Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-Q __________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2023 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 001-35662 __________________ QUALYS, INC. (Exact name of registrant as specified in its cha ...

Qualys, Inc. (NASDAQ:QLYS) Q1 2023 Earnings Conference Call May 4, 2023 5:00 PM ET Company Participants Blair King - Vice President, Investor Relations & Corporate Development Sumedh Thakar - President & Chief Executive Officer Joo Mi Kim - Chief Financial Officer Conference Call Participants Matt Saltzman - Morgan Stanley Brian Essex - JPMorgan Alex Henderson - Needham & Company Rudy Kessinger - D.A. Davison Josh Tilton - Wolfe Research Operator Thank you for standing by. Welcome to the Qualys First Quarte ...

Sumedh Thakar, President and CEO Joo Mi Kim, CFO Safe harbor Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: - our ability to continue to develop platform capabilities and solutions; - the ability of our platform and solutions to perform as intended; - customer acceptance and purchase of our existing solutions an ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-Q __________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 001-35662 __________________ QUALYS, INC. (Exact name of registrant as specified in its charter) __________________ Delaware 77-0534145 ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Qualys, Inc. provides a leading cloud-based platform for IT, security, and compliance solutions, serving over 10,000 global customers via a SaaS model with annual subscriptions - **Qualys** is a pioneer and leading provider of a cloud-based platform delivering IT, security, and compliance solutions to **over 10,000 customers worldwide**[21](index=21&type=chunk)[29](index=29&type=chunk) - The business model is primarily **software-as-a-service (SaaS)** with renewable annual subscriptions, recognized ratably[28](index=28&type=chunk) - In 2022, the company introduced new Cloud Apps: **Custom Assessment and Remediation (CAR)**, **Context Extended Detection and Response (XDR)**, and **Network Detection and Response (NDR)**[40](index=40&type=chunk) Revenue Growth (2020-2022) | Year | Revenues (in millions) | | :--- | :--- | | 2022 | $489.7 | | 2021 | $411.2 | | 2020 | $363.0 | [Our Platform](index=6&type=section&id=Our%20Platform) The Qualys Cloud Platform delivers integrated IT, security, and compliance solutions through a scalable multi-tenant infrastructure, utilizing sensors and agents for continuous visibility - The platform consists of **Qualys Cloud Apps**, core services, and a scalable multi-tenant cloud infrastructure, leveraging physical/virtual sensors and cloud agents for continuous visibility[30](index=30&type=chunk)[31](index=31&type=chunk) - Solutions are delivered via **11 global shared cloud platforms** or a **Qualys Private Cloud Platform (PCP)** for on-premises or dedicated cloud environments[35](index=35&type=chunk) - Core services include **Asset Tagging and Management**, **Reporting and Dashboards**, **Remediation and Workflow**, and a **Big Data Correlation and Analytics Engine** using Elasticsearch[36](index=36&type=chunk)[43](index=43&type=chunk) [Our Growth Strategy](index=13&type=section&id=Our%20Growth%20Strategy) Qualys's growth strategy centers on continuous innovation, expanding existing customer solutions, driving new customer acquisition, and selective technology acquisitions - Continuously innovate and enhance the cloud platform, with **CAR**, **XDR**, and **NDR** introduced in 2022[75](index=75&type=chunk) - Expand solution usage within the existing base of **over 10,000 customers**[75](index=75&type=chunk) - Drive new customer growth through free services and by expanding relationships with channel partners like **AWS**, **Microsoft Azure**, and **Google Cloud Platform**[75](index=75&type=chunk)[77](index=77&type=chunk) - Selectively pursue technology acquisitions, such as the **2022 acquisition of Blue Hexagon Inc.** to add **AI/machine learning capabilities** for threat detection[75](index=75&type=chunk) [Sales and Marketing](index=13&type=section&id=Sales%20and%20Marketing) Qualys employs a dual sales strategy with direct and inside teams, significantly leveraging channel partners who accounted for **42% of 2022 revenues** - Sales are conducted through a **direct field sales team** for enterprises and an **inside sales team** for SMBs[76](index=76&type=chunk) - Channel partners, including **Accenture**, **IBM**, and **Verizon**, are a key sales channel, with Qualys selling subscriptions to partners for resale[77](index=77&type=chunk)[78](index=78&type=chunk) Revenue from Channel Partners | Year | Revenue from Channel Partners (%) | | :--- | :--- | | 2022 | 42% | | 2021 | 41% | | 2020 | 42% | [Human Capital Resources](index=16&type=section&id=Human%20Capital%20Resources) As of December 31, 2022, Qualys had **2,143 employees**, with **75% located outside the U.S.** and **66% in Pune, India**, promoting diversity and a hybrid work model Employee Headcount by Department (as of Dec 31, 2022) | Department | Number of Employees | | :--- | :--- | | Research and Development | 1,062 | | Sales and Marketing | 376 | | Operations and Customer Support | 478 | | General and Administrative | 227 | | **Total** | **2,143** | - Approximately **75% of employees** were located outside the U.S., with **66% in Pune, India**[94](index=94&type=chunk) - The company promotes diversity, with **two of seven board members being women** and **over 50% of the executive team** from underrepresented communities[96](index=96&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including operational variability, innovation challenges, intense competition, security incidents, reliance on third-party partners, international operations, and evolving legal and regulatory landscapes - **Business & Operational Risks:** Potential for fluctuating operating results, failure to innovate or scale the platform, reliance on subscription renewals, and adverse economic conditions[108](index=108&type=chunk)[111](index=111&type=chunk)[115](index=115&type=chunk) - **Security & Service Risks:** The platform may be subject to security incidents, potentially harming reputation and leading to liability, with service disruptions at shared cloud platforms also posing a risk[121](index=121&type=chunk)[128](index=128&type=chunk) - **Market & Competition Risks:** Intense competition from established players like **Broadcom**, **CrowdStrike**, **Palo Alto Networks**, **Rapid7**, and **Tenable**, with solution failures potentially harming the brand[133](index=133&type=chunk)[140](index=140&type=chunk) - **Dependency Risks:** Reliance on third-party channel partners (generating **42% of 2022 revenue**), risks of international operations (**75% of employees outside the U.S.**), and dependence on key management personnel[145](index=145&type=chunk)[147](index=147&type=chunk)[158](index=158&type=chunk) - **Legal & Regulatory Risks:** Evolving data privacy laws (**GDPR**, **CCPA**), use of open-source software, potential IP infringement claims, and compliance with export controls could impose significant costs[173](index=173&type=chunk)[178](index=178&type=chunk)[188](index=188&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) Qualys's principal executive offices are in Foster City, California, with a major office in Pune, India, and shared cloud platforms operated from third-party facilities globally - Principal executive offices are located in **Foster City, California** (**76,922 sq. ft.** lease until April 2028)[218](index=218&type=chunk) - A major office is located in **Pune, India** (**281,787 sq. ft.** lease until February 2025)[218](index=218&type=chunk) - Shared cloud platforms are operated at third-party facilities in the **U.S.**, **Canada**, **Switzerland**, **India**, and the **Netherlands**[219](index=219&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2022, Qualys accrued **$1.5 million** for a probable legal loss, noting that litigation outcomes are unpredictable and could materially impact financial results - As of December 31, 2022, the company had an accrual of **$1.5 million** in accrued liabilities for a legal matter where loss is probable and estimable[411](index=411&type=chunk) - The company states it is not reasonably possible that it has incurred a material loss from any other ongoing legal proceedings, individually or combined[220](index=220&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Qualys common stock trades on Nasdaq under "QLYS"; the company has never paid dividends but has an active share repurchase program, authorizing **$900.0 million** as of year-end 2022, with **847,598 shares** repurchased in Q4 2022 - The company's common stock is traded on the **Nasdaq Global Select Market** under the symbol **"QLYS"**[224](index=224&type=chunk) - Qualys has never declared or paid cash dividends and does not expect to in the foreseeable future[226](index=226&type=chunk) - The board authorized a share repurchase program, with an aggregate authorization of **$900.0 million** as of December 31, 2022, and an additional **$100.0 million** authorized on February 9, 2023[234](index=234&type=chunk)[235](index=235&type=chunk) Share Repurchases (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2022 | 231,057 | $136.68 | | Nov 2022 | 285,100 | $121.98 | | Dec 2022 | 331,441 | $115.09 | | **Total Q4** | **847,598** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2022, Qualys reported **$489.7 million** in revenue, a **19% increase**, with net income rising to **$108.0 million**, supported by strong liquidity and healthy operating cash flow of **$198.9 million** Financial Highlights (2022 vs 2021) | Metric | 2022 (in millions) | 2021 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $489.7 | $411.2 | +19% | | Gross Profit | $386.9 | $321.7 | +20% | | Income from Operations | $130.5 | $87.7 | +49% | | Net Income | $108.0 | $71.0 | +52% | | Diluted EPS | $2.74 | $1.77 | +55% | - The **Net Dollar Expansion Rate** was **109%** for 2022, indicating strong growth from existing customers[266](index=266&type=chunk) - **Adjusted EBITDA** for 2022 was **$218.6 million** (**45% of revenues**), compared to **$191.2 million** (**46% of revenues**) in 2021[271](index=271&type=chunk) - Cash provided by operating activities was **$198.9 million** in 2022, with **$317.3 million** used for share repurchases[272](index=272&type=chunk)[276](index=276&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) For 2022, revenues grew **19% to $489.7 million**, driven by customer expansion, while operating expenses increased across R&D and Sales & Marketing, leading to a **49% rise in income from operations** to **$130.5 million** Revenue Analysis (2022 vs 2021) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $489.7M | $411.2M | +$78.6M | +19% | Operating Expenses Analysis (2022 vs 2021) | Expense Category | 2022 (in millions) | 2021 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of Revenues | $102.8 | $89.4 | +15% | | Research & Development | $101.2 | $81.3 | +24% | | Sales & Marketing | $97.2 | $76.5 | +27% | | General & Administrative | $58.0 | $76.3 | -24% | - The **$18.3 million decrease in G&A expenses** was primarily due to a **$27.3 million stock-based compensation expense** in 2021 related to the former CEO's grants[259](index=259&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, Qualys held **$380.5 million** in cash and generated **$198.9 million** from operations, with major cash uses including **$317.3 million** for share repurchases and **$15.4 million** for capital expenditures Cash Flow Summary (2022 vs 2021) | Cash Flow Activity | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Cash from Operating Activities | $198.9 | $200.6 | | Cash from (used in) Investing Activities | $145.1 | ($29.5) | | Cash used in Financing Activities | ($306.0) | ($107.9) | - The principal source of liquidity as of December 31, 2022, was **$380.5 million** in cash, cash equivalents, and marketable securities[272](index=272&type=chunk) - Major cash uses in 2022 were **$317.3 million** for share repurchases and **$15.4 million** for capital expenditures[275](index=275&type=chunk)[276](index=276&type=chunk) - Material cash requirements include **$46.4 million** for operating leases and **$77.1 million** for other purchase obligations[278](index=278&type=chunk)[279](index=279&type=chunk) [Financial Statements and Supplementary Data](index=54&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Qualys's audited consolidated financial statements for 2022, with Grant Thornton LLP providing an unqualified opinion on both financial statements and internal controls, highlighting stock-based compensation tax effects as a critical audit matter - The independent auditor, **Grant Thornton LLP**, issued an **unqualified opinion** on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[292](index=292&type=chunk)[302](index=302&type=chunk) - The auditor identified the **tax effects of temporary and permanent differences related to stock-based compensation** as a critical audit matter due to its complexity and required expertise[297](index=297&type=chunk)[298](index=298&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31, 2022) | Category | Amount (in thousands) | | :--- | :--- | | **Total Assets** | **$700,941** | | Cash, cash equivalents, and marketable securities | $380,533 | | Total Current Assets | $473,338 | | **Total Liabilities** | **$411,812** | | Deferred Revenues (Current & Noncurrent) | $317,218 | | Total Current Liabilities | $352,188 | | **Total Stockholders' Equity** | **$289,129** | Consolidated Statement of Operations (Year Ended Dec 31, 2022) | Category | Amount (in thousands) | | :--- | :--- | | Revenues | $489,723 | | Gross Profit | $386,935 | | Income from Operations | $130,547 | | **Net Income** | **$107,992** | [Controls and Procedures](index=92&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with the independent auditor concurring and no material changes identified - The **CEO and CFO** concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[453](index=453&type=chunk) - Management concluded that the company's **internal control over financial reporting** was effective as of December 31, 2022, based on the **COSO framework**[456](index=456&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth quarter of 2022[458](index=458&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=93&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement, with the company maintaining a public code of business conduct and ethics - The information for this item is incorporated by reference from the registrant's **Proxy Statement for the 2023 Annual Meeting of Stockholders**[462](index=462&type=chunk) - The company has adopted a **code of business conduct and ethics** applicable to all employees, officers, and directors, available on its website[463](index=463&type=chunk) [Executive Compensation](index=93&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's **2023 Proxy Statement** - The information for this item is incorporated by reference from the registrant's **Proxy Statement for the 2023 Annual Meeting of Stockholders**[464](index=464&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=93&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the company's **2023 Proxy Statement** - The information for this item is incorporated by reference from the registrant's **Proxy Statement for the 2023 Annual Meeting of Stockholders**[465](index=465&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=93&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's **2023 Proxy Statement** - The information for this item is incorporated by reference from the registrant's **Proxy Statement for the 2023 Annual Meeting of Stockholders**[466](index=466&type=chunk) [Principal Accounting Fees and Services](index=93&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the company's **2023 Proxy Statement** - The information for this item is incorporated by reference from the registrant's **Proxy Statement for the 2023 Annual Meeting of Stockholders**[467](index=467&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=94&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and CEO/CFO certifications - This section provides a list of all financial statements and exhibits filed with the **Form 10-K**[470](index=470&type=chunk)[471](index=471&type=chunk) - Key exhibits include the **Amended and Restated Certificate of Incorporation**, various equity incentive plans, and **certifications from the CEO and CFO** as required by the **Sarbanes-Oxley Act**[471](index=471&type=chunk)[472](index=472&type=chunk)

Qualys, Inc. (NASDAQ:QLYS) Q4 2022 Earnings Conference Call February 9, 2023 5:00 PM ET Company Participants Blair King - Vice President, Investor Relations & Corporate Development Sumedh Thakar - President & Chief Executive Officer Joo Mi Kim - Chief Financial Officer Conference Call Participants Dan Bergstrom - RBC Capital Markets Joshua Tilton - Wolfe Research Rob Owens - Piper Sandler Brian Essex - JPMorgan Rudy Kessinger - D.A. Davidson Hamza Fodderwala - Morgan Stanley Operator Good day, and thank you ...

Investor Presentation Security and Compliance for the Digital Transformation February 9, 2023 Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: - our ability to continue to develop platform capabilities and solutions; - the ability of our platform and solutions to perform as intended; - customer acceptance and purc ...

Business Overview - Qualys is an industry-leading cloud security and compliance platform[9] - The company uniquely positioned to capitalize on stack consolidation and move to the cloud[9] - Qualys Cloud Platform provides one view across the entire global hybrid-IT environment[11] Financial Performance and Growth - The company has accelerating organic revenue growth, reaching $359 million in Q3 2022 YTD, a 19% year-over-year increase[46, 48] - Adjusted EBITDA margin was 46% in Q3 2022 YTD[67] - Free cash flow margin was 40% in Q3 2022 YTD[84] Customer Base and Market Opportunity - Qualys has over 10,000 subscription customers[37] - 66% of the Forbes Global 50, 46% of Global 500, and 25% of Global 2000 standardized on Qualys[35] - The company estimates a large expanding market opportunity, with a total addressable market of $51 billion[33, 34] Products and Services - VMDR (Vulnerability Management, Detection and Response) customer penetration is increasing, reaching 45% in Q3 2022[52] - The platform integrates 25 IT, Security & Compliance Apps[24, 25] - The company offers Multi-Vector EDR (Endpoint Detection & Response) and Context XDR (Extended Detection & Response) solutions[19, 28]

Qualys, Inc. (NASDAQ:QLYS) Q3 2022 Earnings Conference Call November 2, 2022 5:00 PM ET Company Participants Blair King - IR Sumedh Thakar - President & CEO Joo Mi Kim - CFO Conference Call Participants Joshua Tilton - Wolfe Research Anusha Santhiapillai - RBC Capital Markets Matt Saltzman - Morgan Stanley Trevor Walsh - JMP Securities Operator Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Qualys Third Quarter 2022 Investor Conference Call. At this time, all participants are ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-Q __________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 2022 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 001-35662 __________________ QUALYS, INC. Delaware 77-0534145 (State or other jurisdic ...