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Q2 Holdings Idea Proposal

Q2 Holdings Idea Proposal
 

Is Q2 Holdings meeting customer expectations and will it see meaningful organic and cross-selling success in 2016?

Report Available: March 16, 2016

 

Blueshift’s initial research shows QTWO’s cloud-based banking service continuing to grow at a rapid pace. In order to maintain this growth, QTWO must ensure high renewal rates. But QTWO’s average customer subscribes to only six to eight of the 35 plus SaaS offered solutions, making sales of additional services and expansion of existing accounts essential. Increasing competition and the continued consolidation of the banking industry may become a bigger challenge for QTWO and could slow growth.

 

Observations

  1. QTWO reported strong Q4 2015 results with total revenue of $30.4 million, an increase of 37% year to year. Full year 2015 revenue was $108.9 million, up 38% year to year. In addition to landing two Tier 1 banks in Q4 and a total of seven for the year, organic user growth and cross-selling within the existing customer base made a significant contribution to growth. Existing subscribers are expanding their use of the Q2 platform by adding additional services. QTWO’s 2015 revenue churn was only 3.5% compared to 4.8% in 2014 and beat the company’s goal of 5%. The low revenue churn and cross sales to existing accounts contributed to the 122% trailing 12-month revenue retention rate for 2015, matching the 2014 result.
  2. QTWO’s customer satisfaction level, high renewal rates, and expanded use of its product suite by existing customers is key to the company’s continued success. To meet these demands, QTWO increased its R&D spending 7% in Q4 and 88% year to year, while also acquiring Social Money during Q4 2014.
  3. QTWO faces significant competition. In Blueshift’s largely positive March 13, 2015 report, 13 different competitors were discussed, many with strong customer bases and broad product and service offerings of back office and consumer-facing digital solution.
  4. Another challenge for QTWO is the industry consolidation trend with one analyst predicting that 2016 could see a record number of mergers in the regional banking segment. Regional and small banks are the bread and butter for QTWO and mergers will reduce the total available market, potentially leading to higher churn rates if a QTWO subscriber is absorbed.

 

To determine if QTWO can maintain high renewal rates and expand within existing customers at meaningful levels, Blueshift will gather data and issue a market research report from independent sources in the following areas: Tier 1 banks, Tier 2/3 banks, and Industry specialists.

 

Companies: Q2 Holdings (QTWO), NCR Corporation (NCR), ACI Worldwide (ACIW), Bottomline Technologies (EPAY), Jack Henry and Associates (JKHY), Fiserv (FISV), Fidelity National Information Services (FIS), Wells Fargo (WFC), Bank of America (BAC)

 

Research Begins: Feb. 29, 2016