QTWO Q2 Holdings Inc

Q2 Holdings, Inc. (NYSE: QTWO), a leading provider of digital transformation solutions for financial services, today announced results for its third quarter ending September 30, 2024.

GAAP Results for the Third Quarter 2024

• Revenue for the third quarter of $175.0 million, up 13 percent year-over-year and up 1 percent from the second quarter of 2024.

• GAAP gross margin for the third quarter of 50.9 percent, up from 47.8 percent in the prior-year quarter and 50.2 percent in the second quarter of 2024.

• GAAP net loss for the third quarter of $11.8 million compared to GAAP net loss of $23.2 million for the prior-year quarter and GAAP net loss of $13.1 million for the second quarter of 2024.

Non-GAAP Results for the Third Quarter 2024

• Non-GAAP revenue for the third quarter of $175.0 million, up 13 percent year-over-year and up 1 percent from the second quarter of 2024.

• Non-GAAP gross margin for the third quarter of 56.0 percent, up from 53.9 percent for the prior-year quarter and 55.7 percent from the second quarter of 2024.

• Adjusted EBITDA for the third quarter of $32.6 million, up from $19.7 million for the prior-year quarter and $29.9 million from the second quarter of 2024.

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

“We achieved solid bookings success across our business lines in the third quarter, highlighted by six Enterprise and Tier 1 deals, including three with Top 50 U.S. banks,” said Q2 Chairman and CEO Matt Flake. “Additionally, our strong financial performance enabled us to reach our total revenue Rule of 30 target during the quarter. We believe these results and our continued success in winning and expanding our relationships with financial institutions of all sizes reflects our position as a leader in the market.”

Third Quarter Highlights

Six Enterprise & Tier 1 Contracts Demonstrate Continued Broad-Based Sales Success

• Signed two Enterprise & one Tier 1 digital banking contracts, including:
  • Two new banks, one for Q2’s retail solutions, and the other to utilize its retail, SMB and commercial solutions.
  • One expansion with an Enterprise Bank, adding commercial solutions.
• Signed two Enterprise & one Tier 1 relationship pricing contracts, including:
  • Two new banks, highlighted by a top 50 US bank.
  • One expansion with an Enterprise Bank, adding treasury pricing solutions.
• Signed a new contract with Envisant, to utilize our Q2 Fabric offering, which combines Helix's embedded finance platform with Q2's digital banking capabilities.
• Subscription Annualized Recurring Revenue increased to $654.6 million, up 20 percent year-over-year.
• Remaining Performance Obligations total, or Backlog, increased by $78 million sequentially and a record $467 million year-over-year, resulting in a total committed Backlog of over $2.0 billion at quarter-end, representing 4 percent sequential growth and 30 percent year-over-year growth.

Q2's Comprehensive Solutions Continue to Drive Robust Bookings

Q2 delivered broad-based bookings activity in the quarter across digital banking and relationship pricing with both new and existing customers. The third quarter was the strongest cross-sale bookings quarter so far in 2024, with nearly 50% of incremental annual recurring revenue (ARR) bookings coming from existing customers.

The versatility of Q2's digital banking platform continued to be a differentiator in the quarter, as the three Enterprise & Tier 1 wins included two Top 50 banks as well as a new Tier 1 bank, formed through an acquisition. The largest digital banking win was with a Tier 2 bank which adopted the entire platform of retail, SMB and commercial solutions, further diversifying the bookings strength in the third quarter.

Relationship pricing saw meaningful bookings in the quarter, highlighted by three Enterprise & Tier 1 wins, including two top 50 banks, and the largest overall ARR deal in the quarter, which was also the fifth largest relationship pricing deal in company history.

Helix bookings activity included a significant renewal and expansion with one of its largest customers in the quarter, as well as a material net new Q2 Fabric win with Envisant, a credit union service organization.

“We are pleased with our third quarter results, which exceeded our guidance and achieved our total revenue Rule of 30 target set at the beginning of 2023," said Q2 Prospective CFO Jonathan Price. "Our subscription revenue now accounts for over 80% of our total revenue, reflecting the strength of our business model. We've made substantial progress in free cash flow generation, and as we look ahead, we remain focused on growing our higher-margin recurring revenue streams and improving operational efficiency.”

Financial Outlook

As of November 6, 2024, Q2 Holdings is providing guidance for its fourth quarter of 2024 and updated guidance for its full year 2024, which represents Q2 Holdings’ current estimates on Q2 Holdings’ operations and financial results. The financial information below represents forward-looking, non-GAAP financial information, including estimates of non-GAAP revenue and adjusted EBITDA. GAAP net loss is the most comparable GAAP measure to adjusted EBITDA. Adjusted EBITDA differs from GAAP net loss in that it excludes items such as depreciation and amortization, stock-based compensation, transaction-related costs, interest and other (income) expense, income taxes, lease and other restructuring charges, gain on extinguishment of debt and the impact to deferred revenue from purchase accounting. Q2 Holdings is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort. Therefore, Q2 Holdings has not provided guidance for GAAP net loss or a reconciliation of the forward-looking adjusted EBITDA guidance to GAAP net loss. However, it is important to note that these excluded items could be material to Q2's results computed in accordance with GAAP in future periods.

Q2 Holdings is providing guidance for the fourth quarter of 2024 as follows:

• Total non-GAAP revenue of $178.1 million - $181.1 million, which would represent year-over-year growth of 10 to 12 percent.

• Adjusted EBITDA of $34.3 million - $36.3 million, representing 19 to 20 percent of non-GAAP revenue for the quarter.

Q2 Holdings is providing updated guidance for the full-year 2024 as follows:

• Total non-GAAP revenue of $691.5 million - $694.5 million, which would represent year-over-year growth of 11 percent.

• Adjusted EBITDA of $122.0 million - $124.0 million, representing 18 percent of non-GAAP revenue for the year.

Conference Call Details

Date:

Wednesday, November 6, 2024

 

Time:

5:00 p.m. EST

 

Hosts:

Matt Flake, Chairman & CEO / Jonathan Price, Prospective CFO / Kirk Coleman, President

 

Conference Call Registration:

https://registrations.events/direct/Q4I6081012

 

Webcast Registration:

https://events.q4inc.com/attendee/265196731

 

All participants must register using the above links (either the webcast or conference call). A webcast of the conference call and financial results will be accessible from the investor relations section of the Q2 website at http://investors.Q2.com/. In addition, a live conference call dial-in will be available upon registration. Participants should dial in at least 10 minutes before the start of the conference call. An archived replay of the webcast will be available on this website for a limited time after the call. Q2 has used, and intends to continue to use, its investor relations website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

About Q2 Holdings, Inc.

Q2 is a leading provider of digital transformation solutions for financial services, serving banks, credit unions, alternative finance companies, and fintechs in the U.S. and internationally. Q2 enables its financial institution and fintech customers to provide comprehensive, data-driven digital engagement solutions for consumers, small businesses and corporate clients. Headquartered in Austin, Texas, Q2 has offices worldwide and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com. Follow us on LinkedIn and X to stay up to date.

Use of Non-GAAP Measures

Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; adjusted EBITDA margin; non-GAAP gross margin; non-GAAP gross profit; non-GAAP sales and marketing expense; non-GAAP research and development expense; non-GAAP general and administrative expense; non-GAAP operating expense; non-GAAP operating income (loss); and free cash flow. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that Q2 does not consider indicative of its core performance.

In the case of non-GAAP revenue, Q2 adjusts revenue to exclude the impact to deferred revenue from purchase accounting adjustments. In the case of adjusted EBITDA, Q2 adjusts net loss for such items as interest and other (income) expense, taxes, depreciation and amortization, stock-based compensation, transaction-related costs, lease and other restructuring charges, gain on extinguishment of debt and the impact to deferred revenue from purchase accounting. In the case of adjusted EBITDA margin, Q2 calculates adjusted EBITDA margin by dividing adjusted EBITDA by non-GAAP revenue. In the case of non-GAAP gross margin and non-GAAP gross profit, Q2 adjusts gross profit and gross margin for stock-based compensation, amortization of acquired technology, transaction-related costs, lease and other restructuring charges and the impact to deferred revenue from purchase accounting. In the case of non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, Q2 adjusts the corresponding GAAP expense to exclude stock-based compensation. Non-GAAP operating expense is calculated by taking the sum of non-GAAP sales and marketing expenses, non-GAAP research and development expense, and non-GAAP general and administrative expense. In the case of non-GAAP operating income (loss), Q2 adjusts operating income (loss), for stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangibles, lease and other restructuring charges, and the impact to deferred revenue from purchase accounting. In the case of free cash flow, Q2 adjusts net cash provided by (used in) operating activities for purchases of property and equipment and capitalized software development costs.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income (loss). As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, 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 these non-GAAP measures 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: our position as a leader in the market; our continued success in winning and expanding our relationships with financial institutions of all sizes; our ability to continue to drive robust bookings; the versatility of our digital banking platform and its ability to continue to differentiate us in the market; the strength, sophistication of and continued momentum selling our relationship pricing platform; continued focus by financial institutions on relationship profitability; the ability of Q2 Fabric to allow customers to pursue their own unique growth objectives; the strength of our business model and execution; our positioning for continued growth; our continued focus on growing our high-margin recurring revenue streams and improving operational efficiency; our ability to drive sustainable, profitable growth and driving shareholder value; our ability to execute against our three-year target framework; and our quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon our 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) global economic uncertainties and challenges or changes in the financial services industry and credit markets, including as a result of recent bank failures, mergers and acquisitions within the banking sector, inflation, higher and shifting interest rates and any potential financial regulations and their potential impacts on our prospects' and customers' operations, the timing of prospect and customer implementations and purchasing decisions, our business sales cycles and on account holder or end user, or End User, usage of our solutions; (b) the risk of increased or new competition in our existing markets and as we enter new markets or new segments of existing markets, or as we offer new solutions; (c) the risks associated with the development of our solutions, including artificial intelligence, or AI, based solutions, and changes to the market for our solutions compared to our expectations; (d) quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts; (e) the risks and increased costs associated with managing growth and global operations, including hiring, training, retaining and motivating employees to support such growth, particularly in light of recent macroeconomic challenges, including increased competition for talent, employee turnover, labor shortages and wage inflation; (f) the risks associated with our transactional business which are typically driven by End User behavior and can be influenced by external drivers outside of our control; (g) the risks associated with effectively managing our business and cost structure in an uncertain economic environment, including as a result of challenges in the financial services industry and the effects of seasonality and unexpected trends; (h) the risks associated with geopolitical uncertainties, including the heightened risk of state-sponsored cyberattacks or cyber fraud on financial services and other critical infrastructure, and political uncertainty or discord, including related to the 2024 U.S. presidential election; (i) the risks associated with accurately forecasting and managing the impacts of any economic downturn or challenges in the financial services industry on our customers and their End Users, including in particular the impacts of any downturn on financial technology companies, or FinTechs, or alternative finance companies, or Alt-FIs, and our arrangements with them, which represent a newer market opportunity for us, a more complex revenue model for us and which may be more vulnerable to an economic downturn than our financial institution customers; (j) the challenges and costs associated with selling, implementing and supporting our solutions, particularly for larger customers with more complex requirements and longer implementation processes, including risks related to the timing and predictability of sales of our solutions and the impact that the timing of bookings may have on our revenue and financial performance in a period; (k) the risk that errors, interruptions or delays in our solutions or Web hosting negatively impacts our business and sales; (l) the risks associated with cyberattacks, financial transaction fraud, data and privacy breaches and breaches of security measures within our products, systems and infrastructure or the products, systems and infrastructure of third parties upon which we rely and the resultant costs and liabilities and harm to our business and reputation and our ability to sell our solutions; (m) the difficulties and risks associated with developing and selling complex new solutions and enhancements, including those using AI with the technical and regulatory specifications and functionality required by our customers and relevant governmental authorities; (n) risks associated with operating within and selling into a regulated industry, including risks related to evolving regulation of AI and machine learning, the receipt, collection, storage, processing and transfer of data and increased regulatory scrutiny in financial technology and related services, including specifically on banking-as-a-service, or BaaS, services; (o) the risks associated with our sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of our sales cycle; (p) the risks inherent in third-party technology and implementation partnerships that could cause harm to our business; (q) the risk that we will not be able to maintain historical contract terms such as pricing and duration; (r) the general risks associated with the complexity of our customer arrangements and our solutions; (s) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (t) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (u) the risks associated with further consolidation in the financial services industry; (v) the risks associated with selling our solutions internationally and with the continued expansion of our international operations; and (w) the risk that our debt repayment obligations may adversely affect our financial condition and that we may not be able to obtain capital when desired or needed on favorable terms.

Additional information relating to the uncertainty affecting the Q2 business is 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.Q2.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)

(unaudited)

 

 

 

September 30, 2024

 

December 31, 2023

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

320,294

 

 

$

229,655

 

Restricted cash

 

 

1,854

 

 

 

3,977

 

Investments

 

 

87,558

 

 

 

94,353

 

Accounts receivable, net

 

 

57,924

 

 

 

42,899

 

Contract assets, current portion, net

 

 

7,228

 

 

 

9,193

 

Prepaid expenses and other current assets

 

 

17,559

 

 

 

11,625

 

Deferred solution and other costs, current portion

 

 

24,256

 

 

 

27,521

 

Deferred implementation costs, current portion

 

 

9,666

 

 

 

8,741

 

Total current assets

 

 

526,339

 

 

 

427,964

 

Property and equipment, net

 

 

34,248

 

 

 

41,178

 

Right of use assets

 

 

31,055

 

 

 

35,453

 

Deferred solution and other costs, net of current portion

 

 

28,798

 

 

 

26,090

 

Deferred implementation costs, net of current portion

 

 

24,795

 

 

 

21,480

 

Intangible assets, net

 

 

101,147

 

 

 

121,572

 

Goodwill

 

 

512,869

 

 

 

512,869

 

Contract assets, net of current portion and allowance

 

 

10,072

 

 

 

12,210

 

Other long-term assets

 

 

3,492

 

 

 

2,609

 

Total assets

 

$

1,272,815

 

 

$

1,201,425

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued liabilities

 

$

58,753

 

 

$

62,404

 

Deferred revenues, current portion

 

 

141,267

 

 

 

118,723

 

Lease liabilities, current portion

 

 

10,784

 

 

 

10,436

 

Total current liabilities

 

 

210,804

 

 

 

191,563

 

Convertible notes, net of current portion

 

 

491,951

 

 

 

490,464

 

Deferred revenues, net of current portion

 

 

25,324

 

 

 

17,350

 

Lease liabilities, net of current portion

 

 

39,357

 

 

 

45,588

 

Other long-term liabilities

 

 

10,262

 

 

 

7,981

 

Total liabilities

 

 

777,698

 

 

 

752,946

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

1,160,098

 

 

 

1,075,278

 

Accumulated other comprehensive loss

 

 

(593

)

 

 

(1,111

)

Accumulated deficit

 

 

(664,394

)

 

 

(625,694

)

Total stockholders' equity

 

 

495,117

 

 

 

448,479

 

Total liabilities and stockholders' equity

 

$

1,272,815

 

 

$

1,201,425

 

Q2 Holdings, Inc.

Condensed Consolidated Statements Of Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

Revenues (1)

 

$

175,021

 

 

$

154,967

 

 

$

513,419

 

 

$

462,506

 

Cost of revenues (2)

 

 

85,962

 

 

 

80,834

 

 

 

255,281

 

 

 

241,248

 

Gross profit

 

 

89,059

 

 

 

74,133

 

 

 

258,138

 

 

 

221,258

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

25,558

 

 

 

26,123

 

 

 

78,736

 

 

 

82,968

 

Research and development

 

 

36,901

 

 

 

34,542

 

 

 

107,522

 

 

 

103,063

 

General and administrative

 

 

31,495

 

 

 

28,084

 

 

 

92,954

 

 

 

79,903

 

Transaction-related costs

 

 

—

 

 

 

3

 

 

 

—

 

 

 

24

 

Amortization of acquired intangibles

 

 

4,776

 

 

 

5,250

 

 

 

14,392

 

 

 

15,764

 

Lease and other restructuring charges

 

 

3,129

 

 

 

3,303

 

 

 

5,222

 

 

 

7,576

 

Total operating expenses

 

 

101,859

 

 

 

97,305

 

 

 

298,826

 

 

 

289,298

 

Loss from operations

 

 

(12,800

)

 

 

(23,172

)

 

 

(40,688

)

 

 

(68,040

)

Total other income, net (3)

 

 

3,263

 

 

 

1,011

 

 

 

7,892

 

 

 

22,238

 

Loss before income taxes

 

 

(9,537

)

 

 

(22,161

)

 

 

(32,796

)

 

 

(45,802

)

Provision for income taxes

 

 

(2,260

)

 

 

(1,006

)

 

 

(5,904

)

 

 

(1,503

)

Net loss

 

$

(11,797

)

 

$

(23,167

)

 

$

(38,700

)

 

$

(47,305

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale investments

 

 

383

 

 

 

423

 

 

 

560

 

 

 

1,285

 

Foreign currency translation adjustment

 

 

230

 

 

 

(470

)

 

 

(42

)

 

 

(307

)

Comprehensive loss

 

$

(11,184

)

 

$

(23,214

)

 

$

(38,182

)

 

$

(46,327

)

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.20

)

 

$

(0.40

)

 

$

(0.65

)

 

$

(0.81

)

Weighted average common shares outstanding, basic and diluted

 

 

60,310

 

 

 

58,492

 

 

 

59,974

 

 

 

58,223

 

(1)

Includes deferred revenue reduction from purchase accounting of zero and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and zero and $0.3 million for the nine months ended September 30, 2024 and 2023, respectively.

(2)

Includes amortization of acquired technology of $5.5 million and $5.9 million for the three months ended September 30, 2024 and 2023, respectively, and $16.5 million and $17.6 million for the nine months ended September 30, 2024 and 2023, respectively.

(3)

Includes a gain of $19.9 million related to the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the nine months ended September 30, 2023.

Q2 Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(38,700

)

 

$

(47,305

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

Amortization of deferred implementation, solution and other costs

 

 

19,851

 

 

 

19,184

 

Depreciation and amortization

 

 

52,819

 

 

 

53,764

 

Amortization of debt issuance costs

 

 

1,517

 

 

 

1,608

 

Amortization of premiums and discounts on investments

 

 

(852

)

 

 

(2,791

)

Stock-based compensation expense

 

 

69,456

 

 

 

59,819

 

Deferred income taxes

 

 

2,074

 

 

 

(120

)

Gain on extinguishment of debt

 

 

—

 

 

 

(19,312

)

Other non-cash items

 

 

1,231

 

 

 

4,186

 

Changes in operating assets and liabilities:

 

 

(14,680

)

 

 

(35,318

)

Net cash provided by operating activities

 

 

92,716

 

 

 

33,715

 

Cash flows from investing activities:

 

 

 

 

Net maturities of investments

 

 

8,208

 

 

 

102,559

 

Purchases of property and equipment

 

 

(5,253

)

 

 

(4,568

)

Capitalized software development costs

 

 

(17,589

)

 

 

(19,322

)

Net cash provided by (used in) investing activities

 

 

(14,634

)

 

 

78,669

 

Cash flows from financing activities:

 

 

 

 

Payment for maturity of 2023 convertible notes

 

 

—

 

 

 

(10,908

)

Payment for repurchases of convertible notes

 

 

—

 

 

 

(149,640

)

Proceeds from capped calls related to convertible notes

 

 

—

 

 

 

139

 

Debt issuance costs related to revolving credit agreement

 

 

(942

)

 

 

—

 

Proceeds from the exercise of stock options and ESPP

 

 

11,448

 

 

 

4,322

 

Net cash provided by (used in) financing activities

 

 

10,506

 

 

 

(156,087

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(72

)

 

 

(137

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

88,516

 

 

 

(43,840

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

233,632

 

 

 

201,902

 

Cash, cash equivalents and restricted cash, end of period

 

$

322,148

 

 

$

158,062

 

Q2 Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

GAAP revenue

 

$

175,021

 

 

$

154,967

 

 

$

513,419

 

 

$

462,506

 

Deferred revenue reduction from purchase accounting

 

 

—

 

 

 

76

 

 

 

—

 

 

 

275

 

Non-GAAP revenue

 

$

175,021

 

 

$

155,043

 

 

$

513,419

 

 

$

462,781

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

89,059

 

 

$

74,133

 

 

$

258,138

 

 

$

221,258

 

Stock-based compensation

 

 

3,010

 

 

 

3,373

 

 

 

9,575

 

 

 

10,323

 

Amortization of acquired technology

 

 

5,504

 

 

 

5,885

 

 

 

16,512

 

 

 

17,648

 

Lease and other restructuring charges

 

 

391

 

 

 

132

 

 

 

986

 

 

 

561

 

Deferred revenue reduction from purchase accounting

 

 

—

 

 

 

76

 

 

 

—

 

 

 

275

 

Non-GAAP gross profit

 

$

97,964

 

 

$

83,599

 

 

$

285,211

 

 

$

250,065

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin:

 

 

 

 

 

 

 

 

Non-GAAP gross profit

 

$

97,964

 

 

$

83,599

 

 

$

285,211

 

 

$

250,065

 

Non-GAAP revenue

 

 

175,021

 

 

 

155,043

 

 

 

513,419

 

 

 

462,781

 

Non-GAAP gross margin

 

 

56.0

%

 

 

53.9

%

 

 

55.6

%

 

 

54.0

%

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

25,558

 

 

$

26,123

 

 

$

78,736

 

 

$

82,968

 

Stock-based compensation

 

 

(4,443

)

 

 

(4,050

)

 

 

(12,783

)

 

 

(13,133

)

Non-GAAP sales and marketing expense

 

$

21,115

 

 

$

22,073

 

 

$

65,953

 

 

$

69,835

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

36,901

 

 

$

34,542

 

 

$

107,522

 

 

$

103,063

 

Stock-based compensation

 

 

(4,735

)

 

 

(3,908

)

 

 

(13,203

)

 

 

(11,691

)

Non-GAAP research and development expense

 

$

32,166

 

 

$

30,634

 

 

$

94,319

 

 

$

91,372

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

31,495

 

 

$

28,084

 

 

$

92,954

 

 

$

79,903

 

Stock-based compensation

 

 

(12,136

)

 

 

(9,778

)

 

 

(33,895

)

 

 

(24,672

)

Non-GAAP general and administrative expense

 

$

19,359

 

 

$

18,306

 

 

$

59,059

 

 

$

55,231

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(12,800

)

 

$

(23,172

)

 

$

(40,688

)

 

$

(68,040

)

Deferred revenue reduction from purchase accounting

 

 

—

 

 

 

76

 

 

 

—

 

 

 

275

 

Stock-based compensation

 

 

24,324

 

 

 

21,109

 

 

 

69,456

 

 

 

59,819

 

Transaction-related costs

 

 

—

 

 

 

3

 

 

 

—

 

 

 

24

 

Amortization of acquired technology

 

 

5,504

 

 

 

5,885

 

 

 

16,512

 

 

 

17,648

 

Amortization of acquired intangibles

 

 

4,776

 

 

 

5,250

 

 

 

14,392

 

 

 

15,764

 

Lease and other restructuring charges

 

 

3,520

 

 

 

3,435

 

 

 

6,208

 

 

 

8,137

 

Non-GAAP operating income

 

$

25,324

 

 

$

12,586

 

 

$

65,880

 

 

$

33,627

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP net loss to adjusted EBITDA:

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(11,797

)

 

$

(23,167

)

 

$

(38,700

)

 

$

(47,305

)

Deferred revenue reduction from purchase accounting

 

 

—

 

 

 

76

 

 

 

—

 

 

 

275

 

Stock-based compensation

 

 

24,324

 

 

 

21,109

 

 

 

69,456

 

 

 

59,819

 

Transaction-related costs

 

 

—

 

 

 

3

 

 

 

—

 

 

 

24

 

Depreciation and amortization

 

 

17,651

 

 

 

18,286

 

 

 

52,819

 

 

 

53,764

 

Lease and other restructuring charges

 

 

3,520

 

 

 

3,435

 

 

 

6,208

 

 

 

8,137

 

Provision for income taxes

 

 

2,260

 

 

 

1,006

 

 

 

5,904

 

 

 

1,503

 

Gain on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19,869

)

Interest and other (income) expense, net

 

 

(3,348

)

 

 

(1,091

)

 

 

(7,973

)

 

 

(2,593

)

Adjusted EBITDA

 

$

32,610

 

 

$

19,657

 

 

$

87,714

 

 

$

53,755

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

 

18.6

%

 

 

12.7

%

 

 

17.1

%

 

 

11.6

%

Q2 Holdings, Inc.

Reconciliation of Free Cash Flow

(in thousands)

(unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

 

2023

 

Net cash provided by operating activities

 

$

92,716

 

 

$

33,715

 

Purchases of property and equipment

 

 

(5,253

)

 

 

(4,568

)

Capitalized software development costs

 

 

(17,589

)

 

 

(19,322

)

Free cash flow

 

$

69,874

 

 

$

9,825

 

Q2 Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Revenue Outlook

(in thousands)

(unaudited)

 

 

 

Q4 2024 Outlook

 

Full Year 2024 Outlook

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

GAAP revenue

 

$

178,100

 

$

181,100

 

$

691,500

 

$

694,500

Deferred revenue reduction from purchase accounting

 

 

—

 

 

—

 

 

—

 

 

—

Non-GAAP revenue

 

$

178,100

 

$

181,100

 

$

691,500

 

$

694,500

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106520312/en/

MEDIA CONTACT: Jean Kondo Q2 Holdings, Inc. M: +1-510-823-4728 jean.kondo@Q2.com INVESTOR CONTACT: Josh Yankovich Q2 Holdings, Inc. O: +1-512-682-4463 josh.yankovich@Q2.com