Summary
Qualys opened fiscal 2022 with revenue of $113.4 million in the first quarter, up 17.2% from $96.8 million in the same quarter a year earlier. Gross profit rose 19.1% to $89.4 million, and gross margin reached 78.8%, up 1.2 percentage points. The swing came below the gross line. Operating income was $33.5 million against a loss a year earlier, and net income was $25.4 million, or $0.64 per diluted share, compared with $0.2 million, or $0.01 per diluted share. Operating margin was 29.6% against negative 2.8%.
The profit swing traces back to stock compensation. The prior-year quarter carried the accelerated vesting of the former chief executive's equity awards, which pushed general and administrative expense up sharply and drove that operating loss. General and administrative expense fell hard this quarter, and the filing attributes most of the decline to the smaller stock-based compensation charge. Research and development and sales and marketing both grew as the company kept investing, but the drop in stock compensation more than offset them.
Management's preferred numbers tell a steadier story. Non-GAAP net income was $35.6 million, or $0.89 per diluted share, against $29.8 million, or $0.74 per diluted share, a year earlier. Non-GAAP operating income rose 27% to $47.0 million, and Adjusted EBITDA rose 22% to $54.3 million, which management framed as 48% of revenues. The gap between GAAP and non-GAAP profit remains wide, and that is the main reason to read both sets of numbers together.
Cash generation was strong. Operating cash flow rose 36.6% to $79.0 million, and capital expenditures were $7.6 million, up 22.0%. Free cash flow, a non-GAAP measure defined as cash provided by operating activities less purchases of property and equipment, was $71.4 million against $51.6 million a year earlier. Backlog points to continued demand. Deferred revenue, current portion only, stood at $266.9 million, up 21.9%, and remaining performance obligations were $281.2 million, up 27.3%. Calculated current billings, a non-GAAP metric, reached $122.5 million, up 20% from $102.2 million a year earlier, when growth was 6%. Qualys repurchased stock during the quarter and added $200.0 million to its repurchase authorization, lifting the total to $900.0 million, with $225.2 million still available as of March 31, 2022.
Guidance moved higher. For the full year fiscal 2022, management raised its revenue outlook to $484.0 million to $486.5 million, representing 18% growth over 2021, from a previous range of $482.0 million to $485.0 million. Non-GAAP net income per diluted share is guided to $3.13 to $3.17, up from $2.87 to $2.92, and the company also raised its GAAP earnings per share target for the year. For the second quarter of 2022, management guided to revenue growth of 17% to 18% over the same quarter in 2021 and non-GAAP net income per diluted share of $0.78 to $0.80.
Operationally, management said customer penetration of the Vulnerability Management, Detection and Response application reached 40%. The company unveiled Context XDR, upgraded Multi-Vector EDR, added advanced remediation features to Patch Management, and started a ten-city QSC roadshow in Atlanta. Revenue mix tilted toward international business, with United States customers at 59% of revenue versus 62% a year earlier, and partners supplied 41% of revenue versus 40%. The disclosed risks are familiar: competition in cloud security, the ongoing COVID-19 pandemic and related public health measures, currency swings involving the dollar, euro, pound and rupee, an effective income tax rate that can move unexpectedly, and a tax law change requiring capitalization of research and development expenses starting January 1, 2022. Customer retention, sales cycle length, and the budgeting cycles and seasonal buying patterns of customers also remain variables.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $113.4M | $109.8M | +3.3% | $96.8M | +17.2% |
| Gross profit | $89.4M | $86.1M | +3.9% | $75.1M | +19.1% |
| Gross margin | 78.8% | 78.4% | +0.5 pp | 77.6% | +1.3 pp |
| Research & development | $23.1M | $22.4M | +3.2% | $17.7M | +30.2% |
| Sales & marketing | $20.1M | $22.2M | -9.1% | $18.0M | +12.0% |
| General & administrative | $12.6M | $12.4M | +1.5% | $42.0M | -69.9% |
| Total operating expenses | $55.9M | $57.0M | -2.0% | $77.8M | -28.2% |
| Operating income (loss) | $33.5M | $29.0M | +15.4% | -$2.7M | +1339.7% |
| Operating margin | 29.6% | 26.5% | +3.1 pp | -2.8% | +32.4 pp |
| Net income (loss) | $25.4M | $21.8M | +16.4% | $228.0K | +11044.7% |
| Net margin | 22.4% | 19.9% | +2.5 pp | 0.2% | +22.2 pp |
| Diluted EPS | $0.64 | $0.54 | +$0.10 | $0.01 | +$0.63 |
Risks
Discloses a December 2020 Accellion FTA zero-day vulnerability where attackers illegally obtained certain information and the company incurred response costs. It also warns that Russia's invasion of Ukraine heightens cybersecurity and privacy breach risks from nation-state actors.
MD&A states income tax provision increased by $10.4 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to tax law change requiring mandatory capitalization of research and development expenses starting January 1, 2022. The effective tax rate was 23.8% compared with 110.3%.
Company suspended services to all customers in Russia and Belarus effective March 2022 in response to Russia's invasion of Ukraine and related sanctions. Revenue from those operations was not material for the three months ended March 31, 2022 and the twelve months ended December 31, 2021, but additional sanctions could affect sales and operations.
Approximately 41% of revenues for the three months ended March 31, 2022 were derived from sales through channel partners. Agreements are generally non-exclusive, and loss of one or more larger channel partners could adversely affect sales.
As of March 31, 2022, approximately 76% of employees were located outside the United States, with 67% in Pune, India. The company also cites risks from increasing tensions between India and China and from foreign regulatory and tax structures.
Sales cycle for solutions typically ranges from six to twelve months but can be more than eighteen months, particularly with large transactions, making timing and forecasting difficult.
Competes with larger vendors such as Broadcom, CrowdStrike, Palo Alto Networks, Rapid7, and Tenable, some of which can bundle competing products and offer lower prices. This may create pricing pressure and reduce gross profits.
Physical scanner appliances are built by a single manufacturer, and the manufacturer's ability to timely manufacture and ship depends on hardware component availability and supply shortages. An interruption could delay deployment to customers requesting physical scanner appliances.
Substantially all solutions are hosted from 11 third-party shared cloud platforms, and some are not currently redundant. A disruption or failure to renew provider agreements could interrupt or delay service delivery.
Former chief executive officer resigned for health reasons in March 2021 and current chief executive officer was appointed in April 2021. The company has no key-man insurance and faces intense competition for highly skilled personnel.
Privacy laws such as GDPR provide for fines up to four percent of previous year's annual revenue or €20 million, whichever is higher. CCPA, CPRA, Brexit, and uncertainty around data transfer mechanisms may require changes and increase compliance costs.
Risk factors cite adverse economic conditions, inflation, and geopolitical turmoil including the Russia-Ukraine conflict as pressures on IT security spending. MD&A also notes volatility in foreign exchange rates, with approximately 28% of expenses and 24% of revenues in foreign currencies for the three months ended March 31, 2022.
Revenues grew from $321.6 million in 2019 to $411.2 million in 2021, and headcount increased from 1,194 employees at the beginning of 2019 to 1,876 as of March 31, 2022. Failure to improve IT systems, financial infrastructure, and processes could impair growth management and forecasting.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Non-GAAP Gross Margin
Subscription Customers
Non-GAAP Operating Income
Operating Cash Flow
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.