Q2 (QTWO) investor relations material

Competitive positioning and product differentiation

• Single platform approach enhances user experience, operating efficiency, and customer support, leveraging AI and deep domain expertise in digital banking and fraud prevention.

• Win rates remain strong, especially in tier one deals, with average selling prices rising due to larger deals and broader product adoption.

• Expansion into fraud solutions is gaining momentum, with AI-driven products addressing continuous, cross-channel threats and delivering measurable value to financial institutions.

• Integration with over 1,000 providers and regulatory expertise create significant barriers to entry for competitors, especially as AI adoption accelerates.

• Cross-sell has always been a core strategy, now amplified by a growing base of large institutions and a focus on platform consolidation.

AI strategy and monetization

• AI is central to future growth, with new products like Q2 Code and fraud solutions in early adoption, using hybrid pricing models combining subscription and usage-based fees.

• Early feedback on AI product pricing is positive, with fraud solutions showing clear value and scalable pricing models expected by year-end.

• AI is also being used to drive internal efficiencies in delivery, support, and compliance, leveraging regulatory experience as a competitive advantage.

• Customers are extending contract durations, reflecting trust in the platform and a desire to partner on AI-driven innovation.

• The company is seen as a leader in AI adoption, with a track record of first-to-market innovation and strong customer relationships.

Financial outlook and growth drivers

• 2026 revenue guidance raised to $875M–$882M, with at least 14% subscription revenue growth and 27% EBITDA margins; 2025 outlook includes 12.5%–13% subscription growth and 150–200 bps margin expansion.

• Growth is increasingly driven by expansion within existing customers, cross-sell, and new product adoption, with churn trending below plan and win rates above 50%.

• M&A activity is a tailwind, with high survival rates in customer transactions and upside potential, though timing and impact vary by deal type.

• Gross margins improved to 62% post-cloud migration, with a long-term target of 65%+ by 2030, supported by AWS optimization and AI-driven efficiencies.

• Top upside levers include accelerated AI monetization, higher attach rates for adjacent products, and continued cost efficiencies.