Foster City, Calif., — July 31, 2018 — Qualys, Inc. (NASDAQ: QLYS), a pioneer and leading provider of cloud-based security and compliance solutions, today announced financial results for the second quarter ended June 30, 2018. For the quarter, the Company reported revenues of $68.2 million, net income under Generally Accepted Accounting Principles (“GAAP”) of $10.3 million, non-GAAP net income of $16.4 million, Adjusted EBITDA of $26.7 million, GAAP earnings per diluted share of $0.24, and non-GAAP earnings per diluted share of $0.39.

“We are very pleased with our second quarter results which were fueled by continued platform innovation and increased customer adoption of the Qualys Cloud Platform and its integrated Apps,” said Philippe Courtot, chairman and CEO of Qualys. “We believe we are uniquely positioned to enable customers to consolidate their security and compliance stack, drastically reducing their spend. In addition, our true platform approach provides our customers with a single-pane-of-glass view across on-premises assets, endpoints, clouds, and early next year, mobile environments. As we continue delivering additional best-of-breed detection and response capabilities through the Qualys Cloud Platform, we believe that our customers’ savings will compound. Furthermore, we are now well on our way to providing CIOs with a continuous and updated view of their global IT assets with two-way synchronization with their CMDBs. Such capability is the cornerstone of security, as without visibility, there is no security.”

Second Quarter 2018 Financial Highlights

Revenues: Revenues for the second quarter of 2018 increased by 23% to $68.2 million compared to $55.3 million for the same quarter in 2017.

Gross Profit: GAAP gross profit for the second quarter of 2018 increased by 20% to $51.9 million compared to $43.1 million for the same quarter in 2017. GAAP gross margin percentage was 76% for the second quarter of 2018 compared to 78% for the same quarter in 2017. Non-GAAP gross profit for the second quarter of 2018 increased by 22% to $53.4 million compared to $43.7 million for the same quarter in 2017. Non-GAAP gross margin percentage was 78% for the second quarter of 2018 compared to 79% for the same quarter in 2017.

Operating Income: GAAP operating income for the second quarter of 2018 increased by 21% to $10.9 million compared to $9.0 million for the same quarter in 2017. As a percentage of revenues, GAAP operating income was 16% for the second quarter of 2018 compared to 16% for the same quarter in 2017. Non-GAAP operating income for the second quarter of 2018 increased by 32% to $20.4 million compared to $15.5 million for the same quarter in 2017. As a percentage of revenues, non-GAAP operating income was 30% for the second quarter of 2018 compared to 28% for the same quarter in 2017.

Net Income: GAAP net income for the second quarter of 2018 was $10.3 million, or $0.24 per diluted share, compared to $7.2 million, or $0.18 per diluted share, for the same quarter in 2017. Non-GAAP net income for the second quarter of 2018 was $16.4 million, or $0.39 per diluted share, compared to non-GAAP net income of $10.1 million, or $0.26 per diluted share, for the same quarter in 2017.

Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for the second quarter of 2018 increased by 31% to $26.7 million compared to $20.4 million for the same quarter in 2017. As a percentage of revenues, Adjusted EBITDA was 39% for the second quarter of 2018 compared to 37% for the same quarter in 2017.

Operating Cash Flow: Operating cash flow for the second quarter of 2018 increased by 47% to $24.2 million compared to $16.5 million for the same quarter in 2017. As a percentage of revenues, operating cash flow was 36% for the second quarter of 2018 compared to 30% for the same quarter in 2017.

Adoption of the new revenue recognition standard (ASC 606): ASC 606 resulted in the Company being required to capitalize commission expenses relating to new and upsell business and amortizing the expense over 5 years effective January 1, 2018. Without the adoption of ASC 606, commission expenses would have been $0.5 million higher in the second quarter of 2018.

Second Quarter 2018 Business Highlights

Select New Customers:

• Atrium Health, Danone, Government of the District of Columbia, Hexion, ManpowerGroup, Philips Lighting, Room & Board, Southern Company, TE Connectivity, Zscaler.

Business Highlights:

• Hosted Virtual Analyst & Investors Day. Qualys’ executive team discussed the Company’s vision, strategy, product roadmap and investment highlights as well as showcased forthcoming new applications.
• Unveiled Qualys Community Edition, a free cloud-based service that gives small organizations unified visibility of their own or their clients’ IT and web assets, and the ability to easily assess security and compliance postures using the accuracy and reliability of the Qualys Cloud Platform.
• Announced an expanded partnership with Carahsoft under which Carahsoft will proactively market, sell and distribute the FedRAMP-authorized Qualys Gov Platform to federal agencies as well as state and local governments.
• Released the Qualys’ Container Security (CS) App, a new cloud app that enables customers to build continuous security into their global container deployments and DevOps processes at any scale, and integrate the results into one unified view of their global hybrid IT security and compliance posture, breaking down silos and lowering ownership cost.
• Introduced new functionality for the Security Assessment Questionnaire (SAQ) Cloud App, allowing customers the ability to achieve better visibility of data across their own network and supply chain for compliance with the European Union’s General Data Protection Regulations.
• Announced the introduction of Asset Inventory (AI), a new groundbreaking App for global IT asset inventory and Configuration Management Databases (CMDB) synchronization, providing customers with a single “source of truth” for all IT assets within hybrid environments, including on-premises, endpoints, clouds and (in the near future) mobile.
• Purchased a minority stake in 42Crunch Ltd. as the first Qualys venture investment and simultaneously signed a distribution agreement. 42Crunch has developed an API security platform enabling organizations to quickly deliver applications built on secure APIs.

Financial Performance Outlook

Third Quarter 2018 Guidance: Management expects revenues for the third quarter of 2018 to be in the range of $70.9 million to $71.5 million, representing 19% to 20% growth over the same quarter in 2017. GAAP net income per diluted share is expected to be in the range of $0.20 to $0.22, which assumes an effective income tax rate of 26%. Non-GAAP net income per diluted share is expected to be in the range of $0.37 to $0.39, which assumes an effective non-GAAP income tax rate of 23%. Third quarter 2018 EPS estimates are based on approximately 42.2 million weighted average diluted shares outstanding for the quarter.

Full Year 2018 Guidance: Management now expects revenues for the full year 2018 to be in the range of $278.0 million to $279.2 million, up from the previous guidance range of $276.8 million to $278.5 million. Expected growth over the full year 2017 is 20% to 21%. GAAP net income per diluted share is now expected to be in the range of $0.84 to $0.88, which assumes an effective income tax rate of 18%, up from the previous guidance range of $0.74 to $0.79. Non-GAAP net income per diluted share is now expected to be in the range of $1.46 to $1.50, which assumes an effective income tax rate of 23%, up from the previous guidance range of $1.43 to $1.48. Full year 2018 EPS estimates are based on approximately 42.1 million weighted average diluted shares outstanding.

Investor Conference Call

Qualys will host a conference call and live webcast to discuss its second quarter financial results at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on Tuesday, July 31, 2018. To access the conference call, dial (877) 881-2609 in the U.S. or (970) 315-0463 for international participants with conference ID # 8243829. The live webcast of Qualys’ earnings conference call, investor presentation, and prepared remarks can also be accessed at https://investor.qualys.com/events.cfm. A replay of the conference call will be available through the same webcast link following the end of the call.

Investor Contact

Melissa Fisher
Chief Financial Officer
(650) 801-6100
[email protected]