Q2 Holdings, Inc. revenue jumped on 24.3% and EBITDA Margin showed almost no change
02/13/2019 • About Q2 Holdings, Inc. (
$QTWO) • By InTwits
Q2 Holdings, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Q2 Holdings, Inc. is a fast growth stock: 2018 revenue growth was 24.3%, 5 year revenue CAGR was 33.5% at 2018 ROIC -14.2%
- The company operates at negative EBITDA Margin: -6.2%
- Q2 Holdings, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 9.7%. Average EBITDA Margin for the same period was -10.8%. In 2018 SBC/Revenue was even higher: 12.3%
- Q2 Holdings, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.9%. At the same time it's a lot of higher than industry average of 13.3%.
- CAPEX is quite volatile: $13m in 2018, $12m in 2017, $14m in 2016, $7m in 2015, $5m in 2014
- The company has unprofitable business model: ROIC is -14.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.0x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 24.3%. Revenue growth showed acceleration in 18Q4 - it increased 29.9% YoY. Revenue decline was accelerating on average at -3.8 pp per annum in 2014-2018. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.3 pp from 24.7% to 22.4% in FY2018. EBITDA Margin followed a growing trend at 3.6 pp per annum in 2014-2018.
Gross Margin increased slightly on 0.75 pp from 48.7% to 49.5% in 2018. Gross Margin stuck to a growing trend at 1.8 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 1.8 pp from 40.4% to 38.6% in 2018. SG&A as a % of Revenue followed a declining trend at -3.0 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.5 pp from 10.8% to 12.3% in 2018. SBC as a % of Revenue followed a growing trend at 1.7 pp per annum in the last 5 years.
Net Income margin decreased slightly on 1.2 pp from -13.5% to -14.7% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 5.5%. CAPEX/Revenue decreased slightly on 1.0 pp from 6.5% in 2015 to 5.5% in 2018. It's average level of CAPEX/Revenue for the last three years was 7.1%. During 2014-2018 CAPEX as a % of Revenue topped in 2016 at 9.6% and was declining since that time.
Accounts receivable as a % of Revenue increased slightly on 1.4 pp from 6.8% to 8.2% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Q2 Holdings, Inc. has spent
$131m on M&A in 2018 which accounts for 54.2% of revenue.
Return on investment
The company operates at negative ROIC (-14.2%) and ROE (-26.7%). ROIC jumped on 11.8 pp from -26.0% to -14.2% in 2018. ROE decreased slightly on 1.4 pp from -25.3% to -26.7% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.0x and Debt / EBITDA is . Net Debt / EBITDA didn't change in 2018. Debt jumped while cash jumped on 86.9%.
The company has no short term refinancing risk: short term debt is zero.
Management team
The company's CEO is Matthew P Flake. Matthew P Flake is a founder and has 5 years tenure with the company. CEO total compensation was
$5,216,787 in 2018 which included
$520,000 salary. The company's CFO Jennifer N Harris has spent 5 years with the company.
Insider ownership is 3.0%. Insider ownership didn't change in 2018.
The company has 1,190 employees. The number of employees surged on 60.4%. Average revenue per employee in 2018 was
$202,605 and it dropped on 22.5%.
Financial and operational results
FY ended 12/31/2018
Q2 Holdings, Inc. ($QTWO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 79.1 | 108.9 | 150.2 | 194.0 | 241.1 | 24.3% |
| Gross Profit | 33.1 | 49.7 | 72.8 | 94.5 | 119.2 | 26.2% |
| SG&A | 40.1 | 50.0 | 68.2 | 78.3 | 93.1 | 18.8% |
| EBITDA | -15.0 | -18.0 | -23.5 | -12.0 | -15.0 | |
| EBIT | -19.1 | -24.8 | -35.7 | -26.9 | -31.9 | |
| Tax | 0.1 | 0.2 | 0.4 | -0.3 | -3.8 | |
| Net Income | -19.6 | -25.1 | -36.4 | -26.2 | -35.4 | |
| Stock Based Compensation | 4.6 | 7.4 | 12.6 | 20.9 | 29.5 | 41.1% |
Balance Sheet
|
|---|
| Cash | 68.0 | 67.0 | 54.9 | 58.0 | 108.3 | 86.9% |
| Accounts Receivable | 5.0 | 9.0 | 12.2 | 13.2 | 19.7 | 49.0% |
| Accounts Payable | 2.0 | 3.5 | 4.2 | 7.6 | 9.2 | 20.3% |
| Short Term Debt | 0.4 | 0.2 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.2 | 0.0 | 0.0 | 0.0 | 182.7 | |
Cash flow
|
|---|
| Capex | 5.0 | 7.1 | 14.3 | 12.3 | 13.3 | 7.9% |
| Acquisitions | | 27.5 | 0.4 | 3.8 | 130.7 | 3,324.9% |
Ratios
|
|---|
| Revenue growth | 39.1% | 37.6% | 38.0% | 29.1% | 24.3% | |
| EBITDA growth | 5.9% | 20.0% | 30.7% | -49.1% | 25.8% | |
|
|---|
| Gross Margin | 41.8% | 45.7% | 48.5% | 48.7% | 49.5% | 0.7% |
| EBITDA Margin | -18.9% | -16.5% | -15.7% | -6.2% | -6.2% | -0.1% |
| EBIT Margin | -24.1% | -22.8% | -23.8% | -13.9% | -13.2% | 0.7% |
| SG&A, % of revenue | 50.6% | 45.9% | 45.4% | 40.4% | 38.6% | -1.8% |
| SBC, % of revenue | 5.8% | 6.8% | 8.4% | 10.8% | 12.3% | 1.5% |
| Net Income Margin | -24.8% | -23.0% | -24.2% | -13.5% | -14.7% | -1.2% |
| CAPEX, % of revenue | 6.4% | 6.5% | 9.6% | 6.3% | 5.5% | -0.8% |
|
|---|
| ROIC | -41.1% | -25.1% | -32.7% | -26.0% | -14.2% | 11.8% |
| ROE | | -25.5% | -33.3% | -25.3% | -26.7% | -1.4% |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 0.0% |
| Employees | 501 | 658 | 742 | 742 | 1,190 | 60.4% |
| Revenue/Employee, th. $ | 158 | 165 | 202 | 261 | 203 | -22.5% |
Q2 Holdings, Inc. ($QTWO) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 55 | 59 | 61 | 67 | | 23.1% | 23.0% | 20.8% | 29.9% |
| EBITDA | -1 | -3 | -4 | -7 | | | | | |
| Net Income | -6 | -9 | -9 | -12 | | | | | |
Balance Sheet
|
|---|
| Cash | 255 | 177 | 212 | 108 | | 497.4% | 412.7% | 427.6% | 86.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 175 | 178 | 180 | 183 | | | | | |
Ratios
|
|---|
| Gross Margin | 50.8% | 50.0% | 50.2% | 47.3% | | 1.9% | 1.1% | 1.7% | -1.4% |
| EBITDA Margin | -2.4% | -4.8% | -5.9% | -10.9% | | 5.2% | 3.6% | -1.7% | -6.2% |
| Net Income Margin | -11.0% | -14.7% | -14.6% | -17.7% | | 4.8% | 1.7% | -3.1% | -7.0% |
Peers in Application Software
Below you can find Q2 Holdings, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| Q2 Holdings, Inc. ($QTWO) | | 37.6% | 38.0% | 29.1% | 24.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.1% |
|---|
| Q2 Holdings, Inc. ($QTWO) | 41.8% | 45.7% | 48.5% | 48.7% | 49.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -9.4% | -4.7% | -3.3% | -3.2% |
|---|
| Q2 Holdings, Inc. ($QTWO) | -18.9% | -16.5% | -15.7% | -6.2% | -6.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| Q2 Holdings, Inc. ($QTWO) | 6.4% | 6.5% | 9.6% | 6.3% | 5.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.2% | -10.2% | -9.3% |
|---|
| Q2 Holdings, Inc. ($QTWO) | -41.1% | -25.1% | -32.7% | -26.0% | -14.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (70 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
