Summary
Q2 Holdings posted revenue of $172.9 million for the quarter ended June 30, 2024, up 11.9% from the prior-year quarter. Subscription revenue contributed a $20.1 million increase, largely offset by a $1.7 million decline in services and other revenue tied to softer professional and discretionary services and lower Helix pass-through revenue. Gross margin rose to 50.2% from 47.8% a year earlier. The operating loss narrowed to $13.7 million from $23.7 million, and the net loss narrowed to $13.1 million from $23.6 million. Diluted loss per share was $0.22, an improvement from $0.41 in the prior-year quarter.
Sales execution carried the quarter. The company signed four Tier 1 digital banking contracts, including two with new banks, plus two expansion agreements with existing customers that now use retail, SMB and commercial solutions. It also signed one Enterprise and one Tier 1 relationship pricing contract and renewed a top ten Helix customer for multiple years. Subscription annualized recurring revenue reached $633.9 million, up 19% from $533.2 million at the end of the second quarter of 2023. Total ARR was $783.0 million versus $681.2 million. Registered Users were 23.6 million as of June 30, 2024, up from 21.7 million a year earlier. Remaining performance obligations, which management calls backlog, totaled $1.96 billion, up 28.1% from the prior-year quarter, and current deferred revenue of $134.4 million was up 20.5%.
Cash generation stepped up. Operating cash flow was $36.0 million for the quarter, up from $13.1 million a year earlier, and $49.5 million for the first half against $17.0 million in the prior-year period. Free cash flow, which subtracts purchases of property and equipment and capitalized software development costs, was $34.8 million for the six months compared with $0.5 million a year earlier. Capital expenditures were $1.5 million in the quarter, down 35.9% from $2.3 million. First-half revenue was $338.4 million, up 10.0% from $307.5 million. First-half gross margin was 50.0% against 47.8%, and the first-half operating loss narrowed to $27.9 million from $44.9 million. The first-half net loss widened to $26.9 million from $24.1 million, and diluted loss per share widened to $0.45 from $0.42, reflecting a $19.9 million gain from the partial repurchase of convertible notes booked in the prior-year period.
Profitability improved faster than the top line. Adjusted EBITDA was $29.9 million for the quarter, up from $17.6 million, and adjusted EBITDA margin was 17.3% versus 11.4%. Non-GAAP gross margin was 55.7%, up from 54.2%. GAAP operating margin was -7.9%, an improvement of 7.4 percentage points from -15.3%. Management raised its full-year outlook. Full-year 2024 non-GAAP revenue guidance is $688.5 million to $692.5 million, growth of 10% to 11%, with adjusted EBITDA of $116.5 million to $119.5 million, or 17% of non-GAAP revenue. For the third quarter of 2024, guidance is non-GAAP revenue of $171.5 million to $174.5 million, year-over-year growth of 11% to 13%, and adjusted EBITDA of $27.5 million to $29.5 million, or 16% to 17% of non-GAAP revenue.
Risks stay tied to a customer base of banks, credit unions, FinTechs and alternative finance companies. Management cited higher interest rates, persistent inflation, tight labor markets and wage inflation, recession fears, bank failures and continued consolidation in the financial services industry, all of which can shift implementation timing and purchasing decisions. Cyberattacks and fraud, data privacy, evolving regulation of AI, and competition in existing and new markets sit on the risk list, along with repayment obligations on the convertible notes. Net revenue retention was 108% for the year ended December 31, 2023, and revenue churn was 6.1% for that year. Subscription revenue growth was 17% in the quarter and 15% for the six months, and management expects subscription revenue to keep rising as a share of total revenue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $172.9M | $165.5M | +4.5% | $154.5M | +11.9% |
| Gross profit | $86.8M | $82.3M | +5.6% | $73.8M | +17.6% |
| Gross margin | 50.2% | 49.7% | +0.5 pp | 47.8% | +2.4 pp |
| Research & development | $35.8M | $34.9M | +2.6% | $34.1M | +4.9% |
| Sales & marketing | $27.7M | $25.4M | +9.0% | $28.7M | -3.4% |
| General & administrative | $31.3M | $30.2M | +3.7% | $27.1M | +15.3% |
| Total operating expenses | $100.5M | $96.4M | +4.2% | $97.5M | +3.1% |
| Operating income (loss) | -$13.7M | -$14.2M | +3.4% | -$23.7M | +42.1% |
| Operating margin | -7.9% | -8.6% | +0.6 pp | -15.3% | +7.4 pp |
| Net income (loss) | -$13.1M | -$13.8M | +5.7% | -$23.6M | +44.7% |
| Net margin | -7.5% | -8.4% | +0.8 pp | -15.3% | +7.7 pp |
| Diluted EPS | -$0.22 | -$0.23 | +$0.01 | -$0.41 | +$0.19 |
Risks
The company has convertible notes including the 2025 Notes due in 2025 and the 2026 Notes due in 2026, and may need to dedicate cash flows to repay principal or make cash payments upon conversion. If conversion is not economical, a default or fundamental change could cross-default the $125.0 million Revolving Credit Agreement, none of which was drawn as of July 31, 2024.
MD&A reports ongoing pressure from higher interest rates, persistent inflation, tight labor markets, wage inflation, geopolitical uncertainty and recession fears, and notes a significant portion of revenues comes from U.S. based RCFIs that face liquidity concerns, regulatory scrutiny and merger or failure risk. These conditions may reduce customer growth initiatives, lending activity and demand for certain solutions.
Subscription revenue grew 17% for the three months and 15% for the six months ended June 30, 2024 versus prior-year periods, but MD&A reports a general decline in transactional and other revenue from Helix and payment solutions due to decreased usage and lower demand for discretionary professional services amid challenging macroeconomic conditions.
MD&A highlights increased banking regulator and investor scrutiny of commercial real estate lending, which may force financial institution customers to tighten underwriting, hold higher reserves and incur new compliance burdens. Regulatory changes aimed at stabilizing the financial system could further strain customer profitability and demand.
MD&A states the company has experienced difficulty hiring and retaining highly skilled employees, leading to increased personnel costs from competition for talent and pressure to improve benefits and compensation. This could continue to raise operating expenses even as revenue grows.
SaaS KPIs
All quarters →Registered Users
Non-GAAP gross margin
Adjusted EBITDA
Installed Customers
Non-GAAP Operating Income
Adjusted EBITDA margin
Subscription Revenue Growth
Summary, forecast, risks and KPIs are extracted from Q2 Holdings, Inc.'s SEC filings for Q2 FY2024 (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.