Q2 (QTWO)2025-02-12 21:17Financial Performance - Fourth quarter revenue reached $183.0 million, a 13% increase year-over-year, and full-year revenue totaled $696.5 million, up 12% year-over-year [7]. - GAAP net income for the fourth quarter was $0.2 million, compared to a net loss of $18.1 million in the prior-year quarter, with a full-year net loss of $38.5 million, improved from a loss of $65.4 million in 2023 [7]. - Adjusted EBITDA for the fourth quarter was $37.6 million, up from $23.2 million in the prior-year quarter, with full-year adjusted EBITDA of $125.3 million, an increase from $76.9 million in 2023 [7]. - Q2 Holdings reported revenues of $183,045,000 for the three months ended December 31, 2024, representing a 12.0% increase from $162,118,000 in the same period of 2023 [30]. - The company achieved a gross profit of $96,343,000 for the three months ended December 31, 2024, compared to $81,393,000 in the prior year, indicating a gross margin improvement [30]. - Operating expenses totaled $97,918,000 for the three months ended December 31, 2024, slightly down from $99,410,000 in the same quarter of 2023 [30]. - Q2 Holdings reported a net income of $164,000 for the three months ended December 31, 2024, a significant recovery from a net loss of $18,079,000 in the same period of 2023 [30]. - Non-GAAP gross profit for the twelve months ended December 31, 2024, was $390,207 thousand, compared to $340,860 thousand in 2023, reflecting a growth of 14.5% [34]. - Adjusted EBITDA for the twelve months ended December 31, 2024, reached $125,338 thousand, significantly higher than $76,940 thousand in 2023, marking an increase of 63.2% [34]. - Free cash flow for the twelve months ended December 31, 2024, was $106,720 thousand, compared to $39,649 thousand in 2023, indicating a substantial increase of 169.5% [36]. - GAAP operating loss narrowed to $1,575 thousand in Q4 2024 from a loss of $18,017 thousand in Q4 2023, showing a significant improvement [34]. - Non-GAAP operating income for the twelve months ended December 31, 2024, was $95,464 thousand, compared to $49,660 thousand in 2023, reflecting an increase of 92.2% [34]. - GAAP net income for Q4 2024 was $164 thousand, a recovery from a net loss of $18,079 thousand in Q4 2023 [34]. Revenue Growth and Projections - Subscription Annualized Recurring Revenue increased to $682 million, a 15% year-over-year growth from $594 million at the end of 2023 [16]. - Total committed Backlog reached approximately $2.2 billion, representing 9% sequential growth and 21% year-over-year growth [16]. - The company anticipates total revenue for Q1 2025 to be between $184.0 million and $188.0 million, representing year-over-year growth of 11% to 14% [20]. - Q2 updated its three-year financial framework, increasing the average annual subscription revenue growth target from 14% to 15% [13]. Cash Flow and Assets - Cash and cash equivalents rose to $358,560,000 as of December 31, 2024, compared to $229,655,000 at the end of 2023, indicating improved liquidity [28]. - The company reported a net cash provided by operating activities of $135,751,000 for the twelve months ended December 31, 2024, compared to $70,292,000 in the previous year, showing enhanced operational efficiency [32]. - Net cash provided by operating activities for the twelve months ended December 31, 2024, was $135,751 thousand, up from $70,292 thousand in 2023, an increase of 93.4% [36]. - The total assets of Q2 Holdings increased to $1,294,795,000 as of December 31, 2024, up from $1,201,425,000 a year earlier, reflecting growth in the company's financial position [28]. Strategic Initiatives and Market Outlook - The company signed five Tier 1 digital banking contracts, including four new customers and an expansion within an existing customer [8]. - Q2's management expressed confidence in capitalizing on market opportunities and driving continued success in the coming years [24]. - The company raised its full-year 2026 free cash flow conversion target from 70% to 85% [13]. - Future outlook includes a focus on developing AI-based solutions and expanding international operations, despite potential geopolitical and market risks [26]. - The company has emphasized the risks associated with managing growth and global operations, particularly in the context of economic uncertainties and regulatory changes [26]. Profitability Challenges - Q2 Holdings' accumulated deficit increased to $664,230,000 as of December 31, 2024, from $625,694,000 a year earlier, highlighting ongoing challenges in profitability [28]. - Non-GAAP gross margin improved to 57.4% in Q4 2024 from 56.0% in Q4 2023, and for the full year, it increased to 56.0% from 54.5% [34]. - The company reported a non-GAAP sales and marketing expense of $89,172 thousand for the twelve months ended December 31, 2024, down from $92,751 thousand in 2023, indicating a reduction of 3.1% [34].