Company Quick10K Filing
Quick10K
Qualys
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$86.39 39 $3,380
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-31 Earnings, Exhibits
8-K 2019-06-14
8-K 2019-06-05 Officers, Shareholder Vote
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-02-12 Earnings, Exhibits
8-K 2018-12-21 Officers
8-K 2018-12-07 Officers
8-K 2018-10-25 Earnings, Officers, Exhibits
8-K 2018-07-26 Earnings, Officers, Exhibits
8-K 2018-06-18 Shareholder Vote
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-02-12 Earnings, Exhibits
MTZ Mastec 3,890
ALLO Allogene Therapeutics 3,650
PBH Prestige Brands 1,590
VLGEA Village Super Market 403
EQ Equillium 105
CLRO Clearone 37
DVCR Diversicare Healthcare Services 26
DTII Defense Technologies International 0
PHOT Growlife 0
ARS Aleris 0
QLYS 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. The Company and Summary of Significant Accounting Policies
Note 2. Fair Value of Financial Instruments
Note 3. Property and Equipment, Net
Note 4. Revenue From Contracts with Customers
Note 5. Business Combination
Note 6. Intangible Assets, Net
Note 7. Leases
Note 8. Commitments and Contingencies
Note 9. Stock-Based Compensation
Note 10. Net Income per Share
Note 11. Stockholder's Equity
Note 12. Income Taxes
Note 13. Segment Information and Information About Geographic Area
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 qlys-2019630xexhibit311.htm
EX-31.2 qlys-2019630xexhibit312.htm
EX-32.1 qlys-2019630xexhibit321.htm
EX-32.2 qlys-2019630xexhibit322.htm

Qualys Earnings 2019-06-30

QLYS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
false--12-31Q220192019-06-300001107843P3YP4Y683000648000100000P5Y0.0010.0011000000000100000000039015034392240753901503439224075202000004000000.0010.001200000002000000000001200000 0001107843 2019-01-01 2019-06-30 0001107843 2019-07-30 0001107843 2018-12-31 0001107843 2019-06-30 0001107843 2019-04-01 2019-06-30 0001107843 2018-01-01 2018-06-30 0001107843 2018-04-01 2018-06-30 0001107843 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-04-01 2019-06-30 0001107843 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-01-01 2018-06-30 0001107843 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-04-01 2018-06-30 0001107843 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-01-01 2019-06-30 0001107843 2017-12-31 0001107843 2018-06-30 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001107843 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001107843 us-gaap:CommonStockMember 2018-12-31 0001107843 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001107843 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001107843 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001107843 2019-01-01 2019-03-31 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001107843 us-gaap:CommonStockMember 2019-03-31 0001107843 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001107843 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001107843 us-gaap:RetainedEarningsMember 2019-06-30 0001107843 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001107843 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001107843 us-gaap:CommonStockMember 2019-06-30 0001107843 us-gaap:RetainedEarningsMember 2018-12-31 0001107843 us-gaap:RetainedEarningsMember 2019-03-31 0001107843 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001107843 2019-03-31 0001107843 2018-01-01 0001107843 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0001107843 2018-01-01 2018-03-31 0001107843 us-gaap:RetainedEarningsMember 2018-06-30 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001107843 us-gaap:CommonStockMember 2018-06-30 0001107843 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0001107843 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001107843 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001107843 us-gaap:RetainedEarningsMember 2018-03-31 0001107843 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001107843 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001107843 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001107843 2018-03-31 0001107843 us-gaap:CommonStockMember 2018-03-31 0001107843 us-gaap:CommonStockMember 2017-12-31 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001107843 us-gaap:RetainedEarningsMember 2017-12-31 0001107843 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001107843 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0001107843 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0001107843 us-gaap:RetainedEarningsMember 2018-01-01 0001107843 2018-09-30 0001107843 qlys:ForeignCurrencyContractEuroMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-06-30 0001107843 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001107843 2018-12-31 2018-12-31 0001107843 qlys:ForeignCurrencyContractPoundMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-06-30 0001107843 2018-07-01 2018-09-30 0001107843 us-gaap:ForwardContractsMember 2018-12-31 0001107843 qlys:ForeignCurrencyContractPoundMember us-gaap:NondesignatedMember 2018-12-31 0001107843 qlys:ForeignCurrencyContractEuroMember us-gaap:NondesignatedMember 2019-06-30 0001107843 us-gaap:ForeignExchangeContractMember 2019-06-30 0001107843 us-gaap:ForwardContractsMember 2018-09-30 0001107843 qlys:ForeignCurrencyContractPoundMember us-gaap:NondesignatedMember 2019-06-30 0001107843 qlys:ForeignCurrencyContractEuroMember us-gaap:NondesignatedMember 2018-12-31 0001107843 us-gaap:ForwardContractsMember 2017-12-31 0001107843 us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 us-gaap:CommercialPaperMember 2018-12-31 0001107843 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 qlys:NoncurrentAssetsMember us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001107843 us-gaap:CashEquivalentsMember us-gaap:MoneyMarketFundsMember 2019-06-30 0001107843 qlys:CurrentAssetsMember 2019-06-30 0001107843 us-gaap:CashMember 2019-06-30 0001107843 qlys:NoncurrentAssetsMember us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001107843 qlys:CurrentAssetsMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001107843 qlys:NoncurrentAssetsMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001107843 qlys:NoncurrentAssetsMember 2019-06-30 0001107843 qlys:CurrentAssetsMember us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001107843 us-gaap:CashAndCashEquivalentsMember us-gaap:CommercialPaperMember 2019-06-30 0001107843 qlys:CurrentAssetsMember us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001107843 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-09-30 0001107843 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-01-01 2018-09-30 0001107843 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2018-09-30 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2018-09-30 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-09-30 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2018-09-30 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001107843 us-gaap:ForwardContractsMember 2017-01-01 2017-09-30 0001107843 us-gaap:ForwardContractsMember 2018-07-01 2018-09-30 0001107843 2017-01-01 2017-09-30 0001107843 2017-07-01 2017-09-30 0001107843 2018-01-01 2018-09-30 0001107843 us-gaap:ForwardContractsMember 2018-01-01 2018-09-30 0001107843 us-gaap:ForwardContractsMember 2017-07-01 2017-09-30 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2017-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2017-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2017-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2017-12-31 0001107843 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001107843 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2017-12-31 0001107843 qlys:NoncurrentAssetsMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 qlys:CurrentAssetsMember us-gaap:CommercialPaperMember 2018-12-31 0001107843 qlys:NoncurrentAssetsMember us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 qlys:NoncurrentAssetsMember 2018-12-31 0001107843 qlys:CurrentAssetsMember us-gaap:AssetBackedSecuritiesMember 2018-12-31 0001107843 qlys:NoncurrentAssetsMember us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 us-gaap:CashMember 2018-12-31 0001107843 qlys:CurrentAssetsMember 2018-12-31 0001107843 us-gaap:CashEquivalentsMember us-gaap:MoneyMarketFundsMember 2018-12-31 0001107843 qlys:CurrentAssetsMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0001107843 qlys:CurrentAssetsMember us-gaap:CorporateBondSecuritiesMember 2018-12-31 0001107843 us-gaap:CashAndCashEquivalentsMember 2018-12-31 0001107843 qlys:ScannerAppliancesMember 2017-12-31 0001107843 us-gaap:FurnitureAndFixturesMember 2017-12-31 0001107843 us-gaap:AssetsHeldUnderCapitalLeasesMember 2018-09-30 0001107843 us-gaap:LeaseholdImprovementsMember 2017-12-31 0001107843 us-gaap:LeaseholdImprovementsMember 2018-09-30 0001107843 us-gaap:ComputerEquipmentMember 2017-12-31 0001107843 us-gaap:FurnitureAndFixturesMember 2018-09-30 0001107843 us-gaap:ComputerEquipmentMember 2018-09-30 0001107843 us-gaap:ComputerSoftwareIntangibleAssetMember 2017-12-31 0001107843 qlys:ScannerAppliancesMember 2018-09-30 0001107843 us-gaap:ComputerSoftwareIntangibleAssetMember 2018-09-30 0001107843 us-gaap:AssetsHeldUnderCapitalLeasesMember 2017-12-31 0001107843 qlys:ScannerAppliancesAndOtherComputerEquipmentNotPlacedInServiceMember 2018-12-31 0001107843 qlys:ScannerAppliancesAndOtherComputerEquipmentSubjectToSubscriptionMember 2018-12-31 0001107843 qlys:ScannerAppliancesAndOtherComputerEquipmentSubjectToSubscriptionMember 2017-12-31 0001107843 qlys:ScannerAppliancesAndOtherComputerEquipmentNotPlacedInServiceMember 2017-12-31 0001107843 us-gaap:SalesChannelThroughIntermediaryMember 2018-07-01 2018-09-30 0001107843 us-gaap:SalesChannelThroughIntermediaryMember 2017-07-01 2017-09-30 0001107843 us-gaap:SalesChannelDirectlyToConsumerMember 2018-07-01 2018-09-30 0001107843 us-gaap:SalesChannelDirectlyToConsumerMember 2019-01-01 2019-06-30 0001107843 us-gaap:SalesChannelThroughIntermediaryMember 2019-01-01 2019-06-30 0001107843 us-gaap:SalesChannelThroughIntermediaryMember 2018-01-01 2018-06-30 0001107843 us-gaap:SalesChannelDirectlyToConsumerMember 2018-01-01 2018-06-30 0001107843 us-gaap:SalesChannelDirectlyToConsumerMember 2017-07-01 2017-09-30 0001107843 qlys:SubscriptionRevenueMember 2019-04-01 2019-06-30 0001107843 qlys:SubscriptionRevenueMember 2018-04-01 2018-06-30 0001107843 qlys:SubscriptionRevenueMember 2018-07-01 2018-09-30 0001107843 qlys:SubscriptionRevenueMember 2017-07-01 2017-09-30 0001107843 qlys:A1MobilityMember 2019-01-10 2019-01-10 0001107843 qlys:A1MobilityMember 2018-12-31 0001107843 qlys:A1MobilityMember 2018-01-01 2018-12-31 0001107843 qlys:A1MobilityMember 2018-04-01 2018-04-01 0001107843 qlys:DevelopedTechnologyMember 2019-01-01 2019-06-30 0001107843 us-gaap:PatentsMember 2018-01-01 2018-09-30 0001107843 us-gaap:DevelopedTechnologyRightsMember 2017-12-31 0001107843 us-gaap:DevelopedTechnologyRightsMember 2018-09-30 0001107843 us-gaap:PatentsMember 2017-12-31 0001107843 us-gaap:PatentsMember 2018-09-30 0001107843 us-gaap:PatentsMember 2017-01-01 2017-09-30 0001107843 us-gaap:DevelopedTechnologyRightsMember 2018-01-01 2018-09-30 0001107843 us-gaap:DevelopedTechnologyRightsMember 2017-01-01 2017-09-30 0001107843 2018-01-01 2018-01-31 0001107843 us-gaap:OtherNoncurrentLiabilitiesMember 2019-06-30 0001107843 qlys:A2000EquityIncentivePlanMember 2018-09-30 0001107843 qlys:A2012EquityIncentivePlanMember 2019-06-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2018-09-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2018-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0001107843 us-gaap:ResearchAndDevelopmentExpenseMember 2017-07-01 2017-09-30 0001107843 us-gaap:CostOfSalesMember 2017-01-01 2017-12-31 0001107843 us-gaap:ResearchAndDevelopmentExpenseMember 2018-01-01 2018-12-31 0001107843 us-gaap:GeneralAndAdministrativeExpenseMember 2017-07-01 2017-09-30 0001107843 us-gaap:CostOfSalesMember 2018-07-01 2018-09-30 0001107843 us-gaap:SellingAndMarketingExpenseMember 2017-01-01 2017-12-31 0001107843 us-gaap:SellingAndMarketingExpenseMember 2018-07-01 2018-09-30 0001107843 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-12-31 0001107843 us-gaap:ResearchAndDevelopmentExpenseMember 2018-07-01 2018-09-30 0001107843 us-gaap:CostOfSalesMember 2017-07-01 2017-09-30 0001107843 us-gaap:GeneralAndAdministrativeExpenseMember 2018-07-01 2018-09-30 0001107843 us-gaap:SellingAndMarketingExpenseMember 2018-01-01 2018-12-31 0001107843 us-gaap:CostOfSalesMember 2018-01-01 2018-12-31 0001107843 us-gaap:ResearchAndDevelopmentExpenseMember 2017-01-01 2017-12-31 0001107843 us-gaap:GeneralAndAdministrativeExpenseMember 2017-01-01 2017-12-31 0001107843 us-gaap:SellingAndMarketingExpenseMember 2017-07-01 2017-09-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2017-12-31 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-09-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2017-07-01 2017-09-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2018-07-01 2018-09-30 0001107843 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2018-07-01 2018-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0001107843 us-gaap:EmployeeStockOptionMember 2017-07-01 2017-09-30 0001107843 2018-02-05 0001107843 2018-10-30 0001107843 country:US 2018-12-31 0001107843 qlys:OtherGeographicAreasMember 2019-06-30 0001107843 country:US 2019-06-30 0001107843 qlys:OtherGeographicAreasMember 2018-12-31 0001107843 qlys:OtherGeographicAreasMember 2018-01-01 2018-06-30 0001107843 country:US 2018-01-01 2018-06-30 0001107843 qlys:OtherGeographicAreasMember 2019-04-01 2019-06-30 0001107843 country:US 2018-04-01 2018-06-30 0001107843 country:US 2019-01-01 2019-06-30 0001107843 qlys:OtherGeographicAreasMember 2019-01-01 2019-06-30 0001107843 qlys:OtherGeographicAreasMember 2018-04-01 2018-06-30 0001107843 country:US 2019-04-01 2019-06-30 xbrli:shares qlys:contract iso4217:GBP iso4217:EUR iso4217:USD iso4217:USD xbrli:shares xbrli:pure qlys:segment
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2019
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from          to
    
Commission file number 001-35662
__________________
QUALYS, INC.
(Exact name of registrant as specified in its charter)
__________________
Delaware
 
77-0534145
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification Number)

919 E. Hillsdale Boulevard, 4th Floor, Foster City, California 94404
(Address of principal executive offices, including zip code)

(650) 801-6100
(Registrant’s telephone number, including area code)
__________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Common stock, $0.001 par value per share
QLYS
NASDAQ Stock Market
 
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 


Table of Contents


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x

The number of shares of the Registrant's common stock outstanding as of July 30, 2019 was 39,238,573.


Table of Contents

Qualys, Inc.
TABLE OF CONTENTS
 
 
Page
PART I – FINANCIAL INFORMATION
Item 1.
 
 
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018
 
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018
 
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018
 
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018
 
Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2019 and 2018
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



3

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Qualys, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)

 
June 30,
2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
91,381

 
$
41,026

Short-term marketable securities
207,626

 
248,140

Accounts receivable, net of allowance of $648 and $683 as of June 30, 2019 and December 31, 2018, respectively
63,184

 
75,825

Prepaid expenses and other current assets
19,395

 
13,974

Total current assets
381,586

 
378,965

Long-term marketable securities
111,521

 
76,710

Property and equipment, net
59,359

 
61,442

Operating leases - right of use asset
28,101

 

Deferred tax assets, net
22,976

 
26,387

Intangible assets, net
19,836

 
21,976

Goodwill
7,325

 
7,225

Restricted cash
1,200

 
1,200

Other noncurrent assets
13,708

 
11,775

Total assets
$
645,612

 
$
585,680

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities :
 
 
 
Accounts payable
$
963

 
$
5,588

Accrued liabilities
24,315

 
26,695

Deferred revenues, current
176,609

 
164,624

Operating lease liabilities, current
6,826

 

Total current liabilities
208,713

 
196,907

Deferred revenues, noncurrent
20,835

 
20,423

Operating lease liabilities, noncurrent
31,987

 

Other noncurrent liabilities
479

 
10,361

Total liabilities
262,014

 
227,691

Commitments and contingencies (Note 8)


 


Stockholders’ equity:
 
 
 
Preferred stock, $0.001 par value; 20,000,000 shares authorized, no shares issued and outstanding at June 30, 2019 and December 31, 2018

 

Common stock, $0.001 par value; 1,000,000,000 shares authorized; 39,224,075 and 39,015,034 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
39

 
39

Additional paid-in capital
345,637

 
330,572

Accumulated other comprehensive income (loss)
1,240

 
(586
)
Retained earnings
36,682

 
27,964

Total stockholders’ equity
383,598

 
357,989

Total liabilities and stockholders’ equity
$
645,612

 
$
585,680


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


4

Table of Contents

Qualys, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Revenues
$
78,929

 
$
68,153

 
$
154,272

 
$
133,031

Cost of revenues
17,537

 
16,248

 
35,246

 
32,149

Gross profit
61,392

 
51,905

 
119,026

 
100,882

Operating expenses:
 
 
 
 
 
 
 
Research and development
17,695

 
13,128

 
33,532

 
25,681

Sales and marketing
17,165

 
18,976

 
34,480

 
35,209

General and administrative
10,424

 
8,906

 
20,855

 
20,691

Total operating expenses
45,284

 
41,010

 
88,867

 
81,581

Income from operations
16,108

 
10,895

 
30,159

 
19,301

Other income (expense), net:
 
 
 
 
 
 
 
Interest expense
(28
)
 
(39
)
 
(70
)
 
(77
)
Interest income
2,198

 
1,452

 
4,249

 
2,542

Other income (expense), net
231

 
(529
)
 
8

 
(336
)
Total other income, net
2,401

 
884

 
4,187

 
2,129

Income before income taxes
18,509

 
11,779

 
34,346

 
21,430

Provision for income taxes
2,277

 
1,486

 
4,848

 
1,995

Net income
$
16,232

 
$
10,293

 
$
29,498

 
$
19,435

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.41

 
$
0.26

 
$
0.75

 
$
0.50

Diluted
$
0.39

 
$
0.24

 
$
0.71

 
$
0.46

Weighted average shares used in computing net income per share:
 
 
 
 
 
 
 
Basic
39,198

 
38,987

 
39,143

 
38,843

Diluted
41,530

 
42,215

 
41,570

 
42,074


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


5

Table of Contents

Qualys, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
16,232

 
$
10,293

 
$
29,498

 
$
19,435

Other comprehensive income (loss):

 

 

 

Available-for-sale marketable securities:
 
 
 
 
 
 
 
Change in net unrealized gain (loss) on marketable securities, net of tax
724

 
65

 
1,379

 
(342
)
Reclassification adjustment for net realized gain included in net income
15

 
79

 
43

 
95

Total change in unrealized gain (loss) on marketable securities, net of tax
739

 
144

 
1,422

 
(247
)
Cash flow hedges:
 
 
 
 
 
 
 
Change in net unrealized gain, net of tax
148

 

 
$
441

 
$

Reclassification adjustment for net realized gain (loss) included in net income
43

 

 
(37
)
 

Total change in unrealized gain (loss) on cash flow hedges, net of tax
191

 

 
404

 

Other comprehensive income (loss), net of tax
930

 
144

 
1,826

 
(247
)
Comprehensive income
$
17,162

 
$
10,437

 
$
31,324

 
$
19,188


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



6

Table of Contents

Qualys, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 
Six Months Ended
 
June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
29,498

 
$
19,435

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
15,809

 
14,249

Bad debt expense
86

 

Loss on disposal of property and equipment
183

 
9

Stock-based compensation
16,780

 
15,914

Amortization of premiums and (accretion) of discounts on marketable securities
(1,060
)
 
(169
)
Deferred income taxes
3,047

 
681

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
12,555

 
11,876

Prepaid expenses and other assets
(6,863
)
 
(4,073
)
Accounts payable
(1,189
)
 
(331
)
Accrued liabilities
(121
)
 
6,238

Deferred revenues
12,397

 
4,424

Other non-current liabilities
153

 
(1,026
)
Net cash provided by operating activities
81,275


67,227

Cash flows from investing activities:
 
 
 
Purchases of marketable securities
(184,829
)
 
(151,825
)
Sales and maturities of marketable securities
193,270

 
120,838

Purchases of property and equipment
(14,138
)
 
(13,240
)
Business combinations
(1,850
)
 
(3,359
)
Purchase of privately-held investment

 
(2,500
)
Net cash used in investing activities
(7,547
)
 
(50,086
)
Cash flows from financing activities:
 
 
 
Repurchase of common stock
(24,117
)
 
(19,356
)
Proceeds from exercise of stock options
8,991

 
12,174

Payments for taxes related to net share settlement of equity awards
(7,411
)
 
(8,935
)
Principal payments under finance lease obligations
(836
)
 
(794
)
Net cash used in financing activities
(23,373
)
 
(16,911
)
Effect of exchange rate changes on cash and cash equivalents

 
(42
)
Net increase in cash, cash equivalents and restricted cash
50,355

 
188

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

 
87,791

Cash, cash equivalents and restricted cash at end of period
$
92,581

 
$
87,979


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


7

Table of Contents

Qualys, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 
(Unaudited)
(in thousands, except share data)



 
 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Retained Earnings
 
Total
Stockholders’
Equity
 
 
Shares
 
Amount
 
Balances at December 31, 2018
 
39,015,034

 
$
39

 
$
330,572

 
$
(586
)
 
$
27,964

 
$
357,989

Net income
 

 

 

 

 
13,266

 
13,266

Other comprehensive income, net of tax
 

 

 

 
896

 

 
896

Issuance of common stock upon exercise of stock options
 
152,164

 

 
4,047

 

 

 
4,047

Repurchase of common stock
 
(94,090
)
 

 
(1,129
)
 

 
(6,742
)
 
(7,871
)
Issuance of common stock upon vesting of restricted stock units
 
99,601

 

 

 

 

 

Taxes related to net share settlement of equity awards
 
(38,877
)
 

 
(3,367
)
 

 

 
(3,367
)
Stock-based compensation
 

 

 
8,443

 

 

 
8,443

Balances at March 31, 2019
 
39,133,832

 
39

 
338,566

 
310

 
34,488

 
373,403

Net income
 

 

 

 

 
16,232

 
16,232

Other comprehensive income, net of tax
 

 

 

 
930



 
930

Issuance of common stock upon exercise of stock options
 
192,687

 

 
4,944

 

 

 
4,944

Repurchase of common stock
 
(183,948
)
 

 
(2,207
)
 

 
(14,038
)
 
(16,245
)
Issuance of common stock upon vesting of restricted stock units
 
126,754

 

 

 

 

 

Taxes related to net share settlement of equity awards
 
(45,250
)
 

 
(4,044
)
 

 

 
(4,044
)
Stock-based compensation
 

 

 
8,378

 

 

 
8,378

Balances at June 30, 2019
 
39,224,075

 
39

 
345,637

 
1,240

 
36,682

 
383,598





8

Table of Contents

 
 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained Earnings
 
Total
Stockholders’
Equity
 
 
Shares
 
Amount
 
Balances at December 31, 2017
 
38,598,117

 
$
39

 
$
304,155

 
$
(574
)
 
$
39,924

 
$
343,544

Adoption of revenue recognition standard
 

 

 

 

 
2,711

 
2,711

Net income
 

 

 

 

 
9,142

 
9,142

Other comprehensive loss, net of tax
 

 

 

 
(391
)
 

 
(391
)
Issuance of common stock upon exercise of stock options
 
285,997

 

 
7,933

 

 

 
7,933

Repurchase of common stock
 
(21,288
)
 

 
(255
)
 

 
(1,226
)
 
(1,481
)
Issuance of common stock upon vesting of restricted stock units
 
158,561

 

 

 

 

 

Taxes related to net share settlement of equity awards
 
(63,695
)
 

 
(4,030
)
 

 

 
(4,030
)
Stock-based compensation
 

 

 
8,891

 

 

 
8,891

Balances at March 31, 2018
 
38,957,692

 
39

 
316,694

 
(965
)
 
50,551

 
366,319

Net income
 

 

 

 

 
10,293

 
10,293

Other comprehensive income, net of tax
 

 

 

 
144

 

 
144

Issuance of common stock upon exercise of stock options
 
144,851

 

 
4,239

 

 

 
4,239

Repurchase of common stock
 
(235,539
)
 

 
(2,826
)
 

 
(15,049
)
 
(17,875
)
Issuance of common stock upon vesting of restricted stock units
 
184,008

 

 

 

 

 

Taxes related to net share settlement of equity awards
 
(65,214
)
 

 
(4,904
)
 

 

 
(4,904
)
Stock-based compensation
 

 

 
7,023

 

 

 
7,023

Balances at June 30, 2018
 
38,985,798

 
39

 
320,226

 
(821
)
 
45,795

 
365,239



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


9

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1.
The Company and Summary of Significant Accounting Policies

Description of Business

Qualys, Inc. (the “Company”, "we", "us", "our") was incorporated in the state of Delaware on December 30, 1999. The Company is headquartered in Foster City, California and has wholly-owned subsidiaries throughout the world. The Company is a pioneer and leading provider of cloud-based security and compliance solutions that enable organizations to identify security risks to their IT infrastructures, help protect their IT systems and applications from ever-evolving cyber-attacks and achieve compliance with internal policies and external regulations. The Company’s cloud solutions address the growing security and compliance complexities and risks that are amplified by the dissolving boundaries between internal and external IT infrastructures and web environments, the rapid adoption of cloud computing and the proliferation of geographically dispersed IT assets. Organizations can use the Company’s integrated suite of solutions delivered on its Qualys cloud platform to cost-effectively obtain a unified view of their security and compliance posture across globally-distributed IT infrastructures.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2018, included herein, was derived from the audited financial statements as of that date but does not include all disclosures, including notes required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results of operations expected for the entire year ending December 31, 2019 or for any other future annual or interim periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 27, 2019.

Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the condensed consolidated financial statements and the reported results of operations during the reporting period. The Company’s management regularly assesses these estimates, which primarily affect revenue recognition, the valuation of accounts receivable, goodwill and intangible assets, capitalization of internally developed software, stock-based compensation and the provision for income taxes. Actual results could differ from those estimates and such differences may be material to the accompanying unaudited condensed consolidated financial statements.

Derivative Financial Instruments

Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company uses foreign currency forward contracts to mitigate the impact of foreign currency fluctuations of certain non-U.S. Dollar denominated asset positions, to date primarily cash and accounts receivable (non-designated), as well as to manage foreign currency fluctuation risk related to forecasted transactions (designated). The Company accounts for these instruments as either non-designated or cash flow hedges, respectively. Open contracts are recorded within prepaid expenses and other current assets or accrued liabilities in the condensed consolidated balance sheets. Gains and losses resulting from currency exchange rate movements on non-designated forward contracts are recognized in other income (expense), net. Any gains or losses from derivatives designated as cash flow hedges are first accumulated


10

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


in other comprehensive income ("AOCI") and then reclassified to revenue when the hedged item impacts the unaudited condensed consolidated financial statements.

The cash flow effects of the Company's derivative contracts for the six months ended June 30, 2019 were included within net cash provided by operating activities on its condensed consolidated statements of cash flows. As of June 30, 2019, the Company had 18.9 million and £9.2 million of notional amounts outstanding on foreign currency ("FX") contracts designated as cash flow hedges. The Company had no hedges designated as cash flow hedges as of June 30, 2018.

Stock-Based Compensation

The Company recognizes the fair value of its employee stock options and restricted stock units over the requisite service period for those awards ultimately expected to vest. The fair value of each option is estimated on date of grant using the Black-Scholes-Merton option pricing model and the fair value of each restricted stock unit is based on the fair value of the Company's stock on the date of grant. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.

The Company has issued performance-based awards and accounts for these awards as stock-based compensation with multiple performance conditions. For these performance-based awards, the Company records compensation expense for only the performance milestones that are probable of being achieved, with such expense recorded on a straight-line basis over the expected vesting period. The Company reassesses performance-based estimates each reporting period and, if the estimated service period changes, the Company recognizes all remaining compensation expense over the remaining service period and, if the probability of achievement changes to or from “probable,” the Company recognizes the cumulative effect. For the three and six months ended June 30, 2019, the Company recorded approximately $0.2 million and $0.5 million of stock-based compensation cost for these awards, respectively.

Internally Developed Software Costs

The Company capitalizes certain costs incurred to develop new internal-use software. Capitalized costs include salaries, benefits, and stock-based compensation charges for employees that are directly involved in developing its cloud security platform during the application development stage. These capitalized costs are included in other noncurrent assets on the accompanying condensed consolidated balance sheets. Upon general release, such costs are amortized on a straight-line basis over an estimated useful life of three years. Amortization of internally developed software is recorded to cost of revenues. Capitalization of internally developed software cost was $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively. Unamortized cost for capitalized internally developed software was $1.6 million at June 30, 2019 and $1.2 million at December 31, 2018. Amortization expense for capitalized internally developed software was insignificant for the three and six months ended June 30, 2019. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. 

Cost Method Investments
In the second quarter of fiscal 2018, the Company invested $2.5 million in preferred stock of a privately-held company. The investment has been accounted for using the cost method and included in other noncurrent assets on the accompanying condensed consolidated balance sheets. The Company's cost method investment is assessed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company has not recorded any dividends or other-than-temporary impairment charges related to its cost method investment. The fair value of the investment is not readily available, and there are no quoted market prices for the investment. During the three months ended June 30, 2019, the Company made an advance payment of $0.6 million to the investee for certain development work, which is recorded in other noncurrent assets on the condensed consolidated balance sheet.

Recently Adopted Accounting Pronouncements



11

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset and lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for the Company beginning in the first quarter of fiscal 2019 and early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Targeted Improvements - Leases (Topic 842). This update provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Pursuant to the leasing criteria, most of the Company's leased space and equipment leases will be required to be accounted for as right-of-use assets ("ROU") on the balance sheet with offsetting financing obligations. In the statement of operations, what was formerly rent expense for operating leases will be lease expense; and finance leases will be bifurcated into amortization of right-of-use assets and interest on lease liabilities. The Company adopted the ASU utilizing the current period adjustment method on January 1, 2019, and recognized an ROU asset of $30.8 million and a lease liability of $41.6 million on its condensed consolidated financial statements. As of January 1, 2019, $3.9 million of deferred rent and $6.9 million related to tenant improvement allowance was removed upon adoption. As part of this adoption, the Company elected the package of transitional practical expedients to not reassess (1) whether any contracts that existed prior to adoption have or contain leases, (2) the classification of existing leases or (3) initial direct costs for existing leases. The Company also elected to make the accounting policy election for short-term leases, permitting the Company to not apply the recognition requirements of this standard to short-term leases with terms of 12 months or less.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted this guidance as of January 1, 2019. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This ASU is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. This ASU must be applied on a prospective basis. The Company adopted this ASU during the first quarter of fiscal 2019 and the adoption did not have a material impact on the Company's condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs related to internal-use software. ASU 2018-15 is effective for the Company beginning in the first quarter of fiscal 2020 and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

NOTE 2.
Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For certain of the Company’s financial instruments, including certain cash equivalents, accounts receivable, accounts payable, and other current liabilities, the carrying amounts approximate their fair values due to the relatively short maturity of these balances.

The Company measures and reports certain cash equivalents, marketable securities, derivative foreign currency forward contracts and commitments associated with prior business combinations at fair value in accordance with the provisions of the authoritative accounting guidance that addresses fair value measurements. This guidance establishes


12

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Valuations based on inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The Company's financial instruments consist of assets and liabilities measured using Level 1 and 2 inputs. Level 1 assets include a highly liquid money market fund, which is valued using unadjusted quoted prices that are available in an active market for an identical asset. Level 2 assets include fixed-income U.S. government agency securities, commercial paper, corporate bonds, asset-backed securities and derivative financial instruments consisting of foreign currency forward contracts. The securities, bonds and commercial paper are valued using prices from independent pricing services based on quoted prices in active markets for similar instruments or on industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets. The foreign currency forward contracts are valued using observable inputs, such as quotations on forward foreign exchange points and foreign interest rates. The estimated fair value of commitments from prior acquisitions are determined based on management’s estimate of fair value using a Monte Carlo simulation model, which uses Level 3 inputs for fair value measurements. As of June 30, 2019, management estimated the fair value of such commitments to be zero.



13

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


The Company's cash and cash equivalents, and marketable securities consist of the following:
 
June 30, 2019
  
Amortized Cost
 
Unrealized Gains
 
Unrealized (Losses)
 
Fair Value
 
(in thousands)
Cash and cash equivalents:
 
 
 
 
 
 
 
Cash
$
90,154

 
$

 
$

 
$
90,154

Money market funds
727

 

 

 
727

Commercial paper
500

 

 

 
500

Total
91,381

 

 

 
91,381

Short-term marketable securities:
 
 
 
 
 
 
 
Corporate bonds
36,252

 
46

 
(39
)
 
36,259

Asset-backed securities
8,840

 
1

 
(1
)
 
8,840

U.S. government agencies
162,356

 
179

 
(8
)
 
162,527

Total
207,448

 
226

 
(48
)
 
207,626

Long-term marketable securities:
 
 
 
 
 
 
 
Asset-backed securities
40,833

 
244

 

 
41,077

U.S. government agencies
44,351

 
483

 

 
44,834

Corporate bonds
25,382

 
228

 

 
25,610

Total
110,566

 
955

 

 
111,521

Total
$
409,395

 
$
1,181

 
$
(48
)
 
$
410,528

 
December 31, 2018
  
Amortized Cost
 
Unrealized Gains
 
Unrealized (Losses)
 
Fair Value
 
(in thousands)
Cash and cash equivalents:
 
 
 
 
 
 
 
Cash
$
40,913

 
$

 
$

 
$
40,913

Money market funds
113

 

 

 
113

Total
41,026

 

 

 
41,026

Short-term marketable securities:
 
 
 
 
 
 
 
Commercial paper
3,237

 

 

 
3,237

Corporate bonds
30,906

 

 
(84
)
 
30,822

Asset-backed securities
10,447

 

 
(15
)
 
10,432

U.S. government agencies
203,734

 
9

 
(94
)
 
203,649

Total
248,324

 
9

 
(193
)
 
248,140

Long-term marketable securities:
 
 
 
 
 
 
 
Asset-backed securities
22,945

 
10

 
(28
)
 
22,927

U.S. government agencies
18,804

 

 
(53
)
 
18,751

Corporate bonds
35,322

 
3

 
(293
)
 
35,032

Total
77,071

 
13

 
(374
)
 
76,710

Total
$
366,421

 
$
22

 
$
(567
)
 
$
365,876





14

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


The following table shows the changes to AOCI related to available-for-sale marketable securities for the six months ended June 30, 2019 (in thousands):

 
Unrealized Gain (Loss), net
AOCI for available-for sale marketable securities balance at December 31, 2018
$
(545
)
Change in net unrealized gain, net of tax
1,379

Amounts reclassified for net realized gain included in net income
43

Total change in unrealized gain (loss), net of tax
1,422

AOCI for available-for sale marketable securities balance at June 30, 2019
$
877



The following table sets forth by level within the fair value hierarchy, the fair value of the Company's available-for-sale marketable securities measured on a recurring basis, excluding cash and money market funds:

 
June 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
(in thousands)
Commercial paper
$

 
$
500

 
$

 
$
500

U.S. government agencies

 
207,361

 

 
207,361

Corporate bonds

 
61,869

 

 
61,869

Asset-backed securities

 
49,917

 

 
49,917

Total
$

 
$
319,647

 
$

 
$
319,647


 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
(in thousands)
Commercial paper
$

 
$
3,237

 
$

 
$
3,237

U.S. government agencies

 
222,400

 

 
222,400

Corporate bonds

 
65,854

 

 
65,854

Asset-backed securities

 
33,359

 

 
33,359

Total
$

 
$
324,850

 
$

 
$
324,850



There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy, as determined at the end of each reporting period.

The following summarizes the fair value of marketable securities classified as available-for-sale by contractual, or effective, maturity:

 
June 30, 2019
 
Mature within
One Year
 
Mature after One Year through Two Years
 
Mature over Two Years
 
Fair Value
 
(in thousands)
Commercial paper
$
500

 
$

 
$

 
$
500

U.S. government agencies
162,527

 
30,192

 
14,642

 
207,361

Corporate bonds
36,258

 
19,651

 
5,960

 
61,869

Asset-backed securities
30,329

 
14,678

 
4,910

 
49,917

Total
$
229,614

 
$
64,521

 
$
25,512

 
$
319,647



15

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


Derivative Financial Instruments
Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company uses foreign currency forward contracts to mitigate the impact of foreign currency fluctuations of certain non-U.S. Dollar denominated asset positions, to date primarily cash and accounts receivable, as well as to manage foreign currency fluctuation risk related to forecasted transactions.
Non-designated forward contracts

At June 30, 2019, the Company had five outstanding forward contracts with notional amounts of 10.0 million and £4.0 million. At December 31, 2018, the Company had two outstanding forward contracts with notional amounts of 16.0 million and £6.3 million.
Designated cash flow hedge contracts

At June 30, 2019, the Company had 26 open cash flow hedge contracts with notional amounts of 18.9 million and £9.2 million. During the three and six months ended June 30, 2019, the Company recorded unrealized FX gains related to these contracts in AOCI of $0.2 million and $0.4 million, respectively, net of tax. The Company did not have any unrealized FX gains or losses during the three and six months ended June 30, 2018, respectively.
At December 31, 2018, the Company had two open cash flow hedge contracts with notional amounts of 12.9 million and £4.1 million. The unrealized foreign currency losses on these contracts were recorded in AOCI and were insignificant.

The following summarizes the gains (losses) recognized in other income (expense), net on the condensed consolidated statement of operations, from forward contracts and other foreign currency transactions:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Net gain (loss) from forward contracts
$
44

 
$
890

 
$
78

 
$
314

Other foreign currency transactions gain (loss)
249

 
(1,357
)
 
55

 
(549
)
Total foreign exchange gain (loss), net
$
293

 
$
(467
)
 
$
133

 
$
(235
)


NOTE 3.
Property and Equipment, Net

Property and equipment, net, which includes assets under finance lease, consists of the following:
 
June 30,
 
December 31,
 
2019
 
2018
 
(in thousands)
Computer equipment
$
102,868

 
$
93,530

Computer software
26,788

 
26,030

Furniture, fixtures and equipment
5,966

 
5,814

Finance leases - right of use asset
3,503

 
3,503

Scanner appliances
15,349

 
15,356

Leasehold improvements
16,468

 
16,439

Total property and equipment
170,942

 
160,672

Less: accumulated depreciation and amortization
(111,583
)
 
(99,230
)
Property and equipment, net
$
59,359

 
$
61,442





16

Table of Contents
Qualys, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


Physical scanner appliances and other computer equipment have a net carrying value of $6.0 million and $7.9 million at June 30, 2019 and December 31, 2018, respectively, including assets that have not been placed in service of $0.9 million and $1.8 million, respectively. Depreciation and amortization expense relating to property and equipment, including capitalized leases, was $6.3 million and $6.4 million for the three months ended June 30, 2019 and 2018, respectively, and $12.7 million and $12.8 million for the six months ended June 30, 2019 and 2018, respectively. Accumulated depreciation under finance leases was $1.6 million at June 30, 2019.


17

Table of Contents
Qualys, Inc.