Summary
Second quarter fiscal 2022 revenue at Qualys reached $119.9 million, up 20.3% from the prior-year quarter. GAAP gross profit rose 21.4% to $94.8 million, and gross margin was 79.1%, up 0.7 percentage points. Operating income rose 12.4% to $33.0 million, but operating margin slipped to 27.5%, down 1.9 percentage points. Net income rose 25.8% to $26.6 million, and diluted EPS rose 26.4% to $0.67. On a non-GAAP basis, net income was $35.3 million, or $0.89 per diluted share, and Adjusted EBITDA rose 16% to $54.4 million, or 45% of revenue.
For the first six months of fiscal 2022, revenue was $233.3 million, up 18.8%. Operating income was $66.5 million, up 149.6%, and net income was $52.0 million, up 143.4%. Diluted EPS was $1.31, up 147.2%. Operating cash flow for the six months was $112.9 million, up 0.5%, while capital expenditures were $11.2 million, down 13.6%. In the second quarter alone, operating cash flow fell 37.8% to $33.8 million, and capital expenditures fell 47.2% to $3.5 million. Non-GAAP free cash flow for the six months was $101.7 million.
Deferred revenue, current portion, ended the quarter at $275.7 million, up 20.8%. Remaining performance obligations were $270.2 million, up 19.7%. Calculated current billings were $128.7 million, up 18% from the prior-year quarter, slower than the 26% growth reported in that earlier period. Non-GAAP operating income was $47.3 million, or 39% of revenue. The quarter's cash flow decline makes the billings and deferred revenue trends worth watching. Management pointed to continued demand for VMDR, an upgrade called TruRisk, a new Custom Assessment and Remediation solution, an enhanced Partner Program, and the 10-city Qualys Security Conference roadshow.
Guidance points to continued top-line growth. For the third quarter of fiscal 2022, management expects revenue of $124.5 million to $125.1 million, which represents 19% growth over the prior-year quarter. GAAP net income per diluted share is expected to be $0.56 to $0.58, and non-GAAP net income per diluted share is expected to be $0.85 to $0.87. For the full fiscal year 2022, revenue guidance is $488.0 million to $489.5 million, or 19% growth, up from the previous range of $484.0 million to $486.5 million. GAAP EPS guidance is $2.39 to $2.44, up from the previous range of $1.91 to $1.95. Non-GAAP EPS guidance is $3.50 to $3.55, up from the previous range of $3.13 to $3.17.
Risks remain. Qualys faces competition, customer acceptance and retention challenges, possible defects or vulnerabilities in its products, long and unpredictable sales cycles, customer budgeting cycles and seasonal buying patterns, and the ongoing effects of COVID-19. Foreign exchange losses tied to a stronger U.S. dollar against the euro, British pound and Indian rupee pressured other income (expense), net in the quarter. A tax law change requiring mandatory capitalization and amortization of research and development expenses starting January 1, 2022 also affects cash taxes and the income tax provision. The income tax provision decreased in the quarter, helped by excess tax benefits from stock-based compensation and that tax law change. Management also cites its ability to manage rapid growth, fluctuations in its effective tax rate, and general market, political, economic and business conditions. The company continues to invest in sales, marketing and research and development, which will increase operating expenses in absolute dollars. Those investments could pressure margins if revenue growth slows.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $119.9M | $113.4M | +5.7% | $99.7M | +20.3% |
| Gross profit | $94.8M | $89.4M | +6.1% | $78.2M | +21.4% |
| Gross margin | 79.1% | 78.8% | +0.3 pp | 78.4% | +0.7 pp |
| Research & development | $24.8M | $23.1M | +7.3% | $19.8M | +25.2% |
| Sales & marketing | $23.7M | $20.1M | +17.8% | $17.8M | +33.5% |
| General & administrative | $13.3M | $12.6M | +5.5% | $11.2M | +18.9% |
| Total operating expenses | $61.9M | $55.9M | +10.7% | $48.8M | +26.8% |
| Operating income (loss) | $33.0M | $33.5M | -1.6% | $29.4M | +12.4% |
| Operating margin | 27.5% | 29.6% | -2.1 pp | 29.4% | -1.9 pp |
| Net income (loss) | $26.6M | $25.4M | +4.7% | $21.1M | +25.8% |
| Net margin | 22.2% | 22.4% | -0.2 pp | 21.2% | +1.0 pp |
| Diluted EPS | $0.67 | $0.64 | +$0.03 | $0.53 | +$0.14 |
Risks
Adverse economic conditions, inflationary pressures, a potential recession, and geopolitical turmoil including the Russia-Ukraine conflict could reduce IT security spending and make forecasting difficult. The filing says constrained IT security spending may decrease revenue and earnings and could lengthen collection cycles and increase bad debt.
Qualys disclosed the December 2020 Accellion FTA zero-day incident in which attackers illegally obtained certain information, and it says it has incurred and may continue to incur costs to enhance security. It also states that Russia's invasion of Ukraine heightens cybersecurity and privacy breach risks from nation-state actors.
The market is highly fragmented and Qualys competes with larger vendors such as CrowdStrike, Palo Alto Networks, Broadcom, Rapid7, and Tenable. Larger competitors can bundle competing products and pressure prices, which may reduce average sales prices and gross margins.
The sales cycle for Qualys subscriptions typically ranges from six to twelve months but can exceed eighteen months, particularly for large transactions. This length and unpredictability can cause revenues to vary and make operating results difficult to forecast.
MD&A states total other income (expense), net decreased by $1.4 million and $2.0 million for the three and six months ended June 30, 2022 compared to the prior-year periods, mainly due to an increase in foreign exchange loss from U.S. Dollar appreciation against EUR, GBP, and INR. For the six months ended June 30, 2022, 29% of expenses and 24% of revenues were in foreign currencies.
For the six months ended June 30, 2022, approximately 41% of revenues were derived from sales through channel partners. Agreements with channel partners are generally non-exclusive, and the loss of one or more large partners could adversely affect sales.
Qualys growth depends on recruiting and retaining qualified sales personnel, and competition for highly skilled personnel is intense. Recent or planned hires may not become as productive as quickly as expected, and upfront sales and marketing expenses could hurt operating results if revenues do not increase.
As of June 30, 2022, approximately 75% of employees were located outside the United States, with 67% in Pune, India. This exposes Qualys to foreign labor, data privacy, tax, regulatory, and geopolitical risks, including increasing tensions between India and China.
A tax law change effective January 1, 2022 requires mandatory capitalization and amortization of research and development expenses. MD&A says net cash taxes paid during the six months ended June 30, 2022 were higher by approximately $11.2 million compared to the same period in 2021, and the income tax provision increased 114.6% for the six months ended June 30, 2022 compared to the prior-year period.
Substantially all solutions are hosted from 11 third-party shared cloud platforms, and some are not currently redundant. Disruption, failure to renew provider agreements, or delays moving customers could interrupt service, reduce revenues, and cause customer credits.
If Qualys solutions fail to detect vulnerabilities, falsely detect them, or do not cover all mobile and personal devices, brand and reputation could suffer and lead to negative publicity, lost customers, and claims. False positives from third-party attack-source data may impair perceived reliability.
Privacy and data protection obligations, including GDPR, CCPA, and CPRA, create compliance costs and uncertainty. GDPR fines can reach up to four percent of prior-year annual revenue or EUR 20 million, whichever is higher, and data transfer mechanisms remain subject to challenge.
Qualys suspended services to all customers in Russia and Belarus effective March 2022 in response to Russia's invasion of Ukraine and related sanctions, and changes to sanctions could further affect sales and operations. Revenue from Russia and Belarus was not material during the six months ended June 30, 2022 and the year ended December 31, 2021.
Headcount increased to 1,962 employees as of June 30, 2022, and revenue grew from $321.6 million in 2019 to $411.2 million in 2021. Failure to improve IT systems, financial infrastructure, and controls could prevent accurate forecasting and efficient management.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Non-GAAP Gross Margin
Non-GAAP Operating Income
Adjusted EBITDA Margin
Calculated Current Billings Growth (YoY)
Non-GAAP Operating Income (% of revenues)
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q2 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.