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Qualys Announces Fourth Quarter And Full Year 2017 Financial ResultsFOSTER CITY, Calif., Feb. 12, 2018 /PRNewswire/ -- Qualys, Inc. (NASDAQ: QLYS), a pioneer and leading provider of cloud-based security and compliance solutions, today announced financial results for the fourth quarter and full year ended December 31, 2017. For the quarter, the Company reported revenues of $62.9 million, net income under Generally Accepted Accounting Principles ("GAAP") of $2.9 million, non-GAAP net income of $13.0 million, Adjusted EBITDA of $23.8 million, GAAP earnings per diluted share of $0.07 and non-GAAP earnings per diluted share of $0.32. For the full year ended December 31, 2017, the Company reported revenues of $230.8 million, GAAP net income of $40.4 million, non-GAAP net income of $43.5 million, Adjusted EBITDA of $84.9 million, GAAP earnings per diluted share of $1.01 and non-GAAP earnings per diluted share of $1.09. "We achieved significant milestones in 2017, finishing the year with a strong fourth quarter in terms of revenues and operating margins and delivering an impressive suite of new technology and application components to our Cloud Platform. We continue to accelerate our product roadmap, most recently signing a term sheet to acquire a company in India, which has developed a well architected and comprehensive agent technology for mobile platforms and which we plan to integrate into our platform. The scalability, accuracy, immediacy and breadth of our platform helps our customers consolidate their security and compliance stack, drastically reducing the cost and complexity associated with deploying and maintaining on-premises solutions while helping them to build security into their digital transformation initiatives," said Philippe Courtot, chairman and CEO of Qualys. "We ended 2017 with record operating margins and because of our highly cash-generative model, we are also pleased to announce a $100 million share repurchase program to offset dilution from employee grants and M&A as well as $25 million designated for venture investing." Fourth Quarter 2017 Financial Highlights Revenues: Revenues for the fourth quarter of 2017 increased by 20% to $62.9 million compared to $52.2 million for the same quarter in 2016. Normalized for the impact of FX (foreign exchange) and the MSSP (Managed Security Service Provider) contract, revenues increased by 22% over the same quarter in 2016. Gross Profit: GAAP gross profit for the fourth quarter of 2017 increased by 20% to $48.5 million compared to $40.4 million for the same quarter in 2016. GAAP gross margin percentage was 77% for the fourth quarter of 2017 compared to 77% for the same quarter in 2016. Non-GAAP gross profit for the fourth quarter of 2017 increased by 21% to $49.5 million compared to $40.9 million for the same quarter in 2016. Non-GAAP gross margin percentage was 79% for the fourth quarter of 2017 compared to 78% for the same quarter in 2016. Operating Income: GAAP operating income for the fourth quarter of 2017 was $9.7 million compared to $8.8 million for the same quarter in 2016. Non-GAAP operating income for the fourth quarter of 2017 was $18.6 million compared to $13.8 million for the same quarter in 2016. Net Income: GAAP net income for the fourth quarter of 2017 was $2.9 million, or $0.07 per diluted share, compared to $5.9 million, or $0.15 per diluted share, for the same quarter in 2016. Due to the U.S. Tax Cuts and Jobs Act, GAAP net income for the fourth quarter of 2017 includes a $10.4 million tax expense for the reduction in the value of Qualys' U.S. deferred tax assets caused by the U.S. corporate tax rate reduction. Non-GAAP net income for the fourth quarter of 2017 was $13.0 million, or $0.32 per diluted share, compared to non-GAAP net income of $8.8 million, or $0.23 per diluted share, for the same quarter in 2016. Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for the fourth quarter of 2017 increased by 29% to $23.8 million compared to $18.5 million for the same quarter in 2016. As a percentage of revenues, Adjusted EBITDA was 38% for the fourth quarter of 2017 compared to 35% for the same quarter in 2016. Fourth Quarter 2017 Business Highlights Select New Customers:
Business Highlights:
Full Year 2017 Financial Highlights Revenues: Revenues for 2017 increased by 17% to $230.8 million compared to $197.9 million for 2016. Normalized for the impact of FX (foreign exchange) and the MSSP (Managed Security Service Provider) contract, revenues increased by 19% over 2016. Gross Profit: GAAP gross profit for 2017 increased by 16% to $179.2 million compared to $154.8 million for 2016. GAAP gross margin percentage was 78% for 2017 compared to 78% for 2016. Non-GAAP gross profit increased by 16% to $181.9 million for 2017 compared to $156.7 million for 2016. Non-GAAP gross margin percentage was 79% for 2017 compared to 79% for 2016. Operating Income: GAAP operating income for 2017 was $37.2 million compared to $30.1 million for 2016. Non-GAAP operating income for 2017 was $64.8 million compared to $51.0 million for 2016. Net Income: GAAP net income for 2017 was $40.4 million, or $1.01 per diluted share, compared to $19.2 million, or $0.50 per diluted share, for 2016. Non-GAAP net income for 2017 was $43.5 million, or $1.09 per diluted share, compared to non-GAAP net income of $32.8 million, or $0.86 per diluted share, for 2016. Adjusted EBITDA: Adjusted EBITDA (a non-GAAP financial measure) for 2017 increased by 25% to $84.9 million compared to $68.0 million for 2016. As a percentage of revenues, Adjusted EBITDA was 37% for 2017 compared to 34% for 2016. Full Year 2017 Business Highlights Market Recognition
Business Development
Products & Features
Financial Performance Outlook Full Year 2018 Guidance: Management expects revenues for the full year 2018 to be in the range of $275.5 million to $278.5 million, representing 19% to 21% growth over 2017. GAAP net income per diluted share is expected to be in the range of $0.71 to $0.76, which assumes an effective income tax rate of 27%. Non-GAAP net income per diluted share is expected to be in the range of $1.39 to $1.44, which assumes an effective non-GAAP income tax rate of 23%. Full year 2018 EPS estimates are based on approximately 42.0 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 2017 financial results at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on Monday, Feb. 12, 2018. To access the conference call, dial (877) 881-2609 in the U.S. or +1 (970) 315-0463 for international participants with conference ID # 4869758. The live webcast of Qualys' earnings conference call, investor presentation, and prepared remarks can also be accessed at https://investor.qualys.com/events.cfm. A replay of the conference call will be available through the same webcast link following the end of the call. Investor Contact Joo Mi Kim About Qualys, Inc. Qualys, Inc. (NASDAQ: QLYS) is a pioneer and leading provider of cloud-based security and compliance solutions with over 10,300 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 on premises, on endpoints and elastic clouds. Founded in 1999 as one of the first SaaS security companies, Qualys has established strategic partnerships with leading managed service providers and consulting organizations including Accenture, BT, Cognizant Technology Solutions, Deutsche Telekom, Fujitsu, HCL Technologies, DXC Technology, 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 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: acceleration of our product roadmap with the signing of a term sheet to acquire a company in India which has developed agent technology for mobile platforms which we plan to integrate into our platform; our ability to maintain leadership in securing global IT environments and helping customers secure their digital transformation initiatives; the growth of our business, including adoption of our existing solutions and our new offerings to both existing and new customers; our expectations regarding the introduction of new solutions; the capabilities of our platform; the expansion of our partnerships and the related benefits of such partnerships; our strategy and our business model and our ability to execute such strategy; our share repurchase program and allocation of cash for venture investments; our guidance for revenues, GAAP EPS and non-GAAP EPS for the first quarter and full year 2018, and our expectations for the number of weighted average diluted shares outstanding and effective income tax rate for the first quarter and full year 2018. 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 negotiate and execute a definitive agreement to acquire the aforementioned company in India which has developed agent technology for mobile platforms, and to consummate such transaction and successfully integrate this company; 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 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, 2017, filed with the Securities and Exchange Commission on November 3, 2017. 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 operating measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP net income per diluted share. In computing these non-GAAP financial measures, Qualys excludes the effects of stock-based compensation expense, non-recurring expenses and acquisition-related expenses that do not reflect ongoing costs of operating the business. Qualys also monitors Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, other (income) expense, net, non-recurring expenses, and acquisition-related expenses that do not reflect ongoing costs of operating the business). Estimated impact of the MSSP contract signed in February 2016 refers to the difference between the estimated revenue recognized under the new terms in the MSSP contract and the estimated revenue that would have been recognized without the MSSP contract, assuming an appropriate renewal rate. The percentage impact is the net benefit, only in the contract year in which it occurred. Qualys believes that these non-GAAP operating 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 expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and Adjusted EBITDA. Furthermore, Qualys uses these operating 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, 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. Non-GAAP net income and non-GAAP net income per diluted share for the twelve months ended December 31, 2016 excludes $0.7 million of non-recurring expenses related to the remittance of payroll taxes from year 2013 through May 2016. Non-GAAP net income and non-GAAP net income per diluted share for the twelve months ended December 31, 2017 excludes $0.5 million of amortization of intangibles from acquisitions of Nevis Networks and NetWatcher and $0.1 million of compensation expense from the acquisition of NetWatcher that do not reflect ongoing costs of operating the business. During this same period, the Company has not excluded amounts related to other non-recurring items from non-GAAP net income because the Company has considered such amounts to be immaterial in any given quarter during such period. Qualys has not reconciled non-GAAP net income per diluted share guidance to GAAP net income per diluted share 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 2018 is likely to have a significant impact on the Company's GAAP net income per diluted share in the first quarter and full year 2018. Accordingly, 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 tax rate on a non-GAAP basis, which could differ from the GAAP effective tax rate. The Company's non-GAAP effective tax rate was 35% for the full year 2017 (estimated rate was calculated as 36% in each of our first three quarters of fiscal 2017). The Company believes its estimated non-GAAP effective tax rate of 23% in 2018 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.
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