Q2 (US:QTWO)2025-11-05 21:30Customer Metrics - As of December 31, 2024, the company had 460 Installed Customers on its digital banking platform, up from 450 in 2023 and 444 in 2022[110]. - The average number of Registered Users per Installed Customer increased, with approximately 24.7 million Registered Users as of December 31, 2024, compared to 22.0 million in 2023 and 21.1 million in 2022[111]. - The company's net revenue retention rate was 109%, 108%, and 110% for the years ended December 31, 2024, 2023, and 2022, respectively[113]. - The subscription net revenue retention rate was 114%, 112%, and 115% for the same years[113]. Financial Performance - Subscription Annual Recurring Revenue (ARR) was $681.9 million, $593.9 million, and $500.9 million for the years ended December 31, 2024, 2023, and 2022, respectively[115]. - Total ARR was $824.2 million, $734.8 million, and $655.2 million for the years ended December 31, 2024, 2023, and 2022, respectively[115]. - The annual revenue churn was 4.4%, 6.1%, and 6.3% for the years ended December 31, 2024, 2023, and 2022, respectively[116]. - For the three months ended September 30, 2025, the company reported revenues of $201.7 million, a 15.3% increase from $175.0 million in the same period of 2024[139]. - For the nine months ended September 30, 2025, revenues rose by $73.2 million, or 14.3%, to $586.6 million, primarily due to a $70.9 million increase in subscription revenue[144]. - Revenues for the three months ended September 30, 2025, increased by $26.7 million, or 15.2%, to $201.7 million, driven by a $24.6 million increase in subscription revenue[143]. Operating Expenses and Profitability - Non-GAAP operating income for the three months ended September 30, 2025, was $40.7 million compared to $25.3 million for the same period in 2024[120]. - Adjusted EBITDA for the three months ended September 30, 2025, was $48.8 million, compared to $32.6 million for the same period in 2024, reflecting a 49.5% increase[123]. - The cost of revenues as a percentage of revenues decreased to 46.0% for the three months ended September 30, 2025, down from 49.1% in 2024, indicating improved cost efficiency[141]. - Operating expenses totaled $97.8 million for the three months ended September 30, 2025, compared to $101.9 million in 2024, showing a reduction in expenses[139]. - Research and development expenses for the three months ended September 30, 2025, were $38.9 million, representing 19.3% of revenues, down from 21.1% in 2024[141]. - The company recognized a gross profit of $108.8 million for the three months ended September 30, 2025, which is 54.0% of revenues, up from 50.9% in 2024[141]. Cash Flow and Liquidity - Net cash provided by operating activities for the nine months ended September 30, 2025 was $137.8 million, compared to $92.7 million for the same period in 2024[167]. - As of September 30, 2025, the company had cash, cash equivalents, and investments totaling $568.7 million[166]. - The company experienced a net increase in cash, cash equivalents, and restricted cash of $113.7 million for the nine months ended September 30, 2025[167]. - The company anticipates that cash flow from operations and available borrowings will be adequate to meet cash requirements for the next twelve months[166]. Strategic Initiatives - The company continues to invest in expanding its digital banking platform and intends to pursue strategic acquisitions to enhance its offerings[101]. - The company aims to enhance customer engagement and retention through its comprehensive suite of digital solutions tailored to the needs of financial institutions[102]. - The company plans to continue investing in its sales organization to capture opportunities in the financial institution, FinTech, and Alt-FI markets[100]. - The company plans to continue investing in technology infrastructure and customer support to enhance efficiency and support growth[148]. Market and Economic Conditions - The financial services industry is undergoing significant transformation, with increasing demand for digital solutions from financial institutions and the rise of FinTechs and Alt-FIs[97]. - Recent geopolitical tensions and regulatory changes may introduce uncertainty but have not yet materially impacted the company's operations or financial performance[106][105]. - Inflation has not had a direct material effect on the company's business, but significant inflationary pressures could harm financial condition and results of operations[187]. Legal and Regulatory Matters - The company paid $1.8 million in March 2025 to settle a legal dispute, which is excluded from non-GAAP financial measures[120]. - General and administrative expenses for the nine months ended September 30, 2025, rose by $2.1 million, or 2.3%, to $95.1 million, primarily due to a non-recurring legal settlement charge[156]. Risk Management - The company does not believe it has significant exposure to foreign currency exchange risks due to low volume of payments through foreign subsidiaries[185]. - The most significant currency exposures as of September 30, 2025, included the Indian rupee, Mexican peso, Canadian dollar, Australian dollar, and British pound[185]. - The company does not currently use derivative financial instruments to mitigate foreign currency exchange risks but may consider this in the future[186].