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Q2 Holdings Expands Growth Streak in Q1

By Jennifer Saibil - Updated May 11, 2020 at 10:41AM

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The fintech company closed important deals and delivered high revenue growth.

Fintech companies have been benefiting from the COVID-19 pandemic as more business moves online and more people take advantage of digital banking. Q2 Holdings (QTWO -0.13%), which develops cloud-based solutions for community banks, continued to see high revenue growth in the first quarter.

Double-digit growth

Revenue grew 30% to $92.4 million, but gross margin was down to 42.5% from 47.8% in the prior year. Much of that was attributable to employee-related expenses. Net loss widened to $34.1 million from $19.3 million the prior year and $15.7 million in the previous quarter. Most of the came from the acquisition of PrecisionLender in October 2019, and the other portion came from new hires.

Couple working with a bank employee.

Image source: Getty images.

Q2 signed several lucrative contacts during the quarter that included new clients as well as new, large-scale products for existing clients. The company ended the quarter with 15.4 million registered users, an 18% increase year over year. Part of the growth came from the PrecisionLender acquisition.

Keeping it up

Q2 expects similar results in the second quarter, with $94 million to $96 million in adjusted revenue (which includes the deferred revenue reduction from acquisitions normally held out when using generally accepted accounting principles), or a 21% to 24% increase year over year. The full year outlook is non-GAAP revenue of $393 million to $400 million, or a 24% to 26% increase year over year.

CEO Matt Flake said "I believe our subscription model, long-term contracts and strong balance sheet equip us to endure the immediate situation and emerge in a great position to partner more deeply with new and existing customers."

Shares of the fintech company are about flat year to date.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Q2 Holdings. The Motley Fool has a disclosure policy.

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