Summary
Qualys reported revenue of $137.2 million for the second quarter of 2023, up 14.4% from $119.9 million in the same quarter last year. Revenue for the six months ended June 30, 2023 reached $267.9 million, up 14.8% from $233.3 million. GAAP net income for the quarter was $35.4 million, up 33.0% from $26.6 million, and GAAP diluted EPS was $0.95, up from $0.67. For the six months, net income of $64.5 million was up 24.0% and diluted EPS of $1.72 was up from $1.31.
The profit line outran the top line. GAAP operating income for the quarter rose 29.8% to $42.8 million from $33.0 million, and operating margin was 31.2%, up 3.7 percentage points from 27.5%. Gross profit of $110.5 million was up 16.6%, and gross margin was 80.6%, up 1.5 percentage points from 79.1%. For the six months, operating income of $78.0 million was up 17.3% and gross profit of $214.3 million was up 16.3%. Non-GAAP operating income for the quarter was $59.6 million, up 26%, and Adjusted EBITDA was $65.8 million, up 21%.
Cash generation was a bright spot in the quarter. Operating cash flow of $51.5 million was up 52.4% from $33.8 million, though operating cash flow for the six months of $118.3 million was up only 4.9%. Non-GAAP free cash flow for the six months was $112.9 million. Capital expenditures fell to $1.4 million in the quarter from $3.5 million, down 59.6%. Remaining performance obligations were $320.8 million, up 18.7% from $270.2 million a year earlier, and deferred revenue stood at $317.2 million at June 30, 2023.
Non-GAAP net income for the quarter was $47.5 million, or $1.27 per diluted share, and calculated current billings were $143.1 million, up 11%. The net dollar expansion rate was 108% as of June 30, 2023, compared with 110% as of June 30, 2022. Management said 97% of the $17.3 million revenue increase came from customers that existed prior to April 1, 2023, with the remaining 3% from new customers. Direct customers accounted for 57% of total revenue in the quarter, and partners 43%. About 60% of revenue in the first half came from customers in the United States.
For the third quarter of 2023, management guided revenue to $140.5 million to $141.5 million, growth of 12% to 13% over the prior-year quarter, with GAAP EPS of $0.71 to $0.76 and non-GAAP EPS of $1.10 to $1.15. For the full year 2023, the company now expects revenue of $553.0 million to $555.0 million, growth of 13%, down from the previous range of $553.0 million to $557.0 million. Full-year GAAP EPS guidance was raised to $3.07 to $3.22 from $2.58 to $2.73, and non-GAAP EPS guidance was raised to $4.50 to $4.65 from $4.13 to $4.28. Qualys said the non-GAAP per-share guidance cannot be reconciled to the GAAP figure without unreasonable effort.
Risks are mostly macro. Qualys names inflation, rising interest rates, financial institution failures, supply chain disruption, labor shortages, foreign exchange volatility, reduced spending and extended sales cycles, and geopolitical conflict as factors that could curb demand. Competition and the ability to retain customers and win new ones are also flagged. The company still carries valuation allowances on deferred tax assets in certain jurisdictions and said it has not identified sufficient positive evidence to release them. Qualys ended the period with $388.1 million in cash, cash equivalents and marketable securities, including $55.0 million held outside the United States, and it used $108.8 million for share repurchases in the first half, leaving $145.7 million available under its program.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $137.2M | $130.7M | +5.0% | $119.9M | +14.4% |
| Gross profit | $110.5M | $103.7M | +6.6% | $94.8M | +16.6% |
| Gross margin | 80.6% | 79.4% | +1.2 pp | 79.1% | +1.5 pp |
| Research & development | $27.4M | $27.8M | -1.3% | $24.8M | +10.6% |
| Sales & marketing | $26.2M | $25.6M | +2.4% | $23.7M | +10.6% |
| General & administrative | $14.1M | $15.1M | -7.1% | $13.3M | +5.4% |
| Total operating expenses | $67.7M | $68.6M | -1.2% | $61.9M | +9.5% |
| Operating income (loss) | $42.8M | $35.2M | +21.7% | $33.0M | +29.8% |
| Operating margin | 31.2% | 26.9% | +4.3 pp | 27.5% | +3.7 pp |
| Net income (loss) | $35.4M | $29.1M | +21.6% | $26.6M | +33.0% |
| Net margin | 25.8% | 22.3% | +3.5 pp | 22.2% | +3.6 pp |
| Diluted EPS | $0.95 | $0.77 | +$0.18 | $0.67 | +$0.28 |
Risks
MD&A warns that macroeconomic uncertainty, including inflationary pressure, rising interest rates, financial institution failures, labor shortages, reduced spending and extended sales cycles, and geopolitical conflicts, could materially adversely affect the long-term business. The risk factors state these factors were experienced in 2022 and into 2023 and have resulted in decreased revenue and earnings.
The company faces competition from larger vendors such as Broadcom, CrowdStrike, Palo Alto Networks, Rapid7, Tenable and Wiz, many with greater resources and broader product suites. Competitors may bundle products or cut prices, which could increase pricing pressure and cause average sales prices for Qualys solutions to decline.
The company disclosed that in December 2020 it was notified by service provider Accellion of a zero-day vulnerability affecting an FTA server used in its customer support system, and attackers illegally obtained certain information. It has incurred response costs and may continue to incur costs, and it notes heightened cybersecurity risks from nation-state actors related to Russia's invasion of Ukraine.
The sales cycle for subscriptions typically ranges from six to twelve months but can exceed eighteen months, and the company says complexity of customer requirements and the current macroeconomic environment have prolonged it. Long and unpredictable sales timing can cause revenues to vary by period and make forecasting difficult.
For the six months ended June 30, 2023, approximately 43% of revenues came from sales through channel partners, and partner agreements are generally non-exclusive. Loss of one or more larger channel partners, or their greater emphasis on competing products, could adversely affect sales.
As of June 30, 2023, approximately 75% of employees were outside the United States, with 66% in Pune, India, and for the six months ended June 30, 2023, approximately 23% of revenues and 28% of expenses were in foreign currencies. This exposes Qualys to foreign exchange, regulatory, tax and geopolitical risks, including India-China tensions.
The company must comply with evolving privacy and data protection laws, including GDPR fines of up to 4% of prior-year annual revenue or EUR 20 million, the CCPA, and the CPRA, whose enforcement was authorized as of July 1, 2023. Cross-border data transfer mechanisms such as SCCs remain subject to legal challenge and could increase compliance costs or limit data transfers.
The company's growth depends on recruiting and retaining qualified sales personnel and key employees, and competition for highly skilled personnel is intense. MD&A reports personnel costs increased in the quarter, including a $4.1 million increase in sales and marketing and a $3.3 million increase in research and development, driven by increased headcount.
Revenues from subscriptions are recognized ratably over the service period, typically one year, so a shortfall in demand may not significantly reduce current-period revenues but could negatively affect future periods. As of June 30, 2023, deferred revenue was $317.2 million and RPO was $320.8 million, up 18.7% from the prior-year quarter.
Customers have no obligation to renew subscriptions and may not renew at the same or higher levels, and the net dollar expansion rate was 108% as of June 30, 2023 compared with 110% as of June 30, 2022. Failure to renew or sell additional subscriptions would harm operating results.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Subscription Customers
Non-GAAP Operating Income
Adjusted EBITDA as a Percentage of Revenues
Calculated Current Billings Growth (YoY)
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q2 FY2023 (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.