It has been about a month since the last earnings report for Qualys (QLYS Quick QuoteQLYS - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Qualys due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Qualys Q3 Earnings and Revenue Beat Estimates

Qualys reported third-quarter 2024 non-GAAP earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate of $1.33 and came above management’s guidance of $1.28-$1.36.

The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of $1.51. The robust year-over-year growth was primarily driven by higher revenues, improved efficiency and increased financial income.

Qualys’ third-quarter revenues increased 8% year over year to $153.9 million and surpassed the Zacks Consensus Estimate of $150.56 million. The year-over-year increase in the top line was achieved by leveraging the partner ecosystem.

Quarter in Detail

During the third quarter, sales from channel partners increased 17%, outpacing the 1% sales growth registered in direct selling. Revenue contribution mix from channel partners was 47% in the third quarter, while direct selling accounted for the remaining 53%.

Geography-wise, sales in the United States grew 5% year over year and contributed approximately 58% to the third-quarter total revenues. Accounting for the remaining 42% of second-quarter total revenues, international sales increased 14%.

Qualys’ net dollar expansion rate on a constant currency basis for the third quarter was 103%.

QLYS’ non-GAAP gross profit increased 8% year over year to $127.8 million, while the non-GAAP gross margin remained flat at 83% in the third quarter. Non-GAAP operating income grew 5% to $66.1 million, while the non-GAAP operating margin contracted 100 basis points (bps) to 43%, mainly due to an increase in sales and marketing expense.

Adjusted EBITDA for the third quarter rose 1% to $69.7 million, while adjusted EBITDA margin contracted 300 bps to 45%.

Balance Sheet

Qualys ended the quarter with cash and cash equivalents and marketable securities of $386.3 million. During the third quarter, the company generated operating cash flow and free cash flow of $61 million and $57.6 million, respectively.

Guidance

For the fourth quarter, Qualys expects revenues between $154.5 million and $157.5 million, indicating year-over-year growth of 7-9%. It projects non-GAAP earnings in the range of $1.28-$1.38.

For 2024, QLYS expects revenues in the range of $602.9-$605.9 million, up from the previous guidance of $597.5-$601.5 million. The company projects its non-GAAP earnings per share in the range of $5.81-$5.91, up from the previous guidance of $5.46-$5.62.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 8.76% due to these changes.

VGM Scores

Currently, Qualys has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qualys has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.