Q2 (QTWO) - 2025 Q2 - Quarterly Results

Q2 Holdings, Inc. Second Quarter 2025 Financial Results Announcement Q2 Holdings, Inc. announces its second quarter 2025 financial results, highlighting key performance and future outlook Executive Summary Q2 Holdings reported solid Q2 2025 financial results, driven by strong sales, renewals, and demand for risk and fraud solutions, with confidence in profitable growth - Q2 finished the first half of the year with solid sales execution and financial results[5] - Second quarter bookings included meaningful renewals and expansions, underscoring the long-term value of the platform[5] - Continued demand for risk and fraud solutions was observed[5] - CEO Matt Flake expressed confidence in delivering on the profitable growth strategy for the remainder of the year[5] Second Quarter 2025 Highlights Q2 Holdings achieved strong financial performance and significant operational milestones in Q2 2025, driven by customer engagement and innovation Financial Performance Q2 Holdings reported strong Q2 2025 financial performance, with revenue up 13% year-over-year, a swing to GAAP net income, and significantly increased Adjusted EBITDA Q2 2025 Key Financial Performance Metrics | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Q1 2025 (in millions) | YoY Change | | :-------------------- | :-------- | :-------- | :-------- | :--------- | | Revenue | 195.1 | 172.9 | 189.5 | +13% | | GAAP Gross Margin | 53.6% | 50.2% | 53.2% | +3.4 pp | | GAAP Net Income (Loss) | 11.8 | (13.1) | 4.8 | N/A (swing to profit) | | Non-GAAP Gross Margin | 57.5% | 55.7% | 57.9% | +1.8 pp | | Adjusted EBITDA | 45.8 | 29.9 | 40.7 | +53.2% | - Revenue of $195.1 million, up 13 percent year-over-year and 3 percent from first quarter 2025[8] - GAAP net income of $11.8 million compared to GAAP net loss of $13.1 million for the prior-year quarter[8] - Adjusted EBITDA of $45.8 million, up from $29.9 million for the prior-year quarter[8] Operational Achievements Q2 achieved operational milestones including six Tier 1 contracts, 13% Subscription ARR growth to $716.0 million, and a 21% increase in total committed Backlog to ~$2.4 billion - Signed six Tier 1 contracts in the quarter, including expansion agreements with Top 100 U.S. banks for retail digital banking and relationship pricing, and new digital banking contracts[9] Key Operational Metrics | Metric | Q2 2025 | YoY Change | Sequential Change | | :-------------------------------- | :-------- | :--------- | :---------------- | | Subscription Annualized Recurring Revenue (ARR) (in millions) | $716.0 | +13% | N/A | | Total Committed Backlog (in billions) | ~$2.4 | +21% | +3% | - Remaining Performance Obligations total, or Backlog, increased by $61 million sequentially and $403 million year-over-year[9] Customer Engagement and Innovation Q2's CONNECT conference saw record attendance, highlighting customer focus on fraud mitigation, commercial banking innovation, and platform extensibility, showcasing new ERP integration and Q2 Innovation Studio adoption - Q2 hosted its highest-attended CONNECT customer conference to date, with customers underscoring increasing focus on fraud mitigation, commercial banking innovation, and platform extensibility[7] - Fraud and risk innovation was a key focus, with Q2 positioning its single-platform architecture as a key differentiator in fraud prevention[8][10] - Q2 introduced a new direct ERP integration product designed to enhance automation, security, and reconciliation for commercial banking[11] - Over 85% of Q2's digital banking customers now leverage Q2 Innovation Studio, demonstrating outcomes like over 50% reduction in account takeover fraud and significant customer support deflection through AI-powered chat tools[12] Financial Outlook Q2 Holdings is raising its full-year guidance for revenue, adjusted EBITDA, and free cash flow conversion, reflecting strong performance and efficient scaling CFO Commentary and Guidance Update CFO Jonathan Price noted a strong quarter with revenue and adjusted EBITDA above guidance, leading to raised full-year guidance for revenue, adjusted EBITDA, and free cash flow conversion - Q2 delivered another strong quarter, with revenue and adjusted EBITDA results above the high end of guidance[13] - Full-year guidance is being raised across revenue, adjusted EBITDA, and free cash flow conversion[13] Third Quarter 2025 Guidance For Q3 2025, Q2 Holdings expects total revenue between $196.0 million and $200.0 million, representing 12% to 14% year-over-year growth, and Adjusted EBITDA between $44.0 million and $47.0 million Q3 2025 Financial Guidance | Metric | Q3 2025 Guidance (in millions) | YoY Growth | | :---------------- | :----------------- | :--------- | | Total Revenue | $196.0 - $200.0 | 12% - 14% | | Adjusted EBITDA | $44.0 - $47.0 | N/A | - Adjusted EBITDA is expected to represent 22 to 24 percent of revenue for the quarter[16] Full-Year 2025 Guidance Q2 Holdings updated its full-year 2025 guidance, projecting total revenue between $783.0 million and $788.0 million (12% to 13% year-over-year growth) and Adjusted EBITDA between $177.0 million and $181.0 million Full-Year 2025 Financial Guidance | Metric | Full-Year 2025 Guidance (in millions) | YoY Growth | | :---------------- | :---------------------- | :--------- | | Total Revenue | $783.0 - $788.0 | 12% - 13% | | Adjusted EBITDA | $177.0 - $181.0 | N/A | - Adjusted EBITDA is expected to represent 23 percent of revenue for the year[16] Conference Call Details Details for the Q2 Holdings, Inc. second quarter 2025 financial results conference call are provided, including date, time, hosts, and registration links Conference Call Information | Detail | Information | | :--- | :--- | | Date: | Wednesday, July 30, 2025 | | Time: | 5:00 p.m. EDT | | Hosts: | Matt Flake, Chairman & CEO / Jonathan Price, CFO / Kirk Coleman, President | | Conference Call Registration: | https://registrations.events/direct/Q4I60810257 | | Webcast Registration: | https://events.q4inc.com/attendee/591091412 | - All participants must register using the provided links, and an archived replay of the webcast will be available on the investor relations website[17] About Q2 Holdings, Inc. Q2 Holdings, Inc. is a leading provider of digital transformation solutions for financial services, headquartered in Austin, Texas, and publicly traded on the NYSE - Q2 is a leading provider of digital transformation solutions for financial services, serving banks, credit unions, alternative finance companies, and fintechs in the U.S. and internationally[18] - The company enables its customers to provide comprehensive, data-driven digital engagement solutions for consumers, small businesses, and corporate clients[18] - Headquartered in Austin, Texas, Q2 is publicly traded on the NYSE under the stock symbol QTWO[18] Use of Non-GAAP Measures This section defines and explains the rationale for Q2's use of non-GAAP financial measures, along with their adjustments and limitations Definition and Rationale Q2 uses non-GAAP financial measures, such as adjusted EBITDA and non-GAAP gross margin, which management believes are useful for evaluating core operating performance by excluding items not indicative of core business - Q2 uses non-GAAP measures like adjusted EBITDA, non-GAAP gross margin, and non-GAAP