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Qualys Announces Fourth Quarter and Full Year 2012 Financial Results
[February 11, 2013]

Qualys Announces Fourth Quarter and Full Year 2012 Financial Results


(GlobeNewswire Via Acquire Media NewsEdge) 2012 Revenue Growth of 20% to $91.4 MillionFourth Quarter GAAP EPS of $0.03, Non-GAAP EPS of $0.06Full Year 2012 GAAP EPS of $0.08, Non-GAAP EPS of $0.20 REDWOOD CITY, Calif., Feb. 11, 2013 (GLOBE NEWSWIRE) -- Qualys, Inc. (Nasdaq:QLYS), a pioneer and leading provider of cloud security and compliance solutions, today announced financial results for the fourth quarter and year ended December 31, 2012. For the fourth quarter, the Company reported revenues of $24.7 million, GAAP net income of $1.2 million, non-GAAP net income of $2.0 million, adjusted EBITDA of $4.4 million, GAAP earnings per diluted share of $0.03, and non-GAAP earnings per diluted share of $0.06. For the full year ended December 31, 2012, the Company reported revenues of $91.4 million, GAAP net income of $2.3 million, non-GAAP net income of $5.7 million, adjusted EBITDA of $13.8 million, GAAP earnings per diluted share of $0.08, and non-GAAP earnings per diluted share of $0.20.



Philippe Courtot, Chairman and Chief Executive Officer of Qualys, said, "We are very pleased with our performance for the quarter and year as we continue to benefit from strong revenue growth generated from both new and existing customers. While our core Vulnerability Management solution remains the cornerstone of our product suite, we also experienced high demand for our Web Application Scanning and Policy Compliance solutions as we successfully diversified our business throughout last year. We aim to continue this trend in 2013 with innovation efforts that will center on further expanding our platform and reaching into new markets, including the government sector with our Virtualized QualysGuard Private Cloud Platform. We believe that our best-in-class platform and the benefits of increasing operating scale will enable us to further drive growth and shareholder value over the coming year." Fourth Quarter 2012 Financial Highlights Revenues: Revenues for the fourth quarter of 2012 increased by 19% to $24.7 million, compared to $20.7 million in the same quarter last year. Revenue growth was driven by a combination of increased sales of subscriptions for additional solutions to existing customers, as well as sales of subscriptions to new customers.

Bookings: Four-Quarter Bookings (a non-GAAP financial measure) were $101.2 million for the four-quarter period ended December 31, 2012, an increase of $16.1 million, or 19%, compared to $85.1 million for the four-quarter period ended December 31, 2011. The increase in Four-Quarter Bookings was primarily due to sales of subscriptions for additional solutions to a larger customer base, as well as sales of subscriptions to new customers.


Gross Profit: GAAPgross profit for the fourth quarter of 2012 increased by 19% to $19.7 million, compared to $16.5 million in the same quarter last year. GAAP gross margin was 80% for the fourth quarter of 2012, compared to 80% in the same quarter last year. Non-GAAP gross profit for the fourth quarter of 2012 increased 19% to $19.8 million, compared to $16.6 million in the same quarter last year. Non-GAAP gross margin was 80% for the fourth quarter of 2012, compared to 80% in the same quarter last year.

Operating Income: GAAP operating income for the fourth quarter of 2012 increased to $1.6 million, compared to an operating loss of $43,000 in the same quarter last year. Non-GAAP operating income for the fourth quarter of 2012 increased by $1.9 million to $2.5 million, compared to $0.6 million in the same quarter last year. Non-GAAP operating margin increased to 10% in the fourth quarter of 2012 from 3% in the same quarter last year as a result of the Company's continued focus on cost management and the benefits of increasing operating scale.

Net Income: GAAP net income for the fourth quarter of 2012 was $1.2 million, or $0.03 per diluted share, up from a net loss of $0.7 million, or a $0.13 net loss per diluted share, in the same quarter last year. Non-GAAP net income for the fourth quarter of 2012 was $2.0 million, or $0.06 per diluted share, compared to a non-GAAP net loss of $16,000, or a $0.00 net loss per diluted share, in the same quarter last year.

Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for the fourth quarter of 2012 increased by 103% to $4.4 million, compared to $2.2 million in the same quarter last year. As a percentage of revenues, adjusted EBITDA increased to 18% in the fourth quarter of 2012 compared to 11% in the same quarter last year.

Full Year 2012 Financial Highlights Revenues: Revenues for 2012 increased by 20% to $91.4 million, compared to $76.2 million in 2011. Revenue growth was driven by a combination of increased sales of subscriptions for additional solutions to existing customers, as well as sales of subscriptions to new customers.

Gross Profit: Gross profit for 2012 increased by 16% to $73.0 million, compared to $63.0 million in 2011. GAAP gross margin was 80% in 2012, compared to 83% in 2011. Non-GAAP gross profit for 2012 increased by 16% to $73.3 million, compared to $63.1 million in 2011. Non-GAAP gross margin was 80% for 2012, compared to 83% in 2011.

Operating Income: GAAP operating income for 2012 increased by 3% to $3.0 million, compared to $2.9 million in 2011. GAAP operating margin was 3% in 2012, compared to 4% in 2011. Non-GAAP operating income for 2012 increased by 28% to $6.5 million, compared to $5.1 million in 2011. Non-GAAP operating margin was 7% in both 2012 and in 2011.

Net Income: GAAP net income for 2012 was $2.3 million, or $0.08 per diluted share, compared to $2.0 million, or $0.08 per diluted share, in 2011. Non-GAAP net income for 2012 was $5.7 million, or $0.20 per diluted share, compared to $4.1 million, or $0.17 per diluted share, in 2011.

Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for 2012 increased by 32% to $13.8 million, compared to $10.4 million in 2011. As a percentage of revenues, adjusted EBITDA increased to 15% in 2012 compared to 14% in 2011.

Initial Public Offering: Qualys began trading on the NASDAQ Stock Market under the symbol "QLYS" on September 28, 2012, and successfully closed its IPO on October 3, 2012. With the full exercise of the underwriters' over-allotment option, the Company sold 7,836,250 shares of common stock and certain selling shareholders sold 875,000 shares of common stock at a price to the public of $12.00 per share.

Fourth Quarter 2012 Business Highlights Customers: New customers include: Citigroup, Colgate-Palmolive, Comcast, Georgetown University, Grupo Mexico, Hilton Worldwide, Level 3, Nestle Deutschland AG, Penske Automotive, Pepperdine University, RICOH, Standard Life, Sun Life Financial, Telkom SA and U.S. Bancorp.

Hosted more than 600 customers and partners at the 10th Annual Qualys Security Conference in four cities around the world, where attendees shared best practices and learned from existing customers and renowned industry experts how to protect their IT Infrastructure from cyber-attacks and manage compliance more effectively.New Products and Functionalities: Released major extensions to the QualysGuard Cloud Platform including automated workflows for Vulnerability Management and enhanced scan management capabilities to increase efficiency for customers.

Introduced innovative predictive analytics engine to QualysGuard Vulnerability Management to help customers analyze risk exposures to zero-day and Microsoft Patch Tuesday vulnerabilities.

Expanded QualysGuard Policy Compliance with support for new technologies, including Microsoft Windows 8 and Windows 2012 Server.

Expanded QualysGuard Web Application Scanning (WAS) with advanced scanning configurations and reporting enhancements to address the growing needs of customers. New capabilities also include Malware Detection, which is a unique and competitive advantage for WAS, as well as forthcoming integrations with attack tools to allow customers and consultants to further test and validate scanning results.

Upgraded the first generation of the QualysGuard Private Cloud Platforms to the new virtualized and extensible platform at Apple, Fujitsu, Microsoft, NTT and Oracle. This new virtualized platform provides customers, partners and government agencies with the performance and scalability to secure their IT infrastructures while keeping data on premise and will enable Qualys to seamlessly introduce new services to these customers and partners.Industry Recognition: Received top customer ratings in an independent information security study conducted by TheInfoPro, a service of 451 Research with top ratings in every category, outperforming all competitors. Additionally, 100% of Qualys' customers indicated they were not considering switching to a competing solution.

Named a finalist in five 2013 SC Magazine Awards categories, including best customer service and excellence in security and compliances solutions for enterprises and SMBs.Channel Partners: Announced an agreement with The Emirates Integrated Telecommunications Company ("du") to deliver vulnerability and compliance management services to businesses in the United Arab Emirates using the new extensible QualysGuard Private Cloud Platform to be hosted at du in Dubai.

Expanded the partnership with Verizon to include their managed security services and consulting practice leveraging the full suite of QualysGuard solutions.Financial Performance Outlook First Quarter 2013 Guidance: Management expects revenues to be in the range of $24.4 million to $24.9 million. GAAP net loss per diluted share is expected to be in the range of $0.02 to $0.04 and non-GAAP net income (loss) per diluted share is expected to be in the range of a loss of $0.01 to an income of $0.01 based on approximately 35.5 million weighted average diluted shares outstanding for the quarter.

Full Year 2013 Guidance: Management expects revenues to be in the range of $106 million to $108 million. GAAP EPS is expected to be in the range of $0.02 to $0.06 per diluted share and non-GAAP EPS is expected to be in the range of $0.16 to $0.20 per diluted share based on approximately 35.7 million weighted average diluted shares outstanding for the full year.

Investor Conference Call Qualys will host a conference call and live webcast to discuss its fourth quarter and full year 2012 financial results today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To access the conference call, dial (877) 881-2609 in the U.S. or +1 (970) 315-0463 for international participants with conference ID #88737334. The live webcast of Qualys' earnings conference call can also be accessed at investor.qualys.com. A replay of the conference call will be available through the same webcast link following the end of the call.

About Qualys, Inc.

Qualys, Inc. (Nasdaq:QLYS), is a pioneer and leading provider of cloud security and compliance solutions with over 6,000 customers in more than 100 countries, including a majority of each of the Forbes Global 100 and Fortune 100. The QualysGuard Cloud Platform and integrated suite of solutions helps organizations simplify security operations and lower the cost of compliance by delivering critical security intelligence on demand and automating the full spectrum of auditing, compliance and protection for IT systems and web applications. Founded in 1999, Qualys has established strategic partnerships with leading managed service providers and consulting organizations including Accuvant, BT, Dell SecureWorks, Fujitsu, NTT, Symantec, Verizon, and Wipro. The company is also a founding member of the Cloud Security Alliance (CSA). For more information, please visit www.qualys.com.

Qualys, the Qualys logo and QualysGuard 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: our belief that we will continue to diversify our business in 2013, and that our innovation efforts will center on further expanding our platform and reaching into new markets, including the government sector with our Virtualized QualysGuard Cloud Platform; our belief that our best-in-class platform and the benefits of increasing operating scale, will enable us to further drive growth and shareholder value over the coming year; our guidance for revenues, GAAP EPS (net loss) and non-GAAP EPS (net loss) for the first quarter and full year 2013; and our expectations for the number of weighted average diluted shares outstanding for the first quarter and full year 2013. 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; customer acceptance and purchase of our existing solutions and new solutions; our ability to retain existing customers and generate new customers; the market for cloud solutions for IT security and compliance not continuing to develop; competition from other products and services; and general market, political, economic and business conditions.  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 three months ended September 30, 2012, filed with the Securities and Exchange Commission on November 9, 2012.  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 generally accepted accounting principles, or GAAP, Qualys monitors non-GAAP measures of Four-Quarter Bookings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP EPS and adjusted EBITDA.  Qualys monitors Four-Quarter Bookings to understand sales trends for its business. Qualys believes this metric provides an additional tool for investors to use in assessing its business performance in a way that more fully reflects current business trends than reported revenues and reduces the variations in any particular quarter caused by customer subscription renewals. Qualys believes Four-Quarter Bookings reflects the material sales trends for its business because it includes sales of subscriptions to new customers, as well as subscription renewals and upsells of additional subscriptions to existing customers.

Qualys also monitors non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP EPS and adjusted EBITDA to evaluate its ongoing operational performance and enhance an overall understanding of its past financial performance. Qualys believes that these non-GAAP metrics 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 income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP EPS and adjusted EBITDA. Furthermore, Qualys uses these measures to establish budgets and operational goals for managing its business and evaluating its performance. Qualys also believes that non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP EPS and adjusted EBITDA provide additional tools for investors to use in comparing its recurring core business operating results over multiple periods with other companies in its industry.

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 EndedYear Ended  December 31,December 31,  2012201120122011 Revenues $ 24,657 $ 20,652 $ 91,420 $ 76,212 Cost of revenues (1) 4,981 4,123 18,404 13,247 Gross profit 19,676 16,529 73,016 62,965 Operating expenses:         Research and development (1) 4,870 4,953 20,195 19,633 Sales and marketing (1) 9,911 9,229 37,738 31,526 General and administrative (1) 3,268 2,390 12,079 8,900 Total operating expenses 18,049 16,572 70,012 60,059 Income (loss) from operations 1,627 (43) 3,004 2,906 Other income (expense), net:         Interest expense (39) (40) (192) (204) Interest income 12 4 14 14 Other income (expense), net (144) (447) (188) (346) Total other income (expense), net (171) (483) (366) (536) Income (loss) before provision for income taxes 1,456 (526) 2,638 2,370 Provision for income taxes 281 125 358 416 Net income (loss) $ 1,175 $ (651) $ 2,280 $ 1,954           Net income (loss) per share attributable to common stockholders:       Basic $ 0.04 $ (0.13) $ 0.09 $ 0.09 Diluted $ 0.03 $ (0.13) $ 0.08 $ 0.08 Weighted average shares used in computing net income (loss) per share attributable to common stockholders:         Basic 30,807 5,194 11,891 5,053 Diluted 35,064 5,194 28,352 24,194          (1) Includes stock-based compensation as follows:                   Cost of revenues $ 81 $ 47 $ 276 $ 143 Research and development 188 159 672 499 Sales and marketing 218 181 1,074 578 General and administrative 383 248 1,430 927 Total stock-based compensation $ 870 $ 635 $ 3,452 $ 2,147                    Qualys, Inc.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Unaudited)(in thousands)            Three Months EndedYear Ended  December 31,December 31,  2012201120122011 Net income (loss) $ 1,175 $ (651) $ 2,280 $ 1,954 Foreign currency translation gain (loss), net of zero tax (42) (106) (59) (166) Change in unrealized gain (loss) on short-term investments, net of zero tax 8 8 Other comprehensive income (loss), net (34) (106) (51) (166) Comprehensive income (loss) $ 1,141 $ (757) $ 2,229 $ 1,788                Qualys, Inc.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(in thousands)        December 31,  20122011Assets     Current assets:     Cash and cash equivalents $ 34,885 $ 24,548 Short-term investments 83,547 Accounts receivable, net 24,545 20,750 Prepaid expenses and other current assets 4,377 3,774 Total current assets 147,354 49,072 Restricted cash 114 112 Property and equipment, net 18,148 13,861 Intangible assets, net 2,811 3,175 Goodwill 317 317 Other noncurrent assets 1,574 2,252 Total assets $ 170,318 $ 68,789Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)     Current Liabilities:     Accounts payable $ 2,031 $ 2,254 Accrued liabilities 7,803 8,468 Deferred revenues, current 56,497 46,717 Capital lease obligations, current 1,183 1,987 Total current liabilities 67,514 59,426 Deferred revenues, noncurrent 8,616 4,713 Income taxes payable, noncurrent 594 661 Other noncurrent liabilities 1,231 2,134 Capital lease obligations, noncurrent 808 2,406 Total liabilities 78,763 69,340 Convertible preferred stock 63,873 Stockholders' equity (deficit):     Common stock 31 5 Additional paid-in capital 166,651 12,927 Accumulated other comprehensive loss (1,035) (984) Accumulated deficit (74,092) (76,372) Total stockholders' equity (deficit) 91,555 (64,424) Total liabilities, convertible preferred stock and stockholders' equity (deficit) $ 170,318 $ 68,789            Qualys, Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(in thousands)        Year Ended December 31,  20122011 Cash flows from operating activities:     Net income $ 2,280 $ 1,954 Adjustments to reconcile net income to net cash provided by operating activities:     Depreciation and amortization expense 7,341 5,373 Bad debt expense 218 193 Loss on disposal of property and equipment 10 1 Stock-based compensation 3,452 2,147 Non-cash interest expense 24 36 Amortization of premiums on short-term investments 7 Changes in operating assets and liabilities:     Accounts receivable (4,014) (6,651) Prepaid expenses and other assets 91 (3,835) Accounts payable (242) 1,248 Accrued liabilities (1,163) 2,817 Deferred revenues 13,683 11,885 Income taxes payable 181 333 Other noncurrent liabilities 84 1,689 Net cash provided by operating activities 21,952 17,190 Cash flows from investing activities:     Purchases of short-term investments (83,547) Purchases of property and equipment (11,188) (7,499) Purchases of intangible assets (49) Net cash used in investing activities (94,784) (7,499) Cash flows from financing activities:     Proceeds from initial public offering, net of offering costs 84,534 Proceeds from exercise of stock options 1,685 948 Proceeds from early exercise of stock options 384 390 Proceeds from issuance of Series C Preferred Stock 128 Principal payments under capital lease obligations (2,401) (1,476) Non-contingent payment related to acquisition (1,000) Net cash provided by (used in) financing activities 83,202 (10) Effect of exchange rate changes on cash and cash equivalents (33) (143) Net increase in cash and cash equivalents 10,337 9,538 Cash and cash equivalents at beginning of period 24,548 15,010 Cash and cash equivalents at end of period $ 34,885 $ 24,548            Qualys, Inc.RECONCILIATION OF NON-GAAP DISCLOSURESFOUR-QUARTER BOOKINGS(Unaudited)(in thousands)        Four Quarters Ended  December 31,  20122011 Revenues $ 91,420 $ 76,212 Deferred revenues, current     Beginning of the Four-Quarter Period 46,717 37,811 Ending 56,497 46,717 Net change 9,780 8,906 Four-Quarter Bookings $ 101,200 $ 85,118                Qualys, Inc.RECONCILIATION OF NON-GAAP DISCLOSURESEBITDA AND ADJUSTED EBITDA(Unaudited)(in thousands)            Three Months EndedYear Ended  December 31,December 31,  2012201120122011 Net income (loss) $ 1,175 $ (651) $ 2,280 $ 1,954 Depreciation and amortization of property and equipment 1,829 1,473 6,895 4,939 Amortization of intangible assets 115 119 446 434 Interest expense 39 40 192 204 Provision for income taxes 281 125 358 416 EBITDA 3,439 1,106 10,171 7,947 Stock-based compensation 870 635 3,452 2,147 Other (income) expense, net 132 443 174 332 Adjusted EBITDA $ 4,441 $ 2,184 $ 13,797 $ 10,426                    Qualys, Inc.RECONCILIATION OF NON-GAAP DISCLOSURES(Unaudited)(in thousands, except per share data)            Three Months EndedYear Ended  December 31,December 31,  2012201120122011 GAAP gross profit $ 19,676 $ 16,529 $ 73,016 $ 62,965 Plus:         Stock-based compensation expense 81 47 276 143 Non-GAAP gross profit $ 19,757 $ 16,576 $ 73,292 $ 63,108           GAAP income (loss) from operations $ 1,627 $ (43) $ 3,004 $ 2,906 Plus:         Stock-based compensation expense 870 635 3,452 2,147 Non-GAAP income from operations $ 2,497 $ 592 $ 6,456 $ 5,053           GAAP net income (loss) $ 1,175 $ (651) $ 2,280 $ 1,954 Plus:         Stock-based compensation expense 870 635 3,452 2,147 Non-GAAP net income (loss) $ 2,045 $ (16) $ 5,732 $ 4,101           Non-GAAP net income (loss) attributable to common stockholders $ 2,025 $ (16) $ 2,694 $ 902           Non-GAAP net income (loss) per share attributable to common stockholders:       Basic $ 0.07 $ 0.00 $ 0.23 $ 0.18 Diluted $ 0.06 $ 0.00 $ 0.20 $ 0.17 Weighted average shares used in computing non-GAAP net income (loss) per share attributable to common stockholders:         Basic 30,807 5,194 11,891 5,053 Diluted 35,064 5,194 28,352 24,194                    Qualys, Inc.NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS(Unaudited)(in thousands, except per share data)            Three Months EndedYear Ended  December 31,December 31,  2012201120122011 Numerator:         Net income (loss) $ 1,175 $ (651) $ 2,280 $ 1,954 Net income attributable to participating securities (16) (1,204)  (1,518) Net income (loss) attributable to common stockholders - basic 1,159 (651) 1,076 436 Undistributed earnings reallocated to participating securities 15 1,201 1,516 Net income (loss) attributable to common stockholders - diluted $ 1,174 $ (651) $ 2,277 $ 1,952 Denominator:         Weighted-average shares used in computing net income (loss) per share attributable to common stockholders - basic 30,807 5,194 11,891 5,053 Effect of potentially dilutive securities:         Convertible preferred stock 383 13,270 17,590 Common stock options 3,874 3,187 1,537 Warrants 2 Contingently issuable shares related to an acquisition 4 12 Weighted-average shares used in computing net income (loss) per share attributable to common stockholders - diluted 35,064 5,194 28,352 24,194 Net income (loss) per share attributable to common stockholders:         Basic $ 0.04 $ (0.13) $ 0.09 $ 0.09 Diluted $ 0.03 $ (0.13) $ 0.08 $ 0.08          CONTACT: Investors: Don McCauley Chief Financial Officer Qualys, Inc.

+1 (650) 801-6181 [email protected] Media: John Christiansen/Stacy Roughan Sard Verbinnen & Co +1 (415) 618-8750/+1 (310) 201-2040 [email protected]/[email protected] Source: Qualys, Inc.

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