Q2 (QTWO) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue reached $189.7 million, up 15% year-over-year, with strong subscription growth and five Tier 1/Enterprise deals, including major renewals and expansions.

• Net income was $4.8 million, reversing a net loss of $13.8 million in Q1 2024, reflecting improved operating leverage.

• Subscription revenue grew 18% year-over-year, now representing 81% of total revenue.

• Registered Users reached 26.2 million as of March 31, 2025, up from 23.0 million a year earlier.

• The company continues to invest in R&D and customer support to drive innovation and growth.

Financial highlights

• Non-GAAP gross margin improved to 57.9% from 54.9% year-over-year; GAAP gross margin was 53.2%.

• Adjusted EBITDA was $40.7 million (21.5% margin), up from $25.2 million a year ago.

• Free cash flow for Q1 2025 was $37.8 million, up from $6.0 million in Q1 2024.

• Cash, cash equivalents, and investments totaled $486 million at quarter-end.

• Backlog (RPO) increased to $2.3 billion, up 20% year-over-year and 3% sequentially.

Outlook and guidance

• Q2 2025 revenue guidance: $191–$195 million; full-year 2025 revenue guidance: $776–$783 million (11–12% growth).

• Q2 adjusted EBITDA guidance: $41–$44 million; full-year adjusted EBITDA: $170–$175 million (22% margin).

• Full-year subscription revenue growth outlook increased to at least 15.5%.

• Long-term targets: ~15% average annual subscription revenue growth, ~360bps average annual adjusted EBITDA margin expansion, and >85% free cash flow conversion by 2026.

• The company believes its liquidity and access to capital are sufficient for at least the next twelve months.