Q2 Holdings (QTWO) AI Stock Analysis

• Market Cap: $5.03B
• Dividend Yield: N/A
• Average Volume (3M): 937.73K
• Price to Earnings (P/E): ―
• Beta (1Y): 2.09
• Revenue Growth: 11.50%
• EPS Growth: 42.50%
• Country: US
• Employees: 2,476
• Sector: Technology
• Sector Strength: 51
• Industry: Software - Application
• EPS (TTM): -0.64
• Shares Outstanding: 60,727,985
• 10 Day Avg. Volume: 989,846
• 30 Day Avg. Volume: 937,731
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.91
• Price to Cash Flow (P/CF): 27.90
• P/FCF Ratio: 27.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $106.09
• Price Target Upside: 28.10% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 12

Q2 Holdings demonstrates strong revenue growth and improving cash flow, but remains unprofitable with high leverage. Technical indicators suggest bearish momentum, and valuation metrics are weak due to negative earnings. While the appointment of a new director is a positive governance move, it does not significantly impact the current stock performance. The stock's current challenges, especially in profitability, weigh heavily on its overall score.

Positive Factors

Earnings

QTWO posted results which topped expectations across the board on the back of 16.4% subscription revenue growth.

Financial Performance

EBITDA margins expanded to 19% from 13% YoY, showcasing improved profitability.

Sales and Bookings

QTWO logged another strong sales quarter with 6 Tier 1 & Enterprise wins which helped RPO jump ~30% Y/Y.

Negative Factors

Revenue Expectations

The company metered FY26 expectations with lower implied revenue and margin expectations.

Service Revenue

There are persistent headwinds expected in services revenue for the foreseeable future.

Q2 Holdings Business Overview & Revenue Model

Company Description

Q2 Holdings, Inc. is a leading provider of digital banking solutions, specializing in cloud-based platforms for financial institutions, including banks and credit unions. The company's comprehensive suite of offerings includes digital banking, lending, and security solutions designed to enhance the end-user experience and streamline operations for financial institutions. With a focus on innovation and customer-centric approaches, Q2 Holdings enables its clients to deliver seamless and personalized digital services to their customers.

How the Company Makes Money

Q2 Holdings generates revenue primarily through subscription fees and software licensing. The company offers its digital banking solutions on a Software-as-a-Service (SaaS) model, where financial institutions pay recurring fees to access Q2's platform and services. Additionally, Q2 earns revenue from professional services, including implementation, training, and consulting, which help clients integrate and optimize the use of their digital platforms. Strategic partnerships with other technology providers and financial service companies also contribute to Q2's revenue, enabling the company to expand its offerings and reach a broader customer base.

Q2 Holdings Financial Statement Overview

Summary

Q2 Holdings displays strong revenue growth and improving cash flow metrics, but faces challenges with sustained profitability. The balance sheet shows improving equity levels, but high debt levels require careful management.

Income Statement

Q2 Holdings has shown consistent revenue growth over the years, with a significant increase from $315 million in 2019 to $696 million in 2024. However, the company remains unprofitable, with negative net income each year, although the net loss has decreased from $138 million in 2020 to $38 million in 2024. The gross profit margin improved to 50.9% in 2024, but the net profit margin remains negative, reflecting ongoing challenges in achieving profitability.

Balance Sheet

The company's balance sheet indicates a moderate level of leverage with a debt-to-equity ratio of 1.05 in 2024. Stockholders' equity has increased over time, reaching $518 million in 2024, contributing to an improved equity ratio of 40%. While the financial stability has strengthened, the high debt level poses a potential risk if not managed carefully.

Cash Flow

Q2 Holdings has shown substantial improvement in cash flow generation, with operating cash flow increasing from negative in 2020 to $136 million in 2024. The free cash flow grew significantly, reflecting better cash management and operational efficiency. The operating cash flow to net income ratio and free cash flow to net income ratio are strong, indicating the company's ability to generate cash despite net losses.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
696.46M	624.62M	565.67M	498.72M	402.75M
	Gross Profit
354.48M	302.65M	256.35M	225.03M	174.60M
	EBIT
-42.26M	-86.06M	-103.58M	-75.31M	-86.11M
	EBITDA
42.89M	29.02M	-37.74M	-23.20M	-55.72M
	Net Income Common Stockholders
-38.54M	-65.38M	-108.98M	-112.75M	-137.62M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
446.63M	324.01M	433.35M	427.73M	539.05M
	Total Assets
1.29B	1.20B	1.35B	1.39B	1.42B
	Total Debt
541.12M	546.49M	731.09M	621.97M	601.05M
	Net Debt
182.56M	316.83M	531.49M	299.13M	193.35M
	Total Liabilities
777.00M	752.95M	930.70M	814.75M	773.34M
	Stockholders Equity
517.80M	448.48M	419.02M	570.30M	643.36M
Cash Flow		Free Cash Flow
129.06M	39.65M	6.50M	5.31M	-27.56M
	Operating Cash Flow
135.75M	70.29M	36.56M	30.93M	-2.89M
	Investing Cash Flow
-21.08M	113.27M	-165.56M	-65.13M	-124.16M
	Financing Cash Flow
13.32M	-152.01M	5.88M	-51.16M	434.68M

Q2 Holdings Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 82.82
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For QTWO, the sentiment is Positive. The current price of 82.82 is above the 20-day moving average (MA) of 79.25, below the 50-day MA of 87.61, and above the 200-day MA of 82.42, indicating a neutral trend. The MACD of -2.81 indicates Negative momentum. The RSI at 51.84 is Neutral, neither overbought nor oversold. The STOCH value of 92.37 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for QTWO.

Q2 Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EVTC	78 Outperform	$2.39B	21.52	21.11%	0.54%	21.70%	43.10%
JKHY	76 Outperform	$12.61B	31.20	21.90%	1.27%	5.36%	8.62%
GPN	73 Outperform	$23.86B	15.75	6.94%	1.03%	4.68%	63.39%
FICO	65 Neutral	$45.25B	85.05	-47.82%	―	14.49%	21.85%
Sector *	58 Neutral	$22.11B	10.47	-17.86%	2.40%	4.75%	-24.81%
FIS	51 Neutral	$38.85B	51.73	4.65%	1.96%	-17.38%	―
QTWO	49 Neutral	$5.03B	―	-7.98%	―	11.50%	42.50%

Q2 Holdings Corporate Events

Q2 Holdings Announces Board Member Jeffrey Diehl’s Departure

On March 7, 2025, Jeffrey T. Diehl, a long-serving member of the Board of Directors at Q2 Holdings, Inc., announced his decision not to seek reelection at the company’s 2025 annual meeting of stockholders. Diehl, who joined the board in 2007 and has served as Lead Independent Director and a member of the Compensation Committee, will continue his duties until his term ends. His departure is not due to any disagreements with the company, and Q2 Holdings expressed gratitude for his nearly 18 years of service.

Q2 Holdings Expands Board with New Director Appointment

Q2 Holdings, Inc. announced the expansion of its Board of Directors from seven to eight members, appointing Andre L. Mintz as a director effective March 1, 2025. Mr. Mintz will also join the audit and risk and compliance committees. This strategic move is in line with the company’s governance practices and aims to enhance its board’s expertise, particularly in financial literacy and risk management, which is expected to strengthen the company’s industry position.