Total fourth quarter revenue of $51.7 million,
up 23 percent year-over-year, and full-year revenue of $194.0
million, up 29 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 fourth
quarter and full year ending Dec. 31, 2017.
Fourth Quarter and Full-Year 2017 Results
- Revenue for the fourth quarter of $51.7
million, up 23 percent year-over-year and full-year revenue of $194
million, up 29 percent year-over-year.
- GAAP gross margin for the fourth
quarter of 48.6 percent, down from 49.8 percent one year ago.
Non-GAAP gross margin for the fourth quarter of 52.7 percent, down
from 53.2 percent one year ago. GAAP gross margin for the full year
of 48.7 percent, up from 48.5 percent in 2016. Full-year non-GAAP
gross margin of 52.5 percent, up from 51.9 percent in 2016.
- GAAP net loss for the fourth quarter of
$5.5 million, which compares to a GAAP net loss of $7.5 million for
the fourth quarter of 2016, and $5.8 million for the third quarter
of 2017. GAAP net loss for the full year of 2017 of $26.2 million,
which compares to $36.4 million for the full year 2016. Adjusted
EBITDA for the fourth quarter of positive $4.1 million, an
improvement from positive $1.3 million one year ago and positive
$3.6 million for the third quarter of 2017. Full-year adjusted
EBITDA of positive $10.2 million compared to negative $4.5 million
in 2016.
“We had a great finish to 2017 with record bookings in the
quarter,” said Matt Flake, CEO of Q2. “We saw a significant
increase in activity in the bank market, where an improved economic
environment is accelerating banks’ decision-making. With the
addition of four Tier 1 banks in the fourth quarter and a solid
pipeline entering the year, I believe 2018 should be another strong
year for Q2.”
Fourth Quarter and Full-Year 2017 Highlights
- Posted the largest bookings quarter in
company history in the fourth quarter of 2017.
- Signed a Top 100 credit union and four
Tier 1 banks in the fourth quarter, including a $30 billion bank in
the Northeast and a $15 billion bank in the Midwest.
- Signed Acorns, a savings and
micro-investment platform with three million customers, for use of
the Q2 Open product suite.
- Exited the fourth quarter with
approximately 10.4 million registered users on the Q2 platform,
representing 4 percent sequential and 21 percent year-over-year
growth.
Financial Outlook
Q2 Holdings is providing guidance for its first quarter 2018 as
follows:
- Total revenue of $52.6 million to $53.2
million, which would represent year-over-year growth of 18 percent
to 20 percent.
- Adjusted EBITDA of positive $1.4
million to positive $2 million. GAAP net loss is the most
comparable GAAP measure to adjusted EBITDA. Adjusted EBITDA differs
from GAAP net loss in that it excludes things such as depreciation
and amortization, stock based compensation, acquisition-related
costs, interest, income taxes and unoccupied lease charges. 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 2018 as
follows:
- Total revenue of $234 million to $236
million, which would represent year-over-year growth of 21 percent
to 22 percent.
- Adjusted EBITDA of positive $19 million
to positive $21 million. Adjusted EBITDA differs from GAAP net loss
in that it excludes things such as depreciation and amortization,
stock based compensation, acquisition-related costs, interest,
income taxes and unoccupied lease charges. 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:
Feb. 15, 2018
Time:
8:30 a.m. EST
Hosts:
Matt Flake, CEO / Jennifer Harris, CFO
Dial in:
US toll free: 1-833-241-4254 International: 1-647-689-4205
Conference ID:
8194919
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 is a leading provider of secure, experience-driven digital
banking solutions headquartered in Austin, Texas. We are
driven by a mission to build stronger communities by strengthening
their financial institutions. Q2 provides the industry’s
most comprehensive digital banking platform, enriched through
actionable data insights, open development tools and an evolving
fintech ecosystem. We help clients elevate the experience,
drive efficiency and grow faster. 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 and bookings momentum,
increased activity in the bank market and the effects of the
improved economic environment on banks’ decision-making, optimism
about our pipeline and Q2’s performance in 2018, 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)
December 31,
December 31, 2017 2016 (unaudited) (unaudited)
Assets Current assets: Cash and cash equivalents $ 57,961 $ 54,873
Restricted cash 2,315 1,315 Investments 41,685 42,249 Accounts
receivable, net 13,203 12,240 Prepaid expenses and other current
assets 3,115 3,215 Deferred solution and other costs, current
portion 9,246 8,839 Deferred implementation costs, current portion
3,562 2,938 Total current assets
131,087 125,669 Property and equipment, net 34,544 27,480 Deferred
solution and other costs, net of current portion 12,973 11,125
Deferred implementation costs, net of current portion 8,295 8,096
Intangible assets, net 12,034 15,208 Goodwill 12,876 12,876 Other
long-term assets 1,006 526 Total assets
$ 212,815 $ 200,980 Liabilities and
stockholders' equity Current liabilities: Accounts payable and
accrued liabilities $ 29,694 $ 29,088 Deferred revenues, current
portion 38,379 30,123 Total current
liabilities 68,073 59,211 Deferred revenues, net of current portion
28,289 31,707 Deferred rent, net of current portion 9,393 9,466
Other long-term liabilities 438 361
Total liabilities 106,193 100,745 Stockholders' equity: Common
stock 4 4 Treasury stock (855 ) (417 ) Additional paid-in capital
259,726 226,485 Accumulated other comprehensive loss (139 ) (54 )
Accumulated deficit (152,114 ) (125,783 ) Total
stockholders' equity 106,622 100,235
Total liabilities and stockholders' equity $ 212,815 $
200,980
Q2 Holdings, Inc. Condensed
Consolidated Statements of Comprehensive Loss (in thousands,
except per share data)
Three Months Ended December 31,
Twelve Months Ended December 31, 2017 2016
2017 2016 (unaudited) (unaudited) (unaudited)
(unaudited) Revenues $ 51,703 $ 42,155 $ 193,978 $ 150,224
Cost of revenues (1) (2) 26,572 21,146
99,485 77,429 Gross profit 25,131
21,009 94,493 72,795 Operating expenses: Sales and marketing
(1) 10,292 9,486 41,170 36,284 Research and development (1) 10,673
8,508 40,338 32,460 General and administrative (1) 9,863 8,477
37,179 31,959 Acquisition related costs 263 1,514 1,232 6,307
Amortization of acquired intangibles 368 366 1,481 1,470 Unoccupied
lease charges - - -
33 Total operating expenses 31,459
28,351 121,400 108,513
Loss from operations (6,328 ) (7,342 ) (26,907 ) (35,718 ) Other
income (expense), net 137 (74 ) 429
(209 ) Loss before income taxes (6,191 ) (7,416 )
(26,478 ) (35,927 ) Benefit from (provision for) income taxes
670 (97 ) 314 (427 ) Net
loss $ (5,521 ) $ (7,513 ) $ (26,164 ) $ (36,354 ) Other
comprehensive gain (loss) Unrealized gain (loss) on
available-for-sale investments (70 ) (41 ) (85
) 47 Comprehensive loss $ (5,591 ) $ (7,554 ) $
(26,249 ) $ (36,307 ) Net loss per common share: Net loss per
common share, basic and diluted $ (0.13 ) $ (0.19 ) $ (0.63 ) $
(0.92 ) Weighted average common shares outstanding, basic and
diluted 41,777 40,258 41,218
39,649
(1) Includes stock-based compensation
expenses as follows:
Three Months Ended December 31, Twelve Months Ended
December 31, 2017 2016 2017 2016
Cost of revenues $ 1,203 $ 635 $ 3,729 $ 2,043 Sales and marketing
1,101 717 3,243 2,231 Research and development 1,337 884 4,464
2,934 General and administrative 2,672 1,583
9,503 5,432 Total stock-based
compensation expenses $ 6,313 $ 3,819 $ 20,939
$ 12,640
(2) Includes amortization of acquired
technology of $0.9 million and $0.8 million for the three months
ended December 31, 2017 and 2016, respectively, and $3.6 million
and $3.2 million for the twelve months ended December 31, 2017 and
2016, respectively.
Q2 Holdings, Inc. Condensed Consolidated
Statements of Cash Flows (in thousands)
Twelve Months Ended December 31, 2017
2016 (unaudited) (unaudited) Cash flows from operating
activities: Net loss $ (26,164 ) $ (36,354 )
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of deferred implementation, solution and other costs
7,455 6,775 Depreciation and amortization 14,946 12,199
Amortization of debt issuance costs 28 96 Amortization of premiums
on investments 319 425 Stock-based compensation expenses 20,939
12,640 Deferred income taxes (350 ) 281 Other non-cash charges 30
254 Changes in operating assets and liabilities (7,731 )
7,078 Cash provided by operating activities 9,472
3,394 Cash flows from investing activities: Net redemptions of
investments 158 945 Purchases of property and equipment (12,315 )
(14,349 ) Business combinations and asset acquisitions, net of cash
acquired (3,816 ) (95 ) Capitalization of software development
costs (970 ) (2,692 ) Purchases of intangible assets - (323 )
Increase in restricted cash (1,000 ) - Cash
used in investing activities (17,943 ) (16,514 ) Cash flows from
financing activities: Payments on financing obligations and capital
leases, net - (5,059 ) Proceeds from issuance of common stock
11,559 6,003 Net cash provided by
financing activities 11,559 944 Net
increase (decrease) in cash and cash equivalents 3,088 (12,176 )
Cash and cash equivalents, beginning of period 54,873
67,049 Cash and cash equivalents, end of period $
57,961 $ 54,873
Q2 Holdings,
Inc. Reconciliation of GAAP to Non-GAAP Measures (in
thousands, except per share data)
Three Months Ended December
31, Twelve Months Ended December 31, 2017
2016 2017 2016 (unaudited) (unaudited)
(unaudited) (unaudited) GAAP gross profit $ 25,131 $ 21,009 $
94,493 $ 72,795 Stock-based compensation 1,203 635 3,729 2,043
Amortization of acquired technology 914 798
3,624 3,191 Non-GAAP gross
profit $ 27,248 $ 22,442 $ 101,846 $ 78,029
Non-GAAP gross margin: Non-GAAP gross profit $ 27,248
$ 22,442 $ 101,846 $ 78,029 GAAP revenue 51,703
42,155 193,978 150,224
Non-GAAP gross margin 52.7 % 53.2 % 52.5 %
51.9 % GAAP sales and marketing expense $ 10,292 $
9,486 $ 41,170 $ 36,284 Stock-based compensation (1,101 )
(717 ) (3,243 ) (2,231 ) Non-GAAP sales and
marketing expense $ 9,191 $ 8,769 $ 37,927 $
34,053 GAAP research and development expense $ 10,673
$ 8,508 $ 40,338 $ 32,460 Stock-based compensation (1,337 )
(884 ) (4,464 ) (2,934 ) Non-GAAP research and
development expense $ 9,336 $ 7,624 $ 35,874 $
29,526 GAAP general and administrative expense $
9,863 $ 8,477 $ 37,179 $ 31,959 Stock-based compensation
(2,672 ) (1,583 ) (9,503 ) (5,432 ) Non-GAAP
general and administrative expense $ 7,191 $ 6,894 $
27,676 $ 26,527 GAAP operating loss $ (6,328 )
$ (7,342 ) $ (26,907 ) $ (35,718 ) Stock-based compensation 6,313
3,819 20,939 12,640 Acquisition related costs 263 1,514 1,232 6,307
Amortization of acquired technology 914 798 3,624 3,191
Amortization of acquired intangibles 368 366 1,481 1,470 Unoccupied
lease charges - - -
33 Non-GAAP operating income (loss) $ 1,530 $
(845 ) $ 369 $ (12,077 ) GAAP net loss $ (5,521 ) $
(7,513 ) $ (26,164 ) $ (36,354 ) Stock-based compensation 6,313
3,819 20,939 12,640 Acquisition related costs 263 1,514 1,232 6,307
Amortization of acquired technology 914 798 3,624 3,191
Amortization of acquired intangibles 368 366 1,481 1,470 Unoccupied
lease charges - - -
33 Non-GAAP net income (loss) $ 2,337 $ (1,016
) $ 1,112 $ (12,713 )
Reconciliation from diluted
weighted-average number of common shares as reported to pro forma
diluted weighted average number of common shares
Diluted weighted-average number of common shares, as reported
41,777 40,258 41,218 39,649 Weighted-average effect of potentially
dilutive shares 1,976 - 2,064
- Pro forma diluted weighted-average number of
common shares 43,753 40,258 43,282 39,649 Calculation of
non-GAAP income (loss) per share: Non-GAAP net income (loss) $
2,337 $ (1,016 ) $ 1,112 $ (12,713 )
Diluted weighted-average number of common
shares (pro forma for three and twelve months ended December 31,
2017)
43,753 40,258 43,282
39,649 Non-GAAP net income (loss) per share $ 0.05
$ (0.03 ) $ 0.03 $ (0.32 ) Reconciliation of
GAAP net loss to adjusted EBITDA: GAAP net loss $ (5,521 ) $ (7,513
) $ (26,164 ) $ (36,354 ) Depreciation and amortization 3,897 3,264
14,946 12,199 Stock-based compensation 6,313 3,819 20,939 12,640
(Benefit from) provision for income taxes (670 ) 97 (314 ) 427
Interest (income) expense, net (137 ) 74 (429 ) 209 Acquisition
related costs 263 1,514 1,232 6,307 Unoccupied lease charges
- - - 33 Adjusted
EBITDA $ 4,145 $ 1,255 $ 10,210 $ (4,539 )
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version on businesswire.com: http://www.businesswire.com/news/home/20180214006132/en/
Media Contact:Red Fan CommunicationsEmma Chase,
512-551-9253Cell:
512-917-4319emma@redfancommunications.comorInvestor
Contact:Q2 Holdings, Inc.Bob Gujavarty,
512-439-3447bobby.gujavarty@q2ebanking.com
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