Total third quarter revenue of $28 million, up
33 percent year-over-year
Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of secure
virtual banking solutions to regional and community financial
institutions, today announced results for its third quarter ending
September 30, 2015.
Third Quarter 2015 Results
- Revenue for the third quarter of $28
million, up 33 percent year-over-year and up 7 percent
sequentially.
- Non-GAAP gross margin for the third
quarter of 47.7 percent, up from 42.9 percent one year ago. GAAP
gross margin for the third quarter of 46.0 percent, up from 42.1
percent one year ago.
- Adjusted EBITDA for the third quarter
of negative $2.2 million, an improvement from negative $2.3 million
one year ago and slight decrease from negative $2.0 million in the
second quarter. GAAP Net Loss of $7.0 million for the period.
“The third quarter saw the organization executing on all
fronts,” said Matt Flake, president and CEO of Q2 Holdings. “We
added three new Tier 1 customers, and I’m particularly pleased with
the geographic expansion of our Tier 1 success into the Northeast.
We are also making great progress in integrating Centrix, which we
acquired early in the quarter. Employees and customers alike have
reacted positively to the acquisition, and we’ve already begun to
see our sales efforts pay off as our combined customer pipeline
continues to grow.”
Third Quarter 2015 Highlights
- Signed three Tier 1 financial
institutions: a leading bank and a Top 25 Credit Union, both in the
Northeast United States, and a $15 billion bank in the Western
United States.
- Exited the third quarter with over 6
million registered users, up 46 percent year-over-year and up 6
percent sequentially.
- Completed the acquisition of Centrix,
which contributed to our expanding customer base and increased
demand for our products.
Financial Outlook
Q2 is providing guidance for its fourth quarter 2015 as
follows:
- Total revenue of $29.6 million to $30
million, which would represent year-over-year growth of 34 percent
to 35 percent.
- Adjusted EBITDA of negative $1.8
million to negative $2.2 million.
Q2 is providing guidance for the full-year 2015 as follows:
- Total revenue of $108.1 million to
$108.5 million, which would represent year-over-year growth of 37
percent.
- Adjusted EBITDA of negative $8.0
million to negative $8.4 million.
Conference Call Details
Date:
November 5, 2015
Time:
5:00 p.m. EST
Hosts:
Matt Flake, CEO / Jennifer Harris, CFO
Dial in:
US toll free: 1-877-201-0168
International: 1-647-788-4901
Conference ID:
58331785
Parties interested should join the conference call at least 10
minutes before start time to ensure the line is connected. A live
webcast of the conference call will be accessible from the investor
relations section of the Q2 website at
http://investors.q2ebanking.com/.
A replay of the webcast will also be available at this website
on a temporary basis shortly after the call.
About Q2 Holdings, Inc.
Q2 Holdings, Inc. (Q2) is a leading provider of secure,
cloud-based virtual banking solutions headquartered in Austin,
Texas. Q2 enables regional and community financial institutions, or
RCFIs, to deliver a robust suite of integrated virtual banking
services and engage more effectively with their retail and
commercial account holders who expect to bank anytime, anywhere and
on any device. Q2 solutions are often the most frequent point of
interaction between its RCFI customers and their account holders.
As such, Q2 purpose-built its solutions to deliver a compelling,
consistent user experience across digital channels and drive the
success of its customers by extending their local brands, enabling
improved account holder retention and creating incremental sales
opportunities. To learn more about Q2 visit q2ebanking.com.
Use of Non-GAAP Measures
Management believes that adjusted EBITDA and non-GAAP gross
margin are useful measures of operating performance because they
exclude items that Q2 does not consider indicative of its core
performance. In the case of adjusted EBITDA, Q2 adjusts net loss
for such things as interest, depreciation and amortization,
stock-based compensation, acquisition related costs, and taxes. In
the case of non-GAAP gross margin, Q2 adjusts gross margin for
stock-based compensation and amortization of acquired technology.
These non-GAAP measures should be considered in addition to, not as
a substitute for or superior to, net loss and GAAP gross margin, or
other financial measures prepared in accordance with GAAP. A
reconciliation to the closest GAAP measures of these non-GAAP
measures is contained in tabular form on the attached unaudited
condensed consolidated financial statements.
Q2’s management uses adjusted EBITDA and non-GAAP gross margin
as measures of operating performance; to prepare Q2’s annual
operating budget; to allocate resources to enhance the financial
performance of Q2’s business; to evaluate the effectiveness of Q2’s
business strategies; to provide consistency and comparability with
past financial performance; to facilitate a comparison of Q2’s
results with those of other companies, many of which use similar
non-GAAP financial measures to supplement their GAAP results; and
in communication with our board of directors concerning Q2’s
financial performance.
Forward-looking Statements
This press release contains forward-looking statements,
including statements about Q2’s Centrix acquisition and
integration, sales pipeline and quarterly and annual financial
guidance. The forward-looking statements contained in this press
release are based upon Q2’s and Centrix’s historical performance
and its current plans, estimates and expectations and are not a
representation that such plans, estimates or expectations will be
achieved. Factors that could cause actual results to differ
materially from those described herein include risks related to:
(a) the risk that Q2 will face increased competition in its
existing markets and as it enters new sections of the market with
Tier 1 customers and new products and services; (b) the risk that
the market for Q2’s solutions does not grow as anticipated; (c) the
risk that Q2’s increased focus on selling to larger Tier 1
customers may result in greater uncertainty and variability in Q2’s
business and sales results; (d) the challenges and costs associated
with selling, implementing and supporting Q2’s solutions,
particularly for larger customers with more complex requirements
and longer implementation processes; (e) errors, interruptions or
delays in Q2’s service or Web hosting; (f) risks associated with
data breaches and breaches of security measures within Q2’s
products, systems and infrastructure; (g) technological and
regulatory developments; (h) the impact that a slowdown in the
economy, financial markets, and credit markets has on Q2’s business
sales cycles, prospects and customers’ spending decisions and
timing of implementation decisions, particularly in regions where a
significant number of Q2’s customers are concentrated; (i) the
difficulties and risks associated with developing and selling
complex new solutions and enhancements with the technical and
regulatory specifications and functionality desired by customers
and governmental authorities; (j) the difficulties and costs Q2 may
encounter with complex implementations of its solutions and the
resulting impact on the timing of its revenue from any delayed
implementations; (k) the risk that Q2 will not be able to maintain
historical contract terms such as pricing and duration; (l) the
risks associated with managing growth and the challenges associated
with improving operations and hiring, retaining and motivating
employees to support such growth; (m) the risk that modifications
or negotiations of contractual arrangements will be necessary
during Q2’s implementations of its solutions or the general risks
associated with the complexity of Q2’s customer arrangements; (n)
the risks associated with integrating acquired companies and
successfully selling and maintaining their solutions; and (o)
litigation related to intellectual property and other matters and
any related claims, negotiations and settlements.
Additional information relating to the uncertainty affecting the
Q2 business are contained in Q2’s filings with the Securities and
Exchange Commission. These documents are available on the SEC
Filings section of the Investor Relations section of Q2’s website
at http://investors.q2ebanking.com/. These forward-looking
statements represent Q2’s expectations as of the date of this press
release. Subsequent events may cause these expectations to change,
and Q2 disclaims any obligations to update or alter these
forward-looking statements in the future, whether as a result of
new information, future events or otherwise.
Q2 Holdings, Inc.
Condensed Consolidated Balance Sheets (in thousands)
September 30, December 31, 2015 2014
(unaudited) Assets Current assets: Cash and cash equivalents $
75,169 $ 67,979 Restricted cash 1,315 829 Investments 44,720 20,956
Accounts receivable, net 8,986 5,007 Prepaid expenses and other
current assets 2,412 2,695 Deferred solution and other costs,
current portion 6,077 5,060 Deferred implementation costs, current
portion 2,378 1,996 Total current
assets 141,057 104,522 Property and equipment, net 21,426 18,521
Deferred solution and other costs, net of current portion 9,480
7,159 Deferred implementation costs, net of current portion 5,753
5,378 Intangible assets, net 11,267 - Goodwill 8,776 - Other
long-term assets 956 1,226 Total assets
$ 198,715 $ 136,806 Liabilities and
stockholders' equity Current liabilities: Accounts payable and
accrued liabilities $ 16,908 $ 15,190 Deferred revenues, current
portion 22,114 17,289 Capital lease obligations, current portion
253 408 Total current liabilities
39,275 32,887 Deferred revenues, net of current portion 27,795
19,436 Capital lease obligations, net of current portion - 167
Deferred rent, net of current portion 7,578 4,694 Other long-term
liabilities 686 682 Total liabilities
75,334 57,866 Stockholders' equity: Common stock 4 3 Treasury stock
(41 ) (20 ) Additional paid-in capital 204,452 143,337 Accumulated
other comprehensive loss (25 ) (14 ) Accumulated deficit
(81,009 ) (64,366 ) Total stockholders' equity
123,381 78,940 Total liabilities and
stockholders' equity $ 198,715 $ 136,806
Q2 Holdings, Inc. Condensed Consolidated Statements of
Comprehensive Loss (in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended
September 30, 2015 2014 2015 2014
(unaudited) (unaudited) (unaudited) (unaudited) Revenues $
28,018 $ 20,989 $ 78,459 $ 56,981
Cost of revenues (1) (2)
15,135 12,143 42,545
33,185 Gross profit 12,883 8,846 35,914 23,796
Operating expenses: Sales and marketing (1) 6,660 5,642 19,841
17,183 Research and development (1) 5,979 3,155 14,927 8,678
General and administrative (1) 5,961 4,574 16,430 12,350
Acquisition related costs 1,006 - 1,006 - Amortization of acquired
intangibles 227 - 227
- Total operating expenses 19,833
13,371 52,431 38,211 Loss
from operations (6,950 ) (4,525 ) (16,517 ) (14,415 ) Other income
(expense), net 13 (82 ) (3 )
(408 ) Loss before income taxes (6,937 ) (4,607 ) (16,520 ) (14,823
) Provision for income taxes (79 ) (18 ) (123
) (51 ) Net loss $ (7,016 ) $ (4,625 ) $ (16,643 ) $ (14,874
) Other comprehensive loss Unrealized gain (loss) on
available-for-sale investments 25 (20 )
(11 ) (20 ) Comprehensive loss $ (6,991 ) $ (4,645 ) $
(16,654 ) $ (14,894 ) Net loss per common share: Net loss per
common share, basic and diluted $ (0.19 ) $ (0.14 ) $ (0.45 ) $
(0.54 ) Weighted average common shares outstanding, basic and
diluted 37,438 34,171 36,774
27,522
(1)
Includes stock-based compensation expenses as follows:
Three
Months Ended September 30, Nine Months Ended
September 30, 2015 2014 2015 2014
Cost of revenues $ 290 $ 159 $ 706 $ 432 Sales and marketing 399
189 1,035 543 Research and development 302 131 681 360 General and
administrative 920 622 2,450
1,752 Total stock-based compensation expenses
$ 1,911 $ 1,101 $ 4,872 $ 3,087
(2)
Includes amortization of acquired technology of $197 and $0 for
each of the three and nine months ended September 30, 2015 and
2014, respectively.
Q2
Holdings, Inc. Condensed Consolidated Statements of Cash
Flows (in thousands)
Nine Months Ended September
30, 2015 2014 (unaudited) (unaudited) Cash flows
from operating activities: Net loss $ (16,643 ) $ (14,874 )
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: Amortization of deferred implementation,
solution and other costs 3,750 3,198 Depreciation and amortization
4,429 3,122 Amortization of debt issuance costs 72 72 Amortization
of premiums on investments 225 24 Stock-based compensation expenses
4,872 3,087 Other non-cash charges 37 51 Changes in operating
assets and liabilities 3,636 1,062 Cash
provided by (used in) operating activities 378 (4,258 ) Cash flows
from investing activities: Net purchases of investments (24,000 )
(18,072 ) Purchases of property and equipment (3,570 ) (3,815 )
Acquisitions, net of cash received (18,583 ) - Increase in
restricted cash (486 ) (713 ) Cash used in investing
activities (46,639 ) (22,600 ) Cash flows from financing
activities: Proceeds and payments on line of credit, capital
leases, and financing obligations, net (3,197 ) (6,816 ) Proceeds
from issuance of common stock 56,648 87,339
Net cash provided by financing activities 53,451
80,523 Net increase in cash and cash
equivalents 7,190 53,665 Cash and cash equivalents, beginning of
period 67,979 18,675 Cash and cash
equivalents, end of period $ 75,169 $ 72,340
Q2 Holdings, Inc. Reconciliation of GAAP to
Non-GAAP Measures (in thousands, except per share data)
Three
Months Ended September 30, Nine Months Ended
September 30, 2015 2014 2015 2014
(unaudited) (unaudited) (unaudited) (unaudited) GAAP gross profit $
12,883 $ 8,846 $ 35,914 $ 23,796 Stock-based compensation 290 159
706 432 Amortization of acquired technology 197
- 197 - Non-GAAP gross
profit $ 13,370 $ 9,005 $ 36,817 $ 24,228
Non-GAAP gross margin: Non-GAAP gross profit $ 13,370
$ 9,005 $ 36,817 $ 24,228 GAAP revenue 28,018
20,989 78,459 56,981 Non-GAAP
gross margin 47.7 % 42.9 % 46.9 % 42.5
% GAAP sales and marketing expense $ 6,660 $ 5,642 $ 19,841
$ 17,183 Stock-based compensation (399 ) (189 )
(1,035 ) (543 ) Non-GAAP sales and marketing expense
$ 6,261 $ 5,453 $ 18,806 $ 16,640
GAAP research and development expense $ 5,979 $ 3,155 $
14,927 $ 8,678 Stock-based compensation (302 ) (131 )
(681 ) (360 ) Non-GAAP research and development
expense $ 5,677 $ 3,024 $ 14,246 $ 8,318
GAAP general and administrative expense $ 5,961 $
4,574 $ 16,430 $ 12,350 Stock-based compensation (920 )
(622 ) (2,450 ) (1,752 ) Non-GAAP general and
administrative expense $ 5,041 $ 3,952 $ 13,980
$ 10,598 GAAP operating loss $ (6,950 ) $
(4,525 ) $ (16,517 ) $ (14,415 ) Stock-based compensation 1,911
1,101 4,872 3,087 Acquisition related costs 1,006 - 1,006 -
Amortization of acquired technology 197 - 197 - Amortization of
acquired intangibles 227 - 227
- Non-GAAP operating loss $ (3,609 ) $ (3,424
) $ (10,215 ) $ (11,328 ) GAAP net loss $ (7,016 ) $ (4,625
) $ (16,643 ) $ (14,874 ) Stock-based compensation 1,911 1,101
4,872 3,087 Acquisition related costs 1,006 - 1,006 - Amortization
of acquired technology 197 - 197 - Amortization of acquired
intangibles 227 - 227
- Non-GAAP net loss $ (3,675 ) $ (3,524 ) $ (10,341 )
$ (11,787 ) Non-GAAP net loss per share, basic and diluted
Numerator: Non-GAAP net loss $ (3,675 ) $ (3,524 ) $ (10,341 ) $
(11,787 ) Denominator: Weighted average common shares outstanding,
basic and diluted 37,438 34,171
36,774 27,522 Non-GAAP net loss per share,
basic and diluted $ (0.10 ) $ (0.10 ) $ (0.28 ) $ (0.43 )
Pro forma non-GAAP net loss per share, basic and diluted Numerator:
Non-GAAP net loss $ (3,675 ) $ (3,524 ) $ (10,341 ) $ (11,787 )
Denominator: Weighted average common shares outstanding, basic and
diluted 37,438 34,171 36,774 27,522 Plus: assumed conversion of
preferred stock to common stock (1) - -
- 4,130 Denominator for pro forma net
loss per share, basic and diluted 37,438
34,171 36,774 31,652 Pro forma
non-GAAP net loss per share, basic and diluted $ (0.10 ) $ (0.10 )
$ (0.28 ) $ (0.37 ) Reconciliation of net loss to adjusted
EBITDA: Net loss $ (7,016 ) $ (4,625 ) $ (16,643 ) $ (14,874 )
Interest (income) expense, net (13 ) 82 3 408 Depreciation and
amortization 1,873 1,092 4,429 3,122 Stock-based compensation 1,911
1,101 4,872 3,087
Acquisition related costs
1,006 - 1,006 - Provision for income taxes 79
18 123 51 Adjusted EBITDA $
(2,160 ) $ (2,332 ) $ (6,210 ) $ (8,206 )
(1)Assumes conversion of all outstanding
shares of preferred stock, on an as-if-converted basis, at the
later of January 1 of each year or the date of issuance of the
preferred stock.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151105006286/en/
Media Contact:Red Fan CommunicationsKathleen Lucente,
512-551-9253C:
512-217-6352kathleen@redfancommunications.comorInvestor
Contact:Q2 Holdings, Inc.Bob Gujavarty,
512-439-3447bobby.gujavarty@q2ebanking.com
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