This Is Why Q2 Holdings, Inc.'s (NYSE:QTWO) CEO Compensation Looks Appropriate

Simply Wall St
June 01, 2021
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Under the guidance of CEO Matt Flake, Q2 Holdings, Inc. (NYSE:QTWO) has performed reasonably well recently. As shareholders go into the upcoming AGM on 08 June 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. Here is our take on why we think the CEO compensation looks appropriate.

Check out our latest analysis for Q2 Holdings

Comparing Q2 Holdings, Inc.'s CEO Compensation With the industry

Our data indicates that Q2 Holdings, Inc. has a market capitalization of US$5.4b, and total annual CEO compensation was reported as US$5.3m for the year to December 2020. We note that's a decrease of 31% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$520k.

In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$6.3m. So it looks like Q2 Holdings compensates Matt Flake in line with the median for the industry. What's more, Matt Flake holds US$495k worth of shares in the company in their own name.

Component20202019Proportion (2020)
Salary US$520k US$520k 10%
Other US$4.8m US$7.2m 90%
Total CompensationUS$5.3m US$7.7m100%

On an industry level, around 11% of total compensation represents salary and 89% is other remuneration. It's interesting to note that Q2 Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NYSE:QTWO CEO Compensation June 2nd 2021

A Look at Q2 Holdings, Inc.'s Growth Numbers

Over the last three years, Q2 Holdings, Inc. has shrunk its earnings per share by 48% per year. In the last year, its revenue is up 27%.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Q2 Holdings, Inc. Been A Good Investment?

We think that the total shareholder return of 61%, over three years, would leave most Q2 Holdings, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Although the company has performed relatively well, we still think there are some areas that could be improved. We reckon that there are some shareholders who may be hesitant to increase CEO pay further until EPS growth starts to improve, despite the robust revenue growth.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 4 warning signs for Q2 Holdings that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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