Qualys has announced new opportunities in the market, including the introduction of ETM-powered ROC and mROC for managed service providers. A cyber insurance company will offer discounts to Qualys ETM customers based on lower TruRisk scores. Watch the video on qualys.com for more details.
Qualys is launching TruLens, an app that empowers C-level executives and security teams with actionable insights into trending risks specific to their vertical. It notifies potential threats in advance and makes remediation frictionless. This app is going GA soon and will provide immediate alerts on impacted assets.
Qualys has introduced TruRisk Eliminate and Qualys TotalAI at QSC San Diego, marking a milestone in cybersecurity innovation. These features, along with others on the roadmap, will help customers navigate complex threat environments and reduce costs. The company continues to lead in cybersecurity risk management.
Qualys VMDR solution with TruRisk has attracted new customers and increased platform adoption. Recent wins include a large federal government agency that replaced multiple legacy solutions with Qualys modules for risk management. The agency is now using a cloud-based, integrated platform for security operations.
Qualys secured a seven-figure bookings deployment with a government agency, displacing five existing vendors. The agency now benefits from unified dashboards and automation. Qualys is expanding its government business in the US, with an IRAP assessment in Australia at the Protected level for compliance with security standards.
Qualys TotalCloud CNAPP solution has seen success with a financial services company, enabling them to scale container deployments and monitor millions of Kubernetes container images daily. The customer chose Qualys for its integrated platform, proactive risk management, and ability to detect anomalies and prevent zero-day attacks.
Qualys’ leadership in the cloud market was recognized by Gartner in its July 2024 Marketguide for Cloud Native Application Protection Platforms. The company’s focus on providing visibility, automation, and cloud hygiene to defend against adversaries presents a significant growth opportunity. Qualys customers are seeing the benefits of cybersecurity transformation, with a 15% increase in customers spending $500,000 or more in Q3. Partner program growth reflects Qualys’ strong market position. Revenues grew 8% to $153.9 million in Q3, with channel partners driving 47% of total revenues, up from 43% last year.
Qualys continues to focus on consolidating security tools and expanding its partner program to drive growth. Revenues grew 17% from channel partners and 1% from direct sales, with international revenue outpacing U.S. revenue growth. The company’s gross retention rate remained stable at around 90%, with a net dollar expansion rate of 103%.
Qualys’ Enterprise TruRisk Platform is helping customers consolidate cybersecurity efforts, with Patch Management and Cybersecurity Asset Management contributing significantly to bookings. Adjusted EBITDA for Q3 was $69.7 million, with a 45% margin. Operating expenses increased by 12% due to sales and marketing investments.
Revenue guidance for full year 2024 is between $602.9 million to $605.9 million, with a growth rate of 9%. Qualys expects an EBITDA margin in the mid-40s and free cash flow margin in the mid-to-high 30s for the full year. EPS for Q3 was $1.56, with a free cash flow margin of 37%.
Qualys is making strategic investments in data centers to drive operational efficiencies and reduce costs in the long term. Gross margin may be impacted in Q4 due to these investments. Operating expenses will prioritize investments in Sales & Marketing to drive pipeline growth and support sales efforts. Qualys reported strong results, attributing success to aligning product messaging with business risk quantification. The launch of ROC and mROC aims to simplify cybersecurity risk assessment. Net retention rate increased to 103%, but Q4 guidance predicts minimal change. Channel partners play a significant role in revenue growth, with a focus on offering new cybersecurity services like risk advisory and quantification. The company is expanding partnerships to offer services that can lower cyber insurance premiums by investing in a risk operation center. Quarterly billing performance was strong, with a 14% increase, impacted by customer contracts. Looking ahead, Q4 revenue growth is expected to be 7-9%. New product capabilities like TruRisk and TotalAI are driving growth in federal investments and cloud solutions, with a focus on VMDR and cybersecurity asset management. Customers are buying patch management and cloud security solutions in their first purchase, leading to increased bookings. Qualys is experiencing positive early feedback on TotalAI, providing a point-and-shoot scanner for AI security testing. The company is looking forward to momentum in patch management, cybersecurity asset management, and cloud security solution consolidation. Interest in the Risk Operation Center and AI is high, indicating potential growth opportunities.
Following the departure of the Chief Product Officer in September, Qualys has brought product management and product marketing teams together to create a Risk Operation Center branding. This rebranding aims to provide clarity and crisp messaging for customers, emphasizing the evolution of Qualys into a broader platform for risk management.
With the introduction of TruRisk Eliminate, Qualys offers a differentiated product that combines patch management and vulnerability scanning. Despite initial skepticism, Qualys has seen significant uptake in patching cycles, with 78 million patches deployed in customer environments in 2024. TruRisk Eliminate aims to provide a solution for mitigating issues without patching, addressing operational challenges and political battles in customer environments. A new device mitigation capability is being offered to customers by a company to prevent attacks without patches. Customers in highly regulated environments can now isolate devices with this new feature, addressing IT political challenges and zero-day attacks without patches. This new offering has rolled out to production and is receiving positive feedback from customers.
In a recent earnings call, the company reported strong revenue and billings, with upsells exceeding expectations. The uptick in net dollar expansion rate was primarily driven by broad-based upsells and focused execution. While new business bookings saw double-digit growth, the company anticipates a lighter new business quarter in Q4 and a less successful upsell rate.
The company expects calculated billings to increase by 7-9% in Q4, with a focus on current calculated billings. Analysts are curious about the durability of positive trends in channel contributions and new product momentum seen in the recent quarter. The company’s strategic advisory board and user conferences indicate a shift towards AI and cloud-based solutions to address cybersecurity challenges effectively. The macro environment is still a factor, with longer deal cycles and increased scrutiny on deals. Qualys executives are optimistic about cybersecurity conversations and momentum. They highlight differentiated capabilities in ETM, eliminate, patching, and AI security compared to competitors. Focus is on stable cybersecurity interest and long-term impact, despite potential deal fluctuations in upcoming quarters.
Executives acknowledge Q4 guidance assumes lighter new business trends, not a current trend but based on pipeline outlook. While strong new bookings have been consistent, Q4 pipeline appears lighter than desired. Efforts to improve marketing and pipeline are crucial to maintain momentum and drive growth beyond Q4.
Qualys emphasizes the importance of understanding pipeline changes over time. Efforts made in past quarters inform the current Q4 pipeline, with marketing changes playing a key role. Encouraging momentum in recent quarters is highlighted, with Q4 reflecting short-term trends while looking towards future growth.
Qualys positioned as a consolidator of various risk quantification tools. Customer interest in Qualys’ EPM and ROC offerings lies in data consolidation, asset inventory, findings integration, and remediation capabilities. Scalability, scoring visibility, relevant reporting, and remediation differentiation are key customer priorities. A new approach to cybersecurity risk management is gaining popularity, with a focus on operationalizing risk across multiple tools. By consolidating data into a single workflow, CISOs can easily present a comprehensive risk report to the board, making budget conversations smoother and more effective.
This method provides tangible outcomes, such as predicting potential losses and suggesting specific controls to mitigate risks. By presenting clear data and actionable steps, CFOs can make informed decisions about investing in cybersecurity measures, leading to more effective risk management overall.
Businesses are finding value in this approach, as it streamlines the process of analyzing cybersecurity risks and implementing necessary controls. The ability to provide a TruRisk score based on integrated data from multiple security tools is proving beneficial for both customers and businesses.
Moving forward, the focus will be on executing this holistic risk management approach across various fronts. By incorporating product marketing, mROC formation, and cyber insurance, customers can gain a comprehensive view of their risk landscape and provide valuable visibility to their board and management.
To measure the ROI of sales and marketing investments, metrics such as sales productivity and new business bookings are being tracked. While new business bookings have shown growth, there is room for improvement in post-sales renewals and upsells. Adjustments will be made to ensure sales structures are optimized for growth in the coming year.
Investments in channel partnerships, such as setting up MSSP portals and incentivizing partners, are being made to strengthen relationships and drive sales. These initiatives aim to enhance collaboration with partners and improve overall sales performance. Qualys is focusing on federal sales, highlighting a seven-figure deal and upsell in Q3. The company’s platform offers a single solution to replace multiple tools, driving interest and momentum in the federal space. The focus on complexity and cost is attracting bigger names to Qualys, showing positive momentum for the future.
Qualys is seeing success with new products like batch management and cybersecurity asset management, which account for 24% of net new bookings. The sales process emphasizes the comprehensive ROI of Qualys, offering scanning, inventory, and patch management all in one platform. This approach is resonating with customers, giving Qualys a competitive edge in the market.
Current billings for Qualys fluctuate, leading to variations in growth compared to bookings performance. While there may be some lumpiness in billing schedules, the company remains focused on maintaining accuracy when using billings as a proxy for bookings. Overall, Qualys is confident in its strategy and is looking forward to continued success in the federal market and with new products. Qualys is not offering patch management services, but they are focusing on new product capabilities to differentiate themselves. They are evolving from just a vulnerability management scanning tool to providing comprehensive solutions for cloud security and device assessment. They are attracting new customers and upselling existing ones with cybersecurity asset management and patch management.
During a Q&A session, it was clarified that Qualys is selling new products to both new customers and existing ones. They are attracting net new logos with cybersecurity asset management and patch management, and also creating opportunities to upsell to existing customers with new capabilities.
The conference call concluded with thanks to all participants. Before investing in Qualys, consider that it was not listed as one of the 10 best stocks to buy by The Motley Fool Stock Advisor analyst team. They emphasize their track record of identifying stocks that produce high returns, outperforming the S&P 500.
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Read more at Yahoo Finance: Qualys (QLYS) Q3 2024 Earnings Call Transcript