Summary
Qualys reported revenue of $99.7 million for the quarter ended June 30, 2021, up 12.2% from $88.8 million in the same quarter of 2020. Revenue for the first six months of the fiscal year reached $196.5 million, up 12.2% from $175.1 million. Gross profit of $78.2 million in the quarter was up 11.7% from a year earlier, while gross margin slipped to 78.4% from 78.7%. The forward-looking measures point to healthy demand. Remaining performance obligations climbed 47.8% to $225.7 million, and current deferred revenue rose 14.2% to $228.2 million. Calculated current billings, a non-GAAP figure, were $109.0 million, up 26% year over year compared with 7% growth a year earlier. Paid cloud agent subscriptions grew 51% to 64 million deployed, and the company says it now serves more than 19,000 active customers in more than 130 countries.
Profitability was uneven. Operating income of $29.4 million rose 15.1% from $25.5 million, and operating margin improved to 29.4% from 28.7%. Below the operating line the trend reverses. Net income fell 19.7% to $21.1 million from $26.3 million, and diluted earnings per share dropped to $0.53 from $0.64. Taxes explain most of the gap. The effective tax rate for the quarter was 29.2%, against 2.9% a year earlier, as pre-tax income rose and excess tax benefits from stock-based compensation shrank. Non-GAAP net income per diluted share was $0.79, up from $0.74, a reminder that the GAAP decline is tied to stock compensation and taxes rather than operations. The six-month view is rougher. Operating income for the year to date fell 42.0% to $26.7 million from $45.9 million, net income dropped 52.5% to $21.4 million from $45.0 million, and diluted EPS of $0.53 was down 51.8% from $1.10. General and administrative expenses for the six months rose 145.3%, which management attributes largely to accelerated stock-based compensation tied to the resignation of the former chief executive.
Cash generation was the strongest part of the release. Operating cash flow for the quarter was $54.4 million, up 86.2% from $29.2 million, and it equaled 55% of revenue, up from 33% a year earlier. For the six months, operating cash flow of $112.2 million rose 37.5% from $81.6 million. Capital expenditures were $6.7 million in the quarter, up 54.8%, and $12.9 million for the year to date, up 11.6%. Non-GAAP free cash flow, which subtracts purchases of property and equipment and finance lease payments, was $99.2 million for the six months versus $70.0 million a year earlier. Adjusted EBITDA, another non-GAAP measure, rose 9% to $46.7 million.
Management raised its outlook on the back of the quarter. For the third quarter of 2021, Qualys guides revenue to $103.8 million to $104.4 million, representing 12% growth over the same quarter in 2020. Third-quarter GAAP net income per diluted share is expected in a range of $0.46 to $0.48, and non-GAAP net income per diluted share in a range of $0.78 to $0.80. For the full fiscal year 2021, the company now expects revenue of $406.0 million to $407.5 million, up from a prior range of $402.5 million to $404.5 million and 12% growth over 2020. Full-year GAAP EPS guidance moved to $1.38 to $1.43 from $1.06 to $1.11, and non-GAAP EPS guidance to $3.02 to $3.07 from $2.67 to $2.72. The full-year GAAP estimate assumes an effective income tax rate of 28%, and the non-GAAP estimate assumes 21%.
The leadership and product news moved forward during the quarter. Sumedh Thakar was named permanent chief executive after serving in the interim role, and Allan Peters joined as chief revenue officer to run the global sales and partner organization. Qualys also introduced Cybersecurity Asset Management, added real-time malware protection to Multi-Vector EDR, and extended VMDR to patch Linux systems. Risks are the familiar ones for a subscription security vendor. The COVID-19 pandemic and related public health measures remain a source of uncertainty, including questions about vaccine availability and effectiveness against new variants. Competition in cloud security is intense, and currency moves in the euro, British pound and Indian rupee can swing other income. Long sales cycles, customer budgeting cycles, heavy reliance on channel partners and the ability to retain and add customers all feed into renewal-driven revenue, and the effective income tax rate can shift on both a GAAP and non-GAAP basis. The billing, deferred revenue and RPO trends support the raised targets. The tax-driven slide in GAAP earnings is the main blemish on an otherwise solid quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $99.7M | $96.8M | +3.0% | $88.8M | +12.2% |
| Gross profit | $78.2M | $75.1M | +4.1% | $69.9M | +11.7% |
| Gross margin | 78.4% | 77.6% | +0.8 pp | 78.7% | -0.4 pp |
| Research & development | $19.8M | $17.7M | +11.6% | $18.1M | +9.7% |
| Sales & marketing | $17.8M | $18.0M | -1.2% | $15.8M | +12.6% |
| General & administrative | $11.2M | $42.0M | -73.3% | $10.6M | +5.9% |
| Total operating expenses | $48.8M | $77.8M | -37.3% | $44.4M | +9.8% |
| Operating income (loss) | $29.4M | -$2.7M | +1185.5% | $25.5M | +15.1% |
| Operating margin | 29.4% | -2.8% | +32.3 pp | 28.7% | +0.7 pp |
| Net income (loss) | $21.1M | $228.0K | +9172.8% | $26.3M | -19.7% |
| Net margin | 21.2% | 0.2% | +21.0 pp | 29.6% | -8.4 pp |
| Diluted EPS | $0.53 | $0.01 | +$0.52 | $0.64 | -$0.11 |
Risks
In December 2020, Qualys was notified by service provider Accellion of a zero-day vulnerability affecting an Accellion FTA server used in its customer support system, and attackers illegally obtained certain information. The company has incurred response costs, may continue to incur costs to enhance security, and remote work during COVID-19 increases breach risk.
The former CEO resigned for health reasons in March 2021 and the current CEO was appointed in April 2021. For the six months ended June 30, 2021, general and administrative expenses increased 145.3% compared with the same period in 2020, primarily due to a $29.0 million increase in stock-based compensation from accelerated vesting relating to the former CEO resignation.
The sales cycle for Qualys solutions typically ranges from six to twelve months but can be more than eighteen months, particularly with large transactions. This length and unpredictability makes revenues difficult to forecast and can cause operating results to fluctuate.
Qualys faces competition from larger vendors such as CrowdStrike, Palo Alto Networks, Rapid7, Tenable and VMware, which may have greater resources, broader product suites and the ability to bundle offerings or offer lower prices. This could increase pricing pressure and reduce gross profits.
For the six months ended June 30, 2021, approximately 41% of revenues were derived from sales through channel partners. These agreements are generally non-exclusive, and the loss of one or more larger channel partners could adversely affect sales and growth prospects.
As of June 30, 2021, approximately 74% of employees were located outside the United States, with 64% in Pune, India. For the six months ended June 30, 2021, approximately 22% of revenues and 24% of expenses were in foreign currencies, exposing Qualys to currency fluctuations, geopolitical tensions including India-China tensions, and foreign regulatory risks.
Qualys delivers substantially all solutions from eight third-party data centers in the United States, Canada, Switzerland, the Netherlands, United Arab Emirates and India. Some data centers are not currently redundant, and disruption from natural disasters, cyberattacks, power losses or other events could interrupt service delivery and reduce revenues.
Qualys is subject to evolving privacy and data protection rules including GDPR, which can trigger fines of up to €20 million or 4% of global annual revenues, and California laws such as CCPA and CPRA. The CJEU invalidated the EU-U.S. Privacy Shield in July 2020, which may require different or additional data transfer steps and increase compliance costs.
The continued spread of COVID-19, including resurgences and variants, could cause an economic slowdown or global recession that decreases demand for Qualys solutions. MD&A states the company is unable to accurately predict the full impact of the pandemic on its business, financial position, results of operations and cash flows.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Non-GAAP Gross Margin
Adjusted EBITDA Margin
Active Customers
Non-GAAP Operating Income (% of revenues)
Paid Cloud Agent Subscriptions
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q2 FY2021 (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.