QUALYS, INC.

Previous wording

We market and sell our solutions to enterprises, government entities and small and medium-sized businesses across a broad range of industries, including education, financial services, government, healthcare, insurance, manufacturing, media, retail, technology and utilities. For the six months ended June 30, 2025 and 2024, approximately 57% and 59%, respectively, of our revenues were derived from customers in the United States based on our customers' billing addresses. We sell our solutions to enterprises and government entities primarily through our field sales force and to small and medium-sized businesses through our inside sales force. We generate a significant portion of sales through our channel partners, including managed security service providers, leading cloud providers, value-added resellers and consulting firms in the United States and internationally.

Current wording

We market and sell our solutions to enterprises, government entities and small and medium-sized businesses across a broad range of industries, including education, financial services, government, healthcare, insurance, manufacturing, media, retail, technology and utilities. For the nine months ended September 30, 2025 and 2024, approximately 57% and 59%, respectively, of our revenues were derived from customers in the United States based on our customers' billing addresses. We sell our solutions to enterprises and government entities primarily through our field sales force and to small and medium-sized businesses through our inside sales force. We generate a significant portion of sales through our channel partners, including managed security service providers, leading cloud providers, value-added resellers and consulting firms in the United States and internationally.

Previous wording

Comparison of Three and Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Three and Nine Months Ended September 30, 2025 and 2024

Previous wording

Revenues increased by $15.4 million for the three months ended June 30, 2025 compared to the same period in 2024, driven by increased demand for our subscription services by our end customers. Of the total increase of$15.4 million in revenues, 95% was from revenues from customers existing prior to April 1, 2025, and the remaining 5% was from new customers added in the three months ended June 30, 2025. Of the total increase of$15.4 million, 38% was from customers in the United States and the remaining 62% was from customers in foreign countries. Of the total increase of$15.4 million, 23% was from direct customers and the remaining 77% was from partners. In the three months ended June 30, 2025, 51% of total revenue was direct and the remaining 49% was from partners.

Current wording

Revenues increased by $16.0 million for the three months ended September 30, 2025 compared to the same period in 2024, driven by increased demand for our subscription services by our end customers. Of the total increase of$16.0 million in revenues, 95% was from revenues from customers existing prior to July 1, 2025, and the remaining 5% was from new customers added in the three months ended September 30, 2025. Of the total increase of$16.0 million, 40% was from customers in the United States and the remaining 60% was from customers in foreign countries. Of the total increase of $16.0 million, 26% was from direct customers and the remaining 74% was from partners. In the three months ended September 30, 2025, 50% of total revenue was direct and the remaining 50% was from partners.

Previous wording

Revenues increased by $29.4 million for thesix months ended June 30, 2025 compared to the same period in 2024, driven by increased demand for our subscription services by our end customers. Of the total increase of$29.4 million in revenues, 90% was from revenues from customers existing prior to January 1, 2025, and the remaining 10% was from new customers added in the six months ended June 30, 2025. Of the total increase of$29.4 million, 36% was from customers in the United States and the remaining 64% was from customers in foreign countries. Of the total increase of$29.4 million, 17% was from direct customers and the remaining 83% was from partners. In the six months ended June 30, 2025, 51% of total revenue was direct and the remaining 49% was from partners.

Current wording

Revenues increased by $45.5 million for thenine months ended September 30, 2025 compared to the same period in 2024, driven by increased demand for our subscription services by our end customers. Of the total increase of$45.5 million in revenues, 83% was from revenues from customers existing prior to January 1, 2025, and the remaining 17% was from new customers added in the nine months ended September 30, 2025. Of the total increase of$45.5 million, 37% was from customers in the United States and the remaining 63% was from customers in foreign countries. Of the total increase of$45.5 million, 20% was from direct customers and the remaining 80% was from partners. In the nine months ended September 30, 2025, 51% of total revenue was direct and the remaining 49% was from partners.

Previous wording

Cost of revenues increased by $2.5 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $1.8 million, driven by additional employees hired to support the growth of our business, an increase in shared cloud platform cost of $0.9 million, and an increase in license expenses and professional service expenses of $0.7 million, partially offset by a decrease in depreciation and amortization expense of $0.9 million resulting from certain of our assets becoming fully depreciated or amortized.

Current wording

Cost of revenues decreased by $1.0 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to a decrease in shared cloud platform cost of $1.4 million driven by the completion of our effort to migrate certain cloud platform footprint to a lower cost region to optimize infrastructure efficiency, a decrease in depreciation and amortization expense of $0.9 million resulting from certain of our assets that became fully depreciated or amortized, partially offset by an increase in personnel costs, including stock-based compensation, of $1.1 million, driven by additional employees hired to support the growth of our business, and an increase in license expenses and professional service expenses of $0.2 million.

Previous wording

Cost of revenues increased by $4.2 million for thesix months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $3.1 million, driven by additional employees hired to support the growth of our business, an increase in shared cloud platform cost of $1.6 million, and an increase in license expenses and professional service expenses of $1.4 million, partially offset by a decrease in depreciation and amortization expense of $1.9 million resulting from certain of our assets becoming fully depreciated or amortized.

Current wording

Cost of revenues increased by $3.2 million for thenine months ended September 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $4.3 million, driven by additional employees hired to support the growth of our business, and an increase in license expenses of $1.7 million, partially offset by a decrease in depreciation and amortization expense of $2.8 million resulting from certain of our assets becoming fully depreciated or amortized.

Previous wording

Research and development expenses increased by $4.8 million for thesix months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $3.9 million, driven by additional employees hired to support the growth of our business, and an increase in shared cloud platform cost of $0.9 million.

Current wording

Research and development expenses increased by $4.8 million for thenine months ended September 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $3.5 million, driven by additional employees hired to support the growth of our business, and an increase in shared cloud platform cost of $1.3 million.

Previous wording

Sales and marketing expenses increased by $3.7 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, driven by increased headcount and an increase in sales commissions, of $1.9 million, and an increase in marketing expenses, primarily related to digital advertising, partner event and sponsorship, of $1.5 million, and travel expenses of $0.3 million.

Current wording

Sales and marketing expenses increased by $2.6 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, driven by increased headcount, of $2.0 million, and an increase in marketing expenses, primarily related to digital advertising, partner event and sponsorship, of $0.6 million.

Previous wording

Sales and marketing expenses increased by $6.9 million for thesix months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, driven by increased headcount and an increase in sales commissions, of $3.4 million, and an increase in marketing expenses, primarily related to digital advertising, partner event and sponsorship, of $2.7 million, and travel expenses of $0.8 million.

Current wording

Sales and marketing expenses increased by $9.5 million for thenine months ended September 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, driven by increased headcount and an increase in sales commissions, of $5.4 million, and an increase in marketing expenses, primarily related to digital advertising, partner event and sponsorship, of $3.1 million, and travel expenses of $1.0 million.

Previous wording

General and administrative expenses increased by $2.8 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $2.8 million, primarily driven by increase in incentive compensation compared to the same period in 2024, and an increase in license expenses and professional service expenses of $0.5 million, partially offset by a decrease in overhead allocations of $0.5 million.

Current wording

General and administrative expenses increased by $2.7 million for thenine months ended September 30, 2025 compared to the same period in 2024, primarily due to an increase in personnel costs, including stock-based compensation, of $3.4 million, primarily driven by increase in headcount and increase in incentive compensation compared to the same period in 2024, and an increase in license expenses of $0.9 million, partially offset by a decrease in overhead allocations of $1.6 million.

Previous wording

Total other income, net increased by $3.1 million for the six months ended June 30, 2025, compared to the same periods in 2024, primarily due to favorable changes in foreign currency of $3.3 million, partially offset by a decrease in interest income of $0.2 million.

Current wording

Total other income, net decreased by $2.0 million for the three months ended September 30, 2025, compared to the same periods in 2024, primarily due to unfavorable changes in foreign currency of $1.5 million, and a decrease in interest income of $0.5 million.

Previous wording

Total other income, net increased by $1.3 million for the three months ended June 30, 2025, compared to the same periods in 2024, primarily due to favorable changes in foreign currency of $1.6 million, partially offset by a decrease in interest income of $0.3 million.

Current wording

Total other income, net increased by $1.1 million for the nine months ended September 30, 2025, compared to the same periods in 2024, primarily due to favorable changes in foreign currency of $1.8 million, partially offset by a decrease in interest income of $0.7 million.

Previous wording

Income tax provision increased by $1.1 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to the tax effect of an increase in pretax income and a decrease in excess tax benefits arising from stock-based compensation.

Current wording

Income tax provision increased by $8.8 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the tax effect of a decrease in the benefit from FDII deduction as a result of the enactment of the OBBBA and a decrease in the tax benefits arising from discrete adjustments in the period.

Previous wording

Income tax provision increased by $2.1 million for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to the tax effect of a decrease in excess tax benefits arising from stock-based compensation compared to the prior year, and from an increase in pretax income.

Current wording

Income tax provision increased by $11.0 million for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the tax effect of a decrease in the benefit from FDII deduction as a result of the enactment of the OBBBA, along with a decrease in excess tax benefits from stock-based compensation and a decrease in tax benefits from other discrete adjustments compared to the prior year.

Previous wording

Our net dollar expansion rates were 104% and 102% as of June 30, 2025 and June 30, 2024, respectively.

Current wording

Our net dollar expansion rates were 104% and 103% as of September 30, 2025 and September 30, 2024, respectively.

Previous wording

Because of these limitations, Adjusted EBITDA should be considered alongside other financial performance measures, including revenues, net income, cash flows from operating activities and our financial results presented in accordance with U.S. GAAP. The following unaudited table presents the reconciliation of net income to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

Current wording

Because of these limitations, Adjusted EBITDA should be considered alongside other financial performance measures, including revenues, net income, cash flows from operating activities and our financial results presented in accordance with U.S. GAAP. The following unaudited table presents the reconciliation of net income to Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024:

Previous wording

As of June 30, 2025, our principal source of liquidity was cash, cash equivalents and marketable securities of $621.2 million, including $105.1 million of cash held outside of the United States. The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this report:

Current wording

As of September 30, 2025, our principal source of liquidity was cash, cash equivalents and marketable securities of $663.6 million, including $139.2 million of cash held outside of the United States. The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this report:

Previous wording

During the six months ended June 30, 2025, we generated$130.1 million of cash from our net income, as adjusted for non-cash items mainly related to stock-based compensation expense, depreciation and amortization expense and deferred taxes, as compared to$118.2 million during the six months ended June 30, 2024. In addition, we also generated$13.3 million of cash from changes in working capital during the six months ended June 30, 2025, of which$13.5 million was related to the net decrease in accounts receivable and deferred revenue due to the timing of collections and billings, and a$4.4 million increase in payables and accrued liabilities primarily driven by the timing of payments, partially offset by a$4.6 million increase in prepaid expenses primarily driven by the timing of payments. During the six months ended June 30, 2024, we generated$17.1 million of cash from changes in working capital, of which$24.6 million was attributed to a decrease in accounts receivable due to the timing of collections and $8.6 million increase in payables and accrued liabilities, partially offset by a$4.5 million increase in prepaid expenses primarily driven by the timing of payments.

Current wording

During the nine months ended September 30, 2025, we generated$217.9 million of cash from our net income, as adjusted for non-cash items mainly related to stock-based compensation expense, depreciation and amortization expense and deferred taxes, as compared to$180.4 million during the nine months ended September 30, 2024. In addition, we also generated$15.9 million of cash from changes in working capital during the nine months ended September 30, 2025, of which$27.1 million was related to a net favorable change in accounts receivable and deferred revenue due to the growth in billings and collections, partially offset by an$11.2 million net unfavorable change in prepaid expenses and payables and accrued liabilities primarily due to the timing of payments. During the nine months ended September 30, 2024, we generated$16.0 million of cash from changes in working capital, of which$26.8 million was attributed to decreases in accounts receivable and deferred revenue due to the timing of collections and billings, partially offset by a$9.9 million increase in prepaid expenses and a $1.0 million decrease in payables and accrued liabilities primarily due to the timing of payments.

Previous wording

During the six months ended June 30, 2025, we used$82.8 million of cash for purchases of marketable securities net of sales and maturities, and used$3.4 million of cash in capital expenditures mainly related to purchases of computer equipment to support our growth and development and leasehold improvements for expansion of our office spaces, as compared to$6.4 million of cash generated from sales and maturities of marketable securities net of purchases, partially offset by$3.1 million of cash used in capital expenditures mainly related to purchases of computer equipment to support our growth and development during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2025, we used$93.1 million of cash for purchases of marketable securities net of sales and maturities, and used$4.3 million of cash in capital expenditures mainly related to purchases of computer equipment to support our growth and development and leasehold improvements for expansion of our office spaces, as compared to$53.0 million of cash for purchases of marketable securities net of sales and maturities, and$6.5 million of cash used in capital expenditures mainly related to purchases of computer equipment to support our growth and development during the nine months ended September 30, 2024.

Previous wording

During the six months ended June 30, 2025, we used$89.5 million of cash for share repurchases,$15.3 million of cash in payment of employee withholding taxes upon vesting of restricted stock units, partially offset by$5.6 million of proceeds from employee exercise of stock options, and$3.8 million of proceeds from issuance of common stock through our ESPP, as compared to$53.0 million of cash used for share repurchases, and$17.7 million of cash used in payment of employee withholding taxes upon vesting of restricted stock units and $1.5 million payment of cash held in escrow as part of the Blue Hexagon acquisition on October 4, 2022, partially offset by$6.0 million of proceeds from employee exercise of stock options, and$3.6 million of proceeds from issuance of common stock through our ESPP, during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2025, we used$138.8 million of cash for share repurchases,$20.2 million of cash in payment of employee withholding taxes upon vesting of restricted stock units, partially offset by$8.9 million of proceeds from employee exercise of stock options, and$6.8 million of proceeds from issuance of common stock through our ESPP, as compared to$97.2 million of cash used for share repurchases, and$23.1 million of cash used in payment of employee withholding taxes upon vesting of restricted stock units and $1.5 million payment of cash held in escrow as part of the Blue Hexagon acquisition on October 4, 2022, partially offset by$8.3 million of proceeds from employee exercise of stock options, and$6.9 million of proceeds from issuance of common stock through our ESPP, during the nine months ended September 30, 2024.

Previous wording

Our material cash requirements include our operating lease obligations to make payments under our non-cancelable lease agreements for our facilities and shared cloud platforms. We had fixed operating lease payment obligations of $70.7 million as of June 30, 2025, with $12.7 million expected to be paid within the next 12 months.

Current wording

Our material cash requirements include our operating lease obligations to make payments under our non-cancelable lease agreements for our facilities and shared cloud platforms. We had fixed operating lease payment obligations of $69.2 million as of September 30, 2025, with $12.6 million expected to be paid within the next 12 months.

Previous wording

We expect to continue to use cash to repurchase shares in 2025 under our share repurchase program authorized by our board of directors on February 5, 2018. On February 6, 2025, we announced that our board of directors authorized an additional $200.0 million to the share repurchase program authorization, increasing the total amount of authorized repurchase to $1.4 billion. As of June 30, 2025, approximately $254.6 million remained available under our share repurchase program. Shares will be repurchased from time to time in privately negotiated transactions or on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act.

Current wording

We expect to continue to use cash to repurchase shares in 2025 under our share repurchase program authorized by our board of directors on February 5, 2018. On February 6, 2025, we announced that our board of directors authorized an additional $200.0 million to the share repurchase program authorization, increasing the total amount of authorized repurchase to $1.4 billion. As of September 30, 2025, approximately $205.2 million remained available under our share repurchase program. Shares will be repurchased from time to time in privately negotiated transactions or on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act.