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May 2, 2022, 4:31 p.m. EDT

Q2 Holdings, Inc. Announces First Quarter 2022 Financial Results

AUSTIN, Texas, (BUSINESS WIRE) -- Q2 Holdings, Inc. /zigman2/quotes/203491356/composite QTWO +2.57% , a leading provider of digital transformation solutions for banking and lending, today announced results for its first quarter ending March 31, 2022.

GAAP Results for the First Quarter 2022

  • Revenue for the first quarter of $134.1 million, up 15 percent year-over-year and up 2 percent from the fourth quarter of 2021.

  • GAAP gross margin for the first quarter of 45.1 percent, down from 45.7 percent for the prior-year quarter and flat with the fourth quarter of 2021.

  • GAAP net loss for the first quarter of $23.6 million, compared to GAAP net losses of $25.7 million for the prior-year quarter and $25.4 million for the fourth quarter of 2021.

Non-GAAP Results for the First Quarter 2022

  • Non-GAAP revenue for the first quarter of $134.3 million, up 15 percent year-over-year and up 1 percent from the fourth quarter of 2021.

  • Non-GAAP gross margin for the first quarter of 51.4 percent, down from 52.6 percent for the prior-year quarter and 51.5 percent for the fourth quarter of 2021.

  • Adjusted EBITDA for the first quarter of $8.1 million, down from $9.9 million for the prior-year quarter and $10.8 million for the fourth quarter of 2021.

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

“The first quarter represented a solid start to the year,” said Q2 CEO Matt Flake. “We signed a broad range of deals, both in digital lending and banking, highlighted by continued success in the Enterprise and Tier 1 segments. Our Emerging Businesses also delivered a strong performance; partners and customers alike continue to rapidly adopt Q2 Innovation Studio while Helix signed new deals and supported a major program launch. With our strong execution in the quarter, we continue to believe that we are well positioned to capitalize on our expanding market opportunity.”

First Quarter Highlights

Continued Sales Success, Leading the Industry in Delivering “The Digital Bank”

  • Signed two enterprise contracts and one Tier 1 digital lending contract including a(n):

  • Signed three Tier 1 digital banking contracts including (a):

  • Exited the first quarter with more than 19.7 million registered users on the Q2 digital banking platform, representing 8 percent year-over-year growth and 3 percent sequential growth.

Enabling New Ecosystems within Financial Services

  • Launched a strategic program with NYDIG, a leading bitcoin company who is leveraging our Helix platform to power their new payroll offering, called Bitcoin Savings Plan, a benefit program offered through US employers.

  • Strong adoption of Q2 Innovation Studio, growing total fintech partners by 25% and surpassing 50% of Q2 digital banking customers using Innovation Studio in at least one of our programs.

“We delivered solid financial results in the first quarter, with revenue exceeding the high end of our guidance,” said David Mehok, Q2 CFO. “Based on our recent performance and the favorable demand environment, we are raising our full-year guidance, which reflects confidence in a reacceleration of revenue growth and margin expansion exiting 2022 and into 2023.”

Financial outlook

As of May 2, 2022, Q2 Holdings is providing guidance for its second quarter of 2022 and full-year 2022, which represents Q2 Holdings’ current estimates on Q2 Holdings’ operations and financial results and the anticipated impacts of the COVID-19 pandemic. 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 second quarter of 2022 as follows:

  • Total non-GAAP revenue of $139.5 million to $141.0 million, which would represent year-over-year growth of 12 to 14 percent.

  • Adjusted EBITDA of $7.4 million to $8.9 million, representing 5 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:   Tuesday, May 3, 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/683457951

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: Q2’s continued operational execution; Q2’s expectations regarding the demand environment for its solutions; Q2’s confidence in a reacceleration of revenue growth and margin expansion; Q2’s ability to capitalize on its expanding market opportunity; 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 the adverse impacts of the COVID-19 pandemic on Q2’s business operations and on global economic and financial markets, including on Q2’s customers, partners and suppliers and employees and business, as well as 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, new markets with Alt-FIs and fintechs and new products and services; (b) the risk that COVID-19, government actions or other factors continue to negatively impact or disrupt the markets for Q2’s solutions and that the markets for Q2’s solutions do not return to normal or grow as anticipated, in particular with respect to Enterprise and Tier 1 customers and Alt-FI and fintech customers; (c) the risk that Q2’s increased focus on selling to larger Enterprise or 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 impact 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, including risks related to the timing and predictability of sales of Q2’s solutions and the impact that the timing of bookings may have on Q2’s revenue and financial performance in a period; (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 cyberattacks, data and privacy breaches and breaches of security measures within Q2’s products, systems and infrastructure or the products, systems and infrastructure of third parties upon which Q2 relies and the resultant costs and liabilities and harm to Q2’s business and reputation and its ability to sell its products and services; (h) the impact that inflation or a slowdown in the economy, financial markets and credit markets may have 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 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 COVID-19 pandemic, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (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) the risks associated with anticipated higher operating expenses in 2022 and beyond; (q) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (r) the risks associated with further consolidation in the financial services industry; (s) risks associated with selling Q2 solutions internationally and with our international operations, including risks related to impacts resulting from Russia’s recent invasion of Ukraine and the related international response; and (t) the risk that Q2 debt repayment obligations may adversely affect its financial condition and cash flows from operations in the future and that Q2 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)
  
March 31, December 31,
2022 2021
Assets
Current assets:
Cash and cash equivalents $ 225,544   $ 322,848  
Restricted cash   2,978     2,973  
Investments   188,144     104,878  
Accounts receivable, net   36,601     46,979  
Contract assets, current portion, net   2,994     1,845  
Prepaid expenses and other current assets   22,927     10,531  
Deferred solution and other costs, current portion   25,028     25,076  
Deferred implementation costs, current portion   7,374     7,320  
Total current assets   511,590     522,450  
Property and equipment, net   63,343     66,608  
Right of use assets   50,541     52,278  
Deferred solution and other costs, net of current portion   27,171     26,930  
Deferred implementation costs, net of current portion   17,487     17,039  
Intangible assets, net   156,306     162,461  
Goodwill   512,869     512,869  
Contract assets, net of current portion and allowance   22,753     22,103  
Other long-term assets   2,044     2,307  
Total assets $ 1,364,104   $ 1,385,045  
    
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 48,456   $ 60,665  
Convertible notes, current portion   10,855     -  
Deferred revenues, current portion   103,322     98,692  
Lease liabilities, current portion   9,214     9,001  
Total current liabilities   171,847     168,358  
Convertible notes, net of current portion   655,809     551,598  
Deferred revenues, net of current portion   26,205     29,168  
Lease liabilities, net of current portion   59,008     61,374  
Other long-term liabilities   5,048     4,251  
Total liabilities   917,917     814,749  
    
Stockholders' equity:
Common stock   6     6  
Additional paid-in capital   922,365     1,064,358  
Accumulated other comprehensive loss   (1,298 )   (135 )
Accumulated deficit   (474,886 )   (493,933 )
Total stockholders' equity   446,187     570,296  
Total liabilities and stockholders' equity $ 1,364,104   $ 1,385,045  
Q2 Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands, except per share data)
(unaudited)
  
Three Months Ended March 31,
2022 2021
Revenues [ (1)] $ 134,071   $ 116,520  
Cost of revenues [ (2)]   73,672     63,319  
Gross profit   60,399     53,201  
 
Operating expenses:
Sales and marketing   25,266     19,816  
Research and development   31,131     26,795  
General and administrative   20,568     18,834  
Acquisition related costs   3     850  
Amortization of acquired intangibles   4,422     4,419  
Unoccupied lease charges [(3)]   408     -  
Total operating expenses   81,798     70,714  
Loss from operations   (21,399 )   (17,513 )
Total other income (expense), net   (796 )   (8,007 )
Loss before income taxes   (22,195 )   (25,520 )
Provision for income taxes   (1,364 )   (135 )
Net loss $ (23,559 ) $ (25,655 )
Other comprehensive gain (loss):
Unrealized gain (loss) on available-for-sale investments   (1,073 )   19  
Foreign currency translation adjustment   (90 )   2  
Comprehensive loss $ (24,722 ) $ (25,634 )
Net loss per common share:
Net loss per common share, basic and diluted $ (0.41 ) $ (0.46 )
Weighted average common shares outstanding, basic and diluted   57,015     55,798  
 
[(1)] Includes deferred revenue reduction from purchase accounting of $0.2 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively.
 
[(2)] Includes amortization of acquired technology of $5.6 million and $5.2 million for the three months ended March 31, 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 months ended March 31, 2022, the charges related to an updated assessment of facilities in Texas and North Carolina.
Q2 Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended March 31,
2022 2021
Cash flows from operating activities:
Net loss $ (23,559 ) $ (25,655 )
Adjustments to reconcile net loss to net cash from operating activities:
Amortization of deferred implementation, solution and other costs   5,722     6,088  
Depreciation and amortization   14,919     12,912  
Amortization of debt issuance costs   676     505  
Amortization of debt discount   -     6,501  
Amortization of premiums on investments   312     76  
Stock-based compensation expense   14,855     13,463  
Deferred income taxes   875     96  
Other non-cash charges   310     11  
Changes in operating assets and liabilities   (18,731 )   (19,475 )
Net cash used in operating activities   (4,621 )   (5,478 )
Cash flows from investing activities:
Net purchases of investments   (84,652 )   (26,565 )
Purchases of property and equipment   (3,866 )   (6,111 )
Capitalized software development costs   (4,291 )   (822 )
Net cash used in investing activities   (92,809 )   (33,498 )
Cash flows from financing activities:
Proceeds from exercise of common stock   131     1,971  
Net cash provided by financing activities   131     1,971  
Net decrease in cash, cash equivalents, and restricted cash   (97,299 )   (37,005 )
Cash, cash equivalents, and restricted cash, beginning of period   325,821     411,185  
Cash, cash equivalents, and restricted cash, end of period $ 228,522   $ 374,180  
Q2 Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share data)
(unaudited)
    
Three Months Ended March 31,
2022 2021
GAAP revenue $ 134,071   $ 116,520
Deferred revenue reduction from purchase accounting 242 528  
Non-GAAP revenue $ 134,313   $ 117,048  
  
GAAP gross profit $ 60,399   $ 53,201  
Stock-based compensation   2,739     2,535  
Amortization of acquired technology   5,604     5,157  
Acquisition related costs   -     116  
Deferred revenue reduction from purchase accounting   242     528  
Non-GAAP gross profit $ 68,984   $ 61,537  
   
Non-GAAP gross margin:
Non-GAAP gross profit $ 68,984   $ 61,537  
Non-GAAP revenue   134,313     117,048  
Non-GAAP gross margin   51.4 %   52.6 %
   
GAAP sales and marketing expense $ 25,266   $ 19,816  
Stock-based compensation   (3,326 )   (2,537 )
Non-GAAP sales and marketing expense $ 21,940   $ 17,279  
   
GAAP research and development expense $ 31,131   $ 26,795  
Stock-based compensation   (2,852 )   (3,145 )
Non-GAAP research and development expense $ 28,279   $ 23,650  
   
GAAP general and administrative expense $ 20,568   $ 18,834  
Stock-based compensation   (5,102 )   (4,878 )
Non-GAAP general and administrative expense $ 15,466   $ 13,956  
   
GAAP operating loss $ (21,399 ) $ (17,513 )
Deferred revenue reduction from purchase accounting   242     528  
Stock-based compensation   14,019     13,095  
Acquisition related costs   3     966  
Amortization of acquired technology   5,604     5,157  
Amortization of acquired intangibles   4,422     4,419  
Unoccupied lease charges   408     -  
Non-GAAP operating income $ 3,299   $ 6,652  
   
GAAP net loss $ (23,559 ) $ (25,655 )
Deferred revenue reduction from purchase accounting   242     528  
Loss on extinguishment of debt   -     -  
Stock-based compensation   14,019     13,095  
Acquisition related costs   3     966  
Amortization of acquired technology   5,604     5,157  
Amortization of acquired intangibles   4,422     4,419  
Unoccupied lease charges   408     -  
Amortization of debt discount and issuance costs   676     7,006  
Non-GAAP net income $ 1,815   $ 5,516  
   
Reconciliation from diluted weighted-average number of common shares
as reported to Non-GAAP diluted weighted-average number of common shares
Diluted weighted-average number of common shares, as reported   57,015     55,798  
Non-GAAP weighted-average effect of potentially dilutive shares   499     2,192  
Non-GAAP diluted weighted-average number of common shares   57,514     57,990  
   
Calculation of non-GAAP income per share:
Non-GAAP net income $ 1,815   $ 5,516  
Non-GAAP diluted weighted-average number of common shares   57,514     57,990  
Non-GAAP net income per share $ 0.03   $ 0.10  
   
Reconciliation of GAAP net loss to adjusted EBITDA:
GAAP net loss $ (23,559 ) $ (25,655 )
Depreciation and amortization   14,919     12,912  
Stock-based compensation   14,019     13,095  
Provision for income taxes   1,364     135  
Interest and other (income) expense, net   662     7,907  
Acquisition related costs   3     966  
Unoccupied lease charges   408     -  
Loss on extinguishment of debt   -     -  
Deferred revenue reduction from purchase accounting   242     528  
Adjusted EBITDA $ 8,058   $ 9,888  
Q2 Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Revenue Outlook
(in thousands)
   
Q2 2022 Outlook Full Year 2022 Outlook
Low High Low High
GAAP revenue $ 139,333   $ 140,833   $ 576,819   $ 580,819  
Deferred revenue reduction from purchase accounting   167     167     681     681  
Non-GAAP revenue $ 139,500 $ 141,000 $ 577,500 $ 581,500

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220502005615/en/

SOURCE: Q2 Holdings, Inc.

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

COMTEX_406596591/2456/2022-05-02T16:30:32

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/zigman2/quotes/203491356/composite
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$ 39.56
+0.99 +2.57%
Volume: 274,451
July 1, 2022 4:00p
P/E Ratio
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