Summary
Qualys reported third quarter fiscal 2024 revenue of $153.9 million, an 8.4% increase from $142.0 million in the same quarter a year earlier. GAAP gross profit rose 8.5% to $125.0 million. GAAP operating income climbed 3.1% to $45.0 million. Net income moved the other way. GAAP net income fell 0.7% to $46.2 million, and diluted EPS was flat at $1.24. Growth at the top line did not carry all the way down to the bottom line.
Operating expenses explain the gap. Gross margin was 81.3% for the quarter, essentially flat against 81.2% a year earlier. Operating margin slipped to 29.2% from 30.7%, down 1.5 percentage points. Sales and marketing expenses jumped 17%, and general and administrative expenses rose 16%, both largely on higher headcount. Research and development expenses edged up 4%. The net dollar expansion rate was 103% as of September 30, 2024, down from 106% a year earlier. Existing customers still spend more, but the pace of that expansion has cooled.
Qualys added several products in the quarter, including TruRisk Eliminate, TotalAI, and updates to its Web Application Security solution that add context-aware prioritization and API security features. The company says it serves more than 10,000 subscription customers. Management framed the launches as a way to consolidate customers onto a single platform and widen the gap with competitors.
Cash generation weakened noticeably. Operating cash flow for the quarter fell 34% to $61.0 million from $92.4 million a year earlier. Capital expenditures rose to $3.4 million. Calculated current billings, a non-GAAP measure, grew 14% to $167.4 million. Current deferred revenue rose 10.0% to $337.8 million, and remaining performance obligations rose 15.9% to $383.3 million. Non-GAAP net income was $58.0 million, or $1.56 per diluted share, compared with $1.51 a year earlier. Adjusted EBITDA edged up 1% to $69.7 million.
Guidance points to steadier growth ahead. For the fourth quarter of fiscal 2024, Qualys expects revenue growth of 7% to 9% over the prior-year quarter, with GAAP EPS of $0.84 to $0.94 and non-GAAP EPS of $1.28 to $1.38. For the full fiscal year 2024, the company now expects 9% revenue growth over 2023, and it raised both EPS outlooks. Full year GAAP EPS guidance is $4.31 to $4.41, up from a prior range of $3.85 to $4.01, and non-GAAP EPS guidance is $5.81 to $5.91, up from $5.46 to $5.62. The fourth quarter EPS outlook assumes an effective income tax rate of 21%, while the full year GAAP rate assumption is 18%.
Risks remain. Qualys cites macroeconomic uncertainty, inflation, high interest rates, reduced spending, extended sales cycles, and geopolitical conflicts as threats to demand. Competition in cloud security is intense, and currency swings could affect results. The company also depends on recruiting and retaining sales staff. It held $573.0 million in cash, cash equivalents and marketable securities at September 30, 2024, and had $185.7 million left under its share repurchase authorization.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $153.9M | $148.7M | +3.5% | $142.0M | +8.4% |
| Gross profit | $125.0M | $122.3M | +2.2% | $115.3M | +8.5% |
| Gross margin | 81.3% | 82.2% | -1.0 pp | 81.2% | +0.1 pp |
| Research & development | $28.9M | $27.1M | +6.6% | $27.8M | +4.0% |
| Sales & marketing | $32.7M | $32.1M | +1.7% | $27.9M | +17.2% |
| General & administrative | $18.5M | $15.0M | +23.6% | $16.0M | +15.6% |
| Total operating expenses | $80.1M | $74.2M | +7.9% | $71.7M | +11.7% |
| Operating income (loss) | $45.0M | $48.1M | -6.5% | $43.6M | +3.1% |
| Operating margin | 29.2% | 32.3% | -3.1 pp | 30.7% | -1.5 pp |
| Net income (loss) | $46.2M | $43.8M | +5.6% | $46.5M | -0.7% |
| Net margin | 30.0% | 29.4% | +0.6 pp | 32.8% | -2.7 pp |
| Diluted EPS | $1.24 | $1.17 | +$0.07 | $1.24 | ±$0.00 |
Risks
The filing states that inflationary pressure, high interest rates, significant volatility of global markets, reduced spending, extended sales cycles, and geopolitical conflicts could materially adversely affect Qualys' business. MD&A also says these factors could lead current and potential customers to reduce or eliminate IT security spending.
Qualys says its sales cycle is long and unpredictable, typically six to twelve months but sometimes more than eighteen months, and that complexity of customer requirements and the current macroeconomic environment have prolonged it. This can cause revenues to vary from period to period and make forecasting difficult.
The net dollar expansion rate was 103% as of September 30, 2024, compared with 106% as of September 30, 2023, and Qualys depends on customers renewing subscriptions and purchasing additional solutions. Customers have no obligation to renew, and failure to renew or expand could cause revenues to grow more slowly or decline.
Qualys competes with larger vendors such as Broadcom, CrowdStrike, Palo Alto Networks, Rapid7, Tenable, and Wiz that can bundle competing products and may have greater resources. It says pricing pressure and larger competitors could reduce average sales prices and gross profits.
Qualys says it is targeted for cyber-attacks because it provides IT security solutions and has experienced security incidents and attacks of varying degrees. A breach or incident affecting its platform or third-party service providers could harm reputation, cause customer loss, and lead to liability.
Qualys has incorporated AI/machine learning into its solutions and expects to rely on it for future growth, but it says competitors may incorporate AI more quickly or successfully. It also faces evolving legal, regulatory, and ethical obligations around AI that could require significant changes or lead to liability and reputational harm.
For the nine months ended September 30, 2024, approximately 46% of revenues came from sales through channel partners, and agreements are generally non-exclusive. Loss of one or more larger channel partners or their focus on competing products could adversely affect sales.
As of September 30, 2024, approximately 76% of employees were outside the United States and 68% were in Pune, India, exposing Qualys to foreign regulatory, tax, wage, and geopolitical risks. For the nine months ended September 30, 2024, about 25% of revenues and 27% of expenses were in foreign currencies.
Qualys hosts substantially all solutions from 14 third-party shared cloud platforms, and it says some platforms are not currently redundant and customers may not be rapidly moved between them. Any disruption could interrupt service delivery, reduce revenues, cause customer credits, and lead to non-renewals.
SaaS KPIs
All quarters →Calculated Current Billings
Adjusted EBITDA
Non-GAAP Gross Margin
Subscription Customers
Non-GAAP Operating Income
Calculated Current Billings Growth
Net Dollar Expansion Rate
Operating Cash Flow
Summary, forecast, risks and KPIs are extracted from QUALYS, INC.'s SEC filings for Q3 FY2024 (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.