Q2 Holdings, Inc. Announces Second Quarter 2014 Financial Results
Total revenues of $19.2 million, up 36 percent year-over-year and accelerated growth in new deals
AUSTIN, Texas (Aug. 7, 2014) - Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of secure virtual banking solutions to regional and community financial institutions, today announced results for its second quarter ended June 30, 2014.
Second Quarter 2014 Results
| |
| • | Revenue for the second quarter of $19.2 million, up 36 percent year-over-year and 14 percent from the prior quarter. |
| |
| • | Non-GAAP gross margin of 44.2 percent, up 410 basis points from the prior quarter and up 360 basis points from one year ago. GAAP gross margin for the period was 43.5 percent. |
| |
| • | Adjusted EBITDA of negative $2.5 million, an improvement of $1 million from the prior quarter and compares to $2.4 million one year ago. GAAP Net loss of $4.7 million for the period. |
“I am pleased to report strong results in Q2’s second quarter as a publicly traded company,” said Matt Flake, president and CEO of Q2 Holdings, Inc. “Our performance demonstrates strong execution across the organization. We’re seeing our single platform architecture win with banks and credit unions of all sizes and we continue to deliver new and innovative products to the market. We’re excited about our success and look forward to continuing to capitalize on the digital transformation occurring in the financial services industry.”
Second Quarter 2014 Highlights
| |
| • | Significantly increased new customer wins quarter-over-quarter, demonstrating the success of our single platform and differentiated technology, and a positive return on Q2’s investments in salesforce capacity and productivity. |
| |
| • | Continued bookings momentum, signing two Top 100 financial institutions1 in the quarter and continued traction with these larger customers. |
| |
| • | Exited the second quarter with approximately 3.9 million registered users on the Q2 platform, representing 36 percent year-over-year growth and 13 percent quarter-over-quarter growth. |
| |
| • | Announced availability of version 4.0 of the Q2 Virtual Banking platform which offers improved commercial functionality and greater ease of use. |
Financial Outlook
Q2 Holdings is providing guidance for its third quarter 2014 as follows:
| |
| • | Total revenues of $19.5 million to $19.8 million. |
1 Top 100 based on asset size as reported by United States Federal Reserve and Credit Union National Association.
| |
| • | Adjusted EBITDA of negative $3.4 million to negative $3.1 million. |
Q2 Holdings is providing guidance for the full-year 2014 as follows:
| |
| • | Total revenues of $76.2 million to $76.8 million, which would represent year-over-year growth of 34 percent to 35 percent. |
| |
| • | Adjusted EBITDA of negative $12.4 million to negative $12 million. |
Conference Call Details
Date: Aug. 7, 2014
Time: 5:00 p.m. EDT
Hosts: Matt Flake, CEO / Jennifer Harris, CFO
Dial in: US toll free: 1-877-201-0168
International: 1-647-788-4901
Conference ID: 73893430
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 relations 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 is a leading provider of secure, cloud-based virtual banking solutions headquartered in Austin, Texas. Q2 enables regional and community financial institutions, or RCFIs, to deliver a robust suite of integrated virtual banking services and engage more effectively with their retail and commercial account holders who expect to bank anytime, anywhere and on any device. Q2 solutions are often the most frequent point of interaction between its RCFI customers and their account holders. As such, Q2 purpose-built its solutions to deliver a compelling, consistent user experience across digital channels and drive the success of its customers by extending their local brands, enabling improved account holder retention and creating incremental sales opportunities. To learn more about Q2 visit q2ebanking.com.
Use of Non-GAAP Measures
Management believes that adjusted EBITDA and non-GAAP gross margin 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, loss from discontinued operations and unoccupied lease charges. In the case of non-GAAP gross margin, Q2 adjusts gross margin for stock-based compensation. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, net loss and GAAP gross margin, or other financial measures prepared in accordance with GAAP. Reconciliation to the closest GAAP measures of these non-GAAP measures is contained in the tabular form on the attached unaudited condensed consolidated financial statements.
Q2’s management uses adjusted EBITDA and non-GAAP gross margin 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: the benefits from investments in and increased productivity of Q2’s salesforce; momentum in the market for Q2’s solutions; Q2’s opportunities and ability to deliver innovative products and capitalize on the transformation occurring in financial services; 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 that Q2 will face increased competition as part of entering new markets, (b) the risk that the market for Q2’s solutions does not grow as anticipated, (c) the challenges associated with selling, installing, and delivering Q2’s solutions, (d) errors, interruptions or delays in Q2’s service or Web hosting, (e) breaches of Q2’s security measures, (f) technological and regulatory developments, (g) the impact that a slowdown in the economy, financial markets, and credit markets has on Q2’s business sales cycles, prospects’ and customers’ spending decisions and timing of implementation decisions, (h) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality desired by customers, (i) the difficulties Q2 may encounter with complex implementations of its solutions and the resulting impact on the timing of its revenue from any delayed implementations, (j) the risk that Q2 will not be able to maintain historical contract terms, (k) Q2’s ability to hire, retain and motivate employees and manage its growth, (l) the risk that modification or negotiation of contractual arrangements will be necessary during Q2’s implementations of its solutions, and (m) litigation related to intellectual property and other matters and any related claims, negotiations and settlements.
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 Relations 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.
Q2 Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
|
| | | | | | | | |
| | | June 30, 2014 | | December 31, 2013 |
| | | (unaudited) | | |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 94,906 |
| | $ | 18,675 |
|
| Restricted cash | | 116 |
| | 116 |
|
| Accounts receivable, net | | 5,468 |
| | 9,063 |
|
| Prepaid expenses and other current assets | | 1,971 |
| | 1,079 |
|
| Deferred solution and other costs, current portion | | 3,127 |
| | 3,124 |
|
| Deferred implementation costs, current portion | | 1,945 |
| | 1,814 |
|
| Total current assets | | 107,533 |
| | 33,871 |
|
| Property and equipment, net | | 14,026 |
| | 14,831 |
|
| Deferred solution and other costs, net of current portion | | 6,291 |
| | 5,358 |
|
| Deferred implementation costs, net of current portion | | 4,932 |
| | 4,560 |
|
| Other long-term assets | | 740 |
| | 2,488 |
|
| Total assets | | $ | 133,522 |
| | $ | 61,108 |
|
| | | | | |
| Liabilities and stockholders' equity (deficit) | | | | |
| Current liabilities: | | | | |
| Accounts payable and accrued liabilities | | $ | 8,642 |
| | $ | 15,749 |
|
| Deferred revenues, current portion | | 14,351 |
| | 12,728 |
|
| Capital lease obligations, current portion | | 513 |
| | 714 |
|
| Total current liabilities | | 23,506 |
| | 29,191 |
|
| Deferred revenue, net of current portion | | 17,947 |
| | 14,773 |
|
| Capital lease obligations, net of current portion | | 351 |
| | 575 |
|
| Long-term debt, net of current portion | | 2,054 |
| | 6,288 |
|
| Deferred rent, net of current portion | | 4,892 |
| | 4,444 |
|
| Other long-term liabilities | | 7 |
| | 101 |
|
| Total liabilities | | 48,757 |
| | 55,372 |
|
| Redeemable convertible preferred stock and redeemable common stock | | — |
| | 42,052 |
|
| Stockholders' equity (deficit): | | | | |
| Junior convertible preferred stock | | — |
| | 1,740 |
|
| Common stock | | 3 |
| | 1 |
|
| Additional paid-in capital | | 139,743 |
| | 6,675 |
|
| Accumulated deficit | | (54,981 | ) | | (44,732 | ) |
| Total stockholders' equity (deficit) | | 84,765 |
| | (36,316 | ) |
| Total liabilities and stockholders' equity (deficit) | | $ | 133,522 |
| | $ | 61,108 |
|
Q2 Holdings, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2014 | | 2013 | | 2014 | | 2013 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| | | | | | | | | |
| Revenues | | $ | 19,158 |
| | $ | 14,044 |
| | $ | 35,992 |
| | $ | 26,878 |
|
Cost of revenues (1) | | 10,830 |
| | 8,408 |
| | 21,042 |
| | 16,215 |
|
| Gross profit | | 8,328 |
| | 5,636 |
| | 14,950 |
| | 10,663 |
|
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
Sales and marketing (1) | | 6,032 |
| | 4,138 |
| | 11,541 |
| | 7,198 |
|
Research and development (1) | | 2,787 |
| | 2,152 |
| | 5,523 |
| | 4,018 |
|
General and administrative (1) | | 4,058 |
| | 2,776 |
| | 7,776 |
| | 5,111 |
|
| Unoccupied lease charges | | — |
| | 148 |
| | — |
| | 148 |
|
| Total operating expenses | | 12,877 |
| | 9,214 |
|
| 24,840 |
|
| 16,475 |
|
| Loss from operations | | (4,549 | ) | | (3,578 | ) |
| (9,890 | ) |
| (5,812 | ) |
| Other income (expense), net | | (119 | ) | | (116 | ) | | (326 | ) | | (167 | ) |
| Loss before income taxes | | (4,668 | ) | | (3,694 | ) |
| (10,216 | ) |
| (5,979 | ) |
| Provision for income taxes | | (15 | ) | | (14 | ) | | (33 | ) | | (19 | ) |
| Loss from continuing operations | | (4,683 | ) | | (3,708 | ) |
| (10,249 | ) |
| (5,998 | ) |
| Loss from discontinued operations, net of tax | | — |
| | — |
| | — |
| | (199 | ) |
| Net Loss | | $ | (4,683 | ) | | $ | (3,708 | ) |
| $ | (10,249 | ) |
| $ | (6,197 | ) |
| Net loss per common share: | |
| |
|
|
|
|
|
| Loss from continuing operations per common share, basic and diluted | | $ | (0.14 | ) | | $ | (0.31 | ) |
| $ | (0.42 | ) |
| $ | (0.51 | ) |
| Loss from discontinued operations per common share, basic and diluted | | $ | — |
| | $ | — |
|
| $ | — |
|
| $ | (0.02 | ) |
| Net loss per common share, basic and diluted | | $ | (0.14 | ) | | $ | (0.31 | ) |
| $ | (0.42 | ) |
| $ | (0.53 | ) |
| Weighted average common shares outstanding, basic and diluted | | 34,068 |
| | 11,901 |
| | 24,143 |
| | 11,666 |
|
| | | | | | | | | |
| |
(1) | Includes stock-based compensation expenses as follows: |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2014 | | 2013 | | 2014 | | 2013 |
| Cost of revenues | | $ | 147 |
| | $ | 61 |
| | $ | 273 |
| | $ | 122 |
|
| Sales and marketing | | 187 |
| | 60 |
| | 354 |
| | 99 |
|
| Research and development | | 122 |
| | 66 |
| | 229 |
| | 125 |
|
| General and administrative | | 612 |
| | 189 |
| | 1,130 |
| | 364 |
|
| Total stock-based compensation expenses | | $ | 1,068 |
| | $ | 376 |
|
| $ | 1,986 |
|
| $ | 710 |
|
Q2 Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
| | | | | | | | |
| | | Six Months Ended June 30, |
| | | 2014 | | 2013 |
| | | (unaudited) | | (unaudited) |
| | | | | |
| Cash flows from operating activities: | | | | |
| Net loss | | $ | (10,249 | ) | | $ | (6,197 | ) |
| Adjustments to reconcile net loss to net cash | | | | |
| (used in) provided by operating activities: | | | | |
| Amortization of deferred implementation, solution and other costs | | 2,030 |
| | 1,311 |
|
| Depreciation and amortization | | 2,030 |
| | 1,262 |
|
| Amortization of debt issuance costs | | 48 |
| | 20 |
|
| Stock-based compensation expenses | | 1,986 |
| | 710 |
|
| Loss from discontinued operations | | — |
| | 199 |
|
| Other non-cash charges | | 51 |
| | 61 |
|
| Unoccupied lease charges | | — |
| | 148 |
|
| Changes in operating assets and liabilities | | (10 | ) | | 3,916 |
|
| Net cash provided by (used in) by continuing operations | | (4,114 | ) | | 1,430 |
|
| Net cash used in discontinued operating activities | | — |
| | (236 | ) |
| Net cash provided by (used in) operating activities | | (4,114 | ) | | 1,194 |
|
| Cash flows from investing activities: | | | | |
| Purchases of property and equipment | | (2,468 | ) | | (7,468 | ) |
| Acquisitions and purchase of intangible assets | | — |
| | (125 | ) |
| Cash included in distribution of spin-off | | — |
| | (46 | ) |
| Cash used in investing activities | | (2,468 | ) | | (7,639 | ) |
| Cash flows from financing activities: | | | | |
| Proceeds from issuance of preferred stock | | — |
| | 18,995 |
|
| Payments on line of credit and capital leases, net | | (4,656 | ) | | 3,546 |
|
| Proceeds from issuance of common stock | | 87,469 |
| | 338 |
|
| Net cash provided by financing activities | | 82,813 |
| | 22,879 |
|
| Net increase in cash and cash equivalents | | 76,231 |
| | 16,434 |
|
| Cash and cash equivalents, beginning of period | | 18,675 |
| | 9,111 |
|
| Cash and cash equivalents, end of period | | $ | 94,906 |
| | $ | 25,545 |
|
Q2 Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share data) |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2014 | | 2013 | | 2014 | | 2013 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| GAAP gross profit | | $ | 8,328 |
| | $ | 5,636 |
| | $ | 14,950 |
| | $ | 10,663 |
|
| Stock-based compensation | | 147 |
| | 61 |
| | 273 |
| | 122 |
|
| Non-GAAP gross profit | | $ | 8,475 |
| | $ | 5,697 |
|
| $ | 15,223 |
|
| $ | 10,785 |
|
| | | | | | | | | |
| Non-GAAP gross margin: | | | | | | | | |
| Non-GAAP gross profit | | $ | 8,475 |
| | $ | 5,697 |
| | $ | 15,223 |
| | $ | 10,785 |
|
| GAAP revenue | | 19,094 |
| | 14,044 |
| | 35,928 |
| | 26,878 |
|
| Non-GAAP gross margin | | 44.4 | % | | 40.6 | % |
| 42.4 | % |
| 40.1 | % |
| | | | | | | | | |
| GAAP sales and marketing expense | | $ | 6,032 |
| | $ | 4,138 |
| | $ | 11,541 |
| | $ | 7,198 |
|
| Stock-based compensation | | (187 | ) | | (60 | ) | | (354 | ) | | (99 | ) |
| Non-GAAP sales and marketing expense | | $ | 5,845 |
| | $ | 4,078 |
|
| $ | 11,187 |
|
| $ | 7,099 |
|
| | | | | | | | | |
| GAAP research and development expense | | $ | 2,787 |
| | $ | 2,152 |
| | $ | 5,523 |
| | $ | 4,018 |
|
| Stock-based compensation | | (122 | ) | | (66 | ) | | (229 | ) | | (125 | ) |
| Non-GAAP research and development expense | | $ | 2,665 |
| | $ | 2,086 |
|
| $ | 5,294 |
|
| $ | 3,893 |
|
| | | | | | | | | |
| GAAP general and administrative expense | | $ | 4,058 |
| | $ | 2,776 |
| | $ | 7,776 |
| | $ | 5,111 |
|
| Stock-based compensation | | (612 | ) | | (189 | ) | | (1,130 | ) | | (364 | ) |
| Non-GAAP general and administrative expense | | $ | 3,446 |
| | $ | 2,587 |
|
| $ | 6,646 |
|
| $ | 4,747 |
|
| | | | | | | | | |
| GAAP operating loss | | $ | (4,549 | ) | | $ | (3,578 | ) | | $ | (9,890 | ) | | $ | (5,812 | ) |
| Stock-based compensation | | 1,068 |
| | 376 |
| | 1,986 |
| | 710 |
|
| Non-GAAP operating loss | | $ | (3,481 | ) | | $ | (3,202 | ) |
| $ | (7,904 | ) |
| $ | (5,102 | ) |
| | | | | | | | | |
| GAAP net loss | | $ | (4,683 | ) | | $ | (3,708 | ) | | $ | (10,249 | ) | | $ | (6,197 | ) |
| Stock-based compensation | | 1,068 |
| | 376 |
| | 1,986 |
| | 710 |
|
| Non-GAAP net loss | | $ | (3,615 | ) | | $ | (3,332 | ) |
| $ | (8,263 | ) |
| $ | (5,487 | ) |
| | | | | | | | | |
| Non-GAAP net loss per share, basic and diluted | | | | | | | | |
| Numerator: | | | | | | | | |
| Non-GAAP net loss | | $ | (3,615 | ) | | $ | (3,332 | ) | | $ | (8,263 | ) | | $ | (5,487 | ) |
| Denominator: | | | | | | | | |
| Weighted average common shares outstanding, basic and diluted | | 34,068 |
| | 11,901 |
| | 24,143 |
| | 11,666 |
|
| Non-GAAP net loss per share, basic and diluted | | $ | (0.11 | ) | | $ | (0.28 | ) | | $ | (0.34 | ) | | $ | (0.47 | ) |
| | | | | | | | | |
| Pro forma non-GAAP net loss per share, basic and diluted | | | | | | | | |
| Numerator: | | | | | | | | |
| Non-GAAP net loss | | $ | (3,615 | ) | | $ | (3,332 | ) | | $ | (8,263 | ) | | $ | (5,487 | ) |
| Denominator: | | | | | | | | |
| Weighted average common shares outstanding, basic and diluted | | 34,068 |
| | 11,901 |
| | 24,143 |
| | 11,666 |
|
Plus: assumed conversion of preferred stock to common stock (1) | | — |
| | 13,583 |
| | 6,228 |
| | 12,734 |
|
| Denominator for pro forma net loss per share, basic and diluted | | 34,068 |
| | 25,484 |
|
| 30,371 |
|
| 24,400 |
|
| Pro forma non-GAAP net loss per share, basic and diluted | | $ | (0.11 | ) | | $ | (0.13 | ) |
| $ | (0.27 | ) |
| $ | (0.22 | ) |
| | | | | | | | | |
| Reconciliation of net loss to adjusted EBITDA: | | | | | | | | |
| Net loss | | $ | (4,683 | ) | | $ | (3,708 | ) | | $ | (10,249 | ) | | $ | (6,197 | ) |
| Interest (income) expense, net | | 119 |
| | 116 |
| | 326 |
| | 167 |
|
| Depreciation and amortization | | 1,031 |
| | 624 |
| | 2,030 |
| | 1,262 |
|
| Stock-based compensation | | 1,068 |
| | 376 |
| | 1,986 |
| | 710 |
|
| Provision for income taxes | | 15 |
| | 14 |
| | 33 |
| | 19 |
|
| Loss from discontinued operations | | — |
| | — |
| | — |
| | 199 |
|
| Unoccupied lease charges | | — |
| | 148 |
| | — |
| | 148 |
|
| Adjusted EBITDA | | $ | (2,450 | ) | | $ | (2,430 | ) |
| $ | (5,874 | ) |
| $ | (3,692 | ) |
| | | | | | | | | |
___________________________________________________________
(1) Assumes conversion of all outstanding shares of preferred stock, on an as-if-converted basis, at the later of January 1 of each year or the date of issuance of the preferred stock.
Kathleen Lucente
Red Fan Communications
O: (512)-551-9253/ C: (512)-217-6352
kathleen@redfancommunications.com
Investor Contact:
Bob Gujavarty
Q2 Holdings, Inc.
O: (512)-439-3447
bobby.gujavarty@q2ebanking.com
