Q2 Holdings, Inc 8-K/A, filed Jan 3, 2020

Q2 Holdings, Inc. (QTWO)

8-K/A 2020-01-03 For: 2019-10-31

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Added on April 12, 2026

About this 8-K/A

Q2 Holdings, Inc filed this 8-K/A on January 3, 2020, reporting on events of October 31, 2019.

Items reported

Item 9.01: Financial statements and exhibits

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Delaware	001-36350	20-2706637
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)



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



Exhibit No.		Description
23.1		Consent of Grant Thornton LLP, independent auditors for Lender Performance Group, LLC and Subsidiaries, dated January 3, 2020.
99.1		Consolidated audited financial statements of Lender Performance Group, LLC and Subsidiaries, as of and for the years ended December 31, 2018 and 2017, and the related notes thereto
99.2		Unaudited condensed consolidated financial statements of Lender Performance Group, LLC as of and for the nine months ended September 30, 2019 and 2018, and the related notes thereto
99.3		Unaudited pro forma condensed combined financial information



	Page
Report of Independent Certified Public Accountants	3
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2018 and 2017	4
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018 and 2017	5
Consolidated Statements of Members' (Deficit) Capital for the years ended December 31, 2018 and 2017	6
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017	7
Notes to Consolidated Financial Statements	8



	December 31,
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	21,096	$	2,347
Short-term investments	—		249
Available-for-sale investments	—		7,199
Accounts receivable, net	7,485		1,497
Prepaid expenses and other current assets	1,205		813
Total current assets	29,786		12,105
Property and equipment, net	1,152		342
Intangible assets, net	72		77
Deposits and other assets	200		96
Total assets	$	31,210	$	12,620
Liabilities and members' capital (deficit)
Current liabilities:
Accounts payable	$	839	$	319
Accrued expenses	2,685		2,802
Accrued taxes payable	—		151
Deferred revenue	17,449		9,501
Notes payable, current portion	393		—
Total current liabilities	21,366		12,773
Deferred revenue	4,213		4,758
Notes payable	560		—
Total liabilities	26,139		17,531
Commitments and contingencies (Note 13)
Members' capital (deficit)
Members' capital (deficit)	5,071		(4,911		)
Total members' capital (deficit)	5,071		(4,911		)
Total liabilities and members' capital (deficit)	$	31,210	$	12,620



☐	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



☐	Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



	Q2 HOLDINGS, INC.

January 3, 2020	/s/ Jennifer N. Harris Jennifer N. Harris Chief Financial Officer



	Year Ended December 31,
	2018			2017
Revenue	$	16,969		$	10,890
Cost of Revenue	4,627			2,770
Gross profit	12,342			8,120
Costs and expenses
Software and client support	13,999			8,422
Sales and marketing	4,785			2,137
Operations, general and administrative	6,712			3,682
Depreciation and amortization expense	206			125
Total costs and expenses	25,702			14,366
Loss from operations	(13,360		)	(6,246		)
Other expense:
Interest expense, net	(558		)	(260		)
Other expense	(71		)	(25		)
Realized gain/loss on investments	(89		)	(16		)
Total other expense	(718		)	(301		)
Net loss	(14,078		)	(6,547		)
Other comprehensive (loss) income
Unrecognized effect of foreign currency	164			(22		)
Unrealized gain on investments	—			5
Comprehensive loss	$	(13,914	)	$	(6,564	)



	Preferred and Class A Member Interests		Additional Paid-In Capital			Member Distributions			Other Comprehensive Income (Loss)			Accumulated Deficit			Total Members' (Deficit) Capital
Balance at December 31, 2016	$	32,672	$	48		$	(20,842	)	$	(33	)	$	(9,028	)	$	2,817
Member distributions and redemptions	—		—			(76,212		)	—			—			(76,212		)
Capital contributions	75,142		—			—			—			—			75,142
Class B member profits interests compensation expense	—		206			—			—			—			206
Repurchase of Class B member profit interests	—		(300		)	—			—			—			(300		)
Unrealized gains on investments available-for-sale	—		—			—			5			—			5
Foreign currency translation adjustment	—		—			—			(22		)	—			(22		)
Net loss	—		—			—			—			(6,547		)	(6,547		)
Balance at December 31, 2017	$	107,814	$	(46	)	$	(97,054	)	$	(50	)	$	(15,575	)	$	(4,911	)
Member distributions and redemptions	—		—			(240		)	—			—			(240		)
Capital contributions	24,925		—			—			—			—			24,925
Class B member profits interests compensation expense	—		382			—			—			—			382
Repurchase of Class B member profit interests	—		(1,171		)	—			—			—			(1,171		)
Foreign currency translation adjustment	—		—			—			164			—			164
Net loss	—		—			—			—			(14,078		)	(14,078		)
Balance at December 31, 2018	$	132,739	$	(835	)	$	(97,294	)	$	114		$	(29,653	)	$	5,071



		Years
Computer equipment		3
Software		3
Furniture and fixtures		5
Leasehold improvements		1-7


•	Identification of the contract, or contracts with a customer


•	Identification of the performance obligations in the contract


•	Allocation of the transaction price to the performance obligations in the contract


•	Recognition of revenue when or as the Company satisfies the performance obligations.



	2018		2017
Subscription and support fees	$	16,169	$	10,690
Consulting fees	800		200
	$	16,969	$	10,890



December 31	2018			2017
Deferred revenue, beginning of period	$	14,259		$	7,751
Billings and other*	24,373			17,398
Subscription revenue recognized ratably over time	(16,170		)	(10,690		)
Other revenue recognized	(800		)	(200		)
Deferred revenue, end of period	$	21,662		$	14,259



			Unrealized
			December 31, 2017
			Fair Value Measurements Using:
	Amortized Cost		Gain in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income			Estimated Fair Value
Corporate bonds	$	5,074	$	—	$	(26	)	$	5,048
Mutual Funds	2,153		—		(2		)	2,151
Total available-for-sale securities	$	7,227	$	—	$	(28	)	$	7,199



As of December 31, 2017	As Reported			Adjustments			As Adjusted
Deferred revenue, current portion	$	9,451		$	50		$	9,501
Beginning members' capital	2,865			(48		)	2,817
Ending members' deficit	$	(4,861	)	$	(50	)	$	(4,911	)



For the year ended December 31, 2017	As Reported			Adjustments			As Adjusted
Revenue	$	10,453		$	437		$	10,890
Interest expense, net	(178		)	438			260
Net loss	$	(6,545	)	$	(2	)	$	(6,547	)



	2018		2017
Accrued personnel costs	$	1,979	$	1,424
Accrued professional fees	53		62
Deferred rent	152		167
Accrued member distributions	240		800
Accrued Azure	211		335
Other accrued expenses	50		14
Total accrued expenses	$	2,685	$	2,802



December 31	2018
Loan origination costs	$	16
Loan origination amortization	(6		)
Net asset	$	10



	Class B Member Interests		Class C Member Interests
Outstanding, December 31, 2016	17		—
Granted	6		—
Exercised	—		—
Repurchased	(2	)	—
Forfeited/Canceled	—		—
Outstanding, December 31, 2017	21		—
Granted	5		100
Exercised	—		—
Repurchased	(2	)	—
Forfeited/Canceled	—		—
Outstanding, December 31, 2018	24		100



Member Interests	2018		2017
Estimated divided yield	—	%	—	%
Expected stock price volatility	30.00	%	30.00	%
Weighted-average risk-free interest rate	2.49% to 2.93 %		1.67% to 2.04%
Expected life of options (years)	4		4



Deferred Income Tax Asset	2018		2017
Australian deferred tax asset	$272		$85
UK deferred tax asset	97		—
Allowance for deferred tax asset	(369	)	(85	)
Deferred tax asset, net	—		—



	Operating Leases
2019	$	1,236
2020	1,763
2021	1,677
2022	1,728
2023	1,779
Total minimum lease payments	$	8,183



	Page
Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)	2
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	3
Condensed Consolidated Statements of Members' (Deficit) Capital for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6



	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	12,422		$	21,096
Accounts receivable, net	4,421			7,485
Prepaid expenses and other current assets	1,312			1,205
Total current assets	18,155			29,786
Property and equipment, net	1,580			1,152
Intangible assets, net	68			72
Deposits and other assets	259			200
Total assets	$	20,062		$	31,210
Liabilities and members' capital (deficit)
Current liabilities:
Accounts payable	$	483		$	839
Accrued expenses	5,169			2,685
Current portion of deferred revenue	11,900			17,449
Current portion of notes payable	403			393
Total current liabilities	17,955			21,366
Long-term deferred revenue	8,853			4,213
Notes payable	263			560
Total liabilities	27,071			26,139
Commitments and contingencies (Note 13)
Members' capital (deficit):
Members' equity	(7,009		)	5,071
Total members' capital (deficit)	(7,009		)	5,071
Total liabilities and members' capital (deficit)	$	20,062		$	31,210



	Nine Months Ended September 30,
	2019			2018
Revenue	$	16,487		$	12,311
Cost of revenue	4,402			3,381
Gross profit	12,085			8,930
Costs and expenses:
Software and client support	12,953			10,407
Sales and marketing	4,130			3,603
Operations, general and administrative	6,629			4,776
Depreciation and amortization expenses	296			135
Total costs and expenses	24,008			18,921
Loss from operations	(11,923		)	(9,991		)
Other income (expense):
Interest expense, net	(268		)	(357		)
Other expense	(150		)	(17		)
Realized loss on investments	—			(89		)
Total other expense	(418		)	(463		)
Net loss	(12,341		)	(10,454		)
Other comprehensive income (loss)
Unrealized effect of foreign currency	(129		)	158
Comprehensive loss	$	(12,470	)	$	(10,296	)



	September 30, 2019		December 31, 2018
Trademarks	$	37	$	37
Domain names	43		43
Total intangible assets	$	80	$	80
Less: Accumulated amortization	12		8
Intangibles, net	$	68	$	72



	Operating Leases
2019 (from October 1 to December 31)	$	471
2020	1,763
2021	1,677
2022	1,727
2023	1,779
Total minimum lease payments	$	7,417


•	Application of the acquisition method of accounting in connection with the business combination to reflect the fair value of the purchase consideration;


•	Stock compensation granted to PrecisionLender's management team in connection with the business combination;


•	Amortization of intangible assets acquired in connection with the business combination; and


•	Conforming PrecisionLender's accounting policies with the Company's through adoption of ASC 842 as of January 1, 2019.



	Historical
	As of September 30, 2019
	Q2			PrecisionLender			Pro Forma Adjustments (Note 3)				Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	601,156		$	12,422		$	(518,437	)	(a)	$	95,141
Restricted cash	2,152			—			—				2,152
Investments	35,696			—			—				35,696
Accounts receivable, net	24,349			4,421			—				28,770
Contract assets, current portion	826			—			—				826
Prepaid expenses and other current assets	6,114			1,312			—				7,426
Deferred solution and other costs, current portion	13,902			—			—				13,902
Deferred implementation costs, current portion	4,638			—			—				4,638
Total current assets	688,833			18,155			(518,437		)		188,551
Property and equipment, net	39,917			1,580			—				41,497
Right of use assets	29,159			—			8,282			(f)	37,441
Deferred solution and other costs, net of current portion	25,384			—			—				25,384
Deferred implementation costs, net of current portion	14,884			—			—				14,884
Intangible assets, net	54,167			68			216,830			(b)	271,065
Goodwill	107,857			—			315,086			(c)	422,943
Contract assets, net of current portion	13,981			—			—				13,981
Other long-term assets	3,502			259			—				3,761
Total assets	$	977,684		$	20,062		$	21,761			$	1,019,507
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	8,612		$	483		$	—			$	9,095
Accrued liabilities	12,358			5,169			(1,022		)	(f)	16,505
Accrued compensation	35,689			—			—				35,689
Current portion of notes payable	—			403			(403		)	(d)	—
Deferred revenues, current portion	52,047			11,900			(3,741		)	(e)	60,206
Lease liabilities, current portion	7,472			—			1,977			(f)	9,449
Total current liabilities	116,178			17,955			(3,189		)		130,944
Convertible notes, net of current portion	419,326			—			—				419,326
Deferred revenues, net of current portion	25,391			8,853			(2,784		)	(e)	31,460
Notes payable, net of current portion	—			263			(263		)	(d)	—
Lease liabilities, net of current portion	30,309			—			7,327			(f)	37,636
Other long-term liabilities	4,639			—			1,349			(g)	5,988
Total liabilities	595,843			27,071			2,440				625,354
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock: $0.0001 par value; 150,000 shares authorized; 48,110 issued and outstanding as of September 30, 2019 and 43,535 shares issued and outstanding as of December 31, 2018	5			—			—				5
Members' deficit	—			(7,009		)	7,009			(h)	—
Additional paid-in capital	609,327			—			—				609,327
Accumulated other comprehensive loss	142			—			—				142
Accumulated deficit	(227,633		)	—			12,312			(h)	(215,321		)
Total stockholders' equity	381,841			(7,009		)	19,321				394,153
Total liabilities and stockholders' equity	$	977,684		$	20,062		$	21,761			$	1,019,507



	Preliminary Purchase Consideration
Estimated cash purchase price	$	510,000
Estimated working capital and other adjustments	8,437
Total preliminary purchase price	$	518,437



Tangible assets acquired:
Net working capital, excluding deferred revenue	$	261
Property and equipment, net	1,580
Total tangible assets acquired	1,841
Other assets (liabilities):
Other assets	259
Deferred revenue	(14,230		)
Deferred tax liability	(1,349		)
Total other assets (liabilities)	(15,320		)
Intangible assets	216,830
Net assets acquired, excluding goodwill	203,351
Estimated goodwill	315,086
Total preliminary purchase consideration	$	518,437