"Our strong third quarter 2016 results continue to underscore the market demand for our cloud-based security and compliance platform with customers worldwide using our services to continuously secure their global IT assets while enabling their digital transformation into the cloud," said
Third Quarter 2016 Financial Highlights
Revenues: Revenues for the third quarter of 2016 increased by 20.1% to
Gross Profit: GAAP gross profit for the third quarter of 2016 increased by 18% to
Operating Income: GAAP operating income for the third quarter of 2016 was
Net Income: GAAP net income for the third quarter of 2016 was
Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for the third quarter of 2016 increased by 16% to
Third Quarter 2016 Business Highlights
Customers:
- New customers included: Cooper Tire & Rubber Company, Computershare, CSC (Computer Sciences Corp), Domino's Pizza Enterprises, First Citizens Bancshares,
Greatbatch, Inc. ,HireRight LLC , Nationstar Mortgage, Republic Airways Holdings, The Valspar Corporation, Wake Forest Baptist Medical.
Business Highlights:
- Announced a
Global Strategic Partnership with HPE. HPE will add the Qualys Cloud Platform and Qualys Vulnerability Management as part of its MSS, and leverage the Qualys Cloud Agent to enable customers for better visibility of IT assets across hybrid public and private clouds. - Announced a
Strategic Partnership in the US withNTT Security to integrateQualys's cloud-based IT security and compliance solutions withNTT Security's MSS and strategic consulting engagements. The agreement enablesNTT Security customers to leverage the Qualys Cloud Platform's scale for continuous IT security and compliance visibility across all aspects of IT infrastructure, including mobile, cloud or on-premises environments. - Expanded a
Global Strategic Partnership with Wipro. Wipro will leverage Qualys Vulnerability Management, Policy Compliance and Web Application Security solutions in its MSS offerings for its customers, worldwide. As part of the agreement, Wipro will also integrate the Qualys Cloud Platform with its existing managed security services. - Unveiled two new packages in its popular Qualys Consultant suite with flexible pricing options, enabling consultants to simplify client engagements, increase productivity and reduce cost. With these new packages, this suite now offers multiple comprehensive security assessment tools in a centralized console, allowing consultants to consolidate their current toolsets and eliminate time spent manually installing, managing, and administering them.
Financial Performance Outlook
Fourth Quarter 2016 Guidance: Management expects revenues to be in the range of
Full Year 2016 Guidance: Management now expects revenues to be in the range of
Investor Conference Call
Analysts & Investors Day
About
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 growth of our business, including renewals and market share gains, adoption of our existing solutions and our new offerings to both existing and new customers; the capabilities of our platform; the expansion of our certifications and partnerships and the related benefits of such certifications and partnerships; our strategy and our business model, the scalability of our strategy, and ability to execute such strategy; our guidance for revenues, GAAP EPS and non-GAAP EPS for the fourth
quarter and full year 2016, and our expectations for the number of weighted average diluted shares outstanding and effective income tax rate for the fourth quarter and full year 2016. 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; 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 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
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP,
Furthermore,
We have not reconciled non-GAAP net income per diluted share guidance to GAAP net income per diluted share because we do 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 fourth quarter and full year 2016 is likely to have a significant impact on the Company's GAAP net income per diluted share in the fourth quarter and full year 2016, respectively. Accordingly, a reconciliation of the non-GAAP net income per diluted share guidance to the corresponding non-GAAP net income per diluted share is not available without unreasonable effort.
Beginning in 2015, due to the recognition of deferred tax assets in 2014 and 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 tax rate on a non-GAAP basis, which could differ from the GAAP effective tax rate. The Company believes the non-GAAP effective tax rate, which is 36% in 2016, is a reasonable estimate under its global operating structure. The Company intends to re-evaluate the non-GAAP effective tax rate on an annual basis. However, it 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 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.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Revenues | $ | 50,987 | $ | 42,469 | $ | 145,701 | $ | 119,839 | ||||||||||
| Cost of revenues (1) | 11,288 | 8,762 | 30,796 | 24,883 | ||||||||||||||
| Gross profit | 39,699 | 33,707 | 114,905 | 94,956 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Research and development (1) | 9,405 | 7,564 | 26,382 | 21,919 | ||||||||||||||
| Sales and marketing (1) | 14,240 | 12,282 | 42,624 | 36,501 | ||||||||||||||
| General and administrative (1) | 8,067 | 6,983 | 24,603 | 19,426 | ||||||||||||||
| Total operating expenses | 31,712 | 26,829 | 93,609 | 77,846 | ||||||||||||||
| Income from operations | 7,987 | 6,878 | 21,296 | 17,110 | ||||||||||||||
| Other income (expense), net: | ||||||||||||||||||
| Interest expense | (9 | ) | -- | (23 | ) | (4 | ) | |||||||||||
| Interest income | 363 | 153 | 903 | 386 | ||||||||||||||
| Other expense, net | (124 | ) | (307 | ) | (442 | ) | (485 | ) | ||||||||||
| Total other income (expense), net | 230 | (154 | ) | 438 | (103 | ) | ||||||||||||
| Income before income taxes | 8,217 | 6,724 | 21,734 | 17,007 | ||||||||||||||
| Provision for income taxes | 3,221 | 2,601 | 8,417 | 6,566 | ||||||||||||||
| Net income | $ | 4,996 | $ | 4,123 | $ | 13,317 | $ | 10,441 | ||||||||||
| Net income per share: | ||||||||||||||||||
| Basic | $ | 0.14 | $ | 0.12 | $ | 0.38 | $ | 0.31 | ||||||||||
| Diluted | $ | 0.13 | $ | 0.11 | $ | 0.35 | $ | 0.27 | ||||||||||
| Weighted average shares used in computing net income per share: | ||||||||||||||||||
| Basic | 35,477 | 34,119 | 35,074 | 33,967 | ||||||||||||||
| Diluted | 38,712 | 37,938 | 38,205 | 38,202 | ||||||||||||||
| (1) Includes stock-based compensation as follows: | ||||||||||||||||||
| Cost of revenues | $ | 516 | $ | 333 | $ | 1,318 | $ | 1,005 | ||||||||||
| Research and development | 1,585 | 1,294 | 4,373 | 3,584 | ||||||||||||||
| Sales and marketing | 821 | 1,015 | 3,459 | 2,806 | ||||||||||||||
| General and administrative | 2,181 | 1,779 | 5,972 | 5,283 | ||||||||||||||
| Total stock-based compensation | $ | 5,103 | $ | 4,421 | $ | 15,122 | $ | 12,678 | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net income | $ | 4,996 | $ | 4,123 | $ | 13,317 | $ | 10,441 | |||||||||
| Available-for-sale investments: | |||||||||||||||||
| Change in net unrealized gain (loss) on investments, net of tax | (58 | ) | 15 | 140 | 25 | ||||||||||||
| Less: reclassification adjustment for net realized gain (loss) included in net income | (38 | ) | (5 | ) | 87 | 2 | |||||||||||
| Net change, net of tax | (96 | ) | 10 | 227 | 27 | ||||||||||||
| Other comprehensive income, net | (96 | ) | 10 | 227 | 27 | ||||||||||||
| Comprehensive income | $ | 4,900 | $ | 4,133 | $ | 13,544 | $ | 10,468 | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| (Unaudited) | ||||||||||
| (in thousands) | ||||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 98,299 | $ | 91,698 | ||||||
| Short-term investments | 111,678 | 87,268 | ||||||||
| Accounts receivable, net | 41,910 | 42,325 | ||||||||
| Prepaid expenses and other current assets | 9,072 | 7,945 | ||||||||
| Total current assets | 260,959 | 229,236 | ||||||||
| Long-term investments | 64,930 | 43,277 | ||||||||
| Property and equipment, net | 40,670 | 31,329 | ||||||||
| Deferred tax assets, net | 15,141 | 16,079 | ||||||||
| Intangible assets, net | 1,080 | 1,360 | ||||||||
| 317 | 317 | |||||||||
| Other noncurrent assets | 1,939 | 1,916 | ||||||||
| Total assets | $ | 385,036 | $ | 323,514 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 1,491 | $ | 2,368 | ||||||
| Accrued liabilities | 16,324 | 11,786 | ||||||||
| Deferred revenues, current | 109,026 | 98,025 | ||||||||
| Total current liabilities | 126,841 | 112,179 | ||||||||
| Deferred revenues, noncurrent | 14,416 | 14,564 | ||||||||
| Other noncurrent liabilities | 2,386 | 1,205 | ||||||||
| Total liabilities | 143,643 | 127,948 | ||||||||
| Stockholders' equity: | ||||||||||
| Common stock | 36 | 34 | ||||||||
| Additional paid-in capital | 255,509 | 223,228 | ||||||||
| Accumulated other comprehensive income (loss) | 16 | (211 | ) | |||||||
| Accumulated deficit | (14,168 | ) | (27,485 | ) | ||||||
| Total stockholders' equity | 241,393 | 195,566 | ||||||||
| Total liabilities and stockholders' equity | $ | 385,036 | $ | 323,514 | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
| (Unaudited) | ||||||||||||
| (in thousands) | ||||||||||||
| Nine Months Ended | ||||||||||||
| 2016 | 2015 | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 13,317 | $ | 10,441 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization expense | 12,364 | 10,424 | ||||||||||
| Bad debt expense | 152 | 629 | ||||||||||
| Loss on disposal of property and equipment | 39 | 9 | ||||||||||
| Stock-based compensation | 15,122 | 12,678 | ||||||||||
| Amortization of premiums and accretion of discounts on investments | 617 | 429 | ||||||||||
| Excess tax benefits from stock-based compensation | (4,832 | ) | (315 | ) | ||||||||
| Deferred income taxes | 931 | 5,105 | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | 263 | (5,512 | ) | |||||||||
| Prepaid expenses and other assets | (1,196 | ) | (2,143 | ) | ||||||||
| Accounts payable | (877 | ) | (3,606 | ) | ||||||||
| Accrued liabilities | 6,763 | 2,735 | ||||||||||
| Deferred revenues | 10,853 | 10,612 | ||||||||||
| Other noncurrent liabilities | 1,188 | 182 | ||||||||||
| Net cash provided by operating activities | 54,704 | 41,668 | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of investments | (180,161 | ) | (88,694 | ) | ||||||||
| Sales and maturities of investments | 133,708 | 73,340 | ||||||||||
| Purchases of property and equipment | (18,809 | ) | (14,865 | ) | ||||||||
| Capitalized software development costs | -- | (99 | ) | |||||||||
| Net cash used in investing activities | (65,262 | ) | (30,318 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from exercise of stock options | 12,529 | 6,594 | ||||||||||
| Excess tax benefits from stock-based compensation | 4,832 | 315 | ||||||||||
| Payments for taxes related to net share settlement of equity awards | (202 | ) | -- | |||||||||
| Net cash provided by financing activities | 17,159 | 6,909 | ||||||||||
| Net increase in cash and cash equivalents | 6,601 | 18,259 | ||||||||||
| Cash and cash equivalents at beginning of period | 91,698 | 76,504 | ||||||||||
| Cash and cash equivalents at end of period | $ | 98,299 | $ | 94,763 | ||||||||
| Non-cash investing and financing activities: | ||||||||||||
| Vesting of early exercised common stock options | $ | -- | $ | 16 | ||||||||
| Purchases of property and equipment included in accrued liabilities and accounts payable | $ | 2,606 | $ | -- | ||||||||
| RECONCILIATION OF NON-GAAP DISCLOSURES | |||||||||||||||
| EBITDA AND ADJUSTED EBITDA | |||||||||||||||
| (Unaudited) | |||||||||||||||
| (in thousands) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Net income | $ | 4,996 | $ | 4,123 | $ | 13,317 | $ | 10,441 | |||||||
| Depreciation and amortization of property and equipment | 4,426 | 3,741 | 12,035 | 10,131 | |||||||||||
| Amortization of intangible assets | 110 | 97 | 329 | 293 | |||||||||||
| Interest expense | 9 | -- | 23 | 4 | |||||||||||
| Provision for income taxes | 3,221 | 2,601 | 8,417 | 6,566 | |||||||||||
| EBITDA | 12,762 | 10,562 | 34,121 | 27,435 | |||||||||||
| Stock-based compensation | 5,103 | 4,421 | 15,122 | 12,678 | |||||||||||
| Other (income) expense, net | (239 | ) | 154 | (461 | ) | 99 | |||||||||
| One-time tax related expense | -- | -- | 716 | -- | |||||||||||
| Adjusted EBITDA | $ | 17,626 | $ | 15,137 | $ | 49,498 | $ | 40,212 | |||||||
| RECONCILIATION OF NON-GAAP DISCLOSURES | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| GAAP Cost of revenues | $ | 11,288 | $ | 8,762 | $ | 30,796 | $ | 24,883 | |||||||||
| Less: Stock-based compensation | (516 | ) | (333 | ) | (1,318 | ) | (1,005 | ) | |||||||||
| Non-GAAP Cost of revenues | $ | 10,772 | $ | 8,429 | $ | 29,478 | $ | 23,878 | |||||||||
| GAAP Gross profit | $ | 39,699 | $ | 33,707 | $ | 114,905 | $ | 94,956 | |||||||||
| Plus: Stock-based compensation | 516 | 333 | 1,318 | 1,005 | |||||||||||||
| Non-GAAP Gross profit | $ | 40,215 | $ | 34,040 | $ | 116,223 | $ | 95,961 | |||||||||
| $ | 9,405 | $ | 7,564 | $ | 26,382 | $ | 21,919 | ||||||||||
| Less: Stock-based compensation | (1,585 | ) | (1,294 | ) | (4,373 | ) | (3,584 | ) | |||||||||
| $ | 7,820 | $ | 6,270 | $ | 22,009 | $ | 18,335 | ||||||||||
| GAAP Sales and marketing | $ | 14,240 | $ | 12,282 | $ | 42,624 | $ | 36,501 | |||||||||
| Less: Stock-based compensation | (821 | ) | (1,015 | ) | (3,459 | ) | (2,806 | ) | |||||||||
| Non-GAAP Sales and marketing | $ | 13,419 | $ | 11,267 | $ | 39,165 | $ | 33,695 | |||||||||
| GAAP General and administrative | $ | 8,067 | $ | 6,983 | $ | 24,603 | $ | 19,426 | |||||||||
| Less: Stock-based compensation | (2,181 | ) | (1,779 | ) | (5,972 | ) | (5,283 | ) | |||||||||
| Less: One-time tax related expense | -- | -- | (716 | ) | -- | ||||||||||||
| Non-GAAP General and administrative | $ | 5,886 | $ | 5,204 | $ | 17,915 | $ | 14,143 | |||||||||
| GAAP Operating expenses | $ | 31,712 | $ | 26,829 | $ | 93,609 | $ | 77,846 | |||||||||
| Less: Stock-based compensation | (4,587 | ) | (4,088 | ) | (13,804 | ) | (11,673 | ) | |||||||||
| Less: One-time tax related expense | -- | -- | (716 | ) | -- | ||||||||||||
| Non-GAAP Operating expenses | $ | 27,125 | $ | 22,741 | $ | 79,089 | $ | 66,173 | |||||||||
| GAAP Income from operations | $ | 7,987 | $ | 6,878 | $ | 21,296 | $ | 17,110 | |||||||||
| Plus: Stock-based compensation | 5,103 | 4,421 | 15,122 | 12,678 | |||||||||||||
| Plus: One-time tax related expense | -- | -- | 716 | -- | |||||||||||||
| Non-GAAP Income from operations | $ | 13,090 | $ | 11,299 | $ | 37,134 | $ | 29,788 | |||||||||
| GAAP Net income | $ | 4,996 | $ | 4,123 | $ | 13,317 | $ | 10,441 | |||||||||
| Plus: Stock-based compensation | 5,103 | 4,421 | 15,122 | 12,678 | |||||||||||||
| Plus: One-time tax related expense | -- | -- | 716 | -- | |||||||||||||
| Less: Tax adjustment | (1,575 | ) | (1,455 | ) | (5,109 | ) | (4,239 | ) | |||||||||
| Non-GAAP Net income | $ | 8,524 | $ | 7,089 | $ | 24,046 | $ | 18,880 | |||||||||
| Non-GAAP Net income per share: | |||||||||||||||||
| Basic | $ | 0.24 | $ | 0.21 | $ | 0.69 | $ | 0.56 | |||||||||
| Diluted | $ | 0.22 | $ | 0.19 | $ | 0.63 | $ | 0.49 | |||||||||
| Weighted average shares used in computing non-GAAP net income per share: | |||||||||||||||||
| Basic | 35,477 | 34,119 | 35,074 | 33,967 | |||||||||||||
| Diluted | 38,712 | 37,938 | 38,205 | 38,202 | |||||||||||||
| RECONCILIATON OF NON-GAAP DISCLOSURES | |||||||||
| FREE CASH FLOWS | |||||||||
| (Unaudited) | |||||||||
| (in thousands) | |||||||||
| Nine Months Ended | |||||||||
| 2016 | 2015 | ||||||||
| GAAP Cash flows provided by operating activities | $ | 54,704 | $ | 41,668 | |||||
| Less: | |||||||||
| Purchases of property and equipment | (18,809 | ) | (14,865 | ) | |||||
| Capitalized software development costs | -- | (99 | ) | ||||||
| Non-GAAP Free cash flows | $ | 35,895 | $ | 26,704 | |||||
Investor and Media Contact:
Vice President, FP&A and Investor Relations
(650) 801-6100
ir@qualys.com
Source:
News Provided by Acquire Media