Fintech Firm Q2 Is Weighing Options After Takeover Interest

Matthew Monks, Bloomberg News

(Bloomberg) -- Q2 Holdings Inc., a banking-software provider, is weighing options including a sale after receiving takeover interest, according to people familiar with the matter.

The Austin-based company, which is working with a financial adviser, is fielding interest from potential private equity buyers, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made and Q2 could opt to remain independent.

Q2 shares climbed as much as 11% after being temporarily halted in New York trading Tuesday. They traded around $46.10 apiece at 11:29 a.m., giving the company a market valuation of about $2.6 billion. Prior to the report, they dropped as much as 5.8% on the day and were down more than 55% in the past year.

A representative for Q2 didn’t immediately respond to requests for comment.

Private equity firms, with mountains of cash to put to work, have been aggressively pursuing software providers, which tend to generate steady cash flow. A dip in financial technology stocks in particular has also created buying opportunities. Thoma Bravo has approached banking software specialist Temenos AG about a takeover, Bloomberg News reported last month.

Q2 offers cloud-based digital banking, lending and other services to banks, financial technology firms, alternative finance providers and other clients. One of its main products, Helix, helps companies that want to be in banking, such as Betterment and Credit Karma Inc., offer finance products from checking accounts to debit cards, according to its website.

With more than 1,300 customers, the company says that about half of the banks in North America with at least $100 billion in assets use its products, including the five largest Canadian banks.

Q2 had a net loss of about $23.6 million in the quarter ending March 31, compared with a net loss of about $25.7 million a year earlier, according to its most recent earnings report. While revenue rose last quarter, profits and cash flow were hurt by higher costs tied to hiring and other expenses.

(Updates shares in third paragraph.)