Qlik Q1 Earnings Preview: Solid All-Round Growth Expected

Qlik Technologies (NASDAQ:QLIK) will report its first quarter earnings on April 23. Qlik is an innovative Business Intelligence (BI) software company, which provides its clients with tools and interactive dashboards to search, query, analyze and visualize chunks of data to generate useful business insights. Qlik is considered a pioneer in the field of data discovery. Data discovery involves discovering insights from a set of data and analyzing and presenting those insights in interactive and visual format, which makes it easy for business users (non-IT) to run queries and analysis. The company has grown immensely with the increase in demand for data discovery based BI software, and we believe that this trend will continue in the near future. We currently have a price estimate of $33.01 for Qlik, which is roughly in line with the market price.

See our complete analysis for Qlik

Qlik’s Customer Base Will Continue To Grow

Qlik has seen a significant growth in its customer base, which has jumped from 13,200 customers in 2009 to 34,000 customers by the end of 2014. ^[1] We believe that the company’s subscriber base will continue to grow in the coming years. The business analytics software industry is in the midst of a secular trend of growth and Qlik has been one of the beneficiaries. According to Gartner, the Business Intelligence and Analytics industry grew by 9% in 2013, and is expected to grow at a compounded annual growth rate of 8.7% through 2018. ^[2] Within the BI software market, Qlik belongs to the segment specifically focused on developing easy to use and interactive data discovery platforms. In the recent years, focus has shifted in this market from traditional enterprise IT requirements to data discovery. In addition to the conventional established reports, big firms now want descriptive, predictive and prescriptive analysis performed by a larger population of administrators. According to Gartner, data discovery is poised to become a dominant segment of BI market, replacing traditional BI which involves static reporting. ^[3] We believe Qlik and other similar players are going to be more responsive to this need. Qlik has featured as a leader in Gartner’s Magic Quadrant for Business Intelligence and Analytics Platforms for the last three years and its business discovery platform has been a pioneer in the data discovery segment. ^[2] Qlik’s in-memory technology is also a big draw for its customers. In-memory computing (IMC) technology reduces the number of data transactions required while analyzing data by storing the entire database in random access memory (RAM) which is nearer to the processor. This makes the analysis faster and more real-time and reduces the complexities of physical space requirement.

Revenues Will Trend Upwards

Qlik earns revenue through sale of software licenses, related maintenance and services, and professional services. Licensing business is the primary source of revenue for Qlik and currently brings in over 54% of the company’s total revenues. ^[1] The company sells software licenses mostly in perpetual form. Qlik’s licensing revenues have tripled in the last five years, jumping from under $100 million in 2009 to over $300 million by the end of 2014. ^[1] We believe Qlik’s licensing revenues will continue trending upwards, aided by the company’s “Land and Expand” strategy. Under this strategy, Qlik targets purchasers at the department level, in some instances starting with a bare-bones version that can be downloaded for free and subsequently upgraded with a license purchase. Customer penetration extends from an initial download, both through the purchase of increasingly robust offerings and through the addition of seats as users’ work-mates learn of the new tools’ capabilities and download their own versions.

Maintenance and support is also a major source of revenue for Qlik and contributes 37% towards total revenues. Maintenance revenue has grown in proportion to the software licencing revenue and it currently stands at around 68% compared to 44% three years ago. ^[1] We believe that Maintenance agreement revenue will continue to increase as a percentage of licensing revenue throughout our forecast period. Typically, customers acquire a one year of maintenance agreements along with their initial purchases. The maintenance and support agreements are sold on a term basis and their renewal is optional for customers. For the past three years Qlik has witnessed a strong maintenance renewal rate of around 90%, ^[1] which reflects the value that the customers realize from using its products, and also the value they see in having an active maintenance agreement with Qlik. Qlik’s licensing revenue is based on perpetual licensing, whereas maintenance revenue is recurring and boasts of a strong renewal rate.

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1. Qlik’s SEC Filings [↩] [↩] [↩] [↩] [↩]
2. Magic Quadrant for Business Intelligence and Analytics Platforms, 23 February 2015, Gartner [↩] [↩]
3. Gartner Press Release, December 16, 2013, www.gartner.com [↩]