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Qualys Scouting For Acquisitions

Posted on Monday, May 13th 2019

With the continuous digital transformation and growing adoption of smart connected devices supported by AI and Machine Learning capabilities, enterprise security systems globally are exposed to vulnerabilities. According to Gartner, enterprise spending on Security Technology is expected to grow to $124 billion this year. A MarketsandMarkets report expects the global cybersecurity market to grow 10% annually over the next four years to $248.3 billion by 2023. Another Research and Markets report expects the global security & vulnerability management market to grow 9% annually to become a $13.7 billion industry by 2026. These stellar growth projections are also getting reflected in the financial performance of the security players. Recently, cloud-based security player Qualys (Nasdaq: QLYS) reported its first quarter results that surpassed market expectations.

Qualys’s Financials

For the first quarter of the year, Qualys saw revenues grow 16% over the year to $75.3 million, ahead of the market’s estimates of $75 million. It ended the quarter with a net income of $0.32 per share and an adjusted EPS of $0.49 per share. The Street had forecast an EPS of $0.42 per share for the quarter.

For the current quarter, Qualys forecast revenues of $78.2-$78.7 million, and adjusted earnings of $0.46-$0.48 a share. While the revenue forecast was in line with the market estimates, the earnings forecast was better than the Street’s forecast of $0.45 for the quarter. Qualys expects to end the current fiscal with revenues of $320.5-$323 million and an EPS of $1.89-$1.94.

Qualys’s Product Innovation

During the quarter, Qualys continued to remain focused on product innovation. It announced the general availability of the global IT Asset Inventory Cloud App, a solution that provides security and IT teams a single source of truth for IT assets spread across complex and interconnected hybrid IT environments with synchronization capabilities to Configuration Management Database to help keep the asset data up to date.

It also released a Patch Management App that will allow IT and SecOps to target critical common vulnerabilities and exposures from a single console. Additionally, these teams will also be able to deploy patches across endpoints, on-premise or cloud assets and verify remediation through this single solution.

Finally, it released a Cloud Agent Gateway Service app, that is an extension of its Cloud Agent Platform and enables customers to securely connect Qualys Cloud Agents from sensitive environment and helps reduce the bandwidth demands of large-scale deployments.

Over the past few years, Qualys has built its product portfolio through several acquisitions of smaller, relevant players. Earlier this year, it had announced the acquisition of 1Mby1M company Adya. While recently it has not announced any further acquisitions, the company mentioned that it remains committed to “acquiring small companies with innovative technology that can help accelerate” its time-to-market of new solutions for its Cloud Platform.

Qualys believes that the global security market will gradually align to four key segments and it is gearing up to make sure it caters to them effectively. The first segment is the large enterprise segment where big organizations will drive their own digital transformation by consolidating their stack and migrating applications to the cloud. The second segment is that of the cloud providers who have and will continue to develop a security center framework that will offer customers an environment with security and compliance features already built in. The third segment is that of the next generation managed security service providers who will benefit from organizations with hybrid environments outsourcing their security needs. And finally, the emerging market of the Internet of Things where security needs to be built-in, and will require a combination of agents and continuous monitoring.

With its cloud-based architecture, Qualys is definitely one of the few players in the vulnerability management market that should be able to address this security market growth. Its scalable cloud-based platform will help it provide a single stop solution for all these emerging security requirements.

Its stock is currently trading at $86.39 with a market capitalization of $3.4 billion. It touched a 52-week high of $98.30 in July last year. The stock has recovered from the market turbulence that had sent it falling to a 52-week low of $65.94 in December last year.

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