Q2 Holdings, Inc. (QTWO)
SIC breadcrumb: Services > Business Services > SIC 7372 Services-Prepackaged Software
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1410384. Latest filing source: 0001410384-26-000006.
Informational only. Descriptive public-record data — not a rating, forecast, or investment advice. See Disclaimer.
At a glance
- Revenue
- 794,809,000 USD verified
- Net income
- 52,008,000 USD verified
- Assets
- 1,276,277,000 USD verified
- Free cash flow
- 194,651,000 USD computed
- Net margin
- 6.54% computed
- Operating margin
- 5.02% computed
- Revenue YoY
- +14.12% computed
- ROE
- 7.86% computed
Peer & cluster context
Peer percentile fingerprint
Percentile = share of the N covered peers reporting that ratio whose value is lower (ties counted half); computed among grepcent-covered companies in SIC industry 7372 Services-Prepackaged Software, not the whole market. A higher percentile means a higher value of the ratio, not a better company. Ratios with fewer than 8 reporting peers are omitted. Latest reported values per company; fiscal periods may differ. Descriptive arithmetic - not a score, rating, or ranking.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 794,809,000 | USD | 2025 | 2026-02-11 |
| Net income | 52,008,000 | USD | 2025 | 2026-02-11 |
| Assets | 1,276,277,000 | USD | 2025 | 2026-02-11 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-11. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001410384.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 150,224,000 | 193,978,000 | 241,100,000 | 315,484,000 | 402,751,000 | 498,720,000 | 565,673,000 | 624,624,000 | 696,464,000 | 794,809,000 |
| Net income | -36,354,000 | -26,164,000 | -35,397,000 | -70,877,000 | -137,620,000 | -112,746,000 | -108,983,000 | -65,384,000 | -38,536,000 | 52,008,000 |
| Operating income | -35,718,000 | -26,907,000 | -31,850,000 | -66,746,000 | -99,833,000 | -77,995,000 | -104,761,000 | -86,057,000 | -42,263,000 | 39,897,000 |
| Gross profit | 72,795,000 | 94,493,000 | 119,245,000 | 152,999,000 | 174,599,000 | 225,035,000 | 256,345,000 | 302,651,000 | 354,481,000 | 429,683,000 |
| Diluted EPS | -1.53 | -2.65 | -2.00 | -1.90 | -1.12 | -0.64 | 0.80 | |||
| Operating cash flow | 3,394,000 | 9,472,000 | 4,595,000 | 567,000 | -2,938,000 | 31,092,000 | 36,556,000 | 70,292,000 | 135,751,000 | 201,461,000 |
| Capital expenditures | 14,349,000 | 12,315,000 | 13,285,000 | 13,860,000 | 23,715,000 | 19,754,000 | 11,142,000 | 5,673,000 | 6,692,000 | 6,810,000 |
| Share buybacks | 0.00 | 0.00 | 5,000,000 | |||||||
| Assets | 200,980,000 | 212,815,000 | 463,720,000 | 1,009,434,000 | 1,416,702,000 | 1,385,045,000 | 1,349,726,000 | 1,201,425,000 | 1,294,795,000 | 1,276,277,000 |
| Liabilities | 100,745,000 | 106,193,000 | 304,820,000 | 630,022,000 | 773,338,000 | 814,749,000 | 930,702,000 | 752,946,000 | 776,999,000 | 614,466,000 |
| Stockholders' equity | 100,235,000 | 106,622,000 | 158,900,000 | 379,412,000 | 643,364,000 | 570,296,000 | 419,024,000 | 448,479,000 | 517,796,000 | 661,811,000 |
| Cash and cash equivalents | 54,873,000 | 57,961,000 | 108,341,000 | 100,094,000 | 407,703,000 | 322,848,000 | 199,600,000 | 229,655,000 | 358,560,000 | 367,631,000 |
| Free cash flow | -10,955,000 | -2,843,000 | -8,690,000 | -13,293,000 | -26,653,000 | 11,338,000 | 25,414,000 | 64,619,000 | 129,059,000 | 194,651,000 |
Ratios
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | -24.20% | -13.49% | -14.68% | -22.47% | -34.17% | -22.61% | -19.27% | -10.47% | -5.53% | 6.54% |
| Operating margin | -23.78% | -13.87% | -13.21% | -21.16% | -24.79% | -15.64% | -18.52% | -13.78% | -6.07% | 5.02% |
| Return on equity | -36.27% | -24.54% | -22.28% | -18.68% | -21.39% | -19.77% | -26.01% | -14.58% | -7.44% | 7.86% |
| Return on assets | -18.09% | -12.29% | -7.63% | -7.02% | -9.71% | -8.14% | -8.07% | -5.44% | -2.98% | 4.07% |
| Liabilities / equity | 1.01 | 1.00 | 1.92 | 1.66 | 1.20 | 1.43 | 2.22 | 1.68 | 1.50 | 0.93 |
| Current ratio | 2.12 | 1.93 | 2.96 | 1.40 | 4.23 | 3.10 | 2.77 | 2.23 | 1.40 | 1.02 |
Industry Peer Context
Net margin peer context
Operating margin peer context
ROE peer context
ROA peer context
Financial Bridges
Income statement bridge from reported figures
Figure provenance: SEC companyfacts FY 2025. Revenue: accession 0001410384-26-000006; concept RevenueFromContractWithCustomerExcludingAssessedTax; source concepts us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | Gross profit: accession 0001410384-26-000006; concept GrossProfit; source concepts us-gaap:GrossProfit | Operating income: accession 0001410384-26-000006; concept OperatingIncomeLoss; source concepts us-gaap:OperatingIncomeLoss | Net income: accession 0001410384-26-000006; concept NetIncomeLoss; source concepts us-gaap:NetIncomeLoss
Free cash flow = operating cash flow - capital expenditures
Figure provenance: SEC companyfacts FY 2025. Operating cash flow: accession 0001410384-26-000006; concept NetCashProvidedByUsedInOperatingActivities; source concepts us-gaap:NetCashProvidedByUsedInOperatingActivities | Capital expenditures: accession 0001410384-26-000006; concept PaymentsToAcquirePropertyPlantAndEquipment; source concepts us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | Free cash flow: accession 0001410384-26-000006; concept NetCashProvidedByUsedInOperatingActivities - PaymentsToAcquirePropertyPlantAndEquipment; source concepts us-gaap:NetCashProvidedByUsedInOperatingActivities; us-gaap:PaymentsToAcquirePropertyPlantAndEquipment
Financial Charts
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: RevenueFromContractWithCustomerExcludingAssessedTax. Source concepts: us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: NetIncomeLoss. Source concepts: us-gaap:NetIncomeLoss.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: OperatingIncomeLoss. Source concepts: us-gaap:OperatingIncomeLoss.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: GrossProfit. Source concepts: us-gaap:GrossProfit.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: EarningsPerShareDiluted. Source concepts: us-gaap:EarningsPerShareDiluted.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: NetCashProvidedByUsedInOperatingActivities. Source concepts: us-gaap:NetCashProvidedByUsedInOperatingActivities.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: PaymentsToAcquirePropertyPlantAndEquipment. Source concepts: us-gaap:PaymentsToAcquirePropertyPlantAndEquipment.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: PaymentsForRepurchaseOfCommonStock. Source concepts: us-gaap:PaymentsForRepurchaseOfCommonStock.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: Assets. Source concepts: us-gaap:Assets.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: Liabilities. Source concepts: us-gaap:Liabilities.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: StockholdersEquity. Source concepts: us-gaap:StockholdersEquity.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: CashAndCashEquivalentsAtCarryingValue. Source concepts: us-gaap:CashAndCashEquivalentsAtCarryingValue.
Figure provenance: SEC companyfacts. Latest point: FY 2025 ended 2025-12-31; accession 0001410384-26-000006; filed 2026-02-11. Concept: NetCashProvidedByUsedInOperatingActivities - PaymentsToAcquirePropertyPlantAndEquipment. Source concepts: us-gaap:NetCashProvidedByUsedInOperatingActivities; us-gaap:PaymentsToAcquirePropertyPlantAndEquipment.
As-reported value updates
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-07-29. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001410384.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q3 | 2022-09-30 | -0.48 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -0.01 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | -0.41 | reported discrete quarter | ||
| 2023-Q3 | 2023-09-30 | 154,967,000 | -23,167,000 | -0.40 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 162,118,000 | -18,079,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 165,508,000 | -13,843,000 | -0.23 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 172,890,000 | -13,060,000 | -0.22 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 175,021,000 | -11,797,000 | -0.20 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 183,045,000 | 164,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 189,735,000 | 4,753,000 | 0.07 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 195,148,000 | 11,764,000 | 0.18 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 201,704,000 | 15,048,000 | 0.23 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 208,222,000 | 20,443,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 216,506,000 | 26,639,000 | 0.40 | reported discrete quarter |
| 2026-Q2 | 2026-06-30 | 219,765,000 | 29,858,000 | 0.46 | reported discrete quarter |
Quarterly Charts
Figure provenance: SEC companyfacts. Latest point: FY 2026 ended 2026-06-30; accession 0001410384-26-000053; filed 2026-07-29. Concept: RevenueFromContractWithCustomerExcludingAssessedTax. Source concepts: us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax.
Figure provenance: SEC companyfacts. Latest point: FY 2026 ended 2026-06-30; accession 0001410384-26-000053; filed 2026-07-29. Concept: NetIncomeLoss. Source concepts: us-gaap:NetIncomeLoss.
Figure provenance: SEC companyfacts. Latest point: FY 2026 ended 2026-06-30; accession 0001410384-26-000053; filed 2026-07-29. Concept: EarningsPerShareDiluted. Source concepts: us-gaap:EarningsPerShareDiluted.
Business
Read QTWO's verbatim Item 1 Business section from its latest 10-K: Business.
Risk Factors
Read QTWO's verbatim Item 1A Risk Factors from its latest 10-K: Risk Factors.
Latest quarter (10-Q)
Latest 10-Q source: 0001410384-26-000053.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in our other SEC filings, including the audited consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2025, which are included in our Annual Report on Form 10-K, filed with the SEC on February 11, 2026. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements," and the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 11, 2026, which include a discussion of the uncertainties, risks and assumptions associated with these statements. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. For a description and reconciliation of the non-GAAP measures discussed in this section, see "Non-GAAP Financial Measures."
Overview
We are a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies. Our solutions transform the ways in which financial institutions and other financial services providers engage with account holders and retail and commercial End Users. Digital financial services are highly regulated, subject to extensive and evolving supervisory, consumer protection, privacy and third‑party risk management requirements, and security is paramount, as providers must protect sensitive financial data and funds and defend against continually evolving cyber threats and fraud. Providers must also manage significant technical and operational complexity to deliver consistent, compliant experiences across channels, devices and third‑party integrations while integrating with core systems, legacy infrastructure and multiple third‑party service providers, all while maintaining high availability and resiliency. We deliver these solutions through a unified, cloud-based software platform purpose-built for the complex, regulated financial services industry, enabling scalable and highly configurable digital financial experiences. Our solutions comprise a broad and deep portfolio of digital banking offerings, digital lending and relationship pricing solutions, risk and fraud solutions, Q2 Innovation Studio and Helix.
Delivering advanced digital solutions in the complex and heavily regulated financial services industry requires significant resources, personnel and expertise. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers. We design and develop our solutions with an open platform approach intended to provide comprehensive integration among our solution offerings and our customers' internal and third-party systems. Our platform architecture supports modular innovation and enables customers and partners to deploy new capabilities efficiently while maintaining operational resilience and compliance. This integrated approach allows our customers to deliver a unified financial experience across digital channels. Our solutions provide our customers the flexibility to configure their digital services in a manner that is consistent with each customer's specific offerings, workflows, processes and controls. Our solutions also allow our customers to personalize the digital experiences they deliver to their End Users by extending their individual services and brand requirements across digital channels. Our solutions are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.
Founded over 21 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market adoption of our solutions, strategic investments and acquisitions. As customer needs and technology architectures have evolved, we have expanded our solution portfolio to address a broader set of mission-critical technology, data and operational requirements across the financial services value chain. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, small to medium business, or SMBs, and commercial segments. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.
23
Table of Contents
The financial services industry is experiencing significant transformation driven by the growing demand within financial institutions to digitize their operations and offerings, as well as the rise of FinTechs and Alt-FIs, which are reshaping End-User expectations for more innovative and engaging digital financial experiences. At the same time, advancements in data analytics, automation, and AI are increasing the importance of modern, fast, flexible technology platforms that can support innovation while meeting stringent regulatory, security and resiliency requirements. These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and embracing these market dynamics. We have developed a comprehensive suite of offerings to accelerate and optimize this transformation for our customers, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs and Alt-FIs.
We offer our solutions to most of our customers using a software-as-a-service, or SaaS, model under which our customers pay subscription fees for the use of our solutions. Our digital banking platform customers have numerous End Users, and those End Users can represent one or more account holders registered to use one or more of our solutions on our digital banking platform. We generally price our digital banking platform solutions based on the number of solutions purchased by our customers and the number of Registered Users, as defined in "Key Operating Measures" below, or commercial account holders utilizing our solutions. We generally earn additional revenues from our digital banking platform customers based on the number of End Users on our solutions, the number of transactions that End Users perform on our solutions and the excess number of users and transactions above what is included in our standard subscription fee. As a result, digital banking platform revenues generally increase as our customers buy more solutions from us and increase the number of Registered Users and companies utilizing our solutions and as those retail users and companies increase their number of transactions on our solutions. Our risk and fraud solutions can be sold as part of, or alongside, our digital banking platform, while some solutions may be sold on a standalone basis and are generally monetized through subscription-based arrangements recognized over the term of the applicable customer agreements. The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements. The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred. This combination of subscription-based and usage-based revenue models aligns pricing with customer adoption and platform utilization.
We believe we have the opportunity to continue to grow our business and that the investments we are making are positioning us to continue to realize revenue growth and improve our operating efficiencies. These investments will increase our costs on an absolute dollar basis, but the timing and amount of these investments will vary based on the rate at which we expect to add new customers, the implementation and support needs of our customers, our software development plans, our technology and physical infrastructure requirements and the internal needs of our organization. Many of these investments will occur in advance of any associated benefit. If we are successful in growing our revenues by selling additional innovative solutions to existing customers and creating deeper End-User engagement, we anticipate that greater economies of scale and increased operating leverage will improve our margins over the long term.
We primarily sell our solutions through our direct sales organization. While the financial institution market is well-defined due to the regulatory classification of financial institutions, the markets for FinTechs and other financial services providers are broader and more difficult to define due to the changing number of providers in each market. Over the long term, we intend to continue to invest in additional sales representatives to identify and address opportunities in the financial institution, FinTech and Alt-FI markets and to increase our number of sales support and marketing personnel, as well as our investment in marketing initiatives designed to increase awareness of our solutions and generate new customer opportunities.
We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005. We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets. We have also acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs. Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others. Q2 Innovation Studio, an application program interface, or API, and software development kit, or SDK, bas
[Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A (excerpt)
Latest 10-K Item 7 source: 0001410384-26-000006. The complete FY 2025 MD&A is published at /company/QTWO/mda/fy2025/.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" above for a discussion of the uncertainties, risks and assumptions associated with these statements. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. For a description and reconciliation of the non-GAAP measures discussed in this section, see "Non-GAAP Financial Measures."
Overview
We are a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies. Our solutions transform the ways in which financial institutions and other financial services providers engage with account holders and retail and commercial End Users. Digital financial services are highly regulated, subject to extensive and evolving supervisory, consumer protection, privacy and third‑party risk management requirements, and security is paramount, as providers must protect sensitive financial data and funds and defend against continually evolving cyber threats and fraud. Providers must also manage significant technical and operational complexity to deliver consistent, compliant experiences across channels, devices and third‑party integrations while integrating with core systems, legacy infrastructure and multiple third‑party service providers, all while maintaining high availability and resiliency. We deliver these solutions through a unified, cloud-based software platform purpose-built for the complex, regulated financial services industry, enabling scalable and highly configurable digital financial experiences. Our solutions comprise a broad and deep portfolio of digital banking offerings, digital lending and relationship pricing solutions, risk and fraud solutions, Q2 Innovation Studio and Helix.
Delivering advanced digital solutions in the complex and heavily regulated financial services industry requires significant resources, personnel and expertise. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers. We design and develop our solutions with an open platform approach intended to provide comprehensive integration among our solution offerings and our customers' internal and third-party systems. Our platform architecture supports modular innovation and enables customers and partners to deploy new capabilities efficiently while maintaining operational resilience and compliance. This integrated approach allows our customers to deliver a unified financial experience across digital channels. Our solutions provide our customers the flexibility to configure their digital services in a manner that is consistent with each customer's specific offerings, workflows, processes and controls. Our solutions also allow our customers to personalize the digital experiences they deliver to their End Users by extending their individual services and brand requirements across digital channels. Our solutions are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.
Founded over 21 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market adoption of our solutions, strategic investments and acquisitions. As customer needs and technology architectures have evolved, we have expanded our solution portfolio to address a broader set of mission-critical technology, data and operational requirements across the financial services value chain. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, SMBs and commercial segments. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.
55
Table of Contents
The financial services industry is experiencing significant transformation driven by the growing demand within financial institutions to digitize their operations and offerings, as well as the rise of FinTechs and Alt-FIs, which are reshaping End-User expectations for more innovative and engaging digital financial experiences. At the same time, advancements in data analytics, automation, and AI are increasing the importance of modern, fast, flexible technology platforms that can support innovation while meeting stringent regulatory, security and resiliency requirements. These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and embracing these market dynamics. We have developed a comprehensive suite of offerings to accelerate and optimize this transformation for our customers, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs and Alt-FIs.
We offer our solutions to most of our customers using a SaaS model under which our customers pay subscription fees for the use of our solutions. Our digital banking platform customers have numerous End Users, and those End Users can represent one or more account holders registered to use one or more of our solutions on our digital banking platform. We generally price our digital banking platform solutions based on the number of solutions purchased by our customers and the number of Registered Users, as defined in "Key Operating Measures" below, or commercial account holders utilizing our solutions. We generally earn additional revenues from our digital banking platform customers based on the number of End Users on our solutions, the number of transactions that End Users perform on our solutions and the excess number of users and transactions above what is included in our standard subscription fee. As a result, digital banking platform revenues generally increase as our customers buy more solutions from us and increase the number of Registered Users and companies utilizing our solutions and as those retail users and companies increase their number of transactions on our solutions. Our risk and fraud solutions can be sold as part of, or alongside, our digital banking platform, while some solutions may be sold on a standalone basis and are generally monetized through subscription-based arrangements recognized over the term of the applicable customer agreements. The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements. The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred. This combination of subscription-based and usage-based revenue models aligns pricing with customer adoption and platform utilization.
We believe we have the opportunity to continue to grow our business and that the investments we are making are positioning us to continue to realize revenue growth and improve our operating efficiencies. These investments will increase our costs on an absolute dollar basis, but the timing and amount of these investments will vary based on the rate at which we expect to add new customers, the implementation and support needs of our customers, our software development plans, our technology and physical infrastructure requirements and the internal needs of our organization. Many of these investments will occur in advance of any associated benefit. If we are successful in growing our revenues by selling additional innovative solutions to existing customers and creating deeper End-User engagement, we anticipate that greater economies of scale and increased operating leverage will improve our margins over the long term.
We primarily sell our solutions through our direct sales organization. While the financial institution market is well-defined due to the regulatory classification of financial institutions, the markets for FinTechs and other financial services providers are broader and more difficult to define due to the changing number of providers in each market. Over the long term, we intend to continue to invest in additional sales representatives to identify and address opportunities in the financial institution, FinTech and Alt-FI markets and to increase our number of sales support and marketing personnel, as well as our investment in marketing initiatives designed to increase awareness of our solutions and generate new customer opportunities.
We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005. We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets. We have also acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs. Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others. Q2 Innovation Studio, an API and SDK-based open technology platform, allows our financial institution customers and other partners to develop unique extensions of and integrations to our digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users. We believe our portfolio, which reflects years of strategic development and innovation, affords us a distinct competitive advantage across multiple market segments.
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We believe that financial services providers are best
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MD&A history
Prior-year 10-K MD&A spans are extracted from SEC filings with the same bounded parser used for the latest filing. Each year's full verbatim text is on its own sub-page.
Macro cross-references for QTWO
- PAYEMS - All Employees, Total Nonfarm
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity