PR Newswire | Feb 10, 2021 04:16PM EST

02/10 15:16 CST

Qualys Announces Fourth Quarter and Full Year 2020 Financial Results2020 Revenue Growth of 13% Year-Over-YearQ4 Revenue Growth of 12% Year-Over-Year2020 GAAP EPS: $2.24; 2020 Non-GAAP EPS: $2.87Q4 GAAP EPS: $0.59; Q4 Non-GAAP EPS: $0.71Announces Additional $100 Million Share Repurchase Program FOSTER CITY, Calif., Feb. 10, 2021

FOSTER CITY, Calif., Feb. 10, 2021 /PRNewswire/ -- Qualys, Inc. (NASDAQ: QLYS), a pioneer and leading provider of disruptive cloud-based IT, security and compliance solutions, today announced financial results for the fourth quarter and full year ended December 31, 2020. For the quarter, the Company reported revenues of $94.8 million, net income under United States Generally Accepted Accounting Principles ("U.S. GAAP") of $23.8 million, non-GAAP net income of $28.6 million, Adjusted EBITDA of $43.4 million, GAAP net income per diluted share of $0.59, and non-GAAP net income per diluted share of $0.71. For the full year ended December 31, 2020, the Company reported revenues of $363.0 million, GAAP net income of $91.6 million, non-GAAP net income of $117.0 million, Adjusted EBITDA of $169.5 million, GAAP net income per diluted share of $2.24, and non-GAAP net income per diluted share of $2.87.

"We are pleased to finish 2020 with continued adoption of our Vulnerability Management, Detection and Response (VMDR(r)) application and Cloud Agent subscriptions with approximately 56 million agents purchased. This year we delivered an impressive suite of new applications to our Qualys Cloud Platform, including VMDR, Multi-Vector EDR, and Runtime Container Security, while producing record margins. Additionally, we are excited about our upcoming XDR offering as it presents a significant extension of our cloud platform that will help our customers further consolidate their IT, security and compliance stack," said Sumedh Thakar, interim CEO of Qualys. "In response to the recent SolarWinds and FireEye breaches, we are also offering a free 60-day integrated VMDR service to companies to quickly assess devices impacted by SolarWinds Orion vulnerabilities, SUNBURST Trojan detections, and FireEye Red Team tools. I am also pleased to announce our Board has authorized an additional $100 million open market share repurchase program, which allows us to continue to mitigate our share dilution and drive shareholder value."

Fourth Quarter 2020 Financial Highlights

Revenues:Revenues for the fourth quarter of 2020 increased by 12% to $94.8 million compared to $84.7 million for the same quarter in 2019.

Gross Profit:GAAP gross profit for the fourth quarter of 2020 increased by 9% to $73.6 million compared to $67.5 million for the same quarter in 2019. GAAP gross margin was 78% for the fourth quarter of 2020 compared to 80% for the same quarter in 2019. Non-GAAP gross profit for the fourth quarter of 2020 increased by 9% to $76.0 million compared to $69.6 million for the same quarter in 2019. Non-GAAP gross margin was 80% for the fourth quarter of 2020 compared to 82% for the same quarter in 2019.

Operating Income: GAAP operating income for the fourth quarter of 2020 increased by 25% to $24.4 million compared to $19.5 million for the same quarter in 2019. As a percentage of revenues, GAAP operating income was 26% for the fourth quarter of 2020 compared to 23% for the same quarter in 2019. Non-GAAP operating income for the fourth quarter of 2020 increased by 17% to $36.2 million compared to $30.8 million for the same quarter in 2019. As a percentage of revenues, non-GAAP operating income was 38% for the fourth quarter of 2020 compared to 36% for the same quarter in 2019.

Net Income:GAAP net income for the fourth quarter of 2020 was $23.8 million, or $0.59 per diluted share, compared to $20.7 million, or $0.50 per diluted share, for the same quarter in 2019. As a percentage of revenues, GAAP net income was 25% for the fourth quarter of 2020 compared to 24% for the same quarter in 2019. Non-GAAP net income for the fourth quarter of 2020 was $28.6 million, or $0.71 per diluted share, compared to non-GAAP net income of $25.5 million, or $0.62 per diluted share, for the same quarter in 2019. As a percentage of revenues, non-GAAP net income was 30% for both the fourth quarter of 2020 and the fourth quarter of 2019.

Adjusted EBITDA:Adjusted EBITDA (a non-GAAP financial measure) for the fourth quarter of 2020 increased by 17% to $43.4 million compared to $37.0 million for the same quarter in 2019. As a percentage of revenues, Adjusted EBITDA was 46% for the fourth quarter of 2020 compared to 44% for the same quarter in 2019.

Operating Cash Flow:Operating cash flow for the fourth quarter of 2020 increased by 15% to $38.8 million compared to $33.7 million for the same quarter in 2019. As a percentage of revenues, operating cash flow was 41% for the fourth quarter of 2020 compared to 40% for the same quarter in 2019.

Fourth Quarter 2020 Business Highlights

* Delivered a free 60-day integrated Vulnerability Management Detection and Response service to help organizations quickly assess devices impacted by SolarWinds Orion vulnerabilities, SUNBURST Trojan detections and FireEye Red Team tools. * Deloitte Advisory Limited partnered with Qualys to integrate VMDR, Multi-Vector EDR and the upcoming Next-gen Analytics and Incidence Response into Deloitte Hong Kong Cyber's managed vulnerability services. * Extended partnership with Armor, a leading MSSP, to include the Qualys CloudView App for compliance and monitoring of public clouds. * Partnered with Google Cloud to add out-of-the-box container security support for the new Google Cloud Artifact Registry. * Enhanced Qualys Container Security solution with the addition of deep visibility, runtime defense capabilities and automated enforcement with delivery of Qualys Runtime Security. * Expanded Vulnerability Management integration with Microsoft to include Microsoft Azure Arc to allow customers to perform vulnerability scanning on servers outside of the Azure platform including on-premises and multi-cloud servers. * Expanded to China by establishing a Private Cloud Platform and a partnership with Digital China, the largest value-added provider of integrated IT products, solutions and support for enterprises in China.

Full Year 2020 Financial Highlights

Revenues:Revenues for 2020 increased by 13% to $363.0 million compared to $321.6 million for 2019.

Gross Profit:GAAP gross profit for 2020 increased by 13% to $283.7 million compared to $252.1 million for 2019. GAAP gross margin was 78% for both 2020 and 2019. Non-GAAP gross profit increased by 12% to $292.7 million for 2020 compared to $260.3 million for 2019. Non-GAAP gross margin was 81% for both 2020 and 2019.

Operating Income: GAAP operating income for 2020 was $96.7 million compared to $72.3 million for 2019. As a percentage of revenues, GAAP operating income was 27% for 2020 compared to 22% for 2019. Non-GAAP operating income for 2020 was $143.0 million compared to $113.2 million for 2019. As a percentage of revenues, non-GAAP operating income was 39% for 2020 compared to 35% for 2019.

Net Income: GAAP net income for 2020 was $91.6 million, or $2.24 per diluted share, compared to $69.3 million, or $1.68 per diluted share, for 2019. As a percentage of revenues, GAAP net income was 25% for 2020 compared to 22% for 2019. Non-GAAP net income for 2020 was $117.0 million, or $2.87 per diluted share, compared to non-GAAP net income of $94.5 million, or $2.29 per diluted share, for 2019. As a percentage of revenues, non-GAAP net income was 32% for 2020 compared to 29% for 2019.

Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for 2020 increased by 23% to $169.5 million compared to $138.3 million for 2019. As a percentage of revenues, Adjusted EBITDA was 47% for 2020 compared to 43% for 2019.

Operating Cash Flow:Operating cash flow for 2020 was $180.1 million compared to $160.6 million for 2019. As a percentage of revenues, operating cash flow was 50% for both 2020 and 2019.

Full Year 2020 Business Highlights

Market Recognition

* Recognized as a 2020 Gartner Peer Insights Customer's Choice for Vulnerability Assessment. * Named as Best Vulnerability Management solution by SC Awards. * Acknowledged as leading the next generation of end-to-end vulnerability management technology with VMDR solution by industry analyst firm Ovum (now Omdia).

Products & Features

* Shipped Qualys Multi-Vector EDR, which leverages the Qualys Cloud Platform and Qualys Cloud Agent to link vulnerability and visibility to EDR and provide context beyond the endpoints to reduce false positives for customers and streamline threat hunting. * Provided a comprehensive inventory sync with ServiceNow Service Graph and Configuration Management Database (CMDB) as part of the new Service Graph Connector Program, a new designation within the Technology Partner Program. * Delivered Qualys VMDR, an all-in-one cloud-based app that automates the entire vulnerability management cycle across on-premises, endpoints, cloud, mobile, containers, OT and IoT environments - significantly accelerating the ability for organizations to respond to threats and prevent breaches. * Introduced a free Remote Endpoint Protection solution to help enterprises secure remote workforces by providing instant security assessment, visibility and remote computer patching with zero impact on VPN bandwidth for both corporate and personal computers. * Added malware detection to our free Remote Endpoint Protection solution to help businesses secure remote workers and made it available to federal agencies via a no-cost 60-day pilot.

Business Developments

* Partnered with Infosys, a global leader in next-generation digital services and consulting, to integrate Qualys VMDR and Multi-Vector EDR into its Cyber Next Platform, a managed security service offering. * Expanded partnership with Ivanti, integrating Ivanti Patch Management into the Qualys VMDR Platform to self-heal endpoints with one click. * Acquired software assets of Spell Security, bringing advanced endpoint behavior detection and additional telemetry to the Qualys Cloud Platform while strengthening Qualys' security and threat research capabilities. * Delivered Vulnerability Management and Container Security to Microsoft Azure Security Center for virtual machines and containers. * Announced Qualys Cloud Agent's general availability on Google Cloud, providing customers with visibility of their workloads and virtual machines in Google Cloud with essentially no software to install or maintain. * Selected by Armor, a global MSSP, to embed Qualys VMDR into Armor Anywhere, an industry-leading cloud security platform.

Financial Performance Outlook

Based on information as of today, February 10, 2021, Qualys is issuing the following financial guidance for the first quarter and full year fiscal 2021. The Company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Legal Notice Regarding Forward-Looking Statements" below, including risks and uncertainties associated with the COVID-19 pandemic.

First Quarter 2021 Guidance:Management expects revenues for the first quarter of 2021 to be in the range of $94.8 million to $95.4 million, representing 10% to 11% growth over the same quarter in 2020. GAAP net income per diluted share is expected to be in the range of $0.37 to $0.39, which assumes an effective income tax rate of 26%. Non-GAAP net income per diluted share is expected to be in the range of $0.68 to $0.70, which assumes a non-GAAP effective income tax rate of 21%. First quarter 2021 net income per diluted share estimates are based on approximately 40.6 million weighted average diluted shares outstanding for the quarter.

Full Year 2021 Guidance:Management expects revenues for the full year 2021 to be in the range of $399.0 million to $402.0 million, representing 10% to 11% growth over 2020. GAAP net income per diluted share is expected to be in the range of $1.39 to $1.44, which assumes an effective income tax rate of 26%. Non-GAAP net income per diluted share is expected to be in the range of $2.60 to $2.65, which assumes a non-GAAP effective income tax rate of 21%. Full year 2021 net income per diluted share estimates are based on approximately 40.8 million weighted average diluted shares outstanding.

Investor Conference Call

Qualys will host a conference call and live webcast to discuss its fourth quarter and full year 2020 financial results at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on Wednesday, February 10, 2021. To access the conference call, dial (877) 881-2609 in the U.S. or (970) 315-0463 for international participants with conference ID #1674355. A live webcast of the earnings conference call, investor presentation and prepared remarks can be accessed at https://investor.qualys.com/events-presentations. A replay of the conference call will be available through the same webcast link following the end of the call.

Investor Contact

Vinayak RaoVice President, Corporate Development and Investor Relations (650) 801-6210ir@qualys.com

About Qualys

Qualys, Inc. (NASDAQ: QLYS) is a pioneer and leading provider of disruptive cloud-based IT, security and compliance solutions with over 19,000 active customers in more than 130 countries, including a majority of each of the Forbes Global 100 and Fortune 100. Qualys helps organizations streamline and consolidate their security and compliance solutions in a single platform and build security into digital transformation initiatives for greater agility, better business outcomes, and substantial cost savings.

The Qualys Cloud Platform and its integrated Cloud Apps deliver businesses critical security intelligence continuously, enabling them to automate the full spectrum of auditing, compliance, and protection for IT systems and web applications across on premises, endpoints, cloud, containers, and mobile environments. Founded in 1999 as one of the first SaaS security companies, Qualys has established strategic partnerships with leading cloud providers like Amazon Web Services, Microsoft Azure and the Google Cloud Platform, and managed service providers and consulting organizations including Accenture, BT, Cognizant Technology Solutions, Deutsche Telekom, DXC Technology, Fujitsu, HCL Technologies, IBM, Infosys, NTT, Optiv, SecureWorks, Tata Communications, Verizon and Wipro. The company is also a founding member of the Cloud Security Alliance. For more information, please visit www.qualys.com.

Qualys, Qualys VMDR(r)and the Qualys logo are proprietary trademarks of Qualys, Inc. All other products or names may be trademarks of their respective companies.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements in this press release include, but are not limited to, statements related to: the benefits of our new and upcoming products, features, integrations, collaborations and joint solutions, including our upcoming XDR offering; our strategy and our business model and our ability to execute such strategy; our guidance for revenues, GAAP EPS and non-GAAP EPS for the first quarter and full year 2021; and our expectations for the number of weighted average diluted shares outstanding and the GAAP and non-GAAP effective income tax rate for the first quarter and full year 2021. 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 and new solutions; real or perceived defects, errors or vulnerabilities in our products or services; our ability to retain existing customers and generate new customers; the budgeting cycles, seasonal buying patterns and length of our sales cycle; the impact of the ongoing COVID-19 pandemic and related public health measures on our business and the global economy; our ability to manage costs as we increase our customer base and the number of our platform solutions; the market for cloud solutions for IT security and compliance not increasing at the rate we expect; competition from other products and services; fluctuations in currency exchange rates; unexpected fluctuations in our effective income tax rate on a GAAP and non-GAAP basis; our ability to effectively manage our rapid growth and our ability to anticipate future market needs and opportunities; any unanticipated accounting charges; and general market, political, economic and business conditions in the United States as well as globally. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the Securities and Exchange Commission on November 4, 2020.

The forward-looking statements in this press release are based on information available to Qualys as of the date hereof, and Qualys disclaims any obligation to update any forward-looking statements, except as required by law.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, Qualys provides investors with certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA (defined as earnings before interest expense, interest income and other income (expense), net, income taxes, depreciation, amortization, stock-based compensation, and non-recurring expenses that do not reflect ongoing costs of operating the business) and non-GAAP free cash flows (defined as cash provided by operating activities less purchases of property and equipment (net of proceeds from disposal) and principal payments under capital lease obligations).

In computing non-GAAP financial measures, Qualys excludes the effects of stock-based compensation expense, and non-recurring expenses that do not reflect ongoing costs of operating the business. Qualys believes that these non-GAAP financial measures help illustrate underlying trends in its business that could otherwise be masked by the effect of the income or expenses, as well as the related tax effects, that are excluded in non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA and non-GAAP free cash flows.

Furthermore, Qualys uses some of these non-GAAP financial measures to establish budgets and operational goals for managing its business and evaluating its performance. Qualys believes that non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA and non-GAAP free cash flows provide additional tools for investors to use in comparing its recurring core business operating results over multiple periods with other companies in its industry.

Although Qualys does not focus on quarterly billings, Qualys provides calculated current billings (defined as total revenues recognized in a period plus the sequential change in current deferred revenue in the corresponding period) to assist investors and analysts in assessing its operating performance.

Qualys has not reconciled non-GAAP net income per diluted share guidance to GAAP net income per diluted share guidance because Qualys does not provide guidance on the various reconciling cash and non-cash items between GAAP net income and non-GAAP net income (i.e., stock-based compensation and non-recurring expenses). The actual dollar amount of reconciling items in the first quarter and full year 2021 is likely to have a significant impact on the Company's GAAP net income per diluted share in the first quarter and full year 2021. A reconciliation of the non-GAAP net income per diluted share guidance to the GAAP net income per diluted share guidance is not available without unreasonable effort.

In order to provide a more complete picture of recurring core operating business results, the Company's non-GAAP net income and non-GAAP net income per diluted share include tax adjustments required to achieve the effective income tax rate on a non-GAAP basis, which could differ from the GAAP effective income tax rate. The Company believes its estimated non-GAAP effective income tax rate of 21% in 2021 is a reasonable estimate under its global operating structure. The Company may adjust this rate during the year to take into account events or trends that it believes materially impact the estimated annual rate. The non-GAAP effective income tax rate could be subject to change for a number of reasons, including but not limited to, significant changes resulting from tax legislation, material changes in geographic mix of revenues and expenses and other significant events.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating its business internally and as such has determined that it is important to provide this information to investors.

Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

Three Months Ended Twelve Months Ended December 31, December 31,

2020 2019 2020 2019

Revenues $ 94,801 $ 84,664 $ 362,963 $ 321,607

Cost of revenues^(1) 21,221 17,163 79,226 69,517

Gross profit 73,580 67,501 283,737 252,090

Operating expenses:

Research and development ^(1) 18,643 17,808 72,548 68,239

Sales and marketing^(1) 17,892 19,344 67,965 70,833

General and administrative^(1) 12,633 10,804 46,570 40,765

Total operating expenses 49,168 47,956 187,083 179,837

Income from operations 24,412 19,545 96,654 72,253

Other income (expense), net:

Interest expense (5) (8) (9) (106)

Interest income 946 2,052 5,385 8,443

Other income (expense), net (261) (287) 7 (607)

Total other income, net 680 1,757 5,383 7,730

Income before income taxes 25,092 21,302 102,037 79,983

Provision for income taxes 1,276 638 10,465 10,647

Net income $ 23,816 $ 20,664 $ 91,572 $ 69,336

Net income per share:

Basic $ 0.61 $ 0.53 $ 2.34 $ 1.77

Diluted $ 0.59 $ 0.50 $ 2.24 $ 1.68

Weighted average shares usedin computing net income pershare:

Basic 39,168 39,003 39,167 39,075

Diluted 40,440 40,921 40,823 41,345

^(1)Includes stock-basedcompensation as follows:

Cost of revenues $ 801 $ 588 $ 2,767 $ 2,262

Research and development 3,615 3,276 13,502 11,151

Sales and marketing 1,484 1,395 5,785 4,984

General and administrative 4,204 4,470 17,981 16,495

Total stock-based compensation $ 10,104 $ 9,729 $ 40,035 $ 34,892

Qualys, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

December 31, 2020 December 31, 2019

Assets

Current assets:

Cash and cash equivalents $ 74,132 $ 87,559

Short-term marketable securities 281,892 211,331

Accounts receivable, net 100,179 78,034

Prepaid expenses and other current assets 19,142 18,692

Total current assets 475,345 395,616

Long-term marketable securities 98,458 119,508

Property and equipment, net 64,850 60,579

Operating leases - right of use asset 44,838 40,551

Deferred tax assets, net 15,811 18,830

Intangible assets, net 12,006 16,795

Goodwill 7,447 7,447

Restricted cash 1,200 1,200

Other noncurrent assets 16,864 15,082

Total assets $ 736,819 $ 675,608

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 731 $ 848

Accrued liabilities 29,833 22,784

Deferred revenues, current 213,494 192,172

Operating lease liabilities, current 11,672 7,663

Total current liabilities 255,730 223,467

Deferred revenues, noncurrent 30,540 20,935

Operating lease liabilities, noncurrent 45,700 44,015

Other noncurrent liabilities 367 388

Total liabilities 332,337 288,805

Stockholders' equity:

Common stock 39 39

Additional paid-in capital 401,359 362,408

Accumulated other comprehensive income (loss) (484) 1,162

Retained earnings 3,568 23,194

Total stockholders' equity 404,482 386,803

Total liabilities and stockholders' equity $ 736,819 $ 675,608

Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in thousands)

Twelve Months Ended December 31,

2020 2019

Cash flow from operating activities:

Net income $ 91,572 $ 69,336

Adjustments to reconcile net income to netcash provided by operating activities:

Depreciation and amortization expense 32,845 31,201

Bad debt expense 486 247

Loss on disposal of property and equipment 106 202

Stock-based compensation 40,035 34,892

Amortization of premiums (accretion of 826 (1,597)discounts) on marketable securities

Deferred income taxes 3,512 7,095

Changes in operating assets and liabilities:

Accounts receivable (22,631) (2,456)

Prepaid expenses and other assets (2,329) (6,012)

Accounts payable (389) (1,076)

Accrued liabilities 5,126 715

Deferred revenues 30,927 28,060

Net cash provided by operating activities 180,086 160,607

Cash flow from investing activities:

Purchases of marketable securities (391,693) (331,131)

Sales and maturities of marketable securities 341,879 328,350

Purchases of property and equipment (30,037) (27,573)

Proceeds from disposal of property and 419 -equipment

Acquisition of businesses, net of cash (1,500) (4,050)acquired, and purchases of intangible assets

Purchase of privately-held investment - (625)

Net cash used in investing activities (80,932) (35,029)

Cash flow from financing activities:

Repurchase of common stock (126,729) (86,424)

Proceeds from exercise of stock options 34,461 24,831

Payments for taxes related to net share (20,199) (15,743)settlement of equity awards

Principal payments under finance lease (114) (1,709)obligations

Net cash used in financing activities (112,581) (79,045)

Net increase (decrease) in cash and cash (13,427) 46,533equivalents

Cash, cash equivalents and restricted cash at 88,759 42,226beginning of period

Cash, cash equivalents and restricted cash at $ 75,332 $ 88,759end of period

Qualys, Inc.

RECONCILIATION OF NON-GAAP DISCLOSURES

ADJUSTED EBITDA

(Unaudited)

(in thousands)

Three Months Ended Twelve Months Ended December 31, December 31,

2020 2019 2020 2019

Net income $ 23,816 $ 20,664 $ 91,572 $ 69,336

Depreciation and amortization of 7,225 6,195 26,556 25,121property and equipment

Amortization of intangible assets 1,645 1,520 6,289 6,080

Provision for income taxes 1,276 638 10,465 10,647

Stock-based compensation 10,104 9,729 40,035 34,892

Other income, net (680) (1,757) (5,383) (7,730)

Adjusted EBITDA $ 43,386 $ 36,989 $ 169,534 $ 138,346

Qualys, Inc.

RECONCILIATION OF NON-GAAP DISCLOSURES

(Unaudited)

(in thousands, except per share data)

Three Months Ended Twelve Months Ended December 31, December 31,

2020 2019 2020 2019

GAAP Cost of revenues $ 21,221 $ 17,163 $ 79,226 $ 69,517

Less: Stock-based (801) (588) (2,767) (2,262)compensation

Less: Amortization of (1,620) (1,495) (6,189) (5,980)intangible assets

Non-GAAP Cost of revenues $ 18,800 $ 15,080 $ 70,270 $ 61,275

GAAP Gross profit $ 73,580 $ 67,501 $ 283,737 $ 252,090

Plus: Stock-based 801 588 2,767 2,262compensation

Plus: Amortization of 1,620 1,495 6,189 5,980intangible assets

Non-GAAP Gross Profit $ 76,001 $ 69,584 $ 292,693 $ 260,332

GAAP Research and $ 18,643 $ 17,808 $ 72,548 $ 68,239development

Less: Stock-based (3,615) (3,276) (13,502) (11,151)compensation

Less: Amortization of (25) (25) (100) (100)intangible assets

Non-GAAP Research and $ 15,003 $ 14,507 $ 58,946 $ 56,988development

GAAP Sales and marketing $ 17,892 $ 19,344 $ 67,965 $ 70,833

Less: Stock-based (1,484) (1,395) (5,785) (4,984)compensation

Non-GAAP Sales and marketing $ 16,408 $ 17,949 $ 62,180 $ 65,849

GAAP General and $ 12,633 $ 10,804 $ 46,570 $ 40,765administrative

Less: Stock-based (4,204) (4,470) (17,981) (16,495)compensation

Non-GAAP General and $ 8,429 $ 6,334 $ 28,589 $ 24,270administrative

GAAP Operating expenses $ 49,168 $ 47,956 $ 187,083 $ 179,837

Less: Stock-based (9,303) (9,141) (37,268) (32,630)compensation

Less: Amortization of (25) (25) (100) (100)intangible assets

Non-GAAP Operating expenses $ 39,840 $ 38,790 $ 149,715 $ 147,107

GAAP Income from operations $ 24,412 $ 19,545 $ 96,654 $ 72,253

Plus: Stock-based 10,104 9,729 40,035 34,892compensation

Plus: Amortization of 1,645 1,520 6,289 6,080intangible assets

Non-GAAP Income from $ 36,161 $ 30,794 $ 142,978 $ 113,225operations

GAAP Net income $ 23,816 $ 20,664 $ 91,572 $ 69,336

Plus: Stock-based 10,104 9,729 40,035 34,892compensation

Plus: Amortization of 1,645 1,520 6,289 6,080intangible assets

Less: Tax adjustment (6,929) (6,366) (20,937) (15,821)

Non-GAAP Net income $ 28,636 $ 25,547 $ 116,959 $ 94,487

Non-GAAP Net income pershare:

Basic $ 0.73 $ 0.66 $ 2.99 $ 2.42

Diluted $ 0.71 $ 0.62 $ 2.87 $ 2.29

Weighted average shares usedin non-GAAP net income pershare:

Basic 39,168 39,003 39,167 39,075

Diluted 40,440 40,921 40,823 41,345

Qualys, Inc.

RECONCILIATION OF NON-GAAP DISCLOSURES

FREE CASH FLOWS

(Unaudited)

(in thousands)

Twelve Months Ended December 31,

2020 2019

GAAP Cash flows provided by operating activities $ 180,086 $ 160,607

Less:

Purchases of property and equipment, net of proceeds from disposal (29,618) (27,573)

Principal payments under capital lease obligations (114) (1,709)

Non-GAAP Free cash flows $ 150,354 $ 131,325

Qualys, Inc.

RECONCILIATION OF NON-GAAP DISCLOSURES

CALCULATED CURRENT BILLINGS

(Unaudited)

(in thousands)

Three Months Ended December 31,

2020 2019

GAAP Revenue $ 94,801 $ 84,664

Plus: Current deferred revenue at December 31 213,494 192,172

Less: Current deferred revenue at September 30 (200,283) (180,304)

Non-GAAP Calculated current billings $ 108,012 $ 96,532

Calculated current billings growth compared to same quarter of prior year 12% 15%

View original content: http://www.prnewswire.com/news-releases/qualys-announces-fourth-quarter-and-full-year-2020-financial-results-301226228.html

SOURCE Qualys, Inc.