Q2 (QTWO) Q2 2025 earnings summary

Executive summary

• Revenue for Q2 2025 reached $195.1 million, up 13% year-over-year, driven by strong subscription growth, customer expansions, and six Tier 1 contract wins, including major U.S. banks.

• Adjusted EBITDA was $45.8 million, up 53% year-over-year, with a margin of 23.5%; GAAP net income was $11.8 million, reversing a net loss in Q2 2024.

• Free cash flow for Q2 was $42 million, with $79.5 million generated in the first half of 2025, reflecting robust operational execution and demand for digital banking solutions.

• Innovation Studio adoption surpassed 85% of digital banking customers, driving operational efficiencies, fraud reduction, and deposit growth.

• Customer conference highlighted digital transformation, fraud prevention, AI, and commercial innovation.

Financial highlights

• Total revenue for Q2 was $195.1 million, up 13% year-over-year and 3% sequentially, with subscription-based revenues growing 16% and now comprising 81% of total revenue.

• Adjusted EBITDA was $45.8 million, up from $29.9 million a year ago; non-GAAP gross margin was 57.5%, up from 55.7% in Q2 2024.

• Net income was $11.8 million, compared to a net loss of $13.1 million in Q2 2024; operating income was $9.8 million, up from a loss of $13.7 million.

• Cash, cash equivalents, and investments totaled $532 million at quarter end.

• Backlog increased to $2.4 billion, up 21% year-over-year.

Outlook and guidance

• Q3 2025 revenue guidance: $196–$200 million; full-year 2025 revenue guidance raised to $783–$788 million (12–13% year-over-year growth).

• Full-year adjusted EBITDA guidance raised to $177–$181 million (23% of revenue); Q3 adjusted EBITDA guidance: $44–$47 million.

• Full-year subscription revenue growth outlook increased to at least 16%; long-term targets include average annual subscription revenue growth of 15%.

• Free cash flow conversion outlook raised to 90% for 2025 and above 90% by 2026.

• Majority of enterprise and Tier 1 activity expected in the second half of 2025.