Financial Analysis

Commitments and Contingencies The Company has non-cancelable contractual commitments for certain third-party products, stadium sponsorship costs, commitment fees associated with the Company's Revolving Credit Agreement, third-party public cloud service provider fees and other product costs. Several of these purchase commitments for third-party products contain both a contractual minimum obligation and a variable obligation based upon usage or other factors which can change on a monthly basis. The estimated amounts for usage and other factors are not included within the table below. Future minimum contractual commitments that have initial non-cancelable terms in excess of one year at June 30, 2026 were as follows: Contractual Commitments Year Ended December 31, 2026 (July 1 to December 31) $ 43,743 2027 91,741 2028 57,422 2029 499 2030 and thereafter Total commitments $ 193,405 Legal Proceedings From time to time, the Company is involved in legal proceedings arising both in and outside the ordinary course of its business. The Company is not presently a party to any legal proceedings that it believes, if determined adversely to the Company, would have a material adverse effect on the Company. Loss Contingencies In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency, such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount …

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"Debt Convertible Senior Notes due 2026 In the second quarter 2026, the Company repaid the $304.0 million aggregate remaining principal amount of its 0.75% convertible senior notes due June 2026, or the 2026 Notes, in cash prior to the maturity date of June 1, 2026. No conversions occurred prior to or at maturity. The following table summarizes our total outstanding borrowings: As of June 30, 2026 As of December 31, 2025 Principal $ $ 303,995 Unamortized debt issuance costs (627) Net carrying amount $ $ 303,368 Revolving Credit Agreement On July 29, 2024, the Company entered into a five-year secured Revolving Credit Agreement with Wells Fargo Bank, National Association, Wells Fargo Securities, LLC and Texas Capital Bank. The Revolving Credit Agreement provides for a revolving line of credit of up to $125.0 million, which may be drawn upon as revolving loans, swingline loans or letter of credit issuances, with sublimits (i) in the case of swingline loans, in an amount up to $20.0 million and (ii) in the case of letters of credit, in an amount up to $10.0 million. Borrowings under the Revolving Credit Agreement may, at the Company's election, bear interest quarterly at either (a) the base rate plus the applicable margin (""Base Rate Loans"") or (b) the adjusted term secured overnight financing rate (the ""SOFR""), plus the applicable margin (the ""Adjusted Term SOFR Loans""). The applicable margin ranges from 0.75% to 1.50% per annum for Base Rate Loans and 1.75% to 2.50% per a …

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The following table disaggregates the Company's revenue by major source: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Subscription $ 182,773 $ 158,422 $ 362,659 $ 312,711 Transactional 17,924 16,734 35,732 35,351 Services and Other 19,068 19,992 37,880 36,821 Total Revenues $ 219,765 $ 195,148 $ 436,271 $ 384,883

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Stock-Based Compensation In March 2014, the Company's board of directors approved the 2014 Equity Incentive Plan, or 2014 Plan. The 2014 Plan terminated on June 1, 2023, except with respect to the outstanding awards previously granted thereunder. As of June 1, 2023, there were 7,606 shares of common stock that were reserved for issuance pursuant to outstanding awards, assuming maximum performance for any performance-based awards, under the 2014 Plan. In May 2023, the Company's stockholders approved the 2023 Equity Incentive Plan, or 2023 Plan, with an effective date of June 1, 2023, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards may be granted to employees, consultants and directors. At time of approval, up to 14,045 shares of common stock were reserved for issuance under the 2023 Plan, all of which consisted of shares previously reserved for issuance under the 2014 Plan and any shares that would otherwise be returned to the 2014 Plan as a result of the forfeiture, repurchase or termination of awards issued under that plan. The 2023 Plan is a successor to and continuation of the Company's 2014 Plan. As of June 30, 2026, 3,859 shares remain authorized and available for future issuance under the 2023 Plan, assuming attainment of maximum performance for any market stock units or performance stock units. In March 2014, the Company adopted its Employee Stock Pur …

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Fair Value Measurements The carrying values of the Company's financial assets not measured at fair value on a recurring basis, principally accounts receivable, restricted cash and accounts payable, approximated their fair values due to the short period of time to maturity or repayment. Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair value measurements defines a three-level valuation hierarchy for disclosures as follows: Level IUnadjusted quoted prices in active markets for identical assets or liabilities; Level IIInputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and Level IIIUnobservable inputs that are supported by little or no market activity, which requires the Company to develop its own assumptions. The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following table details the fair value h …

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Goodwill and Intangible Assets The carrying amount of goodwill was $512.9 million at both June 30, 2026 and December 31, 2025. Goodwill represents the excess purchase price over the fair value of net assets acquired. The annual impairment test was performed as of October 31, 2025. No impairment of goodwill was identified during 2025, nor has any impairment of goodwill been recorded to date. Intangible assets at June 30, 2026 and December 31, 2025 were as follows: As of June 30, 2026 As of December 31, 2025 Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount Acquired technology $ 117,737 $ (110,177) $ 7,560 $ 117,737 $ (101,481) $ 16,256 Capitalized software development costs 115,408 (49,522) 65,886 103,884 (41,763) 62,121 $ 233,145 $ (159,699) $ 73,446 $ 221,621 $ (143,244) $ 78,377 The Company recorded intangible assets from various prior business combinations as well as capitalized software development costs. Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from five to seven years. During the three months ended June 30, 2026 and 2025, the Company capitalized software development costs of $7.5 million and $6.1 million, respectively, and $14.4 million and $11.6 million for the six months ended June 30, 2026 and 2025, respectively. Amortization expense included in cost of revenues on the condensed consolidated statements of comprehensive income was $9.8 milli …

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Income Taxes In accordance with applicable accounting guidance, the income tax expense for the six months ended June 30, 2026 is based on the estimated annual effective tax rate for fiscal year 2026. The Company's provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items, valuation allowances, and any applicable income tax credits. The Company's provision for income taxes reflected an effective tax rate of approximately 5.9% and 12.8% for the three months ended June 30, 2026 and 2025, respectively, and 8.1% and 11.8% for the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2026 and 2025, the Company's effective tax rate was lower than the U.S. federal statutory rate primarily due to its valuation allowance offsetting the benefits of losses. The Company's income tax expenses and benefits consist of federal, state and foreign current and deferred income tax expense from global operations. To date, the Company has provided a valuation allowance against most of its deferred tax assets as it believes the objective and verifiable evidence of its historical pretax net losses outweighs any positive evidence of its forecasted future results. The Company will continue to monitor the positive and negative evidence, and it will adjust the valuation allowance as sufficient objective positive evidence, …

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Leases The Company leases office space under non-cancellable operating leases for its corporate headquarters in Austin, Texas, in two adjacent buildings under separate lease agreements. Pursuant to the first agreement, the Company leases office space with an initial term that expires on April 30, 2028, with the option to extend the lease for an additional ten-year term. The Company is not reasonably certain to exercise the renewal under this agreement, therefore no amounts related to this option are recognized as part of lease liabilities or right of use assets. Pursuant to the second agreement, the Company leases office space with lease terms of approximately ten years, with an option to extend the lease on the second building from five to ten years. The Company is reasonably certain to exercise this renewal under this agreement, therefore amounts related to this option are recognized as part of lease liabilities and right of use assets. The Company also leases office space in other U.S. cities located in Nebraska, Iowa and North Carolina. Internationally, the Company leases offices in India and Australia, and from time to time, employees may work from flexible office spaces in the U.S. and internationally. During the three months ended June 30, 2026, the Company recorded $2.7 million in lease liabilities related to the commencement of a U.S. based office lease agreement. The Company recognized a corresponding right-of-use asset of $2.1 million, net of $0.6 million in tenant …

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"In September 2025, the Financial Accounting Standards Board, or FASB, issued ASU No. 2025-06, ""IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software."" The amendments are intended to reduce diversity in practice and provide clearer criteria for determining which implementation and development costs should be capitalized versus expensed. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Entities may apply a prospective transition approach, a modified transition approach, or a retrospective transition approach. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU No. 2025-05, ""Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets"" which provides targeted improvements to the guidance for measuring expected credit losses. The amendments are intended to enhance consistency in application and clarify the treatment of certain financial assets within the scope of Topic 326. The ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods, on a prospective basis. The Company adopted the new guidance effective January 1, 2026 on a prospective basis a …

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Revenues Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when the Company's solutions are implemented and made available to its customers. The promised consideration may include fixed amounts, variable amounts or both. Revenues are recognized net of sales credits and allowances. Disaggregation of Revenue Revenue-generating activities are directly related to the sale, implementation and support of the Company's solutions within a single operating segment. The Company derives the majority of its revenues from subscription fees for the use of its hosted solutions, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to its solutions and certain third-party related pass-through fees. The following table disaggregates the Company's revenue by major source: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Subscription $ 182,773 $ 158,422 $ 362,659 $ 312,711 Transactional 17,924 16,734 35,732 35,351 Services and Other 19,068 19,992 37,880 36,821 Total Revenues $ 219,765 $ 195,148 $ 436,271 $ 384,883 Deferred Revenues Deferred revenue primarily consists of payments received and amounts billed in advance for subscription a …

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Segments and Geographic Information All revenue-generating activities are directly related to the sale, implementation and support of the Company's solutions in a single operating segment. The Company is a leading provider of digital solutions to financial institutions, FinTechs and Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies. The Company derives the majority of its revenues from subscription fees for the use of its hosted solutions, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to its solutions and certain third-party related pass-through fees. Additionally, see Note 3 - Revenues for additional information about disaggregated revenue. The Company's chief operating decision maker, or CODM, is the Chief Executive Officer, and the financial information reviewed by the CODM is presented on a consolidated basis for the single operating segment for purposes of allocating resources, evaluating financial performance and monitoring budget versus actual results based on net income that is also reported on the condensed consolidated statements of comprehensive income. The significant expenses within net income on which the CODM relies include those that are reported on the condensed consolidated statements of comprehensive income. The measure of the Company's single operating segment assets is reported on the condensed consolidated bala …

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"Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation These interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and Securities and Exchange Commission, or SEC, requirements for interim financial statements. The interim unaudited condensed consolidated financial statements include the accounts of Q2 Holdings, Inc. and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the Company's opinion, the interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation. Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2025, which are included in the Company's Annual Report on Form 10-K, or Form 10-K, file …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Repurchase Program In October 2025, the Company's Board of Directors authorized a share repurchase program, or the Repurchase Program, that authorizes the Company to repurchase up to $150.0 million of its common stock. The Repurchase Program permits shares of common stock to be repurchased from time to time at management's discretion, through open market purchases or privately negotiated transactions, including accelerated share repurchase transactions, block trades or pursuant to Rule 10b5-1 trading plans. The timing and number of shares of common stock repurchased will depend on a variety of factors, including but not limited to the market price of our common stock, general business and market conditions, alternative investment opportunities and funding considerations. The Repurchase Program does not obligate the Company to repurchase any specific number or dollar amount of shares and has no expiration date. The Repurchase Program may be modified, suspended or terminated by the Company's Board of Directors at any time. During the three months ended June 30, 2026, the Company repurchased 502 shares for $22.9 million. During the six months ended June 30, 2026, the Company repurchased 2,267 shares for $120.1 million. All shares of common stock that were repurchased were retired. As of June 30, 2026, $24.9 million remained available for future stock repurchases.

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Subsequent Events Repurchase Program In July 2026, the Company's Board of Directors authorized up to an additional $350.0 million of repurchases of its shares of common stock, with repurchases permitted from time to time at management's discretion, through open market purchases or privately negotiated transactions, including accelerated share repurchase transactions, block trades or pursuant to Rule 10b5-1 trading plans. The timing and number of shares of common stock repurchased will depend on a variety of factors, including but not limited to the market price of the Company's common stock, general business and market conditions, alternative investment opportunities and funding considerations. The Company is not obligated to repurchase any specific number or dollar amount of shares and the authorization has no expiration date. The authorization may be modified, suspended or terminated by the Company's Board of Directors at any time.

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