Q2 Holdings' Sales Surge 31%

As the world becomes more mobile, so too must banks.

Fortunately, Q2 Holdings (NYSE: QTWO) -- as a leading provider of secure, cloud-based digital banking solutions -- helps financial institutions do just that.

In turn, Q2's sales are soaring, as evidenced by its strong third-quarter results.

Q2 Holdings results: The raw numbers

What happened with Q2 this quarter?

  • Q2 ended the third quarter with nearly 10 million registered users on its platform, representing 4% sequential and 27% year-over-year growth.
  • Revenue rose 5% sequentially and 31% year over year, to $50.1 million.
  • GAAP gross margin declined to 48.5% from 48.8% in the third quarter of 2016, while non-GAAP gross margin -- which adjusts for stock-based compensation and amortization of acquired technology -- was flat year over year at 52.3%.
  • Adjusted EBITDA improved to positive $3.6 million, compared to negative $1.1 million in the year-ago quarter.
  • Still, Q2 remains unprofitable on a GAAP basis; it generated a net loss of $5.8 million in the third quarter, versus a loss of $9.5 million in the prior-year period.

What management had to say 

CEO Matt Flake highlighted some of Q2's successes during a conference call with analysts (transcript by Seeking Alpha). 

Looking forward

For the fourth quarter, Q2 Holdings expects:

  • Total revenue of $51.4 million to $51.8 million, which would represent year-over-year growth of 22% to 23%.
  • Adjusted EBITDA of positive $3.3 million to $3.7 million. 

As such, Q2 expects full-year revenue of $193.6 million to $194 million -- representing year-over-year growth of 29% -- and adjusted EBITDA of $9.4 million to $9.8 million.

"We converted multiple Tier 1 opportunities in the quarter including two banks and one of the largest credit unions in the country," Flake said in a press release. "I remain encouraged by our pipeline and optimistic that we can sustain our positive momentum into the fourth quarter."

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Q2 Holdings. The Motley Fool has a disclosure policy.