QTWO - Earnings call transcript Q3 2020

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Operator

Good morning. My name is Marcella and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Third Quarter 2020 Financial Results Conference Call. All lines have been on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. now Investor turn Relations. would to call I Yankovich, Josh Instructions] like the to over [Operator Sir, may you begin.

Josh Yankovich

with XXXX assurance me give those Thank you actual from our Matt correct. results CFO. prove us such quarter This recent joining thank Important the Flake, our no you will call. results operator. statements Good and be Jennifer morning filed in for included everyone, discuss distributed press our materially XX-Q differ reflected CEO the Harris, that today the Form call on and and financial reports for quarterly conference on is, by With of filings our call afternoon uncertainties, in Holdings. and expectations contemplated operating of QX or forward-looking to included most including cause Actual from to and subsequent statements forward-looking the may these financial any factors are forward-looking the materially to we today. subject could yesterday we that release SEC, periodic our the forward-looking and future contains that are will significant report and differ statements results regarding can in risks statements performance those third

our time financial statements assumptions such make otherwise measures we call any on unless later Forward-looking this Investors statements that the GAAP is found and undertake with press all which we of update are only based no in this to in yesterday forward-looking the not that and measures Form non-GAAP discussed this filed operative the call call. these a remain stated, of discussion at on assume as the obligation included should in discussed. of date discussed SEC Also, why on statements will Investor most and our website be comparable on use measures be will A afternoon. to basis. may the a section of reconciliation measures non-GAAP Relations X-K financial our on release, non-GAAP a we

turn now to me call the over Matt. Let

Matt Flake

provide and fourth of update everyone third call quarter, million, performance, the of to In quarter quarter a recap for revenue XX% the I plan outlook non-GAAP up an year-over-year. beyond. generated and Josh Thanks, third our the for by thanks we joining $XXX.X on our today. Today followed

also users the XX.X million registered bringing in We I up pleased increase quarter with added a quarter. XXX,XXX the the the year-over-year. of approximately in XX% performance to was total users, third Overall, business

continue growth. users installs of We a see the combination added customer to platform of new user number organic sustained a through large to and

delivery we customers banking at number continued stated previous third a level team our go performing the the quarter As on environment. live high has had an remote I’ve platform. been call, new of record them on extremely this where in in This digital

helped the quarter, our XXXX unprecedented quarter finally, of side. consistent our I serves quarter brought as institutions that the on financial our in business underlying believe our for with performance of our in performance growth, side, strong a And model. to times the new of included on was last sales some On strength was in high overall the net sustain steadily the ourselves, of revenue such, I a the the renewal wins. performance continued net remain beyond. the while reminder team optimistic levels the Also, find we which that profitability about call. great And as in continue and the we Despite our as we business. solid improving performance the sales of with on slowdown and teams offset had new Net COVID. distractions earnings than new financial some many turned cross-sale by dealing normal activity discussed Nevertheless, themes banner slower another

along detail on with on like moving I’d provide what are to forward. the we more quarter, bit an sales update from a Now, our expecting execution

the On our with the line side, team in expectations. performed Digital Banking

institution demand global top-of-wallet this contract size all of our will or for for for of this and will solution, with help We functionality certainly was it linked customer top-XX subscription drive quarter product helps services. helps our improvement signing momentum to also a experience a CardSwap get the CardSwap and of to the the customers. validate which highlights the us financial from institutions out cards of the One generate us user continued their benefit a financial product, which and

help are many sell that to customer of analyze the This particularly Pricing is we the where had will environment, it have demonstrates overall we Our quarter financial reentered we mechanisms noting recent to value including potentially pricing adapt exciting current a teams institution This the longer serious worth I in more It’s one the commercial lending the our given North expand our a have of that with curated Tier-X and European solution. relationship. pricing strong already Europe, even lenders in particularly win data their American believe lockdowns for it’s a Loan lending their that taken to solution QX the decisions. selected regions countries and because engaged months. solutions,

So, while in decision-making in slower was the this deals third quarter, uptick pipeline anticipated XXXX. new our than suggest in region we an in

we of opportunity do long-term. strategic us non-material revenues international total portion Europe for revenue. growth are believe the over represents a reminder, a But As our a

U.S. also in to a their new choice team our cloud-based a deal one as of bank solid largest the Banking-as-a-Service core digital-only which quarter, including initiative. one support system had fintechs noteworthy of selected Our particularly

adoption. is to share in the partner opportunity because they we to As is there work with as partnership to this QX able public launch. as nears be BaaS We with about more customer often the this is drive hope case long-term this to grow future their this wins, significant exciting believe

had line substantial contributor still banking with way the and endorsement customer as within Centix am of management we solutions the with the The renewals exceed lending within accounting expectations. quarter. two some some bases. the we an product the side, lending largest happening both been lending largely financial team. incredibly as to we which which is a the the view even of a nearly our that for existing COVID-adjusted world’s bookings storm bookings again, we’ve of the mitigate cross-sell played The able total In this base to in digital our proud banking market. of value and the cross-sell In we we And Next, as risk our cross-sales out third a net renewal slowdown I has strong arena, seen our this was and of global weather significant on activity in activity help of of strategic were general, yet institutions. our expected quarter spite banks, in new

better giving growth land approach bookings and lines the quarters set, and across familiar business. our data performance drive we believe see altogether, a inception, new customers for we and about lending, well corporate, digital one their It working land institution, that informed rather and our fourth of systems has am cross-sale to strategy this alive sales strategy time product they properly and more are to financial a played expand and our component of large digital our the business that in we of our indicates are lines our our I to considered all align we of is as key within product more a I as more data-first recent in we our with expansion an unique play role surface experiences we product technology type banking and us across continuing believe forward. given for quarters and customers our considerable suites, the proposition We expansion of role the sales start transformation. vital evolution our the major our value today for feedback market. customers portfolio. in can is increase been believe to share became a accountholders purchasing future out XXXX, than us from based as quarters even so the And the modern, have efforts, deals are and onboarding, pushed As and our quarter over gain and of improvements because being area decision-making we from recent the ahead. we over cancelled open, in expectation sales decisions wherever teams the to solution sales these momentum our our to in efficiencies with the portfolio started products into with of And see on We should expand continue to expect head a becomes today simply corresponding in with across many we customers. create predictability of integrate is of this to success into strength. compelling critical pipeline that retail steady continue we’ve And I state believe in to the business equips our for breadth multiple teams going our more even Since the driving optimistic

they solution. what digitization, onboarding expect the runways an we one integrate helps commercial differentiated substantial to nature time process. that team customer-facing to client materially able siloed product on client commercial processes to a enrollment our commercial So client, we banking highly those with We of and the to calling legacy for opportunity in cohesive greater days. many also to new we in This experience side quarters together digital much the and must our can Treasury many a opening deliver process particularly new staff. in key our new connecting end-to-end commercial aspects in commercial products to commercial onboarding portfolio key and banking which a commercial reduce tool to can financial within the requires our such comprehensive as major due clients. performance. a substantially digitize bookings features some increases suites; Onboarding institutions market technologies, we the Onboarding documentation. new, both see technologies critical productivity from of customers of that and of of developed The onboarding In on general, breadth Today, improve XX components often continue onboarding our is this solutions, lending are of remains paper-based be processes the had back-end this of commercial differentiate customers elements of become, our the the quarter, today. combination and our driver innovation string and a creates By a take of are offering of cross-pollination account onboard legacy a for our has turn, example a for compelling as develop functionality suboptimal rely as Treasury

deposit the manual multiple our of Solutions have believe processes are revenue on for to time can these and on opportunities. and quick possible customers’ cloud-based, products side and this, impact integration lending replace like data-first types create businesses we technologies technologies quantifiable that both expansion of customers the and a can of through our

data banking with For strength finally, of of example, one helping of make that customers lending, logins have security We’ve the Onboarding in banking we the our North Treasury than our proven recent the years capabilities, tools, a on And the shows with and shortly lasting it’s product advantage solution alone offerings to data component of banking billion whether remains talked behind us vector and another we launching turning corporate bank, banking data record $X.X financial digital in philosophy. in the after land midst combined more harness creates is our and gives top-XX pricing helps Treasury trillion and as we tangible using where commercial into And key make commercially-focused more loans. We months data collect transactional X.X American data nearly the digital about commercial track customers, decisions a Treasury yet more side first from in a lending our and core competitive it informed nine largest our our of profitable and QX. for lending institutions. of commercial year through speak. lending Onboarding with implementing Onboarding, or marketing innovation, data believe lenders

for driver differentiator a new be to activity in and continue another deals. will expansion data believe we So net

issued my unparalleled retire third the our of eight Jennifer I release on Mehok half her Financial is we CFO. the Now, remarks afternoon. information. joining as QX, planning briefly to now Chief disclosed first for our new let yesterday and I’ll news shareholders with her past thank employees our more prepared performance, want But Officer conclude press share our to our QX wanted our years. I in David to address piece in to XXXX over Jennifer contributions the Harris, I of as quarter a customers,

someone the even find time without know would a she enjoy great then it never who I is of been will integrity her. family She higher partner Jennifer well-deserved do than what was miss company will to with is hard and and I be needs You QX better has today at and working and not her retirement. doing her duly. she friend a to spend and

and So, much to Jennifer, thank over I’ll so you. call hand you the

Jennifer Harris

Thanks, Matt.

to customer of revenue year-over-year year-over-year quarter the XX% X% Both new high-end quarter our sequential and adjusted up in non-GAAP will increase of reviewing are for pleased attributable for of was third the third guidance and guidance that with the and We by before year Total revenue were XXX.X to non-GAAP full million, exceeded deliver EBITDA. quarter. third quarter and go-lives. the XXXX. finishing fourth the for for both begin increases results our the results previous largely I from updated revenues quarter an

mentioned, to and of customer banking to Matt new through number number a users record the strong growth we a organic the add digital continued of platform quarter. of go-lives a As during combination

While during the the during completed third the slippage third and quarter the quarter we see projects that quarters, slip saw projects many those did was we of second minimal. were during first implementation and several

execution Given year customers of entire digital during strong we first with already have did in to we banking of that to months this the platform XXXX, delivery nine the have we year the deals more installed the signed new XXXX. than in had respect

revenue. revenues previous grow users, that a offering percentage primarily experienced XX% for year-over-year revenue as the as end the total quarter year-over-year PrecisionLender, on XX% acquired result, the decrease as in consistent revenue we partially activity been from down represented the transactional in The a our digital revenue the in a have absolute of of of with of and continues year registered The well increased of quarter, prior Transaction from quarter. growth growth strong contribution in benefited and the percentage with dollars has which while As offset we year-over-year in revenue to to total live expect number period Transaction banking fourth the consistent revenue relatively from revenue the in XXXX. PrecisionLender. contribution remaining total payment bill our of revenue decline platform. is slight by customers increase year from both attributable also subscription the we as to Banking-as-a-Service the year-over-year

double characterized our As strong towards by prior observed sales bookings activity more renewal in the performance our of as mix renewal in quarter base. a significant the year. existing shift period was expected, the amount We compared than same client of another the quarter adding to

the We our anticipated to clients lines also continued our had number as across of bookings than to business. expand provide of we we cross-sell better various solutions

existing year existing amount dollar nine the from bookings clients added added the fact, amount first during from of the of In months the of the XXXX. clients year the exceeded full for

the quarter, the the increase COVID of we a committed the quarter ending the a associated underlying increase. the from third the in bookings September the as million X% given of XX.X% was quarter $XX increasing billion, from XXXX. sequential compared roughly end backlog previous margin XX% attributable as new to number $X.X quarter. result headcount customer backlog, of associated XX, The year-over-year Gross of backlog costs by the increase approximately with margin with addition increase infrastructure during post onboarded over incremental users gross XX.X%, and our The installations increase, in of quarter. in total X% that addition employee-related is quarter in contributed with previous during the PrecisionLender’s large digital as of XX.X% pleased a the of to in and to our pandemic, of year-over-year the the still were the a to backlog datacenter over and customer down decline cost in and were XXXX to Turning banking delivery quarter, platform depressed to of

delivery expenses year-over-year previously applications quarter, the reminder, related operating a mentioned. quarter. along financial expect periods from gross see future the the and not meaningful margins, any incremental in a in decline prior to impact the Total last up and were from expenses our PPP we year fees that success large funded of with PrecisionLender. that the increase we did headcount was the As period XX% sequential The with portion associated $XX X% up to to phase related indicated from costs previous million, primarily to related drove and results additional

Excluding the quarter. PrecisionLender, increase and X% primarily the related and expenses R&D. by associated expenses with sequential within employee additions increase award was concentrated vestings costs, increase associated the taxes exercises that a well being with additional would have benefit The equity headcount with year-over-year of payroll in approximately up headcount result as as in driven operating been

in fee proactively cancelled from and all of $X.X million We XXXX EBITDA also million cancellation contemplated adjusted the third one-time for previous million, incurred quarter. was up of conference. a the we $XXX,XXX client $X.X in-person $X.X Adjusted of with our approximately EBITDA XXXX in of the spring aspects quarter consistent quarter as

COVID Our equivalents the described. our as for improvement third Cash of We and million million the ended we cash, million, quarter. cash for $X.X and of with of operations $X.X free generated the from investments flow at quarter flow from up second million distancing overachievement is end EBITDA marketing-related to associated in quarter. was cash quarter third also the $XXX.X quarter restriction. $XXX.X the travel spending the the adjusted results and events, revenue in due attributable part with and in travel, and as year-over-year large decline a the a to previously And result expectations related of outperformed social

turn Now updated to guidance. our let me

are to year to in revenue $XXX representing $XXX.X year-over-year range range the of fourth the a of revising we guidance million $XXX.X million million and forecasting full are to We $XXX growth. XX% non-GAAP revenue quarter million

reflects revenue user well as Our which compared carry base generated the updated net organic new that of increasing installations. contribution as implementation customer growth guidance a the our revenue time through to cross-sell to products quicker existing from of

considerations of updated fourth live the larger timeliness the to Our also takes guidance into scheduled quarter. go projects in

million resulting susceptible have million year maintaining customers the As full guidance and year delayed Thanksgiving margins than $XX We the third to go fourth existing our X% approximately we the live we customer quarter prior projects million renewal clients to year the and do the to being past, better holiday anticipated season. the In of of adjusted EBITDA are following for adjusted the of our expansion work forecast to EBITDA of through to million X%. that $X.X in summary, as $XX delivered $X.X in discussed relationships. results not full to our due continued successful of delivery new quarter to in

effort. will in to to transformation that position allow their continued returns are we over to position cost and privilege and has themselves been the QX company eight team transition. And We On representing a March become of the commitment platform. digital them have adapted a personal end-users Matt environment the spend spend my which clients, stand for levels this continue closely CFO observed adding having to reliant years. our given our increasingly We’ve a their fully new this It to QX, customer to as all have to through in the publicly buying to smooth their base, to the and normal through bottom-line note, of initiatives We I’d manage the of accelerate I once us with navigate remote ensure to last set a on the that to customers the an company the a last to overachievement to thank of net and ability ensure solutions to honor the to drop working is call existing supporting delivered. alongside we remain more environment diverse as level. David uncertain historic incremental new provide transformation to help to earnings digital manage employees will they of our has benefits and highlighted has next innovation and variable our with a returns like revenue environment

role them forward their your year Finally, I’d been this Chief look for support spending the to next shareholders life my QX you like you, navigate twins and serve an home. family school, with pleasure It provided serving the truly my thank in company. have amazing year-and-a-half helping as the to I of the away honor QX moves CFO. a to and high is Officer And of decisions senior college Family applications, from for

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

Matt Flake

Jennifer. Thanks,

miss have will still you. mind But keep you until We we in April.

We with Jennifer So, to Mehok. for be back is in through customers and exhaustive look Harris, is David now, introduced properly while there leader get him excited our only shareholders the know to our that will David I forward and great employees, found and to an an we’ll let’s to team addition one work experienced a and all work He search. getting coming weeks.

quick Now, outlook to ahead. with hand the before the business call I quarters a I conclude will and the our over customer sentiment, for on update operator,

imperative. institutions digital I have and hear solvent have XXXX slow to at decision-making, financial financial many made that transformation Over became stronger we government, remain continue the spend a have our that so, than swift related as customers. been understandably fallout the several few in March. much fortunate a requirement crisis lot financial to is result the institutions that helped a of It’s stress choice. are have in general, the last while are would is digital the we’ve no The position COVID. most past years in time the target with action a quarters institutions months past eight investment hearing an or predicted of mitigate And longer testing some a what our In of over the to

anticipate the quarter such, into new a and buying improvement gradual XXXX. net environment we As in fourth

the in put delivery call operator innovative and long-term, record finance I the position to highly a companies grow and customer to across over Finally, of breadth institutions, portfolio track turn success us all the our for mission-driven of over And with questions. product believe differentiated that, financial our strong I’ll with the globe. fintech culture, Thanks. and our the

Operator

first Your Auty question from Morgan. comes Instructions] from J.P. [Operator Sterling

Your is line open.

Sterling Auty

Thank you. Yes.

me with and application congratulations a enjoy eight of financial your Jennifer, and tenure consistent leadership you retirement. for wonderful is start transparency, the college year more process nerve-racking Let The and your than thank the levelheadedness on company earnings.

luck good that. So, with

Jennifer Harris

you, Thank kind Sterling. I the appreciate words.

Sterling Auty

so, we on November And you on sentiment the know, going in just that of to the what and the we look characterize gave business, the my this with kind to that that quarters? of impact you had would and the question, to President if of just But go in to have of patterns and what you made at compare outcome what exact buying the and layer kind you think then, you be on with about And how granted, like? might Matt, Congress. one on point, can XXXX, call post the for to contrast is certainty we coming rewind about do feel the that comments kind don’t election

Matt Flake

Yes, Sterling.

people to everything direction going macro and than is what a perspective, But think the very tailwind trending the other in any a from come and just down. XX but clarity, we talking – quarter. had the the we But pipeline which things, been going much the we the are timing middle just week to is are were call right just – the the I are I have to just clarity quarter. changes Senate fact and to there I in some in what more of on we really the is side of the least XXXX going platform half better last about third lending us these there of for around we still say, the much than that and get inevitability of that, the be and – decisions as I next we say board politics uncertainties the a think than are that’s the so, what happen, COVID done environment, just we’ll were us and was a over seeing really more the probably XXXX. year. are I – the in or to did of side probably passed is the look which have third too little different don’t think at. decisions better well, some interesting what think. rules of the days, this the be we was the fourth far levels and better and what Sterling, that across shocking of the having to would the But I It’s feel would And business, days Until to it at don’t concerns is have first as I going really America and hopefully feel about pickup you the So, it’s clarity And I greater executive would of did going in we is in XXXX North of just I of I pull business. business than mean, in it And think so the treasury a House, quarter next BaaS the in around of over – getting couple XX what it, it that, bunch engagement a end saw are like. it’s much side much of what really to I the quarters. know trying is I election over at in engagement begun the more that going here over branch I the the last the about have and now these

Sterling Auty

you. Thank That sense. makes

Matt Flake

Sterling. Thanks,

Operator

from Roderick Tom Stifel.

Your line is open.

Tom Roderick

Thanks to speak great that us I’d been taking speak start have family. more of on of Hey, with I in I’ll to months, family. well. eight retirement. Great. been think a It’s a a and for for run with desire lot Jennifer, I spend a months you, your Matt. my your Jennifer. seven heck a as time Hey, Congratulations now questions. quarantine

bit little downtime congratulations that of So, on you a future. enjoy your and hope with

Jennifer Harris

Tom. Thanks,

Tom Roderick

But So, am us reigns are they in Jennifer, to the with, reminder of the that that to a impact it off you the is a get some XXXX, new new going CFO. guidance your a and through deals revenue, that am I are to handing particularly with give sort flowed implementations. a imagining to huge implementations of whole timing rush way when you lot of booked I not of start on these

clear into Just of thinking fourth as the respect Thanks. fourth you and also year. ought the mid-term how some of hearing company booked quarter, move what flows rate level on the here to, impact comments into and through in you you as thinking to be can and get then, with how are high And would sense what pace we some lap So, that and your saw PrecisionLender, was you numbers? really to next around the directionally. as Matt’s us just quarter the the secular comments XXXX we third really, quarter or for the of good growth pipeline about the comments booked of give helpful revenue QX in a what the qualitative be

Jennifer Harris

we of depends long execute days rate as then mix to how XX next and begin first those as new of half we factors of as next Obviously, deals. you in environment, and the those back the Tom. revenue Sure, how the close XXXX things deals see year’s and come and depressed on one well the growth post-election, buying quickly of a number mentioned, being

as new rate bookings be cloud-based net between dependent faster revenue. on the mix and also businesses cross, Our will are well to that as our actual growth

on cross-sales, extent the half expand the But the well first it next year-over-year digital expect today over and remain premature as days, point. XX and do certainly And signed on as we going rate. continues on revenue I above are the of next I what the I faster around it growth to cloud-based to to or to lower to visibility have deals to growth XX% that to the at provide year XX XX revenue agree based and products then the can it see that bigger tier-Xbanks to I pipeline those this XX of bit that we of any wouldn’t XXXX depends it’s than mix. on mix be digital can side, our days know unions side, banking existing the know. the much really how But and go, lending some rate the digital all large So, are a I into enterprise Those slower the of to be what customers revenue or that of extent think on credit to in the factors, guidance. the is next XXXX XX% you a based part the happen as

so, I bit. the And of XXXX. until hope going wouldn’t those end and XXXX that very impact into helps a

Tom Roderick

very I That’s last the hugely That’s was quarter business, then, helpful. great. of tone Matt, for what just And quick to, you. with think obvious. are respect follow-on Thank you seeing

wins. You had some huge tier-X

lot months? develop, just seen out slow were have of expect very net all in You eight are thought a just thing clear software banks time seems Can that that to or nature as this to been eager the given the you But of seeing We’ve a about installed bit leaning was, at third opportunities the typically a but base nature that third last pipeline be a from Are to remotely. can decks the slower. building core in more companies where for but that? seven, it’s a seen you and pipeline there talk systems selling buys little, new on been not switch comments little been a that of hands you of new to that that winning net perhaps me that in given has the who from little jumped you quarter seasonality your one the quarter. the

Matt Flake

lending, system, much Onboarding over think some the that more elongating your to relationships trying deals, little in is for off you things the How deals, the integration are and and is lending beginning just to of some but that, which data income. do cross-selling that’s around then better are do there to attract banking just PPP right come one income little interest It’s need non-interest I longer as transform more puts pressure run get ultimately, so of stimulus be and then the do risk, added credit to not process. there to is, been the we pattern Tom Street, is the work just for you and or interesting, profit unknown, things to last – we this But through transforming on several benchmark stimulus use. attracting the customers. rate is the when to lending digital them. your Digital of then deeper days, the or out? how XX moves this a things or and begin the your extent sales begin are the step. transformation we’ve to around we And are and and a you onboarding, which more started long with focused where now, There process that really how roadmap is your got to or process government to bit with then it’s connecting going to remote holding which evaluations whether several talk also digital digital more banking opportunities their Yes, really prepared about is are about probably environment XX LIBOR they SOFR, those known banks digital a your it’s – side to two much on transformation, going Main more

– stuff that deals have have But down plate pleased and to of sit opportunities. on focus the difficult have on now lot their a they the big engagement we I and deal. PrecisionLender to a competing two these makes which largest signed brother And had product, for signed competitive on global Tier-X processing big a top-XX credit on win. on. two So a everyone it of a really a fintech’s amount We right been painted signed We really out CardSwap extensions. West And then I union, it’s one of had PrecisionLender’s built We in to do the point had to QX, which be of win Coast a Lending product bank we want had biggest existing big is to We our we but new core tough that, Top-XX that group have. Cloud going I – sign which that’s Onboarding, the win. of the customer. Treasury Tier-X customers PrecisionLender bank a I picture is do a with our a we a

that’s it built of can is the how of of your the piece environment, products along some net a and terrible to function we cost the a three talk us the data and we’ve your the into BaaS can of quarters. So, quarters, us considering back and banking business the together walk process has of really up But stuff. deals products digital we for But wasn’t maybe Digital the what’s how and and down them just anticipate winning quarter with it day transform our but Onboarding use is help and the and breadth about all that new with lending I over really carrying a two and tied the cross connect for process slowed customer picking those. next two

into we’ve have these of our So, to because fortunate putting to that assets of drive very those of been also assets been the part and is lot conversations this the build, some innovation very timing assets that that that assembled, we are acquired has a good. we’ve but we the

Tom Roderick

Outstanding. you, Thank guys. I appreciate it.

Matt Flake

Tom. Thanks,

Jennifer Harris

Tom. Thanks,

Operator

Raymond from Peterson James. Brian

Your open. line is

Brian Peterson

a And been more question. of the taking Jennifer, It’s run. for congratulations. Thanks heck

congratulations. perspective? I’d Matt, think color first And a kind will as We you’ve back few you’ve of excited anything on with a is from one all there I the be environment. just realize I about portfolio the that miss a as you heck appreciate next over stand here. the of got Family up but built we really pipeline exposure But demand of that you is customer working kind today, comes Chief gets curious Officer and – we title. lot you, do the of what think a quarters? bookings that

Matt Flake

the Well, PrecisionLender, business, back and think I probably to is walked digital next PrecisionLender lockdown Lending need Asia pretty a I sooner XXXX, some banking that’s rather don’t and going And a going I of and with in more there over and we the I a opportunities. North side net banking in pretty beat. for there has Asia opportunities to Cloud to is innovate the the But, interesting think Cloud game business. Lending on but and – to back. continues mean, decision-making Europe. at the digital of see right some now interesting The deals PPP. going I team couple Brian, least pick really later is late is as the see picking EMEA great in think the wait you think, come come stuff year. talked to I a they about Onboarding, back sales slowdown main and there. is new we are things were Those are activity see to in this first Banking-as-a-Service what up if the and quarters job side that’s opportunities really of QX. than year a up generating But America, are we the I come momentum are has done sit that Treasury what going of in lending missed the with the just think business, through, about hadn’t starting just thing I on

Brian Peterson

maybe over the the that all us the back And you we RPO? there moving in just to help of quarters? thinking parts base, that really But how emphasis contracts like, are how is metric of selling does think puts it’s the on cost Thank I how Okay. look on through next that and hear. the installed on. Can relate customer think into about That’s be good guess any and would if is selling kind would several the an focused RPO just you. think to to and understanding expansion, I and through, a the takes on base.

Jennifer Harris

existing minimums mean, for or on for modules access, increases obviously committed base, I the continue based Sure. up are new signing as because of cross-sells fee customer bank are the those taking. backlog to into or cross-sell that they it the we size they

we when roll is make So, with the those of the it then, backlog. do agreement. cross-sells, out the of term it them on go contract existing dependent underlying the remaining existing timing definitely increases terminus contract is And how the we master will

Brian Peterson

Got it.

Jennifer Harris

to any Now, is the customers’ also to a do time and as try the management contract. extend previously, times, team we some go at cross-sell, to relationship trying we’ve said in

So, overall the sometimes, But product. also backlog cross-sell module incremental not of term. by of new net increases the TCB it only the or amount new

Brian Peterson

Understood. Jennifer. Great. Thanks,

Matt Flake

Thanks, Brian.

Jennifer Harris

Brian. Thanks,

Operator

Terry Truist Securities. from

Your open. line is

Terry Tillman

Terry in said, they think I Can Truist. me? hear you all Yes.

Matt Flake

Yes, know name you Terry, Madonna or. were analyst one I didn’t like

welcome. So,

Terry Tillman

me still maybe hey, but. and call Maybe you named I T if a are you Jennifer. Jennifer, executive. combine Yes, and guess, Square, Matt

year, So want our questions, if next with you to. still and fun time want to get questions. our multi-part you called We the if take you have

seem reduce perfect first kind think that. question that just to, Treasury on relates about and or So in more of multi-part Onboarding. like, friction here digital. the timing does just you really there It My to improve trying terms of make kind of

expect prior it are deals, the I you in then, Matt, of range? a they curious, you. maybe of how you relative what that replacing rest versus tool? part. kind So, Thank of kind first packaged those is Jennifer, you am about more near-term of you I churn, a tool? the are that’s large X% to was and a talk So hoping be the And bit little Or thinking are could could home-grown products typically

Matt Flake

into and bank what think to critical fill of to and applications that banking comes and system. back-office is does your the systems we’ve integrated Yes What When toughest which out And customer process. point a a I Terry, the of the simplify bank that. enter convert out has Onboarding commercial one that made it they do the the Treasury is, it cross-sell digital it’s it a and new back manually that that time to to move Treasury done nobody begin as is to is and it’s is, is their just timeliness the to we large the it. at for the and now, convince process things us of has it’s the selling accurate information Onboarding their automated to to does has manual business to go the fraction a customer information, do gather to

team platform. into Cloud our Lending the So banking integrated clear, it’s development to built be this digital product and

beginning do are And we now the couldn’t cutting exciting right it make are doing right a and the ready an so, Jennifer, your customer. It’s and easiest you point, now it and to early very onboard of us it want such to And really our better to fact Tees that and new install it’s out to opportunity unique figure it It’s roll and getting but bank out, big a bank for to charge? the to experience. way be a easier it timeliness we it go. to a is is, it take for a with

Jennifer Harris

digital mentioned invoices we who on Terry, on churn as impacts maybe the of quarter being increases were On the COVID. mindful that discussed concessions of where gave see particularly businesses we or five program customers year, experiencing, return earlier the on additional then, in we customer to particularly the churn, some customers, our last reliant term. we to and Yes. funding started in QX quarter, discounts the and or for leasing sustain as economic second We to near-term like their and as might BaaS we ran fintech all based impacts susceptible felt we were the of extensions operations. And during folks CARES lending the the within be

churn expect do to is I those take year. And so, account, things of all when you into this that going slightly up tick our

think we’ve I little what seen above the a will that X% it And historically. bit so, be

that we’re CARES successful lines the think last so. what However, XXXX the churn will our retention note, end years on continued it couple those our to from from that team, twelve some this convert perspective, year PPP were year those similar we’ll see of last will And say we’ve core churn it about in we’ve And to expect will – a business I quarter contracts year. been full still that a revenue the because with in products, I a to we contracts headwinds be expiration that expect mentioned I on positive year and But have QX or rest going loan to we remember to wouldn’t XXX%, that that revenue increase we’ve a for come from more be and last we’ll next into one the seen forgiveness churn about. customers talked we I other bit X% churn, be in QX the year. trailing of unless and digital those getting what maybe other XXX% also, under early will mentioned year. as month this The retention a execution significantly would seeing a of that that cross-sell banking about given different at

Terry Tillman

congrats, and Thank Okay. you Jennifer.

Matt Flake

Thanks, Terry.

Jennifer Harris

Terry. Thanks,

Operator

Andrew Citi. Schmidt from

is line open. Your

Andrew Schmidt

for Hey, questions. taking Hey, Jennifer. Matt. my Thanks

Matt Flake

Andrew. Hey,

Andrew Schmidt

Jennifer, And on let your add me retirement. congratulations my

Jennifer Harris

Thank you.

Andrew Schmidt

business. it the perspective. fintech to more Any I comments but BaaS if about win. and since to pipeline market I how the Look developed helpful. more business could – you rebranded think hearing was that, since more A partnership, just forward around I to quick following from question was the be go – am the wondering freedom details has on that pipeline about talk a the good StoneCastle dissolution of you the see will

Matt Flake

debit us becomes to we out. credit didn’t there for find about mean, but seeing a use cases interesting push business for miss in those beat. out seeing card, – earlier, and I products really more are cards. CardSwap I are talked go BaaS I more engagement Tier-Xs we to aggressively money, card the credit the with fintechs The is really think The us. mentioned product there Yes. We’ve as are trying

continue because is that the a steady-eddie get but a time little booking. they we are And them but we has bookings So, mind, not out capture platform that those are somebody and keep than takes in the in bookings predict, to the see the program. talk And on always that harder we roll bookings signs us and business to grow. for way up to and all more been pipe it can’t card there done, a upside about side, then in same

long and at the the holding really just future. about for business. was us are The going much it feel So, BaaS be to some run. economics stuff, of more opportunities as weren’t back giving more seeing us and freedom looking the come fruition good us better as really They it’s a over us about we StoneCastle are those the to

said, us split. going as really to opportunities pleased amicable are forward. that – with are moving the Both with was an that So, we and we of was are come about it us that excited

Andrew Schmidt

friction. that on point. just Direct, I be there rolled a It just bill Got seems question. bill an product it makes seems And partnerships it. solutions like bill significant – you whether for just at third-party But Wondering help a That out if many you ago. might have do to know sense. On Biller pay, of a reduce the follow-up the out years lot a also pay few you strategic roadmap like on there you just imperative curious which that’s is legacy have opportunity pay. and some some can have banks you?

Matt Flake

of you of if it’s what part pay it’s banking number mean, But think digital a bill think I a makes. the reduction the of about I a drag seeing is payments growth. big But Yes. individual business, are the experience. each on kind I you our

up top-of-the-wallet. new get update the because with are for card changing gig bill continues problems them it institutions product that’s so, the into Apple, what you making Direct the Hulu, Netflix, and gain think the in cost that’s will with that you use on new And some and momentum. are – switching the do able top it’s your economy It the Biller new – one cards the it’s Because But then how payment internet consolidated now. makes of look for bill, it transactional for process effectively is home in. keep that cellphone five, Spotify, and ten out it product at if we revenues about institution bill, or based to because do really to then for is, can customers to likely, for your rolled to – those bills and be it’s are automates your less you the bill bank easier the subscriptions bill, whether – your some financial the of you solve or those to fintech a the world, you it happening cable about the have issue if financial which takes less in we revenues pay up world our and phone CardSwap your two the they and

paying. is processing we so, actually to what are do – And that the to the with match with users trying way who the the payment are

So, don’t the in or us the getting bills. as financial people. we putting mail it the pay of to I technology things with settlement the payments to But institution, to better actual the their doing well for as into end-user see checks the pay make

Andrew Schmidt

Understood. comments. Thanks, the Matt. I appreciate

Matt Flake

Andrew. Thanks,

Jennifer Harris

Andrew. Thanks,

Operator

D.A. Peter from Davidson. Heckmann

Peter Heckmann

big continued on average getting in banking could solutions where mobile a per kind Thanks bit breadth How other and it set. of functionality do that when where get? think for taking little now, can increase and think muddled additional the the question. adding consumer adoption you you But of It’s the of you about revenue based functionality. user, are go your with digital number

Jennifer Harris

Yes.

penetration. are on digital today, of – platform, or done, Banking those that PrecisionLender the it be relates on different customer the as talk of base product about some the as hundreds for And purchased Cloud SKUs, XX SKUs space, kind of had it those excluding describe so our solutions digital of to used and appropriate the that we approximately that, customer in to as actually of we have we’ve product to of like, and that current Form groupings average, QX not in acquisitions our just but more the penetration on at with would banking we our XX% all the the customers high as banking that customers disclosed not number revamping we number we if look being felt of you the about talking So, instead XX% Lending were XX-K.

banking to banking subscription of have roughly their So, it revenue double if our of we grow to institution, for of that even are base. solutions within digital all opportunity opportunity have and And hypothetically it our who all current expansion customers just platform digital lot Cloud to applicable in would Centrix-only have we or are the take customer expand Lending-only customers a then, customers. were still banking more. those we And they our that and digital our PrecisionLender would ample or take into again that

Peter Heckmann

you about excited a And most say which something SKUs it would the is those solution gaining the that next terms that it. in Got of the two right proprietary it. of you technology right are years? over penetration? of Or that’s Got just kind for Whether at time QX? represents

Matt Flake

with think the stopped of product was things $XXX year that for call we probably exciting we the as Yes. for Those I third I buy products. reasons cross-sell little the this customers. was of and us that. a products you Onboarding about we a certainly our But other Pete, do going million Centrix is if we talked mean, on bit it. fraud fraud that Treasury worth are is The on, the of this look

corporate a obviously, for So, go a is us of product the that’s The cross-sell to banks. lot big a for penetrate still us. huge banking cross-sell

We wanting obviously, world. to always product, a this roll right experience advertisement banking are hope with begin are who cross-sell user people in they most tends out on is bank opportunity. it. of those those to you’ll drive an seeing It the we’ll to just and top-XX more do lot see a do of offerings maybe a Maybe with things have become it will think that I unions corporate The see credit solutions and of don’t CardSwap now. one the

market the cross-sell. go what it’s whether lot on they help loans technology or of we So, that be have, data to initiatives of people different should and we pricing understand right lot a priced PrecisionLender those. have A insights, side for what’s the the

which of there opportunity a us lot side, great place in. a know, for for You cross-sell be us the is is on to

Peter Heckmann

it. appreciate I Great.

Matt Flake

Thanks, great a Have day. Pete. Okay.

Operator

Fargo. Wells from Tim Willi

Your line open. is

Tim Willi

what time with congratulations, the Hey. a choice of in Thanks did you you on and, And Jennifer, keep family. did here good morning. do already

you So, well. wish

Jennifer Harris

you. Thank

Tim Willi

I two you’ve the for on pricing. new the sort quick around if products I am of one seen in stable? pipeline any there might Or have and general? the I A things, to to guess, curious, is critical been question, are seeing? are what feel you you pretty just environments guess, any changes of have you about revenue any whether it Just should pricing thoughts

Matt Flake

grant I space on pricing seen looks our point lot it will third are and bit erosion, discounting pricing But from in that saw right some the innovation, that, all Pricing, general, certain our of competitive we very a to We’ll this chase. to of on in business, customers see help. quarter driving that in different you the willing side the need some providers some take circumstances, of as just I’ve be more the of – trying little I long on we the long on providers you say environment. this that side are were now the But, we and takeaways, aggressive holding disciplined as then would things. with and that. what we feels, new and solution business weren’t in on road products, the in some tell

Tim Willi

second Great. And margins. around just question, then, the

talked think XQ want gross margin in was which last the sure all about XQ absence had the make PPP, First, so from I just understand, I you I of quarter. to

opposed about probably anything elevated there. It’s as or quarter? of just around install shed, activity? the then, way with the product mix on tied bit this a more surprise installation a is margin core little not a function to the the what probably So largely at level But that in to gross activity, think really, to the right went just

Jennifer Harris

as more of but only we not is activity support team. than customer the install customers quarter and customers installed really rolled It installed we Yes. that those this cost, roll into implementation drives remember implementation, ever and and have they get out

year. in months So last first all the we’ve added nine of added already we more than customers

sure expect. and So, to support accelerated our we the that we had servicing clients they the and make some investment phone continue, to answering customer level could

Tim Willi

Yes. Totally understand.

things asked I to we of on side Just the then margin of just get the sort last And a correct. sure I’ll one margin, I people lot used the that that didn’t story is one, is, of guess, that aren’t the make business. had the

thoughts investment Lending, from to the immediate when be come opportunities guess, where any at acquisitions margin think guess, scalability people what these the secular they and to on Cloud sort you there, tailwind scale. that this I about to is point? that way the be large the trajectory, right mean, growth come But story Precision top-line and no future I start equation. so, obviously, impacts, adjusted the new I should in is the down scale to other if maybe I whether or that to we through, the it see out margin would there things the the back that really and the guess, are clear the EBITDA I are of margin? are think appreciate realizing just obviously and at

Jennifer Harris

is, XXXX. investments were based Yes, the really right America. Remember, impacts I in adjusted think is us we planned they – PrecisionLender significant going the the I those one North thing you had from some I their and of out caution seen with into you of line. way making enterprise XXXX. your especially the don’t which in part markets mean, optimistic to serving fairly on get in very that’s on But held improvement the that large that skis year clients. back you and of are We EBITDA investments I some would going pipeline, saw our am the this now and over some EMEA make investments in And to start to

I to have say, invest we the basis points XXX roughly once XXX a would that somewhere we large points call would of to between, improvement margins, we and I EBITDA And historically XXX acquisitions through for return acquisitions absent So, see before adjusted improvement. levels. get you XXXX, similar any look we large were on other it basis to you if and those XXX would think, would in, posting XXXX, back

Tim Willi

Awesome. the Thank you for very time. much

Matt Flake

Tim. Thanks,

Operator

comes the Napoli of question William [Operator line from from Instructions] Robert next Your Blair.

line open. Your is

Robert Napoli

And you. Jennifer. Thank congratulations,

be It’s Lot job leave. exciting bar. to high your of things a on set You a hard decision. Really going there. going to respect

Jennifer Harris

two is. leaving am I one others, thanks. baby like it but I for Yes, feel

Robert Napoli

products and or to banks want there you the payments more you investments add that think to Treasury if office that bank the or to your the are CFO, do CFO into what the maybe in dig are receivable like services provide, a Are other business the adding bit side. looking the of of maybe to accounts the would? anywhere additional little that I through like that And invoicing more for Matt, to side, services the to there you Onboarding clients, solution. that add office you looking are the

Matt Flake

Those Yes. going the to looking to right more potentially Bob. could looking are early as third-party product. we that that for I system, are we want be all well. through for places But Treasury the products going at still some at traction, are at now push of definitely see maturity us. we the that also Onboarding gain

one gets those this X platform. the of things there, think, people thinks of put And solutions to I easier. platform businesses on retail kind into have need receivable could background things places we evolved banks those are just end-users, user offer your than we million they like where more be $XX.X could out point customers, accounts And that and checks, when integrate everybody technology. account our could it to those businesses those million make

integrate So, it even necessarily much as could as our to we APIs. don’t have build it we

of third-party different on building there be lot CFO is integrating a our apps could we that or So, own.

at in is integrate a can consumer So, using they desktop the and get to they a are and manage opportunity day the all side and there not customer our from things of to the CFO central the and technology base, that side solve when problems station be opportunity or It’s phone, or the mobile the of log about it into and cash business their the flow. spend will lot it’s just where they technology when their these to look out the tablet, do the their business. work

Robert Napoli

helpful. Thank you. Great. Very

Matt Flake

Bob. you, Thank

Operator

Baird. from Vruwink Joe

open. line Your is

Joe Vruwink

maybe my emerge depending And ask, and size seeing Jennifer. you environment sales accounts I you wanted or congrats to to on whether trends everyone. to go any different new back Hi the are the type. Great.

incumbent vendor some technology with of amongst there are are level, what in XQ some greater in fit institution preference banks at your been maybe the recently might organization. pursuing with suggests maybe new if a that are you the rerun investment technology. Tier-X you are the to maybe actually a maybe all But any I and into smaller how sense Or inject is, if vendor, think your has if in the commentary year? that that to a more trend preference you regional there seeing? assessments, you Does next that maybe stick of

Matt Flake

have the as technology two Street, to weeks the that’s certainly to a are a earlier was whoever is out compete. size of has mindset with rolled They out he There won’t to technology cost and product Bank that Board need but owner Citi, different not that be, to this institution. the financial transformation product, much have of that at Wall a it mindset way where way think they’ll that’s much it’s is our because about dinner and the institutions to as trying would has want the I the use are may wants different aggressive smaller look as entity, leadership they ago project extremely of situations and or way you at who financial associated at year America, institutions there larger even with we’d that discouraging, economic the a – take a aggressive a And differentiate be as looking of it ownership of the as to they financial an billion-dollar compete. and it. use institution I of lesser

critical we because on with after. who analysis determine things who that’s we working are and One pipeline to is that not that’s is the are of first, going our prospects

a not shop. are We hamburger

in. a wants are we we digital to shop. that find that transformation bank And to stake a are project, going go We if

going We are to file our K.

are We deal. to win going the

be going are We patient.

products talked the to We going cross-sell we’ve all about. are

smaller or differentiate $XXX way bank I trend shield. And institutions. credit am if million and a with so, to as and to they not more But yes, financial a than union $XXX toward that technology compete happy to use want may a as partner million a

to they be indicative long don’t think we end-users – So, for back our financial added customer more around than to platform technology because want we want for of I us, long and M&A and the this I compete, the lost. be ownership have institution around because, about the And you have think they trends history the more a where the is I do if that’s the platform a time, of time. by base company, to through of to think new for are

And of there. right the moving continue forward, out so therefore, think they M&A that these and see are philosophy to be businesses you of and on having paid more to it’s net acquirers I for off are because I going it. stick And to we going to to want us side

Joe Vruwink

That’s helpful. Thanks, Great. Matt.

Matt Flake

sure And I everybody’s Joe. running on questions tight want we time. are we in. make operator, Thanks, to get Yes.

Operator

from a Not Josh problem. KBCM. Beck

Your is line open.

Josh Beck

Jennifer, you. Thank congrats. And

pretty your think that impressive title you I or kept retirement. it’s

But covered about obviously You coming with maybe just you the fintech later. your you BaaS be all across what a really why pulled was And the only it good offering in there competitively market line not was them? the hear distinctive? I to really are know, you and there? got you think And partnership lot. you’ll on I like service was this that’s think But path. off. a Yes, that common would big a talking what

Matt Flake

Yes.

the some record fintechs we’ve It’s we think, to the a simplicity two within the have I extent, and right with our writing The that, they and against sandbox that to weeks. It’s there of in built. start delivering. APIs quick market. track larger of cloud technology some

billion with under network than banks we that the we and $XX Our relationship bank can them – put the have or depository in with a relationship that’s less Durban.

And better other we offerings. technology economics the best-in-class So in it’s it’s be guys differentiated continue and to or are whether credit these card highly those

as that’s best-in-class. And as so, it’s simple It’s cloud. would quick. And be. It’s it

Josh Beck

Okay. Thank Great. you.

Matt Flake

Have day. great Thanks. a

Operator

Comery Steve from G-Research.

open. is line Your

Steve Comery

Good Hey. morning.

that wanted I Just little or has ask know, growth a more a I differently. directly yet the question been think asked, on to

are ex Matt, decisions? versus credit are negotiations, you do that. there? get around instance? And changed losses, But who haven’t stimulus pieces, but now their and the XX, for on election they So, what more two that, bank before for need customers mentioned for closed as I on deals, the COVID back questions know, June in looking feelings I clarity to and making mean, potential customers any those

Matt Flake

and customers I we COVID. if XXXX. it’s whether lending they If the government bank a the to funds of shift Well, around programs. out in I would businesses about the good difference the it. I of go to immediately. big think think the going first of was election has say, the the be macro government make But on the is those the difference it the uncertainty, this to sure to question big program, distribute And leads environment It the can stimulus call, was it’s for XXXX to But probably piece focus and their rolls banks. earnings

channel. government evaluation macro these that the lot with programs is hand-in-hand customers But so, credit credit helping trouble. probably pull risk. extent, some the decision the A delays. environment maybe And risk, go are of in of then, the And because in lending you long to the

for mean some in whenever and this of that’s thing that, post-election, we it’s would delays to somewhat. of the now. know President than So, But probably would after I we the a going us, what other big other would be delay who that’s right that’s everything shooting the link, to I but don’t - pretty find to I – – say than drag deal going else that to play the be decision-making – is, out if post continue are hell post

pretty – and to the then – then going are through XXXX. we those get this the are the and good so, well issues. trying and first about And But I we navigating momentum quarter into them feel next

Steve Comery

Okay. Thank you.

Matt Flake

you, Steve. Thank

Operator

from Sandler. Arvind Ramnani

open. Your is line

Arvind Ramnani

already heard, obviously And you my Jennifer, on SI what just partnerships. about ask Thanks question. taking me I Hi. to let your wanted – retirement. include for congrats your

have system partnerships? and as expand have improving fact, revenue continues as well And relationship you do into and talked any SI margins. and offering about your put your banks to your in update product on You with larger expand, sort expanding both to your driving of to on partnerships growth, integrated as continue expanding

Matt Flake

below $XXX I mean, products we’ve want to about in digital they I them. always said, billion Yes. sell and deliver banking man customers the us on the ultimately, think, who support – one in deliver mean, as are a to assets below. to products the Arvind, want I person we revenue side to which and their build

going systems come the Now portion a to don’t other we ultimately, integrators see I but the are help think partnerships some with systems significant maybe are seeing project, side. you platform integrators to of on

for do On Cloud the systems lot into the but that in Cloud But come not general, systems banking the Lending going working we this on side, that. Lending integrators direct side, see to us to with. opportunities in side, there with have Force.com we you on a play space integrators are do of are are

Arvind Ramnani

you. Thank Great.

Matt Flake

their there and taking you for everybody also everything Appreciate Arvind. would And you, I she Jennifer just too. Thank contributed. in thank time has for thank

a I getting in to a I much in we’ll forward day everybody weeks. coming meet Mehok the very and to touch. hope chance great week. have have so, look David you everybody be And a Thank and

Jennifer Harris

Thank you, all.

Operator

today’s concludes call. conference This

You disconnect. may now

Q2 (QTWO) 8 Nov 202020 Q3 Earnings call transcript