QTWO - Earnings call transcript Q4 2019

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Operator

Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Fourth Quarter and Full Year 2019 Financial Results Conference Call. [Operator Instructions] Thank you.

I will now turn the call over to Steve Calk, Director of Investor Relations. begin. please Sir,

Steve Calk

Matt Good us operator. XXXX and you today thank call. Harris, and Thank CFO. our our morning, fourth joining is call the for me year our quarter for CEO; With Jennifer you, on everyone, Flake, and conference full

we factors forward-looking results, the call statements our press from Actual most Important regarding materially Holdings. and the subject be or that forward-looking statements differ are results Form differ materially that to This contemplated recent assurance annual to uncertainties, included by and the statements, afternoon SEC, QX financial risks including report contains correct. periodic discuss actual forward-looking and the performance could give will future the with of forward-looking and that those on subsequent such in these filings, of results including filed release any to in from operating those statements XX-K yesterday today. are reflected our we distributed no significant can cause and financial reports may prove will expectations our

Forward-looking later as the remain no discussed, statements are should this on call. any discussed statements investors these assume obligation time, a such of and not update that we operative this day to assumptions on at that will we statements in based make only call undertake forward-looking

X-K all with section basis. stated, discussed non-GAAP in found afternoon. included may will of a use on the on Relations SEC in to the measures Investor otherwise the and our financial of filed most yesterday Form press A be financial discussion is measures non-GAAP unless and why comparable on our of our Also, website reconciliation this which GAAP measures a the non-GAAP measures call release, be we

the call Matt? turn Now Matt. to over me let

Matt Flake

XXXX XXXX. I’ll financial detailed year to Steve. Today our and fourth as well guidance look a Jennifer results first for more some the quarter XXXX. I’ll highlights share over the turn full at for then the year full from quarter Thanks, as call and

we year-over-year in and XX% revenue increase In users $XXX.X $XX.X million users year-over-year up than more the year year XXX,XXX fourth fourth for ending non-GAAP added was million, quarter, quarter, million, of our We the the generated XX% sequentially. revenue on full platform, year-over-year. of with the Non-GAAP XX.X XX%. up XX% a

was QX. XXXX transformational year a for

banking expand the banking meaningfully to platform customer of our continue digital as We digital as our space. functionality footprint in well the

progressive of acquisitions us Cloud Our and largest commercial most several have in roster our capabilities the of market. we PrecisionLender And the by and bolstered financial Lending with partner XXXX. of customers our in institutions some equipped to to these added

on the partner our reaching. Open users signed of I’d surpassed The fintechs to like we XXXX, with In X QX rapid launched most million congratulate institutions. we’re across QX help and noteworthy an community of for product milestone the Open component Open continues platform. to the companies. excited story team our the to industries, the user the in be to promising This growth is side, several we banking-as-a-service some On progressive a most and late of operational QX fintech financial CorePro, that potential country for

our quarter continues we customer in help extended a the transforming to The Lending’s sales of as base commercial of fourth our and in a lending our and our existing at expanded our space. I’m digitally acquisition capabilities market banking And business. addressable year of full digital is marked in for team their through course, ask PrecisionLender. into And pleased the high performing Cloud also evolution the business XXXX first level lending with to their part contributions QX.

team, alike. when geographies team customers brought finally company. a by We members the in international big we’ve for had international perspectives inspired say, global and our as full year and I wins the been our in new was XXXX And talent I our by first and speak

I As in XXXX, global we well transformation we on financial our head as digital trajectory into are for continue believe services. positioned a leader to

portfolio of most the some enables solutions finance that are largest services to us fintech. partner whether bank, financial the credit progressive a With or with and company union, providers, alternative they industries

we was I’d on XXXX to quarter comments the effect execution. cross-pollination portfolio. a update of see bolstered to the I’ll throughout some solutions we’ve we that like success performance $X fourth a key with over XXXX from Now themes saw and fourth had We sales added And with few ending to strong backlog the billion. In started several our building dive our sales year from into about the quarter, specifically. expanded sales start in committed that by

First, pleased platform our financial products been I’ve our two team’s signed institutions our the this to is XX within straight it team segment market. our X one expand that presence digital are We space. X Tier X in signing. ability at banking encouraging an Tier with new Tier making consistency in quarters the resonating with our effectively platform least Tier X sales sign And believe

for the example, the banking. we bank small signed business in of an U.S. XX Tier fourth selected digital that’s a top our Xs banking and As quarter one is platform corporate

and that The our I user suite believe compete to banking for will largest the a of in of be breadth QX. ultimately bank of for big and win digital position opportunity. is banking our This feature experience put combination corporate clients. us this one win

of banking financial institutions the of critical new at into strategies. their the opportunities. call, banking inroad component As mentioned expansion Many I corporate our us commercial is provided a larger where of the with has into arena valuable them onset digital a

capabilities, clients banking loans we corporate onboard with our expanded then compelling to our have commercial lending and onto combine commercial you suite corporate efficiently when more those banking more And our help relationships a solution platform. win

net in our driving and fourth success Showing significant to this corporate our a banking X the success new up land role quarter. as a deals suite overall helping cross-sales addition major in In Tier our well. client, majority of played in

with consistent picking of happy, to the the which their subject year, when consist feedback renewal and unless keeping the an I always with quarter as of quarter from we consistent of meaningfully a our they happen said, renewals hear directly which our the activity as And strong of call the when course, the clients and speaking On I’ve we up basis. phone indicator on a appreciate a deliver of are system and available, up innovation I don’t keeping our continuing clients. strategic At we in which customers record the direction, cross-sales, from business, that end bookings renewals read had is understand evolved perspective.

net lending with of activity best our Cloud On side with first bookings comprised in wrapped house, a the up quarter cross-sale we of Cloud the the history. strong full quarter Lending Lending’s and new year record

renewals Cloud Just their cross-sales are Lending and support product, that to as with promise fulfilling the I platform, customer operations our our and signify believe digital banking teams clients.

the the history that passion we first On lender the net of of exceeded gaining us, alternative signed QX year road And knowledge have front, America. quarter, family, with I’m team with North and year And part I traction success. wrap by the Cloud in deal Cloud fourth and in the this first teams There’s our new a the full up as a encouraged made the America. want in but our in it’s talent, both major have North ahead largest is of the as the of Cloud clients to team the expectation. thank Lending long single

I’d team two signed to like Following November, in multiple deals our with the close of has the PrecisionLender acquisition highlight.

QX platform first The with the a was is an customer. billion bank in $XX Southeast existing that

this key optimistic in While flight first will QX differentiator. prior QX’s And I’m PrecisionLender opportunity combining this many deals deepening be believe and banking the a to the that commercial acquisition, customers. solutions with of PrecisionLender was our with platform banking existing was we

of the was a this is the I’d we to with QX The the bank. about five some for a to world’s of I like And PrecisionLender the top as acquisition When to highlight that largest viewing acquisition, come second fruition, me made believe banks. positive. to opportunities market combination deal the Canadian following deal PrecisionLender’s and signing leads spoke of the

to power story. the example. Given how world of to suite way by the moment to real a are new PrecisionLender take PrecisionLender the the illustrate products want of QX I

commercial rate, deliver or losing deal commercial Today, in of spreadsheet, banker to to him is loan every the lender set moment lending static money leverage gives Instead pricing working deal PrecisionLender structuring together. sales $X forced to recommendations. on leaving to that data tools and frequently all decide worth compete virtually the coaching, a between on a intelligent trillion close from the a losing of of

real-time bankers institution’s profitability the portfolio have need an the banker puts impact revenue, insights the commercial gives these client better profitability relationship. outcome deals, Using into demonstrate their when make on the that to can visibility meaningful play, loans data across provide a on applied As PrecisionLender and of the and relationships. on they to can them recommendations impact

innings early and with store. what clients do we about products. from we in have work still received integrating with pleased optimistic PrecisionLender we the reception and I’m on it’s to our XXXX our While have are has

achieved little I before time provide reflect the but Now, just just did on year end achieved. how since founding. we’ve good over the what want operational to the year, we the is to color to our Jennifer, The call we’ve that always a also scale not a hand on I of in previous on

For our handful $X have only We assets, instance, a customers more our XX customer time production evolved IPO. compared of considerably. banking in and ended XXXX of billion in those digital XXX has base the with at to than

year institutions the portfolio, of from security our have without from entire our we None compared moved vendors. XX.X customer U.S. the $X the these our through of perspective, and banks investment And a Those a technology billion at platform. happens demand hosting the innovation $XXX million in roster. our the Across with million of XXX trillion third end registered their on the this increasingly top users to digital QX platform, users we user time IPO. ended banking XX.X on over

of raw we an users banking of in their of increasing users times the institutions are is banking importance digital channel is in holders digital a to logged the growth accessing traffic resilient among average user through assets underscoring platform generate While, In and compared most how technologies base, see and account XXX a XX XXXX is Compared due data the our see more more to our the partially growth clients. valuable XXXX. data our shallow integrations frequently, our behave. solutions as on data, we believe to to save reliable, company. our year deep spend, point that I roughly highly in this

our SMART, QX end balances. businesses account These just up deep can insights create meaningful we view produces products and fraud our differentiator risk an it do for today serving like platform which user it creates even through the business. run our powerful beyond means critical we more and on a each And as to robust help and our our data a an and continue their pillar This of PrecisionLender. grow, data, customers insights engagement strategy becomes of

services evidenced services must financial I Financial more the way to Finally, digital the all being is of and to technology data are so, across they can in their only they technology that increasingly And line asked becoming deliver view business. customers. become believe companies evaluate of transformation how every has their transform institutions do operate by I important.

empowering global from concept success in leader with say, our solidify front believe XXXX it’s helped this mind loans, our back as for that providers. office I digital position to service deposits office, a financial to I transformation From in

***X-XX

***XX***

concept from as mind a continue providers. leader I into success From service loans, deposits our with financial say, solidify XXXX believe to will empowering And global helped this I’m we back in to that digital journey office our office, it’s optimistic I that that front XXXX. for position on transformation in

year Thank you, quarter over first discuss to pass and full the for that, XXXX. to the fourth full guidance will our results I quarter and and call Jennifer with and year

Jennifer Harris

results guidance begin fourth full Thanks, reviewing for our the before full with and and the first of Matt. quarter XXXX XXXX. quarter I’ll finishing by for year of year

unless basis that referenced in are non-GAAP Please remarks my note stated. on otherwise all numbers a

told acquired PrecisionLender the from last part as deferred given of you deferred balance purchase substantial As sizeable recorded our revenue a quarter accounting. reminder, we the that revenue and reduction

reflects business. numbers a We from non-GAAP impact of in non-GAAP plan most earnings believe true more to deferred run to to accurately attached we our release. available accounting the as GAAP it discuss the go-forward revenue the of reconciliations rate to on revenue revenue the excluding the comparable numbers All disclose basis, purchase tables and are

$XXX.X Revenue Total for from non-GAAP million, $XX.X fourth revenue XXXX up was quarter. of of year-over-year quarter in for and increase million million, inclusion the the XX% year of quarter XX% December. an PrecisionLender generated results the the was previous month full of for up the the operations year-over-year, and fourth from XX% $X increase for sequential of our revenue approximately and the year-over-year, was November

The by from go-lives remaining revenue user in platform subscription sequential the our new customer growth XXXX. as and business, year-over-year related increase to services our an and the in banking-as-a-service the platform businesses on of was during contribution a digital organic banking lending quarter, expanding increase QX and driven and result

XX% represented down quarter, revenue the full bill revenue XXXX, as as revenue and Transaction-based in revenue. attributable of the total of XXXX. the to decline total The XX% is slowing Transaction of pay revenue for year growth the XX% percentage from well of to year revenue in subscription in PrecisionLender quarter for as revenue for year full in prior revenue increased previous of XX% transaction represented the continued the total from XX% a period. generated compared

mentioned, our for almost Matt to to quarter of generated the long date was backlog value XXXX times over of of renewal the bookings QX term two value extensions. XXXX, our QX renewal our quarter by strongest previously. quarter added dollar contract dollar the QX of in our than largest XXXX renewal XX% being As Renewals added in bookings renewals with and bookings

X with excluding backlog combined continued PrecisionLender win, quarter. XX, from sales of million as and Tier last XXXX, existing achievement of billion $XXX over to the December $X.X renewal committed our a This approximately for end of performance up strong the business, contributed

the of approximately year the impact acquisition the of quarter backlog, total any $XX PrecisionLender revenue of added deferred purchase accounting. reduction in fourth excluding the in to result addition, million In a in as

approximately approximately at the churn a Our churn revenue of anticipate churn to to added churn of approximately M&A I X% and activity years at X.X%, prior businesses total. the the was for XXXX to was XXXX. acquired from industry, consistent with within remain XX% X.X% continue result for

at was the from XXXX. back in count M&A customer go-lives customer of installed with the of end from the year churn with XXX platform of our count customer the spike new end customer activity in concentrated growth QX Our at combined XXX, half a up base. The in reduced year the in was

solutions was was Our trailing quarter platform that revenue XXX% added on XX-month the approximately XXX%, from serves revenue up XXXX revenue to retention retention closed XXX% year. rate in by XXXX The in XXXX rate just increase for rate acquisitions retention business XXX%, for of XXXX. QX fourth for the and to the we the

added our in Given the expect broader QX portfolio of products, would of including the I comparable of retention rate XXXX be PrecisionLender in that XXXX. revenue solutions to XXXX, with

XX.X%, XX.X% XXXX, Gross margin quarter. the fourth from in XX% up of and previous the in was quarter

XX.X% full gross combined margin from the year-over-year to a attributable lower XXXX. up decrease year XXXX, for and subscription For full in is transaction growth the revenue was the increase margin XX%, The revenue. in continued sequential year with

of year-over-year from PrecisionLender including high improved sequential our and months two and both the addition, margin. from revenue revenue businesses also margin our In banking-as-a-service cloud-based expanded contribution lending contribution

were XX% ago expenses year-over-year and from Both in year up driven period, related in $XX and count additions primarily benefit operating the from million, quarter. X% head up the Total by operating were previous the sequential and the increase expenses employee costs. increase

result a As added those with the ended up the of end acquisition. employees being from X,XXX PrecisionLender XXX of as with employees, XXXX we approximately X,XXX of at year the

controls, immigration global the initiatives support of XXXX XXXX international as addition, expansion comply in businesses well and our compliance. new costs increased them with facilities In compliance footprint as with increased with our in import, global of QX the acquisitions costs, as to export, of PrecisionLender GDPR and globally costs to QX such and of brought Lending regulatory Cloud

and PrecisionLender the the of the $X.X been for the quarter. $XX.X December, million business fourth was up impact $XX.X $XX.X acquisition have EBITDA of the of of the impact quarter Even year previous without year in EBITDA would up for the XXXX, for million Adjusted $X.X PrecisionLender in November and EBITDA in million, XXXX. Adjusted was on and quarter from million million adjusted the $XX.X full fourth from the million acquisition, for with remainder $XX slightly the full XXXX. million, the

We and million quarter. million we and $XXX.X equivalents cash, generated down investments quarter PrecisionLender. Cash Operating acquisition ended cash million of operations $X.X $XXX fourth of and free paid quarter of million, the flow at with third from were for $XXX.X the for by was the from the flow the approximately cash free cash end $XXX,XXX. approximately of offset flow,

up first Let sharing wrap me by quarter guidance. year full our and XXXX

range revenue revenue forecast representing to revenue adjusted of and providing million $XX non-GAAP year to negative previously, discussed adjusted to $XXX quarter to guidance of We in $XX full As $X EBITDA. full range million. $XX We to adjusted in growth quarter and negative the million $XX EBITDA the $X will of XX% for non-GAAP $XXX million year-over-year for million million first be XX% of we first million, and EBITDA forecast XXXX. XXXX of year million

expect positive we the from are we a second Similar a PrecisionLender operating to of ramp and EBITDA the timing leverage with half increased the year, see of to the steep synergy. in of losses QX the to return XXXX, any absorbing expected XXXX, and operating given acquisition in adjusted

XXXX our existing another examples solid delivered we execution bookings of our as for of strong several was QX, solutions and strong customer year various cross-pollination In renewals, summary, of basis. including within

financial lending addition and portfolio portfolio global data-driven commercial institutions. our PrecisionLender’s of the pricing enablement, expanded with tools management also We for product sales

on to Based the a of customer processes back we intend year year the Tier successful and investing of these EBITDA investments, positive integrate impacted margins business continue the half the in first to and in acquisition what across XXXX. portfolio, X in PrecisionLender broader in to people in with the saw very similar pattern adjusted ensure outcomes. combined we of half to Given success return and to be expect to the the we we expect the sales

the turn me closing to call his Matt over back for let Now remarks.

Matt Flake

around Thanks, Jennifer. we when our performance of expanded future customers, excellence. customers employees hard appreciate for the and our I of dedication XXXX. know to customers to of other. thank our enhanced digital and In job ourselves and each well for you extremely positioned I’m I our in your done personally significantly our the want work the your customer And for to value our commitment employee a and This bring year vision we innovation closing, proud in XXXX. appreciate was transformation. to our I bases, and each world

to Looking great position Bank in the and Alt-FIs capabilities. traction to their like on to to a looking spend grow XXXX, space believe, capitalize I gaining services. we’re continues transformation on to movement IT entrance in are and newer expand digital and fintechs the financial

to our believe we With our the I integrate that opportunity to while is is our as transformation work do in and to aid our clients across market market. solutions we large products, their are unique portfolio, our they current wherever ever digital businesses, with value proposition in believe have as transformation

Thanks. to over call the operator the questions. for And turn with that, I’ll

Operator

Instructions] first comes question Your [Operator with from Sterling Auty JPMorgan.

Sterling Auty

thanks. Hi, guys. Yes,

So question… follow-up. one the one with question, housekeeping start just we’ll Maybe

Jennifer Harris

could that? Sterling, Sorry. Yes. you repeat

Sterling Auty

in housekeeping the table the guidance I’m guidance, question. to the press ask release? can back of in reconcile half you going versus release, help the that revenue press the there us Yes. you numbers, gave beginning happened the the what a In

Jennifer Harris

reconciliation shortly and filed this GAAP morning. the and of tables press to Yes. night Sterling, in incorrect. press last the after we the X-K the that amended The release revenue a release release press in non-GAAP actual wire press hit corrected realized release an revenue original correct, was was we guidance the

apologize I clerical for error. that So

Sterling Auty

I And your Those XX. given the No talk unions all then IPO, in to investment XX credit like the untouchable, Thank banks market was problem. the the that. for and when back and addressable really Jennifer, Matt own their was seem below think you solutions. top they’re almost the top

business I’m really you And highest And of for it with the top you XX. the change. XX a So what you the in a level in mindset portfolio U.S., top XX think has or distinct you when I do of that going think that the bank kind what winning solutions curious, within do with opportunity marks changed are of institutions forward? those have, see

Matt Flake

Yes, Sterling.

– as the think don’t I their much I So for has technology. part of that appetite changed know

can I with happened the bank to in a than holders, to think more product. comfortable platform, United flowing scaled $X point what’s XX that XX States have trillion through million this they our use products the is is close the where account top that

a we reference our of referenced have customers, think We on delivering record the of lot it. products time I using the a call. and to on They’re able track

more we We now. XX have about customers had than you think Xs are public, going if that Tier one. And

scale market. And going the more So data our to of points can we around experience, drive getting think upmarket. the now there’s then to And proof continue is the activity I drive product. products we’re mobility, that up

along, of about, As Chase, Wells, of to continue way this, bread rise at they $XX top decisions. Bank to then see I’ve technology top that billion of growing Citi all different to we there. banks to $X billion, those when are business But I the credit become it’s the really $X billion, differentiate, success $X I our America, And do, to with compete for to platform butter of and products. got said great are because are say the to going a billion us. is and want that us you’re to does lot banks what’s always and XX And unions as and financial institution think for those the out are seems in Sterling, a targets use the the

Sterling Auty

makes That Thank sense. you.

Operator

Next Roderick from question Stifel. comes Tom with

Tom Roderick

great finish a the hi Matt, congrats questions Thanks to taking for my and Hi Jennifer. year. on

Sterling’s at it it’s number that going over if off kind some Jennifer, And data, through the gave, year-on-year. there. you like XX% of look to looks of piggyback up backlog I’m going question So I

the you year. And the year. that’s that your fourth So what growth last renewals I a quarter, from better saw talk on seen rate, then about we’ve in Xx you bookings than all think,

of digital some now it’s way, put than this the things So of ever the market banking kind it obvious came guys with. cross-sell those making together, that think just I up-sell, to than story more has been if that is we you more way

So into and renewals, function with a go question you little about here more tell to these respect the guess, is, up-sell cross-sell. us the go-to-market I big bit as the

guess into it’s new for of And a just – some conversation, little the your cross to of the the own anecdotally, such used solutions and I around and you there? specifically about perhaps has hearing get it can long bit leasing appetite you Just I lending serviced, love around Street a platform you much that bit solutions hear into renewals, Would PrecisionLender since been get the has here. starting talk little address you what’s a the than time. When holistic more when more, BaaS portfolio they’re you? more Thanks. from think that a just for the these not larger that the banks what’s the

Matt Flake

Tom. Yes,

of with just address cross-sell me customers. to how all let So try after going we’re our the

think there’s management. the right our on moved to kickoff, a year. I the net going coordination a new and between sales lot now the it We relationship had earlier and in sellers we lot of

the customer case of every We successes of had Austin, them the every globe, the we’ve person studies January. in they around impact had. on time different around work, how second most spent management the all or we that relationship educating week how and So here seller from that products first

we is then telling educational our continue but that what now process, begin we that do story customers. so we And to

Lending really example. Cloud is think good I a

we telling some the story as incorporated word If And get about that QX you then then into out. their they also, announced well. deal think to in were takes August technology our XXXX, it of it, the story time story and

have which It’s ours, an We a bank on with the PrecisionLender, actually We client then the we in spring have spring conferences have and this is in year. which is client annual CONNECT, two conference it. in April.

Cloud that’s of happens ends And company tight prospects. of of And public, up the the existing our just quarter, and so what deal that retail fourth time signed banking there then history the together, are the products biggest history story the then the functionality the that the banking was data well the come in were story. company business Lending results just the in the But to their the of quarter. the signing as customers of on with deal small a And all went point, company breadth in in it. we’re about biggest they at with is the and your out as customers we analytics time corporate getting now, digital with we behind third

digital them, terms, you relationship balances transfers walk And talk a as how – it’s it’s say that to how well. bank data platform customers, onboard or whether negotiate digital ultimately and not the the sales and able with about you’re acquire PrecisionLender and sell into and bank, engage your with you about them right We’re also then them, do how banking the just to do Cloud now It’s and negotiate you transform about Lending Gro? and take do and relationship you your with transformation and if that trying transactions. accounts and commercial your do how with optimize

So – bank a or a the geared that that marketing savings client actually a credit was in a products all that a We begin out to we’re digital with had story. walking allows set Alt-FI who transformation union product of a They fintech or with rolled on got They’ve it. it a success miles of lot They year. where did towards rolled than earn interest. account not of a around out. a that less in there’s lot and you a

$X.X see how technology in provide you studies institution. record cross-sells really third case transform able a And that’s around why your this can of XXXX. We we’re So quarter billion. to had backlog the financial of

product lot of keep X and team, we’re way can relationship back why also the Sterling’s market to Tier of sure with success they running question. Tier and educating a making in the examples making why of having and team, up So moving we we’re X having kind it then sales the up customers, existing That’s management around as well. promises that and the the see that functioning. that’s where space It and delivery our goes we’re can

going And million than banking-as-a-service We’ve account more then stuff very the well. is got clearly X on holders that.

going it’s the the more clean we’re to brand global be strategy But going of effort. to And of into make There’s areas a we big you’re first, it. and and just in a second the of continue XXXX these you’re driver our a see to lot quarter. stuff, just global of into going really all in – that think going So it’s beyond. kind to been that sure continue up I cross-pollination see coordinated invest late to energy business to

Tom Roderick

And wins as we to to they comparably ramp? about digital what start Just win? of side. traditional that? big some Should from in Outstanding, the history perspective the leasing and talk side. of Cloud a When you size? Do into a bit PrecisionLender and some about you. just bigger Lending following these take we compare deals the had noting thank in side, how Lending when in lending that about hearing time of some PrecisionLender’s those the of little X magnitude-wise, would you the of in deals deal Tier some sort us biggest means relative XQ a you banking seen sense you’ve Do to on up think maybe can magnitude Cloud XQ that we put and terms give and these be on

Matt Flake

Yes.

So you clarification, deal and It biggest had through and third walk wasn’t scale in just the year. might the the that of quarter. then top quarter, in size fourth Jennifer, Lending if PrecisionLender. But for kind this biggest their deal the Cloud

Jennifer Harris

Lending. Cloud

a ARR, So typically deal, – that $X the in whereas million on they’ve largest quarters, of these about couple Lending had two $X roughly $X.X Cloud deals is it’s roughly for million. PrecisionLender, enterprise million deal of last

seeing our those like on these Cloud revenue. larger more looks implementation a close deals. there, So fairly to things Cloud that Tier for in the Tier a PL X small say that quicker were take more X But And Lending and keep to time I we’ve would said of to Tier large historically us. X, mind American North we’re deals, Lending that banking on

the typically, to to of while large quicker. a time land revenue to revenue much time told And deal, going our it they still expand Tier that for Lending do so strategy. be on they deals to when an we also And revenue. PL to is closer goes X you and then you those remind go I into kind enterprise in that would Cloud

go the businesses. And they of then those So in on they in move rolled the lines and get certain once few or of geographies a next to they certain out, one. land

away, initial over grow it not you the while the right impact So away time. see or does impact full may right

Tom Roderick

Really done, good, it. nicely thank you appreciate I both,

Operator

James. Next question from Brian Peterson Raymond comes with

Brian Peterson

for taking the Thanks questions.

sort I’m guess just last that through wanted those I So products I of renewal earlier just renewals. And you? cross-sell of number long-term contracts, dynamics? terms in that renewals bigger contract new you much should curious the to be quarter surprise the Obviously, given will start drive of your about could of we was thinking terms, on kind or how than of in did the year, it fourth the was some nature

Jennifer Harris

Yes. surprised I think don’t us. necessarily it

have only five term we of And but think and these clients, one one large average six years. We have right? If of about the at you our it. all contract between large time didn’t client IPO,

So out from we’re years about now IPO. six

signed had and strategy years X to out those XXXX that working digital stellar of of after to And And XXXX, the two for guys renew. there so wins, Tier with constantly then you’re on and all transformation. see our those of institutions see some of starting when is RM their starting deals were some come right financial in team sizes we

they to cross-sell to contracts. opportunity try add the time existing to time incremental they’re cross-sell utilizing that functionality, in also and any on new go And

When be contract. two while there’s renewal up out it to do customers years XX two they’re to going they may for on another that years. for take So not it another add the two push years months and up-sell, left where to an to

getting At just So and those the time, quarter. stellar they extensions. our the same focusing had the on back did the really renewals, the with half RMs job a combined we a great extensions, got cross-sells in year, of

Brian Peterson

Well, good Understood. there. Understood. work

into it overall pipeline the as the execution head of the good. commentary Matt, we Thanks, business for you was various pretty XXXX? So sounds on have that parts like guys. quarter fourth the Any

Matt Flake

the for grow. legacy would the the pipe If continues break business that to continues platform XXXX. Thanks, Yes. apart say good feel about little really bit, I it Brian. platform And QX – I I business a

X, We’re X, in whether doing Tier union. it’s really well in Tier the marketplace, Tier bank credit or X

Tier the way talked schedule. tough the harder Canadian predict, Candidly, the they’re and bank, your I Cloud pulled can On you as I we to side to Those reference probably ahead a which five banks. of is are top work PrecisionLender as said guys off of little to think you top really side, Xs XXX the of enterprise And you And that in business, momentum. know, the Precision. earlier, gaining even predict. about,

So I with happy that. was really

I of build And what now data is and in trying quarter, pipe the And number more we’re surpassed going of We’ve think first point really, quarter days the the the doing regional XX fourth the and more right – quarter, community is are segment. into in the where the in active it is to just to those year. fourth the those deals pipe. difficult – the the predictability already one of was be complex. in the in

of going that time, little lot pipe build out like working up So I’m we’re seeing a us build It’s good momentum to on year PrecisionLender take to the mentioned, of about pipeline. a I hard to the took as Lending a just that side. Cloud us

into that with blue-chip getting they on then but the we’re into fintechs, to not only to the are continue looking Open other side, And into banking-as-a-service. QX beginning come play verticals work see

with So as that well. I’m happy

said, transformation looks continue a the we’ve that message for our pipe case as our drive we’ve and got strong And of, It’s and customers. really so our beyond. coordinate message studies to and XXXX matter to in prospects just to

Brian Peterson

year. Good Thanks, Matt.

Operator

Terry Next with comes SunTrust Robinson. Tillman question from

Terry Tillman

Hi QX or here. on, side, bit my multi-part and Open the banking-as-a-service what just it. focus on lot of color good the maybe but things more talk some little I’ll to Matt materiality But is it. maybe of I single question question about Jennifer, a about on and guess a you talked

of kind your in and scale Credit as relates it’s is But Karma? talked some curious, terms win the you the all or examples works design start whether they and I specific you and color they commits get X of know account Thank a to – bookings building some where that this a million just about way revenue? new you you. on Or start the holders. marketing more maybe the product. they to in banking size Now it are

Jennifer Harris

Terry, and providers their said off we’ve carries revenue to those real software underlying a to really banking-as-a-service we the subscription account et always that mind, cetera. adopt generate cards interchange in Keep have as where Yes. taking them start the cards debit utilizing like banking-as-a-service and these for the and getting small debit fairly float, and is, holders and use upside

a monthly is between so fee typical for And guys somewhere subscription and $XX,XXX. $X,XXX these

from So under good quick But coming interchange XXXX the entire X% going and it’s early the grow. for some We traction. in see to exited revenue and And predict up pick just amount end we’re was that’s folks revenue Credit difficult seeing float how starting still of I just total Karma. company. to to QX, like think

upside optimistic overall see that’s in what’s So where there. are It’s just very And a part to backlog, small the that you growth And I’m is. strong going I business. real still it’s included continued underlying the subscription. think the of

Terry Tillman

Thanks.

Operator

from with Vafi comes question Canaccord. Joseph Next

Joseph Vafi

great results and morning Good guys. Hey, here.

customers. circle some back to the I’d thought Just largest of

model. On wins out Fidelity for negative to a banking or were homegrown banking is continues indicated honestly it in large that institutions dynamic systems, really where National, is with quarter, had their something that this they that quite FIS, and a replacing if they was three wondering how marketplace, play the call positive your business

Matt Flake

of But and which products FIS, Fiserv is. up some don’t and I like by know which Systematics, that Hogan there. the homegrown owned systems then and FIS is Yes. are

I beginning the We their Jack see office replace lot think of a some of to banks and Fiserv back Henry begin you’re systems. lot banks, more banks. of of to obviously, a FIS work legacy with

that regularly. through reasons so And replace in going are strategies And there’s to systems. multiple those people we’re and

the has institutions is, of And a around obviously, very large a FIS of financial that banks so and lot world. a company lot

those So systems back-office we some closely to largest or our with we’ve because the guys and to integrate work there’s got a on systems, those. of payment customers

openness old they the spend. it’s or just your which of do an using going APIs, what’s right an the if IT may emblematic kind not And So now, it on core processor, the need investment is in things. homegrown there’s is of bank to have

part occurring. the just that’s And transformation of so it’s

Joseph Vafi

big. room but That’s deals? M&A portfolio here, just there deal the then Okay. the know helpful. I pretty larger on how Thanks. mean right is more was, date, now? appetite And is biggest still getting PrecisionLender strategically the for front Is to I your obviously,

Matt Flake

Thank Yes. you.

no meaningful story, We’re focused strategy to expand on go-to-market transactions. and our any companies, integrating these And our do in land integrating XXXX. plans

headway nothing lending business of the sure of a XXXX, with lot Thanks, in have now We of deal. to another and deposit do Joseph. absorb we in the side get the the side in business really we works right the XXXX want make we before

Operator

Napoli question with William from Bob Next Blair. comes

Bob Napoli

and you morning. good Thank

is renewals. have wondering of number are mean little the you deals, Or the a there pricing. the deals, of some – you versus I because these as are could what color the giveback doing the you on, And on on – there is any history? have customers? more then was these – question if another pricing I to deals Just your these power you’re selling? give your trend you’re do larger size that original is as some is deals? Do are larger price products renewals given

Jennifer Harris

Yes.

innovation lot the a over couple last had of of obviously years. have We

in that obviously, put that, revenue volume you’re year pressure last holder grown We’ve to have the to XX-month been account so trailing XXX% their increase And offset new and customers base XXX% add discounting this growth. on and for in help year. as their right, the to because retention, such of us our services seeing able from products

lending able solutions, addition gives to then, course, just pricing. up-sell the of that the lift So of to maintain we’re price. further And us with and more opportunity the

Bob Napoli

bit products above a around well Thank what is growing? you the average? various mean, the growth of I some products BaaS the – and – organic for Can the what are Okay. give color I you. is growth a XX% in for corporate was which products, of little color And you wondering you then could the about growing Lending, if about average? the give was rates And the below Cloud growing the talked which lot I quarter. guess or

Jennifer Harris

and yes. I corporate well is the commercial lumped in kind think The – functionality. piece corporate Corporate as is Centrix, as QX of faster, it. then a which the growing I and with SMART big of

Bob Napoli

Great. Thank you. Appreciate it.

Matt Flake

Thanks. Bob.

Operator

Next question Mayank from Tandon comes Needham. with

Mayank Tandon

the year? of, you. margin size in note, are the Jennifer, you feel to you, create a bit get Thank them you for you terms of seeing closely larger an I through gross a more that of larger does the could Thank given more to SI sense quarter. want come to the and get little deals, deals incentive how that work the a with that on for same wanted trends talk given And now Just on you. trajectory? partners about Congrats to size? scope the better

Jennifer Harris

Yes.

year, mentioned with to in steep the in my in half a ramp really be of expect we impacted QX. right, first margins I the our prepared As remarks,

so mid-XXs so would And expect a to first the half near year expect be very full a to would in see high going of full the that XXXX, the perspective, year that you’re in in year. the of then somewhere similar year before I XX% will for to QX from to full the XX% year in the it mid- XXs. And somewhere I exiting and the gross-margin low around the right returning

Matt Flake

their want systems opportunity up they to the with U.S. us. system platform also the we are use for doesn’t Open the And use PrecisionLender various to no have we’re people really continue any that on on change open with globally. be And side, SIs play the the there, the opportunity and From beginning not them want you’ll on on we’ve to coming the starting and SIs opportunities on systems There’s certain before, on of integrators, things business. some whether then to it’s Cloud we’re there. with of experiment in but platform, we’ll then for SDK, them see we’re working where integrators. side, to meaningful the And more do systems cloud side, things, need it. integrators Lending to them platform, integrators QX and And an could more many systems more find of the for with partnered some

Operator

question Next with comes Davidson. from Peter Heckmann

Peter Heckmann

still Around generating surprised your morning. in your contemplate in what success taking of range? XX% growth. banks type the this net shift the only count, something that customer for question. Good but to that of I’m banks, growth, Thanks always XX adding and a type you really basis, larger in top for the terms organic comment indicates tier. does XXXX, guidance XX%, in GAAP growth non-GAAP Could of on the a

Jennifer Harris

much range PrecisionLender than XX% That’s something the that. growing what business, it in contemplates, to XX% the Yes. obviously exactly with quicker

Peter Heckmann

about? or margins. years? thinking But an think aspirational just about three on should next this And bit product large target you to how Great. diversify we about set, suppressing the the little give update margin can that that’s business you a had over have you. of you unusually mergers helped evolving outlook. talk I What four be then types some know the Thank and can we’ve us

Jennifer Harris

Cloud center this of of because instances and costs we percent the XX% the I get infrastructure each in we think security in to we’ve true that to Lending said have costs business and applications, SaaS XX% a acquisition market. margin. of the and for underlying before could to recent don’t XX-plus being PrecisionLender highly that It infrastructure have get that they these data with would business. core the native-cloud individual regulated the some But acquisitions bank have be hard or our

of XX%, could just there’s those going actually to But and there. contribute think portion overall while expand of over margins longer business now, gross larger term. a small the such I XX% continue get XX% total piece the So the to as business. to right It’s pieces of grow our a to you take that a revenue, beyond the see

Peter Heckmann

like the into, translate that would what And EBITDA line?

Jennifer Harris

different don’t costs. Well, any bringing them I think – I see operating

through mostly think So margin well. in fall to increase as margins I the would gross EBITDA the

Peter Heckmann

Thank you.

Matt Flake

Thanks, Pete.

Operator

Schmidt with comes question Andrew from Citi. Next

Andrew Schmidt

good congrats here. Jennifer, on start and to Matt year the the

get Obviously, just uncertainty election around quotient little context built just general the what a I revenue you terms it’s FYXXXX maybe to be outlook. to outlook question, extent outlook. more in would First wondering context always up how wanted into built was the There’s revenue some that some some And uncertainty. helpful. you’ve year. of

Jennifer Harris

business. year necessarily that the time only X, year the Because being core remember, first six to a or Tier the built months, our bookings quarter in the space of that know signed in the X we the into revenue we’ve it’s with don’t seven Tier revenue. current even that really I lot impact

they other impact, think as just I visibility variabilities with of it’s big macro quicker the such good many we sight the I suppose, and got besides lately. of And So the is PrecisionLender business. space environment existing deals just won they have much told line so entered cetera, where or et couple you we’ve where really it election, time. could this But enterprise and our a

the get how and they revenue take. pipeline strategy based the that that and it’s But then sales time, on to the what them land over of time through going closed it take most the those for for exactly how figure mentioned to in guys, more Matt some us evolve cycles out. what complex looks like, expand And work deals true is to out those what time

But than confident year feel we’ve that, more our provides I variability guide. revenue think, had very our about so included And in we’ve what current I into historically. what model

Andrew Schmidt

I investment the perspective maybe around in to helpful. then be Got would And integration be PrecisionLender, the quarter, what an progresses? and just the fourth And That far. that helpful. you’ve done little a understand thus as context then from year acquisition it. closed on more remains That’s just what bit done

Matt Flake

Yes.

Cloud as as business. about really like And owning XXX – as business deepen we’ve relationships tried customers. into learn So with to work, the And the is just the and also then together, our how far educate over companies Board across their what an relationship much the as customers, putting we our our well there’s on commercial solve we’re platform that. days for as as how products XXX do element they of their and problems can Lending can sellers management in the

machine And some We’ve really begun early, products. and we’ve so we’re some Andi of our but tool their that’s really there. that’s seeing actually Those opportunities integrate learning where are started. with – interesting to

it’s sellers so there’s And days come. the mostly And to that But going PrecisionLender sell know how be making sure around the been – not vice more XXX QX there’s to disrupting in, to pipeline, story. versa. the

that space So those to guys more it that’s out that what they for add have. space. They didn’t We going they because continue by any them side in And to And driving make invest really where momentum that gone. that the really that’s had. really sellers to we’re as in regional community investment continue the just and for didn’t have sure the opportunities, build want them selling to really enterprise has well.

Andrew Schmidt

again. Congrats guys. much very you Thank it. Got

Operator

with Huff Brett from Stephens. comes question Next

Brett Huff

congrats X on wins and Tier guys. Good morning the

Matt Flake

Thanks, Brett. hanging Appreciate you’re in there.

Brett Huff

color still how that – Two want me. think, think inorganic, on is that little much we’re questions dig that a than less $X the million? to I just of inorganic and just sure getting bit how One little we was is I Cloud said on and Is – piece PrecisionLender. make the of Gro, $X we for in you of And up I to Lending that in that thought. right. Any million stub divided a showed in still that

Jennifer Harris

$X That PrecisionLender. was strictly million

November December, was and on XX. closed So that and – it we for two October months the deal

was million We did quarter. all not out not Cloud So the split include fourth in Gro revenue that $X.X we the did PrecisionLender. Lending or from –

Brett Huff

still we Cloud But last XX but October Lending Okay. year. – closed on we

inorganic – of Precision? a that inorganic top So of months still, there but of what, $X.X maybe was Cloud a from on quarter of half the was from couple Lending still, million

Jennifer Harris

correct. That’s

Brett Huff

wanted drivers things even nicely, I then that. per generally corporate make the the probably get you’re But there question your you things consumer it Thank there of that? of user that. what kind And view, on is, go going second expect think other or but as platform we the mentioned, up user, point Is and probably a has corporate you. cross-sell from like are just just per upmarket, that maybe selling that’s I more mix, I less of been from to you understood are just should Internet, forward? – rev you Okay. going sure

Jennifer Harris

Yes.

the the I inclusive think that registered revenue months of users the you to the last platform. And banking looking like on had is Cloud user digital thing give PrecisionLender. we QX is that things then number other at remember Lending, the is two you’re the Open, registered just

So market, driving corporate success that part XXXX, a within banking pointed exactly of – that this number increase. lot per than talked a of the digital about We’ve also but side. smaller retail corporate side brings that’s you much or user to. But the what the the higher it’s And the we’ve users a in on side. seen cost, year

is the So shift also it driving mix up.

Brett Huff

Great. the Thanks for help.

Jennifer Harris

Brett. Thanks,

Operator

Faucette Morgan And with James question from a we have Stanley.

James Faucette

been I XXXX. on of of business? the to we little but how through want a second improved timing, second seems my Can versus it Thank of to ask in that inflection – go you’re of like couple that PrecisionLender, efficiencies implied you increased expecting give come answered. you. from rest synergies and just across synergies the On much not a just leverage in us questions of some detail the as bit volume to you’re Most and follow-ups. only achieve looking have EBITDA half just

Jennifer Harris

that And they you on international also say And it’s we’ve market. would about allow as we’re we spend alreadyhave to the into to if sales the infrastructure have the with corporate to London and their remember, an in the the put The really support staff. immaterial their from pipeline. synergies and got as doubling that international perspective. Lending. down Sydney, able staff to would talking now G&A synergies can also is growing investing footprint very that was those growing where be spend, PrecisionLender Cloud areas entering is, infrastructure small I and and a had them What existing a here really relatively had business footprint just to group They well money increase their the with in administrative they growing

on the the is And that’s back efficiency So of the like year, that’s we where said. coming from. half really

James Faucette

keep of wondering and just it. guess core I banking just we but you’re think this, then pipeline. for seeing hearing in Got a little you’re your competition your and kind how feeling And about looking you’re – you’ve alluded about what increased can I thinking you’re of you seeing to win who there digital clarification rates? how about and

Matt Flake

run competitive business want ACI, corporate small to Jack into. out technology The I products. side newer FIS, are some then Fiserv, the retail, is Bottom the Yes. them don’t Henry, that business. still call FINASTRA players Fundtech retail-focused some There’s or on market the there – of that And line, on we

very the a X, little is still win competitively. in the little Xs, is the Tier got Tier higher. at – well doing rate we’re Tier to is XX% still lower, But we’ve winning We’re X that greater. a be or volume still around range.

and numbers the in retention. and the that see can You the growth

our good we the is product where grow. differentiation about And feel So win to the rates are. suite competitive continues

James Faucette

Thank That’s much. so you great.

Operator

I’ll the call And at presenters. time, over the to this turn

Matt Flake

everybody. Thank Sorry, us joining you progress quarter’s certainly are couple call. our out much. a follow at forward but with you of the of we questions There’s next left. ran updating later, We today. time that appreciate on with we We’ll up you very everybody do look to

Operator

Ladies today’s you Thank participating. concludes this call. gentlemen, for and conference

disconnect. You may now

Q2 (QTWO) 20 Feb 202019 Q4 Earnings call transcript