Qualys, Inc. Q3 FY2025 earnings call

Sumedh Thakar highlighted that the future of cybersecurity is moving to risk surface management with Agentic AI-powered proactive risk management. Qualys continues to execute well in Q3 with solid revenue growth and profitability. The Risk Operations Center (ROC) powered by Qualys ETM is a key innovation, with ROCon attendance up 20% over last year. Qualys has strategic wins, including a Global 700 customer and a major airline in the Middle East. Partner-led deal registration increased, with nearly a dozen partners certified for mROC services. Q-Flex pricing model was beta tested in Q3 with notable customer interest, such as a Global 10 customer increasing annual bookings by over 50% under Q-Flex.

Revenues grew 10% to $169.9 million. The channel contributed 50% of total revenues, up from 47% a year ago. Revenue from channel partners grew 17% vs 5% growth in direct. Geo-wise, international revenue grew 15% ahead of domestic's 7%, with U.S. and international revenue mix at 56% and 44% respectively. Patch Management and Cybersecurity Asset Management combined made up 17% of total bookings and 28% of new bookings on an LTM basis. TotalCloud CNAPP accounted for 5% of LTM bookings.

For full year 2025, revenues are expected to be in the range of $665.8 million to $667.8 million, representing 10% growth. Fourth quarter 2025 revenues are projected to be $172 million to $174 million, 8%-9% growth. Full year 2025 EBITDA margin is expected to be in the mid- to high 40s, net free cash flow margin in the low 40s. EPS for full year 2025 is expected to be $6.93 to $7, up from prior range. Planned capital expenditures for 2025 are $5.5 million to $7 million, with Q4 2025 at $1.2 million to $2.7 million.

No major specific risks discussed in detail, but general market and competitive risks exist, such as rapid evolution of threat landscape and competition from other cybersecurity vendors.

Q: Roger Boyd of UBS asked about ETM pricing and upsell confidence.

A: Sumedh explained ETM includes Cybersecurity Asset Management and Agentic AI capabilities, with upsell potential to TruRisk Eliminate.

Q: Patrick Colville of Scotiabank asked about federal business and competition.

A: Sumedh discussed early federal conversations and Qualys' focus on narrowing threat intel and quick remediation vs competitors.

Q: Mike Cikos of Needham asked about one-time benefits and net dollar retention.

A: Joo Mi said no material one-time CCP impacts, and net dollar retention at 104% with focus on ETM upsells.

Q: William Kingsley Crane of Canaccord Genuity asked about R&D spend prioritization.

A: Sumedh and Joo Mi talked about leveraging AI in R&D and focusing on key product areas.

Q: Shrenik Kothari of Baird asked about TruConfirm and mROC partner leverage.

A: Sumedh said TruConfirm is part of ETM for differentiation, and mROC helps accelerate top line growth.

Q: Junaid Siddiqui of Truist Securities asked about sales cycle changes.

A: Sumedh said positive feedback on Risk Operations Center and quicker POCs by ingesting data from existing tools.

Q: Joshua Tilton of Wolfe Research asked about growth delta and non-VM products.

A: Sumedh discussed Qualys' organic platform and focus on Risk Operations Center for business-aligned risk management.

Q: Garrett Burkam of William Blair asked about product innovations and mROC traction.

A: Sumedh talked about ETM upselling from VMDR and positive customer feedback on ROC.

Q: Anec Bevin of Jefferies asked about exposure management budget and billings.

A: Sumedh and Joo Mi discussed customer focus on proactive risk management and 8% billings growth on track.

Q: Rudy Kessinger of D.A. Davidson asked about future growth confidence.

A: Sumedh mentioned focus on converting VMDR to ETM and federal opportunity.

Q: Yun Kim of Loop Capital Markets asked about ETM sales motion and acquisition strategy.

A: Sumedh explained ETM includes multiple capabilities and openness to acquisitions while focusing on organic growth.