Q2 Holdings, Inc. reports 71.1% CAPEX growth in 2020 and 27.7% Revenue growth
02/17/2021 • About Q2 Holdings, Inc. (
$QTWO) • By InTwits
Q2 Holdings, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Q2 Holdings, Inc. is a fast growth stock: 2020 revenue growth was 27.7%, 5 year revenue CAGR was 29.9% at 2020 ROIC -9.3%
- The company operates at negative EBITDA Margin: -9.9%
- Q2 Holdings, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 4.8% while average EBITDA Margin was -9.7% for the sames years
- Q2 Holdings, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.3%. At the same time it's a lot of higher than industry average of 3.2%.
- CAPEX is quite volatile: $14m in 2020, $29m in 2019, $13m in 2018, $5m in 2017, $4m in 2016
- The company has unprofitable business model: ROIC is -9.3%
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 27.7%. Revenue growth showed small slowdown in 20Q4 - it was 25.5% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 8.9 pp from -0.50% to 8.4% in 2020.
Gross Margin decreased on 5.1 pp from 48.5% to 43.4% in 2020. During the last 5 years Gross Margin topped in 2018 at 49.5% and was declining since that time. SG&A as a % of Revenue decreased on 2.7 pp from 38.3% to 35.6% in 2020. SG&A as a % of Revenue followed a declining trend at -2.2 pp per annum in the last 5 years.
Net Income margin dropped on 11.7 pp from -22.5% to -34.2% in 2020. During the last 5 years Net Income margin topped in 2017 at -13.5% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In 2020 Q2 Holdings, Inc. had CAPEX/Revenue of 5.9%. CAPEX/Revenue showed almost no change from 2017 to 2020. For the last three years the average CAPEX/Revenue was 5.3%. During the last 5 years CAPEX as a % of Revenue bottomed in 2019 at 4.4%.
Return on investment
The company operates at negative ROIC (-9.3%) and ROE (-26.9%). ROIC increased slightly on 1.5 pp from -10.9% to -9.3% in 2020. ROE decreased slightly on 0.58 pp from -26.3% to -26.9% in 2020. ROIC followed a growing trend at 6.2 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is -3.2x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in 2020. Debt jumped on 27.9% while cash jumped on 307%.
Q2 Holdings, Inc. has no short term refinancing risk: cash is higher than short term debt (5,957.1%).
Management team
Q2 Holdings, Inc.'s CEO Matthew P Flake "Matt" has spent 7 years with the company. The company's CFO David Mehok has spent 4 months years with the company.
Financial and operational results
FY ended 12/31/2020
Q2 Holdings, Inc. ($QTWO) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 150.2 | 194.0 | 241.1 | 315.5 | 402.8 | 27.7% |
| Gross Profit | 72.8 | 94.5 | 119.2 | 153.0 | 174.6 | 14.1% |
| SG&A | 68.2 | 78.3 | 93.1 | 120.7 | 143.3 | 18.7% |
| EBITDA | -23.5 | -12.0 | -15.0 | -36.2 | -39.8 | |
| EBIT | -35.7 | -26.9 | -31.9 | | | |
| Tax | 0.4 | -0.3 | -3.8 | | | |
| Net Income | -36.4 | -26.2 | -35.4 | -70.9 | -137.6 | |
| Stock Based Compensation | 12.6 | 20.9 | 29.5 | | | |
Balance Sheet
|
|---|
| Cash | 54.9 | 58.0 | 108.3 | 100.1 | 407.7 | 307.3% |
| Accounts Receivable | 12.2 | 13.2 | 19.7 | | | |
| Accounts Payable | 4.2 | 7.6 | 9.2 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 9.1 | 6.8 | -25.1% |
| Long Term Debt | 0.0 | 0.0 | 182.7 | 460.9 | 594.2 | 28.9% |
Cash flow
|
|---|
| Capex | 14.3 | 12.3 | 13.3 | 13.9 | 23.7 | 71.1% |
| Acquisitions | 0.4 | 3.8 | 130.7 | | | |
Ratios
|
|---|
| Revenue growth | 38.0% | 29.1% | 24.3% | 30.9% | 27.7% | |
| EBITDA growth | 30.7% | -49.1% | 25.8% | 140.3% | 10.1% | |
|
|---|
| Gross Margin | 48.5% | 48.7% | 49.5% | 48.5% | 43.4% | -5.1% |
| EBITDA Margin | -15.7% | -6.2% | -6.2% | -11.5% | -9.9% | 1.6% |
| EBIT Margin | -23.8% | -13.9% | -13.2% | | |
| SG&A, % of revenue | 45.4% | 40.4% | 38.6% | 38.3% | 35.6% | -2.7% |
| SBC, % of revenue | 8.4% | 10.8% | 12.3% | | |
| Net Income Margin | -24.2% | -13.5% | -14.7% | -22.5% | -34.2% | -11.7% |
| CAPEX, % of revenue | 9.6% | 6.3% | 5.5% | 4.4% | 5.9% | 1.5% |
|
|---|
| ROIC | -32.7% | -26.0% | -14.2% | -10.9% | -9.3% | 1.5% |
| ROE | -33.3% | -25.3% | -26.7% | -26.3% | -26.9% | -0.6% |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | | | |
| Employees | 742 | 742 | 1,190 | | | |
| Revenue/Employee, th. $ | 202 | 261 | 203 | | | |
Q2 Holdings, Inc. ($QTWO) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 92 | 98 | 104 | 109 | | 29.6% | 25.7% | 30.2% | 25.5% |
| EBITDA | -12 | -15 | -0 | -6 | | - | - | - | - |
| Net Income | -34 | -39 | -27 | -38 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 83 | 376 | 365 | 408 | | -24.8% | -35.4% | -39.3% | 307.3% |
| Short Term Debt | 9 | 9 | 8 | 7 | | 29.9% | 31.0% | 12.3% | -25.1% |
| Long Term Debt | 464 | 470 | 473 | 594 | | 117.9% | 6.6% | 5.3% | 28.9% |
Ratios
|
|---|
| Gross Margin | 42.5% | 45.5% | 44.7% | 40.8% | | -5.3% | -2.9% | -4.5% | -7.6% |
| EBITDA Margin | -13.0% | -15.4% | -0.4% | -5.4% | | 0.9% | -6.4% | 7.0% | 6.7% |
| Net Income Margin | -36.9% | -39.9% | -25.7% | -34.7% | | -9.8% | -17.6% | -2.4% | -16.7% |
Peers in Application Software
Below we provide Q2 Holdings, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.5% |
|---|
| Q2 Holdings, Inc. ($QTWO) | - | 29.1% | 24.3% | 30.9% | 27.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 64.2% | 64.6% | 66.0% | 68.4% | 70.6% |
|---|
| Q2 Holdings, Inc. ($QTWO) | 48.5% | 48.7% | 49.5% | 48.5% | 43.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -4.7% | -3.3% | -3.3% | 4.5% | 7.7% |
|---|
| Q2 Holdings, Inc. ($QTWO) | -15.7% | -6.2% | -6.2% | -11.5% | -9.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Q2 Holdings, Inc. ($QTWO) | 9.6% | 6.3% | 5.5% | 4.4% | 5.9% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.2% | -10.2% | -9.8% | -4.2% | -1.8% |
|---|
| Q2 Holdings, Inc. ($QTWO) | -32.7% | -26.0% | -14.2% | -10.9% | -9.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (54 companies) | -0.9x | -0.8x | -0.7x | 0.4x | 0.2x |
|---|
