Q2 (QTWO) Q4 2024 earnings summary

Executive summary

• Q4 and full-year 2024 results exceeded guidance, with strong growth in non-GAAP revenue and adjusted EBITDA, driven by robust sales execution, record renewal activity, and the best bookings quarter in company history.

• Bookings performance was balanced between net new and expansion wins, with 25 Tier 1 and enterprise deals signed, and significant growth in Tier 2 and 3 digital banking deals.

• Innovation Studio bookings more than doubled year-over-year, cited as a key differentiator in over 90% of wins.

• Risk and fraud solutions experienced rapid growth, reflecting heightened customer focus on fraud mitigation.

• Positioned for continued value delivery to shareholders, customers, and employees in 2025 and beyond.

Financial highlights

• Q4 non-GAAP revenue was $183 million, up 13% year-over-year and 5% sequentially; full-year non-GAAP revenue reached $696.5 million, up 12%.

• Adjusted EBITDA for Q4 was $37.6 million (20.6%–21% margin), up 62% year-over-year; full-year adjusted EBITDA was $125.3 million (18% margin), up 63%.

• Gross margin for Q4 was 57.4%, up from 56% a year ago; full-year gross margin was 56%, up 150 basis points.

• Subscription revenue grew 16% for the year, representing 79–80% of total revenue.

• Free cash flow for the year was $107 million, with an 85%+ conversion rate of adjusted EBITDA.

Outlook and guidance

• Q1 2025 revenue guidance: $184–188 million; full-year 2025 revenue guidance: $772–779 million (11–12% growth).

• Q1 2025 adjusted EBITDA guidance: $36–39 million; full-year 2025 adjusted EBITDA: $165–170 million (21–22% margin).

• Updated three-year framework: average annual subscription revenue growth target raised to ~15%, 2026 outlook at ~13%.

• Average annual adjusted EBITDA margin expansion target increased to ~360 basis points; 2026 free cash flow conversion target raised to >85%.