Total first quarter revenue of $44.5 million, up 32 percent
year-over-year
AUSTIN, Texas--(BUSINESS WIRE)--
Q2
Holdings, Inc. (NYSE:QTWO), a leading provider of secure,
cloud-based digital banking solutions for community-focused financial
institutions, today announced results for its first quarter ending March
31, 2017.
First Quarter 2017 Results
-
Revenue for the first quarter of $44.5 million, up 32 percent
year-over-year and up 6 percent sequentially.
-
GAAP gross margin for the first quarter of 48.9 percent, up from 47.2
percent one year ago. Non-GAAP gross margin for the first quarter of
52.5 percent, up from 50.8 percent one year ago.
-
GAAP net loss for the first quarter of $7.0 million, which compares to
a GAAP net loss of $9.7 million for the first quarter of 2016.
Adjusted EBITDA for the first quarter of positive $1.1 million, an
improvement from negative $2.4 million one year ago.
“Our clients’ growth fueled strong organic user growth in the first
quarter, and we experienced wins in both the bank and credit union
markets,” said Matt Flake, CEO of Q2. “We also recently hosted CONNECT,
our annual conference, and I’m encouraged by the fact that our clients
feel optimistic about their business environments and the future
direction of the Q2 Platform.”
First Quarter 2017 Highlights
-
Hosted CONNECT, Q2’s annual client conference, in early April with
record attendance from both client and prospect financial institutions.
-
Delivered multiple Tier 1 customers into production on Q2’s corporate
banking platform.
-
Launched new Active-Active disaster recovery solution designed to
noticeably mitigate downtime and deliver increased performance in the
event of an outage. Reflective of Q2’s commitment of over $20 million
over the last five years in data center hosting solutions.
-
Exited the first quarter with approximately 8.9 million registered
users on the Q2 Platform, representing 4 percent sequential and 32
percent year-over-year growth.
Financial Outlook
Q2 Holdings is providing guidance for its second quarter 2017 as follows:
-
Total revenue of $46.9 to $47.5 million, which would represent
year-over-year growth of 30 percent to 32 percent.
-
Adjusted EBITDA of positive $600 thousand to $1.0 million. GAAP net
loss is the most comparable GAAP measure to adjusted EBITDA. Adjusted
EBITDA differs from GAAP net loss in that it excludes depreciation and
amortization, stock based compensation, acquisition-related costs,
interest, and income taxes. 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.
Q2 Holdings is providing guidance for the full-year 2017 as follows:
-
Total revenue of $192.3 to $194.3 million, which would represent
year-over-year growth of 28 percent to 29 percent.
-
Adjusted EBITDA of positive $6.5 million to $7.7 million. Adjusted
EBITDA differs from GAAP net loss in that it excludes depreciation and
amortization, stock based compensation, acquisition-related costs,
interest, and income taxes. 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.
Conference Call Details
Date:
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May 4, 2017
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Time:
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8:30 a.m. EDT
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Hosts:
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Matt Flake, CEO / Jennifer Harris, CFO
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Dial in:
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US toll free: 1-877-201-0168
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International:
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1-647-788-4901
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Conference ID:
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8089225
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Please join the conference call at least 10 minutes before start time to
ensure the line is connected. A live webcast of the conference call will
be accessible from the investor services section of the Q2 Holdings,
Inc. website at http://investors.q2ebanking.com/.
A replay of the webcast will also be available at this website on a
temporary basis shortly after the call.
About Q2 Holdings, Inc.
Q2 Holdings, Inc. (Q2) is a leading provider of secure,
cloud-based digital banking solutions headquartered in Austin, Texas. Q2
is driven by a culture of partnership and dedication to empowering
community-focused banks and credit unions with digital banking
solutions that help them stand apart, scale smart and grow beyond with
retail and commercial account holders. Q2’s solutions are designed to
deliver a compelling, secure and consistent user experience on any
device and enable customers to improve account holder retention and
to create incremental sales opportunities. To learn more about Q2, visit www.q2ebanking.com.
Use of Non-GAAP Measures
Q2 uses the following non-GAAP financial measures: 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 loss; and,
non-GAAP net loss. 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 adjusted EBITDA, Q2 adjusts net loss for such things as
interest, taxes, depreciation and amortization, stock-based
compensation, acquisition-related costs, amortization of technology and
intangibles, and unoccupied lease charges. In the case of non-GAAP gross
margin and non-GAAP gross profit, Q2 adjusts gross profit and gross
margin for stock-based compensation and amortization of acquired
technology. 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. In the case of non-GAAP operating loss
and non-GAAP net loss, Q2 adjusts operating loss and net loss,
respectively, for stock-based compensation, acquisition related-costs,
amortization of acquired technology, amortization of acquired
intangibles, and unoccupied lease charges.
These non-GAAP measures 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 positive sales momentum, optimism about the banking
business environment and the future direction of Q2 products and
execution, 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 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 and new
products and services; (b) the risk that the market for Q2’s solutions
does not grow as anticipated; (c) the risk that Q2’s increased focus on
selling to larger 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
impacts 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; (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 data breaches and breaches of security measures within Q2’s
products, systems and infrastructure and the resultant harm to Q2’s
business and its ability to sell its products and services; (h) the
impact that a slowdown in the economy, financial markets, and credit
markets has 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 associated with managing growth
and the challenges associated with improving operations and hiring,
retaining and motivating employees to support such growth; (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) litigation
related to intellectual property and other matters and any related
claims, negotiations and settlements; and (q) the risks associated with
further consolidation in the financial services industry.
Additional information relating to the uncertainty affecting the Q2
business are contained in Q2’s filings with the Securities and Exchange
Commission. These documents are available on the SEC Filings section of
the Investor Services section of Q2’s website at http://investors.q2ebanking.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.
|
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Q2 Holdings, Inc.
|
Condensed Consolidated Balance Sheets
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
42,756
|
|
|
|
$
|
54,873
|
|
|
|
Restricted cash
|
|
|
|
1,315
|
|
|
|
|
1,315
|
|
|
|
Investments
|
|
|
|
39,409
|
|
|
|
|
42,249
|
|
|
|
Accounts receivable, net
|
|
|
|
8,449
|
|
|
|
|
12,240
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
6,017
|
|
|
|
|
3,215
|
|
|
|
Deferred solution and other costs, current portion
|
|
|
|
8,422
|
|
|
|
|
8,839
|
|
|
|
Deferred implementation costs, current portion
|
|
|
|
3,275
|
|
|
|
|
2,938
|
|
Total current assets
|
|
|
|
109,643
|
|
|
|
|
125,669
|
|
Property and equipment, net
|
|
|
|
31,701
|
|
|
|
|
27,480
|
|
Deferred solution and other costs, net of current portion
|
|
|
|
12,853
|
|
|
|
|
11,125
|
|
Deferred implementation costs, net of current portion
|
|
|
|
8,110
|
|
|
|
|
8,096
|
|
Intangible assets, net
|
|
|
|
15,907
|
|
|
|
|
15,208
|
|
Goodwill
|
|
|
|
12,876
|
|
|
|
|
12,876
|
|
Other long-term assets
|
|
|
|
496
|
|
|
|
|
526
|
|
Total assets
|
|
|
$
|
191,586
|
|
|
|
$
|
200,980
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
$
|
22,836
|
|
|
|
$
|
29,088
|
|
|
|
Deferred revenues, current portion
|
|
|
|
28,781
|
|
|
|
|
30,123
|
|
Total current liabilities
|
|
|
|
51,617
|
|
|
|
|
59,211
|
|
Deferred revenues, net of current portion
|
|
|
|
29,935
|
|
|
|
|
31,707
|
|
Deferred rent, net of current portion
|
|
|
|
9,181
|
|
|
|
|
9,466
|
|
Other long-term liabilities
|
|
|
|
473
|
|
|
|
|
361
|
|
Total liabilities
|
|
|
|
91,206
|
|
|
|
|
100,745
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
Treasury stock
|
|
|
|
(455
|
)
|
|
|
|
(417
|
)
|
|
|
Additional paid-in capital
|
|
|
|
233,876
|
|
|
|
|
226,485
|
|
|
|
Accumulated other comprehensive loss
|
|
|
|
(55
|
)
|
|
|
|
(54
|
)
|
|
|
Accumulated deficit
|
|
|
|
(132,990
|
)
|
|
|
|
(125,783
|
)
|
Total stockholders' equity
|
|
|
|
100,380
|
|
|
|
|
100,235
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
191,586
|
|
|
|
$
|
200,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 Holdings, Inc.
|
Condensed Consolidated Statements of Comprehensive Loss
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
44,534
|
|
|
|
$
|
33,759
|
|
Cost of revenues (1) (2)
|
|
|
|
22,772
|
|
|
|
|
17,814
|
|
Gross profit
|
|
|
|
21,762
|
|
|
|
|
15,945
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Sales and marketing (1)
|
|
|
|
9,878
|
|
|
|
|
8,207
|
|
|
Research and development (1)
|
|
|
|
9,651
|
|
|
|
|
7,903
|
|
|
General and administrative (1)
|
|
|
|
8,452
|
|
|
|
|
7,421
|
|
|
Acquisition related costs
|
|
|
|
348
|
|
|
|
|
1,482
|
|
|
Amortization of acquired intangibles
|
|
|
|
371
|
|
|
|
|
368
|
|
Total operating expenses
|
|
|
|
28,700
|
|
|
|
|
25,381
|
|
Loss from operations
|
|
|
|
(6,938
|
)
|
|
|
|
(9,436
|
)
|
Other income, net
|
|
|
|
34
|
|
|
|
|
14
|
|
Loss before income taxes
|
|
|
|
(6,904
|
)
|
|
|
|
(9,422
|
)
|
Provision for income taxes
|
|
|
|
(136
|
)
|
|
|
|
(230
|
)
|
Net loss
|
|
|
$
|
(7,040
|
)
|
|
|
$
|
(9,652
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale investments
|
|
|
|
(1
|
)
|
|
|
|
89
|
|
Comprehensive loss
|
|
|
$
|
(7,041
|
)
|
|
|
$
|
(9,563
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
|
$
|
(0.17
|
)
|
|
|
$
|
(0.25
|
)
|
Weighted average common shares outstanding, basic and diluted
|
|
|
|
40,630
|
|
|
|
|
39,024
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes stock-based compensation expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2017
|
|
|
2016
|
Cost of revenues
|
|
|
$
|
724
|
|
|
|
$
|
406
|
|
Sales and marketing
|
|
|
|
631
|
|
|
|
|
435
|
|
Research and development
|
|
|
|
945
|
|
|
|
|
632
|
|
General and administrative
|
|
|
|
1,897
|
|
|
|
|
1,132
|
|
|
Total stock-based compensation expenses
|
|
|
$
|
4,197
|
|
|
|
$
|
2,605
|
|
|
|
|
|
|
|
|
|
(2)
|
Includes amortization of acquired technology of $0.9 million and
$0.8 million for the three months ended March 31, 2017 and 2016,
respectively.
|
|
|
|
Q2 Holdings, Inc.
|
Condensed Consolidated Statements of Cash Flows
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(7,040
|
)
|
|
|
$
|
(9,652
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
Amortization of deferred implementation, solution and other costs
|
|
|
|
1,719
|
|
|
|
|
1,636
|
|
|
|
Depreciation and amortization
|
|
|
|
3,525
|
|
|
|
|
2,927
|
|
|
|
Amortization of debt issuance costs
|
|
|
|
24
|
|
|
|
|
24
|
|
|
|
Amortization of premiums on investments
|
|
|
|
69
|
|
|
|
|
102
|
|
|
|
Stock-based compensation expenses
|
|
|
|
4,197
|
|
|
|
|
2,605
|
|
|
|
Deferred income taxes
|
|
|
|
117
|
|
|
|
|
70
|
|
|
|
Other non-cash charges
|
|
|
|
(6
|
)
|
|
|
|
24
|
|
|
|
Changes in operating assets and liabilities
|
|
|
|
(13,273
|
)
|
|
|
|
2,451
|
|
Cash provided by (used in) operating activities
|
|
|
|
(10,668
|
)
|
|
|
|
187
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Net redemptions (purchases) of investments
|
|
|
|
2,770
|
|
|
|
|
(6,183
|
)
|
|
|
Purchases of property and equipment
|
|
|
|
(5,361
|
)
|
|
|
|
(3,590
|
)
|
|
|
Business combinations and asset acquisitions, net of cash acquired
|
|
|
|
(1,316
|
)
|
|
|
|
(95
|
)
|
|
|
Capitalization of software development costs
|
|
|
|
(532
|
)
|
|
|
|
(563
|
)
|
|
|
Purchases of intangible assets
|
|
|
|
-
|
|
|
|
|
(75
|
)
|
Cash used in investing activities
|
|
|
|
(4,439
|
)
|
|
|
|
(10,506
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments on financing obligations and capital leases, net
|
|
|
|
-
|
|
|
|
|
(2,187
|
)
|
|
|
Proceeds from issuance of common stock
|
|
|
|
2,990
|
|
|
|
|
716
|
|
Net cash provided by (used in) financing activities
|
|
|
|
2,990
|
|
|
|
|
(1,471
|
)
|
Net decrease in cash and cash equivalents
|
|
|
|
(12,117
|
)
|
|
|
|
(11,790
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
|
54,873
|
|
|
|
|
67,049
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
42,756
|
|
|
|
$
|
55,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 Holdings, Inc.
|
Reconciliation of GAAP to Non-GAAP Measures
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
GAAP gross profit
|
|
|
$
|
21,762
|
|
|
|
$
|
15,945
|
|
|
|
Stock-based compensation
|
|
|
|
724
|
|
|
|
|
406
|
|
|
|
Amortization of acquired technology
|
|
|
|
886
|
|
|
|
|
798
|
|
Non-GAAP gross profit
|
|
|
$
|
23,372
|
|
|
|
$
|
17,149
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross margin:
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit
|
|
|
$
|
23,372
|
|
|
|
$
|
17,149
|
|
|
|
GAAP revenue
|
|
|
|
44,534
|
|
|
|
|
33,759
|
|
Non-GAAP gross margin
|
|
|
|
52.5
|
%
|
|
|
|
50.8
|
%
|
|
|
|
|
|
|
|
|
|
GAAP sales and marketing expense
|
|
|
$
|
9,878
|
|
|
|
$
|
8,207
|
|
|
|
Stock-based compensation
|
|
|
|
(631
|
)
|
|
|
|
(435
|
)
|
Non-GAAP sales and marketing expense
|
|
|
$
|
9,247
|
|
|
|
$
|
7,772
|
|
|
|
|
|
|
|
|
|
|
GAAP research and development expense
|
|
|
$
|
9,651
|
|
|
|
$
|
7,903
|
|
|
|
Stock-based compensation
|
|
|
|
(945
|
)
|
|
|
|
(632
|
)
|
Non-GAAP research and development expense
|
|
|
$
|
8,706
|
|
|
|
$
|
7,271
|
|
|
|
|
|
|
|
|
|
|
GAAP general and administrative expense
|
|
|
$
|
8,452
|
|
|
|
$
|
7,421
|
|
|
|
Stock-based compensation
|
|
|
|
(1,897
|
)
|
|
|
|
(1,132
|
)
|
Non-GAAP general and administrative expense
|
|
|
$
|
6,555
|
|
|
|
$
|
6,289
|
|
|
|
|
|
|
|
|
|
|
GAAP operating loss
|
|
|
$
|
(6,938
|
)
|
|
|
$
|
(9,436
|
)
|
|
|
Stock-based compensation
|
|
|
|
4,197
|
|
|
|
|
2,605
|
|
|
|
Acquisition related costs
|
|
|
|
348
|
|
|
|
|
1,482
|
|
|
|
Amortization of acquired technology
|
|
|
|
886
|
|
|
|
|
798
|
|
|
|
Amortization of acquired intangibles
|
|
|
|
371
|
|
|
|
|
368
|
|
Non-GAAP operating loss
|
|
|
$
|
(1,136
|
)
|
|
|
$
|
(4,183
|
)
|
|
|
|
|
|
|
|
|
|
GAAP net loss
|
|
|
$
|
(7,040
|
)
|
|
|
$
|
(9,652
|
)
|
|
|
Stock-based compensation
|
|
|
|
4,197
|
|
|
|
|
2,605
|
|
|
|
Acquisition related costs
|
|
|
|
348
|
|
|
|
|
1,482
|
|
|
|
Amortization of acquired technology
|
|
|
|
886
|
|
|
|
|
798
|
|
|
|
Amortization of acquired intangibles
|
|
|
|
371
|
|
|
|
|
368
|
|
Non-GAAP net loss
|
|
|
$
|
(1,238
|
)
|
|
|
$
|
(4,399
|
)
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP net loss to adjusted EBITDA:
|
|
|
|
|
|
|
|
|
GAAP net loss
|
|
|
$
|
(7,040
|
)
|
|
|
$
|
(9,652
|
)
|
|
|
Depreciation and amortization
|
|
|
|
3,525
|
|
|
|
|
2,927
|
|
|
|
Stock-based compensation
|
|
|
|
4,197
|
|
|
|
|
2,605
|
|
|
|
Provision for income taxes
|
|
|
|
136
|
|
|
|
|
230
|
|
|
|
Interest income, net
|
|
|
|
(34
|
)
|
|
|
|
(14
|
)
|
|
|
Acquisition related costs
|
|
|
|
348
|
|
|
|
|
1,482
|
|
Adjusted EBITDA
|
|
|
$
|
1,132
|
|
|
|
$
|
(2,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170503006290/en/
Source: Q2 Holdings, Inc.