Qlik misses Q4 2015, soft guidance for 2016. What's going on?

Profile picture for user gonzodaddy By Den Howlett February 11, 2016
Summary:
Qlik disappointed but things are not quite as rough as they seem and in fact may be much better in 2016 than the company estimates.

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Business Intelligence (BI) watchers have been eagerly awaiting Qlik's Q4 2015 results. Like arch rival Tableau, Qlik is forecasting below market expectations for 2016. What happened and what can we discern about the BI market in the light of Gartner's contentious MQ?

The quarter fell below expectations by a margin that can be explained by currency headwinds. In a densely packed press release, Qlik showed Q4 2015 revenue pegged at $205.5 million, up 12% year over year. Take out the currency impact and we'd be looking at around $210 million or a 22% uplift. The market had expected $208 million so presumably had taken some of the currency factor into account. The press release notes that the impact in Q4 against forecast was $4 million. Operating margin was negatively impacted as well which the company explained as:

...primarily due to variable cost increases driven by our revenue, channel and geographic mix in the fourth quarter. Despite these impacts, we modestly expanded non-GAAP operating margins in 2015, and plan to drive further operating margin improvement in 2016.

Looking forward into 2016, Qlik provided revenue guidance of $695-705 million. The market expected $718 million. Similarly, margin is expected to be lower for the full year.

I have to say from the get go that Qlik does itself no favors. For a company that specializes in visualization, it would have been a lot easier for us to digest what is going on if they had eaten their own dogwood and presented some slides that demonstrate what happened. Instead, we have a barrage of figures that don't tell the story so well and have to grind through over an hour's Q&A to pull the explanations out of the CFO/CEO. What's more, for all his cerebral capabilities, CEO Lars Björk seems to have perfected the art of making dull content almost sleep inducing. Even where there was good news, the CEO's delivery could not have been flatter if you'd taken a steam roller to it. It is all so un-necessary.

Unlike Tableau's outing, which, quite frankly was nonsensical, Qlik provided enough clues as to what happened for us to at least get a better grip on what's happening in the company. For example, "variable cost increases" translates to a change in the revenue mix during which more deals than expected were driven by the channel, leading to a lowering of margin. This is actually a good sign because it speaks well to Qlik's ability to attract those looking to make hay while the BI sun shines. This contrasts with Tableau which made no mention of channel.

One important data point: Qlik is not seeing any perceptual change in its win rate against competition. Tableau said the same thing.

When taken with changes the company announced in the sales organization last year, we can also infer that the direct sales teams are not yet firing on all cylinders. Qlik will need to be careful here because if the same softness and mix carries into Q2 2016, then a re-org is a near certainty. That would be a pity because, as noted on the analyst call, Qlik had important success when it pitches its enterprise governance strength. The win at Qantas, coming on the back of success at Lufthansa, should mean that Qlik owns the airline industry. That's a big chunk of change. Add in the company's golden position in the latest Gartner MQ and that should be enough to get a world class sales person past the finishing line over its competitors.

There was more good news. Sense, Qlik's latest offering is starting to pick up traction although here, the company was careful to hedge on when Sense will account for more than 50% of total sales. Think end 2016, early 2017. My market checks suggest that enterprise influencers are now more inclined to rethink Qlik in light of Tableau's back end and scaling issues. All good you might think.

My guess is that the company is not as confident as it could be. If anything I'd venture that it is a tad timid when it has a lot going for it. That is unfortunate but nothing that a good kick in the marketing pants cannot cure. The question is - will the company bite that particular bullet or will it continue to act almost defensively in a market where younger, more brash players are out there making noise? We shall see.

Image credit - via Qlik Sense presentation