QTWO - Earnings call transcript Q4 2017

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Operator

Good morning, my name is Jacqueline, and I will be your conference operator today. At this time, I would like to welcome, everyone, to the Q2 Holdings 4Q 2017 and Full Year Results Conference Call. [Operator Instructions]. Bob Gujavarty, Vice President of Investor Relations.

You may begin your conference.

Bob Gujavarty

morning. Good QX XX, for XXXX. the and Fourth Conference December Year-Ended Holdings to the Call Quarter Welcome Matt and I'm Relations, today, are and Gujavarty, with our Bob Vice me on President the CFO. Harris, our Jennifer of Investor Flake, CEO; call,

conference As broadcast live is via a call being webcast. reminder, today's

available distributed our now, In have you be call received addition, yesterday press following website a the of our a of release should was that the afternoon. replay copy will on call. By

the on available Services is it not, have you our of Investor website. If section

Let this me highlight investor also our participation quarter. several in events

We Conference will TMT the be Conference attending Orlando Stanley the Raymond James' Institutional Morgan in Investor in Francisco. San and

to These caution made differ solely can to numerous statements Before must materially are you beginning, projected uncertainties, statements the information today's important and factors, discussion, results these Also, during risks the remarks we could from implied to statements session, in results subject and and by statements. these cause on statements. question-and-answer to actual forward-looking differ including statements. present forward-looking in are actual this results the which other risks uncertainties based from those or subject are cause that that forward-looking contain

the please other factors For our additional update the statements. forward-looking not to any We Securities refer and undertake and filings do contained information, Commission with disclosures. Exchange and to risk therein any duty

results, be Services portion as state the non-revenue non-GAAP GAAP will non-GAAP Website. press our outlook which things, a release, to non-GAAP future not GAAP financial been Any on has compensation not discuss stock business, price. unreasonable is unless both significant measure compensations our we to cannot on we because, is which we expense, the other reconciliation available financial a are on reliably we today call, referring expense Since our to effort. tables among representative the we they GAAP the reconciled future GAAP stock-based will dependent are The in forward-looking is measures without our our that comparable provide this have future our attached of internally outlook Investor stock-based We are to number. and estimate on During of the reconciled believe available measures we GAAP to we and expect a non-GAAP financial impact how measures. future measure basis

let me to Flake. Now the call turn Matt over

Matthew Flake

share full the call I'll highlights thanks to business and Bob, of a XXXX over us for the quarter joining fourth and Thanks, I'll on Jennifer, then you fourth turn some to detailed to XXXX. year and from all earnings call. full provide our quarter financial Today, more well the at XX% fourth quarter, the XXXX the year-over-year. XX% was for XXXX. look year up first generating for year-over-year. $XX.X ended as quarter million, our financial with a and year year Revenue $XXX guidance of full results million, up strong as revenue We

quarter the added users discussing in from today's users year-over-year. also XX.X for dollars fourth the the was platform, like off quarter, XXX,XXX ending our single with approximately call increase XX% a the quarter. on bookings We our I'd kick record quarter. highest by performance a sales The in to year million

you of would improving help the net bank the XXXX, our is bank new fourth execution bank a positive bank suite banks and to commercial Our from QX's Throughout with year business technology the platform yet And a in as acquisition a bank team's an the I a team. and the to look made quarter, this the acquiring customer. commented institution This quarter, new are position puts QX in banking ago. that by retail were this treasury highly largely our example a acquiring is legacy the Northeast. a in from solution, competitive initiated focus headquartered accelerate win Banking strong our a billion not confident a that market. line. solution, largest bank has customer saying, to belief time elevated X for I execution a bringing This X in their a position performance than particularly them We they use the reference and Tier In evaluation to in evaluation their record sales an the at of initiated yet strong customer the another the added Corporate A plan fourth which their accounts. corporate has banks they new the their institution while the the down in had our feel quarter completed midst was in purchasing an business better the commercial in on environment of I product us replace powered evaluation decision evaluation, great space. in acquire retail platform bank a solution economic believe our commercial when existing to would of an for tool an $XX earn which

platform to X bank which won, order a acquired back with QX a had prevent the In QX's erosion and the the a move fourth quarter, customer in in existing online contract of for banking Tier to systems. and in them bank was to the of their and return fourth South, Another deals, the to the XXXX platform quarter, we in us $X commercial migrated experience accounts. single billion value retail signed to a customer

I it's bank. for uncommon the As collapse previously, institution the larger acquired not M&A, bank of to said the in technology

national to The in because their X the retail and business looking the discuss, value and a platform platform. with unique our of is for the in wealth QX's management for this So Tier bank of for This initiative. strategic QX Midwest. addition banking a assets grow win, to banks QX, win firm. brokerage this is chartered a $XX the bank the firm aggressively of final retail institution selected billion The win I'll these speaks of both was scenarios to

the for investment other QX, customer a their its retail of firms opportunity kind in country for across it represents channels. the is new increase as While the first and QX, investment believe of look their banking expansion to an we this market

While credit it several union another the the signed quarter was including positive States. credit congratulate a execution. top of for Eastern post unions I'd solid new bank team, results. credit our team in We continued team for United year like a big to the to credit union XXX union

QX this in traction indicative win in signing customers. total potential with and savings of QX Our and signing We're the X market. a early than stature Open's team is million progress to Open's subscription also with of differentiation as believe I platform to and have QX addressable with customer, Open a agreement a quarter, excited more the long-term leading Acorns, fourth made This microinvestment our demonstrates fintech expand market. also Acorns

strong to While forward QX perspective, way grow pleased I'm over for I you throughout pipeline this to updates deal Open our it with sharing an is time. with is relatively there's potential MRR look key XXXX. modest from the and progressing,

record direct solid sales team had renewals a quarter, finish full a year. fourth our in had team the the year, While good signing quarter and a the sales of our to number cross also

previous is grow their our way my our the discussed technology belief Given and in base renewal as looking we business. that strategic that to this use activity call, customer M&A activity high to reinforces a

good leading I'll XXXX the our activity into also indicator quarter, out to about of XXXX. renewal XXXX, that bookings view I throughout And sales as team looks beyond. team's strong stating -- feel and churn convert my by across pipeline to sales to headed our close great that manageable a We our year. in customer a in close addition great the commentary pipeline the ability

our milestone accomplished bigger our I is at as remarked teams execution million have the last level, want even add roster. larger user on upmarket XXXX, our On and operations move complement this and in a to customers to our in On XXXX. and it to we crossing big to the an continued call, I continued on delivery threshold all the company larger testament while front, was teams they XX

reinforces more past digital we desktop time on and continuing several for a see to In scale customers. demonstrates devices. a posting me In reflect our usage the in our while in we As also grow we on technology. record from month their new we the customers. driving it's we to the we customers, have strategic install XX% to a all What We've -- about we XXXX, saw of with achieved from achieved of and channel technology. look in back value to only our logins importance the talked continue which than that I is the $X centers, over are saw of billion a uptime growth our of our this mobile this also system channel year-over-year, perspective logins as XXXX, value usage our investments to customers the hosting which of that succeeding believe adoption also from December our tells data years. And alone, good

believe, maintaining our what time the and that, Jennifer. existing reiterating the wrap and record-setting teams want new QX, and the to spend With beyond. to year of from of availability I'll happy delivering QX's calls over winning my performance, And these discussing thank vital platform, I'll we creating call sales year the customers lot positioned While and I for new another for and executing continue we hand installing component a customers, all system are XXXX QX of to in I up pause well great extending comments by was of platform customers on was at market. referenceable a products that a to XXXX success. to

Jennifer Harris

Matt. Thanks,

full pleased $XX.X quarter in XXXX and which with full for to quarter results combined of guidance Revenue million, improvements previous and the operating non-GAAP income XXXX. Total is full year-over-year adjusted year-over-year the resell. The current XX% our component And year year from full bill growth fourth in revenue solid quarter revenue year year. of deceleration fourth million, subscription and was slightly full down non-GAAP the fourth revenue positive up quarter slightly delivered approximately income, first down $XXX in full growth of services XXXX, before in of of are consecutive and with the consistent from sequential operating in the the the result of XXXX for quarter The XX% XXXX was execution in revenue our year quarter XXXX. revenue increase third have the year revenue which EBITDA in we XXXX, and expectations. as approximately and X% We to in of revenue $XXX,XXX. for XX% largest year-over-year. quarter. the quarter review services, the growth XX% of fourth our resulted our below year represented slowed quarter quarter. with XX% I'll further of implied XXXX was second pay our and revenue pay guidance revenue of both for another continued revenue up the principally transaction of bill-pay an Transaction-based the finishing was Bill

revenue M&A was driven XXXX. churn full basis churn down Our X.X%, slightly X.X%. the churn XXXX year was therefore points Approximately from XXX X.X% the in of was for by activity, controllable

Looking at to ahead, expect X% churn remain XXXX. in below we or

We M&A communicated we with increased negatively our count. from platform year ended the QX previously, XXXX. XXX As impacted the end activity down slightly XXX at of have net customers, customer

Our years. XX-month consistent XXXX prior for was revenue trailing with retention XXX%, rate

of reminder, at this from end installed of of group year the that customers same current the of end all previous at revenue with a customers the year. compares the As revenue metric the

from and margin gross revenue The from quarter. slightly fourth to basis. XX.X% results quarter XX.X% earnings otherwise references in of to please primarily expenses all the non-GAAP was that higher the as stated, in and quarter, up I turn on operating attributable Gross year-over-year down previous on we our expenses, was our for a XX.X% the of call. services a discussed are unless operating to note As slightly margin XXXX quarter mix decline third and

$XX.X Both we margin Adjusted X to at million, the with For the end year-over-year from improvement expenses the year year only operating was Total of as for period, at million growth Adjusted in by $XX.X XXXX. driven for or but XXXX EBITDA million the in negative and the additions full moderating previous at of to and in flow that the from up previous headcount an and continue ended cash the up the in sequential the We XXXX, the with expenditures higher from of quarter expenses. operating expenses up quarter XXX XX.X% grow $X.X employees, cash fourth revenue the quarter slightly our $XX.X revenue, were increase $XXX,XXX, we a free by $X.X ended from revenue in ago, million, year $XX.X operations from equivalents XX.X%, and growth full was was cash, million up net XXXX. in the Cash XXXX. end capital driven year operating the for year-ago resulting were I million rate up expect X.X% million gross and quarter. investments full EBITDA quarter. in incurred quarter. was up $X.X XX% $X.X from XXXX. million and from moderate XXX primarily flow expenses in of $X.X million, $X.X below of operating year from of third the of million,

generated of earlier of we we in flow free cash year. million, For communicated half the the second guidance XXXX, the $XX.X achieving

$XXX representing to $X.X million, XXXX growth. range to year million of and to of forecast in $XX.X Let forecast XX% guidance. of first the full $XX up year of XXXX. range by revenue and $XX.X full XX% quarter first year-over-year We first full our to for adjusted quarter million, million to in the year $X me $XXX and $XX revenue million EBITDA the million wrap million We sharing quarter million

In was let of to such it the adjusted transitioning cash positive. we back of As in expect free closing cash client free EBITDA flow continued year, summary, we a QX that, and quarter year the notable I pace growth, annual XXXX headcount and will revenue with which taxes and deliver year for in of impact over improvement additions, half second followed to growth to as In continue XXXX, improve Matt, becoming prior improvements was to me remarks. back year seasonal anticipate, the profitability revenue the of payroll a another strong full flow. of during first factors for the turn the in positive by half With the XXXX. conference, years, his held

Matthew Flake

XXXX Tier revenue last With Thanks, solid to growth joining Jennifer. momentum, having I exciting the to with excellent XXXX. for customer of XXXX In the another X be and initiatives industry-leading with that, signed I'll of operator for us over XXX entered questions. closing, we days thank in you combined product Xs hand service. today, expect profitability, improving and year it

Operator

[Operator Instructions].

first Todd with comes Your Stifel. question from Roderick

Thomas Roderick

nothing, transpired for a said, call time, new Jennifer, for today like growth fast-forward win. Tier front, number then, and if and quarter's pretty feels all I So go back for XX% seems X at good I to I and that the if there you things last have environment, bookings this to and XX% think, look positive at surprises look was the of, on the conference like but year had particularly sort since at you

well everything from your like came seems it ahead of expectations. ahead a bookings or new So perspective out

Do exiting seems think bit story? or like the XXXX of a rate you bill first of upon the how helpful, perhaps keeping I you for And returning of is part reduction a So growth would into as it more the XX% in you my air second you to guess, little little of a whether term? little looks back disconnect. both expectations like pay get XX%? question a you you it's what if to churn comment growth then because bit longer first the this That guide question to in just XX% about pause do part cautious through to bit comment is, of year just, could that saw terms of XXXX half this type -- a could what or pocket, a you be and that's see

Jennifer Harris

Tom. Yes,

more a my guide. conservatism revenue So in different to provide few leading me a XXXX there bit factors is

the X mentioned, the few days the X First, of deals. of as last the in them Most X we signed Tier Matt and of signed year. last quarter we days XXX

holidays, that and would So of I of push in several the early into early planning still of and timeframe and XXXX. year many QX typical the the of expect slotting those the implementation are X part implementation, with would them stages very

growth lot for as expect revenue And saw the achievement year. this XXXX. over than the to prepared of slowing remarks, XXXX in year-over-year we a that bill-pay to I really contribute revenue significant in rather So a mentioned growth my I then bookings

XXX we we bill I rate to so look the all have. year's growth And lastly, in until is then our comment would that the ASC they're work adoption into conservatism the improvement this also can on see that of EY guide bounce for that additional going or through it's doing currently next working impact of and at some to built point pay at an And there. back

and might pipeline. this about had bookings to strong question the out, of the going had more we the and that EY had and back add that revenue assumptions in of last would then up. to feel Our performance I more that we initial pull go have I be through bookings those given and did much nature that at visibility this sure forward feel I expect the the year make to with versus from year's be given I is payments better change in But note would pushing it's slowdown we experiencing X% that I needs tailwinds positive we assessment year to half that the were last to when revenue XXX that finally, contracts guidance because the into but Open pick concur. confident still about and the our in I than would contracts. less And of I revenue, any year's, they 'XX than the make escalating that

of in year. your of timing first what question, and of is that's the half this mix the is growth, so bookings the And XXXX a part really lot by the of for driven second that the --

at tell I point is is driven I the less this year-over-year no really low-end by and XX% high you can how that can expect to the in revenue first growth of year. of than go for this XXXX So half execution what be growth the

on I the look high-end give So more you can might what like midyear. light

Thomas Roderick

what seem reform, turning your activity their Matt, budgets? of they're but we're makers bit back of relative 'XX XXXX. landed these just about I you're kind you fourth about Can How seems the hearing Very a the seeing hear to hear the Perfect. on QX X thinking to in in it from helpful. and optimistic more out you Tier to driven decision comments deal what your you some Love field? factors. but more by you're for purchase and mean, and about the quarter, to wins environment a environment? little not big with bookings flush, more not pipeline about the talk discussions more purchasing just budget big budget like little for increased the IT starting first-hand tax a just about bit pretty

Matthew Flake

The been always bit. of the just will first lot activity QX. off a in quarter than I've be better kind has QX first think, slower the more coming a the seasonal seen what with and already in And based third quarter the of but seen, we've are lower first than a I on strong quite -- our quarters, a activity

you're, and quarter. the So your of, usually, you worried barrels about next empty kind

a -- -- there's activity up right right out reform up little more lot they're of urgency our The them. stocks, look What is So there stuff, I'm at they're trading seeing of the bit you a now. now. out good customer tax

to I to digital so retail business, our of right that's think, and and deals. corporate, positioned with with from the more up drive driving the to -- stuff, also into deals to platform for now QX breath that to well we're to analytics support. innovation really match products, continue SMART product then the uptime just great see and the going us, record decision-making continue to they We're continue fraud we small win and get

Operator

Sterling comes question Auty JP from next Morgan. Your from

Sterling Auty

we the out number the is enough in banks have you've and signed of time timing of big I think frames you was the Or you mentioned go-live, timing should resources X the currently? to just signed kind Tier to X days, that X - A deals the way of given that you're that us do and a the how about about the so additional the given short go-live us meet the think concentration going the talking time implementation to XXX go-live deals Harris Jennifer spreading little staffed or what in frame of signed? like. last capacity bit add would sheared those require implementation of surprises such some a So

to So the capacity. to concurrent of needs it's meet hire going drive to us that

ramp-up ones. will see gross you year of think handle half margins as in of depressed implementation I capacity back in the a to first So year we the the improving these the bit additional before half concurrent some

Sterling Auty

opportunity to any there engage Is and third pressure some workload with that some to a of push to graders party? systematic

Matthew Flake

we've Yes, the general, in seen larger as mostly you about install Sterling, with that this buy -- We've deals integrated it, market, the management you, kind live that that's and that's "We project the the but it the this So financial to of that's it." some we product. institution systems and in market the with committed of from as far still talked -- side project past. helping the the extent on to, is

in or I -- to don't 'XX. the come not going little have a integrators meaningful a they're play into impact systems I So see but bit, 'XX

Jennifer Harris

annual just year, I that margin I more year-over-year the somewhere points above on XX expect gross we XXX. than in also and would probably this do year, of a margins to first it's still basis Yes, the gross I comment would expect posted said not depress it likely be but the I that while much the improvement, half

Sterling Auty

one, that the or percent last of bill growth? you revenue then pay, mentioned that year-over-year XX% on Got was you. And

Jennifer Harris

been years, at to and -- this they down X dropped the was They about they've year-over-year growth. year-over-year growth XX% a year-over-year That year, the XX% rate last historically growth.

Operator

of line Raymond Brian Peterson next from question comes the from Your James.

Brian Peterson

the strong bookings this on Congrats quarter.

versus that retail and about the the but portion versus non-retail. like from -- year bigger segment the Tier of having business or this X trends ago, to I you a X deals, implementation So non-retail's the can It little X maybe a maybe, retail. talk of sounds much bit wanted how

So but in any be, analytics, treasury, may how that you've new over or historically, I does course cetera? seen et you X of, year look there way can get on corporate, Is users into the know retail, come two, for that?

Matthew Flake

is maybe, There it's longer bank. so than corporate of that couple on on Yes. crown a a the usually year, side, impacts the jewels to deals, moving different little domain to the the on larger the going -- fall that, because you're of

it to a lot more payroll, or their as process, heavy as more time. if more you've that. lot far think There's to any On anything, there's lifting takes got you data move move receivables a about

You have be that. with really cautious to

the to in things, corporate running through the users think but and happy than isn't with in ground a XX of our time QX more the total from the side close SMART you product, timing about customers production year I'm that frame of system. really XX% we've the if about So got the performance

So on retail about that bit X Tier talked the can cycle we come on the point, at going bit that QX -- is X they're do same be Tier little faster, corporate a time Brian, QX about on at as bit in so and delivery. margins -- different, as a about something same it takes but is to all stuff to the then, will are we turn higher, comes sales Open the a Open. this little quite a a lot faster, but

Brian Peterson

it. Got

fourth moving the specifically that in on Just on there the pay, appreciate clarifying you that is guys the XXXX? maybe anything, there, but bill parts quarter in the that conservative changed more I on made

Jennifer Harris

hard Bill center encourage us, it's promote pay, to retail the for side. their them I pay think business. to resell the on bill adoption, banks to we unknown a not higher to and because just of revenue a It's strategic and generating part it's a us not cost it's activity right? is

And just bit of see more so a kind I the growth. that we're think, conservative same being we assuming

Operator

Stanley. Essex Brian from comes question next from Morgan Your

Thomas Robb

have a deals? what on for be Essex. signing is past on your to Tier Thomas of that For Robb, few those of It's forward to you've that we And Good implementation there look do watching X that like, think we job of, the outside line? any kind we step and live kind timeline, the banks provided on out top in Brian of year. quarters? for all year about back should take seasonality kind of X If the kind QX next on coming deals

Jennifer Harris

So all signed the deals days, of XXX given think next quarters. were the see seven don't of the I to those in going last go-live you're much couple in

the think, we're of early slotting call, still as of just the on mentioned because I phases they I in signed. the some for these

those rollout but still in and live we of they're whether so follow get going go so we're to or still. might now in previous handful Xs approach bit that of in so that portion these signed a the might a that earlier, And big they're determining a have the seven it's a midyear, say, pipeline. early to are whether are in were go starting to live bang. live in of going an XXX a phase elect to bit Tier And phases There yes, tell is the it's opportunity last all signed the revenue little that a been years

Matthew Flake

And as out. about said we'll historically, plays I QX talk better quarters, Thomas, see mean, feeling I'm and QX, how for seasonal generally, the like QX far QX are earlier, about we I a as having and than seasonality, quarter slower and good

Thomas Robb

cross-selling out, thinking breaking products? the and -- from either side on new any Great. kind products break new customers' of, existing to And -- out growth again, revenue about way users, then maybe between new

Jennifer Harris

Yes.

we've I been number Tier that revenue lot I during going of have in historically, XX-month our given a you to down think XXXX be didn't implemented So actually retention, would come if is a that to a expect we look trailing 'XX. at bit that, XXX%. Xs at

revenue and in 'XX And customers go-live of XXX%, X they Tier their remember so end you had largest number. why XXXX 'XX a X had our the look stayed at of full so at of if at year the that we

from So have for roughly XX-month you year X and 'XX been next our revenue that largest I same calculation, Xs exclude trailing year. the would Tier retention about this will be XXX% those if the expect

we of that expect growth the from new that now So users. remainder the to come net

Operator

Your from Heckmann Peter question comes next from Davidson.

Peter Heckmann

commercial the the you It for fourth mix the -- those about think clarify to really sounds like just side, was XXXX, you products? on the some had of corporate good between but Could quarter, retail? X commercial or versus this trying success mix

Matthew Flake

for there's -- you, I if could Jennifer on other -- to I you've think don't -- of other got corporate. of some are there's but remember they that the were and Xs, retail out but some and think, I the Tier X them Tier break think, I corporate, of just because call, Xs, -- Tier this

I across and wins corporate banks that couldn't wins and but were of unions. were existing of Tier as new of lot it had completely lot Tier there base corporate were both -- was and corporate well. three X then to cross-sell and way, existing We But break the only and products cross-sell retail that the had think, them the customers to then lot Xs a couple then credit a Pete, So then I we of out net broadly a mix. a of a where some add-ons

Jennifer Harris

of that grow XXXX, that corporate corporate revenue contribution out probably to I year-over-year. the in north but point will I a XX% at digit would mid-single was in low that from year millions perspective, expect this the

So off but small rest than growing it's faster the of the a still business. base, it's of

Peter Heckmann

tool either and/or marketplace, And the competition of retain you as bundling great. to pricing core find in in looking do has That's the find a use terms or of then that their Okay. some or upgraded to compete? capabilities processors do the you competition

Matthew Flake

developers feel have over on the platform small retail, we than corporate, they've like digital to the the allows for We've same. us we're rather our that -- stuff focus all I as bundling having I to business, analytics compete. to roll build banking, XX had used out fraud on singular products just to and mean, innovate innovate doing to single a with yes, products Yes. with that world. the compete to then on a different I stack mean, working always tool new last hard years new and and they're

a can So technology. I in competitive how advantage think, have we out inherently roll we

in we banks deals there. win think strategic the way the that see you the I the out marketplace on

Xs, There's anybody, you X XXX XXX who I a done. we're days, everybody at just some also everybody Pete, the we're win competing people we're Henry, how us. X the proxy you're always no continuing FIS the in and tell and to nice days time. as a So And that's nap products, there's in well impressed pipeline Jack players us, then great with on the all sometimes there's change gets it's those up landscape, in compete we're as shows Pfizer, is not of at in know and for many pure and general, against the but wins last out that really Tier and doing Tier ahead because -- pleased certain

Peter Heckmann

PXP in providers, that PXP? the transfer pay. bill either then bill Or of great. And third-party if seeing in bank maybe Would banks a one stream transactional pay originated more to your the a direct payment towards with or and at the portion follow-up or bill could that from included we number? was originated more bank on That's just transactional be going originated the I could shifting pay addition away maybe with

Matthew Flake

Open, you paying say revenue in of that. Netflix, of of people PXP a some in of a mortgage, part of or Wells transactional seeing that to we're to our things Direct that, rolled direct. doing have our you and and used we've so do paying paying new we're they're mind, QX with just but off cable combat Yes. portals they lot as different customers you they're paying pay product Biller to in allow to that your you I getting as general our to bill cord some that ways. whoever have bill would And that those many with out up Amazon, things you our them generate these help setup things you're solution, direct, PXP bills are make payment, consolidating AT&T of picking him do and to to It customers through be X bills well product, you're Anytime keep cutting, revenue for are trying them, through our lot that are CardSwap are payment and not refinance them as for on puts a now -- Fargo signing payments of their going a lot incentives payment. to but just bills, DIRECTV would pay, have up

more -- that's what of is. it's it So

Operator

Vafi comes next Joseph Capital. from from Your Loop question

Joseph Vafi

sales banks. X, focus was a seeing little larger on towards the with with executed versus signings follow-up. the strategy a there moving on How last just and of the Tier years forward in Tier what strong I in you and then, X we're quarter and traction banks have I maybe, was Tier couple over if and wondering could resources shift there X the a we

Matthew Flake

I'll time and is since in in take our shift then we no March we first. of ever we since Tier more -- I mean, X XX the XX-plus of first one signed strategy. There signed about May second public XXXX the -- in 'XX. went

a in right winning change lot credit of banks, X, winning no strategy. We're unions. Tier the too. deals, Tier We're ones still So X

if think lot acquisitions. seeing at our look you we're a to continuing banks I make -- of

credit lot those for really in It's and then I doing a active And seen unions, those They've long change I no banks unions activity a banks. a X January would through $XXX strategy been of of and there Eddie. time in we've particular, well credit and lot most there's -- Tier in in million the Tier steady That billion. are probably about then January. also $X all had call coming the to are X us. here is been So have

strategy. continue as to sales going in execute that but we're to no space well, in So change

Joseph Vafi

quarter but M&A may And here bit missed I fourth the in the was a Okay. and know quarter. a I have that headwind this, of first little perhaps in

outlook user the base the as install an XXXX? look have to at in You base this and headwind/tailwind on we M&A point to

Matthew Flake

what's think, Yes. to M&A I to predict I happen. going -- it's hard mean,

well. we X% to probably under that thing as number last The we see consistent saw for we'll what year. think, have I 'XX that is our I'll churn still you tell

So continue 'XX. like there it in there's activity of, anticipate out and would be was going being, M&A to kind it to I

Operator

question Your SunTrust. comes from from next Terry Tillman

Terrell Tillman

bit Todd of multiyear so guidance, but or little up the follow we're know in first, talking low to of XXXX, you about set least on XX%. throwing Todd that feel into something I'm or I from you like you we XXXX, 'XX like say. don't kind did, comfortable, actually XX%? to for get I look, is just to it to questions now growth original Roderick. a at new This should [indiscernible] you up -- wanted terms opened scenario XX% kind than conservative Jennifer, terms risk it want of or I or of us conversions otherwise, opened execution worst-case in nothing you would said, so there out you're slower assuming business is there in bill or relate pay that of lower something even highly in for saying up

Jennifer Harris

EY that. think XXX testing than it's that premature anymore can worst-case specific the impact of our what a implementation how to it's think completely go not that's I through give is. just guidance floor having the really little revenue right forward Right? that think setting I of we and scenario now

Terrell Tillman

you sometimes And accounting there's impact what or of to XXX ASC related would -- on on that companies, revenue, if other mean, seen there's but other any revenue be? relates commissions, expenses treatments, dynamic kind were impact sometimes sales walk we've some effects, there's I be from there any multiple as to where could through it impact, to

Jennifer Harris

Yes.

of a it's couple different things. So

have that remember, new us forward. old each straight-line contract in timing revenue should some The get we pull we rates. that escalators, our the term entire recognize actually of If going that price rules Under revenue contracts. we to higher annual over rules, as will year we so increases the that you increased build the average the we're require think price to and recognize revenue

thing acquisition. a license, other it a customers data in on is Centrix premise, the The of still number Centrix term-based while who the had their it center. not they was took

it license. the it even data it's recognized since agreement basis center. had subscription though not we be so was based, it license new because rules, will And Under a our viewed they're on a in as a term term-based

we them to to that deliver license performance future we install prim, have on after no So obligation.

on well, Centrix now from So the management perspective, expect had payment. where in XX% then as the because remember actually goes capitalized commission to all if and the we rules time direct pull commission changes some sales expense side we on But layer under that live is our commission when so folks can expense and past, we the some a capitalize go-live, and deal there do more just there's for -- XX% from new told as will the before also, we've much so And where of go revenue overlay expense customer the we you paid forward that's well. considered deal. that that sold of the an between we contract a when and the now you execution retention related live

piece So be second will that expensed.

payment still will the be. through more, working extent second capitalizing what we're expensing but So net the of

Terrell Tillman

That's ask Or innovations. of larger signing, get the Xs choose want out these like your months. my small API? Acorns? have a kind to or I a whether for they some over QX not the you of could institutions of is SMART. lot about you question like microfinance into because this financial be of Matt, card busy they gone nontraditional what next a talk about the after, I've potentially can or of service use also to kind terms you're that In final like that asked good and pick calling to Tier historically of in wedge about past, you few Open it's color. sounds Could newer I guess, you'll be It QX the

Matthew Flake

bank -- this savings this product the is being app, also the And -- obviously a some Terry, there yes, fintechs and also quarters institutions financial TAM technology. also out quick. Acorns the implemented then mean, really we're want having order some and we're utilizing Chime we've that like the -- announced, I for is this brands us, when in Qapital, -- think, you to it's APIs with the -- some larger Also, look larger announced I with there's dialogue you it's expanded last three this go quarter. to in we at that use product there referenced top the talk turn XXX up there's

opportunity, guys give it quarter a represents continue to going done on market opening to significant the every making. there's So up be it's are us. work we updates we of you a But for but think I'm lot to it. on progress

Operator

Your comes from Needham Mayank the Tandon of next from & question line Company.

Mayank Tandon

is corporate a a little Matt, that I given I to see incumbents around like what have side drill while for what wanted these the I other potential area? just imagine success world for the takeaway you you and Bottomline competitive the against that having wanted bit into corporate been that in to ACI. have more the is are corporate players, reason driving incumbents the and the in just

Matthew Flake

It's and them experience, and look think, names the new products we've technology. functionality have, Yes, Mayank, that XX-plus and while robust look on and ultimately, about they've years then and that talked had entrant perspective, mobile requires and set space. great for and we feel a a new decided modern from so to been the use thinking We -- I being that on so. a into building with and they've something feel the do of that user got different. corporate for to doing you start to feature mentioned, kind able We design

us I guys lot taken think, it's trying money to but that, a time do transition to of lot that. and tough, it's to those are a of

product sell been have have ground, into more -- and big patient. look us get and been we they're the and referenceable, with have very some plus they're running up deals, our to tightly them but we So feel us really it's the now helping We've deals. signed rough, worked gotten customers

in to in compete days, competitive we on, about and as good in that's to to momentum think We're you're, And that's think the into with force. we've kind lead XXX XXXX, occur. our really XX% and to we're continue well. seeing corporate Keep seen feel extend in we guys the the this on but to continue point I of, why position those side, about last continuing solution going R&D mind, what it going going invest we've so based got

Mayank Tandon

Got it.

in-house replacing software clear, And to your or launching are Matt, into be solutions these these competitive own so just custom-built are opportunities? takeaways and you

Matthew Flake

other that competitive well. the business the -- and trying but in who in talked could the as are game quarter takeaways -- not are all just the All players all takeaways, this to ones we win about competitive

we -- that So there there's take corporate now. right -- solutions many solutions don't -- homegrown many not custom not corporate

taking usually So of competitors. it's -- from you're the one almost always it away

Mayank Tandon

revenue the forward just ramp question the final margin think about Jennifer. beyond that going given we for And targets X 'XX, how laid Right. Jennifer for you 'XX? fiscal out should

Jennifer Harris

I am sorry, the what ramp?

Mayank Tandon

The margins. The EBITDA margins?

Jennifer Harris

Yes.

think, year I than you that not better the we X it if of Tier more X I of year-over-year handle and this something that than basis XX Tier And full XXXX, improvement would points, will the the Sterling's think, you're then basis, back capacity a are I half much that in year, see depressed do year-over-year but points in to XXX look may the expect X the of year some add the probably because to you'll implementations. because then to provided response I question, be, implementations. commented to at first to margins half concurrent going in see basis have we going on

Mayank Tandon

given have the Sorry, on Jennifer, make margins revenue, I in potentially, worst-case so that go in deleverage to you model? just based of meant number, the type said 'XX the you XX% where and can 'XX, scenario, investments

Jennifer Harris

No.

improvement. of deals but early we're think, that to mix tell, very year-over-year really it's the it's little because signed I are a the drives committed that to that,

So would annual about improvement a year-over-year same to range. still the expect see I

Operator

Ramnani KeyBanc. last question from your Arvind And comes from

Arvind Ramnani

of Tier to on wins, asked, wanted my congratulations been but ask wins. questions one just about have Most the your you

clients XX%? have signing footprint And, up critical new getting mass clients these to clients Xs, going this and to is priority of, Now kind up versus refereranceable that kind on to do these going? Tier you you Or going over expanding and XX have take at basically, the clients? be and focused or XX% of,

Matthew Flake

in -- assets. institutions think, yes, we're than billion are XX -- I $XX mean, So, than to think are financial up I we more that greater I we have

don't referenceable customer. you without So having get a that

that, had referenceable. using as the then the we've So them very with pleased quality and we're and wins

that running products whether they SMART, SMART and want go and ones up multiple them. as new get finding not are to -- in using the if to cross-sell expand maybe, they're right? we'll far and have want corporate, the focus if that our As We've have in to corporate, they're not running got and use the go live ones footprint to we we'll

news, want So of products -- net Arvind, to then and we don't a existing customers the the the them have anything. it's mix deliver kind go that into cross-sell sell of

Arvind Ramnani

want integrators, from longer be be a strategy Okay. you strategy? or -- Does shift You look couple if a using guys of of, it you a is the still people sales seem -- to referenced, focus, in there years, next but of over to appetite systems to anything operational doesn't strategy? huge change there sort term, kind going

Matthew Flake

and setting bigger I'm into I think, I play. so expectations. integrators I just as systems we -- asset, be I continue to just -- with as cautious customers our think are come going getting mean, want through are acquisition to to

customer so use are integrators. systems think -- go to gap that your I have going them. you I'm It's integrators, time and base in XX%. will a some just and to bridge trying have certain you system we'll the the take margins there's just from guys

for unions talking cloud, $X integrators they like you QX rapidly. going also integrators -- systems with not that paying see And in delivering SMART anytime to turn then billion the Open, but billion systems to we and are deliver. -- things or are are You banks soon. with on like products We're credit $X

of but in could of change to want to overnight. margin a but want don't all be us some the will that profile products, lot be there but that's cautious, integrators sudden there for these a yes, make I just be leap ways I So going to deliver to systems play, the

Operator

conference This concludes today's call.

disconnect. now may You

Q2 (QTWO) 15 Feb 182017 Q4 Earnings call transcript