Core Insights - The company reported strong fourth quarter results, with a 16% year-over-year growth in subscription revenue and a significant increase in adjusted EBITDA margins by over 400 basis points [5][28]. - The full year 2025 was highlighted as the strongest in terms of bookings, revenue, and profitability, with a total of 26 enterprise and Tier 1 deals executed [7][28]. - The company is optimistic about 2026, raising its subscription revenue growth outlook to at least 14% and providing a clearer long-term financial framework [37][38]. Financial Performance - Total revenue for Q4 was $208.2 million, a 14% increase year-over-year, driven primarily by subscription-based revenues [27][28]. - For the full year, total revenue reached $794.8 million, also up 14% from the previous year, with subscription revenue accounting for 82% of total revenue [28][29]. - The company achieved a total annualized recurring revenue (ARR) of $921 million, reflecting a 12% year-over-year growth [29]. Sales and Bookings - The fourth quarter marked the second largest bookings quarter in the company's history, following a record third quarter [5][6]. - Notable wins included a $40 billion digital banking customer and multiple Tier 1 deals, indicating strong demand and execution capabilities [6][10]. - Expansion with existing customers played a critical role, with half of the Tier 1 and enterprise deals coming from existing relationships [7][10]. Product Strategy - The digital banking platform has been a key driver of success, with significant contributions from relationship pricing and risk and fraud solutions [8][10]. - The company processed over $4 trillion in transactions in 2025, representing a 21% year-over-year growth [12]. - Innovation Studio has become integral to the strategy, enhancing product delivery and customer engagement [13][14]. Market Trends - Financial institutions are increasingly prioritizing investments in fraud mitigation solutions, with the company's risk and fraud products showing strong performance [9][15]. - The M&A activity in the banking sector has positively impacted the business, with 93% of M&A deals involving a Q2 customer choosing Q2 as the go-forward solution [10][11]. - The company is well-positioned to capitalize on the growing demand for integrated fraud management solutions [16][17]. Future Outlook - The company anticipates a strong pipeline heading into 2026, with expectations for larger deals to be weighted towards the second half of the year [25][40]. - Guidance for Q1 2026 revenue is projected between $212.5 million and $216.5 million, with full-year revenue expected to grow approximately 10% [36][37]. - Long-term targets include achieving non-GAAP gross margins of at least 65% and adjusted EBITDA margins of at least 35% by 2030 [39].

Core Viewpoint - Q2 Holdings (QTWO) reported quarterly earnings of $0.61 per share, exceeding the Zacks Consensus Estimate of $0.59 per share, and showing an increase from $0.48 per share a year ago, indicating a positive earnings surprise of +4.10% [1] Financial Performance - The company achieved revenues of $208.22 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 1.66%, and up from $183.04 million in the same quarter last year [2] - Over the last four quarters, Q2 Holdings has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Q2 Holdings shares have declined approximately 20.6% since the beginning of the year, contrasting with the S&P 500's gain of 1.4% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.67 on revenues of $209.95 million, and for the current fiscal year, it is $2.79 on revenues of $872.62 million [7] - The trend of earnings estimate revisions for Q2 Holdings was mixed prior to the earnings release, which may change following the recent report [6] Industry Context - The Internet - Software industry, to which Q2 Holdings belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, VTEX, is expected to report quarterly earnings of $0.05 per share, reflecting a year-over-year increase of +66.7% [9]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved total revenue of $208.2 million, a 14% year-over-year increase and a 3% sequential increase, primarily driven by subscription-based revenues [24] - Full year revenue reached $794.8 million, also up 14% from the previous year, marking the highest annual growth rate since 2021 [25] - Subscription revenue for the full year grew by 17%, accounting for 82% of total revenue, while total annualized recurring revenue (ARR) increased to $921 million, up 12% year-over-year [25][26] - Adjusted EBITDA for Q4 was a record $51.2 million, up 36% from the prior year, with full year adjusted EBITDA at $186.5 million, a 49% increase [31] Business Line Data and Key Metrics Changes - The Digital Banking Platform was a significant contributor to bookings success, with strong performance across banks and credit unions [10] - The risk and fraud solutions emerged as one of the fastest-growing product lines, highlighted by the largest fraud deal in company history with a $200 billion bank [11] - The company processed over $4 trillion in transaction volume in 2025, representing a 21% year-over-year growth [13] Market Data and Key Metrics Changes - The company reported a trailing 12-month total net revenue retention rate of 113%, up from 109% in 2024, indicating strong customer retention [27] - The revenue churn rate for 2025 was 5.2%, an increase from 4.4% in 2024, attributed to higher M&A activity [27][28] Company Strategy and Development Direction - The company aims to leverage its single-platform approach to enhance deposit growth and retention, positioning itself as a key player in the digital banking space [12] - The focus on AI is seen as a critical enabler for long-term strategy, with plans to integrate AI capabilities into existing products and develop new ones [20][22] - The company is targeting annual subscription revenue growth of approximately 12.5%-13% for 2027, with long-term profitability targets set for gross margins of at least 65% and adjusted EBITDA margins of at least 35% by 2030 [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment, citing improving credit quality and stable margins as supportive factors for growth entering 2026 [23] - The company anticipates that Tier One and enterprise activity will be weighted toward the back half of 2026, with a healthy pipeline of both net new and expansion opportunities [23][39] Other Important Information - The company ended 2025 with a cash balance of $433 million, down from $569 million, due to the retirement of convertible notes and stock repurchases [31] - The company generated free cash flow of $173 million for the year, representing a 93% conversion rate of adjusted EBITDA [32] Q&A Session Summary Question: Demand for solutions during core modernization - Management indicated that any decision by a financial institution to change technology, particularly core systems, opens up opportunities for the company, although quantifying this is challenging [41][42] Question: Visibility into subscription growth - Management expressed confidence in the subscription growth outlook, attributing it to strong bookings in the first half of 2026, which could drive upside for 2027 [44][45] Question: Cross-sell opportunities for fraud products - Management noted that only 10% of Tier One customers utilize all three product lines, indicating significant room for expansion, particularly in fraud solutions [51][52] Question: Balancing cash for share repurchases versus M&A - Management emphasized the flexibility provided by strong free cash flow, allowing for thoughtful capital allocation between share repurchases and potential M&A opportunities [53][54] Question: Digital banking market dynamics - Management described the demand for digital banking solutions as strong, with significant opportunities for growth as many banks still rely on legacy systems [60][61] Question: Time-to-revenue for risk and fraud products - Management indicated that standalone fraud solutions typically have faster implementation timelines compared to traditional digital banking solutions [62][63] Question: Demand trends for commercial solutions - Management highlighted that demand for commercial banking solutions has increased due to the importance of deposits, with expectations for continued strong demand [70][71] Question: Long-term margin targets - Management explained that the long-term margin targets are based on a combination of subscription revenue mix, cost efficiencies, and operational leverage [75][76]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported total revenue of $208.2 million, a 14% increase year-over-year and a 3% increase sequentially, driven by subscription-based revenues [23][24] - Full year revenue reached $794.8 million, also up 14% from the prior year, marking the highest annual growth rate since 2021 [24] - Subscription revenue for the full year grew by 17%, representing 82% of total revenue, while total annualized recurring revenue (ARR) grew to $921 million, up 12% year-over-year [24][25] - Adjusted EBITDA for Q4 was a record $51.2 million, up 36% from the prior year, with full year adjusted EBITDA at $186.5 million, up 49% [30][31] - Gross margins improved to 58.6% for Q4 and 58% for the full year, reflecting a shift towards higher-margin subscription revenue [28][29] Business Line Data and Key Metrics Changes - The Digital Banking Platform was a significant contributor to bookings success, with strong performance across various customer segments [10] - The risk and fraud solutions emerged as one of the fastest-growing product lines, with a notable deal involving a $200 billion bank [11] - The company executed 26 enterprise and Tier One deals in 2025, with half of these being expansions with existing customers [9][10] Market Data and Key Metrics Changes - The company noted a constructive demand environment supported by improving credit quality, stable margins, and re-accelerating M&A activity as it entered 2026 [22] - The company maintained a strong pipeline with healthy activity across both net new and expansion opportunities, particularly in larger deals [22] Company Strategy and Development Direction - The company emphasized a profitable growth strategy, focusing on balancing investments to sustain durable subscription revenue growth while driving operational efficiency [35] - The strategy includes leveraging AI as a key enabler for long-term growth, with plans to enhance existing products and develop new ones [20][21] - The company aims to achieve non-GAAP gross margins of at least 65% and adjusted EBITDA margins of at least 35% by 2030, reflecting long-term expectations for operating leverage [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute and invest thoughtfully, highlighting a strong pipeline and a clear strategy for profitable growth [36] - The management team noted that the demand for digital banking solutions remains robust, particularly as financial institutions prioritize deposit growth and fraud mitigation [12][16] Other Important Information - The company completed its cloud migration in January 2026, which is expected to enhance operational efficiencies [28] - The company reported a free cash flow conversion rate of 93% for the year, attributed to increased focus on profitability and effective working capital management [31] Q&A Session Summary Question: Demand for solutions during core modernization - Management indicated that any decision by a financial institution to change technology, particularly core systems, opens up opportunities for the company, although quantifying this is challenging [39][40] Question: Visibility into subscription growth - Management expressed confidence in the subscription growth outlook, attributing it to strong bookings in Q4 and the overall performance in 2025 [41][42] Question: Cross-sell opportunities for fraud products - Management noted significant room for expansion within the existing customer base, with only 10% of Tier 1 customers utilizing all three product lines [48][49] Question: Balancing cash for share repurchases versus M&A - Management highlighted the flexibility provided by strong free cash flow generation, allowing for thoughtful capital allocation decisions [50][51] Question: Digital banking market dynamics - Management described the ongoing demand for digital banking solutions, particularly as many banks still rely on legacy systems that require upgrades [56][57] Question: Time-to-revenue for risk and fraud products - Management indicated that standalone fraud solutions typically have faster implementation timelines compared to traditional digital banking solutions [59][61] Question: Demand trends for commercial solutions - Management noted that demand for commercial banking solutions has increased significantly due to the importance of deposits and the competitive landscape [68][69] Question: Long-term margin targets - Management explained that the long-term margin targets are based on a combination of factors, including efficiency opportunities and a shift towards higher subscription revenue [72][73]

Financial Data and Key Metrics Changes - In Q4 2025, total revenue was $208.2 million, a 14% year-over-year increase and a 3% sequential increase, driven by subscription-based revenues [23] - Full year total revenue reached $794.8 million, up 14% from the prior year, marking the highest annual growth rate since 2021 [24] - Subscription revenue for the full year grew by 17%, representing 82% of total revenue [24] - Adjusted EBITDA for Q4 was $51.2 million, a 36% increase from the prior year, while full year adjusted EBITDA was $186.5 million, up 49% [30] - Gross margins improved to 58.6% in Q4, up from 57.4% in the prior year, and 58% for the full year, up from 56% [27][28] Business Line Data and Key Metrics Changes - The Digital Banking Platform was a significant contributor to bookings success, with strong performance across various customer segments [9] - Risk and fraud solutions emerged as one of the fastest-growing product lines, with a notable deal involving a $200 billion bank [10] - The commercial banking solutions processed over $4 trillion in transaction volume in 2025, representing 21% year-over-year growth [12] Market Data and Key Metrics Changes - The company reported a trailing 12-month total net revenue retention rate of 113%, up from 109% in 2024, indicating strong customer retention [26] - The company maintained a high level of M&A activity, with 93% of M&A transactions involving Q2 customers choosing Q2 as their go-forward solution [10] Company Strategy and Development Direction - The company aims to leverage its single-platform approach to enhance deposit growth and retention, focusing on delivering best-in-class experiences [11] - The strategy includes a heightened emphasis on AI, with plans to integrate AI capabilities into existing products and develop new ones [19][20] - The company is targeting annual subscription revenue growth of approximately 12.5%-13% for 2027, with long-term profitability targets set for 2030 [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, citing improving credit quality and stable margins as supportive factors for growth in 2026 [21] - The company anticipates continued strong performance in larger deals, particularly in the second half of 2026 [21] - Management highlighted the importance of operational efficiency and effective capital allocation as key components of their growth strategy [35] Other Important Information - The company ended 2025 with a cash balance of $433 million, down from $569 million, primarily due to the retirement of convertible notes [30] - Free cash flow for the year was $173 million, representing a 93% conversion rate of adjusted EBITDA [31] Q&A Session Summary Question: What is the demand for solutions when a financial institution decides to migrate its core to the cloud? - Management indicated that any change in technology by a bank or credit union opens up opportunities for the company, although quantifying the timing is challenging [40] Question: How should investors think about underlying visibility into subscription growth? - Management noted that the strength of Q4 bookings and the mix of larger deals provide confidence in the subscription growth outlook for 2027 [42] Question: What is the potential for expanding fraud products within the existing customer base? - Management highlighted that only 10% of Tier One customers utilize all three product lines, indicating significant cross-sell opportunities [49] Question: How does the company weigh cash usage for share repurchases versus M&A? - Management emphasized the flexibility provided by strong free cash flow generation, allowing for thoughtful capital allocation decisions [50] Question: What is the current state of the banking M&A landscape? - Management noted that M&A activity is picking up, with a strong historical performance in retaining customers post-acquisition [84]

User Growth - As of December 31, 2025, the company had approximately 27.3 million Registered Users, up from 24.7 million in 2024 and 22.0 million in 2023, indicating a growth trend in user adoption [277]. Customer Retention and Revenue Growth - The company reported a net revenue retention rate of 113% for the year ended December 31, 2025, compared to 109% in 2024 and 108% in 2023, reflecting strong customer retention and expansion [280]. - The subscription net revenue retention rate was 115% for the year ended December 31, 2025, up from 114% in 2024 and 112% in 2023, indicating effective upselling to existing customers [280]. - Subscription revenue growth was 17% for the year ended December 31, 2025, compared to 16% in 2024, indicating continued expansion in digital banking solutions [342]. Financial Performance - GAAP revenue for the year ended December 31, 2025, was $794.8 million, compared to $696.5 million in 2024 and $624.6 million in 2023 [285]. - Non-GAAP operating income for 2025 was $154.4 million, up from $95.5 million in 2024 and $49.7 million in 2023 [289]. - Adjusted EBITDA for the year ended December 31, 2025, was $186.5 million, compared to $125.3 million in 2024 and $76.9 million in 2023 [292]. - The company reported a net income of $52.0 million for the year ended December 31, 2025, compared to a net loss of $38.5 million in 2024 and a net loss of $65.4 million in 2023 [292]. Revenue Composition - The majority of revenues are derived from subscription fees, transactional revenue from bill-pay solutions, and professional services [313]. - Total ARR was $921.4 million, $824.2 million, and $734.8 million for the years ended December 31, 2025, 2024, and 2023, respectively [282]. - Subscription Annual Recurring Revenue (ARR) reached $780.1 million, $681.9 million, and $593.9 million for the years ended December 31, 2025, 2024, and 2023, respectively [282]. Cost Management - Cost of revenues primarily includes salaries and personnel-related costs, third-party service costs, and amortization of software development costs [296]. - Cost of revenues rose by $23.1 million, or 6.8%, from $342.0 million in 2024 to $365.1 million in 2025, mainly due to increased third-party cloud service costs and personnel expenses [344]. - Gross margin improved to 54.1% in 2025 from 50.9% in 2024, reflecting better cost management and revenue growth [339]. Operating Expenses - Total operating expenses decreased slightly to $389.8 million in 2025 from $396.7 million in 2024, with a notable reduction in sales and marketing expenses [337]. - Research and development expenses increased by $11.1 million, or 7.7%, from $143.2 million in 2024 to $154.3 million in 2025, driven by personnel costs and enhancements to solutions [349]. - Operating expenses are expected to increase in absolute dollars but decrease as a percentage of revenues over the long term as the company grows [300]. Cash Flow - Net cash provided by operating activities was $201.5 million in 2025, influenced by non-cash adjustments of $173.4 million and net income of $52.0 million [364]. - Net cash used in investing activities was $4.0 million in 2025, consisting of $94.1 million for investments and $21.3 million for capitalized software development costs [367]. - Net cash used in financing activities was $189.0 million in 2025, primarily due to the repayment of $191.0 million of 2025 Notes and $5.0 million in share repurchases [369]. Strategic Initiatives - The company continues to invest in expanding its digital banking platform and pursuing strategic acquisitions to enhance its offerings and market presence [270]. - The company aims to grow its business by increasing customer engagement and expanding its product portfolio, which is expected to improve operating efficiencies over time [268]. - The company plans to continue investing in implementation and customer support teams to drive future efficiency and support growth [345]. Stock-Based Compensation - The company incurred stock-based compensation expenses of $86.9 million in 2025, $89.2 million in 2024, and $79.2 million in 2023 [289]. - Stock-based compensation consists of restricted stock units and is recognized over the requisite service period [327].

February 11, 2026 Q2 02 Safe Harbor Statement 4th Quarter & Full-Year 2025 Results This presentation and the accompanying oral presentation contain forward-looking statements and information that are based on our management's beliefs and assumptions and our manacement. The satements and information cortained in this presentation that are not purel historical are corward-looking statements within the meaning of the Private Section 21A di the Seourities Act of 1933, as amerched, and Section 21E of the Securit ...

Financial Performance - Fourth quarter revenue reached $208.2 million, a 14% increase year-over-year, and full-year revenue totaled $794.8 million, also up 14% year-over-year[7] - GAAP net income for the fourth quarter was $20.4 million, compared to $0.2 million in the prior-year quarter, and full-year GAAP net income was $52.0 million, reversing a loss of $38.5 million in 2024[7] - Adjusted EBITDA for the fourth quarter was $51.2 million, up from $37.6 million in the prior-year quarter, with full-year adjusted EBITDA of $186.5 million, an increase from $125.3 million in 2024[7] - Net income for the twelve months ended December 31, 2025, was $52,008, compared to a net loss of $(38,536) in 2024[34] - Total revenues for the twelve months ended December 31, 2025, increased to $794,809, up from $696,464 in 2024, representing a growth of 14.1%[35] - Non-GAAP gross profit for the twelve months ended December 31, 2025, was $461,095, compared to $390,207 in 2024, reflecting a year-over-year increase of 18.2%[35] - Free cash flow for the twelve months ended December 31, 2025, was $173,368, significantly higher than $106,720 in 2024, marking a growth of 62.4%[37] - GAAP gross margin improved to 54.1% for the twelve months ended December 31, 2025, compared to 50.9% in 2024[35] - Adjusted EBITDA for the twelve months ended December 31, 2025, was $186,514, up from $125,338 in 2024, indicating a growth of 48.9%[35] - Net cash provided by operating activities for the twelve months ended December 31, 2025, was $201,461, compared to $135,751 in 2024, an increase of 48.4%[34] - Non-GAAP operating income for the twelve months ended December 31, 2025, was $154,382, compared to $95,464 in 2024, reflecting a year-over-year increase of 61.8%[35] Subscription and Revenue Growth - Subscription Annualized Recurring Revenue increased to $780.1 million, reflecting a 14% year-over-year growth[8] - The company signed eight Enterprise and Tier 1 contracts in the quarter, including agreements with a Tier 1 bank and a $40 billion bank for various digital banking solutions[8] - For Q1 2026, the company expects total revenue between $212.5 million and $216.5 million, indicating year-over-year growth of 12% to 14%[20] - Full-year 2026 revenue guidance is set between $871.0 million and $878.0 million, representing a 10% year-over-year growth[20] - The company anticipates adjusted EBITDA for 2026 to be between $225.0 million and $230.0 million, which would be approximately 26% of revenue[20] - Initial expectations for 2027 include subscription revenue growth of approximately 12.5% to 13% and adjusted EBITDA margin expansion of 150 to 200 basis points[20] - Subscription revenue reached $170.7 million in Q4 2025, up 16.4% from $146.6 million in Q4 2024[32] Operational Metrics - Remaining Performance Obligations (Backlog) grew by $175 million sequentially and $472 million year-over-year, totaling approximately $2.7 billion at quarter-end, representing 7% sequential growth and 21% year-over-year growth[8] - The company's gross profit for Q4 2025 was $115.3 million, compared to $96.3 million in Q4 2024, reflecting a gross margin improvement[32] - Current liabilities increased to $544.1 million in Q4 2025 from $398.9 million in Q4 2024, primarily due to higher accounts payable and accrued liabilities[30] - The company’s accumulated deficit decreased to $612.2 million as of December 31, 2025, from $664.2 million a year earlier[30] - Operating expenses for Q4 2025 were $98.4 million, a marginal increase from $97.9 million in Q4 2024[32] Strategic Focus - The company anticipates continued growth in subscription services and plans to enhance its AI-based solutions in the upcoming quarters[28] - Q2 Holdings is focused on expanding its market presence and improving its sales and marketing capabilities to drive future revenue growth[28] - The company repurchased $5,000 in common shares during the financing activities for the twelve months ended December 31, 2025[34]

Core Insights - Q2 Holdings, Inc. reported strong financial results for Q4 and full-year 2025, achieving a GAAP net income of $20.4 million for Q4 and $52.0 million for the full year, a significant improvement from a net loss of $38.5 million in 2024 [1][2] - The company experienced a 14% year-over-year revenue growth, reaching $208.2 million in Q4 and $794.8 million for the full year [1][2] - Q2 Holdings emphasized its focus on AI-driven innovation and strong execution across its business, which contributed to improved profitability and cash flow [1][2] Financial Performance - GAAP gross margin for Q4 was 55.4%, up from 52.6% in the prior year, and for the full year, it was 54.1%, compared to 50.9% in 2024 [1][2] - Non-GAAP adjusted EBITDA for Q4 was $51.2 million, an increase from $37.6 million in the prior year, and for the full year, it was $186.5 million, up from $125.3 million in 2024 [1][2] - The company signed eight significant contracts in Q4, including agreements with a top five credit union and a $40 billion bank, indicating strong demand for its digital banking solutions [1][2] Growth and Strategy - Q2 Holdings aims to leverage AI as a core element of its long-term strategy, enhancing its platform to deliver faster innovation and improve productivity [1][2] - The company anticipates subscription revenue growth of approximately 12.5% to 13% for 2027, with a long-term goal of achieving a non-GAAP gross margin of around 65% by 2030 [2] - Q2 Holdings is raising its full-year 2026 subscription revenue growth outlook, reflecting confidence in its operational execution and market demand [1][2] Shareholder Actions - In Q4 2025, Q2 retired $191 million in convertible debt and repurchased approximately 69,000 shares at an average price of $72.52, demonstrating a commitment to returning value to shareholders [1][2] - The company has $145 million remaining on its share repurchase authorization, indicating ongoing plans to manage its capital structure effectively [1][2]

Q2 Q2 Holdings, Inc. Investor Presentation February 2026 Ω2 Safe Harbor Statement This presentation and the accompanying oral presentation contain forward-looking statements and information that are based on our management's beliefs and assumptions and our manacement. The satements and information cortained in this presentation that are not purel historical are corward-looking statements within the meaning of the Private Section 21A di the Seourities Act of 1933, as amerched, and Section 21E of the Securiti ...