 18%. Its outlook, however, was a mixed bag. While Qualys exceeded the market’s expectations on revenue outlook, its lower than anticipated earnings outlook suggests that it is preparing for another investment year. Analysts believe that Qualys is struggling on account of the tough competitive environment coupled with years of underinvestment when compared to its peers. It will need to rely on stepping up investments in sales hiring and building channel partnerships to drive growth.

Qualys’s Product Expansion

Recently, Qualys announced the launch of Qualys Context XDR, its first context-aware XDR powered by the Qualys Cloud Platform. It combines rich asset inventory and vulnerability context, network, and endpoint telemetry from Qualys sensors, with high-quality threat intelligence and third-party log data to identify threats quickly and reduce alert fatigue. Qualys Content XDR provides the security context that operations teams need to eliminate false positives and noise by triangulating risk posture, asset criticality, and threat intelligence to provide visibility, contextual priority, and meaningful insights about assets that allow teams to quickly make impactful decisions for enhanced protection.

Last quarter, Qualys also released an Infrastructure as Code (IaC) scanning service to its CloudView app. The new offering enables detection and remediation of misconfigurations early in the development cycle, thus removing risk in the production environment. Qualys realizes that the biggest threat with public clouds faced by security professionals lies in the misconfiguration of resources. These are normally detected post-deployment, making companies more vulnerable to exploits. With IaC, companies will be able to deploy cloud-native applications and provision their cloud infrastructure better by detecting security issues earlier in the development cycle. It will also help drive greater collaboration between DevOps and security teams.

Last summer, Qualys’s former CEO and visionary Philippe Courtot sadly passed away. Philippe invested in Qualys in 1999, and became its CEO in 2001. It was his vision that made Qualys a pioneering cloud delivery platform. He helped take Qualys public in 2012 and pivoted it to a subscription-based cloud service. I wonder if Qualys is still missing the visionary that he was in its current leadership.

Qualys’s stock is currently trading at $121.65 with a market capitalization of $4.72 billion. It touched a 52-week high of $142.94 in November last year. The stock has recovered from the 52-week low of $90.26 it had fallen to in May last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Photo Credit: Gerd Altmann / Pixabay