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Banking software provider Q2 (NYSE:QTWO) reported Q1 CY2025 results exceeding the market’s revenue expectations , with sales up 14.6% year on year to $189.7 million. Guidance for next quarter’s revenue was better than expected at $193 million at the midpoint, 0.8% above analysts’ estimates. Its GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

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Q2 Holdings (QTWO) Q1 CY2025 Highlights:

• Revenue: $189.7 million vs analyst estimates of $186.6 million (14.6% year-on-year growth, 1.7% beat)

• EPS (GAAP): $0.07 vs analyst estimates of -$0.01 (significant beat)

• Adjusted Operating Income: $32.7 million vs analyst estimates of $29.96 million (17.2% margin, 9.1% beat)

• The company slightly lifted its revenue guidance for the full year to $779.5 million at the midpoint from $775.5 million

• EBITDA guidance for the full year is $172.5 million at the midpoint, above analyst estimates of $168.1 million

• Operating Margin: 1.2%, up from -8.6% in the same quarter last year

• Free Cash Flow Margin: 19.9%, similar to the previous quarter

• Market Capitalization: $4.94 billion

Company Overview

Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Q2 Holdings grew its sales at a 11.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.

This quarter, Q2 Holdings reported year-on-year revenue growth of 14.6%, and its $189.7 million of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 11.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 10.4% over the next 12 months, similar to its three-year rate. Despite the slowdown, this projection is above the sector average and implies the market is forecasting some success for its newer products and services.

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