Q2 Holdings, Inc. Reports Q4 and Full-Year 2024 Financial Results
Q2 Holdings, Inc. (NYSE: QTWO), a leading provider of digital transformation solutions for financial services, has announced its financial results for the fourth quarter and full year ending December 31, 2024. The company reported strong growth in revenue, profitability, and client engagement, highlighting its continued momentum in the digital banking sector.
GAAP Financial Performance for Q4 and Full-Year 2024
Q2 Holdings reported significant increases in revenue and profitability metrics, demonstrating the effectiveness of its strategic initiatives and sustained demand for its solutions.
- Revenue: The company achieved revenue of $183.0 million for the fourth quarter, representing a 13% year-over-year increase and a 5% sequential increase from Q3 2024. For the full year, total revenue reached $696.5 million, up 12% from 2023.
- Gross Margin: GAAP gross margin for the fourth quarter improved to 52.6%, up from 50.2% in Q4 2023 and 50.9% in Q3 2024. Full-year 2024 GAAP gross margin was 50.9%, compared to 48.5% in 2023.
- Net Income: GAAP net income for the fourth quarter was $0.2 million, a substantial improvement compared to the $18.1 million loss in Q4 2023 and the $11.8 million loss in Q3 2024. Full-year 2024 net loss stood at $38.5 million, a significant reduction from the $65.4 million loss in 2023.
Non-GAAP Financial Performance for Q4 and Full-Year 2024
Q2’s non-GAAP financial results also showcased robust performance, underscoring the company’s ability to drive efficiency and profitability.
- Revenue: Non-GAAP revenue mirrored GAAP revenue at $183.0 million for Q4, reflecting a 13% year-over-year increase. Full-year non-GAAP revenue reached $696.5 million, up 11% from 2023.
- Gross Margin: Non-GAAP gross margin improved to 57.4% in Q4, up from 56.0% in Q4 2023 and 56.0% in Q3 2024. For the full year, non-GAAP gross margin reached 56.0%, up from 54.5% in 2023.
- Adjusted EBITDA: Adjusted EBITDA for Q4 surged to $37.6 million, an increase from $23.2 million in Q4 2023 and $32.6 million in Q3 2024. Full-year 2024 adjusted EBITDA was $125.3 million, up from $76.9 million in 2023.
For a full reconciliation of GAAP to non-GAAP results, please refer to the tables below.
CEO Commentary: A Strong Year of Growth and Execution
“We delivered strong fourth-quarter results to cap off a great year,” said Matt Flake, Chairman and CEO of Q2 Holdings. “Our sales execution remained outstanding, culminating in our best bookings quarter of the year and the second-best in company history. Throughout Q2 Holdings 2024, we built on our prior momentum, securing net new digital banking wins across institutions of all sizes, seeing robust sales in relationship pricing, and achieving a record year for renewals, with renewal bookings up 80% year-over-year. Given our continued success and financial strength, we are well-positioned to create value for shareholders, customers, and employees in 2025 and beyond.”
Key Business Highlights: Fourth Quarter and Full-Year 2024
Broad-Based Sales Success with Tier 1 and Enterprise Contracts
Q2 Holdings secured seven Tier 1 and Enterprise contracts in Q4 2024, reinforcing its strong position in digital banking solutions:
- Five new Tier 1 digital banking contracts, including:
- Four new customers and an expansion within an existing customer.
- A diverse mix of clients selecting Q2’s platform for retail, commercial, or both solutions.
- One new Tier 1 relationship pricing contract with a major financial institution.
- Expansion of an existing relationship pricing contract with an enterprise bank.
- Partnership with Wells Fargo to enhance commercial client experiences through actionable insights and coaching.
These achievements culminated in Q2’s strongest bookings quarter of the year, marking the largest ever bookings for cross-sales and renewals during Q4 2024.
Growth in Recurring Revenue and Backlog
- Subscription Annualized Recurring Revenue (ARR): Increased 15% year-over-year to $682 million, up from $594 million at the end of 2023.
- Remaining Performance Obligation (RPO) Backlog: Increased $189 million sequentially, reaching a total committed backlog of approximately $2.2 billion, reflecting 9% sequential growth and 21% year-over-year growth.
Record-Setting 2024 and Future Growth Prospects
Q2 Holdings capped off a record-breaking year with its strongest-ever cross-sale and renewal quarter, along with a well-balanced mix of net new and expansion deals. The company’s digital banking platform continued to differentiate itself in the market, securing five Tier 1 wins across both retail and commercial banking segments.
For the full year, Q2 achieved record-breaking sales activity:
- 25 Enterprise and Tier 1 wins across digital banking and relationship pricing solutions.
- Nearly double the number of Tier 2 and Tier 3 digital banking customers signed compared to 2023.
- Continued expansion in the commercial banking segment, with over 60 Tier 1 financial institutions now using Q2’s commercial banking solutions.
Despite its growing customer base, Q2 sees significant expansion potential ahead, particularly as 50 of its Tier 1 customers have yet to adopt its commercial solutions.
Updated Financial Framework for 2025-2026
Building on 2024’s performance, Q2 Holdings has raised its long-term financial targets, reflecting confidence in its growth trajectory:
- Average annual subscription revenue growth target increased from 14% to 15%.
- Target for annual adjusted EBITDA margin expansion increased to 360 basis points.
- Full-year 2026 free cash flow conversion target increased from 70% to 85%.
CFO Commentary: Driving Profitability and Future Growth
“We are very pleased with our financial performance to close out the year, as we exceeded the high end of our guidance for both revenue and adjusted EBITDA,” said Jonathan Price, CFO of Q2 Holdings. “Our strong execution across key metrics underscores the effectiveness of our profitable growth strategy. Given our success, we have updated our three-year financial framework Q2 Holdings with more ambitious targets. With a strong pipeline and increased visibility into our future revenue streams, we are well-positioned to capitalize on market opportunities and sustain our growth momentum in the coming years.
