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(Mark One)

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the fiscal year ended December 31, 2024.

 or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

(Exact name of Registrant as Specified in Its Charter)

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None     

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ☒     No   ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ☐     No   ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒     No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒     No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No ☒

Based on the closing price of the registrant's common stock on the last business day of the registrant's most recently completed second fiscal quarter, which was June 30, 2024, the aggregate market value of its shares held by non-affiliates on that date was approximately $3,622,032,451. Shares of common stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status was based on publicly filed documents and is not necessarily a conclusive determination for other purposes.

There were 60,727,986 shares of the registrant's common stock outstanding as of January 31, 2025.

Part III of this Annual Report on Form 10-K incorporates certain information by reference from the definitive proxy statement for the registrant's 2025 Annual Meeting of Stockholders to be filed within 120 days of the registrant's fiscal year ended December 31, 2024, or the Proxy Statement. Except with respect to information specifically incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.

 

 

•the risks associated with cyberattacks, financial transaction fraud, data and privacy breaches and breaches of security measures within our products, systems and infrastructure or the products, systems and infrastructure of third parties upon which we rely and the resultant costs and liabilities and harm to our business and reputation and our ability to sell our solutions;

•the impact of and our ability to respond to global economic uncertainties and challenges or changes in the financial services industry and credit markets, including as a result of mergers and acquisitions within the banking sector, inflationary pressures, elevated and fluctuating interest rates, instability in the financial services industry and any changes to or new financial regulations and their potential impacts on our prospects' and customers' operations, the timing of prospect and customer implementations and purchasing decisions, our business sales cycles and on account holder or end user, or End User, usage of our solutions;

•the risk of increased or new competition in our existing markets and as we enter new markets or new segments of existing markets, or as we offer new solutions;

•the risks associated with the development of our solutions, including artificial intelligence, or AI, based solutions, and changes to the market for our solutions compared to our expectations;

•quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts;

•the risks and increased costs associated with managing growth and global operations, including hiring, training, retaining and motivating employees to support such growth;

•the risks associated with our transactional business which are typically driven by End-User behavior and can be influenced by external drivers outside of our control;

•the risks associated with effectively managing our business and cost structure in an uncertain economic environment, including as a result of challenges in the financial services industry and the effects of seasonality and unexpected trends;

•the risks associated with geopolitical uncertainties or discord, including the heightened risk of state-sponsored cyberattacks or cyber fraud on financial services and other critical infrastructure;

•the risks associated with accurately forecasting and managing the impacts of any economic downturn or challenges in the financial services industry on our customers and their End Users, including in particular the impacts of any downturn on financial technology companies, or FinTechs, or alternative finance companies, or Alt-FIs, and our arrangements with them, which may provide more complex revenue arrangements for us and which may be more vulnerable to an economic downturn than our financial institution customers;

•the challenges and costs associated with selling, implementing and supporting our solutions, particularly for larger customers with more complex requirements and longer implementation processes, including risks related to the timing and predictability of sales of our solutions and the impact that the timing of bookings may have on our revenue and financial performance in a period;

•the risk that errors, interruptions or delays in our solutions or Web hosting negatively impacts our business and sales;

•the risks associated with the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers;

•the difficulties and risks associated with developing and selling complex new solutions and enhancements, including those using AI with the technical and regulatory specifications and functionality required by our customers and relevant governmental authorities;

•the risks associated with operating within and selling into a regulated industry, including risks related to evolving regulation of AI and machine learning, the receipt, collection, storage, processing and transfer of data and increased regulatory scrutiny on financial technology and related services, including specifically on banking-as-a-service, or BaaS, services;

•the risks associated with our sales and marketing capabilities, including partner relationships and the length, cost and unpredictability of our sales cycle;

•the risks inherent in third-party technology and implementation partnerships, including defects, failures or interruptions in third-party services or solutions, that could cause harm to our business;

•the risk that we will not be able to maintain historical contract terms such as pricing and duration;

•the general risks associated with the complexity of our customer arrangements and our solutions;

•the risks associated with integrating acquired companies and successfully selling and maintaining their solutions;

•litigation related to intellectual property and other matters and any related claims, negotiations and settlements;

•the risks associated with further consolidation in the financial services industry;

•the risks associated with selling our solutions internationally and with the continued expansion of our international operations;

•the risk that our debt repayment obligations may adversely affect our financial condition and that we may not be able to obtain capital when desired or needed on favorable terms; and

•such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, or the SEC, including the risk factors discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled "Risk Factors."

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this Annual Report on Form 10-K is filed with the SEC. You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Q2 is a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies. Our solutions transform the ways in which financial institutions and other financial services providers engage with account holders and end users, or End Users. Our solutions comprise a broad and deep portfolio of digital banking solutions, digital lending and relationship pricing solutions, Q2 Innovation Studio, and Helix. Q2 Innovation Studio leverages Q2's open technology platform to enable a partnership ecosystem, allowing the design, development, and distribution of innovative products, services, features, and integrations on Q2's digital banking platform. Helix serves as a cloud-native core and banking as a service, or BaaS, solution. We purpose-build our platforms and solutions to enable success for our customers and partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.

Founded over 20 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market acceptance of our solutions, strategic investments and acquisitions. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, small to medium businesses, or SMBs, and commercial segments. As of December 31, 2024, we had more than 1,200 financial institution customers using one or more of our solutions, including more than 40% of the top 100 U.S. Banks and more than 40% of the top 100 U.S. Credit Unions, based on total assets. As of December 31, 2024, we had 460 installed digital banking platform customers, and those customers had approximately 24.7 million account holders registered on our digital banking platform. During 2024, End Users logged into our digital banking platform over 4 billion times and executed over $3.3 trillion in financial transactions. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.

We believe this creates an expanded market opportunity for our business, which we have been thoughtfully evolving for several years. We have continuously invested in expanding and improving our digital banking platform since its introduction in 2005. Over the past several years, we have broadened our offerings through strategic investments and acquisitions to serve a wider range of needs for financial institutions, FinTechs and Alt-FIs. Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others. We believe our portfolio, which reflects years of strategic development and innovation, affords us a distinct competitive advantage across multiple market segments. As a result of our expanded offerings and market opportunity, we estimate our addressable market for our solutions to be approximately $20.0 billion.

Our solutions utilize a software-as-a-service, or SaaS, model designed to scale with our customers as they grow their business, add End Users and expand the breadth of digital services and solutions they offer. On average, Q2 digital banking platform customers have historically grown contracted revenue by approximately 45% within 36 months of implementation. Our SaaS model is also designed to reduce the cost and complexity of implementing, maintaining and enhancing the digital services and solutions our customers provide to their End Users.

Delivering advanced digital solutions in the complex and heavily regulated financial services industry requires significant resources, personnel and expertise. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers. We design and develop our solutions with an open platform approach intended to provide comprehensive integration among our solution offerings and our customers' internal and third-party systems. This integrated approach allows our customers to deliver unified and robust financial experiences across digital channels. Our solutions provide our customers the flexibility to configure their digital services in a manner that is consistent with each customer's specific offerings, workflows, processes and controls. Our solutions also allow our customers to personalize the digital experiences they deliver to their End Users by extending their individual services and brand requirements across digital channels. Our solutions are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.

We primarily sell our solutions through our direct sales organization and the related revenues are recognized over the terms of our customer agreements. The initial term of our digital banking platform agreements averages over five years. Our digital banking platform revenues generally increase as our customers buy more solutions from us and increase the number of End Users and companies utilizing our solutions and as those retail users and companies increase their number of transactions on our solutions. The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements. The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred. We have invested, and intend to continue to invest, to grow our business by adding delivery and support resources aligned with our growth, developing and acquiring new solutions, enhancing our existing solutions and technical infrastructure and expanding our sales and marketing activities.

We were incorporated in March 2005 in the state of Delaware under the name CBG Holdings, Inc. We changed our name to Q2 Holdings, Inc. in March 2013. We are headquartered in Austin, Texas, and our principal executive offices are located at 10355 Pecan Park Boulevard, Austin, Texas 78729. Our telephone number is (833) 444-3469.

The financial services industry is intensely competitive and undergoing rapid transformation, driven by technological advancements, changing consumer expectations, and the impact of FinTechs and Alt-FIs. This dynamic landscape is reshaping roles, partnerships, and business models within the sector.

The widespread adoption of smartphones, tablets, and other connected devices, coupled with innovative financial technologies, has spurred a surge in the number of diverse financial services providers and expanded digital offerings. This proliferation has fragmented the market while raising consumer expectations. Today, users across retail, SMB, and commercial sectors demand seamless financial experiences across all digital touchpoints. Financial institutions and other providers must adapt by offering comprehensive digital services across channels, improving operational efficiency, and enhancing customer acquisition, engagement, and retention.

Innovations driven by FinTechs have increased End-User demand and expectations for new, more engaging and meaningful digital financial experiences. FinTechs' agility and innovation are pressuring traditional financial institutions to evolve, leading financial institutions to increasingly incorporate FinTech solutions into their offerings and operations. However, FinTechs and other financial services providers face regulatory and technological challenges. They often rely on core banking functions provided by traditional institutions, such as holding insured deposits and transferring money. Banking charters and regulatory compliance require significant expertise and investment, incentivizing partnerships between FinTechs and established institutions. Financial institutions seek to integrate FinTech experiences, while FinTechs and Alt-FIs incorporate banking functionality. This convergence creates new interdependencies, requiring innovative technologies, partnerships, and business models to address the evolving needs and challenges within the financial services industry.

The risks of theft and fraud have always existed in banking and financial services. However, as the adoption, use, and breadth of digital financial services offerings has increased, fraud and theft in digital channels has grown substantially. The methods by which criminals seek to commit fraud are constantly changing, including the increasing use of AI to facilitate attacks, requiring financial services providers and their technology providers to continually modify their security protocols. In addition, safeguarding the funds and information of financial services providers and their End Users becomes increasingly complex as digital financial services grow and extend across new channels, devices, and services not previously contemplated. Successfully securing the digital financial services of financial institutions, FinTechs and other financial services providers requires experience, constant vigilance, and continuous investment to stay informed and guard against these ever-changing threats.

Financial services providers and their solutions are subject to extensive and complex regulations and oversight by federal, state and other regulatory authorities. These laws and regulations are constantly evolving and affect the conduct of financial services providers' operations and, as a result, the business of their technology providers. Compliance of digital financial solutions with these regulatory requirements depends on several factors, including functionality and design, the classification of the financial services provider and its services, and the way the financial services provider and its End Users use the solutions. To ensure compliance with these laws, technology providers and financial services providers may be required to implement operating policies and procedures to protect the privacy and security of their, the financial services providers' and their End Users' information, and to undergo periodic audits and examinations. Maintaining such regulatory compliance becomes increasingly complex as digital financial services grow and extend across new channels, devices, and services not previously contemplated.

The ubiquity of smartphones, tablets and other connected devices and the continued proliferation of digital solutions offered through open development platforms makes it increasingly difficult to provide a consistent, intuitive and personalized End-User experience and requires digital solutions to support new and rapidly changing mobile operating systems and device types. The technical and operational complexities of delivering integrated digital solutions across multiple operating systems, devices, channels, and complex functionality increase the difficulty of providing a consistent, intuitive and personalized End-User experience. Aging or increasingly complex solutions can create the following challenges for financial services providers:

•integrating applications and systems from multiple vendors may increase costs and time-to-market;

•managing relationships with multiple vendors can be time consuming and require a greater investment in business development and support resources;

•building, maintaining and upgrading regulatory-compliant solutions and infrastructure can be expensive and time-consuming and require special expertise that can be hard to find and retain;

•operating, supporting and upgrading systems from multiple vendors can be difficult, costly and less secure and limit the ability to provide a unified End-User experience or comprehensive view of End-User behavior;

•partnering between financial institutions and other financial services providers and innovating and delivering new solutions can be difficult and cost-prohibitive when integration with dated legacy infrastructure is required; and

•training End Users and internal personnel on the use of different point systems can be challenging, time-consuming and costly.

The use of multiple point solutions for digital financial services can require End Users to maintain different login credentials across digital channels and manage different systems. Additionally, the disjointed nature of the underlying workflows, data and terminology caused by the implementation of multiple solutions can lead to decreased End-User adoption, retention and satisfaction. End-Users' adoption, retention and satisfaction can also be adversely impacted by the dated End-User interfaces of older legacy systems.

We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005. We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets. We have also acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs.

Our financial institution customers span from RCFIs to global enterprise banks, demonstrating that our portfolio of solutions gives us access to the full spectrum of financial institutions. We market our relationship pricing, fraud detection, risk assessment and compliance solutions to all federally-insured financial institutions on a standalone basis, or in combination with our digital banking platform. We define RCFIs as federally-insured banks and credit unions with less than $100 billion in assets, which according to data compiled by BauerFinancial as of September 30, 2024, consisted of approximately 9,054 financial institutions with combined assets of $9.1 trillion, representing approximately 34% of the aggregate assets held by the 9,088 total federally-insured financial institutions. RCFIs remain critical to our mission of building strong and diverse communities by strengthening their financial institutions. RCFIs have historically sought to differentiate themselves by providing local, personalized banking services that are responsive to the changing needs and circumstances of their communities. Many RCFIs are locally owned and obtain deposits and make digital lending decisions on a local basis. RCFIs account for a large portion of small business loans, helping local businesses create jobs and drive economic growth in the communities they serve. RCFIs seek to develop strong, lasting relationships with their End Users and can serve as centers of commerce and influence in their communities.

The FinTech and Alt-FI markets consist of thousands of financial services providers seeking to provide End Users with new and innovative financial services, experiences and solutions. Our Q2 Innovation Studio offerings, which we market to financial institutions and FinTechs, allow our financial institution customers and other partners to integrate financial services to our digital banking platform, allowing financial institutions to quickly and efficiently incorporate the integrated solutions into their offerings and operations. We primarily market Helix to FinTechs and financial institutions wishing to incorporate banking products and services into their offerings. We also market our Symphonix lending platform, previously referred to as Cloud Lending, or CL, and discrete elements of our digital banking platform to FinTechs and Alt-FIs.

Based on our estimates of the number of target financial institutions for our digital banking solutions and our internal assumptions as to the number and types of digital accounts they serve, the prices for our solutions and the number of transactions processed, we believe that the market for our digital banking platform, including retail, SMB and commercial banking, regulatory and compliance, as well as account switching, risk and fraud, portfolio management solutions and Q2 Innovation Studio is approximately $13.0 billion. Based on our estimate of the number of target customers of digital lending and relationship pricing services and our internal assumptions as to the number of End Users they serve and the prices for our solutions, we believe that the market for our digital lending and relationship pricing solutions, including the borrower portal, origination, underwriting, servicing, collections, actionable insights, coaching, negotiation, relationship pricing and data-driven sales enablement modules, is approximately $4.5 billion. Based on our estimates of the number of target financial institutions and FinTechs for our Helix solutions and our internal assumptions as to the number of End Users they serve, the prices for our solutions and the number of transactions processed, we believe the market for our Helix solutions including open platform solutions and BaaS, is approximately $2.5 billion. In the aggregate, we believe that the worldwide market opportunity for our solutions is approximately $20.0 billion.

We are a leading provider of digital solutions that transform the ways in which financial institutions and other financial services providers engage with account holders and End Users. We offer our solutions to financial institutions, FinTechs and Alt-FIs wishing to incorporate banking into their customer engagement and servicing strategies. Our integrated, end-to-end collection of solutions and services are designed to enable End Users and customers to engage with and manage financial experiences anytime, anywhere, and from any device, across all devices. We purpose-build our platforms and solutions to enable success for our customers and partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.

Our portfolio of digital solutions includes the following key offerings:

•Digital Banking Platform: Our end-to-end digital banking platform supports our financial institution customers in their delivery of retail, SMB and commercial functionalities across digital channels through a single technology platform. Our open digital banking platform now spans onboarding, banking and a vast set of integrations to third-party financial services across the retail, SMB and commercial segments, and provides our financial institution customers with the tools, knowledge, and access necessary to: monitor and optimize End-User acquisition, engagement and retention; customize and extend the platform; and, improve operational efficiencies. In addition, we offer a suite of risk and fraud solutions designed to assist our customers in their effort to safeguard the financial service offerings against fraudulent activities. Our risk and fraud solutions include a streamlined dispute management solution, assisting customers with Regulation E compliance, and including optional fraud alerts functionality for enhanced security. Our risk and fraud solutions also include fraud monitoring and risk reporting capabilities, including real-time validation features to help mitigate fraud. Our risk and fraud solutions serve a critical function in assisting our customers with fraud detection and mitigation and underscore our commitment to delivering innovative technologies that prioritize security and integrity in financial operations. We offer some of the solutions included in our digital banking platform on a standalone basis to financial institutions as well as Alt-FIs and FinTechs.

•Q2 Innovation Studio: Our application program interface, or API, and software development kit, or SDK, based open technology platform allows our financial institution customers and other partners to develop unique extensions of and integrations to our digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users.

•Lending and Relationship Pricing: Our end-to-end digital lending and relationship pricing portfolio allows our financial institution, FinTech and Alt-FI customers to simplify the End-User experiences of borrowers, accelerate loan decisioning, and reduce operational inefficiencies through digitization and automation of the traditional loan application and underwriting process. Our digital lending and relationship pricing portfolio also provides commercial relationship managers with actionable data-driven insights into an individual commercial End User's entire portfolio, assessing the overall portfolio and individual relationships, highlighting potential concerns and identifying opportunities, and ultimately helping the relationship manager to more effectively price, negotiate and close both commercial loans and depository relationships.

•Helix: Our cloud-native, real-time core processing platform combines the services and functionality necessary for companies and financial institutions to incorporate unique banking services into their digital offerings. Our BaaS Helix solutions allow FinTech customers to easily and efficiently incorporate highly personalized financial experiences within their digital offerings without having to independently meet the stringent regulatory and technical requirements applicable to financial institutions and their banking services. As a core, Helix allows financial institutions to launch unique and personalized digital banking services.

Our solutions provide the following key benefits to our customers and their End Users:

•Enhanced and more frequent engagement with End Users: Our solutions provide our customers with a comprehensive view of End-User engagement and activity across devices and channels. The insights made possible by a comprehensive view enable an enhanced, personalized End-User experience, real-time risk and fraud assessment and other analytic features that improve the function and security of our solutions. The breadth of our solutions and quality of the End-User experience they provide enable our customers to increase the frequency and effectiveness of their interactions with End Users. We believe the frequency and ease of these interactions can strengthen the relationships between End Users and our customers and help our customers better serve their End Users through a more comprehensive understanding of their behavior and activities. In particular, we believe that engaging with commercial End Users involves unique challenges, and by enabling commercial relationship managers with actionable data-driven insights into commercial End-User relationships, they can better serve their commercial End Users and increase overall performance.

•Drive End-User loyalty: We believe our customers can drive End-User loyalty by increasing their level and quality of End-User engagement. Our customers can tailor our solutions by offering individually relevant functionality as well as branded, localized End-User experiences. Our digital banking platform provides our financial institution customers with a comprehensive view of operational and End-User activity across channels and devices allowing them to look for opportunities to improve End-User engagement and grow their End-User relationships with targeted offerings based on specific behavior. We believe this further strengthens End-User loyalty by enabling our customers to engage End Users through customized and End User-friendly digital experiences.

•Vast and flexible integrations: Our highly flexible set of integration tools enables the rapid integration of a breadth of third-party applications and data sources with our digital banking platform. These integration tools connect with a wide variety of third-party applications, allowing us to seamlessly integrate with our customers' internal and third-party systems and services. We currently maintain over 1,000 integrations to a broad variety of financial services technology partners.

•More effective marketing of products and services: Our customers' marketing of their new and existing products and services through our solutions can be frequent, timely, targeted and data-driven. The ease and availability of communications within digital channels also make it easier for End Users to find information about products and services. Our solutions also enable a simplified End-User experience, which can help improve sales of products and services.

•SaaS model: We developed our solutions to be cloud-based. Our customers generally subscribe and pay for their use of our solutions over time, and our solutions do not require our customers to install any significant technical infrastructure. We currently host a significant portion of our digital banking platform for our digital banking and Q2 Innovation Studio customers in our third-party data centers but are in the process of migrating the computing, storage and processing of our banking platform solutions from our third-party data centers to third-party public cloud service providers. Our digital lending, relationship pricing and Helix solutions are hosted entirely with industry leading third-party public cloud service providers. Our SaaS model can reduce the total cost of ownership of our customers by providing the development, implementation, integration, maintenance, monitoring and support of our cloud-based solutions on a subscription basis. Our solutions are designed to support the rapid addition of new services as well as the introduction of new devices and digital channels. As a result, our customers can easily scale the use of our solutions with their needs as they add End Users and expand the digital services and solutions they offer.

•Regulatory compliance: Our solutions leverage our deep domain expertise and the significant investments we have made in the design and development of our technology infrastructure to meet the stringent security and technical requirements of financial institutions and financial services providers. Customers who use our solutions can satisfy security and technical compliance obligations by relying on the security programs and regulatory certification of our technology infrastructure. By doing so, our customers can mitigate or eliminate the costs associated with building, maintaining and upgrading a compliant environment on their own.

•Security controls: We employ multi-layered controls to help secure our customers' and End Users' information. Each layer addresses specific areas of possible fraud or data vulnerability. Our customers can use transactional-based controls to seek to reduce fraudulent transactions by allowing them to adjust configurations such as transaction values, payment windows or account suspension. Our digital banking platform customers who leverage our behavioral analytics and fraud management products are able to identify and block suspected fraudulent activity in real-time at the application layer, based on machine-learning and behavioral analytics, and notify operations staff and End Users of suspect transactions prior to consummation of a transaction. This approach is designed to mitigate and more effectively manage the security risks in financial services and helps protect our customers' reputations. We also continue to invest in the resiliency and security of our platform and solutions.

•Intuitive design: We design and test the features and End-User experience of our solutions to be optimized for touch-based devices and then extend that design to other digital channels. This design process and our broad feature offerings enable our solutions to deliver a modern, unified End-User experience across digital channels.

•Delivery of robust digital financial services across multiple channels: Our solutions enable our customers to deliver robust and integrated digital financial services to their End Users who increasingly expect and appreciate the ability to manage their financial experiences anytime, anywhere and on any device. Through a single log-in and consistent workflow, End Users are able to seamlessly conduct consumer and commercial transactions across digital channels and devices.

We are highly committed to our mission of building stronger and more diverse communities by strengthening their financial institutions, and support our mission by focusing on designing, developing and acquiring new, innovative digital banking and other financial services solutions to meet changing End-User expectations. We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users:

•Our purpose-built digital banking platform is a leader in the digital banking market: We built our award-winning digital banking platform to address unique challenges that financial institutions face in providing digital banking services. Our digital banking platform reduces the inefficiencies of traditional point-to-point integration strategies and replaces multiple management consoles with a single unified view of the rules, rights and security involved with operating seamlessly across digital channels. Our digital banking solutions enable our financial institution customers to provide a compelling, unified End-User experience to consumer and commercial End Users using a single login anywhere, anytime and on any device. We believe our deep domain experience as a leading provider of digital banking solutions positions us well to provide new, innovative digital banking and other financial services solutions to address the evolving needs and challenges within the financial services industry.

•We have acquired and developed solutions to better serve our financial institution customers and a broader set of financial services providers including FinTechs and Alt-FIs: Our portfolio includes offerings such as digital lending and relationship pricing, Q2 Innovation Studio, Helix, account switching, risk and fraud, data-driven sales enablement, spending insights and portfolio management solutions. As the financial services landscape has evolved to become more digitized and open, we have strived to ensure our customers can offer a broader range of digital services to their End Users.

•Our open technology platform accelerates innovation and enables a new technology partnership ecosystem: We are leveraging the strength of our digital banking platform and broad customer base to open our platform and create opportunities for mutually beneficial partnerships among financial institutions and other financial services providers. To accomplish this, we have opened our digital banking platform via Q2 Innovation Studio, which makes it easy for financial institutions and other financial services providers to integrate additional functionality into our platform. Financial institutions can deploy their own development resources to supplement or customize their digital offerings and other digital solution providers can integrate their services with the Q2 digital banking platform. Financial institutions can then choose to incorporate these integrated services into their offerings, creating a new technology partnership ecosystem where financial institutions, FinTechs and other digital solution providers can cooperate, generating new revenue opportunities and enhancing End-User engagement.

•Helix serves the rapidly growing market of FinTechs incorporating banking into their digital offerings, and we believe it is well positioned to address the needs of financial institutions looking to drive digital and core transformations: For several years, we have been investing in our Helix offerings, and our Helix platform now supports numerous FinTech companies, serving over 16 million accounts. As consumer expectations evolve and business needs grow, financial institutions are seeking highly flexible and customizable platforms that allow them to build differentiated financial services solutions, looking to grow their business through innovative technical collaborations, and focusing on automation and scalability to minimize operational burden on their business. Our Helix solutions are unique in the BaaS market given their maturity and nature as a cloud-native core in a market of primarily middleware solutions. Helix's single source of truth, direct contracts and tight operational and compliance controls give it a competitive advantage in serving both banks looking to enter BaaS and FinTechs looking to partner with banks to offer financial solutions.

•We have a proven track record of providing digital solutions to financial services providers: We have a track record of successfully delivering technology for financial services providers. We have deep domain expertise in financial services and community banking, which we utilize to develop and deliver our solutions and services to our customers. We have significant experience and the technical infrastructure to deliver solutions that are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' and their End Users' data.

•Our sales model is tailored to our different markets: The financial institution market is well defined and allows us to effectively focus our go-to-market strategy for our sales and marketing efforts. Utilizing the deep industry experience of our management and sales teams, we are able to leverage our relationships with leaders and influencers at many of our financial institution customers as valuable sources of reference and promotion. We have also developed actionable insights into our sales and marketing performance, enabling us to be efficient with our go-to-market investments. The markets for emerging financial services providers are relatively new, broad and continually evolving. As a result, we leverage our network of technology partners and insights from our experience with financial institution customers to effectively pursue these markets.

•We can grow our customer relationships over time: Throughout the lifecycle of our customer relationships, we employ a structured strategy designed to inform, educate and enhance customer confidence and help our customers identify and implement additional solutions to acquire, engage and retain additional End Users.

•Our revenues are predictable: To date, a substantial majority of our revenues continues to result from sales of our digital banking platform. We generally recognize our revenues over the terms of our customer agreements. The initial term of our digital banking platform agreements averages over five years. Our long-term agreements and our high customer retention, as well as the growth over time in the number of End Users using our solutions, drive the recurring nature of our revenues and provide us with significant visibility into future revenues.

•Established financial stability: We generated cash flow from operations in recent years and expect to show continued improvement in cash flows from operations in the normal course of business over the long term. We believe our financial maturity is viewed as a strength by potential customers as they make their vendor selections, and we feel that our ability to generate cash flow from operations affords us with opportunities to invest in and pursue our growth strategy.

•Our award-winning culture drives innovation and customer success: We believe our award-winning, innovation-focused culture and the location of our operations facilitate recruiting and retaining top development, integration and design talent. We are headquartered in Austin, Texas, which is a vibrant city that continues to attract an increasing number of young professionals and has close ties to leading research institutions. In each of the past 14 years, the Austin American-Statesman recognized us as one of Austin's "Top Places to Work." We believe our mission, combined with our focus on delivering leading-edge digital solutions, enables us to attract and retain top talent.

We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users and to capitalize on the evolving needs and challenges within the financial services industry. To accomplish this goal, we are pursuing the following growth strategies:

•Further penetrate our large market opportunity: Financial institutions are increasingly adopting cloud-based digital banking solutions. With the ubiquity of mobile and tablet devices and resulting proliferation of mobile digital solutions provided through open developer platforms, End Users are increasingly engaging with financial experiences across a variety of digital channels. Over the past several years, in response to the increasing demand for innovative digital banking and other financial services, we have taken steps to expand our addressable market by acquiring and developing solutions that serve the needs of a broader, global set of financial services providers and their End Users. Through Q2 Innovation Studio, we have opened our digital banking platform, making it easy for financial institutions and other digital solution providers to integrate additional functionality to our platform. We believe that our expanded portfolio of solutions addresses a broader set of customer needs. We intend to further penetrate our large market opportunity and increase our number of financial institutions and other financial services providers using our broad range of digital solutions through acquiring and developing additional solutions, investments in our sales and marketing organization and related activities.

•Grow revenues by expanding our relationships with existing customers: We believe there is significant opportunity to expand our relationships with existing customers as they increase the number of End Users on the platform and by selling them additional solutions. Our broad portfolio of solutions gives us access to decision makers across our customers' organizations. Specifically, we sell distinct solutions targeted for purchase by roles such as head of risk, lending, finance, operations, branding and technology. The breadth of our portfolio of solutions and the duration of our typical initial digital banking platform arrangement provides us with the ability to better understand our customers' businesses, build trust with them and offer them new ways to acquire, engage and retain End Users. In addition, our financial institution customers grow their End User bases organically and through acquisitions of other financial institutions. Our revenues from existing customers continue to grow as they increase the number of End Users on our solutions and as the number of transactions these End Users perform on our solutions increases. Our investments in digital lending and relationship pricing, BaaS, account switching, risk and fraud, open platform solutions, data-driven sales enablement, spending insights and portfolio management, and other innovative solutions will help our customers expand their relationships with us by allowing them to more efficiently sell and market additional services and solutions to their End Users.

•Relentlessly innovate to expand our solutions offerings and enhance our platform: We believe our history of innovation distinguishes us in the market, and we intend to continue to invest in our software development efforts and introduce new solutions that are largely informed by and aligned with the business objectives of our existing and new customers. We have rapidly grown through a combination of broad market acceptance of our solutions and relentless innovation, investment and acquisitions. Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others. Additionally, our Q2 Innovation Studio leverages our open technology platform to enable a partnership ecosystem, allowing our financial institution customers and other partners to integrate financial services to our digital banking platform and quickly and efficiently incorporate the integrated solutions into their offerings and operations.

•Selectively pursue acquisitions and strategic investments: In addition to continuing to develop our solutions organically, we regularly evaluate strategic opportunities. We anticipate that we will continue to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and new markets.

We offer a comprehensive suite of over 60 product offerings and maintain more than 1,000 integrations. Our solutions are designed to meet the diverse needs of financial institutions, FinTechs, and Alt-FIs, enabling them to deliver unified and robust financial experiences across digital channels. We design and develop our solutions with a platform approach intended to provide comprehensive integration between our solution offerings and our customers' and partners' internal and third-party systems. This integrated approach allows our customers to deliver a unified and robust financial experience across digital channels.

Our key solution offerings include:

Our digital banking platform allows financial institutions to offer a comprehensive suite of retail, SMB and commercial digital banking services to their End Users through a single technology platform. Our open platform architecture, deep integration with other systems and the multi-tenant aspects of our infrastructure, enable us to develop digital banking solutions that allow our customers to harness the power of the information within their other systems to gain greater insights and to improve the overall security of their End Users and themselves. To date, a substantial majority of our revenues continue to result from sales of our digital banking platform.

Our digital banking platform provides our customers with the following benefits:

•single-login and multi-layered security across channels and devices;

•comprehensive suite of features and functionality catering to the diverse requirements of retail, SMB, and commercial banking;

•deep integration with internal and third-party systems;

•unified End-User experience with consistent workflows and data;

•rapid configurability and development of new features;

•comprehensive End-User activity tracking and reporting; and

•flexible branding and personalization options.

Additionally, we offer the following products that enhance and complement our digital banking platform:

•risk management suite for transaction monitoring and fraud management;

•advanced security analytics using behavioral analysis and machine learning;

•remote deposit capture and mobile check-processing solutions;

•data-driven marketing tools and user analysis features;

•personal financial management and goal-setting tools;

•card management and direct deposit switching functionality; and

•spending insight solutions for SMBs to streamline expense management and provide financial oversight.

These features enable our customers to deliver a robust and personalized digital banking experience while improving operational efficiency and driving growth.

Our comprehensive risk and fraud solutions are designed to enhance the security and integrity of digital banking operations. These solutions are integrated into our digital banking platform and can also be offered as standalone products, providing flexibility to meet diverse customer needs. Our risk and fraud solutions help financial institutions proactively identify and mitigate potential fraud risks, enhance regulatory compliance, and improve operational efficiency. Key offerings include:

•real-time security analytics and behavioral analysis;

•event-driven validation for non-transactional fraud management;

•electronic transaction dispute management;

•ACH file monitoring and risk reporting; and

•check and ACH positive pay systems for commercial users.

These solutions leverage advanced technologies such as machine learning and real-time analytics to provide robust protection. By integrating or independently implementing these solutions, our customers can:

•strengthen their overall security posture;

•streamline fraud management processes;

•enhance End User trust and satisfaction; and

•adapt to evolving fraud threats and regulatory requirements.

Our risk and fraud solutions complement our digital banking platform while offering the flexibility to be deployed separately, allowing financial institutions to tailor their security approach to their specific needs and existing infrastructure.

Our Q2 Innovation Studio is a comprehensive technology suite that empowers financial institutions to innovate rapidly and efficiently. It consists of four key components designed to facilitate the design, development and distribution of innovative products, services, and features through our digital banking platform:

•Customer Program: Provide tools for customer feature development and open API integrations;

•Partner Developer Program: Enables collaboration with certified development partners;

•Partner Accelerator: Offers pre-integrated FinTech solutions selected by the financial institution; and

•Q2 Partner Marketplace: Offers pre-integrated FinTech solutions selected by the End Users.

This ecosystem can reduce time-to-market for new offerings, enhance customer engagement, and facilitate collaboration between financial institutions and FinTechs. It enables our clients to customize their digital banking experience, differentiate their brand, and stay competitive in the evolving financial services landscape.

Our digital lending and relationship pricing solutions provide comprehensive tools for managing commercial lending deposits and fee-based transactions. These cloud-based, data-driven solutions cater to financial institutions, FinTechs and Alt-FIs, offering advanced capabilities to streamline lending processes and optimize pricing strategies, including:

•advanced loan pricing and negotiation tools;

•treasury pricing and fee-based service structuring;

•portfolio management including analysis, performance, reporting and trend identification;

•AI assistance for relationship managers;

•end-to-end loan origination and servicing;

•support for diverse loan types and asset classes; and

•automation of lending activities.

By leveraging these solutions, our customers can enhance their lending operations, improve decision-making, and deliver more competitive and tailored financial products to their clients.

Our BaaS solution allows FinTechs and financial institutions to incorporate banking services into their digital offerings. Helix empowers our customers to expand their service offerings, enter new markets, and deliver innovative financial products while maintaining regulatory compliance and operational efficiency. Helix provides:

•a cloud-native, real-time core processing platform;

•integrated issuer processing and identity verification; and

•access to regulated banking services through Q2's financial institution partners.

These comprehensive solutions are designed to help our customers transform their digital operations, differentiate their brands, and enhance user acquisition, engagement, and retention while improving overall efficiency and profitability in the rapidly evolving financial services landscape.

We seek to deepen and grow our customer relationships by providing consistent, high-quality implementation services, professional services, advisory services and customer support, which we believe drive higher customer retention and incremental sales opportunities within our existing customer base. We structure our implementation teams to effectively collaborate with the management and technology teams of our customers ensuring the rapid deployment and effective utilization of our solutions. We offer customized professional services to assist our customers with their efforts to extend our offerings and differentiate their digital brands. We engage with select established customers for more tailored, premium professional services, or Integrated Services, resulting in a deeper and ongoing level of engagement with them. Under certain circumstances for our Symphonix lending solutions, we also partner with third-party professional system integrators to support our customers in the installation and configuration process. These implementation teams develop and execute a coordinated implementation plan for our customers centered around five standard phases of IT transformation projects: initiation, configuration, application testing, limited production and production.

Our customer support personnel serve the comprehensive support-related needs of our customers. Due to the highly-regulated and complex nature of the financial services industry, our implementation and customer support teams, including any third-party professional system integrators with which we partner, must be knowledgeable about our solutions and the regulatory environment in which our customers are required to operate.

In addition to our Q2 Innovation Studio offerings, our customers are reliant on an ever-growing ecosystem of third-party digital solutions to complement their financial services offerings, and we provide a broad range of tools to help our customers efficiently bring them to market. The flexible nature of our solutions, along with our proprietary, highly flexible set of integration tools, allows our customers, third parties, and Q2 to build rapid integrations with our customers' internal and third-party systems to support End-User activities and customer processes. These integration tools connect with a wide variety of third-party applications, allowing us to seamlessly integrate with our customers' internal and third-party systems such as account services, payments and imaging. Our ability to integrate with these systems enables our customers to offer a comprehensive set of consumer and commercial functionality to their End Users which we believe increases the value of the Q2 platform to our customers.

Our sales and marketing organization is responsible for growing our customer base and maintaining and expanding relationships with our existing customers. We sell our solutions primarily through our direct sales organization and also through partnerships for select solutions and global regions. Our direct sales organization consists of experienced sales professionals who are organized by geography, account size, type of market and whether a prospect is a new or existing customer. Customers are assigned a dedicated representative to provide ongoing assistance in the execution of the customer's digital strategy to meet the needs of its End Users. Our sales representatives are supported by our lead generation, solutions consulting, digital strategy and sales operations teams.

Our marketing team complements our sales organization through integrated programs for demand creation, pipeline acceleration, customer expansion and brand advocacy. While the financial institution market is well-defined due to the regulatory classification of financial institutions, the markets for FinTechs and other financial services providers are broader and more difficult to define due to the changing number of providers in each market. We focus our marketing efforts on sponsorships, highly-targeted tradeshows, publications, digital newsletters, digital advertising, account-based marketing, as well as referral agreements with strategic industry partners. Our marketing team also conducts primary research to support our industry thought leadership and to identify emerging trends in End-User behavior and digital activities. Our marketing programs primarily target digital transformation, technology, finance, operations and marketing executives as well as senior business leaders.

Our focus on innovation has fueled our growth and enables us to provide our customers cloud-based digital solutions that transform the ways in which financial institutions, FinTechs and other financial services providers engage with End Users. We allocate significant resources to developing and improving our solutions to meet our customers' evolving needs. We monitor and test our solutions regularly, and we maintain a disciplined release process to enhance our existing solutions and introduce new capabilities without interrupting service delivery. We follow state-of-the-art practices in software development and design, including using modern programming languages, data storage systems and other tools. Our multi-tiered architecture enables us to scale, add and modify features quickly in response to changing market dynamics, customer needs and regulatory requirements. Our platform approach supports rapid development and deployment of new features to address evolving market needs. We also enable customers to address their market-specific needs via our extension and integration frameworks, which is a key aspect of our technology strategy.

Due to the highly regulated nature of the financial services industry, our digital banking platform combines both multi-tenant and single instance aspects. This structure is designed to meet data security needs, minimize compliance cost and reduce residual risks. Our solutions utilize a multi-tiered architecture that allows for scalability, operational simplicity, security and disaster recovery. We have also developed an internal operations and analytics platform that aggregates and leverages customer instance and End-User experience captured within our solutions to drive future innovation and scale.

We currently serve our digital banking platform customers from a distributed cloud which combines multiple third-party public cloud service providers and a private cloud consisting of active-active globally-adopted ANSI/TIA-942 Telecommunications Infrastructure Standard data centers managed by a co-location partner. Our digital lending and relationship pricing, Helix and some of our digital banking platform solutions are hosted by third-party public cloud service providers, and we are currently in the process of migrating the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. All of our hosting environments are under our security posture and compliance stance. We integrate various solutions together so that it is a seamless experience to our End Users, minimizing the impact and relevance of any one component on our combined distributed cloud hosting environment. This configuration provides us with a flexible foundation to support our innovation, allowing us to position services on a piecemeal basis to optimize their performance, scale, cost, resiliency and security.

We utilize prevailing industry configurations to minimize service interruptions and regularly consider and implement improvements to enhance the resiliency of our services, including our improvements to actively distribute services across both third-party data centers. As a result of these improvements, our network infrastructure is designed to be fully redundant within each of our third-party data centers, including network teaming to provide network redundancy that includes multiple upstream Internet connections. We have also purchased a private block of IP address space to simplify and expedite our disaster recovery management operations for our digital banking platform customers.

Our digital banking platform has had average uptime in excess of 99.9% since January 2013. We actively monitor our infrastructure 24x7 for any sign of vulnerability, and we seek to take preemptive action to minimize and prevent downtime. Our hosting environments employ advanced measures to enhance integrity and security, from layers of zero-trust network access, design-to-fail architecture, anomaly behavior detection of technical assets, to privileged credential access control. We also use strong endpoint hardening and monitoring to mitigate risk posed by the devices used by our globally distributed workforce.

Our solutions are designed to enforce that End Users are authenticated, authorized and validated before they are granted access, requiring at a minimum, a valid user ID and associated password. Many of our customers also employ other authentication methods such as out-of-band, one-time password delivery to log on to our solutions and hardware cryptographic tokens to authorize transactions. Our layered security model is designed to allow different groups of End Users to have different levels of access to our solutions. Our software development practices require code to be peer-reviewed multiple times before being deployed into production and that our solutions' vulnerability is tested using internal tools prior to release. A Q2 penetration testing team, supported by an independent third party, performs penetration and vulnerability tests on our solutions periodically.

We rely on a combination of patent, trademark, trade secrets and copyright laws, as well as confidentiality procedures and contractual restrictions, to establish, maintain and protect our proprietary rights. As of December 31, 2024, we had nine patent applications pending and 16 patents issued in the U.S. and other countries, with expiration dates ranging from October 2027 to October 2040. Despite substantial investment in research and development activities, we have not focused on patents and patent applications historically. We license third-party technologies, such as bill pay technologies, that are incorporated into some of our solutions.

The market for digital solutions for financial services providers is highly competitive. We believe that the breadth of the comprehensive integrations among our solution offerings and our customers' internal and third-party systems, combined with our deep industry expertise, reputation for consistent, high-quality customer support and the pace at which we bring innovation to market distinguish us from the competition across our cloud-based digital banking, digital lending and relationship pricing, Q2 Innovation Studio and Helix solutions.

We currently compete with providers of technology and services in the financial services industry, including point system vendors, core processing vendors and systems internally developed by financial services providers. With respect to our digital banking platform, we have several point solution competitors, including Candescent, Alkami Technology, Backbase, Apiture and Lumin Digital in the online, consumer and SMB banking space and Finastra and Bottomline Technologies in the commercial banking space. We also compete with core processing vendors that provide systems and services such as Fiserv, Jack Henry and Associates and Fidelity National Information Services, or FIS. With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, nCino, Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv. With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, Marqeta and Green Dot in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Mambu and Thought Machine Group in the cloud-core markets. Some of our competitors have significantly more financial, technical, marketing and other resources than we have, may devote greater resources to the promotion, sale and support of their systems than we can, have more extensive customer bases and broader customer relationships than we have and have longer operating histories and greater name recognition than we have. In addition, some of our competitors spend more funds on research and development in terms of absolute dollars.

Although we compete with point system vendors and core processing vendors, we also partner with some of these vendors for certain data and services utilized in our solutions and receive referrals from them. In addition, certain of our customers have or can obtain the ability to create their own in-house systems, and while many of these systems have difficulties scaling and providing an integrated platform, we still face challenges displacing in-house systems and retaining customers that choose to develop an in-house system.

We believe the principal competitive factors for our solutions in the financial services markets we serve include the following:

•alignment with the missions of our customers;

•ability to provide a single digital banking platform for consumer, SMB and commercial End Users;

•ability to provide a comprehensive portfolio of products of integrated end-to-end solutions for both account holders and borrowers;

•breadth and depth of product portfolio addressing numerous mission critical applications for our customers;

•full-feature functionality across digital channels;

•ability to integrate targeted offers for End Users across digital channels;

•ability to support financial institutions in acquiring deposits with open API technologies;

•provided as SaaS with subscription pricing model;

•ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing an SDK;

•design of the End-User experience, including modern, intuitive and touch-centric features;

•configurability and branding capabilities for customers;

•familiarity of workflows and terminology and feature-on-demand functionality;

•integrated multi-layered security and compliance of solutions with regulatory requirements;

•quality of implementation, integration and support services;

•domain expertise and innovation in financial services technology;

•ability to innovate and respond to customer needs rapidly;

•breadth of integrations to third-party financial services;

•rate of development, deployment and enhancement of solutions; and

•ability to collect and utilize data generated by our solutions to deliver insights to our customers.

We believe that we compete favorably with respect to these factors within the financial institution and other financial services providers markets we serve, but we expect competition to continue and increase as existing competitors continue to evolve their offerings and as new companies enter our market. To remain competitive, we believe we must continue to invest in research and development, sales and marketing, customer support and our business operations generally.

As of December 31, 2024, we had 2,477 employees, of which 2,476 were full time employees, 1,659 of which were employed in the United States, and 817 were employed outside of the United States. We consider our current relationship with our employees to be good. None of our employees are represented by a labor union nor are a party to a collective bargaining agreement.

At Q2, we are as passionate about our people as we are about our mission. For more than 20 years, Q2 has been recognized and defined by our mission-driven culture. Our mission is to build strong and diverse communities by strengthening their financial institutions. Our people are paramount to our success, and we have always operated with a set of principles to help guide us in how we treat one another, run our business and serve our customers, partners and communities. To ensure our continued success, we endeavor to nurture our mission-driven culture by how we grow our teams, define our goals and reward our employees. Our current programs focus on the following key human capital measures and objectives:

Since our founding, our culture has been rooted in our mission. We believe our passion, dedication and commitment towards this mission is a significant differentiator for our customers and employees. At Q2, employees experience a culture that is collaborative, inclusive, kind and fun, and which is firmly grounded in our guiding principles. We weave inclusion into our business functions, strategy and engagement efforts.

Our culture is demonstrated and shared through our employee traditions and daily engagements among our employees and with our customers. We continue to refine our employee engagement programs to meet the continued and changing needs of our Q2 team members, including to accommodate numerous remote and hybrid employees and hybrid working styles. We offer a range of learning and social opportunities, both virtually and remote, with more of our employee engagements returning to Q2 campuses. The role of the campus has evolved to emphasize interaction, which can include formal meetings, informal conversations, brainstorms, social events and other activities that make the most of being together face-to-face.

We fulfill our mission of building stronger, more diverse communities through volunteerism and financial support, partnering with nonprofits that align with our employees' passions. Q2 team members contribute through hands-on and virtual volunteer opportunities, supported by technology to make participation seamless. To encourage community service, we reward employees with donation dollars to support nonprofits of their choice.

In celebration of Q2's 20th birthday, we set an ambitious goal in 2024 for our employees to contribute over 20,000 hours of community service, double the recorded hours from 2023, and they not only met that goal but exceeded it. Employees reported over 23,000 hours of service to 367 organizations and, combined with Q2's efforts, donated more than $1.6 million to nonprofits globally. In 2024, we also granted $150,000 through the Q2 Philanthropy Fund to nonprofits in Texas, Nebraska, North Carolina, the UK, and India. To close the year with gratitude, we gifted every employee $20 to donate to a cause of their choice, resulting in an additional $44,000 invested in nonprofits worldwide.

In 2024, we had the privilege of raising awareness for several impactful community programs addressing diverse needs. This included The Trevor Project, the world's largest suicide prevention and crisis intervention organization for LGBTQIA+ youth, and Girlstart, which empowers girls from historically marginalized communities by introducing them to STEM programs. Our charitable efforts also focus on causes outside of the U.S., including India-based Akshaya Patra Foundation, which strives to address childhood hunger and promote education.

We are committed to our annual company-wide engagement surveys and thoroughly analyze their results, including through the use of third-party analytics, to ensure we hear our employees and understand their input and feedback. Additionally, we conduct pulse surveys throughout the year to supplement our annual engagement surveys, which helps us more promptly enhance employee programs and benefits. In 2024, we hosted employee focus groups to collect qualitative feedback from employees. Our leadership team routinely considers the feedback from our employee engagement surveys, both positive and constructive, and focuses on implementing employee-suggested changes to become an even better place to work.

Q2 has been recognized by the Austin American-Statesman as a Greater Austin Top Workplace for 14 consecutive years and in 2024, Q2 was also recognized as a Top Workplace USA based on survey responses from employees across the country.

Our culture and commitment to inclusion is visible across our organization and highlighted through a host of initiatives, programs and groups including the following:

•our portfolio of company-wide events and forums that foster connections to the organization and one another;

•our employee volunteer groups focused on culture, wellness, and charitable causes that help create opportunities for employees to support causes to make a difference in the workplace and local communities;

•partnerships with industry leaders to bring networking and learning opportunities for our Q2 team members;

•adding a new Q2 employee resource group, or ERG, in 2024 - Veterans and Allies;

•promoting a work environment that encourages employees to express their ideas and perspectives, and one which gives employees easy access to leaders, including executives;

•supporting external organizations committed to underserved communities;

•our workspaces and virtual workspace resources that reinforce our mission and guiding principles and promote a collaborative, high-energy work environment that helps facilitate team-based problem solving and cross-departmental learning; and

•our new-hire employee orientations that help new employees learn about our business, culture, mission and values and be positioned for successful performance in their new roles.

To create a culture of teamwork and rewards, we support a range of recognition programs. One of our most utilized programs is a points-based rewards system that allows our employees to highlight successes and give thanks to individuals and teams across the organization. We encourage the engagement of peer-to-peer recognition and showcase our wins, while we utilize Q2's guiding principles as a framework to recognize the behaviors we expect our employees to model. We provide other meaningful opportunities for recognition that emphasize our commitments to each other and our customers, including our Circle of Awesomeness recognition program which recognizes outstanding team members across our organization, including both sales and non-sales team members. Employees are selected based on peer and customer nominations and are awarded with gifts to celebrate their accomplishments.

Through our sponsorship of Q2 Stadium and our partnership with Austin FC, Austin's major league soccer team, we are able to extend Q2's philanthropic footprint through volunteering and fundraising events, and offer meaningful team-building experiences, including:

•$150,000 in grants to support three central Texas nonprofits dedicated to underserved communities;

•$100,000 in an annual entrepreneurial sponsorship, providing funding to a minority-owned startup;

•our 2024 Dodgeball tournament for Breakthrough T1D, held at Q2 Stadium, which raised more than $115,000;

•volunteering over 900 employee hours through Q2 Stadium volunteer opportunities, benefiting regional nonprofits; and

•providing more than 1,000 Austin FC game-day experiences for our employees and a variety of customers and non-profit partners.

We proudly embrace the diversity of our employees, partners, customers, stakeholders and the communities we serve. We believe that consideration of differing points of view, including unique backgrounds, experiences and talents, is critical to our success. With a strong history of fostering internal talent and providing growth opportunities for our global workforce, we remain committed to evolving our practices to identify and mitigate bias across our organization. In 2024, we expanded our ERG programs to further support our internal communities. Our ERGs include Black Q2, Gente de Q2, Q2 Pride, Q2 Women and the newly launched Q2 Veterans and Allies. The Veterans and Allies ERG has already received tremendous support and engagement. Each ERG is championed by executive leadership, guided by a well-defined mission and driven by a dedicated team of passionate volunteers. Open to all employees, who are actively encouraged to participate, these groups provide opportunities to engage in meaningful events, educational workshops, and volunteer initiatives. Together, we are cultivating a culture of inclusion, belonging, and growth for everyone at Q2.

The following tables represent the diversity statistics of our workforce. Gender numbers reflect Q2's global workforce, and race and ethnicity data is for U.S. only. Gender and ethnicity are self-identified. Based on information provided by our employees who opted to self-identify, representing the vast majority of our employees, our employee population as of December 31, 2024 reflected the following:

We recognize the importance of employees developing and progressing in their careers, starting on their first day with our robust new-hire employee orientation and thoughtful onboarding plans, which are designed to give employees a successful beginning of their Q2 career and to accelerate their time to productivity, including deep dives into our culture, products and markets, as well as our Code of Business Conduct and Ethics, our values and our 10 Guiding Principles. Once employees are onboarded, we focus on ways to further develop their skills and careers at Q2. We provide a variety of resources to help our employees grow in their current roles and build new skills, including a wide variety of development resources and courses, offered on-demand and in facilitated live learning opportunities. We emphasize individual and team development planning as part of our annual goal-setting process. In 2024, our team members completed over 144,000 hours of training. We believe leading our employees is one of the greatest acts of trust we can show to our managers, and accordingly all managers go through training to enable them to effectively perform as leaders. In 2024, we relaunched many of our leadership development programs to better address the training and development needs of all Q2 leaders, from those newly promoted to our executive leaders. Our programs aim to develop a strong leadership bench and ensure cross-functional collaboration on strategic business opportunities. Globally, we are invested in higher education through internship programs that target colleges and universities. Our U.S. college intern program hosts students working across nearly all functions at Q2. Working primarily on Q2 campuses, interns benefit from a 10-week summer program that includes on-the-job learning, a targeted curriculum and community service opportunities.

We offer development experiences in a variety of formats, facilitated in both classroom style and asynchronous on-demand opportunities available to all Q2 team members. We offer role-specific training, ongoing professional skills development, inclusion skills, and we collaborate with other learning partners to create a wide portfolio of learning resources. We also have online learning experiences to better target digital training resources for employees at any point in their Q2 career journey, from new hire through career development.

Talent Acquisition

We work diligently to attract great talent from a diverse range of sources to meet the current and future demands of our business. We have established relationships with world-class universities, professional associations and industry groups to proactively attract talent. To attract talent, we have a strong employee value proposition that leverages our mission-driven culture, collaborative working environment, competitive pay structures and growth opportunities. We are proud that for fiscal year 2024, over 20% of our requisitions were filled internally, utilizing our strong internal talent pipeline, in addition to building the external talent relationships needed to support our company strategy. We continually strive to develop and maintain a broad-based recruitment pipeline representing a diversity of perspectives and experience, with an emphasis on using objective measurements in our hiring process. In 2024, we onboarded new sourcing and evaluation tools to support greater efficiency of our recruiters and employ greater automation throughout our processes.

Our compensation programs are designed to provide a compensation package that will attract, retain, motivate and reward talented mission-aligned employees who must operate in a fast paced, highly-competitive, and technologically-challenging environment, commensurate with their roles and contributions. For our director-level and above employees, as well as all of our sales personnel, we seek to do this by linking annual changes in compensation to overall company performance, and where applicable, each individual's contribution to the results achieved. The emphasis on overall company performance is intended to align such employees' financial interests with the interests of our stockholders, particularly as it relates to our long-term incentive plans. We are committed to providing comprehensive benefit options, and it is our intention to offer benefits that will allow our employees and their families to live healthier and more secure lives. Some examples of our wide-ranging benefits include: defined contribution retirement plans, including employer contributions; employee stock purchase plan; medical insurance, prescription drug benefits, dental insurance, vision insurance, accident insurance, critical illness insurance, life insurance, disability insurance, health savings accounts with employer contributions, flexible spending accounts, legal insurance and pet insurance.

We are committed to the health, safety and well-being of our employees. In addition to traditional employee benefits, we offer a number of innovative benefits to support the physical, mental and financial health of our employees. These include, among many other things: virtual wellness clinics and classes; global fertility benefits; our Q2 Compassion Fund, which is designed to help team members facing financial hardship immediately after natural disasters or unforeseen personal hardships; online tools that assist employees with their physical and mental health; and special events with outside vendors and participants focusing on employee well-being. We also provide global access to an Employee Assistance Program (EAP) connecting our employees and anyone living in their household with access to a variety of resources, including mental health and counseling, work life balance and online legal services.

As a technology service provider to financial institutions, FinTechs and Alt-FIs in the United States, we are not required to be chartered by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration or other federal or state agencies that regulate or supervise our customers and other providers of financial services in the United States.

Our customers and prospects are subject to extensive and complex regulations and oversight by regulatory authorities. These laws and regulations are constantly evolving and affect the conduct of our customers' operations and, as a result, our business. Our solutions must enable our customers to comply with applicable requirements such as the following:

•the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act;

•the Electronic Funds Transfer Act;

•Mobile Banking Guidance;

•the Electronic Signatures in Global and National Commerce Act;

•federal, state and other usury laws;

•the Gramm-Leach-Bliley Act, or GLBA;

•the Fair Credit Reporting Act;

•the Americans with Disabilities Act, or ADA;

•the EU General Data Protection Regulation, or GDPR;

•laws against unfair, deceptive, or abusive acts or practices;

•the Privacy of Consumer Financial Information regulations;

•the Bank Secrecy Act and the USA PATRIOT Act of 2001;

•the Guidance on Supervision of Technology Services Providers promulgated by the Federal Financial Institutions Examination Council, or FFIEC;

•third-party risk management regulations;

•the NCUA's Guidelines for Safekeeping of Member Information;

•the Guidance on Outsourcing Technology Services promulgated by the FFIEC; and

•other federal, state and international laws and regulations.

We are subject to periodic examination by regulators under the authority of the FFIEC under its Guidance on the Supervision of Technology Services Providers and the Gramm-Leach-Bliley Act of 1999, and federal, state and other laws that apply to technology service providers as a result of the services we provide to the institutions and entities they regulate. As a technology service provider, we are examined by federal financial regulators on a rotating basis. These examinations are based on guidance from the FFIEC, which is a formal interagency body empowered to prescribe uniform principles, standards and report forms for the examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions. The examinations cover a wide variety of subjects, including our management, acquisition and development activities, support and delivery, information technology audits, cybersecurity, as well as our disaster preparedness and business recovery planning. The FFIEC has broad supervisory authority to remedy any shortcomings identified in an examination. Following an examination, our financial institutions' customers may request the open section of the report of examination through their lead examination agency.

The Dodd-Frank Act granted the Consumer Financial Protection Bureau, or CFPB, authority to promulgate rules and interpret certain federal consumer financial protection laws, some of which apply to the solutions we offer. In certain circumstances, the CFPB also has examination and supervision powers with respect to service providers who provide a material service to a financial institution offering consumer financial products and services. In October 2024, the CFPB issued a rule pursuant to section 1033 of the Dodd-Frank Act that requires banks and other financial institutions to share data securely with consumers and authorized third parties upon consumer request by giving them control over their personal financial data while promoting transparency, data portability, and competition in the financial sector. Institutions must comply by set dates based on their size starting in 2026.

The compliance of our solutions with these requirements depends on a variety of factors, including the functionality and design of our solutions, the classification of our customers, and the way our customers and their End Users utilize our solutions. To comply with our obligations under these laws, we are required to implement operating policies, programs and procedures to protect the privacy and security of our customers' and their End Users' information and to undergo periodic audits and examinations. Any actual or perceived failure to comply with these laws and requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, monetary penalties, and constraints on our ability to continue to operate. It is also possible that current or future laws or regulations could be interpreted or applied in a manner that would prohibit, alter, or impair our existing or planned products and services, or that could require costly, time-consuming, or otherwise burdensome compliance measures from us. Refer to "Item 1A. Risk Factors" for further information.

In the ordinary course of our business, we and our customers using our solutions access and transmit certain types of data, which subjects us and our customers to certain privacy and information security laws in the United States and internationally, including, for example, GLBA, CCPA, CPRA and GDPR, and other federal, state, and other international data privacy, security, and protection laws and regulations designed to regulate consumer information and mitigate identity theft. We are also subject to privacy laws of various states. These laws impose obligations with respect to the collection, processing, storage, disposal, use and disclosure of personal information, and require that financial services providers have in place policies regarding information privacy and security. In addition, under certain of these laws, we must provide notice to consumers of our policies and practices for sharing nonpublic information with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their nonpublic personal information and disclosure of it to unaffiliated third parties. Certain of these laws may, in some circumstances, require us to notify affected clients of security and privacy breaches of computer databases that contain their End Users' personal information. These laws may also require us to notify relevant law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental agencies that own data. In order to comply with the privacy and information safeguard laws, we have confidentiality and information security standards and procedures in place for our business activities and our third-party vendors and service providers. Privacy and information security laws and regulations evolve regularly, requiring us to adjust our compliance program on an ongoing basis.

Our website address is https://q2.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our Internet website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to the SEC. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

•security and privacy threats and breaches involving our solutions;

•the current economic environment and challenges in the financial services industry, including impacts on our customers' decisions to purchase our products and services and the related demand for our solutions relative to our expectations;

•focusing on the financial services industry, and particular customer segments therein, and any geographies where we have general customer concentration and the potential for any economic downturn or consolidation in such industry, segments or geographies to adversely affect our business;

•the integration of our solutions with and reliance by our solutions on third-party systems or services;

•defects or errors in our solutions, including failures associated with transaction processing or interest, principal or balance calculations;

•defects, failures or interruptions in third-party services or solutions, including third-party data centers and third-party public cloud service providers;

•our ability to plan for and manage our growth and scale with our new and existing customers effectively;

•the length, cost and unpredictability of our sales cycle;

•the development of our solutions and changes to the market for our solutions compared to our expectations;

•our ability to attract new customers and expand and renew existing customer relationships;

•managing challenges and costs associated with the implementation of a higher volume of or more complex configurations of our solutions;

•customer acceptance of and satisfaction with our existing and new solutions;

•the strength of our brand and reputation;

•intense competition in the markets we serve and challenges we face as we enter new markets or new areas of existing markets;

•the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers;

•customer training and customer support;

•evolving technological requirements, enhancements and additions to our solution offerings, including AI;

•our sales and marketing capabilities, including partner relationships;

•our dependency on our management team and other key employees and the increased costs associated with recruiting and retaining talent;

•our international operations;

•mergers, acquisitions, divestitures or strategic investments;

•our revenue recognition method and the relative impacts of changes in subscription rates;

•quarterly fluctuations in our operating results relative to our expectations and guidance and the reliability and accuracy of our forecasts and the market data we use;

•our history of net operating losses and potential limitations on our ability to utilize our net operating loss carryforwards;

•our profit margins and the unpredictability of End-User adoption and usage, and customer implementation and support requirements;

•changes in financial accounting standards or practices;

•our ability to maintain proper and effective internal controls and produce accurate and timely financial statements;

•regulations applicable to us, our customers and our solutions, including evolving regulation of AI, machine learning and the receipt, collection, storage, processing and transfer of data, and the impacts of any violation of these regulations;

•litigation or threats of litigation;

•our ability to protect our intellectual property;

•the use of "open-source" software in our solutions;

•environmental, social and governance, or ESG, disclosures and evolving ESG disclosure requirements;

•the expenses and administrative burdens as a public company;

•the dilutive effects of future sales, or anticipation of future sales, of our common stock and the resulting impact on the price of our common stock;

•unfavorable or misleading research by industry analysts;

•our stock price volatility and historical policy of no dividends;

•anti-takeover provisions in our charter documents and Delaware law;

•our convertible debt obligations and related capped call transactions and the related accounting treatment and our ability to secure sufficient additional financing when desired or needed on favorable terms; and

•our ability to obtain additional financing and potential dilution to our stockholders resulting from raising capital or using equity for acquisitions.

We maintain various types of confidential information, including our own information and that of our customers and their End Users. For example, certain elements of our solutions process and store personally identifiable information, or PII, such as banking and personal information of our customers and their End Users, and we also regularly have access to PII during various stages of the implementation process or during the course of providing customer support. Furthermore, as we develop additional functionality, we may gain greater access to PII. Our solutions and the solutions of our third-party partners are used to process various types of transactions, including debit card, credit card, electronic bill payment, Automated Clearing House, or ACH, payments, real-time payments through faster payment networks, transactions in cryptocurrencies and check clearing that support consumers, financial institutions and other businesses. We maintain policies, procedures and technological safeguards designed to protect the confidentiality, integrity, availability and privacy confidential information, including PII, our solutions and our information technology systems. However, we are vulnerable to attack and cannot entirely eliminate the risk of improper or unauthorized access to our solutions or information technology systems or disclosure of confidential information or other security and privacy events that impact the integrity, availability or privacy of confidential information, including PII, or our systems, solutions and operations, or the related costs we may incur to mitigate the consequences from such events. Further, given the flexibility and complexity of our solutions, including an increasing number of integrations to third party solutions and increasing reliance on third-party public cloud service providers, there is a risk that configurations of, or defects in, the solutions or errors in their development or implementation could create vulnerabilities to fraud, security and privacy breaches. There have been and will continue to be unlawful attempts to disrupt or gain access to our solutions, information technology systems or the PII or funds of our customers or their End Users, and any successful attempts could disrupt our or our customers' operations and result in financial losses to us and our customers. In addition, because we increasingly leverage third-party providers, including cloud, software, data center and other critical technology vendors to develop and deliver our solutions to our customers and their End Users, we rely heavily on the data security technology practices and policies adopted by these third-party providers, and we may not be able to identify vulnerabilities in such third-party practices and policies. A vulnerability in a third-party provider's software or systems, a failure of our third-party providers' safeguards, policies, procedures or overall business operations or a breach of a third-party provider's software or systems could result in financial loss and the compromise of the confidentiality, integrity or availability of our systems or the data housed in our solutions.

Our security measures and the security measures of our customers or third-party providers on whom we rely may not be sufficient to prevent our solutions or systems from being compromised as a result of third-party action, the error or intentional misconduct of employees, customers or their End Users, malfeasance or stolen or fraudulently obtained login credentials. Security incidents can result in unauthorized access to, loss of or unauthorized disclosure of confidential information, litigation, regulatory investigations and enforcement, fines, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales, harm our business and result in increased volatility in our stock price. Our business and operations, as well as those of our customers and third-party providers, are continuously exposed to a broad range of internal and external threats such as cyber-attacks, ransomware attacks, account take-over attacks, hijacking, organized cybercrime, financial transaction fraud, fraudulent representations, malicious code (such as viruses and worms), supply chain attacks, phishing, employee errors or omissions, employee theft or misuse, denial-of-service attacks and other malicious Internet-based activity. These internal and external threats continue to increase and evolve and financial services providers, their End Users, and technology providers are often targets of such threats or attacks. In addition to traditional computer "hackers," sophisticated criminal networks as well as nation-state and nation-state supported actors now engage in attacks, including advanced persistent threat intrusions. Current or future criminal capabilities, including increased threats and speed of exploitation enabled by the use of AI, discovery of existing or new vulnerabilities, and attempts to exploit those vulnerabilities or other developments, may compromise or breach our systems or solutions, or use them to facilitate financial transaction fraud.

In addition, third parties may attempt to fraudulently induce our employees or the employees of our customers or third-party providers into disclosing sensitive information such as usernames, passwords or other information to gain access to our confidential or proprietary information or the data of our customers and their End Users. A party who is able to compromise the security of our facilities, whether physical or systematic, could cause interruptions or malfunctions in our operations. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or sabotage systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our customer base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security measures or gain unauthorized access to our systems or solutions. In addition, there may be a heightened risk of state-sponsored cyberattacks or cyber fraud during periods of geopolitical uncertainty, as cybercriminals attempt to profit from the disruption, given increased online banking, e-commerce and other online activity. Additionally, there is an increased risk that we may experience cybersecurity-related events, such as phishing attacks, and other security challenges as a result of some of our employees and employees of our service providers working remotely from non-corporate managed networks. Increased risks associated with cyberattacks, data and privacy breaches and breaches of security measures within our solutions, systems and infrastructure or the products, systems and infrastructure of our customers or third parties upon which we rely and the resultant costs and liabilities may cause failure or inability to meet our customers' expectations with respect to security and confidentiality and could harm our business, and seriously damage our reputation and affect our ability to retain customers and attract new business. Our systems and operations are also subject to inherent internal threats from employees or contractors such as unauthorized information access or disclosure and asset misappropriation, including as a result of inadequate access management. While we endeavor to counter these threats through processes designed to identify and monitor potentially risky behaviors, including data loss prevention and access rights management protocols, no risk mitigation strategy can entirely eliminate the risks posed by internal threats.

Although we monitor our solutions and information technology systems to detect and block threats, as cyber threats have evolved and continue to evolve, vulnerabilities in our solutions and information technology systems have been and may in the future be exploited. We expect to expend additional resources to continue to modify or enhance our layers of defense to remediate such vulnerabilities. System enhancements and updates create risks associated with implementing new systems and integrating them with existing ones, including risks associated with the effectiveness of our, our customers' and our third-party providers' software development lifecycles. Due to the complexity and interconnectedness of our systems and solutions, the process of enhancing our layers of defense, including addressing hardware-based vulnerabilities, can itself create a risk of systems disruptions and security issues. Our and our customers' and third-party providers' ability and willingness to deliver patches and updates to mitigate vulnerabilities in a timely manner can introduce additional risks, particularly when a vulnerability is being actively exploited by threat actors. Customer utilization of older versions of our solutions can increase the risk and complexity of security vulnerabilities and the resources and time required to address them.

Federal, state and other regulations may require us to notify customers and their End Users of data security incidents involving certain types of personal data. Security and privacy compromises experienced by our competitors, by our customers, by our third-party providers or by us may lead to public disclosures and widespread negative publicity. Any security and privacy compromise in our industry, whether actual or perceived, could erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory investigations or fines or other action or liability, which could materially and adversely affect our business and operating results.

In addition, some of our customers contractually require notification of any data security and privacy compromise and include representations and warranties that our solutions comply with certain regulations related to data security and privacy. Although our customer agreements typically include limitations on our potential liability, there can be no assurance that such limitations of liability would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more claims, or that our insurers will not deny or attempt to deny coverage as to any future claim. The successful assertion of one or more claims against us, the inadequacy of or denial of coverage under our insurance policies, litigation to pursue claims under our policies or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.

Our operating results may vary based on the impact of changes in our industry, the geopolitical landscape or the global economy on us or our customers and their End Users. Continued widespread geopolitical and global economic conditions such as inflationary pressures, high and shifting interest rates, inflation rates, recession fears or economic slowdown in the United States or internationally, geopolitical uncertainty including conflicts in and around Ukraine, the Middle East and other parts of the world, regulatory changes, or political or regulatory uncertainty or discord, could adversely affect demand for our solutions and make it difficult to accurately forecast our results and plan our future business activities. The revenue growth and potential profitability of our business depend on demand for enterprise SaaS solutions and services generally and for financial services solutions in particular. Weak or deteriorating economic conditions in the financial services industry could adversely affect our current or prospective customers' ability or willingness to purchase our solutions, put pressure on corporate information technology expenditures, delay purchasing decisions, reduce the value or duration of their subscriptions, or affect subscription renewal rates, all of which could adversely limit our ability to grow our business and negatively affect our operating results. Persistent elevated interest rates or any fluctuations in interest rates may impact account holder demand for loans and the creditworthiness of existing borrowers, resulting in operational challenges for financial institutions, including higher credit losses and difficulty in assessing risk in their existing loan portfolios and in making new lending decisions. Economic uncertainties, whether relating to general economic and geopolitical conditions, a changing or uncertain regulatory environment or challenges in the financial services industry, including specifically related to discretionary spending, have the ability to limit the growth of our business and negatively affect our operating results. Uncertain economic and geopolitical conditions may also adversely affect third parties with which we have entered into relationships and upon which we depend in order to grow our business, such as technology vendors and third-party public cloud service providers. The duration and severity of these unfavorable or uncertain conditions and their long-term effects on us and our customers remain uncertain and difficult to predict, and we may be unable to continue to grow or to grow at a similar rate in the event of future and sustained economic slowdowns.

Recent economic pressures from elevated and fluctuating interest rates, inflationary pressures, instability in the banking and financial services sectors and slowdowns in the economy, financial markets and credit markets have had and could continue to have an impact on account holders or End Users of our solutions, our customers' prospects and our business sales cycles, and our customers' or prospective customers' spending decisions. Downturns in the financial services industry and unfavorable economic conditions affecting the regions in which our customers or prospective customers are concentrated or particular segments of customers or prospective customers on which we focus, including the Alt-FI and FinTech sectors, have and may continue to cause our customers or prospective customers to delay or reduce their spending on solutions such as ours or seek to terminate or renegotiate their contracts with us, including in either case as a result of insolvency or bankruptcy. A significant portion of our revenues is derived from financial institutions, and in particular RCFIs, and we have been and may continue to be impacted by challenges in the economic environment and financial services industry. Some financial institutions have in the past experienced significant pressure due to economic uncertainty, liquidity concerns and increased regulatory scrutiny. In recent years, many financial institutions have merged or been acquired, and periodically during downturns a limited number of financial institutions have failed, creating market disruption and uncertainty within the financial services industry, in particular among RCFIs. The actions taken by such institutions to address potential liquidity concerns have resulted in certain institutions incurring substantial costs that have negatively impacted, and may continue to negatively impact, their profitability and could lead to further market instability or bank failures. Additionally, regulatory changes aimed at stabilizing the financial system could impose new burdens, further straining the profitability of these institutions and potentially leading to a contraction in economic activities. Market conditions, including deteriorating performance of certain loan portfolios, including commercial real estate loan portfolios, capital constraints, and fluctuating levels of direct losses and charge-offs for some financial institutions, have also caused and may continue to cause financial institutions to reduce lending activity as they seek to increase their reserves to maintain better liquidity. Additionally, banking regulators, as well as increasingly cautious investors, have increased scrutiny of commercial real estate lending. This heightened attention may compel financial institutions with substantial commercial real estate loan portfolios to adopt more stringent underwriting standards, enhance internal controls, bolster risk management policies, conduct more rigorous portfolio stress testing, and maintain higher reserve levels. While the U.S. government has taken measures to strengthen public confidence in the banking system and protect depositors, such steps may be insufficient to resolve the volatility in the financial markets and reduce the risk of additional bank failures. It is possible these conditions may persist, deteriorate or reoccur, and longer term, failures and consolidations are likely to continue, and there are very few new financial institutions being created. Further, if our customers merge with or are acquired by other entities that have in-house developed solutions or that are not our customers or use fewer of our solutions, our customers may discontinue, reduce or change the terms of their use of our solutions.

It is also possible that the larger financial institutions that result from mergers or consolidations could have greater leverage in negotiating terms with us or could decide to replace some or all of our solutions. Financial institutions increasingly face competition from non-depository institutions or other innovative products or emerging technologies, such as cryptocurrencies or stablecoin, which may reduce the number of End Users, or log-ins or transactions using their more traditional financial services. Any of these developments could have an adverse effect on our business, results of operations and financial condition.

The functionality of our solutions depends on our ability to integrate with other third-party systems and services used by our customers, including core processing software and, in the case of our Helix solutions, banking services. Certain providers of these third-party systems or services also offer solutions that are competitive with our solutions and may have an advantage over us with customers using their software by having better ability to integrate with their software and by being able to bundle their competitive products with other applications used by our customers and prospective customers at favorable pricing. We do not have formal arrangements with many of these third-party providers regarding our access to their APIs to enable these customer integrations. We also resell numerous third-party services and market integrations to many third-party services, including services and integrations offered through our Q2 Innovation Studio solution.

Our business and reputation may be harmed if any such third-party provider:

•changes the features or functionality of, or fails to make updates to its services, applications and platforms in a manner adverse to us;

•discontinues or limits our solutions' access to its systems or services;

•suffers a security incident or other incident, including one that requires us to discontinue integration with its systems, or services or results in a compromise of our systems or services;

•experiences staffing shortages or other operational challenges, including as a result of challenging economic conditions, which interferes with their ability to implement or adequately support an integration with our solutions;

•ceases to operate;

•terminates or does not allow us to renew or replace our existing contractual relationships on the same or better terms;

•modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or our customers; or

•establishes more favorable relationships with one or more of our competitors or acquires one or more of our competitors and offers competing services.

Such events or circumstances could delay, limit or prevent us from integrating our solutions with these third-party systems or services, which could impair the functionality of our solutions, prohibit the use of our solutions or limit our ability to sell our solutions to customers, each of which could harm our business. If we are unable to integrate with such third-party systems or services because of changes to or restricted access to the systems or services by such third parties during the terms of existing agreements with customers using such third-party systems or services, we may not be able to meet our contractual obligations to customers, which may result in disputes with customers and harm to our business. In addition, if any such third-party providers experience an outage, our solutions integrated with such systems or services may not function properly or at all, and our customers may be dissatisfied with our solutions. If the systems or services of such third-party providers have performance or other problems, such issues may reflect poorly on us and the adoption and renewal of our solutions and our business may be harmed. Although we or our customers may be able to switch to alternative technologies if a provider's systems or services were unreliable or if a provider was to limit customer access and utilization of its data or the provider's functionality, our business could nevertheless be harmed due to the risk that our customers could reduce their use of our solutions.

Our solutions are inherently complex and from time-to-time have had and may in the future contain defects or errors, particularly when first introduced or as new functionality is released. The volume and dollar amount of payment transactions and interest, principal or balance amounts that we, our customers and our third-party partners process and calculate is significant and continues to grow. Transactions facilitated by us, our customers and our third-party partners include debit card, credit card, electronic bill payment transactions, ACH, payments, real-time payments through faster payment networks, transactions in cryptocurrencies and check clearing that support consumers, financial institutions and other businesses. These transactions often involve significant End-User payments, the timely processing of which is crucial for the End Users. Certain of our solutions also calculate dollar amounts, including interest, principal, remaining balance and payment amounts on loans, and in certain circumstances our solutions serve as the system of record on which our customers rely to instruct and inform End Users of amounts they must pay and their associated remaining balances. Additionally, certain of these solutions are designed to be configurable by our customers and their ability to perform as intended can be affected by the manner in which our customers use or configure the solution. From time-to-time we discover, and may in the future discover, defects or errors in our solutions or the solutions of our third-party partners, as well as unanticipated processing errors resulting from customer use or behavior. In addition, due to changes in regulatory requirements relating to our customers or to technology providers to financial services providers like us, we may discover deficiencies in our or our third-party partners' software processes related to those requirements. Material performance problems or defects in our solutions might arise in the future.

Such errors, defects, other performance problems, or disruptions in service to provide bug fixes or upgrades, whether in connection with day-to-day operations or otherwise, can be costly and complicated for us to remedy, cause damage to our customers' businesses and to their End Users and harm our reputation. Additionally, certain of our solutions are hosted by our customers or third-party resellers, resulting in our inability to directly access and monitor the data being processed by and our customers' use of such solutions. When any such solutions being hosted by our customers or third-party resellers encounter errors, defects or other performance problems, it can be difficult and costly to assess the issues properly and apply fixes, including because we must rely on the assistance and records of our customers or third-party resellers, as applicable. If the continuity of operations, integrity of processing, or ability to detect or prevent fraudulent payments were compromised in connection with payments transactions, we could suffer financial as well as reputational loss. In addition, if we have any such errors, defects or other performance problems, our customers could seek to terminate their agreements, elect not to renew their subscriptions, delay or withhold payment or make claims against us. Any of these actions could result in liability, lost business, increased insurance costs, difficulty in collecting our accounts receivable, costly litigation, increased regulatory oversight, fines or penalties, adverse publicity and brand damage. Such errors, defects or other problems could also result in reduced sales or a loss of, or delay in, the market acceptance of our solutions.

Moreover, software development is time-consuming, expensive, complex and requires regular maintenance. Unforeseen difficulties can arise. If we do not complete our periodic maintenance according to schedule or if customers are otherwise dissatisfied with the frequency or duration of our maintenance services, customers could elect not to renew, or delay or withhold payment to us or cause us to issue credits, make refunds or pay penalties. Because our solutions are often customized and deployed on a customer-by-customer basis, rather than through a multi-tenant SaaS method of distribution, applying bug fixes, upgrades or other maintenance services may require updating each instance of our solutions, including a variety of different versions of our solutions. This could be time consuming and cause us to incur significant expense and may require the involvement of our customers, which potentially increases the technical delivery risk. We might also encounter technical obstacles, and it is possible that we discover problems that prevent our solutions from operating properly. As a result of the complexity of our solutions and the complex needs of our customers, our customers depend on our technical resources to develop reliable and secure solutions and to resolve any technical issues relating to our solutions. Our ability to deliver our solutions is dependent on our software development lifecycle management processes, including with respect to our change management processes, which impact our ability to effectively develop our solutions and to identify, track, test, manage and implement changes to our solutions. As a result, our solutions require an ongoing commitment of significant resources to maintain and enhance them and to develop new solutions in order to keep pace with continuing changes in information technology, emerging cybersecurity risks and threats, evolving industry and regulatory standards and changing preferences of our customers. If our solutions do not function reliably or fail to achieve customer expectations in terms of performance, customers could seek to cancel their agreements with us and assert liability claims against us, which could damage our reputation, impair our ability to attract or maintain customers, harm our results of operations or have an adverse impact on our financial performance.

We rely on hardware and services that we purchase or lease and software, including open-source software, that we develop or license from, or that is hosted by third parties, to offer our solutions. In addition, we obtain licenses from third parties to use intellectual property associated with the development of our solutions. These licenses might not continue to be available to us on acceptable terms, or at all. These third-party providers may in the future choose not to continue to support certain of the hardware, software or services we license. We also may in the future choose to discontinue the use of the hardware, services or software we acquire or license from such third-party providers, which may require that we pay termination fees or recognize related accounting charges or impairments. The loss of the right or ability to use all or a significant portion of our third-party hardware, services or software required for the development, maintenance and delivery of our solutions could result in delays in the provision of our solutions until we develop or identify, obtain and integrate equivalent technology, which could harm our business.

Any errors or defects in the hardware, services or software we use could result in errors, interruptions or a failure of our solutions. Although we believe that there are alternatives, any significant interruption in the availability of all or a significant portion of such hardware, services or software could have an adverse impact on our business unless and until we can replace the functionality provided by these products at a similar cost. Furthermore, such hardware, services and software may not be available on commercially reasonable terms, or at all. The loss of the right to use all or a significant portion of such hardware, services or software could limit access to our solutions. Additionally, we rely upon third parties' abilities to enhance their current products, develop new products on a timely and cost-effective basis and respond to emerging industry standards and other technological changes. We may be unable to influence changes to such third-party technologies, which may prevent us from rapidly responding to evolving customer requirements. We also may be unable to replace the functionality provided by the third-party software currently offered in conjunction with our solutions in the event that such software becomes obsolete or incompatible with future versions of our solutions or is otherwise not adequately maintained or updated.

We currently host a significant portion of our digital banking platform solutions from two third-party data center hosting facilities located in Austin, Texas and Carrollton, Texas, which are both operated by the same third-party provider, and our digital lending and relationship pricing solutions, Helix solutions and an increasing portion of our digital banking platform solutions are hosted by third-party public cloud service providers, including Amazon Web Services and Microsoft Azure. As we continue to move more computing, storage, and processing services out of our third-party data centers and facilities and into third-party public cloud hosting environments, our reliance on these providers and their systems will increase. The owners and operators of these current and future facilities and third-party public cloud service providers do not guarantee that our customers' access to our solutions will be uninterrupted, error-free or secure. We have experienced, and may in the future experience, website disruptions, outages and other performance problems with these third-party data centers and third-party public cloud service providers. These problems may be caused by a variety of factors, including infrastructure changes, hardware failures, human or software errors, viruses, security attacks, fraud, operational disruption, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. We do not control the operation of these third-party data center facilities and third-party public cloud service providers, and such facilities and services are vulnerable to damage or interruption from human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes, pandemics or similar catastrophic events. They also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or terminate our hosting arrangement or other unanticipated problems could result in lengthy interruptions in the delivery of our solutions, cause system interruptions, prevent our customers' End Users from accessing their accounts or services online, cause reputational harm and loss of critical data, prevent us from supporting our solutions or cause us to incur additional expense in arranging for new facilities, services and support, and we may be required to pay refunds to our customers based on service level agreement (SLA) provisions in their contracts.

We also depend on third-party Internet service providers and continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our Internet service or bandwidth providers for any reason or if their services are disrupted, for example due to viruses or denial of service or other attacks on their systems, or due to human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes, pandemics or similar catastrophic events, we could experience disruption in our ability to offer our solutions and adverse perception of our solutions' reliability, or we could be required to retain the services of replacement providers, which could increase our operating costs and harm our business and reputation. Prolonged interruption in the availability, or reduction in the speed or other functionality, and frequent or persistent interruptions in our solutions could cause customers to believe that our solutions are unreliable, leading them to switch to our competitors or to avoid our solutions, which could also harm our business and reputation.

Since our inception, our business has experienced high growth, which has resulted in large increases in our number of employees, expansion of the types of solutions we sell and the customers we sell them to, significant increases in the number of End Users accessing and using our solutions, expansion to international locations and international customers, expansion of our infrastructure, enhancement of our internal systems and other significant changes and additional complexities. We intend to further expand our overall business, customer base, and number of employees. The growth in our business, our management of a growing international workforce and customer base and the stress of such growth on our internal controls and systems generally requires substantial management effort, infrastructure and operational capabilities. To support our growth, we must continue to improve our management's resources and operational and financial controls and systems, and these improvements may increase our expenses more than anticipated and result in a more complex business, and our failure to timely and effectively implement these improvements could have an adverse effect on our operations and financial results. In addition, selling our solutions to larger customers and the increased breadth of our solution offerings and the types of customers we serve may result in greater uncertainty and variability in our business and sales results. We also will have to anticipate the necessary expansion of our relationship management, implementation, customer service and other personnel to support our growth and maintain high levels of customer service and satisfaction, particularly as we sell to larger customers that have heightened levels of complexity in their hardware, software and network infrastructure needs and as we sell a broader range of solutions to a broader and larger set of customers. Our success will depend on our ability to plan for and manage this growth effectively and to address challenges to our growth model resulting from rapid changes in economic conditions. If we fail to anticipate and manage our growth or are unable to provide high levels of system performance and customer service, our reputation, as well as our business, results of operations and financial condition, could be harmed.

Our sales process involves educating prospective customers and existing customers about the use, technical capabilities, implementation timelines and benefits of our solutions and services. Prospective customers, especially larger financial services providers, often undertake a prolonged evaluation process, which typically involves not only our solutions, but also those of our competitors and lasts from six to nine months or longer. We may spend substantial time, effort and money on our sales and marketing efforts without any assurance that our efforts will produce any sales. It is also difficult to predict the level and timing of sales opportunities that come from our partners and resellers.

Events affecting our customers' businesses have and may continue to occur during the sales cycle that could impact the size or timing of a purchase, contributing to more unpredictability in our business and operating results. Such events have and may continue to cause our customers or partners to delay, reduce, or even cancel planned digital financial services spending and impact our business and operations. We may experience challenges associated with accurately predicting the impacts of any economic downturn, or challenges in the financial services industry, on our customers and their End Users. In particular, the impacts of any downturn on Alt-FIs and FinTechs and our arrangements with them are difficult to accurately predict, as Alt-FIs and FinTechs may have particular vulnerabilities to an economic downturn, and our arrangements with FinTechs represent a more variable revenue model for us which may be more vulnerable to an economic downturn than our arrangements with financial institutions where the majority of recurring revenue is associated with contractual commitments. If customers or partners significantly reduce their spending with us or significantly delay or fail to make payments to us, our business, results of operations, and financial condition would be materially adversely affected, and as a result of our sales cycle, subscription model and our revenue recognition policies, the effects of such reductions or delays on our results of operations may not be fully reflected for some time.

The market for financial services has been dramatically changing, and we do not know whether financial institutions and other financial services providers will adopt or continue to adopt our existing and new solutions or whether the market will change in ways that we do not anticipate. Many financial services providers have invested substantial personnel and financial resources in legacy software, and these institutions may be reluctant or unwilling to convert from their existing systems to our solutions. For financial services providers, switching from one provider of solutions (or from an internally developed legacy system) to a new provider is a significant endeavor. Many potential customers believe switching providers involves too many potential disadvantages such as disruption of business operations, loss of accustomed functionality, and increased costs (including conversion and transition costs). Furthermore, some financial institutions may be reluctant or unwilling to use a cloud-based solution over concerns such as the security of their data and reliability of the delivery model. These concerns or other considerations may cause financial institutions to choose not to adopt cloud-based solutions such as ours or to adopt alternative solutions, either of which could harm our operating results. We attempt to overcome these concerns through value enhancing strategies such as a flexible integration process, continued investment in the enhanced functionality and features of our solutions, and investing in new innovative solutions. If financial services providers are unwilling to transition from their current systems, the demand for our solutions and related services could decline and adversely affect our business, operating results and financial condition.

Our future success also depends on our ability to sell new solutions and enhanced solutions to our current and new customers. As we create new solutions and enhance our existing solutions to support new customer types and technologies, these solutions and related services may not be attractive to customers. If the market for our solutions does not continue to evolve in the manner in which we believe it will or if our newer solutions are not adopted by our current and prospective customers, our future business prospects may be negatively impacted. In addition, promoting and selling new and enhanced solutions may require increasingly costly sales and marketing efforts, and if customers choose not to adopt these solutions, our business could suffer.

To increase our revenues, we will need to continue to attract new customers and encourage current customers to expand the utilization of our solutions or agree to price increases associated with existing solutions. In addition, for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions with us on similar or more favorable terms to us when their existing subscription term expires. Our revenue growth rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction with our solutions, customers failing to meet their End User growth projections, decreases in the number of customers, decreases in usage of our solutions by End Users, changes in the type and size of our customers, pricing changes, competitive conditions, the loss of our customers to other competitors and general economic conditions. We cannot give assurance that our current customers will renew or expand their use of our solutions. If we are unable to attract new customers or retain or attract new business from current customers or partners, our business, financial condition and results of operations may be materially and adversely affected.

We have and may continue to face unexpected implementation challenges related to the complexity of our customers' implementation and integration requirements, particularly implementations for larger customers with more complex requirements in their hardware, software and network infrastructure needs. Our implementation expenses increase when customers have unexpected data, hardware or software technology challenges, or complex or unanticipated business or regulatory requirements. In addition, our customers in some cases may require complex acceptance testing related to the implementation of our solutions. Implementations often involve integration with or conversion of customers off of systems and services of third parties over which we do not have control. We may also face implementation challenges if we fail to accurately forecast or provision the necessary time and resources, including qualified talent, particularly following periods of increased sales success or restructurings impacting our implementation teams. Implementation delays may require us to delay revenue recognition under the related customer agreement longer than expected. Further, because we do not fully control our customers’ implementation schedules, if our customers do not allocate the internal resources necessary to meet implementation timelines or if there are unanticipated implementation delays or difficulties, our revenue recognition may be delayed. Losses of End Users or any difficulties or longer implementation processes, including risks related to the timing and predictability of sales of our solutions, could cause customers to delay or forgo future purchases of our solutions.

Our business depends on our ability to satisfy our customers and meet their business needs. Our customers use a variety of network infrastructure, hardware and software, which typically increases in complexity the larger the customer is, and our solutions must support the specific configuration of our customers' existing systems, including in many cases the solutions of third-party providers. If our solutions do not currently support a customer's required data format or appropriately integrate with a customer's applications and infrastructure, then we must configure our solutions to do so, which could negatively affect the performance of our systems and increase our expenses and the time it takes to implement our solutions. Any failure of or delays in our systems or resources could cause service interruptions or impaired system performance. Some of our customer agreements require us to issue credits for downtime in excess of certain thresholds, and in some instances give our customers the ability to terminate the agreements in the event of significant amounts of downtime, or if we experience other defects with our solutions. If sustained or repeated, these performance issues could reduce the attractiveness of our solutions to new and existing customers, cause us to lose customers, and lower renewal rates for existing customers, each of which could adversely affect our revenue and reputation. In addition, negative publicity resulting from issues related to our customer relationships or partners, regardless of accuracy, may damage our business by adversely affecting our ability to attract new customers and maintain and expand our relationships with existing customers.

If the use of our solutions increases, or if our customers demand more advanced features from our solutions, we will need to devote additional resources to improving our solutions, and we also may need to expand our technical infrastructure and related resources at a more rapid pace than we have in the past. This would involve spending substantial amounts to purchase or lease third-party data center capacity and equipment, subscribe to new or additional third-party cloud service services, upgrade our technology and infrastructure or introduce new or enhanced solutions. It takes a significant amount of time to plan, develop and test changes to our solutions and related infrastructure and resources, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. There are inherent risks associated with changing, upgrading, improving and expanding our technical infrastructure and related resources. Any failure of our solutions to operate effectively with future infrastructure and technologies could reduce the demand for our solutions, resulting in customer dissatisfaction and harm to our business. Also, any expansion of our infrastructure and related resources would likely require that we appropriately scale our internal business systems and services organization, including implementation and customer support services, to serve our growing customer base. If we are unable to respond to these changes or fully and effectively implement them in a cost-effective and timely manner, our service may become ineffective, we may lose customers, and our operating results may be negatively impacted.

We believe that a strong brand is necessary to continue to attract and retain customers. We need to maintain, protect and enhance our brand in order to expand our customer base. This depends largely on the effectiveness of our marketing efforts, our ability to provide reliable solutions that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to implement and support our solutions, our ability to continue to develop new functionality and use cases, and our ability to successfully differentiate our solutions and their capabilities from competitive products and services, which we may not be able to do effectively. While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful or cost effective. Our brand promotion activities may not generate customer awareness or yield increased revenues, and even if they do, any increased revenues may not offset the expenses we incur in building our brand. If we are unable to maintain or enhance customer awareness in a cost-effective manner, our brand and our business, financial condition and results of operations could be materially and adversely affected.

Our corporate reputation is susceptible to damage by actions or statements made by adversaries in legal proceedings, current or former employees or customers, competitors and vendors, partners, as well as members of the investment community and the media. There is a risk that negative information about our company, even if based on false rumor or misunderstanding, could adversely affect our business. In particular, damage to our reputation could be difficult and time-consuming to repair, could make potential or existing customers reluctant to select us for new engagements, resulting in a loss of business, and could adversely affect our employee recruitment and retention efforts. Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us and materially and adversely affect our business, financial condition and results of operations.

We currently compete with providers of technology and services in the financial services industry, including point system vendors, core processing vendors and systems internally developed by financial services providers. With respect to our digital banking platform, we have several point solution competitors, including Candescent, Alkami Technology, Backbase, Apiture and Lumin Digital in the online, consumer and SMB banking space and Finastra and Bottomline Technologies in the commercial banking space. We also compete with core processing vendors that provide systems and services such as Fiserv, Jack Henry and Associates and Fidelity National Information Services, or FIS. With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, nCino, Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv. With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, Marqeta and Green Dot in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Mambu and Thought Machine Group in the cloud-core markets. Some of our competitors have significantly more financial, technical, marketing and other resources than we have, may devote greater resources to the promotion, sale and support of their systems than we can, have more extensive customer bases and broader customer relationships than we have and have longer operating histories and greater name recognition than we have. In addition, some of our competitors expend more funds on research and development, which may allow them to introduce new and improved technologies and services more frequently than us.

We also may face competition from new companies entering our markets, which may include large established businesses that decide to develop, market or resell competitive solutions, acquire one of our competitors or form a strategic alliance with one of our competitors. In addition, new companies entering our markets may choose to offer competitive solutions at little or no additional cost to the customer by bundling them with their existing applications, including adjacent financial services technologies and core processing software. New entrants to the markets we serve might also include financial services providers developing financial services solutions and other technologies, including solutions built using competing BaaS solutions or open API platforms. Competition from these new entrants may make our business more difficult and adversely affect our results.

If we are unable to compete in this environment, sales and renewals of our solutions could decline and adversely affect our business, operating results and financial condition. With the introduction of new technologies and potential new entrants into the markets for our solutions, competition could intensify in the future, which could harm our ability to increase sales and achieve profitability. In addition, we may face increased competition in our existing markets or as we enter new markets or sections of a market with larger or different customers and new solutions. Our industry has also experienced recent consolidations which we believe may continue. Any further consolidation our industry experiences could lead to increased competition and result in pricing pressure or loss of market share, either of which could have a material adverse effect on our business, limit our growth prospects or reduce our revenues.

We are currently in the process of migrating the hosting of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. In certain cases, operating our solutions with third-party public cloud service providers requires changes to our solutions to allow for optimal operation of the solution when hosted by the third-party public cloud service provider, and such changes can vary significantly from customer to customer depending up on the particular design and combination of services they use and offer, including integrations to third-party services over which we have little or no control. Migrating customers also requires planned downtime and a transfer of their environment to the public cloud. While we have planned this migration extensively and are conducting it carefully and methodically, we or our customers could experience unforeseen challenges or difficulties with the migration, including outages, service delays, defects or errors. Additionally, such migration may not achieve the anticipated cost savings or technical advantages.

Our Symphonix lending platform runs on salesforce.com's Force.com platform, and we do not have any control over the Force.com platform or the prices salesforce.com charges us or our customers. Salesforce.com may discontinue or modify Force.com or increase its fees or modify its pricing structures for our customers' environments. If salesforce.com takes any of these actions, we may suffer lower sales, increased operating costs and loss of revenue from our Symphonix lending platform until equivalent technology is either developed by us, or, if available from a third party, is identified, obtained and integrated. Additionally, we may not be able to honor commitments we have made to our customers and we may be subject to breach of contract or other claims from our customers.

In addition, we do not control the performance of Force.com. If Force.com experiences an outage, our Symphonix lending platform will not function properly, and our customers may be dissatisfied. If salesforce.com has performance or other problems with its Force.com platform or its operations generally, they will reflect poorly on us and the adoption and renewal of certain of our Symphonix lending platform and our business may be harmed.

Effective customer training on our solutions and high-quality, ongoing customer support are important to the successful marketing and sale of our solutions, for the renewal of existing customer agreements and for the remediation of any defects or issues with our solutions or the manner in which they are being used. Providing this training and support requires that our customer training and support personnel have Q2 solutions and financial services knowledge and expertise, which can make it difficult for us to hire qualified personnel and scale our training and support operations. The demand on our customer support organization has and will continue to increase as we expand our business, offer new and more complex solutions and pursue new and larger customers, and such increased support could require us to devote significant development services and support personnel, which could strain our team and infrastructure and reduce our profit margins. From time to time, customer support cases can include product issues or defects which involve inconvenience or financial harm for our customers or End Users. If we do not help our customers quickly resolve any post-implementation product or support issues and provide effective ongoing customer support, our customers or End Users may incur further inconvenience or may not be able to remediate or limit resulting financial harm, and our ability to sell additional solutions to existing and future customers could suffer and our reputation could be harmed.

We currently incorporate AI capabilities into certain of our solutions, and we are making investments and anticipate further utilization of AI in our solutions in the future. As with many emerging technologies, AI presents risks, challenges, and unintended consequences related to its development, adoption and use that could adversely affect our business. AI algorithms and training methodologies may create accuracy issues, unintended biases and other unexpected outcomes. Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the accuracy and acceptance of AI-based solutions or cause harm to individuals or customers, creating perceived or actual technical, legal, compliance, privacy, security and ethical risks, which could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. These incidents could include explainability risk whereby our potential inability to interpret, articulate, or justify the decision-making processes of AI models, compounded by challenges in achieving replicability of outcomes due to the adaptive nature of AI learning, where identical inputs may not always yield repeatable or consistent outputs, may lead to concerns about trust, regulatory compliance and accountability. If we enable or offer AI-based solutions that are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, or which contain errors or bias or infringe upon the rights of third parties, we may experience competitive, brand or reputational harm or legal or regulatory action. Further, incorporating AI into our solutions may increase our risk of litigation and risk of non-compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed. The legal and regulatory landscape for AI is emerging and evolving rapidly, and what they ultimately will become remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business or entirely limit our ability to incorporate certain AI capabilities into our solutions.

We also currently utilize AI for certain internal functions and in operating our business and we anticipate expanding our use of AI for these purposes, which presents risks and challenges. While we aim to use AI ethically and attempt to identify and mitigate ethical or legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise. The use of AI to support business operations carries inherent risks related to data privacy and security, such as intended, unintended, or inadvertent transmission of proprietary or sensitive information, where security incidents may become more complicated to discover due to the nature of AI. Additionally, we may experience challenges related to implementing and maintaining AI tools, such as developing and maintaining appropriate datasets for such support and internal controls related to their use. Use of AI for business operations also involves the risk of infringing third-party intellectual property rights. Further, dependence on AI may introduce additional operational vulnerabilities by impacting our relationships with customers, partners, and suppliers, by producing inaccurate outcomes based on flaws in the underlying data, or other unintended results. Our competitors or other third-parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.

The markets for our solutions are characterized by rapid technological advancements, changes in customer requirements and technologies, frequent new product introductions and enhancements and changing regulatory requirements. The life cycles of our solutions are difficult to estimate. Rapid technological changes and the introduction of new products and enhancements by new or existing competitors or large financial services providers could undermine our current market position. Other means of digital financial services solutions may be developed or adopted in the future, and our solutions may not be compatible with these new technologies. In addition, the technological needs of, and services provided by, customers may change if they or their competitors offer new services to End Users. Maintaining adequate research and development resources to meet the demands of the markets we serve is essential. The process of developing new technologies and solutions is complex and expensive. The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies or the emergence of new technologies or solutions in the broader financial services industry could render our solutions obsolete or less effective.

The success of any enhanced or new solution depends on several factors, including timely completion, adequate testing and market release and acceptance of the solution. Any new solutions that we develop or acquire may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the broad market acceptance necessary to generate significant revenues. If we are unable to anticipate customer requirements or work with our customers successfully on implementing new solutions or features in a timely manner or enhance our existing solutions to meet our customers' requirements, our business and operating results may be adversely affected.

Increasing our customer base and achieving broader market acceptance of our solutions will depend on our ability to maintain and potentially expand our sales and marketing organizations and their abilities to obtain new customers and sell additional solutions and services to new and existing customers. We believe there is significant competition for direct sales professionals with the skills and knowledge that we require, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future. Our ability to achieve significant future revenue growth may depend on our success in recruiting, training and retaining a sufficient number of direct sales professionals, as well as our ability to deploy our existing sales and marketing resources efficiently. New hires may require significant training and time before they become fully productive and may not become as productive as quickly as we anticipate. As a result, the cost of hiring and carrying new representatives cannot be offset by the bookings and revenues they produce for a significant period of time. Our growth prospects will be harmed if our efforts to expand, train and retain our direct sales team do not generate a corresponding increase in revenues. Additionally, if we fail to sufficiently invest in our marketing programs or they are unsuccessful in creating market awareness of our company and solutions, our business may be harmed and our sales opportunities limited.

In addition to our direct sales team, we also extend our sales distribution through formal and informal relationships with referral partners and resellers. While we are not substantially dependent upon referrals and sales from any partner, our ability to grow revenue in the future may depend upon continued referrals from our partners and growth of the network of our referral partners. These partners are under no contractual obligation to continue to refer business to us, nor do these partners have exclusive relationships with us and may choose to instead refer potential customers to our competitors. We cannot be certain that these partners will prioritize or provide adequate resources for promoting our solutions or that we will be successful in maintaining, expanding or developing our relationships with referral partners. Our competitors may be effective in providing incentives to third parties, including our partners, to favor their solutions or prevent or reduce subscriptions to our solutions either by disrupting our relationships with existing customers or limiting our ability to win new customers. Establishing and retaining qualified partners and training them with respect to our solutions requires significant time and resources. If we are unable to devote sufficient time and resources to establish and train these partners or if we are unable to maintain successful relationships with them, we may lose sales opportunities and our revenues could suffer.

Our success and future growth depend upon the continued services of our management team, in particular our Chief Executive Officer, and other key employees, including in the areas of research and development, marketing, sales, services and general and administrative functions. From time to time, there may be changes in our management team resulting from the hiring or departure of executives, which could disrupt our business. We also are dependent on the continued service of our existing development professionals because of the complexity of our solutions, including complexity arising as a result of the regulatory requirements that are applicable to our customers and the pace of technology changes impacting our customers and their End Users. We may generally terminate any employee's employment at any time, with or without cause, subject to local laws in particular non-U.S. jurisdictions, and any employee may resign at any time, with or without cause; however, our employment agreements with our named executive officers provide for the payment of severance under certain circumstances. We also have entered into employment agreements with our other executive officers which provide for the payment of severance under similar circumstances as in our named executive officers' employment agreements. The loss of one or more of our key employees could harm our business.

If we fail to attract, hire and integrate qualified new employees, motivate and retain existing personnel, or maintain a highly skilled and diverse global workforce, our business and future growth prospects could be harmed. Competition for executive officers, software developers, domain experts in financial services and other highly skilled personnel in our industry is intense. In particular, we compete with many other companies for executive officers, software developers with high levels of experience in designing, developing and managing software, as well as skilled sales and operations professionals and knowledgeable customer support professionals, and we may not be successful in attracting the professionals we need. We have from time-to-time experienced, and we may experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Qualified individuals are usually in high demand, and we may incur incremental costs to attract and retain them. We continue to hire personnel in countries where technical knowledge and other expertise are offered at lower costs than in the U.S., which increases the efficiency of our global workforce structure and reduces our personnel related expenditures. Nonetheless, as globalization continues, competition for employees in these countries has increased, which may impact our ability to retain these employees and increase our compensation-related expenses. We intend to continue to expand our international operations, which will require significant management attention and resources. We may be unable to scale our infrastructure effectively or as quickly as our competitors in these markets, and our revenue may not increase sufficiently to offset these expected increases in costs, causing our results to suffer.

We have international operations in India, Australia, Canada, the United Kingdom and Mexico. In recent years, we have expanded our international operations in order to maintain an appropriate cost structure, access a broader talent pool and meet our customers' needs, which has included opening offices in new jurisdictions. Our continued expansion efforts may involve expanding into less developed countries, which may be subject to political, social or economic instability and have less developed infrastructure and legal systems. The continued international expansion of our operations requires significant management attention and financial resources and involves significant administrative and compliance costs. Our limited experience in operating our business in certain regions outside the U.S. increases the risk that our expansion efforts into those regions may not be successful. In particular, our business model may not be successful in particular countries or regions outside the U.S. for reasons that we currently are unable to anticipate. In addition, conducting international operations subjects us to risks that we have not generally faced in the U.S. These include, but are not limited to:

•fluctuations in currency exchange rates;

•the complexity of, or changes in, foreign regulatory requirements;

•difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations;

•complexities implementing and enforcing cross-border information technology and security controls;

•potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the repatriation of earnings and changes in tax rates;

•the cost and complexity of bringing our solutions into compliance with foreign regulatory requirements, and risks of our solutions not being compliant;

•dependence on resellers and distributors to increase customer acquisition or drive localization efforts;

•the burdens of complying with a wide variety of foreign laws and different legal standards, certain of which may be significantly more burdensome than those in place in the U.S.;

•increased financial accounting and reporting burdens and complexities;

•longer payment cycles and difficulties in collecting accounts receivable;

•longer sales cycles;

•political, social and economic instability abroad;

•terrorist attacks and security concerns in general;

•failure to recruit, onboard, build and retain a talented and engaged global workforce;

•integrating personnel with diverse business backgrounds and organizational cultures;

•difficulties entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledge of these new markets;

•constraints of remote working by employees;

•reduced or varied protection for intellectual property rights in some countries; and

•the risk of U.S. regulation of foreign operations.

The occurrence of any one of these risks could negatively affect our international business and, consequently, our operating results. We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries will produce desired levels of revenue or profitability. If we are unable to effectively manage our expansion into additional geographic markets, our financial condition and results of operations could be harmed.

In particular, we operate some of our research and development activities internationally and outsource a portion of the coding and testing of our products and product enhancements to contract development vendors. We believe that performing research and development in our international facilities and supplementing these activities with our contract development vendors enhances the efficiency and cost-effectiveness of our product development. If we experience problems with our workforce or facilities internationally, we may not be able to develop new products or enhance existing products in an alternate manner that may be equally or less efficient and cost-effective. In addition, if information technology and security controls we have implemented to address risks posed by research and development activities outside of the U.S. are breached or are otherwise ineffective, our intellectual property or technical infrastructure could be compromised or stolen and we could be subjected to cyberattacks or intrusions.

We have completed, and may in the future evaluate and consider, potential strategic transactions, including acquisitions or divestitures of, or investments in, businesses, technologies, services, products and other assets. We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses and additional channels of distribution. Negotiating any acquisition, investment or alliance, or any divestiture opportunity, can be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to approvals that are beyond our control. We may not be able to find and identify desirable additional acquisition targets, we may incorrectly estimate the value of an acquisition target, and we may not be successful in entering into an agreement with any particular target or identified purchaser for divestiture opportunities. Consequently, these transactions, even if undertaken and announced, may not close.

We may not achieve the anticipated benefits from our past acquisitions or any additional businesses we acquire due to a number of factors, including:

•our inability to integrate, manage or benefit from acquired operations, technologies or services;

•our inability to successfully sell and maintain the solutions of the acquired business;

•unanticipated costs or liabilities associated with the acquisition, including the assumption of liabilities or commitments of the acquired business that were not disclosed to us or that exceeded our estimates;

•difficulty integrating the technology, accounting systems, operations and personnel of the acquired business;

•difficulties and additional expenses associated with supporting and modernizing legacy solutions, security architecture and hosting infrastructure of the acquired business;

•uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions;

•difficulty converting the customers of the acquired business to our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company;

•diversion of management's attention to other business concerns;

•adverse effects to our existing business relationships with business partners and customers as a result of the acquisition or divestiture;

•use of resources that are needed in other parts of our business;

•the use of a substantial portion of our cash that we may need to operate our business and which may limit our operational flexibility and ability to pursue additional strategic transactions;

•the issuance of additional equity securities that would dilute the ownership interests of our stockholders;

•incurrence of debt on terms unfavorable to us or that we are unable to repay;

•incurrence of large charges or substantial liabilities;

•our inability to apply and maintain internal standards, controls, procedures and policies with respect to the acquired businesses;

•difficulties retaining key employees of the acquired company or integrating diverse software codes or business culture; and

•becoming subject to adverse tax consequences, substantial depreciation or deferred compensation charges.

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.

We generally recognize revenues monthly over the terms of our customer agreements. The initial term of our digital banking platform agreements averages over five years, although it varies by customer. As a result, the substantial majority of the revenues we report in each quarter are related to agreements entered into during previous quarters. Consequently, a change in the level of new customer agreements or implementations in any quarter may have a small impact on our revenues in that quarter but will primarily affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions, or changes in our rate of renewals may not be fully reflected in our results of operations until future periods. Our subscription model and the proportion of our subscription revenues to our total revenues also make it difficult for us to rapidly increase our revenues through additional sales in any period.

Additionally, we recognize our expenses over varying periods based on the nature of the expense. In particular, we recognize a substantial portion of implementation expenses as incurred even though we recognize the revenues over extended periods. As a result, we may report poor operating results in periods in which we are incurring higher implementation expenses related to revenues that we will recognize in future periods, including implementations for larger customers that have heightened levels of complexity in their hardware, software and network infrastructure needs. Alternatively, we may report better operating results in periods due to lower implementation expenses, but such lower expenses may be indicative of slower revenue growth in future periods. As a result, our expenses may fluctuate as a percentage of revenues and changes in our business generally may not be immediately reflected in our results of operations.

Our quarterly operating results and key operating measures have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results or key operating measures on a period-to-period basis may not be meaningful. Our past results may not be indicative of our future performance. In addition to the other risks described in this report, factors that may affect our quarterly operating results or key operating measures include the following:

•the addition or loss of customers, including through acquisitions, consolidations or failures;

•the timing of large subscriptions and customer terminations, renewals or failures to renew;

•the amount of use of our solutions in a period and the amount of any associated transactional revenues and expenses;

•the amount and timing of professional service engagements and associated revenues and expenses;

•budgeting cycles of our customers and changes in spending on solutions by our current or prospective customers;

•seasonal variations in sales of our solutions, which may be lower in the first half of the calendar year;

•changes in the competitive dynamics of our industry, including consolidation among competitors, changes to pricing or the introduction of new products and services that limit demand for our solutions or cause customers to delay purchasing decisions;

•the amount and timing of cash collections from our customers;

•long or delayed implementation times for new customers, including larger customers with more complex requirements, or other changes in the levels of customer support we provide;

•the timing and predictability of sales of our solutions and the impact that the timing of bookings may have on our revenue and financial performance in a period;

•the timing of customer payments and payment defaults by customers, including any buyouts by customers of the remaining term of their contracts with us in a lump sum payment that we would have otherwise recognized over the term of those contracts, and any costs associated with impairments of related contract assets;

•changes in actual customer usage or projected customer usage of our solutions;

•the amount and timing of our operating costs and capital expenditures;

•changes in tax rules or the impact of new accounting pronouncements;

•general economic conditions or conditions in the financial services industry that may adversely affect our customers' ability or willingness to purchase solutions, delay a prospective customer's purchasing decision, reduce our revenues from customers or affect renewal rates;

•natural disasters or public health emergencies and their effect on the operations of us, our customers, our third-party providers and on the overall economy;

•impairment charges related to long-lived assets;

•unexpected expenses such as those related to non-recurring corporate transactions, litigation or other disputes, or changes in claim trends on our workers' compensation, unemployment, disability and medical benefit plans may negatively impact our operating costs;

•the timing of stock awards to employees and related adverse financial statement impact of having to expense those stock awards over their vesting schedules; and

•the amount and timing of costs associated with recruiting, hiring, training and integrating new employees, many of whom we hire in advance of anticipated needs.

Any one of the factors above, or the cumulative effect of some or all of the factors referred to above, may result in significant fluctuations in our quarterly and annual results of operations. This variability and unpredictability could result in our failure to meet our internal operating plan. Additionally, the price of our common stock might be based on expectations of investors or securities analysts of future performance that are inconsistent with our actual growth opportunities or that we might fail to meet and, if our revenues or operating results fall below expectations, the price of our common stock could decline substantially.

We have incurred losses from operations in each period since our inception in 2005, except for 2010 when we recognized a gain on the sale of a subsidiary. We incurred net losses of $38.5 million, $65.4 million and $109.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $664.2 million. These losses and accumulated deficit reflect the substantial investments we have made to develop, sell and market our solutions, acquire customers and hire and retain qualified employees. As we seek to continue to grow our business, including through acquisitions, we expect to incur additional sales, marketing, implementation and other related expenses, including amortization of acquired intangibles. Our ability to achieve or sustain profitability will depend on our obtaining sufficient scale and productivity so that the cost of adding and supporting new customers does not adversely impact our margins. We also expect to continue to make other investments to develop and expand our solutions and our business, including continuing to increase our marketing, services and sales operations and continuing our significant investment in research and development and our technical infrastructure, while also managing our business in response to continued challenging economic conditions, challenges in the financial services industry and any anticipated or resulting economic slowdown. We may continue to incur losses in the future as we continue to focus on adding new customers and solutions, and we cannot predict whether or when we will achieve or sustain profitability. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenues enough to offset our higher operating expenses, thus making it challenging to achieve and maintain profitability. While our revenues have grown in recent periods, such growth may not be sustainable, and our revenues could decline or grow more slowly than we expect. We also may incur additional losses in the future for a number of reasons, including due to litigation and other unforeseen reasons and the risks described in this report. Accordingly, we cannot give assurance that we will achieve profitability in the future, nor that, if we do become profitable, we will be able to sustain profitability. If we are unable to achieve and sustain profitability, our customers may lose confidence in us and slow or cease their purchases of our solutions and we may be unable to attract new customers, which would adversely impact our operating results.

As the markets for our existing solutions develop and evolve, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. Additionally, as a result of the operational and economic challenges being faced by our customers, we could be forced to modify contractual or payment terms with our customers. Moreover, large or influential financial services providers may demand more favorable pricing or other contract terms, including termination rights. As a result, in the future we may not be able to maintain historical contract terms such as pricing and duration and instead may be required to reduce our prices or accept other unfavorable contract terms, each of which could adversely affect our revenues, gross margin, profitability, financial position and cash flow.

Our customers have no obligation to renew their subscriptions for our solutions after the expiration of the initial subscription term, and if our customers renew at all, then our customers may renew for fewer solutions or on different pricing terms. Our renewal rates may decline or fluctuate as a result of a number of factors, including our customers' satisfaction with our pricing or our solutions or their ability to continue their operations and spending levels. Additionally, certain agreements may include termination rights allowing customers to terminate their customer agreements in the event of, among other things, defects with our solutions, changes in our solution, breach by us of our obligations, requirements from regulatory authorities or a change in control of our company. If our customers terminate or do not renew their subscriptions for our solutions on similar pricing terms, our revenues may decline and our business could suffer. As we create new solutions or enhance our existing solutions to support new technologies and devices, our pricing of these solutions and related services may be unattractive to customers or fail to cover our costs.

Our profit margins can vary depending on numerous factors, including the scope and complexity of our implementation efforts, the number of End Users on our solutions, the frequency and volume of their use of our solutions and the level of customer support services required by our customers. For example, our services offerings typically have a much higher cost of revenues compared to subscription fees for the use of our solutions, so any increase in sales of services as a proportion of our subscriptions would have an adverse effect on our overall gross margin and operating results. If we are unable to increase the number of End Users and the number of transactions they perform on our solutions, the number of End Users on our solutions or the number of transactions they perform decreases, customers fail to achieve their anticipated End User growth, the types of customers that purchase our solutions changes, or the mix of solutions purchased by our customers changes, our profit margins could decrease and our operating results could be adversely affected.

The market data and forecasts included in this report and our other filings with the SEC, including the data and forecasts published by BauerFinancial, among others, and our internal estimates and research are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. If the forecasts of market size, growth or anticipated spending prove to be inaccurate, our business and growth prospects could be adversely affected. Even if the forecasted size or growth proves accurate, our business may not grow at a similar rate, or at all. Our future growth is subject to many factors, including our ability to successfully execute on our business strategy, which itself is subject to many risks and uncertainties. Data and forecasts we use reflect information as of their respective publication dates and the opinions expressed in such reports are subject to change. Accordingly, investors and potential investors are urged not to put undue reliance on such forecasts and market data.

As of December 31, 2024, we had approximately $438.4 million of U.S. federal net operating loss carryforwards. Utilization of these net operating loss carryforwards depends on many factors, including our future income, which cannot be assured. Section 382 of the Internal Revenue Code, as amended, generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone an ownership change. An ownership change is generally defined as a greater than 50% change in equity ownership by value over a 3-year period. Future ownership changes or future regulatory changes could further limit our ability to utilize our net operating loss carryforwards. To the extent we are not able to offset our future income against our net operating loss carryforwards, this would adversely affect our operating results and cash flows if we attain profitability.

We file sales and other tax returns within the U.S. and foreign jurisdictions as required by law and certain customer contracts for a portion of the solutions that we provide. Our tax liabilities with respect to sales and other taxes in various jurisdictions were approximately $1.0 million as of December 31, 2024. From time to time, we face sales and other tax audits, and we will likely continue to do so in the future. Our liability for these taxes could exceed our estimates as tax authorities could assert that we are obligated to collect additional amounts as taxes from our customers and remit those taxes to such authorities.

We do not collect sales or other similar taxes in certain states and other jurisdictions, and some jurisdictions do not apply sales or similar taxes to certain solutions. State, local and foreign taxing jurisdictions have differing rules and regulations governing sales and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of sales taxes to our solutions in various jurisdictions is unclear. We review these rules and regulations periodically, and when we believe we are subject to sales and other taxes in a particular jurisdiction, we may voluntarily engage tax authorities to determine how to comply with their rules and regulations. A successful assertion by one or more jurisdictions, including those for which we have not accrued tax liability, requiring us to collect sales or other taxes with respect to sales of our solutions or customer support could result in substantial tax liabilities for past transactions, including interest and penalties, discourage customers from purchasing our solutions or otherwise harm our business and operating results.

Financial accounting standards may change or their interpretation may change. A change in accounting standards or practices can have a significant impact on our reported financial results for periods prior and subsequent to such change. Changes to existing rules or the re-examining of current practices may adversely affect our reported financial results or the way we conduct our business. Accounting for revenues from sales of our solutions is particularly complex, is often the subject of intense scrutiny by the SEC and will evolve as the Financial Accounting Standards Board, or FASB, continues to consider applicable accounting standards in this area.

We may require additional capital in the future to pursue business opportunities or acquisitions, pay off our existing debt or respond to challenges and unforeseen circumstances. We also may decide to engage in equity or debt financings or enter into credit facilities for other reasons. We may not be able to secure additional debt or equity financing in a timely manner, on favorable terms, or at all. Any debt financing we obtain in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities, including potential acquisitions.

Our customers and prospective customers are highly regulated and may be required to comply with stringent regulations in connection with subscribing to, implementing and using our solutions. As a provider of technology to financial institutions, we are examined on a periodic basis by various regulatory agencies and required to review our third-party suppliers and partners. The stringency of our third-party review is based on criticality criteria. The examination handbook and other guidance issued by the Federal Financial Institutions Examination Council, or FFIEC, govern the examination of our operations and include a review of our systems and data center and technical infrastructure, management, financial condition, development activities and our support and delivery capabilities. If deficiencies are identified, customers may choose to terminate or reduce their relationships with us. In addition, while much of our operations are not directly subject to the same regulations applicable to financial institutions or our bank partners, we are generally obligated to our customers to provide software solutions and maintain internal systems and processes that comply with federal, state and other regulations applicable to them. In particular, as a result of obligations under our customer agreements, we are required to comply with certain provisions of the Gramm-Leach-Bliley Act related to the privacy of consumer information and may be subject to other privacy and data security laws because of the solutions we provide. In addition, numerous regulations have been proposed and are still being written to implement the Dodd-Frank Act, including requirements for enhanced due diligence of the internal systems and processes of companies like ours by their financial institution customers. In October 2024, the CFPB issued a rule pursuant to section 1033 of the Dodd-Frank Act that requires banks and other financial institutions to share data securely with consumers and authorized third parties upon consumer request by giving them control over their personal financial data while promoting transparency, data portability, and competition in the financial sector. Institutions must comply by set dates based on their size starting in 2026. In general, larger financial institutions are subject to more stringent regulations and as a result, as we sell our solutions to larger financial institutions, we will become obligated to meet more stringent regulatory standards, including more in-depth due diligence. Certain of our solutions are designed to be highly configurable by our customers and their ability to perform as intended can be affected by the manner in which our customers use or configure the solutions. To the extent we do not adequately train our customers to properly use such highly configurable solutions and advise them of the associated risks, or to the extent our customers do not follow our training, our customers may use them incorrectly or in a manner that violates the law or causes harm to our customers or their End Users. Regulatory scrutiny of BaaS solutions has recently increased and may require us to devote significant resources to enhancing relevant policies, procedures and operations related to our Helix solutions, and the failure to satisfy such increased scrutiny may cause regulators to take action against us. Furthermore, regulatory scrutiny of BaaS solutions extends directly to middleware providers, which, in certain circumstances, may result in our customers bearing accountability for our compliance and risk management, including with respect to penalties, fines, and other measures that bank regulatory agencies take in the event of non-compliant activity or risks that are not well controlled. In July 2024, the FDIC released a notice of proposed rulemaking (the "NPR") to revise regulations related to brokered deposits, revising the "deposit broker" definition and proposing to eliminate the "exclusive deposit placement arrangement exception," among other changes. Elimination of the "exclusive deposit placement arrangement exception" as proposed in the NPR would require our customers to reevaluate their current classification of certain BaaS deposits and could require our customers to reclassify those as brokered deposits and may also require our customers to reclassify certain BaaS deposits as brokered deposits. As FinTechs and financial institutions face increased regulatory scrutiny, their scrutiny of our services will likely increase and our inability to satisfactorily respond to partner demands could result in those partners moving to different solutions. If we have to make changes to our internal processes and solutions as a result of these regulatory changes, we could be required to invest substantial time and funds and divert time and resources from other corporate purposes to remedy any identified deficiency.

This evolving, complex and often unpredictable regulatory environment could result in our failure to provide regulatory-compliant solutions, which could result in customers' not purchasing our solutions or terminating their agreements with us or the imposition of fines or other liabilities for which we may be responsible. Any failure of our solutions to withstand regulatory scrutiny could reflect badly on our relationship with our regulators and on our overall reputation. In addition, federal, state or foreign agencies may attempt to further regulate our activities in the future. For example, Congress could enact legislation to regulate providers of electronic commerce services as consumer financial services providers or under another regulatory framework. If enacted or deemed applicable to us, such laws, rules or regulations could be imposed on our activities or our business thereby rendering our business or operations more costly, burdensome, less efficient or impossible, any of which could have a material adverse effect on our business, financial condition and operating results.

Our business is subject to a wide variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These data protection and privacy-related laws and regulations continue to evolve and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance. Data privacy, information security, and data protection are significant issues in the U.S. and globally. The regulatory framework governing the collection, processing, storage, use and sharing of certain information, particularly financial and other PII, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. The occurrence of unanticipated events and development of evolving technologies often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data and the way we conduct our business. In the U.S., these include rules and regulations promulgated under the authority of the Federal Trade Commission, and state breach notification laws. If there is a breach of our systems and we know or suspect that unencrypted personal customer or End-User information has been stolen, we may be required to inform the representative state attorney general or federal or country regulator, media, credit reporting agencies, applicable banking agencies and any customers whose information was stolen, which could harm our reputation and business. Additionally, a breach of our systems could trigger an SEC-mandated cybersecurity disclosure that requires us to disclose material cybersecurity incidents. Such a disclosure could harm our reputation and business. Other states and countries have enacted different requirements for protecting personal information collected and maintained electronically. We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the U.S., the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards will have on our business or the businesses of our customers, including, but not limited to, the European Union's GDPR, which came into force in May 2018, the European Union's Digital Operational Resilience Act, or DORA, which was formally adopted November 2022 and the California Consumer Privacy Act, which came into force in January 2020, each of which creates a range of new compliance obligations, which could require us to change our business practices, and significantly increases financial penalties for noncompliance.

Failure to comply with laws concerning privacy, data protection and information security could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers, End Users and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and End Users and prospective customers and End Users), any of which could have a material adverse effect on our operations, financial performance and business. In addition, we could suffer adverse publicity and loss of customer confidence were it known that we did not take adequate measures to assure the confidentiality of the personally identifiable information that our customers had given to us. This could result in a loss of customers and revenue that could jeopardize our success. We may not be successful in avoiding potential liability or disruption of business resulting from the failure to comply with these laws and, even if we comply with laws, may be subject to liability because of a security incident. If we were required to pay any significant amount of money in satisfaction of claims under these laws, or any similar laws enacted by other jurisdictions, or if we were forced to cease our business operations for any length of time because of our inability to comply fully with any of these laws, our business, operating results and financial condition could be adversely affected. Further, complying with the applicable notice requirements in the event of a security and privacy breach could result in significant costs.

Additionally, our business efficiencies and economies of scale depend on generally uniform solutions offerings and uniform treatment of customers and their End Users across all jurisdictions in which we operate. Compliance requirements that vary significantly from jurisdiction-to-jurisdiction impose added costs on our business and can increase liability for compliance deficiencies.

The future success of our business depends upon the continued use of the Internet as a primary medium for commerce, including through mobile usage. We and our customers are subject to laws and regulations applicable to doing business over the Internet. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. It is often not clear how existing laws governing issues such as property ownership, sales and other taxes apply to the Internet, as these laws have in some cases failed to keep pace with technological change. Laws governing the Internet could also impact our business or the business of our customers, and changes in these laws or regulations could require us to modify our software in order to comply with these changes. Additionally, if governmental agencies or private organizations began to impose taxes, fees or other charges for accessing the Internet or commerce conducted via Internet, characterize the types and quality of services and products, or restrict the exchange of information over the Internet, we may experience reduced growth of our business, a general decline in the use of the Internet by financial services providers, or their End Users, or diminished viability of our solutions and our customers' ability to use our solutions could be significantly restricted.

Changing laws and regulations, industry standards and industry self-regulation regarding the collection, use and disclosure of certain data may have similar effects on our and our customers' businesses. Any such constraint on the growth in Internet usage could decrease its acceptance as a medium of communication and commerce or result in increased adoption of new modes of communication and commerce that may not be supported by our solutions. In addition, the use of the Internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease of use, accessibility and quality of service. The performance of the Internet and its acceptance as a business tool have been adversely affected by a variety of evolving data security threats and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the Internet is adversely affected by these issues, demand for our offerings and related services could suffer.

We collect and store personal and identifying information regarding our customers' End Users to enable certain functionality of our solutions and provide our customers with data about their End Users. The enactment of new or amended legislation or industry regulations pertaining to consumer or private sector privacy issues, AI or machine learning could have a material adverse impact on our receipt, collection, storage, processing and transferring of such information. Legislation or industry regulations regarding consumer or private sector privacy issues could place restrictions upon the collection, sharing and use of information that is currently legally available, which could materially increase our cost of collecting some data. These types of legislation or industry regulations could also prohibit us from collecting or disseminating certain types of data, which could adversely affect our ability to meet our customers' requirements and our profitability and cash flow targets. These legislative measures impose strict requirements on reporting time frames for providing notice, as well as the contents of such notices. The costs of compliance combined with the inability to determine whether a data breach has occurred within the time frame provided by, and other burdens imposed by, such laws and regulations may lead to significant fines, penalties or liabilities for any noncompliance with such privacy laws. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our solutions.

In addition to government activity, privacy advocacy groups and other industry groups are considering various new, additional or different self-regulatory standards that may place additional burdens on us. If the collecting, storing and processing of personal information were to be curtailed, our solutions would be less effective, which may reduce demand for our solutions and adversely affect our business.

If our customers or their End Users use our solutions in violation of regulatory requirements and applicable laws, we could suffer damage to our reputation and could become subject to claims. We rely on contractual obligations made to us by our customers that their use and their End Users' use of our solutions will comply with applicable laws. However, we do not audit our customers or their End Users to confirm compliance. We may become subject to or involved with claims for violations by our customers or their End Users of applicable laws in connection with their use of our solutions. Even if claims asserted against us do not result in liability, we may incur costs in investigating and defending against such claims. If we are found liable in connection with our customers' or their End Users' activities, we could incur liabilities and be required to redesign our solutions or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

We may become subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business such as claims brought by our customers in connection with commercial or intellectual property disputes, employment claims made by our current or former employees, whistleblower claims or commercial or intellectual property claims by our suppliers or service providers. Litigation might result in substantial costs and may divert management's attention and resources, which might seriously harm our business, our overall financial condition and our operating results. Insurance may not cover such claims, provide sufficient payments to cover all the costs to resolve one or more such claims or continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and impact our liquidity, thereby reducing our operating results and impacting our financial condition, leading analysts and investors to reduce their confidence and expectations which may reduce the trading price of our stock.

Our industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual property and proprietary rights as well as a high number of allegations and disputes related to these rights. Our competitors and the competitors of our customers, as well as a number of other entities and individuals (both operating and non-operating), own or claim to own intellectual property relating to our industry. As a result, we periodically are subject to allegations and involved in disputes, either directly or on behalf of our customers, that our solutions and the underlying technology infringe the patent and other intellectual property rights of third parties. The frequency of these types of claims also may increase as we continue to add new customers. The defense against these allegations and disputes and, if unsuccessful, their resolution could result in our having to pay damages and negatively impact our ability to continue to sell and provide all or a portion of our solutions or certain third-party solutions, any of which could materially harm our reputation, business results and financial condition. Insurance may not cover such claims, provide sufficient payments to cover all the costs to resolve one or more such claims or continue to be available on terms acceptable to us. Successful outcomes in these disputes depend upon our ability to demonstrate that our solutions do not infringe upon the intellectual property rights of others. We have a very limited patent portfolio, which will likely prevent us from deterring patent infringement claims, and our competitors and others may now and in the future have significantly larger or more relevant patent portfolios than we have.

Our customer agreements typically require us to indemnify our customers in connection with claims alleging our solutions or the underlying technologies infringe the patent or other intellectual property rights of third parties. Our customers regularly receive allegations from third parties or are involved in these disputes with third parties, and we may be required to indemnify them in connection with these matters. We have in the past been involved in these types of disputes, and given the high level of this activity in our industry, we expect these types of disputes to continue to arise in the future. If we are unsuccessful in defending claims for which we are required to provide indemnity, our business and operating results could be adversely affected. Any significant disputes among us and our customers as to the applicability of our indemnity obligations could negatively impact our reputation and customer relations, affect our ability to sell our solutions and harm our operating results. Further, there can be no assurances that any provisions in our contracts that purport to limit our liability would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

In certain instances, we license technologies from third parties for use directly or indirectly in our solutions or for resale with our solutions. Our contracts with these third parties may include provisions that require the third party to indemnify us in the event of any claim or dispute that the third party's technologies infringe upon the patent or other intellectual property rights of others. If we are unable for any reason to seek indemnity or otherwise collect from those third parties for our direct or indirect liabilities related to any claim, then we may have to bear the liabilities ourselves and our business performance and financial condition could be substantially harmed.

The risk of patent litigation exists with operating entities but also has been amplified by the increase in the number of non-practicing patent asserting entities, or "patent trolls." Any claims or litigation, whether by operating entities or "patent trolls," could cause us to incur significant expenses and, if successfully asserted against us or our customers whom we indemnify, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our solutions or require that we comply with other unfavorable terms. Even if the claims do not result in litigation or are resolved in our favor, these claims and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

Our success depends upon our ability to protect our intellectual property, which may require us to incur significant costs. We have developed much of our intellectual property internally, and we rely on a combination of confidentiality obligations in contracts, patents, copyrights, trademarks, service marks, trade secret laws and other contractual restrictions to establish and protect our intellectual property and other proprietary rights. In particular, we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have business relationships in which they will have access to our confidential information. We also rely upon licenses to intellectual property from third parties. No assurance can be given that these agreements or other steps we take to protect our intellectual property or the third-party intellectual property used in our solutions will be effective in controlling access to and distribution of our solutions and our confidential and proprietary information. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized uses of our intellectual property.

Despite our precautions, it may be possible for third parties to copy our solutions and use information that we regard as proprietary to create solutions and services that compete with ours. Third parties also may independently develop technologies that are substantially equivalent to our solutions. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our solutions may be unenforceable under the laws of certain jurisdictions.

Our employees may use certain technological tools and infrastructure that allow us to enhance productivity, such as AI-enhanced chat bot functionality, which can generate code or other content. If we cannot develop or maintain effective policies and controls around the use of AI, or if resulting code or content inadvertently contains malicious or vulnerable data or code, open-source code, infringes upon third-party intellectual property rights or is encumbered by third-party rights, our business and reputation could be harmed. Such use of AI may also result in disclosure of Q2 confidential or proprietary information to the third party providing the AI, or others, and potentially further use or copying by such third parties of Q2's proprietary information.

In some cases, litigation may be necessary to enforce our intellectual property rights or to protect our trade secrets. Litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights and exposing us to significant damages or injunctions. Our inability to protect our intellectual property against unauthorized copying or use, as well as any costly litigation or diversion of our management's attention and resources, could delay sales or the implementation of our solutions, impair the functionality of our solutions, delay introductions of new solutions, result in our substituting less-advanced or more-costly technologies into our solutions or harm our reputation. In addition, we may be required to license additional intellectual property from third parties to develop and market new solutions, and we cannot give assurance that we could license that intellectual property on commercially reasonable terms or at all.

As of December 31, 2024, we had nine patent applications pending and 16 patents issued in the U.S. and other countries. We do not know whether our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow the scope of our claims. To the extent that our pending patent applications or any portion of such applications proceed to issuance as a patent, any such future patent may be opposed, contested, circumvented, designed around by a third party or found to be invalid or unenforceable. In addition, our existing and any future issued patents may be opposed, contested, circumvented, designed around by a third party or found to be invalid or unenforceable. The process of seeking patent protection can be lengthy and expensive. We rely on a combination of patent, copyright, trade secret, trademark and other intellectual property laws to protect our intellectual property, and much of our technology is not covered by any patent or patent application.

We currently, and may in the future, use in our solutions software that is licensed under "open-source," "free" or other similar licenses where the licensed software is made available to the general public on an "as-is" basis under the terms of a specific non-negotiable license. Some open-source software licenses require that software subject to the license be made available to the public and that any modifications or derivative works based on the open-source code be licensed in source code form under the same open-source licenses. Although we monitor our use of open-source software, there can be no assurance that all open-source software is reviewed prior to use in our solutions, that our programmers have not incorporated open-source software into our solutions, or that they will not do so in the future. In addition, some of our products may incorporate third-party software under commercial licenses. We cannot be certain whether such third-party software incorporates open-source software without our knowledge. In the past, companies that incorporate open-source software into their products have faced claims alleging noncompliance with open-source license terms or infringement or misappropriation of proprietary software. Therefore, we could be subject to suits by parties claiming noncompliance with open-source licensing terms or infringement or misappropriation of proprietary software. Because few courts have interpreted open-source licenses, the manner in which these licenses may be interpreted and enforced is subject to some uncertainty. There is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or provide our solutions. As a result of using open-source software subject to such licenses, we could be required to release our proprietary source code, pay damages, re-engineer our products, limit or discontinue sales or take other remedial action, any of which could adversely affect our business.

We strive to conduct our business in a responsible and sustainable manner, considering environmental, social, and governance factors in our decision-making processes. We are committed to sustainable business practices and strive for positive impacts in not just environmental matters, but also social and governance practices. We disclose our goals, accomplishments, and targets related to these matters on our website and through various public communications. While we are dedicated to these objectives, they are aspirational in nature and not guarantees of future performance or results.

Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control. Examples of such risks include:

•market conditions and availability of resources necessary to implement sustainable practices;

•the availability and cost of low or non-carbon-based energy sources;

•the evolving regulatory requirements affecting ESG standards or disclosures;

•the availability of suppliers that can meet our sustainability, diversity and other ESG standards;

•the ability to align with and meet the evolving ESG expectations and demands of our customers, vendors and stockholders;

•our ability to recruit, develop and retain diverse talent in our labor markets; and

•the success of our organic growth and acquisitions, dispositions or restructuring of our business operations.

While we are committed to responsible business practices, we balance these initiatives with our primary focus on creating long-term value for our stockholders and maintaining our competitive position in the market.

Standards for tracking and reporting ESG matters continue to evolve. In March 2024, the SEC enacted comprehensive climate change disclosure rules, although the SEC has since issued an order to stay the rules pending the completion of judicial review of multiple petitions challenging the rules. Our use of disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or differ from those of others. This may result in a lack of consistent or meaningful comparative data from period to period or between us and other companies in the same industry. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. For example, the proliferation of climate and other ESG disclosure requirements at the local, national and international levels have required and may continue to require significant effort and resources and could result in changes to our current ESG goals in order to comply with differing requirements. It is likely that increasing regulatory requirements and regulator scrutiny related to ESG matters will continue to expand globally and result in higher associated compliance costs.

Further, we may rely on data provided by third parties to measure and report our ESG metrics and if the data input is incorrect or incomplete, our brand, reputation, and financial performance may be adversely affected. Our failure or perceived failure to accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance and growth, our ability to attract or retain employees, the attractiveness of our securities as an investment, our relationships with business partners and/or service providers and expose us to increased scrutiny from the investment community, customers, suppliers, employees, as well as enforcement authorities and may also increase the risk we become subject to litigation.

As a public company, we incur significant legal, accounting, administrative and other costs and expenses. Compliance with rules and regulations applicable to public companies may increase our costs, make some activities more time-consuming, and divert management's attention from operational and other business matters to devote substantial time to these public company requirements.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. If we identify any issues in complying with public company reporting requirements (for example, if our financial systems prove inadequate or we or our auditors identify deficiencies in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. While we have documented and assessed our internal controls, we continue to evaluate opportunities to further strengthen the effectiveness and efficiency of our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act, which requires annual management assessment and annual independent registered public accounting firm attestation reports of the effectiveness of our internal control over financial reporting. If we make additional acquisitions, we will need to similarly assess and ensure the adequacy of the internal financial and accounting controls and procedures of such acquisitions. If we fail to maintain proper and effective internal controls, including with respect to acquired businesses, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, harm our ability to operate our business and reduce the trading price of our common stock.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This situation could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We may be required to invest additional resources to comply with evolving laws, regulations and standards. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate investigations, inquiries, administrative proceedings or legal proceedings against us and our business may be adversely affected. Additionally, proposals submitted by stockholders at our annual meeting or other advocacy efforts by stockholders and third parties also may prompt additional changes in governance and reporting requirements, which could further increase our costs.

The trading market for our common stock is influenced in part by the research and reports that securities or industry analysts publish about us or our business. If one or more of the securities or industry analysts who covers us downgrades our stock or publishes unfavorable or misleading research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the market for our stock, and demand for our stock could decrease, which could cause our stock price or trading volume to decline.

The trading price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, including the risk factors described in this report, and other factors beyond our control. Additional factors affecting the trading price of our common stock include, among others:

•variations in our operating results or the operating results of similar companies;

•announcements of technological innovations, new solutions or enhancements or strategic partnerships or agreements by us or by our competitors;

•changes in the estimates of our operating results, our financial guidance or changes in recommendations by any of the securities analysts that follow our common stock;

•the gain or loss of customers, particularly our larger customers;

•adoption or modification of regulations, policies, procedures or programs applicable to our business and our customers' business;

•uncertainties in the financial services industries;

•public disclosures or marketing and advertising initiatives by us or our competitors;

•concerns related to actual or perceived security breaches, outages or other defects related to our solutions;

•threatened or actual litigation;

•changes in our senior management or key personnel; and

•the occurrence of any adverse events or circumstances described in these risk factors.

In addition, the stock market in general and the market for technology companies in particular have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may harm the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could adversely affect an investment in our common stock. Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them. If a suit were filed against us, regardless of its merits or outcome, it could result in substantial costs and divert management's attention.

We have never declared nor paid cash dividends on our capital stock. We currently do not plan to declare dividends on shares of our common stock in the foreseeable future. We currently intend to retain any future earnings to finance the operation and expansion of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Consequently, the only opportunity to achieve a return on investment in our company will be if the market price of our common stock appreciates and shares are sold at a profit. There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that is paid for our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law, which apply to us, may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the stockholder becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our certificate of incorporation and bylaws:

•authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to help defend against a takeover attempt;

•require that directors only be removed from office for cause and only upon a supermajority stockholder vote;

•provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders;

•prevent stockholders from calling special meetings;

•include advance notice procedures for stockholders to nominate candidates for election as directors or bring matters before an annual meeting of stockholders;

•prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and

•provide that certain litigation against us can only be brought in Delaware.

We may need additional financing to execute on our current or future business strategies, including to develop new or enhance existing products and services, acquire businesses and technologies, or otherwise to respond to competitive pressures. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we accumulate additional funds through debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. We cannot give assurance that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, when we desire them, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products and services, or otherwise respond to competitive pressures would be significantly limited. Any of these factors could harm our results of operations and negatively impact the trading price of our common stock.

Our indebtedness under our convertible notes may impair our ability to obtain additional financing in the future for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions, and a portion of our cash flows from operations may have to be dedicated to repaying the principal of the 2026 Notes in 2026 and the principal of the 2025 Notes in 2025, or earlier if necessary. Additionally, if our stock trades at a level where the conversion of any series of our convertible notes is not economical for note holders, the conversion of the applicable series of convertible notes is unlikely. This would require us to repay the full aggregate principal amount outstanding of the applicable series of our convertible notes, plus accrued and unpaid interest and additional amounts (if any) at maturity in cash in lieu of settling conversions of the convertible notes, and thus extinguishing our indebtedness under such convertible notes with shares of our common stock.

In addition, holders of each series of our convertible notes will have the right to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change, as defined in the respective indentures, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Upon conversion of each series of convertible notes, unless we elect to settle such conversion solely through delivery of shares of our common stock to (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the series of notes being converted. We may not have enough available cash on hand or be able to obtain financing at the time we are required to make the repurchases of the series of convertible notes surrendered therefor, or at the time such series of convertible notes is being converted, to settle such repurchase or conversion. In addition, our ability to repurchase each series of convertible notes or to pay cash upon the conversions of each series of convertible notes may be limited by law, by regulatory authority or by agreements governing our current and future indebtedness. Our failure to repurchase a series of convertible notes at a time when the repurchase is required by the applicable indenture, or to pay any cash payable on future conversions of such series of convertible notes as required by the applicable indenture, would constitute a default under such indenture. A default under one of the indentures governing our convertible notes or a fundamental change itself could also lead to a default under our Revolving Credit Agreement and agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof. An event of default under an indenture governing any of our convertible notes may lead to an acceleration of the applicable series of notes. Any such acceleration could result in our bankruptcy, in which the holders of our convertible notes would have a claim to our assets that is senior to the claims of our equity holders.

We entered into a five-year secured revolving credit agreement with Wells Fargo Bank, National Association, Wells Fargo Securities, LLC and Texas Capital Bank on July 29, 2024, the Revolving Credit Agreement, which provides for a $125.0 million revolving line of credit, none of which was drawn as of December 31, 2024. The Revolving Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including covenants which restrict our ability, or any of our subsidiaries to, among other things, create liens, incur additional indebtedness and engage in certain other transactions, in each case subject to certain exclusions. In addition, the Revolving Credit Agreement contains certain financial covenants which become effective in the event our liquidity (as defined in the Revolving Credit Agreement) falls below specified levels. The Revolving Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross-default acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. Borrowings under the Revolving Credit Agreement are secured by our assets and those of Q2 Software, Inc., our wholly owned subsidiary, which has guaranteed all obligations under the Revolving Credit Agreement. The occurrence of an event of default may result in the termination of the Revolving Credit Agreement, an acceleration of repayment obligations with respect to any outstanding principal amounts, an acceleration of repayment obligations with respect to the 2025 Notes and 2026 Notes, or the lenders foreclosing on their security interest, the occurrence of any of which could have an adverse effect on our business, financial condition and results of operations.

Our indebtedness could have important consequences because it may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate or other purposes, or otherwise constrain the operation of our business. Our ability to meet our debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors, many of which are not under our control. Our future operations may not generate sufficient cash to enable us to repay our debt. If we fail to comply with any covenants contained in the agreements governing any of the debt or fail to make a payment on our debt when due, we could be in default on such debt. If we are at any time unable to pay our indebtedness when due, we may be required to renegotiate the terms of the indebtedness, seek to refinance all or a portion of the indebtedness or obtain additional financing. There can be no assurance that, in the future, we will be able to successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing could be obtained on terms that are favorable or acceptable to us.

The conversion of some or all of our convertible notes could dilute the ownership interests of existing stockholders. Any sales in the public market of our common stock issuable upon such conversion of our convertible notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the convertible notes may encourage short selling by market participants because the conversion of the notes could be used to satisfy short positions, or anticipated conversion of the convertible notes into shares of our common stock could depress the price of our common stock.

In connection with the offering of the 2026 Notes and 2025 Notes, we entered into capped call transactions, or the Capped Calls, with one or more counterparties. The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock initially underlying the 2026 Notes and 2025 Notes. The Capped Calls are expected to offset the potential dilution and/or offset any cash payments we are required to make in excess of the principal amount of converted 2026 Notes or 2025 Notes, as a result of conversion of the 2026 Notes or 2025 Notes, with such offset subject to a cap. In connection with establishing their initial hedges of the Capped Calls, the counterparties or their respective affiliates purchased shares of our common stock or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the 2026 Notes and 2025 Notes. The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2026 Notes and 2025 Notes, and are likely to do so during any observation period related to a conversion of the 2026 Notes or 2025 Notes or following any repurchase of 2026 Notes or 2025 Notes by us. This activity could also cause or avoid an increase or a decrease in the market price of our common stock.

The option counterparties to our Capped Calls entered into in connection with the convertible notes are financial institutions, and we will be subject to the risk that they might default under these derivative transactions. Our exposure to the credit risk of these counterparties will not be secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock underlying the convertible notes. We can provide no assurances as to the financial stability or viability of any option counterparty.

In addition, the Capped Calls are complex, and they may not operate as planned. For example, the terms of each may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate events or other transactions occur. Accordingly, these Capped Calls may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Calls.

Certain provisions in the indentures governing our convertible notes may make it more difficult or expensive for a third party to acquire us. For example, the indentures governing our convertible notes will require us to repurchase the convertible notes for cash upon the occurrence of a fundamental change (as defined in the respective indentures) of us and, in certain circumstances, to increase the conversion rate for a holder that converts the convertible notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase our convertible notes, and/or increase the conversion rate, which could make it more costly for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors in our common stock.

In the event any of the conditional conversion features of the 2026 Notes or 2025 Notes is triggered, note holders will be entitled to convert their 2026 Notes or 2025 Notes, as applicable, at any time during specified periods at their option. If one or more holders elect to convert the 2026 Notes or 2025 Notes, as applicable, we may elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), which would result in dilution to the holders of our common stock. If we elect to or would be required to settle a portion or all of our conversion obligation in cash, it could adversely affect our liquidity, which may negatively impact the trading price of our common stock. In addition, even if holders of the 2026 Notes or 2025 Notes do not elect to convert their 2026 Notes or 2025 Notes, as applicable, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital, which may negatively impact the trading price of our common stock.

As a provider of SaaS solutions and an extensive user of a variety of technology services, we are subject to numerous risks from cybersecurity threats that have and could adversely affect us; however, to date none have materially affected us or our business strategy, results of operation or financial condition. Cybersecurity threats are ever-present and continuously evolving and we have and will continue to expend considerable resources to deliver solutions that are designed to comply with the stringent security and technical regulations and practices applicable to financial institutions and financial services providers and to safeguard our solutions and information systems against cybersecurity threats. For more information regarding the risks we face from cybersecurity threats, please see "Item 1A. Risk Factors." We have implemented a risk-based approach to identify and assess the cybersecurity threats that have and could affect our business and information systems, which approach is incorporated into our overall enterprise risk management program. Our enterprise risk management program includes a formal, enterprise-wide inventory, categorization and assessment of risks, including risks associated with cybersecurity threats, overseen by the Risk and Compliance Committee, or RACC, of our Board of Directors. This program is managed by our Chief Risk Officer, or CRO, appointed by the RACC, and an Enterprise Risk Oversight Committee consisting of a cross-functional representation of senior leaders including our Chief Information Security Officer, or CISO. Our CRO has over nine years of senior risk management experience at large technology organizations, following a 20-year career in the U.S. Army. Our enterprise risk management team works in partnership with our security, information technology, compliance, internal audit, and third-party risk management functions, which collectively rely on a variety of internal resources and processes, as well as third-party consultants, auditors and applications, to identify, assess and manage cybersecurity risks, including cybersecurity threats related to third-party providers on which we rely. Our enterprise risk management function also extensively consults with senior management across our organization in identifying, assessing and managing risks.

Our information security program is managed by a CISO, whose team is responsible for leading our enterprise-wide cybersecurity strategy, policy, standards, architecture and processes. Our CISO has more than 20 years of experience directing disparate teams across application and product security, cyber defense, risk management, information governance, information technology compliance, information technology training and sales. Our CISO is appointed by the RACC, which also oversees the implementation, monitoring and testing of our information security program. Our CISO and CRO provide periodic reports to the RACC, at least quarterly. These reports include updates on the Company's cybersecurity risks and threats, the status of projects to strengthen our information security posture, assessments of the information security program, and the emerging threat landscape. Our CISO and CRO also regularly meet separately with the chair of the RACC to provide similar updates. Our information security program includes incident response procedures designed to facilitate escalation of actual or potential cybersecurity incidents initially to members of our security team, and as appropriate to senior management and the RACC, to allow proper consideration, mitigation and remediation of, as well as evaluation of potential disclosure obligations with respect to, actual or potential cybersecurity incidents. Our information security program is regularly evaluated by internal and external experts with the results of those reviews reported to senior management and the RACC. We also actively engage with key vendors, industry participants and intelligence and law enforcement communities as part of our continuing efforts to evaluate and enhance the effectiveness of our information security program.

Our principal executive offices are located in Austin, Texas in two adjacent buildings under separate lease agreements. Pursuant to the first of which the Company leases approximately 129,000 square feet of office space with an initial term that expires on April 30, 2028, with the option to extend the lease for an additional ten-year term, and pursuant to the second of which the Company leases approximately 129,000 square feet of office space with separate lease terms for different portions of the building of approximately seven and ten years, with the options to extend the separate leases on the second building from five to ten years. Approximately 105,000 square feet of the first building is being actively marketed for sublease. In addition, we maintain office space in U.S. cities located in Nebraska, Iowa, North Carolina and Minnesota. Internationally we maintain offices in India, Australia, and the United Kingdom. We believe our current facilities are in good condition, suitable and adequate for the conduct of our business.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Our management believes that there are no claims or actions pending against us, the ultimate disposition of which would have a material impact on our business, financial condition, results of operations or cash flows.

Our common stock has been listed on the New York Stock Exchange under the symbol "QTWO" since March 20, 2014.

As of December 31, 2024, we had 5 holders of record of our common stock. The actual number of holders of common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and nominees. The number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

We have never declared or paid any cash dividends on our common stock. Any future determination to declare cash dividends on our common stock will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. We do not anticipate paying cash dividends on our common stock for the foreseeable future.

The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2019 and December 31, 2024, with the cumulative total return of (i) the Russell 2000 Index and (ii) the S&P Software & Services Select Index. This graph assumes the investment of $100 on December 31, 2019 in our common stock, the Russell 2000 Index and the S&P Software & Services Select Index, and the reinvestment of dividends, if any.

The information contained in the Stock Performance Graph shall not be deemed to be soliciting material or to be filed with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.

None.

We are a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies. Our solutions transform the ways in which financial institutions and other financial services providers engage with End Users. Our solutions comprise a broad and deep portfolio of digital banking solutions, digital lending and relationship pricing solutions, Q2 Innovation Studio, and Helix. Q2 Innovation Studio leverages Q2's open technology platform to enable a partnership ecosystem, allowing the design, development, and distribution of innovative products, services, features, and integrations on Q2's digital banking platform. Helix serves as a cloud-native core and banking as a service, or BaaS, solution. We purpose-build our platforms and solutions to enable success for our customers and partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.

Significant resources, personnel and expertise are required to effectively deliver and manage advanced digital solutions in the complex and heavily regulated financial services industry. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers. We design and develop our solutions with an open platform approach intended to provide comprehensive integration among our solution offerings and our customers' internal and third-party systems. This integrated approach allows our customers to deliver unified and robust financial experiences across digital channels. Our solutions provide our customers the flexibility to configure their digital services in a manner that is consistent with each customer's specific offerings, workflows, processes and controls. Our solutions also allow our customers to personalize the digital experiences they deliver to their End Users by extending their individual services and brand requirements across digital channels. Our solutions and our data center and cloud-based hosting infrastructure and resources are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.

Founded over 20 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market acceptance of our solutions, strategic investments and acquisitions. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, SMBs, and commercial segments. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.

We offer our solutions to most of our customers using a software-as-a-service, or SaaS, model under which our customers pay subscription fees for the use of our solutions. Our digital banking platform customers have numerous End Users, and those End Users can represent one or more account holders registered to use one or more of our solutions on our digital banking platform. We generally price our digital banking platform solutions based on the number of solutions purchased by our customers and the number of Registered Users, as defined in "Key Operating Measures" below, or commercial account holders utilizing our solutions. We generally earn additional revenues from our digital banking platform customers based on the number of End Users on our solutions, the number of transactions that End Users perform on our solutions, and the excess number of users and transactions above what is included in our standard subscription fee. As a result, our revenues from digital banking platform customers grow as our customers buy more solutions from us and increase the number of End Users utilizing our solutions and as those users increase their number of transactions on our solutions. The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements. The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred.

We believe we have the opportunity to continue to grow our business and that the investments we are making are positioning us to continue to realize revenue growth and improve our operating efficiencies. These investments will increase our costs on an absolute dollar basis, but the timing and amount of these investments will vary based on the rate at which we expect to add new customers, the implementation and support needs of our customers, our software development plans, our technology and physical infrastructure requirements and the internal needs of our organization. Many of these investments will occur in advance of any associated benefit. If we are successful in growing our revenues by selling additional innovative solutions to existing customers and creating deeper End-User engagement, we anticipate that greater economies of scale and increased operating leverage will improve our margins over the long term.

We primarily sell our solutions through our direct sales organization. While the financial institutions market is well-defined due to the regulatory classifications of those financial institutions, markets for FinTechs and Alt-FIs are broader and more difficult to define due to the changing number of providers in each market. Over the long term, we intend to continue to invest in additional sales representatives to identify and address opportunities in the financial institution, FinTech and Alt-FI markets across the U.S. and internationally and to increase our number of sales support and marketing personnel, as well as our investment in marketing initiatives designed to increase awareness of our solutions and generate new customer opportunities.

We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005. We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets. We have also acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs. Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others. We believe our portfolio, which reflects years of strategic development and innovation, affords us a distinct competitive advantage across multiple market segments. Additionally, Q2 Innovation Studio, an API-based and SDK-based open technology platform, allows our financial institution customers and other partners to develop unique extensions of and integrations to our digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users.

As our business grows, we intend to continue to invest in and grow our services and delivery organization to support our customers' needs, help them through their digital transformation, deliver our solutions in a timely and effective manner and maintain our strong reputation. We believe that delivery of consistent, high-quality customer support is a significant driver of purchasing and renewal decisions of our prospects and customers. To develop and maintain a reputation for high-quality service, we seek to build deep relationships with our customers through our customer service organization, which we staff with personnel who are motivated by our common mission of using technology to help our customers succeed and who are knowledgeable with respect to the regulated and complex nature of the financial services industry.

In addition to the U.S. generally accepted accounting principles, or GAAP, measures described below in "Components of Operating Results," we monitor the following operating measures to evaluate growth trends, plan investments and measure the effectiveness of our sales and marketing efforts.

We define Installed Customers as the number of customers live on our digital banking platform. The average size of our Installed Customers, measured in both Registered Users per Installed Customer and revenues per Installed Customer, has increased over time as our existing Installed Customers continue to add Registered Users and commercial account holders, buy more solutions from us, and as we add larger financial institutions to our Installed Customer base. The net rate at which we add Installed Customers varies based on our implementation capacity, the size and unique needs of our customers, the readiness of our customers to implement our solutions and customer attrition, including as a result of merger and acquisition activity among financial institutions. We had 460, 450 and 444 Installed Customers on our digital banking platform as of December 31, 2024, 2023 and 2022, respectively.

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our digital banking solutions and has current access to use those solutions as of the last day of the reporting period presented. Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that the number of Registered Users will grow at a faster rate than our number of Installed Customers. We add new Registered Users through both organic and inorganic growth from existing customers and from the addition of End Users from new Installed Customers. Our Installed Customers had approximately 24.7 million, 22.0 million and 21.1 million Registered Users as of December 31, 2024, 2023 and 2022, respectively.

We believe that our ability to retain our customers and expand their use of our products and services over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships. One of the ways we assess our performance in this area is through our net revenue retention rate and subscription net revenue retention rate, or collectively our net revenue retention rates. We calculate our net revenue retention rate as the total revenues in a calendar year, excluding any revenues from acquired customers during such year, from customers who were implemented on any of our solutions as of December 31 of the prior year, expressed as a percentage of the total revenues during the prior year from the same group of customers. Similarly, we calculate our subscription net revenue retention rate as total subscription revenues in a calendar year from customers who were implemented on any of our solutions as of December 31 of the prior year, expressed as a percentage of total subscription revenues for the prior year from the same group of customers. Our net revenue retention rates provide insight into the impact on current year revenues of: the number of new customers implemented on any of our solutions during the prior year; the timing of our implementation of those new customers in the prior year; growth in the number of End Users on such solutions and changes in their usage of such solutions; and sales of new products and services to our existing customers during the current year, excluding any products or services resulting from businesses acquired during such year and customer attrition. The most significant drivers of changes in our net revenue retention rates each year have historically been the number of new customers in the prior year and the timing of our implementation of those new customers. The timing of our implementation of new customers in the prior year is significant because we do not start recognizing revenues from new customers until they are implemented. As an example, if implementations are weighted more heavily in the first or second half of the prior year, both our net revenue retention rate and subscription net revenue retention rate will be lower or higher, respectively, in the subsequent year. Our use of net revenue retention rate and subscription net revenue retention rate have limitations as analytical tools, and investors should not consider them in isolation. Other companies in our industry may calculate net revenue retention rates differently, which reduces their usefulness as a comparative measure. Our net revenue retention rate was 109%, 108% and 110% for the years ended December 31, 2024, 2023 and 2022, respectively, and our subscription net revenue retention rate was 114%, 112% and 115% for the years ended December 31, 2024, 2023 and 2022, respectively.

We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential and our ability to maintain and expand our relationship with existing clients. We calculate Subscription ARR as the annualized value of all recurring subscription revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Subscription ARR also includes the contracted minimum subscription amounts associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced. Subscription revenues are defined within "Critical Accounting Policies and Significant Judgements and Estimates." We calculate Total ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Integrated Services, which we previously referred to as Premier Services. Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature. Total ARR does not include revenue from professional services or other sources of revenue that are not deemed to be recurring in nature. Subscription and Total ARR are not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. Subscription and Total ARR should be viewed independently of revenue and deferred revenue as Subscription and Total ARR are operating metrics and are not intended to be combined with or replace these items. Our use of Subscription and Total ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures.

Our Subscription ARR was $681.9 million, $593.9 million and $500.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our Total ARR was $824.2 million, $734.8 million and $655.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We utilize revenue churn to monitor the satisfaction of our customers and evaluate the effectiveness of our business solutions and strategies. We define revenue churn as the amount of any monthly recurring revenue losses due to customer cancellations and downgrades, net of upgrades and replacements of existing solutions, during a year, divided by our monthly recurring revenue at the end of the prior year. Cancellations refer to customers that have either stopped using our services completely or remained a customer but terminated a particular service.

Downgrades are a result of customers taking less of a particular service or renewing their contract for identical services at a lower price. We had annual revenue churn of 4.4%, 6.1% and 6.3% for the years ended December 31, 2024, 2023 and 2022, respectively. Our use of revenue churn has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate revenue churn differently, which reduces its usefulness as a comparative measure.

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain categories that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business. Set forth in the tables below are the corresponding GAAP financial measures for each non-GAAP financial measure. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure included below. While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures. Items such as the deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges can have a material impact on our GAAP financial results.

We define non-GAAP revenue as total revenue excluding the impact of purchase accounting. We monitor these measures to assess our performance because we believe our revenue growth rates would be understated without these adjustments. We believe presenting non-GAAP revenue aids in the comparability between periods and in assessing our overall operating performance. During the twelve months ended December 31, 2024, there was no impact of purchase accounting on revenue, and our non-GAAP total revenue is now equivalent to our GAAP total revenue.

We provide non-GAAP operating income that excludes such items as deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges. We believe excluding these items is useful for the following reasons:

•Deferred revenue reduction from purchase accounting. We provide non-GAAP information that excludes the deferred revenue reduction from purchase accounting. We believe that the exclusion of deferred revenue reduction from purchase accounting allows users of our financial statements to better review and understand the historical and current results of our continuing operations.

•Amortization of acquired technology and intangible assets. We provide non-GAAP information that excludes expenses related to purchased technology and intangible assets associated with our acquisitions. We believe that eliminating these expenses from our non-GAAP measures is useful to investors, because the amortization of acquired technology and intangible assets can be inconsistent in amount and frequency and significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period, both with and without such expenses.

•Stock-based compensation. We provide non-GAAP information that excludes expenses related to stock-based compensation. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Because of these unique characteristics of stock-based compensation, we exclude these expenses when analyzing the organization's business performance.

•Transaction-related costs. We exclude certain expense items resulting from our evaluation and completion of merger and acquisition and divestiture opportunities, such as related legal, accounting and consulting fees and retention expense. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, transaction-related activities result in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing these non-GAAP measures that exclude transaction-related costs allows users of our financial statements to better review and understand the historical and current results of our continuing operations, and also facilitates comparisons to our historical results and results of less acquisitive peer companies, both with and without such adjustments.

•Lease and other restructuring charges. We provide non-GAAP information that excludes restructuring charges related to the estimated costs of exiting and terminating facility lease commitments, partially offset by anticipated sublease income, and any related impairments of the right of use assets as they relate to corporate restructuring and exit activities. It also excludes severance cash payouts and other related compensation associated with restructuring, departure of executive officers or eliminating certain positions in connection with initiatives intended to align our resources to the portions of our business that we believe will drive the most long-term value. These charges are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.

We define adjusted EBITDA as net loss before deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, depreciation, amortization, lease and other restructuring charges, provision for income taxes, gain on extinguishment of debt and interest and other (income) expense, net. We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results for the following reasons:

•adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance with and without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;

•our management uses adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance;

•adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and

•our investor and analyst presentations include adjusted EBITDA as a supplemental measure of our overall operating performance.

Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. The use of adjusted EBITDA as an analytical tool has limitations such as:

•depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and adjusted EBITDA does not reflect cash requirements for such replacements;

•adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;

•adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;

•adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and

•other companies, including companies in our industry, might calculate adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.

Because of these and other limitations, investors and others should consider adjusted EBITDA together with our GAAP financial measures including cash flow from operations and net loss. The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated (in thousands):

Revenue-generating activities directly relate to the sale, implementation and support of our solutions within a single operating segment. We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our third-party data centers or with third-party public cloud service providers, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees. We recognize the corresponding revenues over time on a ratable basis over the customer agreement term or as incurred based on the nature of the revenue. A small portion of our revenues are derived from customers which host and manage our solutions on-premises or in third-party data centers under term license and maintenance agreements. For these customers, we recognize software license revenue once the customer obtains control of the license, which generally occurs at the start of each license term, and recognize the remaining arrangement consideration for maintenance revenue over time on a ratable basis over the term of the software license.

Subscription fees are based on the number of solutions purchased by our customers, the number of End Users using the solutions and other usage fees those users generate by using our solutions in excess of the levels included in our standard subscription fee. Subscription fees are billed monthly, quarterly or annually and are recognized monthly over the term of our customer agreements. The initial term of our digital banking platform agreements averages over five years, although it varies by customer. The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements. The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred. We begin recognizing subscription fees when the control of the service transfers to the customer, generally when the solution is implemented and made available to the customer. We recognize revenue for debit card and bill-pay related transaction services when End Users utilize debit card services integrated within our Helix and other payment-service solutions in the month incurred based on actual or estimated transactions.

The timing of our implementations varies period-to-period based on our implementation capacity, the number of solutions purchased by our customers, the size and unique needs of our customers and the readiness of our customers to implement our solutions. We typically recognize any related implementation services revenues ratably over the initial customer agreement term beginning on the date we commence recognizing subscription fees. Contract asset balances arise primarily when we provide services in advance of billing for those services. Amounts that have been invoiced are recorded in accounts receivable, and in revenues or deferred revenues, depending on when control of the service transfers to the customer.

We believe that elevated interest rates have increased the importance for financial institutions to attract and retain depository relationships, which we believe has increased demand for our digital banking solutions. We have observed improved subscription bookings and associated revenue primarily from our digital banking solutions, which we believe is a result of banking conditions placing an importance on attracting and retaining deposits. As of December 31, 2024, our subscription revenue growth was 16% year over year, and we expect subscription revenue will continue to increase as a percentage of total revenue. We continue to observe declines in customer demand for certain discretionary aspects of our solutions, namely professional services, which we believe may be related to customer spending patterns and budget cycles, and this may continue until the general economic outlook improves.

Cost of revenues is comprised primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, for employees providing services to our customers. This includes the costs of our personnel performing implementation, customer support, third-party data centers and customer training activities. Cost of revenues also includes the direct costs of bill-pay and other third-party intellectual property included in our solutions, the amortization of deferred solution and services costs, amortization of certain software development costs, co-location facility costs and depreciation of our data center assets, debit card related pass-through fees, third-party public cloud service providers, an allocation of general overhead costs, the amortization of acquired technology intangibles and referral fees. We allocate general overhead expenses to all departments based on the number of employees in each department, which we consider to be a fair and representative means of allocation.

We capitalize certain personnel costs directly related to the implementation of our solutions to the extent those costs are recoverable from future revenues. We amortize the costs for an implementation once revenue recognition commences, and we amortize those implementation costs to cost of revenues over the expected period of customer benefit, which has been determined to be the estimated life of the technology. Other costs not directly recoverable from future revenues are expensed in the period incurred.

We capitalize certain software development costs for those employees who are directly associated with and who devote time to developing our software solutions on an individual product basis, including those related to programmers, software engineers and quality control teams, as well as third-party development costs. Software development costs are amortized to cost of revenues when products and enhancements are released or made available over the products' estimated economic lives.

We intend to continue to increase our investments in our implementation and customer support teams and technology infrastructure to serve our customers and support our growth as we continue the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. Over the long term, we expect cost of revenues to continue to grow in absolute dollars as we grow our business but to fluctuate as a percentage of revenues based principally on cost efficiencies realized in the business, the level and timing of implementation support activities, timing of capitalized software development costs, debit card related pass-through fees, and other related costs.

Operating expenses primarily consist of sales and marketing, research and development and general and administrative expenses. They also include costs related to our acquisitions and the resulting amortization of acquired intangible assets from those acquisitions. In an effort to reduce certain of our personnel related expenditures and improve the scaling of expenses relative to revenue growth, we have taken measures intended to increase the cost efficiency of our global workforce structure. Over the long term, we intend to continue to hire new employees and make other investments to support our anticipated growth. As a result, we expect our operating expenses to increase in absolute dollars but to decrease as a percentage of revenues over the long term as we grow our business.

Sales and marketing expenses consist primarily of salaries and other personnel-related costs, including commissions, employee benefits, bonuses and stock-based compensation. Sales and marketing expenses also include expenses related to advertising, lead generation, promotional events, corporate communications, travel and allocated overhead.

Sales and marketing expenses as a percentage of total revenues will change in any given period based on factors including the addition of newly hired sales professionals, the timing of significant marketing events such as our annual in-person client conference, which we typically hold during the second quarter of each year, and the amount of sales commissions expense amortized. Commissions are generally capitalized and then amortized over the expected period of customer benefit.

We believe that continuing to improve and enhance our solutions is essential to maintaining our reputation for innovation and growing our customer base and revenues. Research and development expenses include salaries and personnel-related costs, including employee benefits, bonuses and stock-based compensation, third-party contractor expenses, software development costs, allocated overhead and other related expenses incurred in developing new solutions and enhancing existing solutions.

Certain research and development costs that are related to our software development, which include salaries and other personnel-related costs, comprised of employee benefits, stock-based compensation and bonuses attributed to programmers, software engineers and quality control teams working on our software solutions, are capitalized and included in intangible assets, net on the consolidated balance sheets. We intend to continue our investments in our software development teams and the associated technology in order to serve our customers and support our growth.

General and administrative expenses consist primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, of our administrative, finance and accounting, information systems, compliance and security, legal, human resources employees and certain members of our executive team. General and administrative expenses also include consulting and professional fees, travel and other corporate expenses. We expect to continue to incur incremental expenses associated with the growth of our business and compliance requirements associated with operating as a regulated, public company.

Transaction-related costs include compensation expenses related to milestone provisions and retention agreements with certain former shareholders and employees of acquired businesses, which are recognized as earned, and various legal and professional service expenses incurred in connection with merger and acquisition and divestiture related matters, which are recognized when incurred.

Amortization of acquired intangibles represents the amortization of intangibles recorded in connection with our business acquisitions which are amortized on a straight-line basis over the estimated useful lives of the related assets.

Lease and other restructuring charges include costs related to the early vacating of certain facilities, any related impairment of the right of use assets and ongoing expenses of other vacated facilities, partially offset by anticipated sublease income from the associated facilities. It also includes severance cash payouts and other related compensation associated with restructuring, departure of executive officers or eliminating certain positions in connection with initiatives intended to align our resources to the portions of our business that we believe will drive the most long-term value.

Total other income (expense), net, consists primarily of interest income and expense, other non-operating income and expense, loss on disposal of long-lived assets, foreign currency translation adjustment and gain on extinguishment of debt. We earn interest income on our cash, cash equivalents and investments. Interest expense consists primarily of the interest from the amortization of debt issuance costs, coupon interest attributable to our convertible notes, commitment fees and interest associated with our Revolving Credit Agreement, as well as fees and interest associated with the letter of credit issued to our landlord for the security deposit for our corporate headquarters.

As a result of our current net operating loss utilization, our income tax expenses and benefits consist primarily of federal, state, and international current and deferred income tax expense from global operations.

Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results might differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, and we believe that the accounting policies discussed below involve the greatest degree of complexity and exercise of significant judgments and estimates by our management. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations and, accordingly, we believe the policies described below are the most critical for understanding and evaluating our financial condition and results of operations.

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services over the term of the agreement, generally when our solutions are implemented and made available to our customers. The promised consideration may include fixed amounts, variable amounts or both. Revenues are recognized net of sales credits and allowances.

Revenue-generating activities directly relate to the sale, implementation and support of our solutions within a single operating segment. We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our third-party data centers or with third-party public cloud service providers, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees.

Our software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing rights to the software. Subscription fees from these applications, including contractual periodic price increases, are recognized over time on a ratable basis over the customer agreement term beginning on the date our solution is made available to the customer. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met. Periodic price increases are estimated at contract inception where appropriate and result in contract assets as revenue recognition may exceed the amount billed early in the contract. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as revenue in the month when the usage amounts are determined and reported.

A small portion of our customers host and manage our solutions on-premises or in third-party data centers under term license and maintenance agreements. Term licenses sold with maintenance entitle the customer to technical support, upgrades and updates to the software on a when-and-if-available basis. For these customers, we recognize software license revenue once the customer obtains control of the license, which generally occurs at the start of each license term, and recognize the remaining arrangement consideration for maintenance revenue over time on a ratable basis over the term of the software license. Revenues from term licenses and maintenance agreements were not significant in the periods presented.

We generate a majority of our transactional revenues based on the number of bill-pay transactions that End Users initiate on our digital banking platform. We also generate a portion of our transactional revenues from third-party fees related to End Users utilizing remote deposit products and from fees generated when End Users utilize debit cards integrated with our Helix products. We recognize revenue for transaction services in the month incurred based on actual or estimated transactions.

Implementation services are required for new digital solutions and other standalone contracts, and there is a significant level of integration and configuration for each customer. Our revenue for implementation services is billed upfront and generally recognized over time on a ratable basis over the customer's term for our hosted application agreements. Implementation services for on-premises agreements are recognized at commencement date. Under certain circumstances, we have determined that these implementation services qualify as a separate performance obligation in certain markets and geographies, and the implementation services for these agreements are recognized over time as services are performed.

Professional services revenues consist primarily of Integrated Services. Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services, resulting in a deeper and ongoing level of engagement with them. Professional services revenues also consist of custom services, core conversion services and other general professional services. These revenues are generally billed and recognized when delivered. Other Revenues also include certain third-party related pass-through fees primarily in our Helix business that are not transactional in nature.

A performance obligation is a promise in a contract to transfer a good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. We have contracts with customers that often include multiple performance obligations, usually including multiple subscription and implementation services. For these contracts, we account for individual performance obligations that are separately identifiable by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price, or SSP, of each distinct good or service in the contract. In determining whether implementation services are distinct from subscription services, we considered various factors including the significant level of integration, interdependency, and interrelation between the implementation and subscription service, as well as the inability of the customer's personnel or other service providers to perform significant portions of the services. We have concluded that the implementation services included in contracts with multiple performance obligations across the majority of our markets and product offerings are not distinct and, as a result, we defer any arrangement fees for implementation services and recognize such amounts over time on a ratable basis as one performance obligation with the underlying subscription revenue for the initial agreement term of the hosted application agreements. We have concluded that for some of our products in certain markets the implementation services included in contracts with multiple performance obligations are distinct and, as a result, we recognize implementation fees on such arrangements over time as services are performed.

The majority of our revenue recognized at a particular point in time is for usage revenue, on-premise software licenses and certain professional services. These services are recognized as the customer obtains control of the asset, as services are performed, or the point the customer obtains control of the software.

Judgment is required to determine the SSP for each distinct performance obligation. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine SSP based on overall pricing objectives and strategies, taking into consideration entity-specific factors, including the value of our contracts, historical standalone sales, customer demographics and the numbers and types of users within our contracts.

We recognize usage revenue related to End Users accessing our products in excess of contracted amounts and from fees that End Users generate using our solutions. Judgment is required to determine the accounting for these types of revenue. We consider various factors including the degree to which usage is interdependent or interrelated to past services and contractual price per user and their relationship to market terms. We have concluded that our usage revenue relates specifically to the transfer of the service to the customer and is consistent with the allocation objective of Topic 606 when considering all of the performance obligations and payment terms in the contract. Therefore, we recognize usage revenue on a monthly or quarterly basis in accordance with the agreement, as determined and reported. This allocation reflects the amount we expect to receive for the services for the given period.

We sometimes provide credits or incentives to our customers. Known and estimable credits and incentives represent a form of variable consideration, which are estimated at contract inception and generally result in reductions to revenues recognized for a particular contract.

These estimates are updated at the end of each reporting period as additional information becomes available. We believe that there will not be significant changes to our estimates of variable consideration as of December 31, 2024.

We evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) with respect to the vendor reseller agreements pursuant to which we resell certain third-party solutions along with our solutions. Generally, we report revenues from these types of contracts on a gross basis, meaning the amounts billed to customers are recorded as revenues, and expenses incurred are recorded as cost of revenues. Where we are the principal, we first obtain control of the inputs to the specific good or service and direct their use to create the combined output. Our control is evidenced by our involvement in the integration of the good or service on our platform before it is transferred to our customers and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Revenues provided from agreements in which we are an agent are insignificant.

We value RSUs at the closing market price on the date of grant. RSUs typically vest in equal installments over a four-year period and compensation expense is recognized straight-line over the requisite service period.

We value purchase rights under the ESPP using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs including the risk-free interest rate, expected term and expected volatility and we assume no dividend yield. Our ESPP has two six-month offering periods which commence on each June 1 and December 1. We recognize compensation expense straight-line over the withholding period for the ESPP.

We grant performance-based restricted stock units which provide for shares of common stock to be earned based on our total stockholder return, or TSR, performance relative to the TSR performance of specified stock indexes, or TSR PSUs, and previously referred to as Market Stock Units, or MSUs. We value TSR PSUs and MSUs on grant date using the Monte Carlo simulation model. The determination of fair value is affected by our stock price and a number of assumptions including the expected volatility and the risk-free interest rate. Our expected volatility at the date of grant is based on the historical volatilities of our stock and peer firms' stocks and the Index over the performance period. We assume no dividend yield and recognize compensation expense ratably over the performance period of the award, as applicable. The number of TSR PSUs and MSUs that vest is based on actual TSR relative to the TSR benchmark as set forth in the award agreement. The minimum percentage that can vest is 0%, with a maximum percentage of 200%. TSR PSUs and MSUs will vest over two-year and three-year performance periods. We recognize compensation expense using the graded attribution method on a straight-line basis over the performance period for each award, as applicable.

We also grant performance-based restricted stock units which provide for shares of common stock to be earned based on our attainment of Adjusted EBITDA as a percentage of non-GAAP Revenue relative to a target specified in the applicable agreement, or EBITDA PSUs. We value EBITDA PSUs at the closing market price on the date of grant. The minimum percentage of EBITDA PSUs that can vest is 0%, with a maximum percentage of 200%. The vesting of EBITDA PSUs is conditioned upon the achievement of certain internal targets and will vest over a two-year and three-year performance period. We recognize compensation expense using the accelerated attribution method over the performance period, if it is probable that the performance condition will be achieved. Adjustments to compensation expense are made each reporting period based on changes in our estimate of the number of EBITDA PSUs that are probable of vesting.

The purchase price allocation for business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. We determine whether substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a business. If it is not met, we determine whether the single asset or group of assets, as applicable, meets the definition of a business.

In connection with our business combinations, we recorded certain intangible assets, including acquired technology, customer relationships, trademarks and non-compete agreements. Amounts allocated to the acquired intangible assets are amortized on a straight-line basis over the estimated useful lives. We periodically review the estimated useful lives and fair values of our identifiable intangible assets, taking into consideration any events or circumstances which might result in a diminished fair value or revised useful life.

The excess purchase price over the fair value of assets acquired is recorded as goodwill. We test goodwill for impairment annually in October, or whenever events or changes in circumstances indicate an impairment may have occurred. Because we operate as a single reporting unit, the impairment test is performed at the consolidated entity level by comparing our estimated fair value to our carrying value. We estimate the fair value of the reporting unit using a "step one" analysis using a fair-value-based approach based on market capitalization to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Determining the fair value of goodwill is subjective in nature and often involves the use of estimates and assumptions including, without limitation, use of estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast. If actual results, or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur impairment charges in a future period.

Impairment of long-lived assets such as property and equipment, acquired intangible assets, capitalized software development costs and right of use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We evaluate the recoverability of our long-lived assets by comparing the carrying amount of the asset group to the estimated undiscounted future cash flows. If the carrying value is not recoverable, an impairment is recognized to the extent that the carrying value of the asset group exceeds its fair value.

The following table sets forth our results of operations data for each of the periods indicated (in thousands):

						Year Ended December 31,
						2024						2023						2022
Revenues(1)						$	696,464					$	624,624					$	565,673
Cost of revenues(2)						341,983						321,973						309,328
Gross profit						354,481						302,651						256,345
Operating expenses:
Sales and marketing						105,951						109,522						108,214
Research and development						143,244						137,334						130,103
General and administrative						122,942						110,186						90,163
Transaction-related costs						—						24						1,176
Amortization of acquired intangibles						16,979						20,667						18,248
Lease and other restructuring charges						7,628						10,975						13,202
Total operating expenses						396,744						388,708						361,106
Loss from operations						(42,263)						(86,057)						(104,761)
Total other income (expense), net(3)						11,403						24,235						(1,314)
Loss before income taxes						(30,860)						(61,822)						(106,075)
Provision for income taxes						(7,676)						(3,562)						(2,908)
Net loss						$	(38,536)					$	(65,384)					$	(108,983)

______________________________________________________________________________

(1)    Includes deferred revenue reduction from purchase accounting of zero, $0.3 million and $0.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(2)    Includes amortization of acquired technology of $22.0 million, $23.4 million and $22.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(3)     Includes a gain of $19.9 million related to the early extinguishment of a portion of our convertible notes for the year ended December 31, 2023.

The following table sets forth our results of operations data as a percentage of revenues for each of the periods indicated:

						Year Ended December 31,
						2024						2023						2022
Revenues(1)						100.0		%				100.0		%				100.0		%
Cost of revenues(2)						49.1		%				51.5		%				54.7		%
Gross margin						50.9		%				48.5		%				45.3		%
Operating expenses:
Sales and marketing						15.2		%				17.5		%				19.1		%
Research and development						20.6		%				22.0		%				23.0		%
General and administrative						17.7		%				17.6		%				15.9		%
Transaction-related costs						—		%				—		%				0.2		%
Amortization of acquired intangibles						2.4		%				3.3		%				3.2		%
Lease and other restructuring charges						1.1		%				1.8		%				2.3		%
Total operating expenses						57.0		%				62.2		%				63.8		%
Loss from operations						(6.1)		%				(13.8)		%				(18.5)		%
Total other income (expense), net(3)						1.6		%				3.9		%				(0.2)		%
Loss before income taxes						(4.4)		%				(9.9)		%				(18.8)		%
Provision for income taxes						(1.1)		%				(0.6)		%				(0.5)		%
Net loss						(5.5)		%				(10.5)		%				(19.3)		%

_______________________________________________________________________________

(1)    Includes deferred revenue reduction from purchase accounting of 0.0%, 0.1% and 0.1% for the years ended December 31, 2024, 2023 and 2022, respectively.

(2)    Includes amortization of acquired technology of 3.2%, 3.7% and 4.0% for the years ended December 31, 2024, 2023 and 2022, respectively.

(3)     Includes a gain of 3.2% related to the early extinguishment of a portion of our convertible notes for the year ended December 31, 2023.

Due to rounding, totals may not equal the sum of the line items in the tables above.

A discussion regarding year-to-year comparisons between the year ended December 31, 2024 and December 31, 2023 is presented below. A discussion regarding year-to-year comparisons between the year ended December 31, 2023 and December 31, 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The following table presents our revenues for each of the periods indicated (dollars in thousands):

Revenues increased by $71.8 million, or 11.5%, from $624.6 million for the year ended December 31, 2023 to $696.5 million for the year ended December 31, 2024. This increase in revenue was primarily attributable to a $77.7 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in usage from new and existing customers and a $3.1 million increase in transactional revenue from usage of our solutions, partially offset by a decrease of $8.9 million in services and other revenue from declines in professional and discretionary services and Helix related pass-through revenue.

The following table presents our cost of revenues for each of the periods indicated (dollars in thousands):

Cost of revenues increased by $20.0 million, or 6.2%, from $322.0 million for the year ended December 31, 2023 to $342.0 million for the year ended December 31, 2024. This increase was primarily attributable to a $9.2 million increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our third-party data centers and other technical infrastructure, an $8.8 million net increase in co-location facility, hardware and software costs, third-party public cloud service provider costs and depreciation of our data center assets resulting from the increased infrastructure necessary to support growing customer activity, a $6.1 million increase from the amortization of capitalized software development and capitalized implementation services, a $3.5 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs and a $2.0 million increase in overhead costs and other discretionary expenses, partially offset by a $4.8 million decrease as a result of higher capitalized implementation costs, a $3.4 million decrease in services, primarily in pass-through fees and a $1.4 million decrease in amortization of acquired customer technology resulting from assets that became fully amortized.

We continue to invest in personnel, business process improvement, third-party partners for intellectual property and transactional processing in our solutions and systems infrastructure to standardize our business processes and drive future efficiency in our implementations, customer support and the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. As we continue to make these investments, we expect they will increase cost of revenues in absolute dollars, and we expect such expenses to decline as a percentage of revenue as our operations continue to scale and revenues grow.

The following tables present our operating expenses for each of the periods indicated (dollars in thousands):

Sales and marketing expenses decreased by $3.6 million, or 3.3%, from $109.5 million for the year ended December 31, 2023 to $106.0 million for the year ended December 31, 2024. This decrease was primarily attributable to a reduction in personnel costs due to measures taken to drive operational effectiveness in our go-to-market strategy.

We anticipate that sales and marketing expenses will increase in absolute dollars over the long-term as we continue to support our revenue growth and increase marketing spend to attract new customers, retain and grow existing customers, build brand awareness, and as we continue to hold various experiences for our current and prospective customers, including our annual client conference typically held during the second quarter. While sales and marketing expenses as a percentage of revenue may fluctuate on a near-term basis, we expect such expenses to decline as a percentage of our revenues over the long-term as our revenues grow and we realize cost efficiencies in the business.

Research and development expenses increased by $5.9 million, or 4.3%, from $137.3 million for the year ended December 31, 2023 to $143.2 million for the year ended December 31, 2024. This increase was primarily attributable to a $2.4 million increase from lower capitalization of software development costs, a $2.3 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $1.0 million increase in travel-related and other discretionary expenses.

We anticipate that research and development expenses will increase in absolute dollars in the future as we continue to support and expand our platform and enhance our existing solutions, as we believe existing customers will have an increased focus on maintaining and improving their digital offerings. While we anticipate research and development expenses as a percentage of revenue may fluctuate on a near-term basis, we expect such expenses to decline as a percentage of our revenues over the long-term as our revenues grow and we realize cost efficiencies in the business.

General and administrative expenses increased by $12.8 million, or 11.6%, from $110.2 million for the year ended December 31, 2023 to $122.9 million for the year ended December 31, 2024. The increase in general and administrative expenses was primarily attributable to a $16.1 million increase in personnel costs, including stock-based compensation, to support the growth of our business and a $1.6 million increase in travel-related, overhead and other discretionary expenses, partially offset by a $4.0 million decrease in professional services, including third-party legal fees and a $1.0 million decrease in charitable contributions from the prior year.

General and administrative expenses consist primarily of salaries, stock-based compensation and other personnel-related costs of our administrative, finance and accounting, information systems, compliance and security, legal, human resources employees and certain members of our executive team. General and administrative expenses also include costs to comply with regulations governing public companies and financial institutions, third-party legal fees, investor relations activities and costs to comply with Section 404 of the Sarbanes-Oxley Act, or SOX. Over the long term, we anticipate that general and administrative expenses will continue to increase in absolute dollars as we continue to incur both increased external audit fees as well as additional spending to ensure continued regulatory and SOX compliance. We expect such expenses to decline as a percentage of our revenues over the longer term as our revenues grow and we realize cost efficiencies in the business.

Transaction-related costs decreased by $24.0 thousand, or 100.0%, from $24.0 thousand for the year ended December 31, 2023 to zero for the year ended December 31, 2024. Transaction-related costs are related to various legal and professional expenses incurred in connection with merger and acquisition and divestiture activities.

Amortization of acquired intangibles decreased by $3.7 million, or 17.8%, from $20.7 million for the year ended December 31, 2023 to $17.0 million for the year ended December 31, 2024. The acquired intangible assets are related to previously disclosed business combinations, and the decrease in amortization is related to intangible assets that became fully amortized.

Lease and other restructuring charges decreased by $3.3 million, or 30.5%, from $11.0 million for the year ended December 31, 2023 to $7.6 million for the year ended December 31, 2024. The decrease in lease and other restructuring charges was primarily attributable to a net $3.0 million decrease related to updated assessments and ongoing expenses of previously vacated facilities, including the associated impairment of the right of use asset and a $0.2 million decrease related to lower severance and other related compensation charges associated with eliminating certain positions in connection with initiatives intended to align our resources to the portions of our business that we believe will drive the most long-term value.

Total other income (expense), net decreased by $12.8 million or 52.9% from $24.2 million for the year ended December 31, 2023 to $11.4 million for the year ended December 31, 2024. The decrease was primarily due to a $19.9 million gain from the partial repurchase of the 2026 Notes and the 2025 Notes during the three months ended March 31, 2023, partially offset by a $5.7 million increase in income from cash, cash equivalents and investments in the current period, a $0.5 million loss realized on investments recognized, a $0.4 million increase from lower losses on foreign currency translation and a $0.4 million increase from lower interest expense in the current period compared to the prior year period.

Total provision for income taxes increased by $4.1 million from $3.6 million for the year ended December 31, 2023 to $7.7 million for the year ended December 31, 2024. The increase in the tax expense for the year ended December 31, 2024 related to the operations of the business and an increase in uncertain tax positions related to various states.

Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including the timing of investments to grow our business. The timing of our implementation activities and corresponding revenues from new customers are subject to fluctuations based on the timing of our sales, which has historically tended to be lower in the first half of the year. The timing of our implementations also varies period-to-period based on our implementation capacity, the number of solutions purchased by our customers, the size and unique needs of our customers and the readiness of our customers to implement our solutions. General economic conditions may continue to impact our business and our customers' spending patterns and budget cycles, and these conditions may continue to disrupt any seasonality trends that may otherwise typically be inherent in our historical operating results. Our quarterly results of operations may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future results.

We have financed our operations primarily through the proceeds from the issuance of common stock from our initial public offering in March 2014, additional registered common stock offerings, convertible note offerings, and cash flows from operations. As of December 31, 2024, our principal sources of liquidity were cash, cash equivalents and investments of $446.6 million. Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, including our ability to access capital markets and available borrowings under our $125.0 million Revolving Credit Agreement, are adequate to meet our cash requirements for the next twelve months. However, if we determine the need for additional short-term liquidity, there is no assurance that such financing, if pursued, would be adequate or available on terms acceptable to us.

The following table summarizes our cash flows for the periods indicated (in thousands):

Our cash flows from operating activities are primarily influenced by net loss less non-cash items, the amount and timing of customer receipts and vendor payments and by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business and customer base.

For the year ended December 31, 2024, our net cash provided by operating activities was $135.8 million, which consisted of non-cash adjustments of $189.1 million, partially offset by a net loss of $38.5 million and cash outflows from changes in operating assets and liabilities of $14.8 million. The primary drivers of cash outflows in operating assets and liabilities were a $31.9 million increase in deferred solution costs primarily from annual commission payments and deferred implementation costs from both new customers and existing customer expansions and a $12.0 million increase in prepaid and other current assets related to timing of various prepaid expenses, most notably a payroll date occurring at the very end of the quarter, partially offset by a $28.9 million increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payments. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs, deferred income taxes and lease impairments, partially offset by amortization of premiums and discounts on investments.

Our investing activities have consisted primarily of purchases and maturities of investments, acquisitions of businesses, costs incurred for the development of capitalized software and purchases of property and equipment to support our growth.

For the year ended December 31, 2024, net cash used in investing activities was $21.1 million, consisting of $95.8 million for the purchase of investments, $22.3 million in capitalized software development costs and $6.7 million for the purchase of property and equipment, partially offset by $103.7 million received from the maturities of investments.

Our recent financing activities have consisted primarily of activity related to our convertible notes as well as net proceeds from exercises of stock options, contributions to our ESPP to purchase our common stock and payments for debt issuance costs related to the Revolving Credit Agreement.

For the year ended December 31, 2024, net cash provided by financing activities was $13.3 million, consisting of $14.3 million of cash received from exercises of stock options and contributions to our ESPP for the purchase of our common stock, partially offset by $0.9 million from payments for debt issuance costs related to the Revolving Credit Agreement.

Our principal commitments consist of the 2026 Notes, 2025 Notes, non-cancelable operating leases primarily related to our facilities, minimum purchase commitments for sponsorship obligations, third-party products, co-location fees and other product costs. Our obligations under our convertible senior notes and Revolving Credit Agreement are described in Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2024 can be found in Notes 10 and 11 to our consolidated financial statements included in this Annual Report on Form 10-K.

See Note 2 - Summary of Significant Accounting Policies contained in the Notes to Consolidated Financial Statements included in this report, regarding the impact of certain recent accounting pronouncements.

Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument might change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we might enter into exchange rate hedging arrangements to manage the risks described below.

We have cash and cash equivalents held primarily in cash and money market funds. In addition, we have marketable securities which typically include U.S. government securities, corporate bonds and commercial paper and certificates of deposit. Cash and cash equivalents are held for working capital purposes. Marketable securities are held and invested with capital preservation as the primary objective. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Any declines in interest rates will reduce future interest income. If overall interest rates changed by 100-basis points in 2024 or 2023, our interest income and the market value of our marketable securities would not have been materially affected. As of December 31, 2024, we had an outstanding principal amount of $304.0 million of 2026 Notes, with a fixed annual interest rate of 0.75% and an outstanding principal amount of $191.0 million of 2025 Notes with a fixed annual interest rate of 0.125%.

Borrowings under our Revolving Credit Agreement bear interest at rates that are variable. To the extent that we draw amounts under the Revolving Credit Agreement, we would be exposed to increased market risk from changes in the underlying index rates, which would affect our interest expense. As of December 31, 2024, there were no amounts drawn on the Revolving Credit Agreement.

As of December 31, 2024, our most significant currency exposures were the Indian rupee, Mexican peso, Canadian dollar, Australian dollar and British pound. As of December 31, 2024, we had operating subsidiaries in India, Mexico, Canada, Australia and the United Kingdom. Due to the relatively low volume of payments made by us through these foreign subsidiaries, we do not believe we have significant exposure to foreign currency exchange risks. However, fluctuations in currency exchange rates could harm our results of operations in the future.

We currently do not use derivative financial instruments to mitigate foreign currency exchange risks. We will continue to review this matter and may consider hedging certain foreign exchange risks in future years.

We do not believe that inflation has had a direct material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth on pages F-1 through F-36 of this Annual Report on Form 10-K.

None.

The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the guidelines established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.

Our independent registered public accounting firm, Ernst & Young, LLP, issued an attestation report on our internal control over financial reporting. This report appears on page F-4.

There were no material changes in our internal control over financial reporting identified in connection with management's evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our business have been detected.

The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our officers and directors for the three months ended December 31, 2024, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (a "Rule 10b5-1 Trading Plan"), were as follows:

Matthew Flake, Chief Executive Officer and Chairman, terminated his previously adopted Rule 10b5-1 Trading Plan. Mr. Flake's plan was entered into on August 5, 2024, was set to expire on June 30, 2025 and provided for the potential sale of up to 148,182 shares of the Company's common stock. Subsequently, Mr. Flake entered into a new Rule 10b5-1 Trading Plan on November 12, 2024. Mr. Flake's plan provides for the potential sale of up to 280,213 shares of the Company's common stock between March 6, 2025 and June 30, 2025, assuming maximum attainment of applicable performance measures with respect to vesting of performance stock unit or market stock unit awards during the specified period. The actual number of shares to be sold under the 10b5-1 Plan will depend on the achievement of applicable performance conditions under the performance or market stock units less any shares sold pursuant to mandatory sell-to-cover transactions not covered by the plan related to withholding taxes.

Jonathan Price, Chief Financial Officer, terminated his previously adopted Rule 10b5-1 Trading Plan. Mr. Price's plan was entered into on March 12, 2024, was set to expire on March 7, 2025 provided for the potential sale of up to 34,117 shares of the Company's common stock, including the potential exercises of vested stock options and the associated sale of up to 11,641 shares of common stock. Subsequently, Mr. Price entered into a new Rule 10b5-1 Trading Plan on November 22, 2024. Mr. Price's plan provides for the potential sale of up to 120,068 shares of the Company's common stock, including the potential exercises of vested stock options and the associated sale of up to 11,641 shares of common stock between February 21, 2025 and December 31, 2025, assuming maximum attainment of applicable performance measures with respect to vesting of performance stock unit or market stock unit awards during the specified period. The actual number of shares to be sold under the 10b5-1 Plan will depend on the achievement of applicable performance conditions under the performance or market stock units less any shares sold pursuant to mandatory sell-to-cover transactions not covered by the plan related to withholding taxes.

Kirk Coleman, President, entered into a Rule 10b5-1 Trading Plan on November 22, 2024. Mr. Coleman's plan provides for the potential sale of up to 142,268 shares of the Company's common stock between February 21, 2025 and September 30, 2025, assuming maximum attainment of applicable performance measures with respect to vesting of performance stock unit or market stock unit awards during the specified period. The actual number of shares to be sold under the 10b5-1 Plan will depend on the achievement of applicable performance conditions under the performance or market stock units less any shares sold pursuant to mandatory sell-to-cover transactions not covered by the plan related to withholding taxes.

Michael Kerr, Senior Vice President, General Counsel, entered into a Rule 10b5-1 Trading Plan on December 13, 2024. Mr. Kerr's plan provides for the potential sale of up to 14,109 shares of the Company's common stock between March 14, 2025 and September 30, 2025, assuming maximum attainment of applicable performance measures with respect to vesting of performance stock unit awards during the specified period. The actual number of shares to be sold under the 10b5-1 Plan will depend on the achievement of applicable performance conditions under the performance stock units less any shares sold pursuant to mandatory sell-to-cover transactions not covered by the plan related to withholding taxes.

In June 2023, the Company adopted a policy pursuant to which any participant in the Company's equity incentive plans whose transactions are subject to Section 16 of the Security Exchange Act of 1934, as amended, is required to sell, upon the vesting or settlement of any such award, a portion of the shares subject to the award determined by the Company in its discretion to be sufficient to cover tax withholding obligations and to remit an amount equal to such tax withholding obligations to the Company. This mandatory sell-to-cover policy was adopted by the Company as a result of the inability of the Company's captive broker to affect the sell-to-cover transactions pursuant to Rule 10b5-1 Trading Plans.

Information required by Part III, Item 10, will be included in our Proxy Statement relating to our 2025 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024, and is incorporated herein by reference.

We have adopted an insider trading policy governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

Information required by Part III, Item 11, will be included in our Proxy Statement relating to our 2025 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024, and is incorporated herein by reference.

Information required by Part III, Item 12, will be included in our Proxy Statement relating to our 2025 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024, and is incorporated herein by reference.

Information required by Part III, Item 13, will be included in our Proxy Statement relating to our 2025 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024, and is incorporated herein by reference.

Information required by Part III, Item 14, will be included in our Proxy Statement relating to our 2025 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024, and is incorporated herein by reference.

(a) Documents Filed with Report

(1) Financial Statements

(2) Financial Statement Schedules.

Schedules required by this item have been omitted since they are either not required or not applicable or because the information required is included in the consolidated financial statements included elsewhere herein or the notes thereto.

(3) Exhibits.

The information required by this Item is set forth on the exhibit index that precedes the signature page of this Annual Report on Form 10-K.