Revenue: $159.9 million, a 10% increase year-over-year. Channel Revenue Contribution: 49% of total revenues, up from 45% a year ago. International Revenue Growth: 16% growth outside the US, compared to 6% domestic growth. Adjusted EBITDA: $74.8 million, representing a 47% margin. Operating Expenses: Increased by 10% to $62.5 million, with sales and marketing growing 15%. EPS: $1.67 for the first quarter of 2025. Free Cash Flow: $107.6 million, representing a 67% margin. Share Repurchase: $39.6 million spent to repurchase 292,000 shares. Full Year Revenue Guidance: $648 million to $657 million, representing 7% to 8% growth. Second Quarter Revenue Guidance: $159.7 million to $162.7 million, representing 7% to 9% growth. Full Year EPS Guidance: $6 to $6.3, up from prior range of $5.5 to $5.9. Capital Expenditures Guidance: $8 million to $11 million for the full year 2025.

Warning! GuruFocus has detected 6 Warning Signs with CURI.

Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Qualys Inc (NASDAQ:QLYS) reported better-than-expected revenue growth, strong profitability, and solid cash flow generation for the first quarter of 2025. The company has successfully expanded its channel partner ecosystem, with revenues from channel partners growing by 19%, outpacing direct sales growth. Qualys Inc (NASDAQ:QLYS) has launched innovative security solutions, including the Enterprise TruRisk Management (ETM) solution, which provides comprehensive AI-powered orchestration of security findings. The company is seeing increased adoption of its cloud security solutions, with Total Cloud Snap making up 5% of LTM bookings. Qualys Inc (NASDAQ:QLYS) has maintained a strong focus on innovation, with advancements in AI security solutions and audit readiness capabilities, enhancing its competitive edge.

Negative Points

The macroeconomic environment remains challenging, with increased scrutiny on cybersecurity spending and longer decision-making cycles impacting upsell opportunities. Despite improvements in gross retention rates, the company faces a challenging upsell environment due to macroeconomic uncertainties. Qualys Inc (NASDAQ:QLYS) experienced a decline in the number of customers spending $500,000 or more annually, indicating potential challenges in retaining large accounts. The company's direct sales growth has been slower compared to its channel partner growth, highlighting a need for improved execution in North America. The company anticipates continued headwinds in new bookings growth, impacting its ability to achieve higher revenue growth rates.

Story Continues

Q & A Highlights

Q: Can you provide insights on the macro environment and its impact on customer spending and guidance? A: Sumedh Thakar, President and CEO, noted that cybersecurity remains a critical aspect of risk management, but there is increased scrutiny on spending and ROI. Decision cycles are longer, and while no specific changes have been observed, there is prudence in expectations due to potential budget scrutiny across the board.

Q: How does the Risk Operations Center (ROC) function from a customer journey perspective, and what financial impact does it have? A: Sumedh Thakar explained that the ROC consolidates risk signals from multiple tools, providing contextual business insights and remediation plans. It helps customers prioritize actionable risks, potentially saving costs by avoiding unnecessary remediation efforts. Customers pay Qualys for these cost savings, which justifies additional budget allocation for the ROC.

Q: Were there any significant deal shifts due to macroeconomic challenges at the end of the quarter? A: Joo Mi Kim, CFO, stated there were no material deal shifts. The commentary was more about anticipated upsell rates not materializing as expected, rather than deals being pushed to the next quarter.

Q: How is Qualys addressing competition from other cybersecurity players expanding into network-based vulnerability management (VM)? A: Sumedh Thakar mentioned that Qualys focuses on prioritizing and remediating vulnerabilities rather than just finding them. The company provides higher value by adding context to vulnerability data from competitors, allowing customers to choose their preferred solutions while still benefiting from Qualys's risk management capabilities.

Q: What is the competitive landscape for TotalAI, and how are security budgets expected to evolve in this market? A: Sumedh Thakar noted that the market is in an exploratory phase, with customers assessing AI-related risks. While there is interest and some early adoption, significant budget allocations for AI security are expected to take a couple of years as organizations evaluate potential losses and formulate budget requests.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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