Q2 Holdings Offers a Quarterly Beat and Raise

Q2 Holdings (QTWO +0.01%) announced impressive first-quarter 2018 results on Wednesday after the market closed, highlighting particularly strong bookings, user growth, and several large new customer wins in what was expected to be a seasonal lull.

With shares of the digital banking solutions company up more than 9% on Thursday as of this writing, let's take a closer look at what Q2 Holdings accomplished over the past few months.

Image source: Getty Images.

Q2 Holdings results: The raw numbers

Data source: Q2 Holdings.

What happened with Q2 Holdings this quarter?

• On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition expenses, Q2 generated net income of $1.6 million, or $0.04 per share, compared to an adjusted net loss of $1.2 million, or $0.03 per share in the same year-ago period.
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) nearly quintupled year over year to $5 million.
• These results compare favorably to guidance provided last quarter, which called for revenue of $52.6 million to $53.2 million, and adjusted EBITDA of $1.4 million to $2 million.
• Q2 Holdings signed a top 50 credit union and two Tier 1 banks during the quarter, including a $10 billion bank in the Southeast and a $7 billion bank in the West.
• Registered users on the Q2 platform grew 22% year over year to 10.9 million.
• Together with StoneCastle Partners, the company signed a long-term deal with MoneyLion -- a leading savings and investment platform with 2 million users -- to use Cambr for deposit accounts and debit cards. Cambr integrates Q2 Open's digital processing platform, CorePro, with StoneCastle's deposit platform to enable non-bank companies like MoneyLion to offer banking products to their customers at scale.

What management had to say

Q2 Holdings CEO Matt Flake stated:

We had a strong start to 2018, sustaining our bookings momentum in what is typically a seasonally slower quarter. Having just wrapped up our annual client conference, I believe our customers are generally optimistic about their improving operating environments. When you combine this with three consecutive quarters of positive bookings momentum, I believe we are well positioned for solid growth in 2018.

Looking ahead

For the second quarter of 2018, Q2 expects revenue in the range of $57.9 million to $58.5 million, or year-over-year growth of 22% to 23%, with adjusted EBITDA of $4.7 million to $5.3 million. 

As such, Q2 also increased its full-year guidance to call for 2018 revenue of $236.5 million to $238.5 million (for growth of 22% to 23%, and up from $234 million to $236 million previously), and for adjusted EBITDA of $21 million to $23 million (up from $19 million to $21 million before).

In the end, this was a straightforward beat-and-raise scenario with little not to like from an investor's perspective, and I think the market is right to bid Q2 Holdings stock up to a fresh all-time high in response.