Stock Story -
What Happened: Shares of banking software provider Q2 (NYSE:QTWO) jumped 10.4% in the morning session after the company reported a "beat and raise" quarter. Second quarter results narrowly topped analysts' revenue expectations. Its gross margin also improved and it slightly raised its full-year revenue guidance. Zooming out, we think this was a decent quarter, showing the company is staying on target. After the initial pop the shares cooled down to $69.96, up 3.6% from previous close.
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What is the market telling us: Q2 Holdings's shares are very volatile and over the last year have had 9 moves greater than 5%. But moves this big are very rare even for Q2 Holdings and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock gained 10.1% on the news that the company reported fourth-quarter results and delivered a decent gross margin improvement, alongside a small beat on the top line. Notably, the company signed the two largest deals in its history, highlighting the solid demand for its digital banking solutions. Looking ahead, guidance shows the growth is slow but steady as full-year revenue guidance came in roughly in line with analysts' expectations, though revenue guidance for the next quarter missed. However, adjusted EBITDA guidance for the full year came in ahead of consensus estimates.
Lastly, the company provided financial projections for the next three years after factoring recent booking strength and its improved deal pipeline. As a result, it expects to deliver 14% subscription revenue growth over the next three years. It also expects to achieve 3-4% adjusted EBITDA margin expansion during the period. Overall, this was a decent quarter for Q2 Holdings.
Q2 Holdings is up 65.9% since the beginning of the year, and at $69.96 per share it is trading close to its 52-week high of $70.47 from July 2024. Investors who bought $1,000 worth of Q2 Holdings's shares 5 years ago would now be looking at an investment worth $907.20.
