Q2 (QTWO) investor relations material

Executive summary

• Achieved record Q2 2026 revenue of $219.8 million, up 13% year-over-year, with adjusted EBITDA of $62.8 million (28.6% margin) and GAAP net income rising to $29.9 million.

• Subscription ARR grew 15% year-over-year to $825.5 million, with strong demand for digital banking, risk, and AI-driven solutions, and eight Tier 1 and enterprise wins.

• Customer engagement at CONNECT 26 conference highlighted practical AI adoption and strong interest in new AI products.

• Net registered users reached 27.8 million as of June 30, 2026, and backlog increased to $2.8 billion, up 17% year-over-year.

• Announced an additional $350 million share repurchase authorization, bringing total capacity to $375 million.

Financial highlights

• Subscription revenue grew 15% year-over-year and 2% sequentially, now 83% of total revenue.

• Non-GAAP gross margin improved to 62.3%, up 480 bps year-over-year, and GAAP gross margin reached 59.2%.

• Adjusted EBITDA margin expanded to 28.6%, up from 23.5% year-over-year.

• Free cash flow for the first half of 2026 was $95.2 million, up from $79.5 million in the prior year.

• Ended the quarter debt-free after repaying $304 million in convertible notes; cash and investments totaled $106 million.

Outlook and guidance

• Raised full-year 2026 revenue guidance to $881M–$886M (11% growth), with adjusted EBITDA guidance of $244M–$248M (28% margin).

• FY 2026 outlook includes at least 14.5% subscription revenue growth and at least 62% gross margin.

• Q3 2026 revenue expected between $218.5M–$222.5M; adjusted EBITDA at $58.5M–$61.5M.

• FY 2030 framework targets ~65% non-GAAP gross margin and ~35% adjusted EBITDA margin.

• FY 2027 preliminary objectives include 12.5–13% subscription revenue growth and 150–200bps adjusted EBITDA margin expansion.