Q2 Holdings, Inc.QTWO
Q2 Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
In March 2014, the Company's board of directors approved the 2014 Equity Incentive Plan, or 2014 Plan. The 2014 Plan terminated on June 1, 2023, except with respect to the outstanding awards previously granted thereunder. As of June 1, 2023, there were 7,606 shares of common stock that were reserved for issuance pursuant to outstanding awards, assuming maximum performance for any performance-based awards, under the 2014 Plan.
In May 2023, the Company's stockholders approved the 2023 Equity Incentive Plan, or 2023 Plan, with an effective date of June 1, 2023, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards may be granted to employees, consultants and directors. At time of approval, up to 14,045 shares of common stock were reserved for issuance under the 2023 Plan, all of which consisted of shares previously reserved for issuance under the 2014 Plan and any shares that would otherwise be returned to the 2014 Plan as a result of the forfeiture, repurchase or termination of awards issued under that plan. The 2023 Plan is a successor to and continuation of the Company's 2014 Plan. As of December 31, 2025, 5,587 shares remain authorized and available for future issuance under the 2023 Plan, assuming attainment of maximum performance for any market stock units or performance stock units.
In March 2014, the Company adopted its ESPP. The plan was implemented starting January 3, 2022, pursuant to which certain participating domestic employees are able to purchase shares of the Company's common stock at a 15% discount of the lower of the market price at the beginning or end of the applicable offering period. Offering periods commence on each June 1 and December 1. The Board provided for a share reserve with respect to the ESPP of 800 shares. The ESPP contains a provision that automatically increases the shares available for issuance under the plan on January 1 of each year through 2024, by an amount equal to the lesser of (a) 500 shares, (b) 1% of the number of shares issued and outstanding on the immediately preceding December 31 or (c) such other amount as may be determined by the Company's board of directors. As of December 31, 2025, 1,129 shares remain authorized and available for future issuance under the ESPP.
Stock-based compensation expense was recorded in the following cost and expense categories on the Company's consolidated statements of comprehensive income (loss):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cost of revenues | $ | 9,711 | $ | 11,821 | $ | 13,346 | ||||||||||||||
| Sales and marketing | 14,196 | 16,779 | 16,771 | |||||||||||||||||
| Research and development | 16,860 | 16,456 | 15,157 | |||||||||||||||||
| General and administrative | 46,182 | 44,159 | 33,914 | |||||||||||||||||
| Total stock-based compensation expense | $ | 86,949 | $ | 89,215 | $ | 79,188 | ||||||||||||||
Stock-based compensation capitalized as an asset was $3.1 million, $5.1 million and $5.3 million in the years ended December 31, 2025, 2024 and 2023, respectively.
Stock Options
Stock option activity was as follows:
| Number of Options | Weighted Average Exercise Price | |||||||||||||
| Balance as of January 1, 2023 | 324 | $ | 35.07 | |||||||||||
| Granted | — | — | ||||||||||||
| Exercised | (74) | 30.91 | ||||||||||||
| Forfeited | — | — | ||||||||||||
| Expired | (4) | 27.86 | ||||||||||||
| Balance as of December 31, 2023 | 246 | 36.43 | ||||||||||||
| Granted | — | — | ||||||||||||
| Exercised | (234) | 35.90 | ||||||||||||
| Forfeited | — | — | ||||||||||||
| Expired | — | — | ||||||||||||
| Balance as of December 31, 2024 | 12 | 47.00 | ||||||||||||
| Granted | — | — | ||||||||||||
| Exercised | (12) | 47.00 | ||||||||||||
| Forfeited | — | — | ||||||||||||
| Expired | — | — | ||||||||||||
| Balance as of December 31, 2025 | — | $ | — | |||||||||||
The aggregate intrinsic value of stock options exercised during each of the years ended December 31, 2025, 2024 and 2023 was $0.5 million, $1.5 million and $0.4 million, respectively. There were no stock options outstanding as of December 31, 2025.
Restricted Stock Units
Restricted stock unit activity was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Nonvested as of January 1, 2023 | 2,944 | $ | 59.99 | |||||||||||
| Granted | 1,981 | 32.31 | ||||||||||||
| Vested | (963) | 63.59 | ||||||||||||
| Forfeited | (366) | 48.39 | ||||||||||||
| Nonvested as of December 31, 2023 | 3,596 | 44.96 | ||||||||||||
| Granted | 1,513 | 49.30 | ||||||||||||
| Vested | (1,231) | 50.49 | ||||||||||||
| Forfeited | (361) | 45.45 | ||||||||||||
| Nonvested as of December 31, 2024 | 3,517 | 44.84 | ||||||||||||
| Granted | 746 | 85.81 | ||||||||||||
| Vested | (1,346) | 48.88 | ||||||||||||
| Forfeited | (317) | 49.66 | ||||||||||||
| Nonvested as of December 31, 2025 | 2,600 | $ | 53.91 | |||||||||||
The total fair value of restricted stock units vested during each of the years ended December 31, 2025, 2024 and 2023 was $111.2 million, $75.7 million and $32.5 million, respectively. Total unrecognized stock-based compensation expense related to restricted stock units was $98.3 million as of December 31, 2025, which the Company expects to recognize over a weighted average period of 2.4 years.
Market Stock Units and Performance Stock Units
MSU and PSU activity was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Nonvested as of January 1, 2023 | 399 | $ | 57.42 | |||||||||||
| Granted | 587 | 39.59 | ||||||||||||
| Vested | (4) | 23.21 | ||||||||||||
| Forfeited | (48) | 55.55 | ||||||||||||
| Nonvested as of December 31, 2023 | 934 | 46.45 | ||||||||||||
| Granted | 389 | 59.92 | ||||||||||||
Change in awards based on performance(1) | 11 | 88.40 | ||||||||||||
| Vested | (82) | 45.90 | ||||||||||||
| Forfeited | (191) | 59.12 | ||||||||||||
| Nonvested as of December 31, 2024 | 1,061 | 49.58 | ||||||||||||
| Granted | 241 | 92.20 | ||||||||||||
Change in awards based on performance(1) | 317 | 47.21 | ||||||||||||
| Vested | (629) | 47.08 | ||||||||||||
| Forfeited | (111) | 64.50 | ||||||||||||
| Nonvested as of December 31, 2025 | 879 | $ | 60.31 | |||||||||||
________________________________________________________________________
(1)Represents the change in the number of MSUs and PSUs earned based on performance achievement for the performance period.
Significant assumptions used in the Monte Carlo simulation model for the TSR PSUs granted during the years ended December 31, 2025, 2024, and 2023 are as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Volatility | 52.5% | 53.5 - 54.1% | 52.7 - 54.8% | |||||||||||||||||
| Risk-free interest rate | 3.9% | 4.2 - 4.5% | 3.9 - 4.5% | |||||||||||||||||
| Dividend yield | — | — | — | |||||||||||||||||
| Longest remaining performance period (in years) | 3 | 3 | 3 | |||||||||||||||||
The total fair value of MSUs and PSUs vested during each of the years ended December 31, 2025, 2024 and 2023 was $49.5 million, $5.6 million and $0.1 million, respectively. Total unrecognized stock-based compensation expense related to MSUs and PSUs was $27.3 million as of December 31, 2025, which the Company expects to recognize over a weighted average period of 1.6 years.
Employee Stock Purchase Plan
The following summarizes the assumptions used for estimating the fair value of ESPP purchase rights:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Risk-free interest rate | 3.8 - 4.4% | 4.4 - 5.4% | 5.3 - 5.4% | |||||||||||||||||
| Expected life (in years) | 0.5 | 0.5 | 0.5 | |||||||||||||||||
| Expected volatility | 41.4 - 46.3% | 38.4 - 40.8% | 37.2 - 66.0% | |||||||||||||||||
| Dividend yield | — | — | — | |||||||||||||||||
| Grant date fair value per share | $19.54 - $24.97 | $16.55 - $28.10 | $9.71 - $9.87 | |||||||||||||||||
During the year ended December 31, 2025, the Company's employees purchased 95 shares under the ESPP at a weighted-average price of $68.09 per share, resulting in cash proceeds of $6.5 million. Total unrecognized stock-based compensation expense related to the ESPP was $1.1 million as of December 31, 2025, which the Company expects to recognize over a weighted average period of 0.4 years.
Free Sentinel
Track for freeWant the next Q2 Holdings, Inc. stock compensation disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment Q2 Holdings, Inc.'s next filing hits EDGAR. No credit card, your email never gets sold.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.