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 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.

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 three months ended March 31, 2026 and 2025, approximately 55% and 57%, 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

Our other income (expense), net consists primarily of interest and returns from our cash equivalent, short-term and long-term marketable securities, non-marketable securities gains and losses, and foreign exchange gains and losses.

Current wording

Our other income (expense), net consists primarily of interest and returns from our cash equivalent, short-term and long-term marketable securities, non-marketable securities gains, losses and impairments of non-marketable securities, and foreign exchange gains and losses.

Previous wording

On July 4, 2025, OBBBA was signed into law. The OBBBA permanently extends and modifies certain domestic and international provisions from the 2017 TCJA and phases out certain provisions from the 2022 Inflation Reduction Act. Beginning in 2025, the OBBBA provides an elective deduction for domestic research and development expenses and a reinstatement of elective 100% first-year bonus depreciation. Some international provisions of the OBBBA will not be effective until 2026 and forward. We have recognized the effects of the OBBBA provisions in our financial results to the extent they are applicable to the three and nine months ended September 30, 2025 September 30, 2025. We will continue to monitor the impact of the OBBBA and the range of potential outcomes, which will depend on facts in each year and anticipated guidance from the U.S. Department of the Treasury.

Current wording

On July 4, 2025, OBBBA was signed into law. Beginning in 2026, the OBBBA changes to FDDEI Deduction and NCTI become effective. We have recognized the effects of these OBBBA provisions in our financial results for the three months ended March 31, 2026. These changes generally resulted in a decrease to our income tax provision for the period. We will continue to monitor the impact of the OBBBA and the range of potential outcomes, which will depend on facts in each year and anticipated guidance from the U.S. Department of the Treasury.

Previous wording

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

Current wording

Comparison of Three Months Ended March 31, 2026 and 2025

Previous 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.

Current wording

Revenues increased by $15.7 million for the three months ended March 31, 2026 compared to the same period in 2025, driven by increased demand for our subscription services by our end customers. Of the total increase of$15.7 million in revenues, 96% was from revenues from customers existing prior to January 1, 2026, and the remaining 4% was from new customers added in the three months ended March 31, 2026. Of the total increase of$15.7 million, 35% was from customers in the United States and the remaining 65% was from customers in foreign countries. Of the total increase of $15.7 million, 14% was from direct customers and the remaining 86% was from partners. In the three months ended March 31, 2026, 48% of total revenue was direct and the remaining 52% was from partners.

Previous 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.

Current wording

Cost of revenues increased by $1.1 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to an increase in personnel costs of $0.9 million, driven by additional employees hired to support the growth of our business, an impairment of our property and equipment of $0.6 million, an increase in shared cloud platform cost of $0.2 million, partially offset by a decrease in depreciation and amortization expense of $0.6 million resulting from certain of our assets that became fully depreciated or amortized.

Previous wording

Research and development expenses remained relatively flat for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the impact of headcount growth to support product development, partially offset by lower average personnel costs, including stock-based compensation driven by lower average grant-date fair value and geographic mix of the incremental hires.

Current wording

Research and development expenses remained relatively flat for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to lower average personnel costs, including stock-based compensation, driven by lower average grant-date fair value and geographic mix of the increased headcount to support product development, resulting in cost savings of $0.6 million, partially offset by an increase in overhead allocations of $0.5 million.

Previous 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.

Current wording

Sales and marketing expenses increased by $6.1 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to an increase in personnel costs, including stock-based compensation, of $5.8 million, driven by an increase in headcount and higher sales commissions and incentive compensation, an increase in sales event and sponsorship of $0.5 million, an increase in travel expenses of $0.5 million, and an increase in overhead allocations of $0.6 million, partially offset by a decrease in marketing expenses of $1.3 million, primarily related to digital advertising.

Previous 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.

Current wording

General and administrative expenses decreased by $0.4 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a decrease in overhead allocations to other expense categories of $1.0 million, partially offset by an increase in license expenses and professional service expenses of $0.4 million, and an increase in personnel costs, including stock-based compensation, of $0.2 million, driven by an increase in headcount.

Previous 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.

Current wording

Total other income, net decreased by $2.4 million for the three months ended March 31, 2026, compared to the same periods in 2025, primarily due to an impairment to our non-marketable security of $2.0 million, and unfavorable changes in foreign currency of $0.4 million.

Previous 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.

Current wording

Income tax provision increased by $3.6 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to an increase in non-deductible stock-based compensation, a decrease in benefit from the R&D credit, and an increase in tax expense arising from discrete adjustments in the period, partially offset by an increase in the tax benefit from FDDEI rules that became effective in 2026 under OBBBA.

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 nine months ended September 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 months ended March 31, 2026 and 2025:

Previous 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:

Current wording

As of March 31, 2026, our principal source of liquidity was cash, cash equivalents and marketable securities of $729.3 million, including $190.8 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 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.

Current wording

During the three months ended March 31, 2026, we generated$77.1 million of cash from our net income, as adjusted for non-cash items mainly related to stock-based compensation expense, depreciation and amortization expense, impairment of non-marketable securities, and deferred taxes, as compared to$65.3 million during the three months ended March 31, 2025. In addition, we also generated$18.2 million of cash from changes in working capital during the three months ended March 31, 2026, of which$27.8 million was related to a net favorable change in accounts receivable and deferred revenue due to the timing of billings and collections, partially offset by an$9.6 million net unfavorable change in prepaid expenses and payables and accrued liabilities primarily due to the timing of payments. During the three months ended March 31, 2025, we generated$44.3 million of cash from changes in working capital, of which$36.0 million was attributed to a net favorable change in accounts receivable and deferred revenue due to the timing of collections and billings, and a $8.3 million net favorable change in payables and accrued liabilities primarily driven by the timing of payments.

Previous 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.

Current wording

During the three months ended March 31, 2026, we used$4.7 million of cash for purchases of marketable securities net of sales and maturities, and used$1.7 million of cash in capital expenditures mainly related to purchases of computer equipment to support our growth and development, as compared to$5.0 million of cash for purchases of marketable securities net of sales and maturities, and$2.0 million of cash used 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 during the three months ended March 31, 2025.

Previous 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.

Current wording

During the three months ended March 31, 2026, we used$53.5 million of cash for share repurchases,$10.4 million of cash in payment of employee withholding taxes upon vesting of restricted stock units, partially offset by$3.9 million of proceeds from issuance of common stock through our ESPP, and$0.3 million of proceeds from employee exercise of stock options, as compared to$39.7 million of cash used for share repurchases, and$10.8 million of cash used in payment of employee withholding taxes upon vesting of restricted stock units, partially offset by$3.8 million of proceeds from issuance of common stock through our ESPP, and$2.6 million of proceeds from employee exercise of stock options during the three months ended March 31, 2025.

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 $69.2 million as of September 30, 2025, with $12.6 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 March 31, 2026, with $13.8 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 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.

Current wording

We expect to continue to use cash to repurchase shares in 2026 under our share repurchase program authorized by our board of directors on February 5, 2018. On February 5, 2026, 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 $1.6 billion. As of March 31, 2026, approximately $306.6 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.