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Q2 Holdings (QTWO)
NYSE:QTWO
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Q2 Holdings
(NYSE:QTWO)
Rating:70Outperform
Price Target:
$92.00
▲(11.22% Upside)
Positive Factors
Revenue Growth
The company's strong revenue growth indicates a robust market position and effective customer acquisition, supporting long-term business expansion.
Subscription Revenue Increase
Growth in subscription revenue reflects a shift towards stable, recurring income streams, enhancing financial predictability and margin sustainability.
Cash Flow Growth
Strong free cash flow growth underscores the company's ability to generate cash, supporting reinvestment and debt management, crucial for long-term stability.
Negative Factors
High Leverage
High leverage can limit financial flexibility and increase risk, potentially impacting the company's ability to invest in growth and weather economic downturns.
Profitability Challenges
Ongoing profitability challenges may hinder the company's ability to reinvest in growth initiatives and improve shareholder returns over time.
Macroeconomic Uncertainties
Macroeconomic uncertainties pose risks to revenue stability and growth, as changes in customer spending can affect demand for the company's offerings.
Q2 Holdings (QTWO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.17B
Dividend YieldN/A
Average Volume (3M)1.10M
Price to Earnings (P/E)1349.4
Beta (1Y)1.65
Revenue Growth13.34%
EPS GrowthN/A
CountryUS
Employees2,476
SectorTechnology
Sector Strength86
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.50
Shares Outstanding62,442,410
10 Day Avg. Volume1,077,067
30 Day Avg. Volume1,103,515
Financial Highlights & Ratios
PEG Ratio3.66
Price to Book (P/B)11.68
Price to Sales (P/S)8.69
P/FCF Ratio46.87
Enterprise Value/Market Cap1.26
Enterprise Value/Revenue8.78
Enterprise Value/Gross Profit16.69
Enterprise Value/Ebitda91.10
Forecast
1Y Price Target
$106.09Price Target Upside28.25% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
Q2 Holdings Business Overview & Revenue Model
Company DescriptionQ2 Holdings, Inc. provides cloud-based digital banking solutions to regional and community financial institutions (RCFIs) in the United States. The company offers Q2 Consumer Banking, a browser-based digital banking solution and comprehensive financial institution branded digital banking capabilities; Q2 Small Business and Commercial, a mobile and tablet digital banking solution; Q2mobile Remote Deposit Capture, a partnered solution that allows remote check deposit capture. It also provides Q2 Sentinel, a security analytics solution; Q2 Patrol, an event-driven validation product; Q2 SMART, a targeting and messaging platform; and Q2 CardSwap that allows account holders receiving newly issued cards to automatically change their payment information. In addition, the company offers Q2 Gro, a digital account opening, and digital sales and marketing platform; Q2 Biller Direct, a bill payment solution; ClickSWITCH allows financial institutions to direct deposits to the end user. Centrix Dispute Tracking System, an electronic transaction dispute management solution; Centrix Payments I.Q. System, an ACH file monitoring and risk reporting solution; Centrix Exact/Transaction Management System, a fraud prevention tool; and Q2 Caliper Software Development Kit. Futher, it provides Q2 Contextual PFM, which allows end users to add external accounts and view them together with internal accounts on digital banking home page; Q2 Goals that enables end users to establish and save towards specific savings goals; Q2 Cloud Lending, a digital lending and leasing platform; PrecisionLender platform, a cloud-based, data-driven sales enablement, pricing, and portfolio management solution; and Q2 BaaS, a portfolio of open API financial services. The company was formerly known as CBG Holdings, Inc. and changed its name to Q2 Holdings, Inc. in March 2013. Q2 Holdings, Inc. was founded in 2004 and is headquartered in Austin, Texas.
How the Company Makes MoneyQ2 Holdings generates revenue primarily through a subscription-based model, where financial institutions pay for access to its digital banking solutions. This includes ongoing fees for the use of its software platforms, as well as additional revenue from value-added services such as transaction processing and data analytics. Key revenue streams include monthly subscription fees, implementation fees for new clients, and transaction fees for various banking services. Additionally, Q2 has established partnerships with other technology providers and financial institutions, enhancing its service offerings and expanding its market reach, which contributes significantly to its earnings.
Q2 Holdings Earnings Call Summary
Earnings Call Date:Jul 30, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 29, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong performance with significant revenue and profit growth, driven by successful expansions and renewals. Despite some challenges in professional services revenue and macroeconomic uncertainties, the company's positive outlook and raised guidance indicate confidence in sustained growth.Q2-2025 Updates
Positive Updates
Revenue Growth Exceeds Expectations
Q2 Holdings reported a first-quarter revenue of $189.7 million, up 15% year-over-year, exceeding the high end of previous guidance.
Record Adjusted EBITDA
The company achieved a record adjusted EBITDA of $40.7 million, representing 21.5% of revenue, up 61% from the prior year.
Strong Free Cash Flow
Free cash flow was $37.8 million, indicating strong cash conversion and operational efficiency.
Significant Expansion and Renewals
The company signed major expansion deals with existing customers, including a top 50 U.S. bank, and achieved strong renewal activity with three of its top 10 largest customers.
Growth in Subscription Revenue
Subscription revenue increased by 18% year-over-year, making up 81% of total revenue, highlighting a shift towards higher-margin revenue streams.
Positive Outlook and Raised Guidance
The guidance for full-year 2025 revenue was raised to $776 million to $783 million, with subscription revenue growth expected to exceed 15.5%.
Negative Updates
Decline in Professional Services Revenue
Services and other revenues declined by 7% year-over-year, primarily due to a reduction in professional services, which are more discretionary.
Seasonal Cash Flow Variability
Although cash flow performance exceeded expectations, the company noted that seasonal patterns might affect future quarters.
Ongoing Macroeconomic Uncertainties
The company acknowledged macroeconomic uncertainties, which could impact customer behavior and discretionary spending.
Company Guidance
In the Q2 Holdings' first quarter 2025 financial results conference call, the company reported revenue of $189.7 million, a 15% increase year-over-year, surpassing the high end of their guidance. Adjusted EBITDA was $40.7 million, making up 21.5% of revenue, and free cash flow totaled $37.8 million. The quarter was marked by strong sales, including five significant Enterprise and Tier 1 deals, and notable expansion within their existing customer base. The company highlighted a Tier 1 relationship pricing deal with a bank to enhance commercial relationship profitability and a notable expansion deal with a top 50 U.S. bank for risk and fraud solutions. Subscription-based revenues grew by 18% year-over-year, constituting 81% of total revenue, while services and other revenues saw a 7% decline. Total annualized recurring revenue (ARR) increased to $847 million, up 11% from the previous year. Gross margins improved to 57.9%, with operating expenses at 40.7% of revenue. The company raised its full-year 2025 guidance, forecasting revenue between $776 million and $783 million and adjusted EBITDA of $170 million to $175 million, anticipating continued strong performance in subscription revenue growth and free cash flow conversion.Q2 Holdings Financial Statement Overview
Summary
Q2 Holdings shows strong revenue and cash flow growth with improvements in net profit margins. However, challenges remain in achieving consistent profitability, especially with negative EBIT margins and a high debt-to-equity ratio.Income Statement
Q2 Holdings has demonstrated robust revenue growth, with a steady increase from $402.8 million in 2020 to $742.9 million in TTM (Trailing-Twelve-Months) 2025, reflecting a solid growth trajectory. The gross profit margin improved, but EBIT and EBITDA margins show challenges in achieving operational profitability, as EBIT remains negative. Net profit margin turned positive in the TTM period, indicating potential improvements in cost management.75
Positive
Balance Sheet
The balance sheet shows a strengthening equity position with stockholders' equity increasing over time, supporting an improved equity ratio. However, the debt-to-equity ratio remains high, indicating reliance on debt financing. Return on equity turned positive in the TTM period, showing potential for improved shareholder value.70
Positive
Cash Flow
There is strong growth in operating cash flow and free cash flow, demonstrating improved cash generation capabilities. The free cash flow to net income ratio is positive, suggesting efficient cash management. The improvement in operating cash flow to net income ratio reflects enhanced operational efficiency.80
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 742.95M | 696.46M | 624.62M | 565.67M | 498.72M | 402.75M |
| Gross Profit | 390.96M | 354.48M | 302.65M | 256.35M | 225.03M | 174.60M |
| EBITDA | 71.61M | 42.89M | 29.02M | -37.74M | -23.20M | -55.72M |
| Net Income | 4.88M | -38.54M | -65.38M | -108.98M | -112.75M | -137.62M |
Balance Sheet | ||||||
| Total Assets | 1.39B | 1.29B | 1.20B | 1.35B | 1.39B | 1.42B |
| Cash, Cash Equivalents and Short-Term Investments | 532.07M | 446.63M | 324.01M | 433.35M | 427.73M | 539.05M |
| Total Debt | 539.32M | 541.12M | 546.49M | 731.09M | 621.97M | 601.05M |
| Total Liabilities | 801.08M | 777.00M | 752.95M | 930.70M | 814.75M | 773.34M |
| Stockholders Equity | 584.34M | 517.80M | 448.48M | 419.02M | 570.30M | 643.36M |
Cash Flow | ||||||
| Free Cash Flow | 179.61M | 129.06M | 39.65M | 6.50M | 5.31M | -27.56M |
| Operating Cash Flow | 178.46M | 135.75M | 70.29M | 36.56M | 30.93M | -2.89M |
| Investing Cash Flow | -74.75M | -21.08M | 113.27M | -165.56M | -65.13M | -124.16M |
| Financing Cash Flow | 6.09M | 13.32M | -152.01M | 5.88M | -51.16M | 434.68M |
Q2 Holdings Technical Analysis
Positive
82.72
Price Trends
82.99
Negative
84.99
Negative
88.07
Negative
Market Momentum
0.30
Negative
57.32
Neutral
77.08
Neutral
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 82.72 is above the 20-day moving average (MA) of 78.20, below the 50-day MA of 82.99, and below the 200-day MA of 88.07, indicating a neutral trend. The MACD of 0.30 indicates Negative momentum. The RSI at 57.32 is Neutral, neither overbought nor oversold. The STOCH value of 77.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for QTWO.
Q2 Holdings Risk Analysis
Q2 Holdings disclosed 55 risk factors in its most recent earnings report. Q2 Holdings reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Q2 Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $5.82B | 12.58 | 34.61% | ― | 36.68% | ― | |
70 Outperform | $5.17B | 1,349.43 | 0.92% | ― | 13.34% | ― | |
69 Neutral | $5.38B | 482.28 | 0.59% | ― | 13.36% | ― | |
68 Neutral | $3.47B | ― | -3.15% | ― | 13.24% | -12.97% | |
66 Neutral | $4.94B | ― | -8.21% | ― | 40.60% | 79.56% | |
65 Neutral | $4.39B | ― | 99.24% | ― | 19.02% | 27.64% | |
61 Neutral | $36.70B | 12.21 | -10.39% | 1.84% | 8.50% | -7.32% |
* Technology Sector Average
Performance Comparison
QTWO
Q2 Holdings
82.18
7.38
9.87%
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Workiva
78.44
3.71
4.96%
BILL
Bill.com Holdings
51.07
-0.84
-1.62%
NCNO
nCino
30.46
1.07
3.64%
ZETA
Zeta Global Holdings Corp
20.76
-6.76
-24.56%
CWAN
Clearwater Analytics Holdings
19.90
-4.11
-17.12%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.