X <\/a>to stay up-to-date.<\/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; and non-GAAP operating income (loss). 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.<\/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 and other (income) expense, taxes, depreciation and amortization, stock-based compensation, transaction-related costs, lease and other restructuring charges, (gain) 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, transaction-related costs, lease and other restructuring charges 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), Q2 adjusts operating income (loss), for stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangibles, lease and other restructuring charges, and the impact to deferred revenue from purchase accounting.<\/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.<\/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.<\/p>\n
Forward-looking Statements<\/b><\/p>\n
\nThis press release contains forward-looking statements, including statements about: customer enthusiasm regarding our roadmap and the importance of technology in retaining and growing deposits; our ability to execute on our focus to grow with improved profitability; our continued bookings strength; the success of our cost initiatives; 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 risks related to: (a) uncertainties in the financial services industries, including as a result of recent bank failures, and the potential impacts on Q2\u2019s customers’ prospects and Q2\u2019s business sales cycles, Q2\u2019s prospects’ and customers’ spending decisions, including professional services which are more discretionary in nature, and the timing of customer implementation and purchasing decisions; (b) the risk of increased or new competition in Q2\u2019s existing markets and as Q2 enter new markets or new sections of existing markets, or as Q2 offer new solutions; (c) the risks associated with the development of Q2\u2019s solutions and changes to the market for Q2\u2019s solutions compared to Q2\u2019s expectations; (d) quarterly fluctuations in Q2\u2019s operating results relative to Q2\u2019s expectations and guidance and the accuracy of Q2\u2019s forecasts; (e) the risks associated with anticipated higher operating expenses in 2023 and beyond; (f) the impact that rising interest rates, inflation, an economic slowdown, or challenges in the financial services industry, financial markets and credit markets have had to date or in the future could have on account holder or end user, or End User, usage of Q2\u2019s solutions, including the promotion and adoption of Q2\u2019s Helix and payment solutions, and on Q2\u2019s customers’ prospects and Q2\u2019s business sales cycles, Q2\u2019s prospects’ and customers’ spending decisions, including professional services which are more discretionary in nature, and the timing of customer implementation and purchasing decisions; (g) the risks and increased costs associated with managing growth and the challenges associated with improving operations and hiring, retaining and motivating employees to support such growth, particularly in light of the macroeconomic impacts of the novel coronavirus disease, or COVID-19, including increased employee turnover, labor shortages, wage inflation and extreme competition for talent; (h) the risk that the residual impacts of the COVID-19 pandemic continue to or that any renewed efforts to limit its spread could negatively impact or disrupt the markets for Q2’s solutions and that the markets for Q2’s solutions do not return to normal or grow as anticipated; (i) the risks associated with Q2\u2019s transactional business which are typically driven by end-user behavior which can be influenced by external drivers outside of Q2\u2019s control; (j) the risks associated with effectively managing Q2\u2019s cost structure in light of the challenging macroeconomic environment, challenges in the financial services industry and from the effects of seasonal or other unexpected trends; (k) the risks associated with the general economic and geopolitical uncertainties, including the heightened risk of state-sponsored cyberattacks on financial services and other critical infrastructure, and continued or increased inflation partially driven by increased energy costs or other unpredictable economic impacts that have and may continue to negatively affect demand for Q2\u2019s solutions; (l) the risks associated with managing Q2\u2019s business in response to continued challenging macroeconomic conditions, challenges in the financial services industry and any anticipated or resulting recession; (m) the risks associated with accurately forecasting and managing the impacts of any macroeconomic downturn or challenges in the financial services industry on Q2\u2019s customers and their end users, including in particular the impacts of any downturn on financial technology companies, or FinTechs, or alternative finance companies, or Alt-FIs, and Q2\u2019s arrangements with them, which represent a newer market opportunity for us, a more complex revenue model for us and which may be more vulnerable to an economic downturn than Q2\u2019s financial institution customers; (n) 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; (o) the risk that errors, interruptions or delays in Q2\u2019s solutions or Web hosting negatively impacts Q2\u2019s business and sales; (p) the risks associated with cyberattacks, data and privacy 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 Q2\u2019s ability to sell Q2\u2019s solutions; (q) the difficulties and risks associated with developing and selling complex new solutions and enhancements with the technical and regulatory specifications and functionality required by Q2\u2019s customers and relevant governmental authorities; (r) regulatory risks, including risks related to evolving regulation of artificial intelligence, or AI, machine learning and the receipt, collection, storage, processing and transfer of data; (s) the risks associated with Q2\u2019s sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of Q2\u2019s sales cycle; (t) the risks inherent in third-party technology and implementation partnerships that could cause harm to Q2\u2019s business; (u) the risk that Q2 will not be able to maintain historical contract terms such as pricing and duration; (v) the general risks associated with the complexity of Q2\u2019s customer arrangements and Q2\u2019s solutions; (w) the risks associated with integrating acquired companies and successfully selling and maintaining their solutions; (x) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (y) the risks associated with further consolidation in the financial services industry; (z) the risks associated with selling Q2\u2019s solutions internationally and with the recent expansion of Q2\u2019s international operations; and (aa) the risk that Q2\u2019s debt repayment obligations may adversely affect Q2\u2019s 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.<\/p>\n
\nAdditional information relating to the uncertainty affecting the Q2 business is contained in Q2’s filings with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Relations section of Q2’s website at http:\/\/investors.Q2.com\/<\/a>. These forward-looking statements represent Q2’s 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.<\/p>\n
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