Q2 Holdings (NYSE:QTWO) announced its second-quarter earnings on Thursday, August 7th, beating analyst estimates on both top and bottom lines. During the quarter, QTWO saw a significant increase new customer wins, including two of the top 100 financial institutions in the U.S. based on asset size. QTWO also announced the availability of a new version of its software-as-a-service ("SaaS") virtual banking platform, which supports an enhanced user experience and helps financial institutions attract, retain, and grow their business and commercial accounts.
QTWO posted second-quarter revenue of $19.2 million, up 36% annually and 14% sequentially. While the company continues to operate at a loss, they're taking significant steps toward scaling their e-banking platform to address the massive U.S. market for regional and community financial institutions ("RCFIs"). Remember that there are over 13,500 federally-insured financial institutions in the country that can be characterized as RCFIs. In fact, over 90% of financial institutions in the U.S. have less than $1 billion in assets. For reference, QTWO currently has just over 300 of these financial institutions as customers.
QTWO management provided forward guidance that implies annual revenue growth in the mid-30% range, consistent with the growth seen in FY2013 as well as the first two quarters of 2014. Adjusted EBITDA guidance remains in-line with 2013's Adjusted EBITDA loss of $12.3 million.
As written in my previous coverage, QTWO offers a service that's becoming increasingly vital to RCFIs in order to remain competitive in today's "always connected" world. While QTWO is not yet profitable and still FCF-negative, the company is investing heavily in itself ahead of an anticipated explosion in growth. Despite the 20% jump last week, shares are still attractive at their current levels given the massive size of QTWO's addressable market and the scalability of their SaaS platform.
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