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Q2 Holdings, Inc. Announces Fourth Quarter and Full-Year 2021 Financial Results

Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for banking and lending, today announced results for its fourth quarter and full year ending December 31, 2021.

GAAP Results for the Fourth Quarter and Full-Year 2021

  • Revenue for the fourth quarter of $131.9 million, up 21 percent year-over-year and up 4 percent from the third quarter of 2021. Full-year 2021 revenue of $498.7 million, up 24 percent year-over-year.
  • GAAP gross margin for the fourth quarter of 45.1 percent, up from 40.8 percent for the prior-year quarter and 45.0 percent for the third quarter of 2021. GAAP gross margin for full-year 2021 of 45.1 percent, up from 43.4 percent for the full-year 2020.
  • GAAP net loss for the fourth quarter of $25.4 million, compared to GAAP net losses of $37.8 million for the prior-year quarter and $31.6 million for the third quarter of 2021. GAAP net loss for full-year 2021 of $112.7 million, compared to $137.6 million for full-year 2020.

Non-GAAP Results for the Fourth Quarter and Full-Year 2021

  • Non-GAAP revenue for the fourth quarter of $132.3 million, up 21 percent year-over-year and up 4 percent from the third quarter of 2021. Full-year 2021 non-GAAP revenue of $500.8 million, up 23 percent year-over-year.
  • Non-GAAP gross margin for the fourth quarter of 51.5 percent, up from 48.3 percent for the prior-year quarter and down from 51.9 percent for the third quarter of 2021. Non-GAAP gross margin for full-year 2021 of 51.9 percent, consistent with 51.9 percent for full-year 2020.
  • Adjusted EBITDA for the fourth quarter of $10.8 million, up from $6.1 million for the prior-year quarter and $7.3 million for the third quarter of 2021. Full-year 2021 adjusted EBITDA of $37.9 million up from $22.2 million for the full-year 2020.

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

“We exited 2021 with strong results, delivering both the second largest bookings quarter and best half-year of bookings performance in company history,” said Q2 CEO Matt Flake. “I was particularly pleased with the broad sales strength, highlighted by numerous Tier 1 and Enterprise deals across both digital banking and lending. Q2 Innovation Studio and Q2 Banking-as-a-Service—now called Helix—continued to gain traction, adding new partners and extending key clients. While we’re continuing to monitor the macro-economic backdrop for our customers in the near term, we are increasingly seeing financial institutions, fintechs, and innovative brands accelerating their investments in financial services technology. With our broad solution portfolio and positive momentum exiting 2021, I believe we’re uniquely poised to capitalize on that opportunity in 2022 and beyond.”

Fourth Quarter Highlights

Sales Success Across the Business

  • Signed three Tier 1 digital banking contracts, including a:
    • Tier 1, Top 100 U.S. bank to utilize our retail & small business solutions;
    • Tier 1 bank to utilize our full digital banking suite including retail, small business and corporate digital banking solutions; and
    • Tier 1 credit union to utilize our corporate digital banking solutions.
  • Signed five enterprise and two Tier 1 digital lending contracts to utilize our loan pricing solutions, including a(n):
    • Enterprise, Top 5 Canadian bank which signed separate deals in both Canada and the U.S.;
    • Enterprise, Top 5 U.S. bank;
    • Enterprise, Top 10 U.S. bank to expand the lines of business which utilize our loan pricing solutions;
    • Enterprise, Top 25 U.S. bank;
    • Tier 1, Top 100 U.S. bank to adopt the full loan pricing solution suite; and
    • Tier 1, financial institution in the U.S.
  • Signed two Tier 1 digital lending contracts to utilize our treasury onboarding solution.
  • Signed multi-year renewals with three of our top five Helix customers.
  • Signed one enterprise and four Tier 1 digital banking contracts to utilize our ClickSWITCH solutions.

Strong Year-End Results due to Sales and Operational Execution

  • Annualized Recurring Revenue increased to $574.2 million, up 24% year-over-year from $464.2 million at the end of 2020.
  • Our Remaining Performance Obligation total, or Backlog, increased by $121.7 million sequentially resulting in total committed Backlog of over $1.4 billion, representing 10% year-over-year growth and 9% sequential growth.
  • Our trailing twelve-month net revenue retention rate was 119%, down slightly from 122% in the prior year.
    • 122% retention rate in 2020 included contribution from the acquisition of PrecisionLender in the fourth quarter of 2019.
  • Our annual revenue churn was 5.4%, down from 5.9% in the prior year.
  • Exited the fourth quarter with approximately 19.2 million registered users on the Q2 digital banking platform, representing 8% year-over-year growth and consistent with the previous quarter.

“We were pleased with our financial performance for the quarter with revenue results near the high-end of our guidance and EBITDA well exceeding our guidance,” said David Mehok, Q2 CFO. “Cash flow from operations for the fourth quarter was $39.3 million, our best quarter on record, as we finished with cash, cash equivalents, and investments of $427.7 million. We believe our continued operational efficiency and continuing sales success will further position us well to capitalize on our long-term market opportunity.”

Financial outlook

As of February 15, 2022, Q2 Holdings is providing guidance for its first quarter of 2022 and full-year 2022, which represents Q2 Holdings’ current estimates on Q2 Holdings’ operations and financial results and the anticipated impacts of the COVID-19 pandemic. 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, acquisition-related costs, interest and other (income) expense, income taxes, unoccupied lease charges, partnership termination charges, 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 foregoing 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 2022 as follows:

  • Total non-GAAP revenue of $131.5 million to $133.0 million, which would represent year-over-year growth of 12 to 14 percent.
  • Adjusted EBITDA of $7.7 million to $8.7 million, representing 6 to 7 percent of non-GAAP revenue for the quarter.

Q2 Holdings is providing guidance for the full-year 2022 as follows:

  • Total non-GAAP revenue of $576.0 million to $581.0 million, which would represent year-over-year growth of 15 percent to 16 percent.
  • Adjusted EBITDA of $40.9 million to $43.9 million, representing 7 to 8 percent of non-GAAP revenue for the year.

Conference Call Details

Date:

 

Wednesday, February 16

Time:

 

8:30 a.m. EST

Hosts:

 

Matt Flake, CEO / David Mehok, CFO / Jonathan Price, EVP Emerging Businesses, Corporate & Business Development

Webcast Registration:

 

https://events.q4inc.com/attendee/853514797

Conference Call Registration:

 

https://conferencingportals.com/event/FXwYzhXH

All participants must register using either above link (webcast or conference call). A webcast of the conference call, financial results and associated materials 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. 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 financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com.

Use of Non-GAAP Measures and Key Operating Measures

Q2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; 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); non-GAAP net income; non-GAAP net income per share; and non-GAAP diluted weighted-average number of common shares outstanding. 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, acquisition-related costs, unoccupied lease charges, partnership termination charges and the impact to deferred revenue from purchase accounting. 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, acquisition-related costs, 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), non-GAAP net income (loss), and non-GAAP net income (loss) per share, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition-related costs, amortization of acquired technology, amortization of acquired intangibles, unoccupied lease charges, partnership termination charges, loss on extinguishment of debt and the impact to deferred revenue from purchase accounting, and with respect to non-GAAP net income, amortization of debt discount and issuance costs and loss on extinguishment of debt. In the case of non-GAAP diluted weighted-average number of common shares outstanding, Q2 adjusts diluted weighted-average number of common shares outstanding by the weighted-average effect of potentially dilutive shares which include (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense and (ii) convertible senior notes outstanding and related warrants including the anti-dilutive impact of note hedge and capped call agreements on convertible senior notes outstanding.

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.

We also monitor the following key operating measures to evaluate growth trends, plan investments and measure the effectiveness of our sales and marketing efforts:

Backlog

Consists of contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods.

Installed Customers

We define Installed Customers as the number of customers on live implementations (or installations) of our digital banking platforms.

Registered Users

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our solutions and has current access to use those solutions as of the last day of the reporting period presented.

Net Revenue Retention Rate

We believe that our ability to retain our customers and expand their use of our products and services over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships. We assess our performance in this area using a metric we refer to as our revenue retention rate. We calculate our revenue retention rate as the total revenues in a calendar year, excluding any revenues from acquired customers during such year, from customers who were implemented on any of our solutions as of December 31 of the prior year, expressed as a percentage of the total revenues during the prior year from the same group of customers.

Annualized Recurring Revenue

We believe Annualized Recurring Revenue, or ARR, provides important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients. We calculate ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter that have not yet commenced, and revenue generated from Premier Services. Premier Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature.

Forward-looking Statements

This press release contains forward-looking statements, including statements about: our momentum with our Q2 Innovation Studio and Helix solutions, and Q2’s ability to add new partners and extend key clients; the impacts of the macro-economic backdrop for Q2’s customers; accelerated investments by financial institutions, fintechs, and innovative brands in financial services technology; Q2’s momentum exiting 2021; the benefits of Q2’s broad solution portfolio, operational efficiency and improving sales performance; Q2’s position to capitalize on its long-term market opportunity; 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 the adverse impacts of the COVID-19 pandemic on Q2’s business operations and on global economic and financial markets, including on Q2’s customers, partners and suppliers and employees and business, as well as risks related to: (a) the risk of increased competition in its existing markets and as it enters new sections of the market with Tier 1 customers, new markets with Alt-FIs and fintechs and new products and services; (b) the risk that COVID-19, government actions or other factors continue to negatively impact or disrupt the markets for Q2’s solutions and that the markets for Q2’s solutions do not return to normal or grow as anticipated, in particular with respect to Enterprise and Tier 1 customers and Alt-FI and fintech customers; (c) the risk that Q2’s increased focus on selling to larger Enterprise or Tier 1 customers may result in greater uncertainty and variability in Q2’s business and sales results; (d) the risk that changes in Q2’s market, business or sales organization negatively impact its ability to sell its products and services; (e) 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; (f) the risk that errors, interruptions or delays in Q2’s products or services or Web hosting negatively impacts Q2’s business and sales; (g) 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 its ability to sell its products and services; (h) the impact that a slowdown in the economy, financial markets and credit markets may have on Q2’s customers and Q2’s business sales cycles, prospects and customers’ spending decisions and timing of implementation decisions, particularly in regions where a significant number of Q2’s customers are concentrated; (i) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by customers and governmental authorities; (j) the risks inherent in technology and implementation partnerships that could cause harm to Q2’s business; (k) the difficulties and costs Q2 may encounter with complex implementations of its solutions and the resulting impact on reputation and the timing of its revenue from any delayed implementations; (l) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (m) the risks and increased costs associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth, particularly in light of the macroeconomic impacts of the COVID-19 pandemic, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (n) the risk that modifications or negotiations of contractual arrangements will be necessary during Q2’s implementations of its solutions or the general risks associated with the complexity of Q2’s customer arrangements; (o) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (p) the risks associated with anticipated higher operating expenses in 2022 and beyond; (q) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (r) the risks associated with further consolidation in the financial services industry; (s) risks associated with selling Q2 solutions internationally; and (t) the risk that Q2 debt repayment obligations may adversely affect its financial condition and cash flows from operations in the future 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,

 

December 31,

 

 

2021

 

2020

Assets
Current assets:
Cash and cash equivalents

$

322,848

 

$

407,703

 

Restricted cash

 

2,973

 

 

3,482

 

Investments

 

104,878

 

 

131,352

 

Accounts receivable, net

 

46,979

 

 

36,430

 

Contract assets, current portion, net

 

1,845

 

 

1,088

 

Prepaid expenses and other current assets

 

10,531

 

 

8,861

 

Deferred solution and other costs, current portion

 

25,076

 

 

19,042

 

Deferred implementation costs, current portion

 

7,320

 

 

8,258

 

Total current assets

 

522,450

 

 

616,216

 

Property and equipment, net

 

66,608

 

 

49,558

 

Right of use assets

 

52,278

 

 

34,709

 

Deferred solution and other costs, net of current portion

 

26,930

 

 

32,782

 

Deferred implementation costs, net of current portion

 

17,039

 

 

15,184

 

Intangible assets, net

 

162,461

 

 

184,859

 

Goodwill

 

512,869

 

 

462,274

 

Contract assets, net of current portion and allowance

 

22,103

 

 

18,694

 

Other long-term assets

 

2,307

 

 

2,426

 

Total assets

$

1,385,045

 

$

1,416,702

 

 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities

$

60,665

 

$

57,047

 

Deferred revenues, current portion

 

98,692

 

 

81,935

 

Lease liabilities, current portion

 

9,001

 

 

6,844

 

Total current liabilities

 

168,358

 

 

145,826

 

Convertible notes, net of current portion

 

551,598

 

 

557,468

 

Deferred revenues, net of current portion

 

29,168

 

 

29,203

 

Lease liabilities, net of current portion

 

61,374

 

 

36,739

 

Other long-term liabilities

 

4,251

 

 

4,102

 

Total liabilities

 

814,749

 

 

773,338

 

 
Stockholders' equity:
Common stock

 

6

 

 

6

 

Additional paid-in capital

 

1,064,358

 

 

1,024,577

 

Accumulated other comprehensive loss

 

(135

)

 

(32

)

Accumulated deficit

 

(493,933

)

 

(381,187

)

Total stockholders' equity

 

570,296

 

 

643,364

 

Total liabilities and stockholders' equity

$

1,385,045

 

$

1,416,702

 

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,

 

 

2021

 

2020

 

2021

 

2020

 
Revenues (1)

$

131,891

 

$

108,986

 

$

498,720

 

$

402,751

 

Cost of revenues (2)

 

72,407

 

 

64,476

 

 

273,685

 

 

228,152

 

Gross profit

 

59,484

 

 

44,510

 

 

225,035

 

 

174,599

 

 
Operating expenses:
Sales and marketing

 

22,497

 

 

17,726

 

 

85,564

 

 

72,323

 

Research and development

 

29,965

 

 

25,213

 

 

116,952

 

 

97,381

 

General and administrative

 

20,025

 

 

17,061

 

 

77,915

 

 

70,937

 

Acquisition related costs

 

176

 

 

500

 

 

2,690

 

 

478

 

Amortization of acquired intangibles

 

4,436

 

 

4,441

 

 

17,901

 

 

17,888

 

Partnership termination charges

 

-

 

 

-

 

 

-

 

 

13,244

 

Unoccupied lease charges (benefit) (3)

 

(48

)

 

45

 

 

2,008

 

 

2,181

 

Total operating expenses

 

77,051

 

 

64,986

 

 

303,030

 

 

274,432

 

Loss from operations

 

(17,567

)

 

(20,476

)

 

(77,995

)

 

(99,833

)

Total other income (expense), net (4)

 

(7,080

)

 

(16,550

)

 

(33,108

)

 

(36,371

)

Loss before income taxes

 

(24,647

)

 

(37,026

)

 

(111,103

)

 

(136,204

)

Provision for income taxes

 

(734

)

 

(795

)

 

(1,643

)

 

(1,416

)

Net loss

$

(25,381

)

$

(37,821

)

$

(112,746

)

$

(137,620

)

Other comprehensive loss:
Unrealized loss on available-for-sale investments

 

(210

)

 

(52

)

 

(213

)

 

(118

)

Foreign currency translation adjustment

 

(19

)

 

58

 

 

110

 

 

72

 

Comprehensive loss

$

(25,610

)

$

(37,815

)

$

(112,849

)

$

(137,666

)

Net loss per common share:
Net loss per common share, basic and diluted

$

(0.45

)

$

(0.69

)

$

(2.00

)

$

(2.65

)

Weighted average common shares outstanding, basic and diluted

 

56,846

 

 

54,632

 

 

56,394

 

 

52,019

 

(1)

Includes deferred revenue reduction from purchase accounting of $0.5 million and $0.7 million for the three months ended December 31, 2021 and 2020, respectively, and $2.1 million and $4.4 million for the twelve months ended December 31, 2021 and 2020, respectively.

 

(2)

Includes amortization of acquired technology of $5.6 million and $5.2 million for the three months ended December 31, 2021 and 2020, respectively, and $22.0 million and $21.3 million for the twelve months ended December 31, 2021 and 2020, respectively.

 

(3)

Unoccupied lease charges include costs related to the early vacating of various facilities, partially offset by anticipated sublease income from these facilities. For the three and twelve months ended December 31, 2021, the charges related to an updated assessment and vacating of facilities in Georgia, Texas, North Carolina and Nebraska, and for the three and twelve months ended December 31, 2020, the charges related to the vacating of facilities in California, North Carolina, and Texas.

 

(4)

Includes a reduction of $1.5 million and $8.9 million related to the early extinguishment of a portion of our 2023 Notes for the twelve months ended December 31, 2021 and the three and twelve months ended December 31, 2020, respectively.
Q2 Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Twelve Months Ended December 31,

2021

 

2020

Cash flows from operating activities:
Net loss

$

(112,746

)

$

(137,620

)

Adjustments to reconcile net loss to net cash from operating activities:
Amortization of deferred implementation, solution and other costs

 

24,496

 

 

22,936

 

Depreciation and amortization

 

54,833

 

 

51,840

 

Amortization of debt issuance costs

 

2,038

 

 

1,977

 

Amortization of debt discount

 

25,824

 

 

21,317

 

Amortization of premiums on investments

 

1,117

 

 

366

 

Stock-based compensation expense

 

55,903

 

 

50,682

 

Deferred income taxes

 

180

 

 

946

 

Loss on extinguishment of debt

 

1,513

 

 

8,932

 

Other non-cash charges

 

2,411

 

 

2,626

 

Changes in operating assets and liabilities

 

(24,644

)

 

(26,892

)

Net cash provided by (used in) operating activities

 

30,925

 

 

(2,890

)

Cash flows from investing activities:
Net maturities (purchases) of investments

 

25,142

 

 

(99,496

)

Purchases of property and equipment

 

(19,754

)

 

(23,715

)

Business combinations, net of cash acquired

 

(64,652

)

 

-

 

Capitalized software development costs

 

(5,865

)

 

(952

)

Net cash used in investing activities

 

(65,129

)

 

(124,163

)

Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs

 

-

 

 

311,321

 

Proceeds from issuance of convertible notes, net of issuance costs

 

-

 

 

132,589

 

Purchase of capped call transactions

 

-

 

 

(39,830

)

Payments for repurchases of convertible notes

 

(63,692

)

 

-

 

Proceeds from bond hedges related to convertible notes

 

26,295

 

 

171,679

 

Payments for warrants related to convertible notes

 

(19,655

)

 

(137,538

)

Proceeds from exercise of stock options to purchase common stock

 

5,892

 

 

13,317

 

Payment of contingent consideration

 

-

 

 

(16,862

)

Net cash provided by (used in) financing activities

 

(51,160

)

 

434,676

 

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

 

(85,364

)

 

307,623

 

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

 

411,185

 

 

103,562

 

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

$

325,821

 

$

411,185

 

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,

 

 

2021

 

2020

 

2021

 

2020

 

GAAP revenue

$

131,891

 

$

108,986

 

$

498,720

 

$

402,751

 

Deferred revenue reduction from purchase accounting

 

452

 

 

684

 

 

2,129

 

 

4,404

 

Non-GAAP revenue

$

132,343

 

$

109,670

 

$

500,849

 

$

407,155

 

 

GAAP gross profit

$

59,484

 

$

44,510

 

$

225,035

 

$

174,599

 

Stock-based compensation

 

2,564

 

 

2,466

 

 

10,590

 

 

9,888

 

Amortization of acquired technology

 

5,604

 

 

5,157

 

 

21,969

 

 

21,341

 

Acquisition related costs

 

82

 

 

194

 

 

409

 

 

929

 

Deferred revenue reduction from purchase accounting

 

452

 

 

684

 

 

2,129

 

 

4,404

 

Non-GAAP gross profit

$

68,186

 

$

53,011

 

$

260,132

 

$

211,161

 

 

Non-GAAP gross margin:

Non-GAAP gross profit

$

68,186

 

$

53,011

 

$

260,132

 

$

211,161

 

Non-GAAP revenue

 

132,343

 

 

109,670

 

 

500,849

 

 

407,155

 

Non-GAAP gross margin

 

51.5

%

 

48.3

%

 

51.9

%

 

51.9

%

 

GAAP sales and marketing expense

$

22,497

 

$

17,726

 

$

85,564

 

$

72,323

 

Stock-based compensation

 

(2,801

)

 

(2,417

)

 

(11,153

)

 

(8,770

)

Non-GAAP sales and marketing expense

$

19,696

 

$

15,309

 

$

74,411

 

$

63,553

 

 

GAAP research and development expense

$

29,965

 

$

25,213

 

$

116,952

 

$

97,381

 

Stock-based compensation

 

(3,234

)

 

(3,089

)

 

(13,273

)

 

(12,869

)

Non-GAAP research and development expense

$

26,731

 

$

22,124

 

$

103,679

 

$

84,512

 

 

GAAP general and administrative expense

$

20,025

 

$

17,061

 

$

77,915

 

$

70,937

 

Stock-based compensation

 

(4,944

)

 

(4,348

)

 

(19,318

)

 

(17,708

)

Non-GAAP general and administrative expense

$

15,081

 

$

12,713

 

$

58,597

 

$

53,229

 

 

GAAP operating loss

$

(17,567

)

$

(20,476

)

$

(77,995

)

$

(99,833

)

Deferred revenue reduction from purchase accounting

 

452

 

 

684

 

 

2,129

 

 

4,404

 

Partnership termination charges

 

-

 

 

-

 

 

-

 

 

13,244

 

Stock-based compensation

 

13,543

 

 

12,320

 

 

54,334

 

 

49,235

 

Acquisition related costs

 

258

 

 

694

 

 

3,099

 

 

1,408

 

Amortization of acquired technology

 

5,604

 

 

5,157

 

 

21,969

 

 

21,341

 

Amortization of acquired intangibles

 

4,436

 

 

4,441

 

 

17,901

 

 

17,888

 

Unoccupied lease charges (benefit)

 

(48

)

 

45

 

 

2,008

 

 

2,181

 

Non-GAAP operating income

$

6,678

 

$

2,865

 

$

23,445

 

$

9,868

 

 

GAAP net loss

$

(25,381

)

$

(37,821

)

$

(112,746

)

$

(137,620

)

Deferred revenue reduction from purchase accounting

 

452

 

 

684

 

 

2,129

 

 

4,404

 

Partnership termination charges

 

-

 

 

-

 

 

-

 

 

13,244

 

Loss on extinguishment of debt

 

-

 

 

8,932

 

 

1,513

 

 

8,932

 

Stock-based compensation

 

13,543

 

 

12,320

 

 

54,334

 

 

49,235

 

Acquisition related costs

 

258

 

 

694

 

 

3,099

 

 

1,408

 

Amortization of acquired technology

 

5,604

 

 

5,157

 

 

21,969

 

 

21,341

 

Amortization of acquired intangibles

 

4,436

 

 

4,441

 

 

17,901

 

 

17,888

 

Unoccupied lease charges (benefit)

 

(48

)

 

45

 

 

2,008

 

 

2,181

 

Amortization of debt discount and issuance costs

 

6,914

 

 

6,486

 

 

27,862

 

 

23,294

 

Non-GAAP net income

$

5,778

 

$

938

 

$

18,069

 

$

4,307

 

 

Reconciliation from diluted weighted-average number of common shares as reported to Non-GAAP diluted weighted-average number of common shares

Diluted weighted-average number of common shares, as reported

 

56,846

 

 

54,632

 

 

56,394

 

 

52,019

 

Non-GAAP weighted-average effect of potentially dilutive shares

 

488

 

 

3,197

 

 

966

 

 

2,403

 

Non-GAAP diluted weighted-average number of common shares

 

57,334

 

 

57,829

 

 

57,360

 

 

54,422

 

 

Calculation of non-GAAP income per share:

Non-GAAP net income

$

5,778

 

$

938

 

$

18,069

 

$

4,307

 

Non-GAAP diluted weighted-average number of common shares

 

57,334

 

 

57,829

 

 

57,360

 

 

54,422

 

Non-GAAP net income per share

$

0.10

 

$

0.02

 

$

0.32

 

$

0.08

 

 

Reconciliation of GAAP net loss to adjusted EBITDA:

GAAP net loss

$

(25,381

)

$

(37,821

)

$

(112,746

)

$

(137,620

)

Depreciation and amortization

 

14,253

 

 

12,865

 

 

54,833

 

 

51,840

 

Stock-based compensation

 

13,543

 

 

12,320

 

 

54,334

 

 

49,235

 

Provision for income taxes

 

734

 

 

795

 

 

1,643

 

 

1,416

 

Interest and other (income) expense, net

 

7,007

 

 

7,594

 

 

31,063

 

 

27,180

 

Acquisition related costs

 

258

 

 

694

 

 

3,099

 

 

1,408

 

Unoccupied lease charges (benefit)

 

(48

)

 

45

 

 

2,008

 

 

2,181

 

Loss on extinguishment of debt

 

-

 

 

8,932

 

 

1,513

 

 

8,932

 

Deferred revenue reduction from purchase accounting

 

452

 

 

684

 

 

2,129

 

 

4,404

 

Partnership termination charges

 

-

 

 

-

 

 

-

 

 

13,244

 

Adjusted EBITDA

$

10,818

 

$

6,108

 

$

37,876

 

$

22,220

 

Q2 Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Revenue Outlook

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Q1 2022 Outlook

 

Full Year 2022 Outlook

 

 

Low

 

High

 

Low

 

High

 
GAAP revenue

$

131,258

$

132,758

$

575,320

$

580,320

Deferred revenue reduction from purchase accounting

 

242

 

242

 

680

 

680

Non-GAAP revenue

$

131,500

$

133,000

$

576,000

$

581,000

 

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