Q2 Holdings’ (NYSE:QTWO) revenue exceeds expectations for the third quarter

Banking software provider Q2 (NYSE:QTWO) met Wall Street’s Q3 CY2024 revenue expectations, with revenue up 12.9% year over year to $175 million. The company expects revenue next quarter to be around $179.6 million, close to analyst estimates. The GAAP loss of $0.20 per share was 8.5% above analyst consensus estimates.

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• Gain: $175 million vs. analyst estimates of $173.5 million (in line)

• EPS: -$0.20 vs. analyst estimates of -$0.22 (8.5% better)

• EVENTS: $32.61 million vs. analyst estimates of $29 million (12.4% better)

• Revenue guidance for Q4 CY2024 is $179.6 million in the middle, about in line with what analysts expected

• Full year EBITDA guidance is in the middle at $123 million, above analyst estimates of $118.2 million

• Gross margin (GAAP): 50.9%, compared to 47.9% in the same quarter last year

• Operating margin: -7.3%, compared to -14.9% in the same quarter last year

• EBITDA margin: 18.6%, compared to 12.7% in the same quarter last year

• Market capitalization: $5.20 billion

“We delivered solid booking success across our businesses in the third quarter, highlighted by six Enterprise and Tier 1 deals, including three with the Top 50 U.S. banks,” said Matt Flake, chairman and CEO of the second quarter.

Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) provides software-as-a-service that enables small banks to offer online banking and consumer lending to their customers.

Consumers today are accustomed to hassle-free digital experiences, from online shopping to ordering food or hailing a taxi. Financial services firms are notoriously risk-averse when adopting modern software, often lacking the resources or competency to develop the digital solutions in-house. This drives demand for software-as-a-service platforms that allow banks and other financial institutions to offer digital services without having to run or maintain them.

Examining a company’s long-term performance can provide clues about business quality. Any company can perform well for a quarter or two, but the best ones grow consistently over the long term. Unfortunately, Q2 Holdings’ revenue grew at a slow annual rate of 12.3% over the past three years. This shows that it has failed to expand in any significant way, a rough starting point for our analysis.

This quarter, Holdings’ year-over-year Q2 revenue growth was 12.9%, and revenue of $175 million was in line with Wall Street estimates. Management currently expects a 10.8% year-over-year increase next quarter.

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