Q2 Holdings Inc (QTWO) Reports 7% YoY Revenue Growth in Q3 2023
Q2 Holdings Inc (NYSE:QTWO) reported Q3 2023 revenue of $155.0 million, a 7% increase YoY.
GAAP net loss for Q3 2023 was $23.2 million, an improvement from $27.8 million in Q3 2022.
Adjusted EBITDA for Q3 2023 was $19.7 million, up from $10.8 million in the prior-year quarter.
The company signed several new and expansion deals, including two of the top 10 largest digital banking deals in company history.
On November 1, 2023, Q2 Holdings Inc (NYSE:QTWO), a leading provider of digital transformation solutions for banking and lending, announced its financial results for the third quarter ending September 30, 2023.
Financial Highlights
Q2 Holdings Inc (NYSE:QTWO) reported revenue for the third quarter of 2023 at $155.0 million, marking a 7% increase year-over-year and remaining flat from the second quarter of 2023. The GAAP gross margin for the third quarter was 47.8%, up from 46.2% in the prior-year quarter. The GAAP net loss for the third quarter was $23.2 million, showing an improvement from the GAAP net losses of $27.8 million for the prior-year quarter.
Non-GAAP revenue for the third quarter was also $155.0 million, up 7% year-over-year. The non-GAAP gross margin for the third quarter was 53.9%, up from 52.1% for the prior-year quarter. Adjusted EBITDA for the third quarter was $19.7 million, a significant increase from $10.8 million for the prior-year quarter.
Operational Highlights
Q2 Holdings Inc (NYSE:QTWO) reported several operational achievements in the third quarter. The company signed a number of net new and expansion deals, including two of the top 10 largest digital banking deals in company history. The company also signed contracts with a top 20 U.S. bank and a Tier 1 U.S. bank to utilize their commercial and small business banking solutions. The company ended the third quarter with over 22.0 million registered users on the Q2 digital banking platform, representing 5% year-over-year growth.
Management Commentary
In the third quarter, we saw financial institutions' focus on deposit growth drive strong demand for our solutions, said Q2 CEO Matt Flake. Our track record of innovation and our focus on customer experience helped us capitalize on that demand in the quarterwe signed a number of net new and expansion deals, including two of the top 10 largest digital banking deals in company history. When you consider our recent execution and the strength of our pipeline, we're confident in our ability to deliver on our profitable growth strategy for the remainder of the year and into 2024.
We delivered solid results in the quarter, with adjusted EBITDA that once again exceeded the high end of our guidance, said David Mehok, Q2 CFO. We continue to drive meaningful profitability expansion, with an increase of over 500 basis points of adjusted EBITDA margin for the quarter compared to the prior year period. Based on the expected acceleration of subscription revenue and increased cost efficiencies in the fourth quarter, we are raising our adjusted EBITDA outlook for the remainder of the year.
Future Outlook
For the fourth quarter of 2023, Q2 Holdings Inc (NYSE:QTWO) expects total non-GAAP revenue of $160.3 million to $163.3 million, representing year-over-year growth of 9% to 11%. Adjusted EBITDA is expected to be between $21.2 million to $23.2 million, representing 13 to 14 percent of non-GAAP revenue for the quarter. For the full-year 2023, the company expects total non-GAAP revenue of $622.5 million to $625.5 million, representing year-over-year growth of 10%, and adjusted EBITDA of $75.0 million to $77.0 million, representing 12 percent of non-GAAP revenue for the year.
Explore the complete 8-K earnings release (here) from Q2 Holdings Inc for further details.
This article first appeared on GuruFocus.
