Delaware (State or Other Jurisdiction of Incorporation) | 001-36350 (Commission File Number) | 20-2706637 (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |||
Press release dated November 6, 2018 | ||||
Q2 HOLDINGS, INC. | |
November 6, 2018 | /s/ Jennifer N. Harris Jennifer N. Harris Chief Financial Officer |
• | Revenue for the third quarter of $60.5 million, up 21 percent year-over-year and up 3 percent from the previous quarter. |
• | GAAP gross margin for the third quarter of 50.2 percent, up from 48.5 percent one year ago. Non-GAAP gross margin for the third quarter of 53.8 percent, up from 52.3 percent one year ago. |
• | GAAP net loss for the third quarter of $8.9 million, which compares to a GAAP net loss of $5.8 million for the third quarter of 2017, and $8.6 million for the second quarter of 2018. Adjusted EBITDA for the third quarter of positive $5.7 million, an improvement from positive $3.6 million one year ago and positive $5.1 million for the second quarter of 2018. |
• | Signed a top 50 credit union in the northeastern United States with more than $5 billion in assets as a retail customer. |
• | Exited the third quarter with more than 12.3 million registered users on the Q2 platform, representing 24 percent year-over-year growth and up 8 percent sequentially. |
• | Q2 Open signed eight deals including a reseller agreement with a large payments provider for our biller direct solution. |
• | Total revenue, excluding the acquisition of Cloud Lending, of $64.9 million to $65.3 million, which would represent year-over-year growth of 26 percent. We anticipate Cloud Lending will add approximately $1.0 million to $2.0 million in revenue to the fourth quarter after all related purchase accounting adjustments, increasing the revenue guide for the quarter to $65.9 million to $67.3 million on a combined basis, which would represent year-over-year growth of 27 percent to 30 percent. |
• | Adjusted EBITDA, excluding the acquisition of Cloud Lending, of $7.1 million to $7.5 million. We anticipate the initial investment we are making to integrate Cloud Lending and achieve our 2019 go to market strategy will reduce adjusted EBITDA in the fourth quarter by approximately $4.0 million to $5.0 million, reducing the adjusted EBITDA guide for the quarter to $2.1 million to $3.5 million. GAAP net loss is the most comparable GAAP measure to adjusted EBITDA. Adjusted EBITDA differs from GAAP net loss in that it excludes things such as depreciation and amortization, stock-based compensation, acquisition-related costs, interest, income taxes and unoccupied lease charges. Q2 Holdings is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort. Therefore, Q2 Holdings has not provided guidance for GAAP net loss or a reconciliation of the foregoing forward-looking adjusted EBITDA guidance to GAAP net loss. |
• | Total revenue, excluding the acquisition of Cloud Lending, of $238.8 million to $239.2 million, which would represent year-over-year growth of approximately 23 percent. The addition of Cloud Lending will increase the revenue guide for the full year to $239.8 million to $241.2 million on a combined basis, which would represent year-over-year growth of 24 percent. |
• | Adjusted EBITDA, excluding the acquisition of Cloud Lending, of $23.0 million to $23.4 million. The addition of Cloud Lending will reduce the adjusted EBITDA guide for the full year to $18.0 million to $19.4 million on a combined basis. Adjusted EBITDA differs from GAAP net loss in that it excludes things such as depreciation and amortization, stock-based compensation, acquisition-related costs, interest, income taxes and unoccupied lease charges. Q2 Holdings is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort. Therefore, Q2 Holdings has not provided guidance for GAAP net loss or a reconciliation of the foregoing forward-looking adjusted EBITDA guidance to GAAP net loss. |
Date: | Nov. 7, 2018 | |
Time: | 8:30 a.m. EST | |
Hosts: | Matt Flake, CEO / Jennifer Harris, CFO | |
Dial in: | US toll free: 1-833-241-4254 | |
International: 1-647-689-4205 | ||
Conference ID: | 1082127 |
September 30, 2018 | December 31, 2017 | |||||||
(unaudited) | (unaudited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 211,779 | $ | 57,961 | ||||
Restricted cash | 2,315 | 2,315 | ||||||
Investments | 86,236 | 41,685 | ||||||
Accounts receivable, net | 23,121 | 13,203 | ||||||
Contract assets, current portion | 487 | — | ||||||
Prepaid expenses and other current assets | 4,795 | 3,115 | ||||||
Deferred solution and other costs, current portion | 10,456 | 9,246 | ||||||
Deferred implementation costs, current portion | 3,599 | 3,562 | ||||||
Total current assets | 342,788 | 131,087 | ||||||
Property and equipment, net | 35,132 | 34,544 | ||||||
Deferred solution and other costs, net of current portion | 16,273 | 12,973 | ||||||
Deferred implementation costs, net of current portion | 10,215 | 8,295 | ||||||
Intangible assets, net | 7,720 | 12,034 | ||||||
Goodwill | 12,876 | 12,876 | ||||||
Contract assets, net of current portion | 8,346 | — | ||||||
Other long-term assets | 1,751 | 1,006 | ||||||
Total assets | $ | 435,101 | $ | 212,815 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 26,156 | $ | 29,694 | ||||
Deferred revenues, current portion | 34,799 | 38,379 | ||||||
Total current liabilities | 60,955 | 68,073 | ||||||
Convertible notes, net of current portion | 180,122 | — | ||||||
Deferred revenues, net of current portion | 25,428 | 28,289 | ||||||
Deferred rent, net of current portion | 8,017 | 9,393 | ||||||
Other long-term liabilities | 590 | 438 | ||||||
Total liabilities | 275,112 | 106,193 | ||||||
Stockholders' equity: | ||||||||
Common stock | 4 | 4 | ||||||
Treasury stock | — | (855 | ) | |||||
Additional paid-in capital | 320,627 | 259,726 | ||||||
Accumulated other comprehensive loss | (83 | ) | (139 | ) | ||||
Accumulated deficit | (160,559 | ) | (152,114 | ) | ||||
Total stockholders' equity | 159,989 | 106,622 | ||||||
Total liabilities and stockholders' equity | $ | 435,101 | $ | 212,815 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | $ | 60,541 | $ | 50,116 | $ | 173,923 | $ | 142,275 | ||||||||
Cost of revenues (1) (2) | 30,140 | 25,813 | 86,420 | 72,913 | ||||||||||||
Gross profit | 30,401 | 24,303 | 87,503 | 69,362 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing (1) | 11,467 | 9,904 | 34,541 | 30,878 | ||||||||||||
Research and development (1) | 12,904 | 10,092 | 35,817 | 29,665 | ||||||||||||
General and administrative (1) | 11,237 | 9,596 | 32,331 | 27,316 | ||||||||||||
Acquisition related costs | 1,811 | 270 | 2,325 | 969 | ||||||||||||
Amortization of acquired intangibles | 251 | 369 | 987 | 1,113 | ||||||||||||
Unoccupied lease charges (3) | — | — | 658 | — | ||||||||||||
Total operating expenses | 37,670 | 30,231 | 106,659 | 89,941 | ||||||||||||
Loss from operations | (7,269 | ) | (5,928 | ) | (19,156 | ) | (20,579 | ) | ||||||||
Other income (expense), net | (1,877 | ) | 149 | (5,005 | ) | 292 | ||||||||||
Loss before income taxes | (9,146 | ) | (5,779 | ) | (24,161 | ) | (20,287 | ) | ||||||||
Benefit from (provision for) income taxes | 287 | (3 | ) | 627 | (356 | ) | ||||||||||
Net Loss | $ | (8,859 | ) | $ | (5,782 | ) | $ | (23,534 | ) | $ | (20,643 | ) | ||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gain (loss) on available-for-sale investments | 78 | 15 | 56 | (15 | ) | |||||||||||
Comprehensive loss | $ | (8,781 | ) | $ | (5,767 | ) | $ | (23,478 | ) | $ | (20,658 | ) | ||||
Net loss per common share: | ||||||||||||||||
Net loss per common share, basic and diluted | $ | (0.21 | ) | $ | (0.14 | ) | $ | (0.55 | ) | $ | (0.50 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 42,993 | 41,386 | 42,597 | 41,030 |
(1) | Includes stock-based compensation expenses as follows: |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cost of revenues | $ | 1,240 | $ | 983 | $ | 3,320 | $ | 2,526 | ||||||||
Sales and marketing | 1,474 | 699 | 4,128 | 2,142 | ||||||||||||
Research and development | 1,758 | 1,149 | 4,680 | 3,127 | ||||||||||||
General and administrative | 3,026 | 2,576 | 8,469 | 6,831 | ||||||||||||
Total stock-based compensation expenses | $ | 7,498 | $ | 5,407 | $ | 20,597 | $ | 14,626 |
(2) | Includes amortization of acquired technology of $0.9 million for each of the three months ended September 30, 2018 and 2017 and $2.7 million for each of the nine months ended September 30, 2018 and 2017. |
(3) | Unoccupied lease charges include costs related to the early exit from a portion of our south Austin facility, partially offset by anticipated sublease income from that facility. |
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
(unaudited) | (unaudited) | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (23,534 | ) | $ | (20,643 | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
Amortization of deferred implementation, solution and other costs | 6,234 | 5,526 | ||||||
Depreciation and amortization | 11,441 | 11,049 | ||||||
Amortization of debt issuance costs | 587 | 28 | ||||||
Amortization of debt discount | 5,370 | — | ||||||
Amortization of premiums on investments | 2 | 263 | ||||||
Stock-based compensation expenses | 20,597 | 14,626 | ||||||
Deferred income taxes | (429 | ) | 227 | |||||
Other non-cash charges | 771 | 5 | ||||||
Changes in operating assets and liabilities | (24,899 | ) | (9,738 | ) | ||||
Cash provided by (used in) operating activities | (3,860 | ) | 1,343 | |||||
Cash flows from investing activities: | ||||||||
Net redemptions of investments | (44,498 | ) | (6,748 | ) | ||||
Purchases of property and equipment | (12,174 | ) | (11,379 | ) | ||||
Business combinations and asset acquisitions, net of cash acquired | (150 | ) | (3,816 | ) | ||||
Capitalization of software development costs | — | (970 | ) | |||||
Purchases of intangible assets | (46 | ) | — | |||||
Increase in restricted cash | — | (1,600 | ) | |||||
Cash used in investing activities | (56,868 | ) | (24,513 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of convertible notes, net of issuance costs | 223,167 | — | ||||||
Purchase of convertible notes bond hedge | (41,699 | ) | — | |||||
Proceeds from issuance of warrants | 22,379 | — | ||||||
Proceeds from issuance of common stock | 10,699 | 8,437 | ||||||
Net cash provided by financing activities | 214,546 | 8,437 | ||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 153,818 | (14,733 | ) | |||||
Cash, cash equivalents, and restricted cash, beginning of period | 60,276 | 57,788 | ||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 214,094 | $ | 43,055 | ||||
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows: | ||||||||
Cash and cash equivalents | $ | 211,779 | $ | 40,140 | ||||
Restricted cash | 2,315 | 2,915 | ||||||
Total cash, cash equivalents, and restricted cash | $ | 214,094 | $ | 43,055 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
GAAP gross profit | $ | 30,401 | $ | 24,303 | $ | 87,503 | $ | 69,362 | ||||||||
Stock-based compensation | 1,240 | 983 | 3,320 | 2,526 | ||||||||||||
Amortization of acquired technology | 912 | 912 | 2,736 | 2,710 | ||||||||||||
Non-GAAP gross profit | $ | 32,553 | $ | 26,198 | $ | 93,559 | $ | 74,598 | ||||||||
Non-GAAP gross margin: | ||||||||||||||||
Non-GAAP gross profit | $ | 32,553 | $ | 26,198 | $ | 93,559 | $ | 74,598 | ||||||||
GAAP revenue | 60,541 | 50,116 | 173,923 | 142,275 | ||||||||||||
Non-GAAP gross margin | 53.8 | % | 52.3 | % | 53.8 | % | 52.4 | % | ||||||||
GAAP sales and marketing expense | $ | 11,467 | $ | 9,904 | $ | 34,541 | $ | 30,878 | ||||||||
Stock-based compensation | (1,474 | ) | (699 | ) | (4,128 | ) | (2,142 | ) | ||||||||
Non-GAAP sales and marketing expense | $ | 9,993 | $ | 9,205 | $ | 30,413 | $ | 28,736 | ||||||||
GAAP research and development expense | $ | 12,904 | $ | 10,092 | $ | 35,817 | $ | 29,665 | ||||||||
Stock-based compensation | (1,758 | ) | (1,149 | ) | (4,680 | ) | (3,127 | ) | ||||||||
Non-GAAP research and development expense | $ | 11,146 | $ | 8,943 | $ | 31,137 | $ | 26,538 | ||||||||
GAAP general and administrative expense | $ | 11,237 | $ | 9,596 | $ | 32,331 | $ | 27,316 | ||||||||
Stock-based compensation | (3,026 | ) | (2,576 | ) | (8,469 | ) | (6,831 | ) | ||||||||
Non-GAAP general and administrative expense | $ | 8,211 | $ | 7,020 | $ | 23,862 | $ | 20,485 | ||||||||
GAAP operating loss | $ | (7,269 | ) | $ | (5,928 | ) | $ | (19,156 | ) | $ | (20,579 | ) | ||||
Stock-based compensation | 7,498 | 5,407 | 20,597 | 14,626 | ||||||||||||
Acquisition related costs | 1,811 | 270 | 2,325 | 969 | ||||||||||||
Amortization of acquired technology | 912 | 912 | 2,736 | 2,710 | ||||||||||||
Amortization of acquired intangibles | 251 | 369 | 987 | 1,113 | ||||||||||||
Unoccupied lease charges | — | — | 658 | — | ||||||||||||
Non-GAAP operating income (loss) | $ | 3,203 | $ | 1,030 | $ | 8,147 | $ | (1,161 | ) | |||||||
GAAP net loss | $ | (8,859 | ) | $ | (5,782 | ) | $ | (23,534 | ) | $ | (20,643 | ) | ||||
Stock-based compensation | 7,498 | 5,407 | 20,597 | 14,626 | ||||||||||||
Acquisition related costs | 1,811 | 270 | 2,325 | 969 | ||||||||||||
Amortization of acquired technology | 912 | 912 | 2,736 | 2,710 | ||||||||||||
Amortization of acquired intangibles | 251 | 369 | 987 | 1,113 | ||||||||||||
Unoccupied lease charges | — | — | 658 | — | ||||||||||||
Amortization of debt discount and issuance costs | 2,523 | — | 5,957 | 28 | ||||||||||||
Non-GAAP net income (loss) | $ | 4,136 | $ | 1,176 | $ | 9,726 | $ | (1,197 | ) | |||||||
Reconciliation from diluted weighted-average number of common shares as reported to pro forma diluted weighted average number of common shares | ||||||||||||||||
Diluted weighted-average number of common shares, as reported | 42,993 | 41,386 | 42,597 | 41,030 | ||||||||||||
Weighted-average effect of potentially dilutive shares | 2,386 | 2,050 | 2,277 | — | ||||||||||||
Pro forma diluted weighted-average number of common shares | 45,379 | 43,436 | 44,874 | 41,030 | ||||||||||||
Calculation of non-GAAP income (loss) per share: | ||||||||||||||||
Non-GAAP net income (loss) | $ | 4,136 | $ | 1,176 | $ | 9,726 | $ | (1,197 | ) | |||||||
Diluted weighted-average number of common shares (pro forma for three and nine months ended Sep. 30, 2018 and three months ended Sep. 30, 2017) | 45,379 | 43,436 | 44,874 | 41,030 | ||||||||||||
Non-GAAP net income (loss) per share | $ | 0.09 | $ | 0.03 | $ | 0.22 | $ | (0.03 | ) | |||||||
Reconciliation of GAAP net loss to adjusted EBITDA: | ||||||||||||||||
GAAP net loss | $ | (8,859 | ) | $ | (5,782 | ) | $ | (23,534 | ) | $ | (20,643 | ) | ||||
Depreciation and amortization | 3,689 | 3,822 | 11,441 | 11,049 | ||||||||||||
Stock-based compensation | 7,498 | 5,407 | 20,597 | 14,626 | ||||||||||||
(Benefit from) provision for income taxes | (287 | ) | 3 | (627 | ) | 356 | ||||||||||
Interest (income) expense, net | 1,877 | (149 | ) | 5,005 | (292 | ) | ||||||||||
Acquisition related costs | 1,811 | 270 | 2,325 | 969 | ||||||||||||
Unoccupied lease charges | — | — | 658 | — | ||||||||||||
Adjusted EBITDA | $ | 5,729 | $ | 3,571 | $ | 15,865 | $ | 6,065 |
MEDIA CONTACT: | INVESTOR CONTACT: | |||
Emma Chase | Bob Gujavarty | |||
Red Fan Communications | Q2 Holdings, Inc. | |||
O: (512) 551-9253 / C: (512) 917-4319 | O: (512) 439-3447 | |||
emma@redfancommunications.com | bobby.gujavarty@q2ebanking.com |