QUALYS, INC. — FY2015 Form 10-K
Reporting period: Year ended December 31, 2015; quarterly figures below compare Q4 2015 with Q4 2014. Qualys provides cloud-based security and compliance subscriptions, primarily renewable annual SaaS subscriptions. Vulnerability Management (VM) remained its core offering.
Financial performance and position
| Metric | FY2015 | FY2014 | Change / context |
|---|---|---|---|
| Revenue | $164.3 million | $133.6 million | Up 23% |
| Gross profit / margin | $130.4 million / 79% | $104.6 million / 78% | Margin improved 1 percentage point |
| Operating income / margin | $24.8 million / 15% | $9.2 million / 7% | Operating leverage improved |
| Net income | $15.9 million | $30.2 million | FY2014 included a $23.7 million deferred-tax benefit |
| Diluted EPS | $0.42 | $0.81 | Prior-year tax benefit materially lifts comparison |
| Operating cash flow | $66.0 million | $41.4 million | Up from prior year |
| Free cash flow (non-GAAP) | $45.8 million | $27.4 million | Operating cash flow less capex and capitalized software |
Q4: Revenue was $44.4 million versus $36.6 million in Q4 2014, up approximately 22%. Operating income was $7.7 million versus $4.2 million. Net income was $5.4 million versus $25.9 million; Q4 2014 included the substantial deferred-tax benefit.
Liquidity and obligations: Cash, cash equivalents and short- and long-term investments totaled approximately $222 million at year-end. Current assets were $229.2 million and current liabilities $112.2 million. The filing reports no material borrowings; disclosed contractual obligations were $8.1 million of operating leases. Stockholders’ equity was $195.6 million. Operating cash flow included a $21.4 million increase in deferred revenue, partly offset by a $10.2 million increase in receivables.
Changes and business developments
- Revenue growth came from both existing customers and new customers. Revenue from customers in place by year-end 2014 increased $18.9 million to $152.5 million; new customers contributed $11.8 million to the year-over-year increase.
- VM generated 79% of FY2015 revenue, down from 82% in 2014. Qualys introduced its Cloud Agent Platform in 2015 to support continuous vulnerability and compliance monitoring across enterprise, cloud and mobile endpoints.
- Stock-based compensation increased to $17.5 million from $10.5 million. Sales and marketing expense declined as a share of revenue, while R&D and G&A increased in dollars.
- The company recorded a $0.3 million impairment of certain indefinite-lived intangible assets. No material legal proceedings or material contingency accruals were reported.
Outlook, commentary and risks
- Management expected growth from existing customers to continue and said existing cash, investments and operating cash flow should fund operations for at least 12 months. It expected approximately $22 million of capital expenditures through December 31, 2016, primarily for infrastructure.
- The filing provides no specific FY2016 revenue or earnings guidance. Management planned continued investment in platform development, sales and marketing, infrastructure and international expansion.
- Key risks include dependence on VM subscriptions, customer renewals and expansion; competition and pricing pressure; execution and adoption of newer offerings; cybersecurity incidents or service interruptions; and reliance on third-party data centers that were not fully redundant, as well as channel partners and a sole-source appliance manufacturer.
- Foreign exchange movements, changing privacy and compliance requirements, long enterprise sales cycles, and the ability to sustain profitability amid planned investment were also highlighted. Forward-looking statements are subject to these and other uncertainties.
Investor verification priorities
- Check subsequent filings for revenue growth, operating margin and whether growth is broadening beyond VM.
- Assess renewal and expansion trends, including how existing-customer growth translates into durable subscription retention.
- Review the quality of operating cash flow and deferred-revenue growth alongside receivables and planned infrastructure spending.
- Separate recurring operating performance from tax effects: FY2014 net income included the $23.7 million tax benefit; FY2015’s effective tax rate was 35.3%.
- Monitor stock-based compensation and dilution, and confirm the status of data-center resilience, security incidents and material legal or tax contingencies.