Q2 Holdings, Inc. Announces Fourth Quarter and Full-Year 2023 Financial Results

Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for financial services, today announced results for its fourth quarter and full year ending December 31, 2023.

GAAP Results for the Fourth Quarter and Full-Year 2023

  • Revenue for the fourth quarter of $162.1 million, up 11 percent year-over-year and up 5 percent from the third quarter of 2023. Full-year 2023 revenue of $624.6 million, up 10 percent year-over-year.
  • GAAP gross margin for the fourth quarter of 50.2 percent, up from 45.2 percent for the prior-year quarter and up from 47.8 percent for the third quarter of 2023. GAAP gross margin for full-year 2023 of 48.5 percent, up from 45.3 percent for the full-year 2022.
  • GAAP net loss for the fourth quarter of $18.1 million, compared to GAAP net losses of $32.4 million for the prior-year quarter and $23.2 million for the third quarter of 2023. GAAP net loss for full-year 2023 of $65.4 million, compared to $109.0 million for full-year 2022.

Non-GAAP Results for the Fourth Quarter and Full-Year 2023

  • Non-GAAP revenue for the fourth quarter of $162.2 million, up 11 percent year-over-year and up 5 percent from the third quarter of 2023. Full-year 2023 non-GAAP revenue of $625.0 million, up 10 percent year-over-year.
  • Non-GAAP gross margin for the fourth quarter of 56.0 percent, up from the prior-year quarter of 51.5 percent and up from 53.9 percent for the third quarter of 2023. Non-GAAP gross margin for full-year 2023 of 54.5 percent, up from 51.6 percent for full-year 2022.
  • Adjusted EBITDA for the fourth quarter of $23.2 million, up from $8.4 million for the prior-year quarter and $19.7 million for the third quarter of 2023. Full-year 2023 adjusted EBITDA of $76.9 million, up from $36.9 million for the full-year 2022.

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

“We closed out 2023 with our best bookings performance in company history, which included our two largest deals ever,” said Q2 CEO Matt Flake. “Our customers' focus on deposit growth drove heightened demand for our solutions throughout 2023, and our competitive differentiation enabled us to make 2023 a record year that included our highest-ever net new bookings, renewals, and backlog growth. This, coupled with our marked improvements in profitability expansion in the year, gives me confidence in our trajectory for 2024 and beyond.”

Fourth Quarter Highlights

  • Signed four Tier 1 digital banking contracts including (a):
  • Top 10 U.S. Credit Union to utilize our retail solutions;
  • Three banks to utilize our commercial and small business solutions.
  • Signed a new Top 4 U.S. bank to a relationship pricing solution contract.
  • Signed an expansion deal with an existing Top 4 U.S. bank customer to further utilize our relationship pricing solutions.
  • Subscription Annualized Recurring Revenue increased to $593.9 million, up 19 percent year-over-year from $500.9 million at the end of 2022.
  • Remaining Performance Obligation total, or Backlog, increased by $269.2 million sequentially, resulting in total committed Backlog of approximately $1.8 billion at quarter-end, representing 17 percent sequential growth and 23 percent year-over-year growth.

“We delivered strong financial results to close out the year, with adjusted EBITDA at the high end of our guidance,” said David Mehok, Q2 CFO. “We've made significant strides in key financial metrics throughout 2023, effectively managing costs and strategically deploying capital. This led to more than doubling our full-year Adjusted EBITDA and a substantial increase in annual free cash flow when compared to the prior year. We believe that a strong demand environment and our progress on profitability improvements positions us well to execute on our new three-year financial targets.”

Financial Outlook

As of February 21, 2024, Q2 Holdings is providing guidance for its first quarter of 2024 and full-year 2024, which represents Q2 Holdings’ current estimates on Q2 Holdings’ operations and financial results. The financial information below represents forward-looking, non-GAAP financial information, including estimates of non-GAAP revenue and adjusted EBITDA. GAAP net loss is the most comparable GAAP measure to adjusted EBITDA. Adjusted EBITDA differs from GAAP net loss in that it excludes items such as depreciation and amortization, stock-based compensation, transaction-related costs, interest and other (income) expense, income taxes, lease and other restructuring charges, (gain) loss on extinguishment of debt and the impact to deferred revenue from purchase accounting. 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 forward-looking adjusted EBITDA guidance to GAAP net loss. However, it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods.

Q2 Holdings is providing guidance for its first quarter of 2024 as follows:

  • Total non-GAAP revenue of $161.7 million to $164.7 million, which would represent year-over-year growth of 6 to 8 percent.
  • Adjusted EBITDA of $22.0 million to $24.0 million, representing 13 to 15 percent of non-GAAP revenue for the quarter.

Q2 Holdings is providing guidance for the full-year 2024 as follows:

  • Total non-GAAP revenue of $683.0 million to $689.0 million, which would represent year-over-year growth of 9 to 10 percent.
  • Adjusted EBITDA of $107.0 million to $111.0 million, representing approximately 16 percent of non-GAAP revenue for the year.

New Three-Year Financial Targets

Q2 Holdings is providing new three-year targets, for the years 2024 through 2026 as follows:

  • Average annual subscription revenue growth of approximately 14 percent.
  • Average annual adjusted EBITDA margin expansion of 300 to 400 basis points.
  • Free Cash Flow of greater than 70 percent of our total Adjusted EBITDA for the full year of 2026.

Conference Call Details

Date:

Wednesday, February 21, 2024

Time:

5:00 p.m. EST

Hosts:

Matt Flake, CEO / David Mehok, CFO / Kirk Coleman, President / Jonathan Price, EVP Strategy and Emerging Businesses

Conference Call Registration:

https://conferencingportals.com/event/sPCVBfoJ

Webcast Registration:

https://events.q4inc.com/attendee/606425959

 

 

All participants must register using the above links (either the webcast or conference call). A webcast of the conference call and financial results will be accessible from the investor relations section of the Q2 website at http://investors.Q2.com/. In addition, a live conference call dial-in will be available upon registration. Participants should dial in at least 10 minutes before the start of the conference call. An archived replay of the webcast will be available on this website for a limited time after the call. Q2 has used, and intends to continue to use, its investor relations website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

About Q2 Holdings, Inc.

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. Q2 enables its financial institutions and fintech companies to provide comprehensive, data-driven digital engagement solutions for consumers, small businesses and corporate clients. Headquartered in Austin, Texas, Q2 has offices worldwide and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com. Follow us on LinkedIn and X to stay up to date.

Use of Non-GAAP Measures

Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; adjusted EBITDA margin; 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 expense; non-GAAP operating income (loss); and free cash flow. 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 non-GAAP revenue, Q2 adjusts revenue to exclude the impact to deferred revenue from purchase accounting adjustments. In the case of adjusted EBITDA, Q2 adjusts net loss for such items as interest and other (income) expense, taxes, depreciation and amortization, stock-based compensation, transaction-related costs, lease and other restructuring charges, (gain) loss on extinguishment of debt and the impact to deferred revenue from purchase accounting. In the case of adjusted EBITDA margin, Q2 calculates adjusted EBITDA margin by dividing adjusted EBITDA by non-GAAP revenue. In the case of non-GAAP gross margin and non-GAAP gross profit, Q2 adjusts gross profit and gross margin for stock-based compensation, amortization of acquired technology, transaction-related costs, lease and other restructuring charges and the impact to deferred revenue from purchase accounting. 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. Non-GAAP operating expense is calculated by taking the sum of non-GAAP sales and marketing expenses, non-GAAP research and development expense, and non-GAAP general and administrative expense. In the case of non-GAAP operating income (loss), Q2 adjusts operating income (loss), for stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangibles, lease and other restructuring charges, and the impact to deferred revenue from purchase accounting. In the case of free cash flow, Q2 adjusts net cash provided by (used in) operating activities for purchases of property and equipment and capitalized software development costs.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income (loss). As a result, these non-GAAP financial measures have limitations and 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: strong demand for our solutions; our competitive differentiation; improvements in profitability expansion; our trajectory for 2024 and beyond; our progress on profitability improvements; our new three-year financial targets and our ability to execute on them; 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) global macroeconomic uncertainties and challenges in the financial services industry and credit markets, including as a result of recent bank failures, inflation and higher interest rates and their potential impacts on Q2's prospects' and customers' operations, the timing of prospect and customer implementations and purchasing decisions, Q2's business sales cycles and on account holder or end user, or End User, usage of Q2's solutions; (b) the risk of increased or new competition in Q2's existing markets and as Q2 enters new markets or new segments of existing markets, or as Q2 offers new solutions; (c) the risks associated with the development of Q2's solutions and changes to the market for Q2's solutions compared to Q2's expectations; (d) quarterly fluctuations in Q2's operating results relative to Q2's expectations and guidance and the accuracy of Q2's forecasts; (e) the risks and increased costs associated with managing growth and the challenges associated with improving global operations, hiring, retaining and motivating employees to support such growth, particularly in light of recent macroeconomic factors, including increased employee turnover, labor shortages, wage inflation and competition for talent; (f) the risks associated with Q2's transactional business which are typically driven by End-User behavior and can be influenced by external drivers outside of Q2's control; (g) the risks associated with effectively managing Q2's business and cost structure in an uncertain macroeconomic environment, including as a result of challenges in the financial services industry and the effects of seasonal or other unexpected trends; (h) the risks associated with geopolitical uncertainties, including the heightened risk of state-sponsored cyberattacks on financial services and other critical infrastructure; (i) the risks associated with accurately forecasting and managing the impacts of any macroeconomic downturn or challenges in the financial services industry on Q2's customers and their End Users, including in particular the impacts of any downturn on fintechs or alternative finance companies, and Q2's arrangements with them, which represent a newer market opportunity for us, a more complex revenue model for us and which may be more vulnerable to an economic downturn than Q2's financial institution customers; (j) 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, including risks related to the timing and predictability of sales of Q2's solutions and the impact that the timing of bookings may have on Q2's revenue and financial performance in a period; (k) the risk that errors, interruptions or delays in Q2's solutions or Web hosting negatively impacts Q2's business and sales; (l) the risks associated with cyberattacks, data and privacy breaches and breaches of security measures within Q2's products, systems and infrastructure or the products, systems and infrastructure of third parties upon which Q2 relies and the resultant costs and liabilities and harm to Q2's business and reputation and Q2's ability to sell Q2's solutions; (m) the difficulties and risks associated with developing and selling complex new solutions and enhancements, including those using artificial intelligence, or AI, with the technical and regulatory specifications and functionality required by Q2's customers and relevant governmental authorities; (n) regulatory risks, including risks related to evolving regulation of AI and machine learning and the receipt, collection, storage, processing and transfer of data; (o) the risks associated with Q2's sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of Q2's sales cycle; (p) the risks inherent in third-party technology and implementation partnerships that could cause harm to Q2's business; (q) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (r) the general risks associated with the complexity of Q2's customer arrangements and Q2's solutions; (s) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (t) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (u) the risks associated with further consolidation in the financial services industry; (v) the risks associated with selling Q2's solutions internationally and with the continued expansion of Q2's international operations; and (w) the risk that Q2's debt repayment obligations may adversely affect Q2's financial condition and that Q2 may not be able to obtain capital when desired or needed on favorable terms.

Additional information relating to the uncertainty affecting the Q2 business is contained in Q2’s filings with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Relations section of Q2’s website at http://investors.Q2.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.

 

Q2 Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

December 31, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

229,655

 

 

$

199,600

 

Restricted cash

 

 

3,977

 

 

 

2,302

 

Investments

 

 

94,353

 

 

 

233,753

 

Accounts receivable, net

 

 

42,899

 

 

 

46,735

 

Contract assets, current portion, net

 

 

9,193

 

 

 

8,909

 

Prepaid expenses and other current assets

 

 

11,625

 

 

 

10,832

 

Deferred solution and other costs, current portion

 

 

27,521

 

 

 

21,117

 

Deferred implementation costs, current portion

 

 

8,741

 

 

 

7,828

 

Total current assets

 

 

427,964

 

 

 

531,076

 

Property and equipment, net

 

 

41,178

 

 

 

56,695

 

Right of use assets

 

 

35,453

 

 

 

39,837

 

Deferred solution and other costs, net of current portion

 

 

26,090

 

 

 

26,410

 

Deferred implementation costs, net of current portion

 

 

21,480

 

 

 

18,713

 

Intangible assets, net

 

 

121,572

 

 

 

145,681

 

Goodwill

 

 

512,869

 

 

 

512,869

 

Contract assets, net of current portion and allowance

 

 

12,210

 

 

 

16,186

 

Other long-term assets

 

 

2,609

 

 

 

2,259

 

Total assets

 

$

1,201,425

 

 

$

1,349,726

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued liabilities

 

$

62,404

 

 

$

54,263

 

Convertible notes, current portion

 

 

 

 

 

10,903

 

Deferred revenues, current portion

 

 

118,723

 

 

 

117,468

 

Lease liabilities, current portion

 

 

10,436

 

 

 

9,408

 

Total current liabilities

 

 

191,563

 

 

 

192,042

 

Convertible notes, net of current portion

 

 

490,464

 

 

 

657,789

 

Deferred revenues, net of current portion

 

 

17,350

 

 

 

21,691

 

Lease liabilities, net of current portion

 

 

45,588

 

 

 

52,991

 

Other long-term liabilities

 

 

7,981

 

 

 

6,189

 

Total liabilities

 

 

752,946

 

 

 

930,702

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

1,075,278

 

 

 

982,300

 

Accumulated other comprehensive loss

 

 

(1,111

)

 

 

(2,972

)

Accumulated deficit

 

 

(625,694

)

 

 

(560,310

)

Total stockholders' equity

 

 

448,479

 

 

 

419,024

 

Total liabilities and stockholders' equity

 

$

1,201,425

 

 

$

1,349,726

 

 
 

Q2 Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

Revenues (1)

 

$

162,118

 

 

$

146,542

 

 

$

624,624

 

 

$

565,673

 

Cost of revenues (2)

 

 

80,725

 

 

 

80,340

 

 

 

321,973

 

 

 

309,328

 

Gross profit

 

 

81,393

 

 

 

66,202

 

 

 

302,651

 

 

 

256,345

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

26,554

 

 

 

28,505

 

 

 

109,522

 

 

 

108,214

 

Research and development

 

 

34,271

 

 

 

34,041

 

 

 

137,334

 

 

 

130,103

 

General and administrative

 

 

30,283

 

 

 

23,696

 

 

 

110,186

 

 

 

90,163

 

Transaction-related costs

 

 

 

 

 

294

 

 

 

24

 

 

 

1,176

 

Amortization of acquired intangibles

 

 

4,903

 

 

 

4,982

 

 

 

20,667

 

 

 

18,248

 

Lease and other restructuring charges

 

 

3,399

 

 

 

7,171

 

 

 

10,975

 

 

 

13,202

 

Total operating expenses

 

 

99,410

 

 

 

98,689

 

 

 

388,708

 

 

 

361,106

 

Loss from operations

 

 

(18,017

)

 

 

(32,487

)

 

 

(86,057

)

 

 

(104,761

)

Total other income (expense), net (3)

 

 

1,997

 

 

 

811

 

 

 

24,235

 

 

 

(1,314

)

Loss before income taxes

 

 

(16,020

)

 

 

(31,676

)

 

 

(61,822

)

 

 

(106,075

)

Provision for income taxes

 

 

(2,059

)

 

 

(735

)

 

 

(3,562

)

 

 

(2,908

)

Net loss

 

$

(18,079

)

 

$

(32,411

)

 

$

(65,384

)

 

$

(108,983

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale investments

 

 

515

 

 

 

490

 

 

 

1,800

 

 

 

(1,873

)

Foreign currency translation adjustment

 

 

368

 

 

 

141

 

 

 

61

 

 

 

(964

)

Comprehensive loss

 

$

(17,196

)

 

$

(31,780

)

 

$

(63,523

)

 

$

(111,820

)

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.31

)

 

$

(0.56

)

 

$

(1.12

)

 

$

(1.90

)

Weighted average common shares outstanding, basic and diluted

 

 

58,742

 

 

 

57,582

 

 

 

58,354

 

 

 

57,300

 

 

 

 

 

 

 

 

 

 

(1)

Includes deferred revenue reduction from purchase accounting of $0.1 million for each of the three months ended December 31, 2023 and 2022, and $0.3 million and $0.6 million for the twelve months ended December 31, 2023 and 2022, respectively.

(2)

Includes amortization of acquired technology of $5.8 million and $5.9 million for the three months ended December 31, 2023 and 2022, respectively, and $23.4 million and $22.7 million for the twelve months ended December 31, 2023 and 2022, respectively.

(3)

Includes a gain of $19.9 million related to the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the twelve months ended December 31, 2023.

 

Q2 Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(65,384

)

 

$

(108,983

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

Amortization of deferred implementation, solution and other costs

 

 

25,848

 

 

 

23,270

 

Depreciation and amortization

 

 

71,707

 

 

 

61,659

 

Amortization of debt issuance costs

 

 

2,104

 

 

 

2,719

 

Amortization of premiums and discounts on investments

 

 

(3,192

)

 

 

(302

)

Stock-based compensation expense

 

 

79,188

 

 

 

65,157

 

Deferred income taxes

 

 

636

 

 

 

1,611

 

(Gain) loss on extinguishment of debt

 

 

(19,312

)

 

 

 

Other non-cash charges

 

 

4,386

 

 

 

11,919

 

Changes in operating assets and liabilities

 

 

(25,689

)

 

 

(20,494

)

Net cash provided by operating activities

 

 

70,292

 

 

 

36,556

 

Cash flows from investing activities:

 

 

 

 

Net maturities (purchases) of investments

 

 

143,911

 

 

 

(130,463

)

Purchases of property and equipment

 

 

(5,673

)

 

 

(11,142

)

Capitalized software development costs

 

 

(24,970

)

 

 

(18,910

)

Business combinations, net of cash acquired

 

 

 

 

 

(5,040

)

Net cash provided by (used in) investing activities

 

 

113,268

 

 

 

(165,555

)

Cash flows from financing activities:

 

 

 

 

Payment for maturity of 2023 convertible notes

 

 

(10,908

)

 

 

 

Payments for repurchases of convertible notes

 

 

(149,640

)

 

 

 

Proceeds from capped calls related to convertible notes

 

 

139

 

 

 

 

Proceeds from exercise of stock options and ESPP

 

 

8,397

 

 

 

5,882

 

Net cash provided by (used in) financing activities

 

 

(152,012

)

 

 

5,882

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

182

 

 

 

(802

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

31,730

 

 

 

(123,919

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

201,902

 

 

 

325,821

 

Cash, cash equivalents, and restricted cash, end of period

 

$

233,632

 

 

$

201,902

 

 

Q2 Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

GAAP revenue

 

$

162,118

 

 

$

146,542

 

 

$

624,624

 

 

$

565,673

 

Deferred revenue reduction from purchase accounting

 

 

69

 

 

 

129

 

 

 

344

 

 

 

644

 

Non-GAAP revenue

 

$

162,187

 

 

$

146,671

 

 

$

624,968

 

 

$

566,317

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

81,393

 

 

$

66,202

 

 

$

302,651

 

 

$

256,345

 

Stock-based compensation

 

 

3,023

 

 

 

3,290

 

 

 

13,346

 

 

 

12,262

 

Amortization of acquired technology

 

 

5,754

 

 

 

5,880

 

 

 

23,402

 

 

 

22,690

 

Transaction-related costs

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Lease and other restructuring charges

 

 

556

 

 

 

23

 

 

 

1,117

 

 

 

23

 

Deferred revenue reduction from purchase accounting

 

 

69

 

 

 

129

 

 

 

344

 

 

 

644

 

Non-GAAP gross profit

 

$

90,795

 

 

$

75,542

 

 

$

340,860

 

 

$

291,982

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin:

 

 

 

 

 

 

 

 

Non-GAAP gross profit

 

$

90,795

 

 

$

75,542

 

 

$

340,860

 

 

$

291,982

 

Non-GAAP revenue

 

 

162,187

 

 

 

146,671

 

 

 

624,968

 

 

 

566,317

 

Non-GAAP gross margin

 

 

56.0

%

 

 

51.5

%

 

 

54.5

%

 

 

51.6

%

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

26,554

 

 

$

28,505

 

 

$

109,522

 

 

$

108,214

 

Stock-based compensation

 

 

(3,638

)

 

 

(3,755

)

 

 

(16,771

)

 

 

(15,379

)

Non-GAAP sales and marketing expense

 

$

22,916

 

 

$

24,750

 

 

$

92,751

 

 

$

92,835

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

34,271

 

 

$

34,041

 

 

$

137,334

 

 

$

130,103

 

Stock-based compensation

 

 

(3,466

)

 

 

(3,624

)

 

 

(15,157

)

 

 

(13,987

)

Non-GAAP research and development expense

 

$

30,805

 

 

$

30,417

 

 

$

122,177

 

 

$

116,116

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

30,283

 

 

$

23,696

 

 

$

110,186

 

 

$

90,163

 

Stock-based compensation

 

 

(9,242

)

 

 

(6,188

)

 

 

(33,914

)

 

 

(23,529

)

Non-GAAP general and administrative expense

 

$

21,041

 

 

$

17,508

 

 

$

76,272

 

 

$

66,634

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(18,017

)

 

$

(32,487

)

 

$

(86,057

)

 

$

(104,761

)

Deferred revenue reduction from purchase accounting

 

 

69

 

 

 

129

 

 

 

344

 

 

 

644

 

Stock-based compensation

 

 

19,369

 

 

 

16,857

 

 

 

79,188

 

 

 

65,157

 

Transaction-related costs

 

 

 

 

 

312

 

 

 

24

 

 

 

1,194

 

Amortization of acquired technology

 

 

5,754

 

 

 

5,880

 

 

 

23,402

 

 

 

22,690

 

Amortization of acquired intangibles

 

 

4,903

 

 

 

4,982

 

 

 

20,667

 

 

 

18,248

 

Lease and other restructuring charges

 

 

3,955

 

 

 

7,194

 

 

 

12,092

 

 

 

13,225

 

Non-GAAP operating income

 

$

16,033

 

 

$

2,867

 

 

$

49,660

 

 

$

16,397

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP net loss to adjusted EBITDA:

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(18,079

)

 

$

(32,411

)

 

$

(65,384

)

 

$

(108,983

)

Depreciation and amortization

 

 

17,943

 

 

 

16,422

 

 

 

71,707

 

 

 

61,659

 

Stock-based compensation

 

 

19,369

 

 

 

16,857

 

 

 

79,188

 

 

 

65,157

 

Provision for income taxes

 

 

2,059

 

 

 

735

 

 

 

3,562

 

 

 

2,908

 

Interest and other (income) expense, net

 

 

(2,131

)

 

 

(888

)

 

 

(4,724

)

 

 

1,087

 

Transaction-related costs

 

 

 

 

 

312

 

 

 

24

 

 

 

1,194

 

Lease and other restructuring charges

 

 

3,955

 

 

 

7,194

 

 

 

12,092

 

 

 

13,225

 

Gain (loss) on extinguishment of debt

 

 

 

 

 

 

 

 

(19,869

)

 

 

 

Deferred revenue reduction from purchase accounting

 

 

69

 

 

 

129

 

 

 

344

 

 

 

644

 

Adjusted EBITDA

 

$

23,185

 

 

$

8,350

 

 

$

76,940

 

 

$

36,891

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

 

14.3

%

 

 

5.7

%

 

 

12.3

%

 

 

6.5

%

 
 

Q2 Holdings, Inc.

Reconciliation of Free Cash Flow

(in thousands)

(unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

 

 

 

Net cash provided by operating activities

 

$

70,292

 

 

$

36,556

 

Purchases of property and equipment

 

 

(5,673

)

 

 

(11,142

)

Capitalized software development costs

 

 

(24,970

)

 

 

(18,910

)

Free cash flow

 

$

39,649

 

 

$

6,504

 

 

Q2 Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Revenue Outlook

(in thousands)

 

 

 

Q1 2024 Outlook

 

Full Year 2024 Outlook

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

GAAP Revenue

 

$

161,700

 

$

164,700

 

$

683,000

 

$

689,000

Deferred revenue reduction from purchase accounting

 

 

 

 

 

 

 

 

Non-GAAP revenue

 

$

161,700

 

$

164,700

 

$

683,000

 

$

689,000

 

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