QUALYS, INC.QLYS
QUALYS, INC. Fair Value Disclosure
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 accrued 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 at fair value in accordance with the provisions of the authoritative accounting guidance that addresses fair value measurements. This guidance establishes 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, including quoted prices for identical assets or liabilities in less active or inactive markets, quoted prices for similar assets or liabilities in active markets, or inputs other than quoted prices that are observable 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. Treasury and 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 of identical instruments in less active or inactive markets, quoted prices of similar instruments in active markets, or 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 following table sets forth by level within the fair value hierarchy the fair value of the Company's financial assets and liabilities measured at fair value on a recurring basis:
| December 31, 2025 | |||||||||||||||||
| Level 1 | Level 2 | Fair Value | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Money market funds | $ | 205 | $ | — | $ | 205 | |||||||||||
| U.S. Treasury and government agencies | — | 330,163 | 330,163 | ||||||||||||||
| Corporate bonds | — | 147,101 | 147,101 | ||||||||||||||
| Asset-backed securities | — | 1,240 | 1,240 | ||||||||||||||
| Foreign currency forward contracts | — | 58 | 58 | ||||||||||||||
| Total assets | $ | 205 | $ | 478,562 | $ | 478,767 | |||||||||||
| Foreign currency forward contracts | $ | — | $ | 4,697 | $ | 4,697 | |||||||||||
| Total liabilities | $ | — | $ | 4,697 | $ | 4,697 | |||||||||||
| December 31, 2024 | |||||||||||||||||
| Level 1 | Level 2 | Fair Value | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Money market funds | $ | 404 | $ | — | $ | 404 | |||||||||||
| Commercial paper | — | 6,443 | 6,443 | ||||||||||||||
| U.S. Treasury and government agencies | — | 233,279 | 233,279 | ||||||||||||||
| Corporate bonds | — | 131,812 | 131,812 | ||||||||||||||
| Asset-backed securities | — | 7,520 | 7,520 | ||||||||||||||
| Foreign currency forward contracts | — | 2,575 | 2,575 | ||||||||||||||
| Total assets | $ | 404 | $ | 381,629 | $ | 382,033 | |||||||||||
| Foreign currency forward contracts | $ | — | $ | 1,339 | $ | 1,339 | |||||||||||
| Total liabilities | $ | — | $ | 1,339 | $ | 1,339 | |||||||||||
There were no transfers between Level 1, Level 2 and Level 3 categories during the years ended December 31, 2025 and 2024.
Cash equivalent and investments
The Company's cash equivalents and marketable securities consist of the following:
| December 31, 2025 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash equivalents: (1) | |||||||||||||||||||||||
| Money market funds | $ | 205 | $ | — | $ | — | $ | 205 | |||||||||||||||
| U.S. Treasury and government agencies | 31,952 | 3 | — | 31,955 | |||||||||||||||||||
| Total | 32,157 | 3 | — | 32,160 | |||||||||||||||||||
| Short-term marketable securities: | |||||||||||||||||||||||
| Corporate bonds | 59,531 | 273 | — | 59,804 | |||||||||||||||||||
| U.S. Treasury and government agencies | 135,649 | 238 | (10) | 135,877 | |||||||||||||||||||
| Total | 195,180 | 511 | (10) | 195,681 | |||||||||||||||||||
| Long-term marketable securities: | |||||||||||||||||||||||
| Corporate bonds | 86,826 | 483 | (12) | 87,297 | |||||||||||||||||||
| Asset-backed securities | 1,227 | 13 | — | 1,240 | |||||||||||||||||||
| U.S. Treasury and government agencies | 162,035 | 396 | (100) | 162,331 | |||||||||||||||||||
| Total | 250,088 | 892 | (112) | 250,868 | |||||||||||||||||||
| Total | $ | 477,425 | $ | 1,406 | $ | (122) | $ | 478,709 | |||||||||||||||
(1)Excludes cash of $218.1 million.
| December 31, 2024 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash equivalents: (1) | |||||||||||||||||||||||
| Money market funds | $ | 404 | $ | — | $ | — | $ | 404 | |||||||||||||||
| Commercial paper | 1,983 | — | — | 1,983 | |||||||||||||||||||
| U.S. Treasury and government agencies | 33,939 | 4 | — | 33,943 | |||||||||||||||||||
| Total | 36,326 | 4 | — | 36,330 | |||||||||||||||||||
| Short-term marketable securities: | |||||||||||||||||||||||
| Commercial paper | 4,459 | 3 | (2) | 4,460 | |||||||||||||||||||
| Corporate bonds | 47,155 | 107 | (3) | 47,259 | |||||||||||||||||||
| U.S. Treasury and government agencies | 97,338 | 207 | (23) | 97,522 | |||||||||||||||||||
| Total | 148,952 | 317 | (28) | 149,241 | |||||||||||||||||||
| Long-term marketable securities: | |||||||||||||||||||||||
| Corporate bonds | 84,414 | 310 | (171) | 84,553 | |||||||||||||||||||
| Asset-backed securities | 7,426 | 94 | — | 7,520 | |||||||||||||||||||
| U.S. Treasury and government agencies | 101,834 | 178 | (198) | 101,814 | |||||||||||||||||||
| Total | 193,674 | 582 | (369) | 193,887 | |||||||||||||||||||
| Total | $ | 378,952 | $ | 903 | $ | (397) | $ | 379,458 | |||||||||||||||
(1)Excludes cash of $195.9 million.
The following table summarizes the gross unrealized losses and fair value of the Company's marketable securities that were in an unrealized loss position aggregated by length of time:
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Corporate bonds | $ | 10,735 | $ | (12) | $ | 1,791 | $ | — | $ | 12,526 | $ | (12) | |||||||||||||||||||||||
| U.S. Treasury and government agencies | 92,419 | (110) | — | — | 92,419 | (110) | |||||||||||||||||||||||||||||
| Total | $ | 103,154 | $ | (122) | $ | 1,791 | $ | — | $ | 104,945 | $ | (122) | |||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Commercial paper | $ | 4,464 | $ | (2) | $ | — | $ | — | $ | 4,464 | $ | (2) | |||||||||||||||||||||||
| Corporate bonds | 27,154 | (171) | 672 | (3) | 27,826 | (174) | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | 64,517 | (221) | — | — | 64,517 | (221) | |||||||||||||||||||||||||||||
| Total | $ | 96,135 | $ | (394) | $ | 672 | $ | (3) | $ | 96,807 | $ | (397) | |||||||||||||||||||||||
The Company considered the extent to which any unrealized losses on its marketable securities were driven by credit risk and other factors, including market risk, and if it is more-likely-than-not that the Company would have to sell the security before the recovery of the amortized cost basis. At December 31, 2025 and 2024, the unrealized losses related to its marketable securities were due to market factors other than credit. The Company does not believe the unrealized losses represent credit risk, and the Company does not intend to sell any of the securities in an unrealized loss position and it is not likely that the Company would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity. Thus, no credit loss was recognized for the Company's marketable securities for the years ended December 31, 2025 and 2024.
The following summarizes the fair value of marketable securities by contractual maturity:
| December 31, 2025 | |||||||||||
| Amortized Cost | Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Due within One Year | $ | 227,338 | $ | 227,841 | |||||||
| Due after One Year through Five Years | 248,860 | 249,628 | |||||||||
| Asset-backed securities | 1,227 | 1,240 | |||||||||
| Total | $ | 477,425 | $ | 478,709 | |||||||
Derivative Financial Instruments
Designated cash flow hedges
The Company enters into foreign currency forward contracts to reduce the risk of variability in future cash flow due to foreign currency exchange rate fluctuation from certain forecasted subscription revenue orders billed in GBP and EUR and operating expenses incurred in INR, which are designated as cash flow hedges. Hedge effectiveness is assessed at inception and at each reporting period utilizing regression analysis. Unrealized foreign exchange gains or losses related to those designated cash flow hedge contracts are recorded in accumulated other comprehensive income (“AOCI”) and will be reclassified into revenues or operating expenses, respectively, in the same periods when the hedged transactions are recognized in earnings.
As of December 31, 2025, the Company had designated cash flow hedge forward contracts with notional amounts of €54.3 million, £24.1 million and Rs.5,526.0 million. As of December 31, 2024, the Company had designated cash flow hedge forward contracts with notional amounts of €51.4 million, £20.3 million and Rs.4,381.0 million.
As of December 31, 2025, the amount of net unrealized loss of $4.3 million before tax on the foreign currency forward contracts for GBP and EUR reported in AOCI is expected to be reclassified into revenue within the next 12 months. As of December 31, 2025, the amount of net unrealized loss of $1.6 million before tax on the foreign currency forward contracts for INR reported in AOCI is expected to be reclassified into operating expenses within the next 12 months.
Non-designated forward contracts
The Company also uses foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities, which are not designated as cash flow hedges. Unrealized foreign exchange gain or losses related to the non-designated forward contracts are recorded in other income (expenses), net and offset the foreign exchange gain or loss on the underlying net monetary assets or liabilities.
As of December 31, 2025, the Company had non-designated forward contracts with notional amounts of €24.4 million, £6.8 million, Rs.2,723.0 million, and C$2.5 million. As of December 31, 2024, the Company had non-designated forward contracts with notional amounts of €27.0 million, £8.0 million, Rs.1,252.0 million, and C$1.0 million.
The following summarizes the fair value of derivative financial instruments as of December 31, 2025 and 2024:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Assets | |||||||||||
| Foreign currency forward contracts designated as cash flow hedge | $ | 55 | $ | 2,495 | |||||||
| Foreign currency forward contracts not designated as hedging instruments | 3 | 80 | |||||||||
| Total | $ | 58 | $ | 2,575 | |||||||
| Liabilities | |||||||||||
| Foreign currency forward contracts designated as cash flow hedge | $ | 4,579 | $ | 1,315 | |||||||
| Foreign currency forward contracts not designated as hedging instruments | 118 | 24 | |||||||||
| Total | $ | 4,697 | $ | 1,339 | |||||||
The Company presents its derivative assets and derivative liabilities at gross fair values in the consolidated balance sheets. However, under the master netting agreements with the respective counterparties of the foreign exchange contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. The potential offset to both assets and liabilities under the right of set-off associated with the Company's foreign currency exchange contracts are immaterial as of December 31, 2025 and 2024. The derivatives held by the Company are not subject to any credit contingent features negotiated with its counterparties. The Company is not required to pledge nor is entitled to receive cash collateral related to the above contracts. The counterparties to these derivatives are large, global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.
The following summarizes the gains (losses) recognized from forward contracts and other foreign currency transactions in other income (expense), net in the consolidated statements of operations:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net gains (losses) from non-designated forward contracts | $ | (4,318) | $ | 1,445 | $ | (198) | |||||||||||
| Other foreign currency transactions gains (losses) | 3,895 | (4,637) | (499) | ||||||||||||||
| Total foreign exchange losses, net | $ | (423) | $ | (3,192) | $ | (697) | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.