Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital banking solutions for financial institutions, today announced results for its third quarter ending Sept. 30, 2018.

• 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.

"We saw solid sales performance in the quarter, highlighted by record bookings for Q2 Open and adding a top 50 credit union," said Matt Flake, CEO of Q2. "Our delivery teams had an outstanding quarter as we added more than 900,000 registered users, a record for a single quarter. Looking ahead, our pipeline is healthy and we believe will be even stronger with the addition of Cloud Lending. I am optimistic that we are positioned well for strong bookings in the fourth quarter."

• 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.

Please join the conference call at least 10 minutes before start time to ensure the line is connected. A live webcast of the conference call will be accessible from the investor services section of the Q2 Holdings, Inc. website at http://investors.q2ebanking.com/.

Q2 is a secure, cloud-based digital banking solutions company headquartered in Austin, Texas. Since 2004, it has been our mission to build stronger communities by strengthening their financial institutions. Our digital banking solutions for deposits, money movement, lending, leasing, security and fraud enable financial institutions to deliver a better financial experience to their account holders. Our bank and credit union customers, along with emerging financial services providers, also benefit from actionable data analytics and access to open technology tools. To learn more about Q2, visit www.q2ebanking.com.

Q2 uses the following non-GAAP financial measures: adjusted EBITDA; non-GAAP gross margin; non-GAAP gross profit; non-GAAP sales and marketing expense; non-GAAP research and development expense; non-GAAP general and administrative expense; non-GAAP operating loss; and, non-GAAP net loss. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that Q2 does not consider indicative of its core performance.

In the case of adjusted EBITDA, Q2 adjusts net loss for such things as interest, taxes, depreciation and amortization, stock-based compensation, acquisition-related costs, amortization of technology and intangibles, and unoccupied lease charges. In the case of non-GAAP gross margin and non-GAAP gross profit, Q2 adjusts gross profit and gross margin for stock-based compensation and amortization of acquired technology. In the case of non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, Q2 adjusts the corresponding GAAP expense to exclude stock-based compensation. In the case of non-GAAP operating loss and non-GAAP net loss, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition related-costs, amortization of acquired technology, amortization of acquired intangibles, and unoccupied lease charges.

Q2's management uses these non-GAAP measures as measures of operating performance; to prepare Q2's annual operating budget; to allocate resources to enhance the financial performance of Q2's business; to evaluate the effectiveness of Q2's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of Q2's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with our board of directors concerning Q2's financial performance.

This press release contains forward-looking statements, including statements about positive sales pipeline and bookings momentum, Q2's performance for the remainder of 2018 and Q2's quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon Q2's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include risks related to: (a) the risk of increased competition in its existing markets and as it enters new sections of the market with Tier 1 customers and new products and services; (b) the risk that the market for Q2's solutions does not grow as anticipated, in particular with respect to Tier 1 customers; (c) the risks associated with integrating acquired companies, including Cloud Lending, and successfully selling and maintaining their solutions; (d) the risk that changes in Q2's market, business or sales organization negatively impacts its ability to sell its products and services; (e) the challenges and costs associated with selling, implementing and supporting Q2's solutions, particularly for larger customers with more complex requirements and longer implementation processes; (f) the risk that errors, interruptions or delays in Q2's products or services or Web hosting negatively impacts Q2's business and sales; (g) risks associated with data breaches and breaches of security measures within Q2's products, systems and infrastructure and the resultant harm to Q2's business and its ability to sell its products and services; (h) the impact that a slowdown in the economy, financial markets, and credit markets has on Q2's customers and Q2's business sales cycles, prospects and customers' spending decisions and timing of implementation decisions, particularly in regions where a significant number of Q2's customers are concentrated; (i) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by customers and governmental authorities; (j) the risks inherent in technology and implementation partnerships that could cause harm to Q2's business; (k) the difficulties and costs Q2 may encounter with complex implementations of its solutions and the resulting impact on reputation and the timing of its revenue from any delayed implementations; (l) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (m) the risks associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth; (n) the risk that modifications or negotiations of contractual arrangements will be necessary during Q2's implementations of its solutions or the general risks associated with the complexity of Q2's customer arrangements; (o) the risk that Q2's increased focus on selling to larger Tier 1 customers may result in greater uncertainty and variability in Q2's business and sales results; (p) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; and (q) the risks associated with further consolidation in the financial services industry.

Additional information relating to the uncertainty affecting the Q2 business are contained in Q2's filings with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Services section of Q2's website at http://investors.q2ebanking.com/. These forward-looking statements represent Q2's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Q2 disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.