A Digital Banking Solution for Regional and Community Financial Institutions

22 January 2019  |  TRADING IDEAS

Q2 Holdings is an American Fin Tech company focused on offering Software as a Service (SaaS) platform for regional and community financial institutions (RCFIs). Hank Seale is the Founder and Chairman of Q2 Holdings. He has experience both as a community banker and as an entrepreneur. Mr. Seale graduated from Texas Tech University, and started his career in The Bank of the Hills. After 7 years experienced as a loan payments teller, Mr. Seale founded Regency Voice Systems, a company that introduced voice banking to community banks. After that, in 1997, Mr. Seale went on to start Q UP Systems, a provider of technology to more than 700 community banks. Both of the two companies were successfully sold to other companies and Mr. Seale founded Q2 Holdings in 2005, which went to public in NYSE in 2014 under ticker QTWO.

Q2 Holdings is growing rapidly and reached revenue of $194 million by the end of 2017. Though the company remains unprofitable, it expects organic revenue growth to accelerate to 26% year-over-year in Q4 2018.

Revenue and Loss from Operation for Q2 Holdings (million USD)

Q2 Holdings offers a leading provider of secure, cloud-based digital banking solutions, such as deposit and money transfer system for RCFIs in the SaaS market. Besides mobile app templates, Q2 Holdings also provides unique service designs for each client through their API connection, Q2 Open. Q2 Holdings targets their clients in the niche market, RCFIs with no greater than $50 billion in assets. As the number of RCFIs is shrinking in recent years due to M&A’s, Q2 Holdings is serving 382 clients out of 11,420 RCFIs in USA by the end of 2017; approximately 3% of the market share. Recently, the company signed a top 50 credit union in the northeastern United States with more than $5 billion in assets as a retail customer.

While the number of RCFIs is decreasing, the number of account holders at Q2 Holdings platform is increasing. Q2 Holdings added over 1.4million account holders in 2017, bringing the number of registered users to over 10 million with total asset of $574 billion.

Q2 Holding is expanding their market to the lending business by acquiring a company called Cloud Lending in October 2018 for $105 million. It is believed this acquisition may expand Q2 Holdings' total addressable market (TAM) by over $2 billion.

Q2 Holdings provided guidance for the full-year 2018. The management forecasts revenue, excluding the acquisition of Cloud Lending, to $239.2 million, which would represent year-over-year growth of approximately 23%. The addition of Cloud Lending will increase the revenue guide for the full year to $241.2 million, which would represent year-over-year growth of 24%.

The original article was published by Stockclip, Inc. on 09/01/2019.

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