Qlik Q1 Earnings: Currency Headwinds Take Some Shine Off Of An Otherwise Impressive Quarter

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QLIK: Qlik Technologies logo
QLIK
Qlik Technologies

Qlik Technologies (NASDAQ:QLIK) put out a strong set of numbers in its quarterly earnings report which was released recently. The company’s subscriber base and revenues both registered an uptick for the first three months of 2015. However, unfavorable currency movements also had a detrimental effect on the company’s revenues for the quarter. The company expects this trend to continue as it has released a soft guidance for the rest of the year. We currently have a price estimate of $33.01 for Qlik, which implies a 5% discount to the market price.

See our complete analysis for Qlik

Strong Dollar Puts Dent In Otherwise Strong Growth

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Qlik’s total revenues amounted to $120.3 million for Q1 2015, an increase of 8% over the prior year period. [1] However, revenue growth was hampered by unfavorable currency movements. Ignoring the effect of currency headwinds, the company’s overall revenues actually registered a 23% uptick for the quarter. Similarly, Qlik’s license revenues grew 2% in actual terms but 16% in constant currency terms. The effect of currency fluctuations has been amplified as Qlik earns nearly two-thirds of its revenue from outside of the Americas. Qlik expects the strong dollar to continue to take its toll on the company’s revenues. The company has given a soft guidance for the year 2015 and expects revenues to be in the $600-610 million range, slightly lower than the consensus average of $617 million. [1] The company experienced robust growth in its customer base and added around 1,000 new customers for the quarter. [2] Qlik’s subscriber tally currently stands at 35,000 and we believe that the company will continue to add new customers 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. 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. [3]

Looking Ahead To Potential Growth Areas For Qlik

Emphasis on ease of use and visualization in business intelligence software has fueled growth for Qlik. However, that does not mean that enterprise requirements can be ignored. According to IDC, the worldwide business analytics market was worth $37.7 billion in 2013 and is expected to grow to around $59.2 billion in 2018. [4] This translates to a 9.4% compounded annual growth rate for the forecast period. Gartner introduced the concept of governed data discovery that refers to platforms that can address enterprise-level IT requirements as well as assist business users (non-IT) in data discovery. No vendor has addressed both these aspects so far, but there is an indication that this convergence will happen. Governed data discovery strives to find the right balance between allowing creativity so that end users can experiment with the data and maintaining just enough centralized control so that enterprise tasks can run smoothly. In keeping with this concept, Qlik is introducing more enterprise related features related to reusing data, data governance and control, and scalability with its new product Qlik Sense. Qlik’s in-memory computing (IMC) technology is complementary to data discovery. It 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. The IMC engine calculates aggregations rapidly and maintains associations in the data, which makes analysis faster and more real-time.

Potential Risks

The business analytics market is overcrowded and Qlik faces intense competition from traditional vendors as well as emerging players. Traditional vendors such as SAP, IBM and Microsoft are aggressively investing in their data discovery capabilities. A number of newer companies such as Tableau, Datameer, Sisense, etc., have also entered the market and are offering new features, including data discovery, dash-boarding and data visualization. Both these types of market players pose a threat to growth in Qlik’s customer base as well as average revenue per customer. Compared to other in-memory computing based business intelligence players such as Tableau, Qlik has higher number of customers. However, Tableau has gained an edge in terms of ease of use and data visualization and its customer base is also growing fast. Qlik will need to increase its R&D expenditure and continue to constantly innovate to compete in this increasingly competitive landscape.

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Notes:
  1. Qlik Announces Strong First Quarter 2015 Financial Results, April 23, 2015, Qlik Press Release [] []
  2. Qlik’s SEC Filings []
  3. Magic Quadrant for Business Intelligence and Analytics Platforms, 23 February 2015, Gartner []
  4. IDC Worldwide Business Analytics Software 2014–2018 Forecast and 2013 Vendor Shares, IDC []