QTWO - Earnings call transcript Q4 2020

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Operator

Good morning. My name is Stephanie 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 2020 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like Relations. today’s now Josh over Yankovich, Investor to would call turn to I go please Sir, ahead.

Josh Yankovich

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

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

turn the me Let over call Matt. to now

Matt Flake

fourth Today I’ll a the $XXX.X financial David our call the of quarter fourth from detailed guidance full the year in Chief Officer and users quarter, fourth the million, for We and for the and XX% on registered look with first as increase the non-GAAP I’ll sequentially. our XXX,XXX we quarter million revenue Josh. million, to XX% Thanks, highlights quarter In a Mehok, at results, as and had $XXX.X ending XX%. full-year Non-GAAP fourth share of our revenue was then year-over-year Financial XX.X XXXX. more some up approximately X% full-year up year-over-year. for generated XXXX. new year turn over quarter year-over-year an well the XXXX platform, users

unprecedented quarter fourth the an to indicate, results a these for As solid our was year business. finish

stimulus We surge continue teams impressive new we prompted on-boarded December, activity customers systems customer by and digital another to saw in well. in an considerable generate expansion and at And base, we activity rate. payments our our managed which users issued within

X several had two quarter, notable we front, wins sales one the and enterprise deals. the On Tier in including

of QX, of highly the manage corporate benefits suite other The their mission One quarter of providing expansion digital in our quarter of line, ability lending. The identify the their from both execution and decision. drivers platform. ability key win was of roadmap, competitive that customer like and are solutions existing were Tier this subsidiary Tier and solutions our and the I banking customer X to as far to traction all with agreement single to legacy $X the win coaching the with The of reaching banking billion deal decision a the purchase our second our selected believe us in XX sided our Along enterprise opted our indication the banking commercial for our the these in enterprise against a extend the market. bank U.S. the their relationships what deal the solutions. retail loan banking with within platform with enterprise in an to X Top was global bank wins the highlights nature critical example was evaluation, solution which an to from pricing the expansion continue corporate QX’s customer. with loan opportunities gain data another given bank, made replace commercial a

sale renewal was also renewal to strong base, performance. impressive customer continued digital of of activity which our and across year in During see rounded driver performance out already both expansion customers. with and lending The the we banking activity this quarter, primary cross fourth an

of We fintechs our of for and to strong breadth traditional our cross saw innovation the decision stated product new and of portfolio, proactively encouraged our offset throughout demand expansion and on-boarding we alike. I XXXX, solutions teams with have like strength have been their to with our financial us, previously CardSwap, our continued As our by institutions products macro in attributable acquisition management sale throughout for slowdowns desire activities driven continued making of relationship discussed. I tremendously the risk extend digital Centrix the The partially net and the year and to helped customers some that has deliver. performance

demand a me provide a other more that seeing experience. acquisition, risk in for the and features and products, accelerated has these management, comprehensive that to indicates seamless user increase for digital steady for We’re pandemic digital end interest which

from quarter In saw hosting performances addition delivery teams. our and to execution, our sales fourth the remarkable

new the largest and of suggests, $XX a two customer fourth had customer billion go-live’s growth. in billion our week for quarter the commercial. continuing software steady an approximately we see from that our at launched We to to for within two ever our deliver continue customers I an organic span. customer [impressive quarter growth approximately retail, $XX to impressed particularly user the while by clip], we As was user fact

projects begin position past, implementation formally the customer in partnerships with our puts us the grow the I relationships a these our to relationship. As to believe it's signing, I dictates contract years come. a in these And that for tone of the success said while

in we customers those delivery recognize the hard year the in of billions I customers stimulus possible played delivering much our issuance to As hundreds teams the for from of close, end to needed making their for to and We stimulus and the came in And of proud of funds relief payments. want in role infrastructure our stimulus had of go. participated our of work dollars users. package. I'm many a IT ready the payments teams the

large solutions support efforts look need COVID-XX am no that global reminder stimulus the demonstrated fourth been for of thousands and our year means take their call banks more of dollars of year few moment and our take business the and the for been strengthening and The tough are and emphasize community caused serve environment are regional payments way financial institutions our a on efficiently XXXX team was the in diversity, and of our there reflect to the proud we for at loans Without XXXX, institutions, the resiliency in I'll QX network than we’ll results world. further hundreds implications to country. just It begin of communities, this forward. our was unexpected. how in more on small the But could large. mission lived to our critical the our and economic with the in financial how history. The underlying which economy highest at billions I delivered. as very and today's just stronger, was back, our The With communities inclusion by also books, critical a and company's to Through amplified what with, employees of to us quarter employees, and our we perhaps business customers, pause of had to function events functioning up of to is consider the extremely customers customers, the our our values environment. now build have To the in business. I pleased level. diverse the most XXXX company equity Many their unique the that a we generated of lessons customers and to

and see our communities in for always CodeXCollege the and which Foundation of proud To more we've year. in across where to believed participated and other XXXX, creating in and groups. diversity from underrepresented stepped globe started. Research and remain ESG in groups to a investors us like to dedicated the technology focus QX just throughout the inclusion Diabetes value backgrounds core I'm of perspectives, Juvenile will efforts the the different While from the team and live across of company, opportunity many to In getting initiatives way work Black Code, up expect the should are the groups hundreds and local we're communities regard Girls disclosure we've members

functionality solution the a deployed create PPP various X relationship our recognized matter continued On pleased the environment experience. best-in-class and customers integrated X unforeseen expanding all a to of portfolio we and We enterprise and loan March. compelling in from of record The add with with ahead We was commercial shipping Onboarding. customers, number our renewals new with components on the a in and banking also perform X’s, and launch sales. in across continue innovation the focus Aite with way I existing I numerous deals, team user teams. product team impressed origination by headwinds, were Tier of cross side, sales We a to remote to forgiveness the spite our development and and and the designed was full XX portfolio and business Tier to solutions, as three of customers, weeks. Treasury signing provider an after reaching forged of

I'm uniquely mind, segments We data, and ever customer than IPO We than our implemented results fintech service, Officer banking globe. our more in our solutions businesses it confident our our had in leading pace, many than equipped banking, XXXX lines amounts the discuss across full-year this those time across first financial solutions. globe X setting challenges, the record of lending, at over delivery beyond. and And digital X,XXX provides as expect spite our our as total saw with increased customers, commercial generate $X.X more few help Our and bases, first footprint outlook. for providers and we transform and the Chief and with all With digital that, digitally in valuable I'll approximately and and including million more of calls full-year to a a across substantial We adding financial across business business David X.X as incredibly system. billion and what and in a comments product in employees, combined our continue of we're approximately our our X,XXX performance institutions services our with logins into we all of at financial of which pricing Financial to data the trillion record in their banking the as XXXX, in XXXX and companies XXXX in close financial guidance was our portfolio ended data, market quarter XXXX With glimpse provide After expansion year beyond. geographies. as I'll digital activity team for software our the that XXXX users driven in to loan XXXX. into regarding Mehok, welcome

David Mehok

our revenue Matt. performance opportunities the Thanks, the financial members ahead. illustrated financial be EBITDA of with and as first more of we QX our our within quarter adjusted our high-end strength the to of team of I of clearly our that guidance. quarter and the team as the excited and My exceeded me for model. were we're lie couldn't talent for the part pleased the range We solutions has guidance

I quantification clarification Before give on detail providing some more results, begin of items. you let me a and the of couple

balances. are services we at business, same services Cloud quarter, aligned associated we recognized services. accounting rather due time the be also to with of the our the the Lending for fourth costs At during First, professional performed, over our those than completion aligned change million and in those of the well reduction time, cost revenue as professional maturity resulted recognized as This in services contracts are $X.X $X.X the and as quarter acceleration of deferred in the of recognition million be deferred cost in as an of in revenue revenue encouraged. revenues, corresponding fourth implementation they

these Combined to impact we million the asset a impairment gross $XXX,XXX. Total negative adjustment impact the recognized to customers, contract asset of and reduction impact of financial on point contract net the to and quarter adjustments a margin these adjustments. our of of of XX QX a fourth my to a point approximately our two an $X.X appropriate, resulted I Second, results, remainder during basis increase to from our or one million to remarks, commentary related margins. revenue approximately resulting basis gross $X.X our restructuring negative full-year was impact the in an quarter, contract and XXX financial to reduction where Throughout our revenue margin. gross margins note will of fintech impairment provide the in gross results with accounting

impacted solutions. of represented year-over-year full-year benefited year-over-year fourth associated and Precision results and total for the fourth with quarter combined our of of which as bill resulted the of new in XXXX XXXX. in quarter cloud positively for increases mix XX% is growth previous growth. from increase full-year Transactional subscription of attributable continued an and million, revenue generated year XXXX, to user’s subscription the revenue during businesses also revenue transactional sequentially. of full-year revenue. year-over-year $XXX.X from and services $XXX.X X.X total XXXX. our revenue increased an down of represented XXXX, the as in increase the the record of and XXXX, Lender, full-year from the user total from XX% benefit was revenue ending Precision banking acquired the over traditional was the guidance increase up the were the with was for for X% organic strong XX.X deployment full-year year-over-year. approximately non-GAAP and revenue Both an with of sequential on-boarding registered Now, first increase users year and the XX% contribution quarter, expanding PPP in both other million I'll added a in XX% quarter quarter before The quarter fourth revenue users Transactional the compared XX% customers million increase Lender, The also an in benefited incremental to XXXX Total by the contributions XX% decline users, delivery number review the QX non-GAAP in for representing of up of year-over-year revenue finishing pay million, performance, based digital prior revenue with Total XX% the growth our period. in the The of revenue platform. and for slowing of for the to the revenue well of from

to of million as resulting backlog Turning a increase we the backlog, billion, of delivered a X% increase year-end of $X.X $XX during in total XX% year-over-year. or committed sequential quarter,

continued Tier expansion another and Tier by the activity. of the during improvement booked quarter, as sequential including successful quarter to addition also X In deals well enterprise due to was sell customers, activity as our we highlighted cross success several renewals, in X

for XXXX X.X%. Our churn revenue was

that result anticipated COVID, an increased fintech in an in macro all could mix churn. of in year, X throughout economic indicated, the overall we customers As the from increase we impacts

the financial X%, despite Our which provided churn initiative, for of existing relief for in exchange below our digital of the customers, full-year impact the QX banking extensions for remained their CARES contracts. short-term

expect XXXX. contracts the We scheduled many consistent in of relatively expiration signed levels despite churn XXXX PPP we to the remain of in

the this churn to through in lost. the as potential opportunity to The increased there more number in customer the large end impact than platform At count as addition, at can customer XXXX. in of bank of reduced added us go-lives platform M&A activity negative was M&A year, the well present growth our XXX up a we've In for to QX as activity XXXX, while attributable QX our count within customer XXX, we've historically was customer users of of the M&A activity in is end installed XXXX, from also event base. existing

net potential as impact We as base well on banking new negatively XXXX. within expect XXXX in digital and customer XXXX, customer increase growth could additions buying level rates COVID-related the our number the in the that slow of in in M&A saw of the activity we activity downs

to be our revenue would which I the XXXX, revenue excluding range XX.X% Gross down quarter. XXX% that in quarter net XX-month for trailing historically. from rate retention XXXX, Our rate expect the of retention of In from XXX% from revenue Precision we XXXX in rate acquired was XXX% XXXX, for was up The and within Lender, quarter fourth XX.X% the the XXXX. XXXX in XXX%, we've impacts to in observed was retention XX.X%, margin fourth previous XXX%.

fee in team quarter and XX% the X,XXX at employees, members The with driven by the of by year incurred million, expenses concentrated full-year $X.X previous were of XXXX in R&D proceeds quarter The million from XXXX. up the in previous offset year for was costs with largely fourth was of the up for operating in $XXX.X million impairment after of from from XXXX. sequential XX.X%, $XX.X attributable XXXX. due adjustment $XX.X quarter. for to the $XX Adjusted quarter. of a resources result negatively of with costs from million adjustment charged primarily XX.X% end to the end million issuance two them margin to quarter, the accounting the and flat of For and Lending million in $XXX.X the full-year delivering quarter period increase in discussed $XX.X We and impact previous investments quarter. it X,XXX users EBITDA within solutions. associated $X.X gross Lending accounting the engagement the increasing at million. XX.X%. margins, from million notes full-year reducing was decrease $XX.X that increase earlier year-over-year in discussed to of was Cloud reducing in and the million, XX.X%], net up adjusted November The impairment due XXXX. to the from $XXX.X million cancellation the ended for our to one-time to $XX.X gross the full-year was impacted and issued across and factoring negatively EBITDA, The gross net asset maturing down year margins for Cloud notes earlier, associated quarter raised gross [XX% the these also cash from event impacted by by in Adjusted was XXXX. XXXX, The year-over-year sales for equivalents, the remaining the and XX% contract we balance million fourth decline marketing charge third contract various full-year our EBITDA in margins from in in privately items We ended from quarter. the largely driven down levels from of investments the year-over-year in hiring a previously fourth and additional asset $X.X in XXXX throughout fourth the R&D. prior convertible expenses of with XXXX. operating million, was sequential employee-related decline roughly negotiated and increased the of of partial customers record cash, cash Total our implementation due This third expenses incremental levels the convertible increase and up exchange in from million, were $X.X and new

to holders. and cash Cash elevated to digital capital for was million. generated increase engagement levels capacity the free for the operations their of fourth for continue expenditures flow million, account from quarter by and of million support and flow our $X.X investments $XX.X driven Our we $XX.X quarter customers the were

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

were in programs see increase that expect XXXX, such throughout to suppressed an the pandemic. We to and as travel costs, due marketing

Matt we on dependent help strength, And back those assume costs, market magnitude COVID-XX, to compared that in a the strengthen to the position well year the flexibility believe While will closing gradual ongoing back which our is ahead. in increase turn for opportunities summary, year, the that the guidance on does as remarks. lie half model these long-term the us costs XXXX of developments hiring in position resurgence deliver our and capitalize beginning to call the in with throughout financial that, return resiliency the his XXXX. financial regarding as as to In and of timing results I'll financial our that over an in

Matt Flake

David. this thank closing, most And in performance Thanks, our look and I'm and of the year In believe I'd partners we'll to their perseverance in and the of QX. like very on our commitment customers one back their for members, I proud our across globe to as to team XXXX. transformative history. communities

many ahead while implications, prospects we and my with its that customers and this technology are forward on As look transformation we've going to a in customers we're demonstrated accelerated XXXX, digital past conversations environment refresh in being an key I it's operate the indicate with pandemic businesses XXXX across initiative COVID-XX to our that not we prepared beyond. way, and believe clearly is

pipeline strong, incremental we focus pre-COVID sales unclear digital continue enjoyed see deal our predictability towards timing to quarter-over-quarter the as performance is customers their continued it's return and adapt and will return, when improvement of to While in expect I initiatives.

XXXX. in XXXX, our believe Finally, business model the revenue continue underlying turn with sustain steadily of business. the in that, it questions. to of And the Thanks. I while I'll profitability we’ll believe growth And over operator strong the itself showed for improving to I strength

Operator

Sterling line the [Operator of Morgan. Auty JP Thank question you. is our And of Instructions] from first

Sterling Auty

Hi Yeah, thanks. guys.

think update. give know are you if my didn't guys guys you an hit and us is with I getting ask question, hopefully I weather to up want one maybe unprecedented holding Texas And Before okay. conditions,

Matt Flake

appreciate I the question. Yeah. very Hey, thanks much. Sterling,

without without employees of of heat, now water. natural XX% and/or Texans with are heat, You a disaster splash million power, power, know, are right our a X.X it water. or manmade is

have earnings call we crazy an a we So, I there's technical it's will – on And would pretty all that at different locations. some suggest this. that difficulties chance perspective, are just from reasonable

worry appreciate don't you here. you amazing And, tough the everybody a time down But we the we great and to we'll setting support fine. attitude good. really an on know, right us call, But has all have now. XXXX And So, us. XXXX is about we had be it's all a really given be had is up QX,

try if X:XX. to So, would we've and the one, keep questions everybody got a at hard stop

I'd not fire So, it, to asking but you for question, appreciate question, thanks one your going and be Sterling, that's get away. so

Sterling Auty

appreciate. I

closing on QX, all families from are in just So of confident that kind of way, you breadcrumbs talked little are but has the you this early for and about actually your in situation, in I'm closing going that to kind solutions your customer an customers demand we'll What's some new demand? new remarks, from XXXX? quarter, the the through you potential new budgeting comments a last by thoughts made comments here projects it curious, and prayers bit that improvement here. those that customers for potential see the

Matt Flake

question. Yeah, Sterling. It's great a

I Everybody the of until funnel, can think nobody need talk through the anything that's question to. funnel. get cares real think about it to top people the but about gets the I

pre-COVID they banking of plan, now lending kind that It Tier know, that XXXX, we're the the and board digital across pretty up budgets, is timelines. I'm hit close. with just project committee’s on pipe pretty came and globally, steady the X hit seeing So, and but the X seeing – have plans, back X deals Tier in were X they dried Tier you is that right deals Tier well, they and is, what was didn't now, what

you're I begin to and there I happen, more the but right lending to engagement so, that going think now. see real occurring banking with don't know deals the going side real quickly on are that's how they're into both to much materialize And XXXX. digital

back out that was begin funnel. active. hopefully but back. the – QX, just to that floodgate There’s don't XXXX, the are in gets Tier expect of XXXX, where, X of open it So, XXXX. talking I'm I cadence pipeline deals see you know, to are in And there wouldn't top to you'll I that is happen a some the these think I to and not

Sterling Auty

right, All Thank you. great.

Matt Flake

Thanks, Sterling. Appreciate it.

Operator

Your next line Roderick question Stifel. of the Tom of is from

Tom Roderick

Yeah, and at you your families questions there this Thanks. great. echo hopefully I'll comments, and and warm, taking safe it. are staying keep down holding guys somewhat morning. you my Sterling's Appreciate this Thanks staying but for call hope still

QX how know that big us you the go of of kind and much loaded guidance full-year of had of deals know, the year cadence and cadence how you it's the on hoping, you breaking Sterling's to, precision big of through models a how know, open this wouldn't the And year, kind gave do single in. know, and and QX where guide I could walking of and about lender on obviously you So, maybe we just, X we've exactly, about think through going into think you we can't come it plays starting you know really how it like back great for are they seems is this deals the But regarding of that? QX you sort floodgates as the guidance. and when the David know continue think this Matt and every through? of in seems that. was some these Tier it to equation of numbers as through great deals, you our of if for how sort deals of as sort a I then mind year. QX to sort like lending but question you come QX, we piggybacking you side intelligence the to is the we pipeline, And about think about Because

your a be in we've little might than past. seen that So different bit

Matt Flake

Yeah, I'll through and take so can how first David kind out. part, plays the of walk it

QX I was of really there because believe, for steady would I XXXX cadence, word but a cadence that the build for all, First isn't say right. wasn't it the would use I us. trough did

deals that COVID got the started hit quarter fourth in momentum it done. January with we plus so into the three the surge, the that the we And because and got and interesting, year the deals this rolled QX, year, those weeks got of then was we stimulus program those last

you're these the things. timing see to So, of beginning

just think big like would to quarter, I now, like want fourth because But little big on do QX, the big to big then that the rolls a it's how get may out that happens, you right you play more second out. quarter and want quarter how a out? walk hesitant I normally David, in a model? a a QX, I things be and How through to back plays see second

David Mehok

things Matt, and sure, out of I'll that in Yeah, a couple call regard.

talked about implemented those two the November, implementation. were QX, we we deals December in big is, First that

in So full those you're to get quarter going a of QX.

out. look quarter seeing point, you great the Tier as a And assume that does the about full we projectile QX much Matt’s of are the the to So, the news and look it's We play are again, more fashion. real great long-term X’s profitability materialize a how those large as of foremost, we're at those and that that's then those to starting business. two pipe, to implementations. it return and And in guidance, starting environment, first for feel to at good demand revenue

XX typically However, month about XX the X when into lag. turns is because those are Tier month know, profitability and you that aspect to of as a revenue, that

So, timeline in be the to implementation factored there. has

until of these start as we materialize, turn out over we to that the deals XXXX. see project year, likelihood to start to them going see in see not we're all revenue to the course So,

in news our through. We them. feel deals great we're of good about So many prospects those really seeing that come

year-over-year that and about, we're accounting in However, look both point to going to turn headwind, million XXXX. thinking talked as XXXX impact off point to until recognized One revenue would land of the XXXX about $X.X the a as sheet you bit it, it into the QX, pointing to a XXX a and we have impact we is, when of you and and about taking recognized key at see you're are other program. things PPP do adjustment in that you out we balance not CARES XXXX the those of factor have then how about the basis headwind plus think we

little So, you point a headwind of growth. that's things. bit three those over a combine of And a

factored XX% even in our in with feel to still we that XX% there. So, confident

Tom Roderick

helpful. Thank it. Stay out there. really I you. Yeah, safe appreciate

Matt Flake

Tom. Thanks

Operator

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

Brian Peterson

I hope are you staying guys and safe. warm staying

quicker a possible it terms that XX can know, you up something be, and on a know, X may I'm pipeline historically, in looking is that's about maybe and know, the So, Tom's implementations? of in I get you to of of Right, anything with try question, customers XXXX. obviously on some how and that's know the looking looking months be or and curious, comments so follow but, delivery up terms that to you understand thoughts make months, running? Is to months encouraging just, they any or are shape XX into just that? accelerate get there Matt, remote decision you

Matt Flake

just just the thing, your typically Yeah, Brian There's to have, is said the software people teams lot to And on of comments. a Speeding to up I'm for the one Thanks but business, – implementations think it’s platform it's question. trying the tier before, the organizational the and I've side delivery a is about readiness the Tier that the about of and they it. time to how X it of have are not are as usually with X, it they talking speed exploration contract. – up. hard trying the

that think you'll implementation up see the speed don't I timeline. So, people

nobody it Lender, be new Now, net data have move people it's either net application applications, are that a don't a a used and things, as before, those little you think conversion, those. side, has trying BaaS I it’s on could BaaS Lending on to faster Precision way the on on side of well. Cloud same the the and that and Because Lender Precision

bit surgery, I of the don't some hard and speed So, digital net people those, typically a of not see expedited banking think people little want you'll what side, to do. But want implementations. on it's is

Brian Peterson

Thank you. it. Got

Matt Flake

Yeah, it. you. thank Thanks Brian, appreciate

Operator

Your with line Tillman the next Terry of question is in Truist.

Terry Tillman

taking and doing given thoughts definitely my with QX Texas. our going for comments. the with everything are thanks you of on some and this Appreciate all Yeah, and question go I’ll call, other

think questions were you You XXXX, XXXX, know, light, the surgeries] I'm what kind mentioned know, happened [probing that to really banking. just banking to probably Matt, how about [heart in you brought in What you on people curious experiences around] kind poor digital and earlier of some occurring. about digital of it relates of, of is, kind some really that were and bookings

here side Do do curious looking of multi-year in and kind the you. we're there's demand to replatforming of a Thank fall beyond, theme we cycle? of banking XXXX in commercial could and side, And out see to you banking is, terms and on people [replatforming], on starting so, stuff. potential I'm just kind curious around start if the even seeing the retail that a

Matt Flake

Terry. thanks, but we're Not there. out getting Yeah, falling yet,

you So, it replatforming once. these with we're digital which I say that ties the conversation can't would transformation that at into customers, do all the is, having

to and going digital? So, to you then and how first you then into all that lending, onboarding, do do does tie treasury do Are work have you to it? go corporate going and to you you're know deal So, retail commercial? going I you X’s it's first Tier Are the where we're down sign think the seeing but about may move we that road, the and we're a our plans, from initially, these of strategic plan. banking to talking then retail that part corporate to things

building to if schedules, you've the they it you they Now, all and hit off and to you know Adding they element. it those experience, is for lending of the interesting the and contract or element not opportunities you, deliver, a lending are but get may have good had. the initially,

in we're are us becoming the platform. pipeline. a now team deal know, off deals sells deal And seeing that platform are precision a We you we that seeing, a for that's have lender

it's customers that those begin and acquisition digital to to we whether and want or be solutions on Centrix And lending to calling and products, well. products starting basically seeing they're to they're out banking or So, their reaching selling are digital of we're those CardSwap our beginning their meaningful a customers are as customers, land, QX number not products quarter. a back and a digital replatforming and engagement

our on products, to Terry. because that of broadest get pollination. it's digital how And that's space. digital we replatforming have in about happening know, technology cross to we give of roadmap we transformation we Thanks, word a I a them use leading them that's a experience can can this whether or So, roadmap lead that the And having the lot set lot there's conversations with a there. in the marketplace. to

Terry Tillman

Take Alright, thanks. care.

Operator

from Schmidt of Citi. is Andrew of the Your next question line

Andrew Schmidt

about historical for pushed you organic kind Hey elevating there's up guys Thanks. everyone user user guys. here, XXXX Should hope a to taking and platforms, echo be and growth? seems thinking comments, It year, just and talk in in customers to relative being step you can been wondering growth of expect to trends. I fourth engagement, quarter, how want my theme user Thanks safe. seasonal digital organic in for about question see growth on expectations elevated FY obviously touch XXXX. to we that everyone me the briefly, let else’s a about talked user are you just staying growth is seems on all

Matt Flake

you don't why that take David, one? you, Thank Yeah.

David Mehok

had as a on seen quarters that We've actually where I this the Thanks, X% of high-end on sure, XX%. Andrew. call, we for growth the And organic range. seen about that of typically now straight user to know range that range. last about historically been and have the is talked Matt. we that we've we've high-end a what been the in growth Yeah, three has Yeah, bit

As range. we're to operate ability to into we’re in very out XXXX, continue looking in high-end that confident our

going aligned XX% out of the you is will X% what we in the range that we've versus see to So, that modeling remainder XX% seen XX% it more to know for with year, as you're to think the XXXX you historically. be much

Andrew Schmidt

Got Good comments Stay environment. in it. the demand lot. Thanks to safe, hear. a great guys. the That's to hear

Matt Flake

you. Andrew. Thanks, Appreciate

Operator

line Peter DA with question next Heckmann Your is of from Davidson. the

Peter Heckmann

Hey, circumstances or talk impairment my of just result Could customer of good morning, the a about question. on everyone. Thanks that the getting switching potentially their as some of fintech a the contract, just focus? you was acquired, taking for around some

Matt Flake

thanks one? Peter. Yeah, that why David, you take don’t

David Mehok

Matt. it Pete. Hey, got you Yeah,

sure it's think I with the not all, this of And one, is that of first scope we the a years important just of couple on fintech’s. ago. started to stage A the lot we're It's the we whole. make you know, journey of size to about strength our impairment to a of partnerships were know, the at early this all partners partner fintech You through clear as unusual. reflective walk had fintech’s, with and

profile. didn't imagine, can you have those financial fintech’s strongest stage As the early

this. strength more secure. what fintech’s about your feel that are we had context, financially. had we're on of we partnering up stack And with move partners of some the has give of very we've partnering the As fintech’s It is we're financial to instability the to that we exposure contracts The the one good the remaining those look contract we've they matured just had of that with? very mix that had. at and/or lower like a XX those as look and is feel larger how business, was that But Top dramatically a those have relative we the very take if a solutions really we secure we to early you ones are customer-base we that XX of as that very terms you going financially. any forward the that that those with. exposure at little to to again, some minimal. And us like fintech allowed and have, more today customers any was Top some low shifted the They're material, financially that Peter, And are And that has strong are question end renegotiate around partnered stage bit to situation? given of the

Peter Heckmann

that contribute to or That higher makes churn little sense. does contract That bit included? makes not that rate sense. And that is

David Mehok

churn about, about by It tenth. impacted yeah. was a It

Peter Heckmann

right, thank you. All

Matt Flake

a Have day. Pete. Thanks, great

Operator

Your next of the RBC. Perlin of question from Dan line is

Dan Perlin

of there? M&A. laid to just think I out to everyone. able question own you their extent reconcile Thanks growth and And then possibility XX% in that a around And maybe Matt, you a to being just little toggle, X secondly, of in that around you model good [have the hope more banks sustain, just this a we decision elevated, higher also, still see had are the to you how deal idea guys down kind do on of were then bit of the committee], but terms but now, churn us have order stay And happening making, as kind of churn these I of maybe question, Tier the you morning, back, you trying they said guys to are that kind M&A, kind remind deals more can because the safe. slow how commentary know, that know you specifically plus you the the rates of of year? reconciling with even result

Matt Flake

guys, winner think we're acquisition, that the his is next I are and think that things mean, trying to use set usually to, able because I one customers of to said I banking. forward surprise it's of our we're expectations. lending – and just they all, are in to we've is I generation you anticipating want platform – because for compete, we in you to the David We the just whether up know, this want the comments thinking or seen that of Yeah, for that you picks that digital that the part M&A but make at right don't churn sure don't

and I that think then But adding piece a we'll And is of manage, knows perspective, to I I net XXXX. people due you. saying, see more have who part But in just I be think or was acquisition there's ahead we not communicate other beneficiary but what to happens. XXXX. think what for are trying the whether platform so, That's David, acquisitions be in going the churn the probably users the think for revenue something to we're onto And more that to us, we'll from it.

David Mehok

Yeah.

exactly? So, Dan, – touch to to sure other I I you can something just clarify think want me there's on? want the parts make If you else do

Dan Perlin

slowdown know, commentary bank. you being kind of know, potential And just then, X about around, was the strong. I you talking deals No. in again, reconciling Tier this

things the that I to of So, you get of was understand I to the to rates. a think XX% to toggle to you're what growth trying the just all. you do pretty in don't kind it play some sustain event covered elicit much these out able –

what guess, cookie way, some that are the confident another I the things helps you So, jar in said us in be of got XX%? that

David Mehok

was that towards resilient things in that one [indiscernible], over understandably, some their in thing We've the they and with the is, some was the pivot just nine of we and other area but struggling do going to out of decisiveness you renewals. proved business know, I’d know, there Dan had distracted and months. some portfolio last on were of our what is, able in of business and you course customers we're to add and very Yeah, this out a got when the one business we're

that for the solution business terms have to us them our critical and in that we them We were with out a extending we contracts backlog. that they helps have sure make and were of reach able

you our the stickiness The other add solutions in helped why using portfolio the and strength saw of to incremental thing is was which solutions, upsell. our the of strength that really

or have where we sure between ability one's make and we it thought the have if those would all hoped those we utilize So, not balance levers quite to that the be.

continue we forward we have to that's So, that XXXX. we into go that's as the that and flexibility flexibility the leverage

Dan Perlin

Thank you

Matt Flake

some an usually and buyout in And occurs acquisition keep that that the happens, when term Dan a fee there's earn-out process. in just mind

system. off So, XX months takes typically – to and them the get it

typically impact the as as much you're in does it down the it So, year road. doesn't

Dan. for the So, thanks again question

Dan Perlin

Thank you.

Operator

next of line Huff question the of Stephens is Brett from Your Inc.

Brett Huff

teens what there's sort then Good organic you're year, accelerating right most for know, the catch in safe and low of and low want – welcome common just supporting that's Matt, organic organic you morning and signing growth think seeing guys. the question terms know, you Thank is, inorganic versus in one. both can David. was it sort is groundswell and got two digitization in number Quick I you're then I hope my up, seems number disassociate thought make and you kind of people think maybe XXXX, of to that the of sure don't XQ, in to high deals roughly anything XXXX, And XXs? want of Again, that growth, on I maybe later you. the maybe XXs? XQ

Matt Flake

part David, why don’t you take of the first it?

David Mehok

out that we've broken but know terms the tell with I plan. start it piece what did organic anticipate when about anticipate you're you overall going discreetly we’re post-COVID you standpoint that's our versus in is as we of be reset, from of that, is, I'll Brett to into of need get right, would We we this essentially – nothing an XXXX, inorganic we organic inorganic, there's head Lending an to and normalize to standpoint X% finished. you an Precision organic and what we that where And revenue. from is, Yeah. where targeted there the said was and organic haven't to That's we number.

that So, inorganic. the that versus for the and organic same seeing the XXXX for you're seeing guidance is numbers you're

Matt Flake

whole Yeah. question? Brett, the the other part was the question, of that

Brett Huff

of fundamental is of digitization know more I maybe is sure – if much much shift? groundswell of sort the Thanks, COVID, Yeah, question, organic a we as the decide kind some want some faster get maybe because just maybe growth to got more of implemented it of deals of how how that can and last acceleration pushed you of piggyback you the to catch-up on make a guys. and

Matt Flake

I here. Yeah, this don't could break I know if out that call thanks. on Well,

people combination these more that because they're to lockdowns some a realize the I have have be are that that then a should with have deals to they deal last both There'll system, you'll around the they somewhat because times need on that pain deals didn't do pickup some in be you'll that renew using occurring. year catch last else. there – to the that then users and be felt of people think there's a of and system more of a up pickle there’ll and year, a groundswell during had everything

Brett. again thanks So,

Brett Huff

you. Great. Thank

Operator

of Blair. William of Napoli line the from is question next Your Robert

Robert Napoli

hear Good Glad you. doing Thank you're morning. well. to

is Question several are thoughts Austin on going so which what we from know product Where about? revenue versus, which growth on. revenue new coming new per in your end, products have of – is user of what's you Like, user, revenue the family most on you are you clients high understand at members talking your excited penetration from? per growth and per know it further about user user? We the products

David Mehok

answer I'll that. Robert Yeah,

CARES we would in I in did if reduce was, you a pricing, per of that return, the average what where per had So, in got is, extends program of we tell both to help see that that remember, was of you XXXX slight user. and we decline there, some And the revenue we FY in did out, and to us of extensions our customers rolled short-term we agreements many we which obviously the out then that user part thought longer-term. relationship we benefits have beneficial very

that currently aren't what do going into some is is feel forward driven now just for this to seeing going Matt demand I We improved had QX some a solutions be be onboarding look just enhanced in solution, into XXXX, have. cross we some of a market demand talked of for we're solutions quarter we of coming in really seeing with. uptick we're think like The we're aggressive we of in We're continues average which you're user new that and get get the year. As the very see what and QX Centrix fashion opportunities, more new, by, our but to revenue about sell Treasury could they're some gross that slight and to we that the referencing, product to strong per think that. in as terms legs as well. this of last

sell So, cross the enhanced really we user that per profile. comes about And ability average revenue sell. cross good feel to with

Robert Napoli

Great, thank you.

Matt Flake

Bob. Thanks

Operator

Your next of of the Vruwink Joe from question is Baird. line

Joe Vruwink

Great. Hi, everyone.

you new of product You feel given the that core is know, year, just out played Treasury that cloud Precision platforms? the upside you product last at it the know, not like new of organization portfolio been of leveraging increasing? this know I that this PPP, faster innovation the start velocity your this revenue change and time always the potential we see the it's on to And over is Do some near-term revenue? things growth? given more has seem of to many innovation. dynamics these out? product maybe the there newer came of And there insights Is of QX, kind where onboarding, to in to but see know, be have products drives, a focusing is some potential you just of Lender things inside just but just the model the

Matt Flake

Yeah, it's a good question.

of about think when like is, I it's talked the one you the see Brian up earlier, things can speed you'll implementations. asked about whether I

through bank to that the three rather Lending, it, doesn't product we tied very to than the But it roll as the to out. that prepared live as not it segment, user, as deliver a It much banking operational months, Precision Cloud an people are riding a and to take to bank and and had – in in end I the roll lot much is account the to there's built difficult banking service PPP faster forgiveness organizational change tied you because or think holder, it's Lender and that is out. if go of readiness a our go week. being digital to quickly. If the weeks look you delay, fast. with against out up corporate banking ready Lender, technology And Precision it's get product want at or can six was roll running. a digital

you So, that or credit and the call you're carefully, wrapped don't but in you process it's institution to go move digital the passwords, what crowned new about we the they around, customers, log the things do happened the they them system of those the technology to really people center, it's and jewels from banking look reset have at And has and bank XXX,XXX, customers or complicated when when union, are one where is the get to financial another sometimes have moving, if through. up fintech know, too. want to the talking

really but data service, those of the of on think, of businesses will some banking revenue things, we talked of I an other these meaningful things. yes, have delivery look, products to get to side insights continue So in Lending, bigger impact some see sales earlier, to just really the gaining about this the the message. a one Cloud these as and acceleration have of you starting they're And that a of all, more I we're they the have, out spent and traction, January, go are the have to and QX we most kickoff some case in had relationship can studies and leverage has conversations. educating a about talking innovation, and with management And come team, together and we sales it how really team

through, think some continue lot drive So, end there's of more out you'll up I but what to nasty going Thank have will you. to that to to know and that's through Appreciate will And it. are don't that. of traction that go timing the And leverage revenue for to be going begin seeing a deal don't comes us. of that these these flow products have be. significant faster, going these conversations conversions and I BaaS, to get

Joe Vruwink

Thank you.

Operator

Your line next Beck question from Josh the of is KBCM. of

Josh Beck

about certainly, Thanks to the could there's lots there there. all for in-roads less it corporate more you different think retail, lending, about guess lot have now, in Texas. ask we're go-to-market and or a little speedy taking bit you that team a for commercial, I the talked that I be question of wanted pulling recovery

have on about we as it, go-to-market approaching leaning view in this curious sales Is areas, more of point And these specialized [indiscernible] I'm just you model? curious generalist you're a how forces you of move from forward? so, some are of a

Matt Flake

mean, transformation they what credit I Yeah, want Josh, want and XX. how people learn to digital to look care you're I I don't our go that within passionate happen is [indiscernible] unions can and banks technology for to is, how or going use XX, if I these about lot is can or know track of selling record we'll us. whether And customers taking people what and our you and a and of see and products. passion it not. translated, is end software these sell care for believe And buyers think up that always delivering innovating of I

based So, we're segment the really on to go market after. the is going

banks and combined credit unions we've now. So,

are those. reps going after of sales So, both

You in could to could you have your credit able of talk your a digital union past, bank be transformation in to have a past, both on you got them. about

hard. they'll about data, banking, lending know, it's acquisition and digital You digital talk

office so product And spending they've whether And time get lot a or team educating to doing strategy that. up to of that's got we're it's or them, our our speed.

get is, the we amount for thing really get front where whether go these me we're to because on in of pandemic because the the able customers people, people, prospects – interesting implementations So, whatever market technologists, more we're of product is, is, to airplanes. it's – can in with and them it coverage

business, the new is when Because that can able on And we of so and a don't specialist technology when you deep a advantage if And that us deep with to get some the for a there's prospect just go eliminate we're operational comes go how is product which works. objects a side important. from the it have time, into that. call opportunities, to do very these shiny big the travel

big think a I in don't So, there's change go-to-market.

right how to our do folks a I of picking the and matter educating think team we're it. it's

I that's XXXX going you and be how think is very we're but it going to what to exactly interesting not view on think So, my asked, to market out. I plays see how

Josh Beck

total makes that think I Thanks sense. No, Matt.

Matt Flake

Appreciate it.

Operator

next of Your line from Sandler. Ramnani the of is Piper Arvind question

Arvind Ramnani

taking Hi, thanks you question. Hopefully, back the my get soon. for power guys

looking of the kind XXXX. back Just at XXXX,

XXXX, a was a given that year. XXXX context it dynamics in Or You post-election the tough very the you year in talk is very strong a year? of post-election Can a of was given this which was compare know pretty about unusual? kind XXXX

Matt Flake

Yeah.

And the one it's rollout, the But back not what the different there word point. pandemic comparisons, There's can't what right is is played only out, stimulus really delays, know that let's there's because these are the now. an like-for-like issues vaccine things I because One business. similar the all of objectives COVID like overused calls you difference. was we're election, surges, there's administration, use was going the unprecedented, is days that's of this that through at on that’s new programs, election election get way the – different these is these the my to a that do thing that to and happening, there's not

compare together, these transformation, in the difficult of banks the as The were are in remotely. unions XXXX. a coming the are as some the two acquisitions of deliver of opposed vendors just products, like very the breadth of or that be XXXX, we very We're where We the it's of So, requirement we don't to in digital single products. begin with to XXXX a lot a credit I to spot able them. right lot to don't compared a where company technology who may threaded to have good customers. customers have single be this and

no unlike this as hard it where moving but over, So, we in in of to to where compare house are it's opposed is crazy no and a Arvind, that's XXXX power the to forward business. them and may with trajectory it frozen XXXX we sound in water as were XXXX,

for So, and one more with the appreciate question that Arvind. we've got question time

Arvind Ramnani

Great.

you the start You about operationally kind Just, you at start months? take XX post travel know, team you employees building higher to of XX know, this next over vacations levels how environment? spending specifically thinking are as you You staffing in staffing months levels know, and higher are to potentially, know, for a or vacation? of

Matt Flake

can to that know, higher for for unlimited of Not I mean, use an vacation. company, I be, plan no but vacationing. people change try the PTO have we there's you we think levels

are manage coming if we're moving today. to forward, think know, we when to you're we're what space know operate work to as that trying back essentially, that, thing we office to to you living or this the have don't back the we're you our employees do in told the have is world coming I is work but figure and we out going

office that. the people putting so, coming point, the will but pioneer And don't I’m office. – I'm we want be will certain back to not a some on at to start going into back in mandate people I

what So, find staffing to can we the we efficiencies want for try to of is, do. us

keeping want while. to they we'll most I think make those interact on for to I know, in be conferences, the large people job other approach them runner] client people, you and safe, sales types [back don't the see it's people But they an don't people, want it go productively, we as to how and are on well. As they a to implementations to earlier, things, then, those I that them, see do feel said have want can of whether If where airplane, they put they the if airplane. feel

So, other real effectively. Arvind. got which model than the staffing estate one more no piece, on Thank for managing changes got we you, we’re time We've the question.

Operator

of James And from Faucette of Stanley. the your next Morgan question line

James Faucette

Great, thank my been also applicable guys of U.S. be personally, clearly, answered. outside you're being and start could be the few resilient here to in very But times, U.S. you customers much most quickly, international, your but just have the value the lot you mentioned hopefully, pretty soon, less you of resilience as to as far a able bringing questions a

that to lot. be great? potential? you either some as that the there organically are address how thoughts, would acquisition, how would about start you thinking So, a And just a Thanks

Matt Flake

Yeah, thank you, James.

So presence a Europe. internationally, remember, have we in

and we actually that are customers Europe. there's year, we take that in London both – some have to customers over Precision in the see in which see office opportunities continue beginning half place, second over the the in traction I lending pipeline an are we there, of there to BaaS some have Lender, We potential will that is hope have deals

Asia, shut their team Australia, quarter, pretty also a missed summer solid December Sydney, they we that have had fourth down. it they in in that offices given really

only So, not working. that there's a lot in but of opportunities Australia, we're Asia

large We to They resellers. have sooner. online coming pretty seem back be some

we're doing. America, doing in exactly what there bunch regions a not those what you That those the way. spending and So, something not can marketing and in be we're focused we're on North very having really measured there's that but you're to those of know taking getting a continue very expensive. but don't really offices products invest Digital And we're banking in on We're in we'll to places. big when is planning opportunities there, is regions. going

pretty time our Europe Australia and Lender So, and in to Asia Precision we're products in good and Lending going lending feel continue at I Cloud are to and good in about and push Europe, the where not really Europe took of, are. slowed we're pretty down. in a And where hit a I those areas, from those we feel standpoint about heavy too and and

about do for going us how measured we feel [those more this. So, to really to patient generate It's international be] just good time a take and little will in stuff.

for the I And everybody thanks question, for it. So, us. appreciate thanks James. joining

next in be we’ll the we’ll calls, investor on coming the be will and over also available couple investor conferences of weeks, be We days. in

this amazed technical I just everybody's we recently. difficulties behaved rails] based how patience So, any appreciate and I'm got without the through [power on

So, everybody a safe. thanks weekend. Stay great a day Hope great and everybody. has

Operator

today’s conclude you. does call. This conference Thank

now disconnect. may You

Q2 (QTWO) 18 Feb 212020 Q4 Earnings call transcript