Q2 Raises Outlook as Revenue Hits Record
Adjusted EBITDA reached $62.8 million as margin expanded 5.1 percentage points.
Q2 Holdings (QTWO), the digital-banking software provider, reported record second-quarter revenue as subscription growth and wider margins lifted earnings.
Revenue reached $219.8 million, up 13% from a year earlier and 2% sequentially. GAAP net income rose to $29.9 million from $11.8 million, while diluted earnings increased to $0.46 a share from $0.18.
Subscription revenue climbed to $182.8 million from $158.4 million a year earlier, driving most of the top-line gain. Transactional revenue increased to $17.9 million, while services-and-other revenue declined to $19.1 million.
The revenue mix helped GAAP gross margin widen to 59.2% from 53.6% a year earlier. GAAP operating income nearly tripled to $29.3 million as cost of revenue declined despite the sales increase.
Q2's subscription annualized recurring revenue rose 15% to $825.5 million, and committed backlog increased 17% to about $2.8 billion. The company signed eight Enterprise and Tier 1 contracts, including expansions at three large banks and a new retail-and-commercial digital-banking agreement with another Tier 1 bank.
Q2 raised its full-year revenue outlook to $881 million to $886 million and now expects adjusted EBITDA of $244 million to $248 million. For the third quarter, the company expects revenue of $218.5 million to $222.5 million, implying 8% to 10% growth, and adjusted EBITDA of $58.5 million to $61.5 million.
The company retired $304.0 million of convertible notes in June and ended the quarter debt-free. It also added $350 million to its share-repurchase authorization, lifting available capacity to about $375 million after buying back 0.5 million shares during the quarter.