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| 8-K - 8-K - Q2 Holdings, Inc. | q420148-k.htm |
Exhibit 99.1
Q2 Holdings, Inc. Announces Fourth Quarter and Full-Year 2014 Financial Results
Total fourth quarter revenue of $22.1 million, up 41 percent year-over-year
and full-year revenue of $79.1 million, up 39 percent year-over-year
AUSTIN, Texas (Feb. 5, 2015) - Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of secure virtual banking solutions to regional and community financial institutions, today announced results for its fourth quarter and full year ended Dec. 31, 2014.
Fourth Quarter and Full-Year 2014 Results
• | Revenue for the fourth quarter of $22.1 million, up 41 percent year-over-year and full-year revenue of $79.1 million, up 39 percent year-over-year. |
• | Non-GAAP gross margin for the fourth quarter of 42.8 percent, up from 31 percent one year ago. GAAP gross margin for the fourth quarter of 41.9 percent, up from 30.6 percent one year ago. Full-year non-GAAP gross margin of 42.6 percent, up from 36.7 percent in 2013. GAAP gross margin for the full year of 41.8 percent, up from 36.2 percent in 2013. |
• | Adjusted EBITDA for the fourth quarter of negative $2.2 million, an improvement from negative $4.9 million one year ago and negative $2.3 million in the third quarter. Full-year adjusted EBITDA of negative $10.4 million compared to negative $12.3 million in 2013. GAAP net loss for the comparable periods, respectively, was as follows: $4.8 million for the fourth quarter 2014; $6.5 million for the fourth quarter of 2013; $4.6 million for the third quarter 2014; $19.6 million for the full year 2014; and $17.9 million for the full year 2013. |
“The fourth quarter was a strong finish to a fantastic year as the company continued to execute across sales, product development and implementations,” said Matt Flake, president and CEO of Q2 Holdings, Inc. “We signed five Tier 1 customers, rolled out the next generation of our platform and added more than 1.2 million users in 2014 while growing revenue 39 percent and boosting gross margin. I’m optimistic about 2015 and look forward to another strong year.”
Fourth Quarter and Full-Year 2014 Highlights
• | Signed two additional Tier 1 financial institutions in the fourth quarter for a total of five for the full year. Added a Top 20 Credit Union in the Southwest and a leading bank in the Western United States in the fourth quarter. |
• | Exited the fourth quarter with more than 4.3 million registered users on the Q2 platform, representing 39 percent year-over-year growth and 5 percent quarter-over-quarter growth. |
• | Rolled out our initial Treasury banking product, which is experiencing strong demand in the marketplace and will support our customers as they look to move up-market and acquire more lucrative commercial accounts. |
Financial Outlook
Q2 Holdings is providing guidance for its first quarter 2015 as follows:
• | Total revenue of $23.2 million to $23.8 million, which would represent year-over-year growth of 38 percent to 41 percent. |
• | Adjusted EBITDA of negative $3.0 million to negative $3.5 million. |
Q2 Holdings is providing guidance for the full-year 2015 as follows:
• | Total revenue of $104 million to $106 million, which would represent year-over-year growth of 31 percent to 34 percent. |
• | Adjusted EBITDA of negative $9.5 million to negative $11 million. |
Conference Call Details
Date: Feb. 5, 2015
Time: 5:00 p.m. EST
Hosts: Matt Flake, CEO / Jennifer Harris, CFO
Dial in: US toll free: 1-877-201-0168
International: 1-647-788-4901
Conference ID: 63250467
Please join the conference call at least 10 minutes before start time to ensure the line is connected. A live webcast of the conference call will be accessible from the investor relations section of the Q2 Holdings, Inc. website at http://investors.q2ebanking.com/.
A replay of the webcast will also be available at this website on a temporary basis shortly after the call.
About Q2 Holdings, Inc.
Q2 is a leading provider of secure, cloud-based virtual banking solutions headquartered in Austin, Texas. Q2 enables regional and community financial institutions, or RCFIs, to deliver a robust suite of integrated virtual banking services and engage more effectively with their retail and commercial account holders who expect to bank anytime, anywhere and on any device. Q2 solutions are often the most frequent point of interaction between its RCFI customers and their account holders. As such, Q2 purpose-built its solutions to deliver a compelling, consistent user experience across digital channels and drive the success of its customers by extending their local brands, enabling improved account holder retention and creating incremental sales opportunities. To learn more about Q2 visit q2ebanking.com.
Use of Non-GAAP Measures
Management believes that adjusted EBITDA and non-GAAP gross margin are useful measures of operating performance because they exclude items that Q2 does not consider indicative of its core performance. In the case of adjusted EBITDA, Q2 adjusts net loss for such things as interest, taxes, depreciation and amortization, stock-based compensation, loss from discontinued operations and unoccupied lease charges. In the case of non-GAAP gross margin, Q2 adjusts gross margin for stock-based compensation. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, net loss and GAAP gross margin, 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 adjusted EBITDA and non-GAAP gross margin 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.
Forward-looking Statements
This press release contains forward-looking statements, including statements about Q2’s excitement and optimism about 2015; demand for our Treasury banking product and its ability to support our customers’ growth; 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 risks related to: (a) the risk that Q2 will face increased competition in its existing markets and as it enters new sections of the market with Tier 1 customers and new products and services; (b) the risk that the market for Q2’s solutions does not grow as anticipated; (c) 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; (d) errors, interruptions or delays in Q2’s service or Web hosting; (e) risks associated with breaches of security measures within Q2’s products, systems and infrastructure; (f) technological and regulatory developments; (g) the impact that a slowdown in the economy, financial markets, and credit markets has on Q2’s business sales cycles, prospects’ and customers’ spending decisions and timing of implementation decisions; (h) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality desired by customers and governmental authorities; (i) the difficulties and costs Q2 may encounter with complex implementations of its solutions and the resulting impact on the timing of its revenue from any delayed implementations; (j) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (k) the risks associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth; (l) the risk that modification or negotiation 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; and (m) litigation related to intellectual property and other matters and any related claims, negotiations and settlements.
Additional information relating to the uncertainty affecting the Q2 business are 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.q2ebanking.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)
December 31, 2014 | December 31, 2013 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | 67,979 | 18,675 | ||||||
Restricted cash | 829 | 116 | ||||||
Investments | 20,956 | — | ||||||
Accounts receivable, net | 5,007 | 9,063 | ||||||
Prepaid expenses and other current assets | 2,695 | 1,079 | ||||||
Deferred solution and other costs, current portion | 5,060 | 3,124 | ||||||
Deferred implementation costs, current portion | 1,996 | 1,814 | ||||||
Total current assets | 104,522 | 33,871 | ||||||
Property and equipment, net | 18,521 | 14,831 | ||||||
Deferred solution and other costs, net of current portion | 7,159 | 5,358 | ||||||
Deferred implementation costs, net of current portion | 5,378 | 4,560 | ||||||
Other long-term assets | 1,226 | 2,488 | ||||||
Total assets | $ | 136,806 | $ | 61,108 | ||||
Liabilities and stockholders' equity (deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | 15,190 | 15,749 | ||||||
Deferred revenues, current portion | 17,289 | 12,728 | ||||||
Capital lease obligations, current portion | 408 | 714 | ||||||
Total current liabilities | 32,887 | 29,191 | ||||||
Deferred revenue, net of current portion | 19,436 | 14,773 | ||||||
Capital lease obligations, net of current portion | 167 | 575 | ||||||
Long-term debt, net of current portion | — | 6,288 | ||||||
Deferred rent, net of current portion | 4,694 | 4,444 | ||||||
Other long-term liabilities | 682 | 101 | ||||||
Total liabilities | 57,866 | 55,372 | ||||||
Redeemable convertible preferred stock and redeemable common stock | — | 42,052 | ||||||
Stockholders' equity (deficit): | ||||||||
Junior convertible preferred stock | — | 1,740 | ||||||
Common stock | 3 | 1 | ||||||
Treasury stock | (20 | ) | — | |||||
Additional paid-in capital | 143,337 | 6,675 | ||||||
Accumulated other comprehensive loss | (14 | ) | — | |||||
Accumulated deficit | (64,366 | ) | (44,732 | ) | ||||
Total stockholders' equity (deficit) | 78,940 | (36,316 | ) | |||||
Total liabilities and stockholders' equity (deficit) | $ | 136,806 | $ | 61,108 | ||||
Q2 Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | $ | 22,148 | $ | 15,669 | $ | 79,129 | $ | 56,872 | ||||||||
Cost of revenues (1) | 12,869 | 10,879 | 46,054 | 36,261 | ||||||||||||
Gross profit | 9,279 | 4,790 | 33,075 | 20,611 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing (1) | 5,886 | 4,929 | 23,069 | 16,726 | ||||||||||||
Research and development (1) | 3,408 | 2,752 | 12,086 | 9,029 | ||||||||||||
General and administrative (1) | 4,641 | 3,424 | 16,991 | 11,742 | ||||||||||||
Unoccupied lease charges | — | — | — | 236 | ||||||||||||
Total operating expenses | 13,935 | 11,105 | 52,146 | 37,733 | ||||||||||||
Loss from operations | (4,656 | ) | (6,315 | ) | (19,071 | ) | (17,122 | ) | ||||||||
Other income (expense), net | (84 | ) | (162 | ) | (492 | ) | (499 | ) | ||||||||
Loss before income taxes | (4,740 | ) | (6,477 | ) | (19,563 | ) | (17,621 | ) | ||||||||
Provision for income taxes | (20 | ) | (22 | ) | (71 | ) | (55 | ) | ||||||||
Loss from continuing operations | (4,760 | ) | (6,499 | ) | (19,634 | ) | (17,676 | ) | ||||||||
Loss from discontinued operations, net of tax | — | — | — | (199 | ) | |||||||||||
Net Loss | $ | (4,760 | ) | $ | (6,499 | ) | $ | (19,634 | ) | $ | (17,875 | ) | ||||
Other comprehensive loss: | ||||||||||||||||
Unrealized gain (loss) on available for sale investments | 6 | — | (14 | ) | — | |||||||||||
Comprehensive loss | $ | (4,754 | ) | $ | (6,499 | ) | $ | (19,648 | ) | $ | (17,875 | ) | ||||
Net loss per common share: | ||||||||||||||||
Loss from continuing operations per common share, basic and diluted | $ | (0.14 | ) | $ | (0.54 | ) | $ | (0.67 | ) | $ | (1.49 | ) | ||||
Loss from discontinued operations per common share, basic and diluted | $ | — | $ | — | $ | — | $ | (0.02 | ) | |||||||
Net loss per common share, basic and diluted | $ | (0.14 | ) | $ | (0.54 | ) | $ | (0.67 | ) | $ | (1.51 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 34,405 | 12,078 | 29,257 | 11,866 | ||||||||||||
(1) | Includes stock-based compensation expenses as follows: |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Cost of revenues | $ | 191 | $ | 72 | $ | 623 | $ | 264 | ||||||||
Sales and marketing | 231 | 94 | 774 | 274 | ||||||||||||
Research and development | 167 | 68 | 527 | 257 | ||||||||||||
General and administrative | 894 | 249 | 2,646 | 810 | ||||||||||||
Total stock-based compensation expenses | $ | 1,483 | $ | 483 | $ | 4,570 | $ | 1,605 | ||||||||
Q2 Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Twelve Months Ended December 31, | ||||||||
2014 | 2013 | |||||||
(unaudited) | (unaudited) | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (19,634 | ) | $ | (17,875 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
used in operating activities: | ||||||||
Amortization of deferred implementation, solution and other costs | 4,435 | 2,837 | ||||||
Depreciation and amortization | 4,083 | 2,971 | ||||||
Amortization of debt issuance costs | 96 | 68 | ||||||
Amortization of premiums on investments | 17 | — | ||||||
Stock-based compensation expenses | 4,570 | 1,605 | ||||||
Loss from discontinued operations | — | 199 | ||||||
Other non-cash charges | 65 | 75 | ||||||
Unoccupied lease charges | — | 236 | ||||||
Changes in operating assets and liabilities | 1,082 | 8,613 | ||||||
Net cash used in continuing operations | (5,286 | ) | (1,271 | ) | ||||
Net cash used in discontinued operating activities | — | (236 | ) | |||||
Net cash used in operating activities | (5,286 | ) | (1,507 | ) | ||||
Cash flows from investing activities: | ||||||||
Net purchases of investments | (20,986 | ) | — | |||||
Purchases of property and equipment | (5,036 | ) | (11,138 | ) | ||||
Acquisitions and purchase of intangible assets | — | (125 | ) | |||||
Increase in restricted cash | (713 | ) | — | |||||
Cash included in distribution of spin-off | — | (46 | ) | |||||
Cash used in investing activities | (26,735 | ) | (11,309 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of preferred stock | — | 18,995 | ||||||
Borrowings and payments on line of credit and capital leases, net | (6,958 | ) | 2,950 | |||||
Proceeds from issuance of common stock | 88,283 | 435 | ||||||
Net cash provided by financing activities | 81,325 | 22,380 | ||||||
Net increase in cash and cash equivalents | 49,304 | 9,564 | ||||||
Cash and cash equivalents, beginning of period | 18,675 | 9,111 | ||||||
Cash and cash equivalents, end of period | $ | 67,979 | $ | 18,675 | ||||
Q2 Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share data)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
GAAP gross profit | $ | 9,279 | $ | 4,790 | $ | 33,075 | $ | 20,611 | ||||||||
Stock-based compensation | 191 | 72 | 623 | 264 | ||||||||||||
Non-GAAP gross profit | $ | 9,470 | $ | 4,862 | $ | 33,698 | $ | 20,875 | ||||||||
Non-GAAP gross margin: | ||||||||||||||||
Non-GAAP gross profit | $ | 9,470 | $ | 4,862 | $ | 33,698 | $ | 20,875 | ||||||||
GAAP revenue | 22,148 | 15,669 | 79,129 | 56,872 | ||||||||||||
Non-GAAP gross margin | 42.8 | % | 31.0 | % | 42.6 | % | 36.7 | % | ||||||||
Adjusted non-GAAP gross profit: | ||||||||||||||||
Non-GAAP gross profit | $ | 9,470 | $ | 4,862 | $ | 33,698 | $ | 20,875 | ||||||||
One-time charge related to past use of intellectual property | — | 1,058 | — | 1,058 | ||||||||||||
Adjusted non-GAAP gross profit: | $ | 9,470 | $ | 5,920 | $ | 33,698 | $ | 21,933 | ||||||||
Adjusted non-GAAP gross margin: | ||||||||||||||||
Adjusted non-GAAP gross profit | $ | 9,470 | $ | 5,920 | $ | 33,698 | $ | 21,933 | ||||||||
GAAP revenue | 22,148 | 15,669 | 79,129 | 56,872 | ||||||||||||
Adjusted non-GAAP gross margin: | 42.8 | % | 37.8 | % | 42.6 | % | 38.6 | % | ||||||||
GAAP sales and marketing expense | 5,886 | 4,929 | 23,069 | 16,726 | ||||||||||||
Stock-based compensation | (231 | ) | (94 | ) | (774 | ) | (274 | ) | ||||||||
Non-GAAP sales and marketing expense | $ | 5,655 | $ | 4,835 | $ | 22,295 | $ | 16,452 | ||||||||
GAAP research and development expense | 3,408 | 2,752 | 12,086 | 9,029 | ||||||||||||
Stock-based compensation | (167 | ) | (68 | ) | (527 | ) | (257 | ) | ||||||||
Non-GAAP research and development expense | $ | 3,241 | $ | 2,684 | $ | 11,559 | $ | 8,772 | ||||||||
GAAP general and administrative expense | 4,641 | 3,424 | 16,991 | 11,742 | ||||||||||||
Stock-based compensation | (894 | ) | (249 | ) | (2,646 | ) | (810 | ) | ||||||||
Non-GAAP general and administrative expense | $ | 3,747 | $ | 3,175 | $ | 14,345 | $ | 10,932 | ||||||||
GAAP operating loss | (4,656 | ) | (6,315 | ) | (19,071 | ) | (17,122 | ) | ||||||||
Stock-based compensation | 1,483 | 483 | 4,570 | 1,605 | ||||||||||||
Non-GAAP operating loss | $ | (3,173 | ) | $ | (5,832 | ) | $ | (14,501 | ) | $ | (15,517 | ) | ||||
GAAP net loss | (4,760 | ) | (6,499 | ) | (19,634 | ) | (17,875 | ) | ||||||||
Stock-based compensation | 1,483 | 483 | 4,570 | 1,605 | ||||||||||||
Non-GAAP net loss | $ | (3,277 | ) | $ | (6,016 | ) | $ | (15,064 | ) | $ | (16,270 | ) | ||||
Non-GAAP net loss per share, basic and diluted | ||||||||||||||||
Numerator: | ||||||||||||||||
Non-GAAP net loss | $ | (3,277 | ) | $ | (6,016 | ) | $ | (15,064 | ) | $ | (16,270 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding, basic and diluted | 34,405 | 12,078 | 29,257 | 11,866 | ||||||||||||
Non-GAAP net loss per share, basic and diluted | $ | (0.10 | ) | $ | (0.50 | ) | $ | (0.51 | ) | $ | (1.37 | ) | ||||
Pro forma non-GAAP net loss per share, basic and diluted | ||||||||||||||||
Numerator: | ||||||||||||||||
Non-GAAP net loss | $ | (3,277 | ) | $ | (6,016 | ) | $ | (15,064 | ) | $ | (16,270 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding, basic and diluted | 34,405 | 12,078 | 29,257 | 11,866 | ||||||||||||
Plus: assumed conversion of preferred stock to common stock (1) | — | 13,583 | 3,089 | 13,161 | ||||||||||||
Denominator for pro forma net loss per share, basic and diluted | 34,405 | 25,661 | 32,346 | 25,027 | ||||||||||||
Pro forma non-GAAP net loss per share, basic and diluted | $ | (0.10 | ) | $ | (0.23 | ) | $ | (0.47 | ) | $ | (0.65 | ) | ||||
Reconciliation of net loss to adjusted EBITDA: | ||||||||||||||||
Net loss | $ | (4,760 | ) | $ | (6,499 | ) | $ | (19,634 | ) | $ | (17,875 | ) | ||||
Interest (income) expense, net | 84 | 162 | 492 | 499 | ||||||||||||
Depreciation and amortization | 961 | 900 | 4,083 | 2,971 | ||||||||||||
Stock-based compensation | 1,483 | 483 | 4,570 | 1,605 | ||||||||||||
Provision for income taxes | 20 | 22 | 71 | 55 | ||||||||||||
Loss from discontinued operations | — | — | — | 199 | ||||||||||||
Unoccupied lease charges | — | — | — | 236 | ||||||||||||
Adjusted EBITDA | $ | (2,212 | ) | $ | (4,932 | ) | $ | (10,418 | ) | $ | (12,310 | ) | ||||
___________________________________________________________
(1) Assumes conversion of all outstanding shares of preferred stock, on an as-if-converted basis, at the later of January 1 of each year or the date of issuance of the preferred stock.
Contacts | ||
Kathleen Lucente
Red Fan Communications
O: (512)-551-9253/ C: (512)-217-6352
kathleen@redfancommunications.com
Investor Contact:
Bob Gujavarty
Q2 Holdings, Inc.
O: (512)-439-3447
bobby.gujavarty@q2ebanking.com