Summary
Q2 Holdings closed the second quarter of 2022 with GAAP revenue of $140.3 million, up 13.5% from the prior-year quarter. Year-to-date revenue reached $274.4 million, up 14.3% from the prior-year period. GAAP gross profit was $62.9 million, up 13.6% from the prior-year quarter. GAAP gross margin was 44.8%, flat versus the prior-year quarter. The company reported an operating loss of $23.8 million, and that loss widened from the prior-year quarter. Net loss was $25.2 million, and the loss narrowed from the prior-year quarter. Diluted EPS was -$0.44, and the loss narrowed from the prior-year quarter. Operating margin was -17.0%, down from the prior-year quarter.
Non-GAAP revenue was $140.5 million, up 13% from the prior-year quarter and up 5% from the first quarter of 2022. Non-GAAP gross margin was 51.3%, down from 51.9% in the prior-year quarter and 51.4% in the first quarter of 2022. Adjusted EBITDA was $9.7 million, down from $9.9 million in the prior-year quarter and up from $8.1 million in the first quarter of 2022. Non-GAAP net income was $3.8 million, or $0.07 per share. The company signed a digital-only bank for a broad set of solutions led by retail digital banking, which it described as one of its ten largest digital banking deals in company history. It also signed a Tier 1 bank for small business and commercial digital banking, and a Tier 1 bank in Australia for a digital lending contract that it called the largest loan origination deal in company history. Registered users on the Q2 digital banking platform ended the quarter at more than 20.2 million, up 7% year-over-year and 3% sequentially. Annualized recurring revenue was $615.5 million as of June 30, 2022, compared with $526.8 million as of June 30, 2021. The company also pointed to Helix wins and a Q2 Innovation Studio partnership with Rocket Mortgage.
Cash generation weakened in the quarter. Operating cash flow was negative $9.8 million, down from positive in the prior-year quarter. Year-to-date operating cash flow was negative $14.4 million, down from positive in the prior-year period. Capital expenditures, reported as a cash outflow, were $1.2 million in the quarter, down 85.1% from the prior-year quarter. Deferred revenue, current portion, was $95.8 million, up 7.5% from the prior-year quarter. Remaining performance obligations were $1.37 billion, up 5.4% from the prior-year quarter.
Management provided guidance for the third quarter of 2022 and full-year 2022. For the third quarter, it expects non-GAAP revenue of $145.8 million to $147.8 million, representing year-over-year growth of 15% to 16%, and adjusted EBITDA of $6.2 million to $8.2 million, or 4% to 6% of non-GAAP revenue. For the full year, it expects non-GAAP revenue of $577.5 million to $581.5 million, year-over-year growth of 15% to 16%, and adjusted EBITDA of $41.4 million to $44.4 million, or 7% to 8% of non-GAAP revenue. The company reiterated its full-year guidance. Management said it is closely monitoring an uncertain economic backdrop and will focus on continued business execution and prudent cost management while investing in areas expected to drive long-term value.
The quarter came with clear risks. Management and the 10-Q point to inflation, rising interest rates, and recession fears that could lead financial institutions to reduce or delay purchases of digital solutions. Higher rates also pressure loan demand and borrower creditworthiness. The hiring environment remains difficult, with intense competition for technical talent, wage inflation, and higher costs for onsite work and travel. The company continues to face uncertainty from the COVID-19 pandemic and Russia's invasion of Ukraine, including cyberattack risk. Other risks include sales cycle timing, implementation timing, customer consolidation, competition, and debt repayment obligations. The 10-Q also notes that the net revenue retention rate was 119% for 2021 and that it expects a lower rate in 2022 because implementations were weighted more heavily in the first half of 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $140.3M | $134.1M | +4.7% | $123.6M | +13.5% |
| Gross profit | $62.9M | $60.4M | +4.1% | $55.3M | +13.6% |
| Gross margin | 44.8% | 45.0% | -0.2 pp | 44.8% | +0.0 pp |
| Research & development | $31.8M | $31.1M | +2.3% | $29.4M | +8.2% |
| Sales & marketing | $26.5M | $25.3M | +4.8% | $20.6M | +28.6% |
| General & administrative | $23.3M | $20.6M | +13.2% | $18.7M | +24.5% |
| Total operating expenses | $86.7M | $81.8M | +6.0% | $75.3M | +15.1% |
| Operating income (loss) | -$23.8M | -$21.4M | -11.1% | -$19.9M | -19.3% |
| Operating margin | -16.9% | -16.0% | -1.0 pp | -16.1% | -0.8 pp |
| Net income (loss) | -$25.2M | -$23.6M | -7.1% | -$30.1M | +16.3% |
| Net margin | -18.0% | -17.6% | -0.4 pp | -24.4% | +6.4 pp |
| Diluted EPS | -$0.44 | -$0.41 | -$0.03 | -$0.53 | +$0.09 |
Risks
MD&A highlights that the Federal Reserve has raised interest rates 2.25% since January 1, 2022 and is expected to raise them further, deepening recession concerns and making it harder for financial institution customers to assess loan-portfolio risk and make new lending decisions. The filing states financial institutions may respond by reducing or delaying purchases of digital solutions, with duration and severity uncertain for the remainder of 2022 and into 2023.
MD&A notes that revenue for 2022 will continue to reflect negative impact from suppressed demand in 2020 and the first half of 2021, and that net revenue retention rate (119% for the year ended December 31, 2021) is expected to be lower in 2022 because implementations were weighted more heavily in the first half of 2021. Timing of implementations and customer purchasing decisions remain subject to delay.
The filing describes an exceptionally challenging hiring environment over the past twelve months and expects intense competition for technical talent to continue through the remainder of 2022, which may drive wage inflation and higher incremental hiring costs including increased use of paid third parties. Personnel and hiring costs rose across cost of revenues, sales and marketing, research and development and general and administrative lines in the quarter.
GAAP operating cash flow fell to -$9.77M in the quarter ended June 30, 2022 from $11.49M in the prior-year quarter, a decline of 185.1%, and year-to-date operating cash flow of -$14.40M compared with $6.01M in the prior-year period, down 339.6%. The GAAP operating loss also widened to -$23.78M in the quarter from -$19.94M, with operating margin down 0.8 percentage points to -17.0%, while non-GAAP operating income declined to $4.6M from $6.6M.
SaaS KPIs
All quarters →Registered Users
Non-GAAP gross margin
Adjusted EBITDA
Installed Customers
Non-GAAP Operating Income
Non-GAAP revenue
Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Q2 Holdings, Inc.'s SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.