Q2 Holdings, Inc. Q4 FY2025 earnings call

Matt Flake noted that the fourth quarter had strong bookings performance, being the second largest bookings quarter in company history. 2025 was the company's strongest year in bookings, revenue, and profitability, with strong sales execution across product areas like digital banking, relationship pricing, and risk and fraud. Bank M&A activity positively impacted the business. Product strategy included the strength of the digital banking single - platform approach, commercial banking solutions as a growth driver, Innovation Studio as a strategic foundation, and the importance of risk and fraud. Discussed AI application, with the single platform giving an advantage in AI innovation, data providing context, and plans to use AI to enhance products and improve operational efficiency. Jonathan Price detailed financial results, including revenue growth, ARR, backlog, and operating expense improvements. Outlined 2026 guidance and long - term financial framework with targets for subscription revenue growth, adjusted EBITDA margins, and long - term margins.

In the fourth quarter, subscription revenue grew 16% year - over - year, adjusted EBITDA margins expanded by over 400 basis points year - over - year, and free cash flow was $56,600,000. For the full year, total revenue was $794,800,000, up 14% from the prior year. Subscription revenue growth was 17% and represented 82% of total revenue. Total ARR grew to $921,000,000, up 12% year - over - year. Ending backlog was $2,700,000,000, up 21% year - over - year. Fourth quarter total revenue was $208,200,000, up 14% year - over - year. Full year adjusted EBITDA was $186,500,000, up 49% from the prior year. Fourth quarter adjusted EBITDA was a record $51,200,000, up 36% year - over - year. Full year free cash flow was $173,000,000, with a free cash flow conversion rate of 93%.

2026 first quarter revenue is expected to be in the range of $212,500,000 to $216,500,000, and full - year revenue in the range of $871,000,000 to $878,000,000, representing a year - over - year growth of approximately 10%. Subscription revenue growth outlook for 2026 is raised to at least 14%. First quarter adjusted EBITDA is expected to be in the range of $52,500,000 to $55,500,000, and full - year 2026 adjusted EBITDA in the range of $225,000,000 to $230,000,000. For 2027, targeting annual subscription revenue growth between 12.5% - 13% and adjusted EBITDA margin expansion between 150 and 200 basis points. Long - term targets by 2030 are non - GAAP gross margins of at least 65% and adjusted EBITDA margins of at least 35%.

The call contains forward - looking statements subject to significant risks and uncertainties, including with respect to expectations for the future operating and financial performance of Q2 Holdings, Inc. for the financial services industry. Actual results may differ materially from those contemplated by these forward - looking statements. Important factors that could cause actual results to differ materially are included in the periodic reports filed with the SEC.

Q: Alex Sklar of Raymond James asked about core modernization and demand for solutions when an FI migrates core to cloud or switches core vendors.

A: Matthew Flake said anytime a bank or credit union changes technology, it opens up opportunities, and they are well - positioned but timing is hard to quantify.

Q: Eleanor Smith of JPMorgan asked about fraud product cross - sell within existing customer base and cash use.

A: Jonathan Price said only 10% of Tier 1 customers have all three solutions, fraud has significant penetration opportunity. On cash use, free cash flow gives flexibility for share repurchases, M&A, and reinvestment.

Q: Terrell Tillman of Truist asked about digital banking dynamism and risk and fraud product time - to - revenue.

A: Matthew Flake said there is significant runway for digital banking, Jonathan Price said fraud stand - alone has faster timelines, while within digital banking net new it follows digital go - live timeline.

Q: Andrew Schmidt of KeyBanc asked about commercial demand evolution and 2030 margin targets.

A: Matthew Flake talked about demand for commercial solutions driven by deposit needs, Jonathan Price said 2030 margin targets are due to subscription mix shift, cost of sales efficiency, and OpEx opportunities.

Q: Matthew VanVliet of Cantor Fitzgerald asked about AI and Innovation Studio monetization.

A: Matthew Flake said Innovation Studio has a revenue - sharing model and is a gateway for AI, Jonathan Price said AI - related efficiencies are upside to targets.

Q: Peter Karos of Stifel asked about banking M&A and internal AI efficiencies.

A: Matthew Flake said M&A is favorable, Jonathan Price said AI efficiencies have early returns and will impact long - term.

Q: Chris Kennedy of William Blair asked about customer tech spend and Innovation Studio.

A: Matthew Flake said vendor consolidation trend continues, Jonathan Price said Innovation Studio is core to the platform and a key AI opportunity.

Q: Charles Nabhan of Stephens asked about non - subscription revenue and Innovation Studio monetization.

A: Jonathan Price said non - subscription revenue is expected to decline in mid - single - digit range, Innovation Studio is a core part with high margin and increasing adoption.

Q: Alexander Sklar of RBC Capital Markets asked about cost savings cadence from cloud migration.

A: Jonathan Price said cloud migration contributes to higher gross margin in 2026 and long - term opportunities.

Q: Cris Kennedy of William Blair asked about Helix and SMB digital banking platform expansion.

A: Jonathan Price said no regulatory change to Helix outlook, SMB is a big opportunity with demand for commercial.