Q2 Holdings, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for the quarter ended September 30, 2026, was $225.8 million, representing a 12% year-over-year increase and a 3% sequential increase from Q2 2026.
• GAAP gross margin was 59.7%, up from 54.0% in the prior-year quarter and 59.2% in Q2 2026.
• Non-GAAP gross margin was 62.6%, up from 57.9% in the prior-year quarter and 62.3% in Q2 2026.
• GAAP net income was $33.2 million, compared to $15.0 million in the prior-year quarter and $29.9 million in Q2 2026.
• Adjusted EBITDA was $67.8 million, up from $48.8 million in the prior-year quarter and $62.8 million in Q2 2026.
• Adjusted EBITDA margin reached a record 30% for the quarter.
• Free cash flow generated was $55.0 million for the quarter.
• Subscription Annualized Recurring Revenue increased to $846.0 million, a 13.5% year-over-year increase.
• Backlog (Remaining Performance Obligations) totaled approximately $2.8 billion, representing 10% year-over-year growth and a $5 million sequential increase.
• The company remained debt-free as of the quarter end.

Guidance and Future Outlook:

• Q2 raised full-year 2026 guidance for both revenue and adjusted EBITDA.
• Q4 2026 revenue guidance is $226.0 million to $230.0 million, implying 9% to 10% year-over-year growth.
• Q4 2026 adjusted EBITDA guidance is $62.4 million to $65.4 million, representing 28% of revenue.
• Full-year 2026 revenue guidance is $888.0 million to $892.0 million, implying 12% year-over-year growth.
• Full-year 2026 adjusted EBITDA guidance is $253.0 million to $256.0 million, representing 28% to 29% of revenue.
• Management expects AI-driven offerings to reach general availability in the coming months.
• Early demand for the new AI-driven fraud solution (User Activity Monitoring) was roughly twice the initial expectation.

Business Segments and Product Lines:

• Signed seven Enterprise and Tier 1 contracts in the quarter, including:
  • A net new agreement with a Tier 1 credit union for commercial digital banking solutions.
  • A net new agreement with a Tier 1 bank for commercial digital banking solutions following a merger.
  • An expansion agreement with an Enterprise bank to add risk and fraud solutions, including the AI-driven User Activity Monitoring solution.
• Credit unions were a key contributor to bookings, including multiple Tier 1 wins.
• At Dev Days 2026, Q2 previewed expanded Q2 Code capabilities covering planning, testing, and deployment, and new Q2 Assistant capabilities designed to complete multi-step customer service and back-office tasks.
• The early adopter program for User Activity Monitoring signed nearly 20 financial institutions.

Market and Competitive Landscape:

• Q2 positions itself as a platform for customers to build upon as they implement AI solutions.
• The company highlights momentum across the business driven by digital banking and AI progress.
• The company serves banks, credit unions, alternative finance companies, and fintechs in the U.S. and internationally.

Risks and Challenges:

• Risks include cyberattacks, financial transaction fraud, data and privacy breaches, and security vulnerabilities in third-party systems.
• Rapidly evolving technologies, including quantum computing and AI, present risks regarding threat actor capabilities and the need for continuous defense evolution.
• Global economic uncertainties, inflationary pressures, fluctuating interest rates, and changes in financial regulations may impact customer purchasing decisions and sales cycles.
• Increased competition in existing and new markets, as well as risks associated with developing and selling complex AI-based solutions.
• Regulatory scrutiny on AI, machine learning, data privacy, and banking-as-a-service (BaaS) services.
• Reliance on third-party AI vendors and public cloud service providers.
• Risks related to geopolitical instability, including acts of war and state-sponsored cyberattacks.
• Challenges in selling, implementing, and supporting solutions for larger customers with complex requirements.

Management Commentary and Tone:

• Matt Flake, Chairman, President and CEO, stated the company delivered "another strong quarter" with solid bookings and momentum, expressing confidence that Q2 is well-positioned to be the platform customers build on.
• Jonathan Price, CFO and Co-CEO, noted that results exceeded the high end of guidance on revenue and adjusted EBITDA, citing record margins and a strong balance sheet providing flexibility.
• Management expressed confidence in the durability of growth, expanding margins, and the company's ability to raise full-year guidance.

Other Key Points:

• Jonathan Price was appointed Co-Chief Executive Officer, effective October 29, 2026, serving alongside Matt Flake. Mr. Price will also join the Board of Directors and continue as CFO during a search for his successor.
• In the third quarter, the company repurchased approximately 0.6 million shares for $38.8 million at an average price of $61.27 per share.
• Year-to-date share repurchases totaled approximately 2.9 million shares for $158.9 million.
• As of September 30, 2026, approximately $336.1 million remained under the share repurchase authorization.
• The company paid $303.995 million for the maturity of convertible notes during the nine months ended September 30, 2026.
• A conference call was scheduled for Wednesday, October 28, 2026, at 5:00 p.m. EDT.