Total second quarter revenue of $47.6 million,
up 32 percent year-over-year
Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of secure,
cloud-based digital banking solutions for community-focused
financial institutions, today announced results for its second
quarter ending June 30, 2017.
Second Quarter 2017 Results
- Revenue for the second quarter of $47.6
million, up 32 percent year-over-year and up 7 percent
sequentially.
- GAAP gross margin for the second
quarter of 48.9 percent, up from 47.6 percent one year ago.
Non-GAAP gross margin for the second quarter of 52.6 percent, up
from 51.1 percent one year ago.
- GAAP net loss for the second quarter of
$7.8 million, which compares to a GAAP net loss of $9.7 million for
the second quarter of 2016. Adjusted EBITDA for the second quarter
of positive $1.4 million, an improvement from negative $2.3 million
one year ago.
“We executed well across the organization in the second
quarter,” said Matt Flake, CEO of Q2. “I was particularly pleased
with the uptick in bank activity in the quarter and continued
strength across credit unions. I am encouraged by our Tier 1
pipeline and optimistic that we should convert multiple
opportunities in the second half of 2017.”
Second Quarter 2017 Highlights
- Exited the second quarter with
approximately 9.6 million registered users on the Q2 Platform,
representing 7 percent sequential and 25 percent year-over-year
growth.
- Launched Q2 Open with early adopter
Qapital, a leading, mobile-first fintech company whose personal
finance app has more than 300,000 active users.
- Received the NAFCU Services Innovation
Award for Q2 SMART. The NAFCU Services annual Innovation Awards are
the credit union industry’s most recognized awards competition for
groundbreaking solutions.
Financial Outlook
Q2 Holdings is providing guidance for its third quarter 2017 as
follows:
- Total revenue of $49.8 to $50.2
million, which would represent year-over-year growth of 30 percent
to 31 percent.
- Adjusted EBITDA of positive $2.2
million to $2.6 million. GAAP net loss is the most comparable GAAP
measure to adjusted EBITDA. Adjusted EBITDA differs from GAAP net
loss in that it excludes depreciation and amortization, stock based
compensation, acquisition-related costs, interest, and income
taxes. 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.
Q2 Holdings is providing guidance for the full-year 2017 as
follows:
- Total revenue of $193.8 to $195.0
million, which would represent year-over-year growth of 29 percent
to 30 percent.
- Adjusted EBITDA of positive $7.8
million to $8.8 million. Adjusted EBITDA differs from GAAP net loss
in that it excludes depreciation and amortization, stock based
compensation, acquisition-related costs, interest, and income
taxes. 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.
Conference Call Details
Date:
Aug. 3, 2017
Time:
8:30 a.m. EDT
Hosts:
Matt Flake, CEO / Jennifer Harris, CFO
Dial in:
US toll free: 1-877-201-0168
International: 1-647-788-4901
Conference ID:
51913770
Please join the conference call at least 10 minutes before start
time to ensure the line is connected. A live webcast of the
conference call will be accessible from the investor services
section of the Q2 Holdings, Inc. website at
http://investors.q2ebanking.com/.
A replay of the webcast will also be available at this website
on a temporary basis shortly after the call.
About Q2 Holdings, Inc.
Q2 Holdings, Inc. (Q2) is a leading provider of secure,
cloud-based digital banking solutions headquartered in Austin,
Texas. Q2 is driven by a culture of partnership and dedication
to empowering community-focused banks and credit unions with
digital banking solutions that help them stand apart, scale
smart and grow beyond with retail and commercial
account holders. Q2’s solutions are designed to deliver a
compelling, secure and consistent user experience on any
device and enable customers to improve account holder retention and
to create incremental sales opportunities. To learn more about
Q2, visit www.q2ebanking.com.
Use of Non-GAAP Measures
Q2 uses the following non-GAAP financial measures: 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 loss; and, non-GAAP net loss. 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 adjusted EBITDA, Q2 adjusts net loss for such
things as interest, taxes, depreciation and amortization,
stock-based compensation, acquisition-related costs, amortization
of technology and intangibles, and unoccupied lease charges. In the
case of non-GAAP gross margin and non-GAAP gross profit, Q2 adjusts
gross profit and gross margin for stock-based compensation and
amortization of acquired technology. 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. In
the case of non-GAAP operating loss and non-GAAP net loss, Q2
adjusts operating loss and net loss, respectively, for stock-based
compensation, acquisition related-costs, amortization of acquired
technology, amortization of acquired intangibles, and unoccupied
lease charges.
These non-GAAP measures 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 positive sales momentum, increased
purchasing activity among credit unions and banks, optimism about
our Tier 1 pipeline, 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 competition in its existing markets and as it enters new
sections of the market with Tier 1 customers and new products and
services; (b) the risk that the market for Q2’s solutions does not
grow as anticipated, in particular with respect to Tier 1
customers; (c) the risk that Q2’s increased focus on selling to
larger Tier 1 customers may result in greater uncertainty and
variability in Q2’s business and sales results; (d) the risk that
changes in Q2’s market, business or sales organization negatively
impacts its ability to sell its products and services; (e) the
challenges and costs associated with selling, implementing and
supporting Q2’s solutions, particularly for larger customers with
more complex requirements and longer implementation processes; (f)
the risk that errors, interruptions or delays in Q2’s products or
services or Web hosting negatively impacts Q2’s business and sales;
(g) risks associated with data breaches and breaches of security
measures within Q2’s products, systems and infrastructure and the
resultant harm to Q2’s business and its ability to sell its
products and services; (h) the impact that a slowdown in the
economy, financial markets, and credit markets has on Q2’s
customers and Q2’s business sales cycles, prospects and customers’
spending decisions and timing of implementation decisions,
particularly in regions where a significant number of Q2’s
customers are concentrated; (i) the difficulties and risks
associated with developing and selling complex new solutions and
enhancements with the technical and regulatory specifications and
functionality required by customers and governmental authorities;
(j) the risks inherent in technology and implementation
partnerships that could cause harm to Q2’s business; (k) the
difficulties and costs Q2 may encounter with complex
implementations of its solutions and the resulting impact on
reputation and the timing of its revenue from any delayed
implementations; (l) the risk that Q2 will not be able to maintain
historical contract terms such as pricing and duration; (m) the
risks associated with managing growth and the challenges associated
with improving operations and hiring, retaining and motivating
employees to support such growth; (n) the risk that modifications
or negotiations of contractual arrangements will be necessary
during Q2’s implementations of its solutions or the general risks
associated with the complexity of Q2’s customer arrangements; (o)
the risks associated with integrating acquired companies and
successfully selling and maintaining their solutions; (p)
litigation related to intellectual property and other matters and
any related claims, negotiations and settlements; and (q) the risks
associated with further consolidation in the financial services
industry.
Additional information relating to the uncertainty affecting the
Q2 business are contained in Q2’s filings with the Securities and
Exchange Commission. These documents are available on the SEC
Filings section of the Investor Services section of Q2’s website at
http://investors.q2ebanking.com/. These forward-looking statements
represent Q2’s expectations as of the date of this press release.
Subsequent events may cause these expectations to change, and Q2
disclaims any obligations to update or alter these forward-looking
statements in the future, whether as a result of new information,
future events or otherwise.
Q2 Holdings, Inc. Condensed Consolidated
Balance Sheets (in thousands)
June 30,
December 31, 2017 2016
(unaudited) (unaudited) Assets Current assets: Cash and cash
equivalents $ 34,471 $ 54,873 Restricted cash 2,915 1,315
Investments 44,185 42,249 Accounts receivable, net 15,012 12,240
Prepaid expenses and other current assets 4,074 3,215 Deferred
solution and other costs, current portion 8,182 8,839 Deferred
implementation costs, current portion 3,400
2,938 Total current assets 112,239 125,669 Property and
equipment, net 31,565 27,480 Deferred solution and other costs, net
of current portion 13,213 11,125 Deferred implementation costs, net
of current portion 8,276 8,096 Intangible assets, net 14,718 15,208
Goodwill 12,876 12,876 Other long-term assets 513
526 Total assets $ 193,400 $ 200,980
Liabilities and stockholders' equity Current liabilities:
Accounts payable and accrued liabilities $ 19,900 $ 29,088 Deferred
revenues, current portion 32,057 30,123
Total current liabilities 51,957 59,211 Deferred revenues, net of
current portion 30,500 31,707 Deferred rent, net of current portion
10,010 9,466 Other long-term liabilities 586
361 Total liabilities 93,053 100,745 Stockholders' equity:
Common stock 4 4 Treasury stock (597 ) (417 ) Additional paid-in
capital 241,835 226,485 Accumulated other comprehensive loss (84 )
(54 ) Accumulated deficit (140,811 ) (125,783 ) Total
stockholders' equity 100,347 100,235
Total liabilities and stockholders' equity $ 193,400 $
200,980
Q2 Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss (in
thousands, except per share data)
Three Months Ended June
30, Six Months Ended June 30, 2017
2016 2017
2016 (unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 47,625 $ 36,005 $ 92,159 $ 69,764 Cost of
revenues (1) (2) 24,328 18,870
47,100 36,684 Gross profit 23,297 17,135
45,059 33,080 Operating expenses: Sales and marketing (1)
11,096 9,611 20,974 17,818 Research and development (1) 9,922 7,830
19,573 15,733 General and administrative (1) 9,268 7,437 17,720
14,858 Acquisition related costs 351 1,476 699 2,958 Amortization
of acquired intangibles 373 368 744 736 Unoccupied lease charges
- 33 - 33
Total operating expenses 31,010 26,755
59,710 52,136 Loss from operations
(7,713 ) (9,620 ) (14,651 ) (19,056 ) Other income (expense), net
109 (85 ) 143 (71 ) Loss
before income taxes (7,604 ) (9,705 ) (14,508 ) (19,127 ) Provision
for income taxes (217 ) (3 ) (353 )
(233 ) Net loss $ (7,821 ) $ (9,708 ) $ (14,861 ) $ (19,360 ) Other
comprehensive loss Unrealized gain (loss) on available-for-sale
investments (29 ) 16 (30 ) 105
Comprehensive loss $ (7,850 ) $ (9,692 ) $ (14,891 ) $
(19,255 ) Net loss per common share: Net loss per common share,
basic and diluted $ (0.19 ) $ (0.25 ) $ (0.36 ) $ (0.49 ) Weighted
average common shares outstanding, basic and diluted 41,064
39,434 40,848 39,229
(1)
Includes stock-based compensation expenses
as follows:
Three Months Ended June 30, Six Months Ended June 30,
2017 2016
2017 2016 Cost of revenues $ 819
$ 455 $ 1,543 $ 861 Sales and marketing 812 492 1,443 927 Research
and development 1,033 652 1,978 1,284 General and administrative
2,358 1,258 4,255
2,390 Total stock-based compensation expenses $ 5,022
$ 2,857 $ 9,219 $ 5,462 (2) Includes
amortization of acquired technology of $0.9 million and $0.8
million for the three months ended June 30, 2017 and 2016,
respectively, and $1.8 million and $1.6 million for the six months
ended June 30, 2017 and 2016, respectively.
Q2 Holdings,
Inc. Condensed Consolidated Statements of Cash Flows (in
thousands)
Six Months Ended June 30,
2017 2016 (unaudited)
(unaudited) Cash flows from operating activities: Net loss $
(14,861 ) $ (19,360 ) Adjustments to reconcile net loss to net cash
used in operating activities: Amortization of deferred
implementation, solution and other costs 3,514 3,192 Depreciation
and amortization 7,227 5,871 Amortization of debt issuance costs 28
48 Amortization of premiums on investments 151 221 Stock-based
compensation expenses 9,219 5,462 Deferred income taxes 234 139
Other non-cash charges 38 178 Changes in operating assets and
liabilities (15,810 ) 1,860 Cash used in
operating activities (10,260 ) (2,389 ) Cash flows from investing
activities: Net redemptions (purchases) of investments (2,119 ) 341
Purchases of property and equipment (7,625 ) (8,745 ) Business
combinations and asset acquisitions, net of cash acquired (3,816 )
(95 ) Capitalization of software development costs (762 ) (1,190 )
Purchases of intangible assets - (138 ) Increase in restricted cash
(1,600 ) - Cash used in investing activities
(15,922 ) (9,827 ) Cash flows from financing activities: Payments
on financing obligations and capital leases, net - (5,051 )
Proceeds from issuance of common stock 5,780
2,744 Net cash provided by (used in) financing activities
5,780 (2,307 ) Net decrease in cash and cash
equivalents (20,402 ) (14,523 ) Cash and cash equivalents,
beginning of period 54,873 67,049 Cash
and cash equivalents, end of period $ 34,471 $ 52,526
Q2 Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Measures (in thousands)
Three Months Ended June 30, Six Months Ended June
30, 2017 2016
2017 2016 (unaudited)
(unaudited) (unaudited) (unaudited) GAAP gross profit $ 23,297 $
17,135 $ 45,059 $ 33,080 Stock-based compensation 819 455 1,543 861
Amortization of acquired technology 912 797
1,798 1,595 Non-GAAP gross
profit $ 25,028 $ 18,387 $ 48,400 $ 35,536
Non-GAAP gross margin: Non-GAAP gross profit $ 25,028
$ 18,387 $ 48,400 $ 35,536 GAAP revenue 47,625
36,005 92,159 69,764 Non-GAAP
gross margin 52.6 % 51.1 % 52.5 % 50.9
% GAAP sales and marketing expense $ 11,096 $ 9,611 $ 20,974
$ 17,818 Stock-based compensation (812 ) (492 )
(1,443 ) (927 ) Non-GAAP sales and marketing expense
$ 10,284 $ 9,119 $ 19,531 $ 16,891
GAAP research and development expense $ 9,922 $ 7,830 $
19,573 $ 15,733 Stock-based compensation (1,033 )
(652 ) (1,978 ) (1,284 ) Non-GAAP research and
development expense $ 8,889 $ 7,178 $ 17,595 $
14,449 GAAP general and administrative expense $
9,268 $ 7,437 $ 17,720 $ 14,858 Stock-based compensation
(2,358 ) (1,258 ) (4,255 ) (2,390 ) Non-GAAP
general and administrative expense $ 6,910 $ 6,179 $
13,465 $ 12,468 GAAP operating loss $ (7,713 )
$ (9,620 ) $ (14,651 ) $ (19,056 ) Stock-based compensation 5,022
2,857 9,219 5,462 Acquisition related costs 351 1,476 699 2,958
Amortization of acquired technology 912 797 1,798 1,595
Amortization of acquired intangibles 373 368 744 736 Unoccupied
lease charges - 33 -
33 Non-GAAP operating loss $ (1,055 ) $ (4,089 ) $
(2,191 ) $ (8,272 ) GAAP net loss $ (7,821 ) $ (9,708 ) $
(14,861 ) $ (19,360 ) Stock-based compensation 5,022 2,857 9,219
5,462 Acquisition related costs 351 1,476 699 2,958 Amortization of
acquired technology 912 797 1,798 1,595 Amortization of acquired
intangibles 373 368 744 736 Unoccupied lease charges -
33 - 33 Non-GAAP
net loss $ (1,163 ) $ (4,177 ) $ (2,401 ) $ (8,576 )
Reconciliation of GAAP net loss to adjusted EBITDA: GAAP net loss $
(7,821 ) $ (9,708 ) $ (14,861 ) $ (19,360 ) Depreciation and
amortization 3,702 2,944 7,227 5,871 Stock-based compensation 5,022
2,857 9,219 5,462 Provision for income taxes 217 3 353 233 Interest
(income) expense, net (109 ) 85 (143 ) 71
Acquisition related costs
351 1,476 699 2,958 Unoccupied lease charges -
33 - 33 Adjusted EBITDA $ 1,362
$ (2,310 ) $ 2,494 $ (4,732 )
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version on businesswire.com: http://www.businesswire.com/news/home/20170802006022/en/
Media Contact:Red Fan CommunicationsEmma Chase,
512-551-9253C:
512-917-4319emma@redfancommunications.comorInvestor
Contact:Q2 Holdings, Inc.Bob Gujavarty,
512-439-3447bobby.gujavarty@q2ebanking.com
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