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Q2 Holdings' Sales Surge 31%

As the world becomes more mobile, so too must banks.

Fortunately, Q2 Holdings (NYSE: QTWO) -- as a leading provider of secure, cloud-based digital banking solutions -- helps financial institutions do just that.

In turn, Q2's sales are soaring, as evidenced by its strong third-quarter results.

Q2 Holdings results: The raw numbers

Metric 

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$50.116 million

$38.305 million

31%

Net loss

($5.782 million)

($9.481 million)

N/A

Earnings per share

($0.14)

($0.24)

N/A

Data Source: Q2 Holdings Q3 2017 earnings release.

The ability to provide mobile banking services is becoming a necessity for banks of all sizes. Image source: Getty Images.

What happened with Q2 this quarter?

  • Q2 ended the third quarter with nearly 10 million registered users on its platform, representing 4% sequential and 27% year-over-year growth.
  • Revenue rose 5% sequentially and 31% year over year, to $50.1 million.
  • GAAP gross margin declined to 48.5% from 48.8% in the third quarter of 2016, while non-GAAP gross margin -- which adjusts for stock-based compensation and amortization of acquired technology -- was flat year over year at 52.3%.
  • Adjusted EBITDA improved to positive $3.6 million, compared to negative $1.1 million in the year-ago quarter.
  • Still, Q2 remains unprofitable on a GAAP basis; it generated a net loss of $5.8 million in the third quarter, versus a loss of $9.5 million in the prior-year period.

What management had to say 

CEO Matt Flake highlighted some of Q2's successes during a conference call with analysts (transcript by Seeking Alpha). 

[O]ur momentum continues to build in 2017. We signed another Tier 1 institution, a $5 billion bank in the Northeast United States, which purchased our corporate banking suite to replace their existing corporate solution. All three Tier 1 wins from the quarter were highly competitive deals that involved all of the major competitors in our space. The breadth and quality of these wins give me confidence that our message, our platform, and our robust product portfolio are continuing to resonate in the marketplace.

Looking forward

For the fourth quarter, Q2 Holdings expects:

  • Total revenue of $51.4 million to $51.8 million, which would represent year-over-year growth of 22% to 23%.
  • Adjusted EBITDA of positive $3.3 million to $3.7 million. 

As such, Q2 expects full-year revenue of $193.6 million to $194 million -- representing year-over-year growth of 29% -- and adjusted EBITDA of $9.4 million to $9.8 million.

"We converted multiple Tier 1 opportunities in the quarter including two banks and one of the largest credit unions in the country," Flake said in a press release. "I remain encouraged by our pipeline and optimistic that we can sustain our positive momentum into the fourth quarter."

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Q2 Holdings. The Motley Fool has a disclosure policy.