Q2.com<\/a>.\n<\/p>\nUse of Non-GAAP Measures<\/b><\/p>\n
\nQ2 uses the following non-GAAP financial measures: non-GAAP revenue; adjusted EBITDA; non-GAAP gross margin; non-GAAP gross profit; non-GAAP sales and marketing expense; non-GAAP research and development expense; non-GAAP general and administrative expense; non-GAAP operating expense; non-GAAP operating income (loss); non-GAAP net income; non-GAAP net income per share; and non-GAAP diluted weighted-average number of common shares outstanding. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that Q2 does not consider indicative of its core performance.\n<\/p>\n
\nIn the case of non-GAAP revenue, Q2 adjusts revenue to exclude the impact to deferred revenue from purchase accounting adjustments. In the case of adjusted EBITDA, Q2 adjusts net loss for such items as interest, taxes, depreciation and amortization, stock-based compensation, acquisition-related costs, unoccupied lease charges, partnership termination charges, loss on extinguishment of debt, and the impact to deferred revenue from purchase accounting. In the case of non-GAAP gross margin and non-GAAP gross profit, Q2 adjusts gross profit and gross margin for stock-based compensation amortization of acquired technology, acquisition-related costs and the impact to deferred revenue from purchase accounting. In the case of non-GAAP sales and marketing expense, non-GAAP research and development expense, and non-GAAP general and administrative expense, Q2 adjusts the corresponding GAAP expense to exclude stock-based compensation. Non-GAAP Operating Expense is calculated by taking the sum of non-GAAP sales and marketing expenses, non-GAAP research and development expense and non-GAAP general and administrative expense. In the case of non-GAAP operating income (loss), non-GAAP net income (loss), and non-GAAP net income (loss) per share, Q2 adjusts operating loss and net loss, respectively, for stock-based compensation, acquisition-related costs, amortization of acquired technology, amortization of acquired intangibles, unoccupied lease charges, partnership termination charges, and the impact to deferred revenue from purchase accounting, and with respect to non-GAAP net income, amortization of debt discount and issuance costs and loss on extinguishment of debt. In the case of non-GAAP diluted weighted-average number of common shares outstanding, Q2 adjusts GAAP diluted weighted-average number of common shares outstanding by the weighted-average effect of potentially dilutive shares which include (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense and (ii) convertible senior notes outstanding and related warrants including the anti-dilutive impact of the Company\u2019s note hedge and capped call agreements on convertible senior notes outstanding.\n<\/p>\n
\nThere are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income (loss). As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP. A reconciliation to the closest GAAP measures of these non-GAAP measures is contained in tabular form on the attached unaudited condensed consolidated financial statements.\n<\/p>\n
\nQ2\u2019s management uses these non-GAAP measures as measures of operating performance; to prepare Q2\u2019s annual operating budget; to allocate resources to enhance the financial performance of Q2\u2019s business; to evaluate the effectiveness of Q2\u2019s business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of Q2\u2019s results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with our board of directors concerning Q2\u2019s financial performance.\n<\/p>\n
Forward-looking Statements <\/b><\/p>\n
\nThis press release contains forward-looking statements, including statements about: the ability of Q2 Innovation Studio to allow our digital banking customers to bring innovation to their customers faster and differentiate their offerings; the state of our pipeline and resulting optimism in deal activity in the back half of the year; our positive financial results and the ability they afford us to continue making strategic investments in opportunities that we believe will deliver long-term value creation; and, Q2\u2019s quarterly and annual financial guidance. The forward-looking statements contained in this press release are based upon Q2\u2019s historical performance and its current plans, estimates, and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include the adverse impacts of the COVID-19 pandemic on Q2\u2019s business operations and on global economic and financial markets, including on Q2\u2019s customers, partners and suppliers and employees and business, as well as risks related to: (a) the risk of increased competition in its existing markets and as it enters new sections of the market with Tier 1 customers, new markets with Alt-FIs and fintechs and new products and services; (b) the risk that COVID-19, government actions or other factors continue to negatively impact or disrupt the markets for Q2\u2019s solutions and that the markets for Q2\u2019s solutions do not return to normal or grow as anticipated, in particular with respect to Tier 1 customers and Alt-FI and fintech customers; (c) the risk that Q2\u2019s increased focus on selling to larger Tier 1 customers may result in greater uncertainty and variability in Q2\u2019s business and sales results; (d) the risk that changes in Q2\u2019s market, business or sales organization negatively impact its ability to sell its products and services; (e) the challenges and costs associated with selling, implementing and supporting Q2\u2019s solutions, particularly for larger customers with more complex requirements and longer implementation processes, including risks related to the timing and predictability of sales of Q2\u2019s solutions and the impact that the timing of bookings may have on Q2\u2019s revenue and financial performance in a period or any future period, including that any declines in bookings growth may not impact Q2\u2019s revenue and financial performance until future periods; (f) the risk that errors, interruptions or delays in Q2\u2019s products or services or Web hosting negatively impacts Q2\u2019s business and sales; (g) risks associated with cyberattacks, data breaches and breaches of security measures within Q2\u2019s products, systems and infrastructure or the products, systems and infrastructure of third parties upon which Q2 relies and the resultant costs and liabilities and harm to Q2\u2019s business and reputation and its ability to sell its products and services; (h) the impact that a slowdown in the economy, financial markets and credit markets may have on Q2\u2019s customers and Q2\u2019s business sales cycles, prospects and customers\u2019 spending decisions and timing of implementation decisions, particularly in regions where a significant number of Q2\u2019s customers are concentrated; (i) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by customers and governmental authorities; (j) the risks inherent in technology and implementation partnerships that could cause harm to Q2\u2019s business; (k) the difficulties and costs Q2 may encounter with complex implementations of its solutions and the resulting impact on reputation and the timing of its revenue from any delayed implementations; (l) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (m) the risks associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth; (n) the risk that modifications or negotiations of contractual arrangements will be necessary during Q2\u2019s implementations of its solutions or the general risks associated with the complexity of Q2\u2019s customer arrangements; (o) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (p) the risks associated with anticipated higher operating expenses in 2021 and beyond; (q) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (r) the risks associated with further consolidation in the financial services industry; (s) risks associated with selling Q2 solutions internationally; and (t) the risk that Q2 debt repayment obligations may adversely affect its financial condition and cash flows from operations in the future and that Q2 may not be able to obtain capital when desired or needed on favorable terms.\n<\/p>\n
\nAdditional information relating to the uncertainty affecting the Q2 business is contained in Q2\u2019s filings with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Relations section of Q2\u2019s website at http:\/\/investors.Q2.com\/<\/a>. These forward-looking statements represent Q2\u2019s expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Q2 disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.\n<\/p>\n
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