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Qualys has posted promising earnings despite a lackluster market response. The company's accrual ratio indicates strong cash conversion, with statutory profit understating free cash flow. Its earnings per share have grown impressively over the last three years, and the company has produced plenty of free cash flow to back up its statutory profit numbers.

Qualys, Inc. (QLYS) reported strong second-quarter (Q2) earnings on Tuesday, with shares gaining 8.3% during the extended trading session. The company's non-GAAP earnings per share (EPS) of $1.68 exceeded the Zacks Consensus Estimate of $1.47 and surpassed management's guidance range of $1.40-$1.50. This marks the fifth consecutive quarter that Qualys has beaten the Zacks Consensus Estimate, with an average surprise of 16.1% [1].

The company's Q2 revenues increased 10% year over year to $164.1 million, outpacing the Zacks Consensus Estimate of $161.2 million. This growth was primarily driven by a 17% increase in sales from channel partners, which contributed 49% of total Q2 revenues, compared to a 4% growth in direct selling [2]. Sales in the United States grew 7% year over year, while international sales increased 15%.

Qualys' non-GAAP gross profit increased 10% year over year to $137.8 million, with a non-GAAP gross margin of 84%. Non-GAAP operating income grew 6% to $70.1 million, but the non-GAAP operating margin contracted 100 basis points to 43%. Adjusted EBITDA for the second quarter rose 5% to $73.4 million, with an adjusted EBITDA margin of 45% [1].

The company ended the quarter with $621 million in cash and cash equivalents and marketable securities, down from $640 million in the year-ago quarter. Qualys generated operating cash flow of $33.8 million and free cash flow of $32.4 million during the second quarter. It also repurchased stocks worth $49.2 million during the second quarter and $89.5 million in the first half of 2025 [1].

Despite the strong earnings report, Qualys' stock price has not responded positively to the news. This could be due to the broader market conditions or investors' expectations. However, the company raised its full-year 2025 guidance, expecting revenues between $656 million and $662 million, up from the earlier range of $648-$657 million. It also raised its non-GAAP EPS guidance for 2025 to $6.20-$6.50 per share [1].

In the third quarter, Qualys expects revenues between $164.5 million and $167.5 million, indicating year-over-year growth of 7%-9%. It projects non-GAAP earnings in the range of $1.50-$1.60 per share [1].

References:
[1] https://www.nasdaq.com/articles/qualys-stock-soars-8-q2-earnings-and-revenues-beat-estimates
[2] https://finance.yahoo.com/news/qualys-stock-soars-8-q2-114300963.html