Q2 Holdings, Inc 10-Q for FY2024 Q2

Q2 Holdings, Inc. (QTWO)

10-Q 2024-07-31 For: 2024-06-30

Added on April 12, 2026

About this 10-Q

Q2 Holdings, Inc filed this 10-Q on July 31, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $172.89M; up 11.9% from $154.53M a year earlier
Net loss: $13.06M; compared with a net loss of $23.62M a year earlier
Diluted EPS: -$0.22; compared with -$0.41 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	QTWO	New York Stock Exchange


		PAGE
PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements.	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	42

Item 4.	Controls and Procedures.	43

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings.	44

Item 1A.	Risk Factors.	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	45

Item 3.	Defaults Upon Senior Securities.	45

Item 4.	Mine Safety Disclosures.	45

Item 5.	Other Information.	45

Item 6.	Exhibits.	46

SIGNATURES		47


	June 30, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	303,823	$	229,655
Restricted cash	2,517		3,977
Investments	68,227		94,353
Accounts receivable, net	59,435		42,899
Contract assets, current portion, net	8,776		9,193
Prepaid expenses and other current assets	12,535		11,625
Deferred solution and other costs, current portion	26,657		27,521
Deferred implementation costs, current portion	9,413		8,741
Total current assets	491,383		427,964
Property and equipment, net	35,491		41,178
Right of use assets	33,411		35,453
Deferred solution and other costs, net of current portion	30,094		26,090
Deferred implementation costs, net of current portion	23,151		21,480
Intangible assets, net	108,402		121,572
Goodwill	512,869		512,869
Contract assets, net of current portion and allowance	11,238		12,210
Other long-term assets	2,985		2,609
Total assets	$	1,249,024	$	1,201,425
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	14,249	$	19,353
Accrued liabilities	20,339		16,471
Accrued compensation	21,360		26,580

Deferred revenues, current portion	134,361		118,723
Lease liabilities, current portion	10,895		10,436
Total current liabilities	201,204		191,563
Convertible notes, net of current portion	491,456		490,464
Deferred revenues, net of current portion	24,334		17,350
Lease liabilities, net of current portion	41,771		45,588
Other long-term liabilities	9,594		7,981
Total liabilities	768,359		752,946
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock: $0.0001 par value; 5,000 shares authorized, no shares issued or outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock: $0.0001 par value; 150,000 shares authorized, 60,283 issued and outstanding as of June 30, 2024 and 59,031 shares issued and outstanding as of December 31, 2023	6		6

Additional paid-in capital	1,134,462		1,075,278
Accumulated other comprehensive loss	(1,206)		(1,111)
Accumulated deficit	(652,597)		(625,694)
Total stockholders' equity	480,665		448,479
Total liabilities and stockholders' equity	$	1,249,024	$	1,201,425


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues	$	172,890	$	154,531	$	338,398	$	307,539
Cost of revenues	86,063		80,703		169,319		160,414
Gross profit	86,827		73,828		169,079		147,125
Operating expenses:
Sales and marketing	27,733		28,701		53,178		56,845
Research and development	35,759		34,096		70,621		68,521
General and administrative	31,283		27,127		61,459		51,819
Transaction-related costs	—		9		—		21
Amortization of acquired intangibles	4,788		5,252		9,616		10,514

Lease and other restructuring charges	967		2,312		2,093		4,273
Total operating expenses	100,530		97,497		196,967		191,993
Loss from operations	(13,703)		(23,669)		(27,888)		(44,868)
Other income (expense):
Interest and other income	3,852		2,107		7,041		4,383
Interest and other expense	(1,120)		(1,581)		(2,412)		(3,025)
Gain on extinguishment of debt	—		—		—		19,869
Total other income (expense), net	2,732		526		4,629		21,227
Loss before income taxes	(10,971)		(23,143)		(23,259)		(23,641)
Provision for income taxes	(2,089)		(479)		(3,644)		(497)
Net loss	$	(13,060)	$	(23,622)	$	(26,903)	$	(24,138)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments	51		(174)		177		862
Foreign currency translation adjustment	49		180		(272)		163
Comprehensive loss	$	(12,960)	$	(23,616)	$	(26,998)	$	(23,113)
Net loss per common share, basic and diluted	$	(0.22)	$	(0.41)	$	(0.45)	$	(0.42)
Weighted average common shares outstanding, basic and diluted
Basic and diluted	60,162		58,286		59,804		58,087


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total stockholders' equity, beginning balances	$	464,971	$	439,101	$	448,479	$	419,024

Common stock and additional paid-in capital:
Beginning balances	1,105,814		1,001,880		1,075,284		982,306
Stock-based compensation expense	25,610		22,079		47,736		41,424
Exercise of stock options	—		384		8,404		474
Issuance of common stock under ESPP	3,044		3,459		3,044		3,459




Settlement of capped calls	—		—		—		139




Ending balances	1,134,468		1,027,802		1,134,468		1,027,802

Accumulated deficit:
Beginning balances	(639,537)		(560,826)		(625,694)		(560,310)

Net loss	(13,060)		(23,622)		(26,903)		(24,138)
Ending balances	(652,597)		(584,448)		(652,597)		(584,448)

Accumulated other comprehensive income (loss):
Beginning balances	(1,306)		(1,953)		(1,111)		(2,972)
Other comprehensive income (loss)	100		6		(95)		1,025
Ending balances	(1,206)		(1,947)		(1,206)		(1,947)

Total stockholders' equity, ending balances	$	480,665	$	441,407	$	480,665	$	441,407

Common stock (in shares):
Beginning balances	60,099		58,198		59,031		57,735

Exercise of stock options	—		15		234		19
Issuance of common stock under ESPP	95		146		95		146
Shares issued for the vesting of restricted stock awards	89		88		923		547


Ending balances	60,283		58,447		60,283		58,447


	As of June 30,
	2024	2023
Stock options, restricted stock units, market stock units and performance stock units	5,296	5,342
Shares issuable pursuant to the ESPP	68	124
Shares related to convertible notes	4,794	5,296
	10,158	10,762


			Fair Value Measurements Using:
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)
Assets
Cash Equivalents:
Money market funds	$	78,665	$	78,665	$	—	$	—


U.S. government securities	1,494		1,494		—		—
	$	80,159	$	80,159	$	—	$	—


Investments:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)
Corporate bonds and commercial paper	$	28,849	$	—	$	28,849	$	—
Certificates of deposit	10,413		—		10,413		—
U.S. government securities	28,616		—		28,616		—
	$	67,878	$	—	$	67,878	$	—


Cash Equivalents:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Money market funds	$	78,665	$	—	$	—	$	78,665

U.S. government securities	1,494		—		—		1,494
	$	80,159	$	—	$	—	$	80,159

Investments:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate bonds and commercial paper	$	28,911	$	—	$	(62)	$	28,849
Certificates of deposit	10,418		1		(6)		10,413
U.S. government securities	28,669		—		(53)		28,616
	$	67,998	$	1	$	(121)	$	67,878


	June 30, 2024		December 31, 2023
Due within one year or less	$	45,659	$	87,133
Due after one year through two years	22,219		7,095
	$	67,878	$	94,228


	Less than 12 months				12 months or greater
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	21,564	$	(34)	$	6,068	$	(28)
Certificates of deposit	980		(1)		1,984		(5)
U.S. government securities	8,727		(5)		19,889		(48)
	$	31,271	$	(40)	$	27,941	$	(81)


	As of June 30, 2024						As of December 31, 2023
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	55,540	$	(51,656)	$	3,884	$	55,540	$	(46,065)	$	9,475
Non-compete agreements	11,525		(10,756)		769		12,020		(10,058)		1,962
Trademarks	19,870		(17,068)		2,802		19,870		(14,266)		5,604
Acquired technology	150,097		(101,784)		48,313		150,097		(90,776)		59,321

Capitalized software development costs	69,233		(16,599)		52,634		56,147		(10,937)		45,210
	$	306,265	$	(197,863)	$	108,402	$	293,674	$	(172,102)	$	121,572


	Amortization
Year Ended December 31,
2024 (July 1 to December 31)	$	25,291
2025	34,990
2026	28,421
2027	12,486
2028	6,217
Thereafter	997
Total amortization	$	108,402


	Operating Leases
Year Ended December 31,
2024 (July 1 to December 31)	$	6,968
2025	12,510
2026	10,024
2027	8,708
2028	5,562
Thereafter	18,202
Total lease payments	$	61,974
Less: imputed interest	(9,308)
Total operating lease liabilities	$	52,666


	Contractual Commitments
Year Ended December 31,
2024 (July 1 to December 31)	$	29,071
2025	248,018
2026	331,915
2027	4,819
2028	3,500
Thereafter	—
Total commitments	$	617,323


	Date Issued	Maturity Date (1)	Principal		Interest Rate per Annum		Conversion Rate for Each $1,000 Principal (2)		Initial Conversion Price per Share
2026 Notes	June 1, 2019	June 1, 2026	$	303,995	0.75	%	$	11.2851	$	88.61
2025 Notes	November 15, 2020	November 15, 2025	$	191,000	0.125	%	$	7.1355	$	140.14


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2024		2023		$		(%)		2024		2023		$		(%)
Revenues	$	172,890	$	154,531	$	18,359	11.9	%	$	338,398	$	307,539	$	30,859	10.0	%


Exhibit Number		Description of Document

3.1	*	Fifth Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2019).

3.2	*	Amended and Restated Bylaws of the Registrant (filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2019).

31.1	**	Certification of Chief Executive Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	**	Certification of Chief Financial Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	#	Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.

32.2	#	Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.

101.INS	**	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	**	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	**	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	**	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	**	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	**	Cover Page Interactive Data File (embedded within the Inline XBRL document)


Date: July 31, 2024						/s/ MATTHEW P. FLAKE
						Matthew P. Flake
						Chief Executive Officer and Chairman
						(Principal Executive Officer)


Date: July 31, 2024						/s/ DAVID J. MEHOK
						David J. Mehok
						Chief Financial Officer
						(Principal Financial and Accounting Officer)