0001410384-26-000037
SEC filingRevenue growth of 14.1% drove GAAP profitability with operating income rising to 12.8% of revenue.
For the three months ended March 31, 2026, Q2 Holdings reported total revenue of $216.5 million, a 14.1% increase from $189.7 million in the same period last year. The revenue growth was primarily driven by a $25.6 million (17%) increase in subscription revenue from new customer sales, solution expansions, and higher usage. Services and other revenue added $2.0 million, partially offset by a $0.8 million decline in transactional revenue.
Gross profit rose to $127.9 million (59.1% margin) from $101.0 million (53.2% margin), with the margin improvement attributed to lower amortization of acquired technology and higher capitalized implementation costs. GAAP operating income surged to $27.7 million (12.8% of revenue) from $2.2 million (1.2% of revenue) in the prior year, demonstrating significant operating leverage. Net income increased to $26.6 million from $4.8 million. On a non-GAAP basis, operating income was $52.7 million versus $32.7 million, and Adjusted EBITDA reached $60.0 million (27.7% margin) compared to $40.7 million (21.5% margin).
Operating expenses as a percentage of revenue improved across all major categories: sales & marketing declined from 14.0% to 11.9%, R&D from 20.0% to 19.3%, and G&A from 17.0% to 14.9%, reflecting cost discipline and revenue scaling. Operating cash flow was $56.3 million, up from $43.5 million in the prior year.
The MD&A does not disaggregate revenue into formal reportable segments. However, subscription revenue—the predominant revenue type—grew 17% YoY, accelerating from overall revenue growth. The company highlights improved subscription bookings from digital banking solutions, both from new customers and expansions. Key operating metrics support this momentum: Subscription Annualized Recurring Revenue (ARR) was $802.3 million as of March 31, 2026, up from $702.4 million a year earlier (+14.2%), and Total ARR reached $944.9 million from $846.6 million. The net revenue retention rate was 113% for full-year 2025, with subscription net revenue retention at 115%, indicating strong expansion within the existing customer base. Registered Users grew to 27.8 million from 26.2 million a year earlier.
Management did not provide explicit quantitative guidance for future periods in the MD&A. They stated an expectation that subscription revenue will continue to increase as a percentage of total revenue. The company intends to continue investing in sales, R&D, and customer support to drive growth while targeting long-term operating leverage. Capital expenditures included $6.6 million for property and equipment and $5.5 million for capitalized software in the quarter. The company believes its cash position ($378.9 million in cash, equivalents, and investments) together with a $125 million revolving credit facility, is adequate to meet near-term obligations, including the upcoming maturity of the 2026 Notes.
As of March 31, 2026, Q2 Holdings held $342.3M in cash and cash equivalents, with an additional $35.9M in available-for-sale debt investments. Total liquidity (cash plus investments) stood at $378.2M. The company had total debt of $303.7M (net carrying amount of convertible notes due June 2026), resulting in a net cash position of $74.5M. Shareholders' equity was $611.7M, down from $661.8M at year-end 2025, primarily due to $97.2M in share repurchases.
Total contractual commitments as of March 31, 2026 were $504.9M, including $357.2M due within the next 12 months (April 2026 to March 2027). The largest component is the $304.0M principal of convertible notes maturing in June 2026, classified as current. Other obligations include lease payments ($47.5M total remaining), third-party product commitments, stadium sponsorship, and cloud service fees. Additionally, the company reported $2.74B in remaining performance obligations (RPO), of which 53% is expected to be recognized as revenue within 24 months.
During Q1 2026, Q2 Holdings repurchased 1.765 million shares for $97.2M under its $150M share repurchase program authorized in October 2025. As of March 31, 2026, $47.8M remained available for future repurchases. No new authorization was announced in this period. The company did not pay dividends. Capital expenditures included $6.6M in property and equipment and $5.5M in capitalized software development costs, though no single capex figure was disclosed. There was no new debt issuance or repayment during the quarter (excluding the convertible notes approaching maturity).
Q2 Holdings operates as a single segment, providing digital solutions to financial institutions and fintechs. The company's revenue is derived primarily from subscription fees ($179.9M in Q1 2026), transactional revenue ($17.8M), and services/other ($18.8M). No geographic breakdown beyond the U.S. as primary market is provided. The CODM (CEO) evaluates performance based on consolidated net income and total assets.
Operating cash flow ($56.3M) significantly exceeded net income ($26.6M), reflecting strong cash conversion driven by non-cash charges (D&A $11.7M, stock comp $20.3M) and a large increase in deferred revenues ($45.5M). The cash conversion ratio (CFO/Net Income) was 2.1x.
Capital expenditures of $12.1M (including $5.5M capitalized software) represented 21.5% of CFO, indicating moderate reinvestment needs. The company remains asset-light with capex at 0.8% of revenue.
While not explicitly stated, free cash flow (CFO - capex) was approximately $44.2M. This covered only 45% of the $97.2M share repurchases, implying the remainder was funded by balance sheet cash and investing activities (net investing inflow of $16.4M from maturities). No dividends were paid.
Major working capital drivers included a $45.5M increase in deferred revenues (client prepayments) and a $22.8M rise in accounts receivable, partially offset by increases in prepaid expenses and accrued liabilities. The net working capital change contributed positively to CFO.
Q1 FY2026 displayed robust cash generation, with CFO growing 29% YoY. The company's significant share repurchase program reduced cash reserves, but operating fundamentals remain solid.