Q2 Holdings Inc 2026 Q3 Earnings Call

Good afternoon, everyone, and thank you for joining us today. With me on the call are Matt Flake, our CEO, and Jonathan Price, our CFO. This call contains forward-looking statements that are subject to significant risks and uncertainties, including, among other things, statements with respect to our expectations for the future operating and financial performance of Q2 Holdings and for the financial services industry. Actual results may differ materially from those contemplated by these forward-looking statements, and we give no assurance that such expectations or any of our forward-looking statements will prove to be correct.

Important factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in our periodic reports filed with the SEC, copies of which may be found on the Investor Relations section of our website, including our quarterly report on Form 10-Q for the third quarter of 2026 and the press release distributed this afternoon and filed in our Form 8-K with the SEC regarding the financial results we will discuss today. Forward-looking statements that we make on this call are based on assumptions only as of the date discussed. Investors should not assume that these statements will remain operative at a later time, and we undertake no obligation to update any such forward-looking statements discussed in this call. Also, unless otherwise stated, all financial measures discussed on this call other than revenue will be on a non-GAAP basis.

A discussion of why we use non-GAAP financial measures and a reconciliation of the non-GAAP measures to the most comparable GAAP measures is included in our press release, which is available on the Investor Relations section of our website and in our Form 8-K filed today with the SEC. We have also published additional materials related to today's results on our Investor Relations website. Let me now turn the call over to Matt.

Thanks, Josh, and good afternoon, everyone. Thank you for joining us today. Before I turn to the quarter, I want to share an exciting leadership announcement we made this afternoon. We have appointed Jonathan Price, our Chief Financial Officer, as Co-Chief Executive Officer. Jonathan will lead alongside me, and I will continue to serve as President and Chairman of the Board. Jonathan will also be joining our Board of Directors. He has been a driving force behind our strategy and performance for nearly a decade, and this structure reflects the Board's focus on long-term continuity as we continue to scale. Jonathan will continue to serve as our Chief Financial Officer while we conduct a search for his successor. Turning to our performance. I'll start by sharing our third quarter results and highlights from across the business.

I'll then hand the call over to Jonathan to discuss our financial performance in more detail and provide our updated outlook. We delivered another quarter of strong financial performance, generating revenue of $225.8 million, representing 12% year-over-year growth. We also generated adjusted EBITDA of $67.8 million, or 30% of revenue, and free cash flow of $55 million. These results reflect our consistent execution against our profitable growth strategy, while we continue to invest in the products and customer experience that support our long-term opportunity. On the sales front, we had a solid bookings quarter led by digital banking and highlighted by 7 total tier 1 and enterprise wins, complemented by meaningful activity in tier 2. We signed both net new and expansion deals with contributions from digital banking, risk and fraud, and Relationship Pricing.

Credit unions were a notable part of our digital banking success, including 2 of our most significant wins from the quarter. The first was an approximately $3 billion credit union that selected our digital banking platform. This tier 2 win was our largest deal of the quarter in terms of contracted recurring revenue and a good reminder that our opportunity to win meaningful business extends well beyond the tier 1 and enterprise segments. The second was an approximately $10 billion credit union that selected Q2's commercial digital banking platform as it builds a commercial banking business within the credit union, serving everything from small businesses to large commercial clients. In a competitive evaluation, they chose Q2 because they wanted a true commercial platform, not an extension of a retail tool. Capabilities like treasury fulfillment, direct ERP integration, and instant payments gave them confidence that we can enable their ambitions.

Their in-house development team was also drawn to the openness of our platform, including our SDK and Innovation Studio. Our wins this quarter underscore how important credit unions remain to our business, and we're committed to helping them compete and grow. Our digital banking experience across retail, small business, and commercial delivered on a single platform with an expanding set of AI and developer tools allows us to support credit unions as their needs become more complex. Our existing customer relationships also continue to create meaningful expansion opportunities across the portfolio. For example, a bank with more than $60 billion in assets that already uses our digital banking platform added multiple risk and fraud capabilities during the quarter. While much of that expansion was for our Centrix product line, it also included our AI-driven account takeover solution, User Activity Monitoring, which continued to see strong demand in the quarter.

Whether customers are adding new capabilities or growing through acquisition, the breadth of our portfolio gives us more ways to support them over time. That is one of the reasons we continue to view our existing customer base as an important source of long-term growth. Beyond our sales performance, we recently hosted our third annual Dev Days, bringing together hundreds of attendees from customers, partners, and developers who build on the Q2 platform. As a reminder, our annual client conference, CONNECT, is where we showcase production-ready capabilities and customer success stories. Dev Days is where we work with our developer community to explore the next frontier of the platform. It is an important opportunity to understand our customers' challenges and help shape the next wave of innovation together. AI was again at the center of this year's discussions.

Our AI work remains focused on three practical priorities: helping protect the institution, helping bankers operate more efficiently, and helping customers and partners build faster. While we covered all three at Dev Days, our new product previews focused on expanded capabilities for Q2 Code and Q2 Assistant in two key areas. The first is helping customers and partners move from concept to execution faster within the Q2 platform. For many financial institutions, the challenge is not a shortage of good ideas. It is having the resources to turn those ideas into something their account holders can use. Writing code is only one part of that process. At Dev Days, we shared our vision for expanding Q2 Code beyond simple code generation and into all aspects of the software development life cycle, from planning and testing to deployment.

The goal is to reduce routine development and operational work while building in Q2's platform knowledge and best practices. The outcome is that small teams can spend more time building the experiences that differentiate their institutions and less time on the work required to get those experiences into production. The second area we covered is evolving from simple information retrieval to helping complete work for FI employees. Today, resolving a customer service request can require an FI employee to move between systems, look up information, and work through a series of manual steps. At Dev Days, we shared new capabilities we are building for Q2 Assistant that will help employees complete multi-step customer service and back-office tasks. Our goal is to bring more of that work together with AI helping employees resolve issues more efficiently and spend more time serving their account holders.

These two examples demonstrate why we believe Q2 has such a central role in driving AI innovation for our customers. These tools are built on our architecture and data inside the workflows where both account holders and FI employees make banking happen. While some of this work is still early, the customer outcomes we are pursuing are straightforward. Faster development, less manual work, and a better experience for bankers and the people they serve. In addition to these new concepts, we continue to make progress with the AI offerings we have already introduced, including Q2 Code, Q2 Assistant, and User Activity Monitoring. During the quarter, we continued to sign customers into our early adopter programs, and we remain on pace to begin making these offerings generally available over the next 90 days.

For User Activity Monitoring, we signed nearly 20 financial institutions into our early adopter program, roughly twice what we expected. The feedback from Dev Days, combined with the engagement we are seeing from customers and partners in the early adopter phase of these three offerings, reinforces our confidence in the role Q2 can play as our customers navigate their AI journeys. Our platform connects the data, systems, and workflows our customers rely on every day. That gives us banking-specific context, an established way to deliver new capabilities, and long-term customer relationships built on trust. Our developer and partner ecosystem extends that opportunity, helping customers benefit from innovation both within Q2 and across the broader market. That combination is why we continue to believe AI innovation in financial services will flow through Q2 and not around us.

Overall, we are pleased with our third quarter performance and the progress we are making across the business. We had another solid bookings performance. We continue to see strong demand for and engagement with our AI and developer solutions. Looking ahead, our pipeline remains strong through the remainder of the year and into 2027. Our results and outlook give us confidence in our ability to continue executing against our long-term financial framework. As we execute against it, I couldn't ask for a better partner than Jonathan. He and I have built a tremendous partnership over the years, and I am thrilled to now lead Q2 alongside him as Co-CEO. With that, I will hand the call over to Jonathan to walk through our financial performance in more detail and discuss our increased full year 2026 guidance.