Summary
Qualys closed the third quarter of fiscal 2021 with revenue of $104.9 million, up 12.7% from the prior-year quarter. Gross profit rose 13.8% to $82.5 million, and gross margin reached 78.6%, up 0.7 percentage points. Operating income increased 21.6% to $32.0 million, lifting operating margin to 30.5%, up 2.2 percentage points. Net income rose 22.1% to $27.8 million, and diluted EPS came in at $0.70, up 25.0%. On a non-GAAP basis, net income was $34.2 million, or $0.86 per diluted share, and Adjusted EBITDA was $50.3 million, up 11%. The quarter showed broad improvement across the income statement, with both gross margin and operating margin expanding alongside double-digit revenue growth.
The year-to-date picture is mixed. Revenue for the first nine months rose 12.4% to $301.4 million, and gross profit rose 12.1% to $235.7 million. Gross margin was 78.2%, down 0.2 percentage points. Operating income fell 18.8% to $58.6 million, and operating margin dropped to 19.5%, down 7.5 percentage points. Net income fell 27.5% to $49.1 million, and diluted EPS was $1.22, down 26.5%. The profit decline largely reflects a large increase in stock-based compensation in general and administrative expenses tied to the resignation of the former chief executive officer. That charge weighed on the first half and did not repeat at the same scale in the third quarter. The year-to-date operating margin was well below the prior-year period, a swing driven by the stock-based compensation charge rather than a change in the core subscription model.
Cash generation was uneven. Third-quarter operating cash flow was $48.5 million, down 18.7% from the prior-year quarter. Capital expenditures were $7.2 million, down 35.8%. For the nine months, operating cash flow was $160.7 million, up 13.8%, while capital expenditures were $20.1 million, down 11.7%. Non-GAAP free cash flows for the nine months were $140.6 million. Current deferred revenue stood at $237.5 million, up 18.6%, and remaining performance obligations were $248.5 million, up 37.2%. Calculated current billings were $114.3 million, up 22%. The deferred revenue and RPO growth point to a healthy pipeline of contracted business, even as quarterly operating cash flow declined. The quarterly decline in operating cash flow came despite the year-to-date increase, which suggests a shift in the timing of collections or payments.
Operationally, Qualys said paid Cloud Agent subscriptions grew 40% year over year to 70 million deployed. The company has over 19,000 active customers in more than 130 countries. It acquired TotalCloud and integrated Zero-Touch Patch into Qualys Patch Management, collaborated with Red Hat, and received recognition at the Pwnie Awards. Guidance for the fourth quarter of 2021 calls for revenue growth of 14% to 15% over the same quarter in 2020. Guidance for the full year 2021 calls for revenue growth of 13% over 2020, raised from the company's previous range. Non-GAAP net income per diluted share guidance is $0.78 to $0.80 for the fourth quarter and $3.16 to $3.18 for the full fiscal year, up from the previous range of $3.02 to $3.07. The board also authorized a $200 million increase to the share repurchase program to mitigate dilution. Risks include the ongoing COVID-19 pandemic and related public health measures, foreign exchange fluctuations, competition, the length of the sales cycle, customer acceptance of new solutions, the ability to manage growth, and changes in the effective income tax rate. The company also faces risks from its reliance on channel partners and the budgeting cycles of customers.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $104.9M | $99.7M | +5.2% | $93.1M | +12.7% |
| Gross profit | $82.5M | $78.2M | +5.5% | $72.5M | +13.8% |
| Gross margin | 78.6% | 78.4% | +0.2 pp | 77.8% | +0.7 pp |
| Research & development | $21.3M | $19.8M | +7.7% | $17.9M | +19.4% |
| Sales & marketing | $18.6M | $17.8M | +4.5% | $16.1M | +15.6% |
| General & administrative | $10.6M | $11.2M | -5.7% | $12.2M | -13.5% |
| Total operating expenses | $50.5M | $48.8M | +3.5% | $46.1M | +9.4% |
| Operating income (loss) | $32.0M | $29.4M | +8.9% | $26.3M | +21.6% |
| Operating margin | 30.5% | 29.4% | +1.0 pp | 28.3% | +2.2 pp |
| Net income (loss) | $27.8M | $21.1M | +31.3% | $22.7M | +22.1% |
| Net margin | 26.5% | 21.2% | +5.3 pp | 24.4% | +2.0 pp |
| Diluted EPS | $0.70 | $0.53 | +$0.17 | $0.56 | +$0.14 |
Risks
In December 2020, a zero-day vulnerability in an Accellion FTA server used for customer support allowed attackers to illegally obtain certain information, and the company has incurred response costs and may incur more. Remote work during COVID-19 has increased breach risk for the company and its service providers.
The former chief executive officer resigned for health reasons in March 2021 and the current chief executive officer was appointed in April 2021. For the nine months ended September 30, 2021, general and administrative expenses rose 88.1% from the prior-year period, driven by a $27.9 million increase in stock-based compensation primarily from accelerated vesting related to the former CEO's resignation, while operating income year to date was down 18.8%.
The company competes with larger vendors such as Broadcom, CrowdStrike, IBM, Palo Alto Networks, Rapid7, Tenable and VMware that can bundle competing products and exert pricing pressure. This may reduce average sales prices and gross profits in the IT, security and compliance market.
Privacy and data protection laws including GDPR, CCPA, CPRA and the Schrems II decision create evolving compliance obligations, potential enforcement actions and possible limits on data transfers from the EEA or Switzerland. GDPR fines can be up to 4% of prior-year annual revenue or EUR 20 million, whichever is higher.
As of September 30, 2021, approximately 74% of employees were located outside the United States and 65% were located in Pune, India, exposing operations to foreign regulatory, wage, employee data privacy, tax and geopolitical risks, including tensions between India and China.
The sales cycle for the company's solutions typically ranges from six to twelve months and can be more than eighteen months, with lengthy testing, evaluation, contract negotiation and budgeting processes. This makes revenue timing difficult to forecast and can cause quarterly operating results to fluctuate.
For the nine months ended September 30, 2021, approximately 41% of revenues were derived from sales through channel partners, and agreements with these partners are generally non-exclusive. Loss of larger channel partners or their greater emphasis on competitors' products could reduce sales.
Substantially all solutions are hosted from seven third-party data centers, and some facilities are not currently redundant. Natural disasters, cyberattacks, power losses or failure to renew facility agreements could interrupt service delivery and reduce revenues.
COVID-19 has significantly increased economic and demand uncertainty, and the company says the full impact cannot be accurately predicted due to unknowns around vaccine efficacy against variants and resumption of normal conditions. A pandemic-driven slowdown or recession could decrease demand for the company's solutions.
The company acquired certain intellectual property of TotalCloud on August 19, 2021, after other acquisitions, and acquisition integration is complex, expensive and time-consuming. This may disrupt product development and sales or dilute stockholders if equity is issued.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Non-GAAP Operating Income
Calculated Current Billings Growth
Active Customers
Paid Cloud Agent Subscriptions
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q3 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.