Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Q2 Holdings, Inc. Announces Second Quarter 2022 Financial Results By: Q2 Holdings, Inc. via Business Wire August 03, 2022 at 16:30 PM EDT Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for banking and lending, today announced results for its second quarter ending June 30, 2022. GAAP Results for the Second Quarter 2022 Revenue for the second quarter of $140.3 million, up 14 percent year-over-year and up 5 percent from the first quarter of 2022. GAAP gross margin for the second quarter of 44.8 percent, consistent with the prior-year quarter and down from 45.1 percent in the first quarter of 2022. GAAP net loss for the second quarter of $25.2 million, compared to GAAP net losses of $30.1 million for the prior-year quarter and $23.6 million for the first quarter of 2022. Non-GAAP Results for the Second Quarter 2022 Non-GAAP revenue for the second quarter of $140.5 million, up 13 percent year-over-year and up 5 percent from the first quarter of 2022. Non-GAAP gross margin for the second quarter of 51.3 percent, down from 51.9 percent for the prior-year quarter and 51.4 percent for the first quarter of 2022. Adjusted EBITDA for the second quarter of $9.7 million, down from $9.9 million for the prior-year quarter and up from $8.1 million for the first quarter of 2022. For a reconciliation of our GAAP to non-GAAP results, please see the tables below. “We are pleased with our performance to close out the first half of the year,” said Q2 CEO Matt Flake. “We had several key wins across all of our lines of business, highlighted by some of our largest digital banking and lending deals in company history. We also saw continued momentum with our Emerging Businesses, including the announcement of a new marquee partnership for Q2 Innovation Studio and increasing adoption of the ecosystem, as well as new wins for our Helix business.” Second Quarter Highlights Partnering with Strategic Customers, Digitizing the Entire Bank Signed a digital-only bank for a broad set of solutions led by retail digital banking, which represents one of our ten largest digital banking deals in company history. Signed a Tier 1 bank to a digital banking contract to utilize our small business and commercial digital banking solutions. Signed a Tier 1 bank in Australia to a digital lending contract to utilize our loan origination solutions, which represents the largest loan origination deal in company history. Exited the second quarter with more than 20.2 million registered users on the Q2 digital banking platform, representing 7 percent year-over-year growth and 3 percent sequential growth. Facilitating the Convergence of Financial Services Signed a large lending company to a contract to utilize our Helix platform. Signed a bank to a contract to launch a digital-only brand, utilizing our Helix platform. Signed numerous Q2 Innovation Studio fintech partners including Rocket Mortgage, the single largest mortgage provider in the country. “Through operational execution during the second quarter, we delivered revenue towards the high end of our guidance range and Adjusted EBITDA which exceeded the high end of our guidance range,” said David Mehok, Q2 CFO. “We are reiterating our full year guidance, although we are closely monitoring the uncertain economic backdrop. Going into the second half of the year, we will be focusing on continued business execution and prudent cost management while investing in areas of our business that we believe will drive long-term value.” Financial outlook As of August 3, 2022, Q2 Holdings is providing guidance for its third quarter of 2022 and full-year 2022, 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, acquisition related costs, interest and other (income) expense, income taxes, unoccupied lease charges, loss 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 foregoing forward-looking adjusted EBITDA guidance to GAAP net loss. However, it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Q2 Holdings is providing guidance for its third quarter of 2022 as follows: Total non-GAAP revenue of $145.8 million to $147.8 million, which would represent year-over-year growth of 15 to 16 percent. Adjusted EBITDA of $6.2 million to $8.2 million, representing 4 to 6 percent of non-GAAP revenue for the quarter. Q2 Holdings is providing guidance for the full-year 2022 as follows: Total non-GAAP revenue of $577.5 million to $581.5 million, which would represent year-over-year growth of 15 percent to 16 percent. Adjusted EBITDA of $41.4 million to $44.4 million, representing 7 to 8 percent of non-GAAP revenue for the year. Conference Call Details Date: Thursday, August 4, 2022 Time: 8:30 a.m. EDT Hosts: Matt Flake, CEO / David Mehok, CFO / Jonathan Price, EVP Emerging Businesses, Corporate & Business Development Conference Call Registration: https://conferencingportals.com/event/ZwJrtqJb Webcast Registration: https://events.q4inc.com/attendee/238357577 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. About Q2 Holdings, Inc. Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com. Use of Non-GAAP Measures Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; 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); non-GAAP net income; non-GAAP net income per share; and non-GAAP diluted weighted-average number of common shares outstanding. 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, acquisition related costs, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting. 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, acquisition related costs, 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), non-GAAP net income (loss), and non-GAAP net income (loss) per share, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition related costs, amortization of acquired technology, amortization of acquired intangibles, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting, and with respect to non-GAAP net income, amortization of debt discount and issuance costs and loss on extinguishment of debt. In the case of non-GAAP diluted weighted-average number of common shares outstanding, Q2 adjusts diluted weighted-average number of common shares outstanding by the weighted-average effect of potentially dilutive shares which include (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense and (ii) convertible senior notes outstanding and related warrants including the anti-dilutive impact of note hedge and capped call agreements on convertible senior notes outstanding. 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 expectations regarding momentum with our Emerging Businesses, including increasing adoption of the Q2 Innovation Studio ecosystem; our areas of focus for the second half of 2022; the current uncertain and challenging economic conditions and the impact such conditions may have on Q2’s business and performance in the second half of 2022 and beyond; and, Q2’s quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon Q2’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 of increased or new competition in our existing markets and as we enter new markets or new sections of existing markets, or as we offer new solutions; (b) risks associated with the development of and changes to the market for our solutions compared to our expectations; (c) quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts; (d) the risks associated with anticipated higher operating expenses in 2022 and beyond; (e) the impact that inflation, rising interest rates or a slowdown in the economy, financial markets and credit markets may have on End User usage of our solutions and on our customers’, prospects and our business sales cycles, our prospects’ and customers’ spending decisions, including for discretionary aspects of our solutions, and timing of implementation decisions; (f) the risks and increased costs associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth, particularly in light of the macroeconomic impacts of the novel coronavirus disease, or COVID-19, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (g) the risk that the COVID-19 pandemic and the associated efforts to limit its spread continue to negatively impact or disrupt the markets for our solutions and that the markets for our solutions do not return to normal or grow as anticipated; (h) risks associated with the general economic and geopolitical impacts of Russia’s invasion of Ukraine, including the heightened risk of cyber-attacks on financial services and other critical infrastructure, and continued or increased inflation caused by increased energy costs or other unpredictable economic impacts that may negatively affect demand for our solutions; (i) 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; (j) the risk that errors, interruptions or delays in our solutions or Web hosting negatively impacts our business and sales; (k) risks associated with cyberattacks, 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; (l) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by our customers and relevant governmental authorities; (m) risks associated with our sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of our sales cycle; (n) the risks inherent in third-party technology and implementation partnerships that could cause harm to our business; (o) the risk that we will not be able to maintain historical contract terms such as pricing and duration; (p) the general risks associated with the complexity of our customer arrangements and our solutions; (q) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (r) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (s) the risks associated with further consolidation in the financial services industry; (t) risks associated with selling our solutions internationally and with our international operations; and (u) the risk that our debt repayment obligations may adversely affect our financial condition and cash flows from operations in the future 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) June 30, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 211,127 $ 322,848 Restricted cash 2,965 2,973 Investments 188,222 104,878 Accounts receivable, net 46,065 46,979 Contract assets, current portion, net 3,217 1,845 Prepaid expenses and other current assets 13,744 10,531 Deferred solution and other costs, current portion 23,551 25,076 Deferred implementation costs, current portion 7,316 7,320 Total current assets 496,207 522,450 Property and equipment, net 62,572 66,608 Right of use assets 48,735 52,278 Deferred solution and other costs, net of current portion 27,568 26,930 Deferred implementation costs, net of current portion 18,221 17,039 Intangible assets, net 150,897 162,461 Goodwill 512,869 512,869 Contract assets, net of current portion and allowance 24,661 22,103 Other long-term assets 1,966 2,307 Total assets $ 1,343,696 $ 1,385,045 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 44,274 $ 60,665 Convertible notes, current portion 10,871 - Deferred revenues, current portion 95,816 98,692 Lease liabilities, current portion 9,330 9,001 Total current liabilities 160,291 168,358 Convertible notes, net of current portion 656,469 551,598 Deferred revenues, net of current portion 24,327 29,168 Lease liabilities, net of current portion 56,646 61,374 Other long-term liabilities 5,024 4,251 Total liabilities 902,757 814,749 Stockholders' equity: Common stock 6 6 Additional paid-in capital 943,607 1,064,358 Accumulated other comprehensive loss (2,566 ) (135 ) Accumulated deficit (500,108 ) (493,933 ) Total stockholders' equity 440,939 570,296 Total liabilities and stockholders' equity $ 1,343,696 $ 1,385,045 Q2 Holdings, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenues (1) $ 140,309 $ 123,573 $ 274,380 $ 240,093 Cost of revenues (2) 77,421 68,233 151,093 131,552 Gross profit 62,888 55,340 123,287 108,541 Operating expenses: Sales and marketing 26,477 20,587 51,743 40,403 Research and development 31,832 29,429 62,963 56,224 General and administrative 23,285 18,704 43,853 37,538 Acquisition related costs 527 1,188 530 2,038 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges (3) 129 812 537 812 Total operating expenses 86,672 75,283 168,470 145,997 Loss from operations (23,784 ) (19,943 ) (45,183 ) (37,456 ) Total other income (expense), net (1,098 ) (10,006 ) (1,894 ) (18,013 ) Loss before income taxes (24,882 ) (29,949 ) (47,077 ) (55,469 ) Provision for income taxes (340 ) (178 ) (1,704 ) (313 ) Net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Other comprehensive gain (loss): Unrealized gain (loss) on available-for-sale investments (544 ) (14 ) (1,617 ) 5 Foreign currency translation adjustment (724 ) (37 ) (814 ) (35 ) Comprehensive loss $ (26,490 ) $ (30,178 ) $ (51,212 ) $ (55,812 ) Net loss per common share: Net loss per common share, basic and diluted $ (0.44 ) $ (0.53 ) $ (0.85 ) $ (0.99 ) Weighted average common shares outstanding, basic and diluted 57,234 56,360 57,125 56,081 (1) Includes deferred revenue reduction from purchase accounting of $0.2 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $0.4 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively. (2) Includes amortization of acquired technology of $5.6 million for each of the three months ended June 30, 2022 and 2021, and $11.2 million and $10.8 million for the six months ended June 30, 2022 and 2021, respectively. (3) Unoccupied lease charges include costs related to the early vacating of various facilities, partially offset by anticipated sublease income from these facilities. For the three and six months ended June 30, 2022, the charges related to an updated assessment of facilities in Texas, North Carolina and Georgia, and for the three and six months ended June 30, 2021, the charges related to an updated assessment of facilities in Georgia and Texas. Q2 Holdings, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ (48,781 ) $ (55,782 ) Adjustments to reconcile net loss to net cash from operating activities: Amortization of deferred implementation, solution and other costs 11,091 11,614 Depreciation and amortization 29,946 26,498 Amortization of debt issuance costs 1,367 1,045 Amortization of debt discount - 13,054 Amortization of premiums on investments 577 458 Stock-based compensation expense 33,425 27,392 Deferred income taxes 857 72 Loss on extinguishment of debt - 1,513 Other non-cash charges 883 1,221 Changes in operating assets and liabilities (43,760 ) (21,076 ) Net cash provided by (used in) operating activities (14,395 ) 6,009 Cash flows from investing activities: Net maturities (purchases) of investments (85,555 ) 37,558 Purchases of property and equipment (5,097 ) (14,379 ) Business combinations, net of cash acquired - (64,652 ) Capitalized software development costs (9,485 ) (2,307 ) Net cash used in investing activities (100,137 ) (43,780 ) Cash flows from financing activities: Payments for repurchases of convertible notes - (63,692 ) Proceeds from bond hedges related to convertible notes - 26,295 Payments for warrants related to convertible notes - (19,655 ) Proceeds from exercise of stock options and ESPP 2,803 4,565 Net cash provided by (used in) financing activities 2,803 (52,487 ) Net decrease in cash, cash equivalents, and restricted cash (111,729 ) (90,258 ) Cash, cash equivalents, and restricted cash, beginning of period 325,821 411,185 Cash, cash equivalents, and restricted cash, end of period $ 214,092 $ 320,927 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 GAAP revenue $ 140,309 $ 123,573 $ 274,380 $ 240,093 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP revenue $ 140,478 $ 124,168 $ 274,791 $ 241,216 GAAP gross profit $ 62,888 $ 55,340 $ 123,287 $ 108,541 Stock-based compensation 3,335 2,763 6,074 5,298 Amortization of acquired technology 5,603 5,604 11,207 10,761 Acquisition related costs - 106 - 222 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP gross margin: Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP revenue 140,478 124,168 274,791 241,216 Non-GAAP gross margin 51.3 % 51.9 % 51.3 % 52.2 % GAAP sales and marketing expense $ 26,477 $ 20,587 $ 51,743 $ 40,403 Stock-based compensation (4,012 ) (2,930 ) (7,338 ) (5,467 ) Non-GAAP sales and marketing expense $ 22,465 $ 17,657 $ 44,405 $ 34,936 GAAP research and development expense $ 31,832 $ 29,429 $ 62,963 $ 56,224 Stock-based compensation (3,850 ) (3,506 ) (6,702 ) (6,651 ) Non-GAAP research and development expense $ 27,982 $ 25,923 $ 56,261 $ 49,573 GAAP general and administrative expense $ 23,285 $ 18,704 $ 43,853 $ 37,538 Stock-based compensation (6,320 ) (4,428 ) (11,422 ) (9,306 ) Non-GAAP general and administrative expense $ 16,965 $ 14,276 $ 32,431 $ 28,232 GAAP operating loss $ (23,784 ) $ (19,943 ) $ (45,183 ) $ (37,456 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Non-GAAP operating income $ 4,583 $ 6,552 $ 7,882 $ 13,204 GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Loss on extinguishment of debt - 1,513 - 1,513 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Amortization of debt discount and issuance costs 691 7,093 1,367 14,099 Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Reconciliation from diluted weighted-average number of common sharesas reported to Non-GAAP diluted weighted-average number of common shares Diluted weighted-average number of common shares, as reported 57,234 56,360 57,125 56,081 Non-GAAP weighted-average effect of potentially dilutive shares 285 1,025 386 1,365 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Calculation of non-GAAP income per share: Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Non-GAAP net income per share $ 0.07 $ 0.09 $ 0.10 $ 0.18 Reconciliation of GAAP net loss to adjusted EBITDA: GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Depreciation and amortization 15,027 13,586 29,946 26,498 Stock-based compensation 17,517 13,627 31,536 26,722 Provision for income taxes 340 178 1,704 313 Interest and other (income) expense, net 1,176 8,388 1,838 16,295 Acquisition related costs 527 1,294 530 2,260 Unoccupied lease charges 129 812 537 812 Loss on extinguishment of debt - 1,513 - 1,513 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Adjusted EBITDA $ 9,663 $ 9,866 $ 17,721 $ 19,754 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Revenue Outlook (in thousands) Q3 2022 Outlook Full Year 2022 Outlook Low High Low High GAAP revenue $ 145,658 $ 147,658 $ 576,818 $ 580,818 Deferred revenue reduction from purchase accounting 142 142 682 682 Non-GAAP revenue $ 145,800 $ 147,800 $ 577,500 $ 581,500 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005714/en/Contacts 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 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Q2 Holdings, Inc. Announces Second Quarter 2022 Financial Results By: Q2 Holdings, Inc. via Business Wire August 03, 2022 at 16:30 PM EDT Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for banking and lending, today announced results for its second quarter ending June 30, 2022. GAAP Results for the Second Quarter 2022 Revenue for the second quarter of $140.3 million, up 14 percent year-over-year and up 5 percent from the first quarter of 2022. GAAP gross margin for the second quarter of 44.8 percent, consistent with the prior-year quarter and down from 45.1 percent in the first quarter of 2022. GAAP net loss for the second quarter of $25.2 million, compared to GAAP net losses of $30.1 million for the prior-year quarter and $23.6 million for the first quarter of 2022. Non-GAAP Results for the Second Quarter 2022 Non-GAAP revenue for the second quarter of $140.5 million, up 13 percent year-over-year and up 5 percent from the first quarter of 2022. Non-GAAP gross margin for the second quarter of 51.3 percent, down from 51.9 percent for the prior-year quarter and 51.4 percent for the first quarter of 2022. Adjusted EBITDA for the second quarter of $9.7 million, down from $9.9 million for the prior-year quarter and up from $8.1 million for the first quarter of 2022. For a reconciliation of our GAAP to non-GAAP results, please see the tables below. “We are pleased with our performance to close out the first half of the year,” said Q2 CEO Matt Flake. “We had several key wins across all of our lines of business, highlighted by some of our largest digital banking and lending deals in company history. We also saw continued momentum with our Emerging Businesses, including the announcement of a new marquee partnership for Q2 Innovation Studio and increasing adoption of the ecosystem, as well as new wins for our Helix business.” Second Quarter Highlights Partnering with Strategic Customers, Digitizing the Entire Bank Signed a digital-only bank for a broad set of solutions led by retail digital banking, which represents one of our ten largest digital banking deals in company history. Signed a Tier 1 bank to a digital banking contract to utilize our small business and commercial digital banking solutions. Signed a Tier 1 bank in Australia to a digital lending contract to utilize our loan origination solutions, which represents the largest loan origination deal in company history. Exited the second quarter with more than 20.2 million registered users on the Q2 digital banking platform, representing 7 percent year-over-year growth and 3 percent sequential growth. Facilitating the Convergence of Financial Services Signed a large lending company to a contract to utilize our Helix platform. Signed a bank to a contract to launch a digital-only brand, utilizing our Helix platform. Signed numerous Q2 Innovation Studio fintech partners including Rocket Mortgage, the single largest mortgage provider in the country. “Through operational execution during the second quarter, we delivered revenue towards the high end of our guidance range and Adjusted EBITDA which exceeded the high end of our guidance range,” said David Mehok, Q2 CFO. “We are reiterating our full year guidance, although we are closely monitoring the uncertain economic backdrop. Going into the second half of the year, we will be focusing on continued business execution and prudent cost management while investing in areas of our business that we believe will drive long-term value.” Financial outlook As of August 3, 2022, Q2 Holdings is providing guidance for its third quarter of 2022 and full-year 2022, 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, acquisition related costs, interest and other (income) expense, income taxes, unoccupied lease charges, loss 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 foregoing forward-looking adjusted EBITDA guidance to GAAP net loss. However, it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Q2 Holdings is providing guidance for its third quarter of 2022 as follows: Total non-GAAP revenue of $145.8 million to $147.8 million, which would represent year-over-year growth of 15 to 16 percent. Adjusted EBITDA of $6.2 million to $8.2 million, representing 4 to 6 percent of non-GAAP revenue for the quarter. Q2 Holdings is providing guidance for the full-year 2022 as follows: Total non-GAAP revenue of $577.5 million to $581.5 million, which would represent year-over-year growth of 15 percent to 16 percent. Adjusted EBITDA of $41.4 million to $44.4 million, representing 7 to 8 percent of non-GAAP revenue for the year. Conference Call Details Date: Thursday, August 4, 2022 Time: 8:30 a.m. EDT Hosts: Matt Flake, CEO / David Mehok, CFO / Jonathan Price, EVP Emerging Businesses, Corporate & Business Development Conference Call Registration: https://conferencingportals.com/event/ZwJrtqJb Webcast Registration: https://events.q4inc.com/attendee/238357577 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. About Q2 Holdings, Inc. Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com. Use of Non-GAAP Measures Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; 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); non-GAAP net income; non-GAAP net income per share; and non-GAAP diluted weighted-average number of common shares outstanding. 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, acquisition related costs, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting. 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, acquisition related costs, 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), non-GAAP net income (loss), and non-GAAP net income (loss) per share, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition related costs, amortization of acquired technology, amortization of acquired intangibles, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting, and with respect to non-GAAP net income, amortization of debt discount and issuance costs and loss on extinguishment of debt. In the case of non-GAAP diluted weighted-average number of common shares outstanding, Q2 adjusts diluted weighted-average number of common shares outstanding by the weighted-average effect of potentially dilutive shares which include (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense and (ii) convertible senior notes outstanding and related warrants including the anti-dilutive impact of note hedge and capped call agreements on convertible senior notes outstanding. 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 expectations regarding momentum with our Emerging Businesses, including increasing adoption of the Q2 Innovation Studio ecosystem; our areas of focus for the second half of 2022; the current uncertain and challenging economic conditions and the impact such conditions may have on Q2’s business and performance in the second half of 2022 and beyond; and, Q2’s quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon Q2’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 of increased or new competition in our existing markets and as we enter new markets or new sections of existing markets, or as we offer new solutions; (b) risks associated with the development of and changes to the market for our solutions compared to our expectations; (c) quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts; (d) the risks associated with anticipated higher operating expenses in 2022 and beyond; (e) the impact that inflation, rising interest rates or a slowdown in the economy, financial markets and credit markets may have on End User usage of our solutions and on our customers’, prospects and our business sales cycles, our prospects’ and customers’ spending decisions, including for discretionary aspects of our solutions, and timing of implementation decisions; (f) the risks and increased costs associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth, particularly in light of the macroeconomic impacts of the novel coronavirus disease, or COVID-19, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (g) the risk that the COVID-19 pandemic and the associated efforts to limit its spread continue to negatively impact or disrupt the markets for our solutions and that the markets for our solutions do not return to normal or grow as anticipated; (h) risks associated with the general economic and geopolitical impacts of Russia’s invasion of Ukraine, including the heightened risk of cyber-attacks on financial services and other critical infrastructure, and continued or increased inflation caused by increased energy costs or other unpredictable economic impacts that may negatively affect demand for our solutions; (i) 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; (j) the risk that errors, interruptions or delays in our solutions or Web hosting negatively impacts our business and sales; (k) risks associated with cyberattacks, 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; (l) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by our customers and relevant governmental authorities; (m) risks associated with our sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of our sales cycle; (n) the risks inherent in third-party technology and implementation partnerships that could cause harm to our business; (o) the risk that we will not be able to maintain historical contract terms such as pricing and duration; (p) the general risks associated with the complexity of our customer arrangements and our solutions; (q) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (r) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (s) the risks associated with further consolidation in the financial services industry; (t) risks associated with selling our solutions internationally and with our international operations; and (u) the risk that our debt repayment obligations may adversely affect our financial condition and cash flows from operations in the future 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) June 30, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 211,127 $ 322,848 Restricted cash 2,965 2,973 Investments 188,222 104,878 Accounts receivable, net 46,065 46,979 Contract assets, current portion, net 3,217 1,845 Prepaid expenses and other current assets 13,744 10,531 Deferred solution and other costs, current portion 23,551 25,076 Deferred implementation costs, current portion 7,316 7,320 Total current assets 496,207 522,450 Property and equipment, net 62,572 66,608 Right of use assets 48,735 52,278 Deferred solution and other costs, net of current portion 27,568 26,930 Deferred implementation costs, net of current portion 18,221 17,039 Intangible assets, net 150,897 162,461 Goodwill 512,869 512,869 Contract assets, net of current portion and allowance 24,661 22,103 Other long-term assets 1,966 2,307 Total assets $ 1,343,696 $ 1,385,045 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 44,274 $ 60,665 Convertible notes, current portion 10,871 - Deferred revenues, current portion 95,816 98,692 Lease liabilities, current portion 9,330 9,001 Total current liabilities 160,291 168,358 Convertible notes, net of current portion 656,469 551,598 Deferred revenues, net of current portion 24,327 29,168 Lease liabilities, net of current portion 56,646 61,374 Other long-term liabilities 5,024 4,251 Total liabilities 902,757 814,749 Stockholders' equity: Common stock 6 6 Additional paid-in capital 943,607 1,064,358 Accumulated other comprehensive loss (2,566 ) (135 ) Accumulated deficit (500,108 ) (493,933 ) Total stockholders' equity 440,939 570,296 Total liabilities and stockholders' equity $ 1,343,696 $ 1,385,045 Q2 Holdings, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenues (1) $ 140,309 $ 123,573 $ 274,380 $ 240,093 Cost of revenues (2) 77,421 68,233 151,093 131,552 Gross profit 62,888 55,340 123,287 108,541 Operating expenses: Sales and marketing 26,477 20,587 51,743 40,403 Research and development 31,832 29,429 62,963 56,224 General and administrative 23,285 18,704 43,853 37,538 Acquisition related costs 527 1,188 530 2,038 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges (3) 129 812 537 812 Total operating expenses 86,672 75,283 168,470 145,997 Loss from operations (23,784 ) (19,943 ) (45,183 ) (37,456 ) Total other income (expense), net (1,098 ) (10,006 ) (1,894 ) (18,013 ) Loss before income taxes (24,882 ) (29,949 ) (47,077 ) (55,469 ) Provision for income taxes (340 ) (178 ) (1,704 ) (313 ) Net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Other comprehensive gain (loss): Unrealized gain (loss) on available-for-sale investments (544 ) (14 ) (1,617 ) 5 Foreign currency translation adjustment (724 ) (37 ) (814 ) (35 ) Comprehensive loss $ (26,490 ) $ (30,178 ) $ (51,212 ) $ (55,812 ) Net loss per common share: Net loss per common share, basic and diluted $ (0.44 ) $ (0.53 ) $ (0.85 ) $ (0.99 ) Weighted average common shares outstanding, basic and diluted 57,234 56,360 57,125 56,081 (1) Includes deferred revenue reduction from purchase accounting of $0.2 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $0.4 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively. (2) Includes amortization of acquired technology of $5.6 million for each of the three months ended June 30, 2022 and 2021, and $11.2 million and $10.8 million for the six months ended June 30, 2022 and 2021, respectively. (3) Unoccupied lease charges include costs related to the early vacating of various facilities, partially offset by anticipated sublease income from these facilities. For the three and six months ended June 30, 2022, the charges related to an updated assessment of facilities in Texas, North Carolina and Georgia, and for the three and six months ended June 30, 2021, the charges related to an updated assessment of facilities in Georgia and Texas. Q2 Holdings, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ (48,781 ) $ (55,782 ) Adjustments to reconcile net loss to net cash from operating activities: Amortization of deferred implementation, solution and other costs 11,091 11,614 Depreciation and amortization 29,946 26,498 Amortization of debt issuance costs 1,367 1,045 Amortization of debt discount - 13,054 Amortization of premiums on investments 577 458 Stock-based compensation expense 33,425 27,392 Deferred income taxes 857 72 Loss on extinguishment of debt - 1,513 Other non-cash charges 883 1,221 Changes in operating assets and liabilities (43,760 ) (21,076 ) Net cash provided by (used in) operating activities (14,395 ) 6,009 Cash flows from investing activities: Net maturities (purchases) of investments (85,555 ) 37,558 Purchases of property and equipment (5,097 ) (14,379 ) Business combinations, net of cash acquired - (64,652 ) Capitalized software development costs (9,485 ) (2,307 ) Net cash used in investing activities (100,137 ) (43,780 ) Cash flows from financing activities: Payments for repurchases of convertible notes - (63,692 ) Proceeds from bond hedges related to convertible notes - 26,295 Payments for warrants related to convertible notes - (19,655 ) Proceeds from exercise of stock options and ESPP 2,803 4,565 Net cash provided by (used in) financing activities 2,803 (52,487 ) Net decrease in cash, cash equivalents, and restricted cash (111,729 ) (90,258 ) Cash, cash equivalents, and restricted cash, beginning of period 325,821 411,185 Cash, cash equivalents, and restricted cash, end of period $ 214,092 $ 320,927 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 GAAP revenue $ 140,309 $ 123,573 $ 274,380 $ 240,093 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP revenue $ 140,478 $ 124,168 $ 274,791 $ 241,216 GAAP gross profit $ 62,888 $ 55,340 $ 123,287 $ 108,541 Stock-based compensation 3,335 2,763 6,074 5,298 Amortization of acquired technology 5,603 5,604 11,207 10,761 Acquisition related costs - 106 - 222 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP gross margin: Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP revenue 140,478 124,168 274,791 241,216 Non-GAAP gross margin 51.3 % 51.9 % 51.3 % 52.2 % GAAP sales and marketing expense $ 26,477 $ 20,587 $ 51,743 $ 40,403 Stock-based compensation (4,012 ) (2,930 ) (7,338 ) (5,467 ) Non-GAAP sales and marketing expense $ 22,465 $ 17,657 $ 44,405 $ 34,936 GAAP research and development expense $ 31,832 $ 29,429 $ 62,963 $ 56,224 Stock-based compensation (3,850 ) (3,506 ) (6,702 ) (6,651 ) Non-GAAP research and development expense $ 27,982 $ 25,923 $ 56,261 $ 49,573 GAAP general and administrative expense $ 23,285 $ 18,704 $ 43,853 $ 37,538 Stock-based compensation (6,320 ) (4,428 ) (11,422 ) (9,306 ) Non-GAAP general and administrative expense $ 16,965 $ 14,276 $ 32,431 $ 28,232 GAAP operating loss $ (23,784 ) $ (19,943 ) $ (45,183 ) $ (37,456 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Non-GAAP operating income $ 4,583 $ 6,552 $ 7,882 $ 13,204 GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Loss on extinguishment of debt - 1,513 - 1,513 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Amortization of debt discount and issuance costs 691 7,093 1,367 14,099 Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Reconciliation from diluted weighted-average number of common sharesas reported to Non-GAAP diluted weighted-average number of common shares Diluted weighted-average number of common shares, as reported 57,234 56,360 57,125 56,081 Non-GAAP weighted-average effect of potentially dilutive shares 285 1,025 386 1,365 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Calculation of non-GAAP income per share: Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Non-GAAP net income per share $ 0.07 $ 0.09 $ 0.10 $ 0.18 Reconciliation of GAAP net loss to adjusted EBITDA: GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Depreciation and amortization 15,027 13,586 29,946 26,498 Stock-based compensation 17,517 13,627 31,536 26,722 Provision for income taxes 340 178 1,704 313 Interest and other (income) expense, net 1,176 8,388 1,838 16,295 Acquisition related costs 527 1,294 530 2,260 Unoccupied lease charges 129 812 537 812 Loss on extinguishment of debt - 1,513 - 1,513 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Adjusted EBITDA $ 9,663 $ 9,866 $ 17,721 $ 19,754 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Revenue Outlook (in thousands) Q3 2022 Outlook Full Year 2022 Outlook Low High Low High GAAP revenue $ 145,658 $ 147,658 $ 576,818 $ 580,818 Deferred revenue reduction from purchase accounting 142 142 682 682 Non-GAAP revenue $ 145,800 $ 147,800 $ 577,500 $ 581,500 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005714/en/Contacts 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
Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for banking and lending, today announced results for its second quarter ending June 30, 2022. GAAP Results for the Second Quarter 2022 Revenue for the second quarter of $140.3 million, up 14 percent year-over-year and up 5 percent from the first quarter of 2022. GAAP gross margin for the second quarter of 44.8 percent, consistent with the prior-year quarter and down from 45.1 percent in the first quarter of 2022. GAAP net loss for the second quarter of $25.2 million, compared to GAAP net losses of $30.1 million for the prior-year quarter and $23.6 million for the first quarter of 2022. Non-GAAP Results for the Second Quarter 2022 Non-GAAP revenue for the second quarter of $140.5 million, up 13 percent year-over-year and up 5 percent from the first quarter of 2022. Non-GAAP gross margin for the second quarter of 51.3 percent, down from 51.9 percent for the prior-year quarter and 51.4 percent for the first quarter of 2022. Adjusted EBITDA for the second quarter of $9.7 million, down from $9.9 million for the prior-year quarter and up from $8.1 million for the first quarter of 2022. For a reconciliation of our GAAP to non-GAAP results, please see the tables below. “We are pleased with our performance to close out the first half of the year,” said Q2 CEO Matt Flake. “We had several key wins across all of our lines of business, highlighted by some of our largest digital banking and lending deals in company history. We also saw continued momentum with our Emerging Businesses, including the announcement of a new marquee partnership for Q2 Innovation Studio and increasing adoption of the ecosystem, as well as new wins for our Helix business.” Second Quarter Highlights Partnering with Strategic Customers, Digitizing the Entire Bank Signed a digital-only bank for a broad set of solutions led by retail digital banking, which represents one of our ten largest digital banking deals in company history. Signed a Tier 1 bank to a digital banking contract to utilize our small business and commercial digital banking solutions. Signed a Tier 1 bank in Australia to a digital lending contract to utilize our loan origination solutions, which represents the largest loan origination deal in company history. Exited the second quarter with more than 20.2 million registered users on the Q2 digital banking platform, representing 7 percent year-over-year growth and 3 percent sequential growth. Facilitating the Convergence of Financial Services Signed a large lending company to a contract to utilize our Helix platform. Signed a bank to a contract to launch a digital-only brand, utilizing our Helix platform. Signed numerous Q2 Innovation Studio fintech partners including Rocket Mortgage, the single largest mortgage provider in the country. “Through operational execution during the second quarter, we delivered revenue towards the high end of our guidance range and Adjusted EBITDA which exceeded the high end of our guidance range,” said David Mehok, Q2 CFO. “We are reiterating our full year guidance, although we are closely monitoring the uncertain economic backdrop. Going into the second half of the year, we will be focusing on continued business execution and prudent cost management while investing in areas of our business that we believe will drive long-term value.” Financial outlook As of August 3, 2022, Q2 Holdings is providing guidance for its third quarter of 2022 and full-year 2022, 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, acquisition related costs, interest and other (income) expense, income taxes, unoccupied lease charges, loss 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 foregoing forward-looking adjusted EBITDA guidance to GAAP net loss. However, it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Q2 Holdings is providing guidance for its third quarter of 2022 as follows: Total non-GAAP revenue of $145.8 million to $147.8 million, which would represent year-over-year growth of 15 to 16 percent. Adjusted EBITDA of $6.2 million to $8.2 million, representing 4 to 6 percent of non-GAAP revenue for the quarter. Q2 Holdings is providing guidance for the full-year 2022 as follows: Total non-GAAP revenue of $577.5 million to $581.5 million, which would represent year-over-year growth of 15 percent to 16 percent. Adjusted EBITDA of $41.4 million to $44.4 million, representing 7 to 8 percent of non-GAAP revenue for the year. Conference Call Details Date: Thursday, August 4, 2022 Time: 8:30 a.m. EDT Hosts: Matt Flake, CEO / David Mehok, CFO / Jonathan Price, EVP Emerging Businesses, Corporate & Business Development Conference Call Registration: https://conferencingportals.com/event/ZwJrtqJb Webcast Registration: https://events.q4inc.com/attendee/238357577 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. About Q2 Holdings, Inc. Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com. Use of Non-GAAP Measures Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; 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); non-GAAP net income; non-GAAP net income per share; and non-GAAP diluted weighted-average number of common shares outstanding. 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, acquisition related costs, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting. 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, acquisition related costs, 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), non-GAAP net income (loss), and non-GAAP net income (loss) per share, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition related costs, amortization of acquired technology, amortization of acquired intangibles, unoccupied lease charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting, and with respect to non-GAAP net income, amortization of debt discount and issuance costs and loss on extinguishment of debt. In the case of non-GAAP diluted weighted-average number of common shares outstanding, Q2 adjusts diluted weighted-average number of common shares outstanding by the weighted-average effect of potentially dilutive shares which include (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense and (ii) convertible senior notes outstanding and related warrants including the anti-dilutive impact of note hedge and capped call agreements on convertible senior notes outstanding. 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 expectations regarding momentum with our Emerging Businesses, including increasing adoption of the Q2 Innovation Studio ecosystem; our areas of focus for the second half of 2022; the current uncertain and challenging economic conditions and the impact such conditions may have on Q2’s business and performance in the second half of 2022 and beyond; and, Q2’s quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon Q2’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 of increased or new competition in our existing markets and as we enter new markets or new sections of existing markets, or as we offer new solutions; (b) risks associated with the development of and changes to the market for our solutions compared to our expectations; (c) quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts; (d) the risks associated with anticipated higher operating expenses in 2022 and beyond; (e) the impact that inflation, rising interest rates or a slowdown in the economy, financial markets and credit markets may have on End User usage of our solutions and on our customers’, prospects and our business sales cycles, our prospects’ and customers’ spending decisions, including for discretionary aspects of our solutions, and timing of implementation decisions; (f) the risks and increased costs associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth, particularly in light of the macroeconomic impacts of the novel coronavirus disease, or COVID-19, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (g) the risk that the COVID-19 pandemic and the associated efforts to limit its spread continue to negatively impact or disrupt the markets for our solutions and that the markets for our solutions do not return to normal or grow as anticipated; (h) risks associated with the general economic and geopolitical impacts of Russia’s invasion of Ukraine, including the heightened risk of cyber-attacks on financial services and other critical infrastructure, and continued or increased inflation caused by increased energy costs or other unpredictable economic impacts that may negatively affect demand for our solutions; (i) 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; (j) the risk that errors, interruptions or delays in our solutions or Web hosting negatively impacts our business and sales; (k) risks associated with cyberattacks, 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; (l) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by our customers and relevant governmental authorities; (m) risks associated with our sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of our sales cycle; (n) the risks inherent in third-party technology and implementation partnerships that could cause harm to our business; (o) the risk that we will not be able to maintain historical contract terms such as pricing and duration; (p) the general risks associated with the complexity of our customer arrangements and our solutions; (q) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (r) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (s) the risks associated with further consolidation in the financial services industry; (t) risks associated with selling our solutions internationally and with our international operations; and (u) the risk that our debt repayment obligations may adversely affect our financial condition and cash flows from operations in the future 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) June 30, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 211,127 $ 322,848 Restricted cash 2,965 2,973 Investments 188,222 104,878 Accounts receivable, net 46,065 46,979 Contract assets, current portion, net 3,217 1,845 Prepaid expenses and other current assets 13,744 10,531 Deferred solution and other costs, current portion 23,551 25,076 Deferred implementation costs, current portion 7,316 7,320 Total current assets 496,207 522,450 Property and equipment, net 62,572 66,608 Right of use assets 48,735 52,278 Deferred solution and other costs, net of current portion 27,568 26,930 Deferred implementation costs, net of current portion 18,221 17,039 Intangible assets, net 150,897 162,461 Goodwill 512,869 512,869 Contract assets, net of current portion and allowance 24,661 22,103 Other long-term assets 1,966 2,307 Total assets $ 1,343,696 $ 1,385,045 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 44,274 $ 60,665 Convertible notes, current portion 10,871 - Deferred revenues, current portion 95,816 98,692 Lease liabilities, current portion 9,330 9,001 Total current liabilities 160,291 168,358 Convertible notes, net of current portion 656,469 551,598 Deferred revenues, net of current portion 24,327 29,168 Lease liabilities, net of current portion 56,646 61,374 Other long-term liabilities 5,024 4,251 Total liabilities 902,757 814,749 Stockholders' equity: Common stock 6 6 Additional paid-in capital 943,607 1,064,358 Accumulated other comprehensive loss (2,566 ) (135 ) Accumulated deficit (500,108 ) (493,933 ) Total stockholders' equity 440,939 570,296 Total liabilities and stockholders' equity $ 1,343,696 $ 1,385,045 Q2 Holdings, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenues (1) $ 140,309 $ 123,573 $ 274,380 $ 240,093 Cost of revenues (2) 77,421 68,233 151,093 131,552 Gross profit 62,888 55,340 123,287 108,541 Operating expenses: Sales and marketing 26,477 20,587 51,743 40,403 Research and development 31,832 29,429 62,963 56,224 General and administrative 23,285 18,704 43,853 37,538 Acquisition related costs 527 1,188 530 2,038 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges (3) 129 812 537 812 Total operating expenses 86,672 75,283 168,470 145,997 Loss from operations (23,784 ) (19,943 ) (45,183 ) (37,456 ) Total other income (expense), net (1,098 ) (10,006 ) (1,894 ) (18,013 ) Loss before income taxes (24,882 ) (29,949 ) (47,077 ) (55,469 ) Provision for income taxes (340 ) (178 ) (1,704 ) (313 ) Net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Other comprehensive gain (loss): Unrealized gain (loss) on available-for-sale investments (544 ) (14 ) (1,617 ) 5 Foreign currency translation adjustment (724 ) (37 ) (814 ) (35 ) Comprehensive loss $ (26,490 ) $ (30,178 ) $ (51,212 ) $ (55,812 ) Net loss per common share: Net loss per common share, basic and diluted $ (0.44 ) $ (0.53 ) $ (0.85 ) $ (0.99 ) Weighted average common shares outstanding, basic and diluted 57,234 56,360 57,125 56,081 (1) Includes deferred revenue reduction from purchase accounting of $0.2 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $0.4 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively. (2) Includes amortization of acquired technology of $5.6 million for each of the three months ended June 30, 2022 and 2021, and $11.2 million and $10.8 million for the six months ended June 30, 2022 and 2021, respectively. (3) Unoccupied lease charges include costs related to the early vacating of various facilities, partially offset by anticipated sublease income from these facilities. For the three and six months ended June 30, 2022, the charges related to an updated assessment of facilities in Texas, North Carolina and Georgia, and for the three and six months ended June 30, 2021, the charges related to an updated assessment of facilities in Georgia and Texas. Q2 Holdings, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ (48,781 ) $ (55,782 ) Adjustments to reconcile net loss to net cash from operating activities: Amortization of deferred implementation, solution and other costs 11,091 11,614 Depreciation and amortization 29,946 26,498 Amortization of debt issuance costs 1,367 1,045 Amortization of debt discount - 13,054 Amortization of premiums on investments 577 458 Stock-based compensation expense 33,425 27,392 Deferred income taxes 857 72 Loss on extinguishment of debt - 1,513 Other non-cash charges 883 1,221 Changes in operating assets and liabilities (43,760 ) (21,076 ) Net cash provided by (used in) operating activities (14,395 ) 6,009 Cash flows from investing activities: Net maturities (purchases) of investments (85,555 ) 37,558 Purchases of property and equipment (5,097 ) (14,379 ) Business combinations, net of cash acquired - (64,652 ) Capitalized software development costs (9,485 ) (2,307 ) Net cash used in investing activities (100,137 ) (43,780 ) Cash flows from financing activities: Payments for repurchases of convertible notes - (63,692 ) Proceeds from bond hedges related to convertible notes - 26,295 Payments for warrants related to convertible notes - (19,655 ) Proceeds from exercise of stock options and ESPP 2,803 4,565 Net cash provided by (used in) financing activities 2,803 (52,487 ) Net decrease in cash, cash equivalents, and restricted cash (111,729 ) (90,258 ) Cash, cash equivalents, and restricted cash, beginning of period 325,821 411,185 Cash, cash equivalents, and restricted cash, end of period $ 214,092 $ 320,927 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 GAAP revenue $ 140,309 $ 123,573 $ 274,380 $ 240,093 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP revenue $ 140,478 $ 124,168 $ 274,791 $ 241,216 GAAP gross profit $ 62,888 $ 55,340 $ 123,287 $ 108,541 Stock-based compensation 3,335 2,763 6,074 5,298 Amortization of acquired technology 5,603 5,604 11,207 10,761 Acquisition related costs - 106 - 222 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP gross margin: Non-GAAP gross profit $ 71,995 $ 64,408 $ 140,979 $ 125,945 Non-GAAP revenue 140,478 124,168 274,791 241,216 Non-GAAP gross margin 51.3 % 51.9 % 51.3 % 52.2 % GAAP sales and marketing expense $ 26,477 $ 20,587 $ 51,743 $ 40,403 Stock-based compensation (4,012 ) (2,930 ) (7,338 ) (5,467 ) Non-GAAP sales and marketing expense $ 22,465 $ 17,657 $ 44,405 $ 34,936 GAAP research and development expense $ 31,832 $ 29,429 $ 62,963 $ 56,224 Stock-based compensation (3,850 ) (3,506 ) (6,702 ) (6,651 ) Non-GAAP research and development expense $ 27,982 $ 25,923 $ 56,261 $ 49,573 GAAP general and administrative expense $ 23,285 $ 18,704 $ 43,853 $ 37,538 Stock-based compensation (6,320 ) (4,428 ) (11,422 ) (9,306 ) Non-GAAP general and administrative expense $ 16,965 $ 14,276 $ 32,431 $ 28,232 GAAP operating loss $ (23,784 ) $ (19,943 ) $ (45,183 ) $ (37,456 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Non-GAAP operating income $ 4,583 $ 6,552 $ 7,882 $ 13,204 GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Deferred revenue reduction from purchase accounting 169 595 411 1,123 Loss on extinguishment of debt - 1,513 - 1,513 Stock-based compensation 17,517 13,627 31,536 26,722 Acquisition related costs 527 1,294 530 2,260 Amortization of acquired technology 5,603 5,604 11,207 10,761 Amortization of acquired intangibles 4,422 4,563 8,844 8,982 Unoccupied lease charges 129 812 537 812 Amortization of debt discount and issuance costs 691 7,093 1,367 14,099 Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Reconciliation from diluted weighted-average number of common sharesas reported to Non-GAAP diluted weighted-average number of common shares Diluted weighted-average number of common shares, as reported 57,234 56,360 57,125 56,081 Non-GAAP weighted-average effect of potentially dilutive shares 285 1,025 386 1,365 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Calculation of non-GAAP income per share: Non-GAAP net income $ 3,836 $ 4,974 $ 5,651 $ 10,490 Non-GAAP diluted weighted-average number of common shares 57,519 57,385 57,511 57,446 Non-GAAP net income per share $ 0.07 $ 0.09 $ 0.10 $ 0.18 Reconciliation of GAAP net loss to adjusted EBITDA: GAAP net loss $ (25,222 ) $ (30,127 ) $ (48,781 ) $ (55,782 ) Depreciation and amortization 15,027 13,586 29,946 26,498 Stock-based compensation 17,517 13,627 31,536 26,722 Provision for income taxes 340 178 1,704 313 Interest and other (income) expense, net 1,176 8,388 1,838 16,295 Acquisition related costs 527 1,294 530 2,260 Unoccupied lease charges 129 812 537 812 Loss on extinguishment of debt - 1,513 - 1,513 Deferred revenue reduction from purchase accounting 169 595 411 1,123 Adjusted EBITDA $ 9,663 $ 9,866 $ 17,721 $ 19,754 Q2 Holdings, Inc. Reconciliation of GAAP to Non-GAAP Revenue Outlook (in thousands) Q3 2022 Outlook Full Year 2022 Outlook Low High Low High GAAP revenue $ 145,658 $ 147,658 $ 576,818 $ 580,818 Deferred revenue reduction from purchase accounting 142 142 682 682 Non-GAAP revenue $ 145,800 $ 147,800 $ 577,500 $ 581,500 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005714/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