QTWO - Earnings call transcript Q2 2021

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Operator

Good morning. My name is Phillis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Second Quarter 2021 Financial Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Josh Yankovich, Investor Relations. begin. please Sir,

Josh Yankovich

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

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

to over Matt. call the turn now me Let

Matt Flake

Thanks, results turn by across sharing our we non-GAAP as in discuss call quarter XXXX. I’ll updated Josh. then over revenue detail I’ll and quarter million, second it David up results second guidance third from to highlights XX% year-over-year quarter, the more year business. In generated full as financial sequentially. well and to start for of the X% $XXX.X today’s and the our

will We also an announced digital at solutions. that of execute key us our level important across signed an resulting increase to a total XX%. competitive than million added XXX,XXX we we And of over Overall, XX.X offering users in delivering sequentially, encouraging the We high platform. our a That we across brings deals year-over-year the new our users lines, more had advantage to product registered business. continue believe build activity in market. quarter our in on on banking

our pipeline. see around evaluations are return customer an more purchasing to will growth continue living and we of beginning normalized by believe which solutions uncertainty help the in timing to and increase conditions digital market we improve, decisions, we the see of in Although that to already a working

activity across year, pre-pandemic the of that to in we return expansion areas begin And back we’re levels. opportunities to to overall our pleased in deal So number half are we’re look of we that seeing optimistic the of as will business. the the ahead space all

transformation, of belief our within that that digital one involved a half we or a for because positive which banking communicated we’ve This on acquiring the announced view first grow rolls entity solution, QX users the being as can in We their often events in QX to year, also we a these onboarded incremental banking in Of the the new of that without customer, around digital the instance. process. were or but on saw side If result are a acquiring acquiring in institutions activity first the digital and forward acquisitions the the all typical financial customers banking existing to reinforces sales long half partner onto looking space are implementation we resurgence the XX strategically company with going M&A thinking in tend through side M&A our business. mergers transactions. a

the While business, from predict, in we recent decision-making optimistic industry-wide activity pandemic. is saw during which difficult encouraging industry our the the we revenue are timing of benefit find to will this M&A M&A we the in especially that considering slowdown

sales signed footprint. build it We arena. banking customer banking-as-a-service in success view net testament breadth achieved and we to deals the momentum in and a our performance quarter, lending to as digital broad-based new the within Transitioning key to of continue the our also digital quality and expansion

On so priority. to banking extend was has we highly platform digital union competitive in ability that credit and with union sophisticated front, a product a team, finding deal strategic won scenario. internal credit platform a strong a the base the a a This provider

digital on criteria. I’ll a platform in the capitalize which us In deal, position detail solution, key case selection the increasingly competitive discussed has shortly, shift. into platform’s in feedback. to business studio flexibility and the important them credit to and innovation where was feature-rich retail was differentiator it was end-to-end according platform to expanding our in the past, banking, put we’ve of own discuss our this their another commercial as trend member That client suite banking and experience this personalize for this Our the our more banking unions, combination in a provides growing digital a timeline

A solution. solution had I’m side with $X across our credit existing pleased our that retail leverage on banner We We in of value renewed customers. traction business our to their demonstrate the that deepen We especially quarter, adding America. and our from second breadth of base. corporate also North union billion growing proof wins while digital relationships quarter also banking and with agreement, the good the to banking broad like ability existing point our examples a was continue several these meaningful to portfolio lending generate the in opportunities believe expansion the customer

streamlining institutions an more to in loan increased our looking and months, borrower put emphasis With their solutions provide for the lending competitive experience a seeing to the we’re are events on capabilities. their order origination transform digitally of fit a lenders last internal financial processes natural XX

The origination first bank. enterprise quality helps deal of I’ll the a highlight was Top-XX segment. is it deal important U.S. origination This in from as a loan with scalability demonstrate the enterprise, and our solutions an an strategic standpoint win

create believe us. with we’re relationship and this add We opportunities North a American will foothold gives to optimistic expansion our us for also efforts. bank, this initial this will also momentum It sales that

institution this to which their in our help also is decision the bank the example, ClickSWITCH an made become to As solution customers. primary financial intended purchase bank retail the for the quarter,

with to opted in A U.S. we continue was our pricing the origination quarter traction at purchased representative addition and bank, Tier not loan to loan X, with coaching build management solutions. pricing, our Top-XXX risk Centrix win In which solutions, our but success, loan also sales the data products. our only

to valuable our looking Another profitable, example to us. competitive pricing more competitive time of a for empower them the loans managers coaching, our with in with utilize we’ll is product relationship and to breadth advantage create real creating pricing design data and to solution allowing loan use additional their This borrowers. technology our opportunities bank

This agreement in digital banking an is our X, pricing existing loan a signed with model expansion action. also client. We Tier

a been has business to customer, and goal over always projects successful more time. earn Our run of them win with their

no balance Given set both sheet customers our the sides breadth product digital to the on a our of position of are now their they in matter we’re today, in partner journey. with transformation where

an interest we partner expressed to to initiative. providing were a when commercial their in client with data pricing great So this this loan on in position them lenders,

activity, with Bitcoin. leading dedicated are a driving in was is NYDIG, fintechs multiple in an on team quarter and solid and technology partnership fronts. quarter far also services to Our innovation services. to that buy, U.S. new hold One and for financial partnering easier with the a such exciting This of banking-as-a-service giving consumers had financial firm sell access us win verticals

portion payroll to to vendors their Bitcoin, formally the first teams award-winning on And for the relationship, custodial we banking-as-a-service as allows leverage financial to their our new our library announced corporate power in the as giving functionality. a culmination aimed functionality offering innovation either such SDK, and to of a their BaaS in-house announced QX been customers platform banking input to the on extend banking-as-a-service institution, from investing products, have U.S. partners. Expanding our in customers, we to to development customers on First, integrations hard client, allocate collaboration services the or dependent of pre-integrated third-party a of our studio institutions a Traditionally, studio their Built deliver at give employees make offering ability with outside custom to customers or digital in personalize developers, customers. work NYDIG’s they’ll QX’s platform from paycheck to the ability our Bitcoin banking their available innovation, new beyond partners fintech digital offer well, years our our country. financial quarter, which account innovation and of the holders. the will

studio accelerate feedback empowers has to their extremely design, account positive. of solutions from innovation to innovative And customers the industry, develop, in and change our distribute pace initial QX our the As holders. clients the continues to been rapidly

our it, ability a we Credit feel Product execute on Studio, to Chief is developed Federal differentiator our the size, true approach. very empowered a As Officer partner with for our has QX put vision Innovation for Stanford Union

users channel also for our reception whom customers are and end accessible potentially a their We rapidly for partners strong and network valuable from products. distribution seeing a of provide

innovation and leveraging a to And the our to equal Innovation formally just more By studio give believe field and and a grows, the years Shifting engagement have delivery. XX to as opportunities partners powerful to will value QX’s it more we than the Although differentiate empowering can is studio of will with number Innovation our that customers And innovation access grow fintech well. contributor ability satisfaction leveling product deliver we for deliver as and today. its with to rapidly, meaningful Studio, Studio playing mission. announced we advantage, technology, come. drive customer QX customers competitive customers believe already we us to levels innovation help high the development

our A banking launch coordinated execute team, to holding tremendous same a environments from company one believe continues the high was set was continued second apart customers is launch delivering and I our complex financial with to owned quarter. particularly effort solutions us of our institutions, from digital largest quarter level with This noteworthy. teams Our the go-live by track One event X sophisticated record in clients. that from a competitors. all to the during at

quarter the delivery David the with with expansion as a combine to on over wins the sales enter position and execution I’ll key we’re through our you in our the feel With back we’re competitive that, and when side, to year. walk the call we financial half of So strong portfolio product the the performance. hand pleased of

David Mehok

Thanks, good everyone. Matt, and morning,

As growth to deliver high end effectively ability we to of which pleased mark we’re with our helped the growth, hit halfway the of year, the strong revenue bringing overall our deals yield exceeding execution our and and has the organic in business, revenue guidance.

and solutions, end was revenue while conclude second investments non-GAAP growth. resulted exceeding updated revenue, detail up for of $XXX.X was in and delivery driven We our our increase growth in year-over-year the which high also our driving quarter subscription the Total quarter Both results guidance third have with and of XXXX. results reviewing for efficiencies, for more I’ll million, by the continue guidance. adjusted sequential quarter in the year-over-year an organic and grow sequentially. begin XX% new in by XXXX people the and largely to increase EBITDA, revenue in and of year the X% first user go-lives of customer full support,

an as previous revenue as fees total slowing associated represented in revenue for go-lives with well we a contribution addition, revenue in revenue which quarter, the from quarter. the transactional growth cross-sold bill sequential XX% debit prior transactional with and Year-over-year period interchange acquired traditional BaaS of revenue products. year with consistent for total continued on also percentage increasing business, increase in the resulted includes constant. contribution ClickSWITCH, also X. increase benefited growth Within due revenue, of in pay Transactional associated of year-over-year business, we’re In was the and the part has as revenue revenue which remaining seeing BaaS with the transactions. from April pass-through combined This to

result year-over-year total million. to our well was We renewal of The the contribution a with Turning bookings approximately as increase net opportunities ended increase billion of $XX of customers X% the year-over-year backlog. quarter new sequential added bookings. $X.X decline with backlog, backlog in largely in and existing as a through

primarily in that resources, expenses with will proactive XX.X% success earnings margin in which which be quarter last gross in QX in we in in year. addition see effectiveness XXXX, in pressured delivering to XX.X% backlog from believe quarter’s fewer The mentioned in approach total XX.X% our solutions. down existing of our due customers, XXXX. call, dollars I to from XXXX the fewer and Gross attributable and to XXXX As in renewing to backlog to resulted the are to part was due growth continue bookings in benefit customers bigger new of XXXX. net year-over-year this compared relative continue down this decline margin be but targeted second the implementation of in for We a impact the that was renewals contributor last for associated to XXXX the renewal in backlog could pressure going second in confident remain year we to from quarter to

banking-as-a-service investments increased second security to on mix the pass-through sequential also expense of year-over-year for driven supporting quarter the operating in of in such in feel in Innovation Studio. million growth or in continue $XX.X by of as our R&D QX customers. Total OpEx our QX revenue revenue. in a was QX the G&A with exhibited in a about XX.X% were quarter. like pronounced to these We expand and decline expenses ultimately focused in second second The solutions and XXXX addressable margin we by percentage to customers, efficiencies continuing to The transactional or were gross as XX.X% or growth We in and $XX.X our our OpEx XXXX. a showing our solutions, benefit of maintaining market. impacted higher in decline and compared business open XX.X% of also invest percent $XX.X and sequential revenue most uptime quarter million as revenue in revenue of invest strongly the of greatest reduction as revenue of the best-in-class million

Cash the to EBITDA Another sequential second was related from sequentially. The million, million during attributable to and the in the quarter maintaining equivalents the largely increase $XX.X of notes, the flow first and headcount with well offset year-over-year quarter cost driver in OpEx the came attributable million onboarded than cash of $X.X flat balanced Adjusted in expenses in and the in XXXX the of remaining revenue, growth $X.X which This to as of the down we $XXX quarter million. second incremental from XXXX. operating decline of a rate by gross of to the total, compared balance up end increase increased both at We acquisition of $XXX.X than during a more operations the approach was reduced contribution resulting management, cash, of acquisition announced XXXX million of was $XXX.X quarter. ClickSWITCH cash ended in operations R&D the million, of the from from from to ClickSWITCH. of investments use of repurchase scaling quarter quarter in below cash from decline cash quarter. as the the the margins. ClickSWITCH the $X.X million our these In more first transactions was majority

$X.X and million. net were the sequential which incurred quarter payout timing contracts payroll vestings, expenditures was generated quarter. paid for our In first in the improvement $X.X annual addition as cash the well disciplined part stock and free vendor in working to to out with capital of management, payments flow million large of both capital the associated of as taxes in due bonus We

we our million. As in of a $X.X with termination will the reminder, agreement StoneCastle, the third quarter, make final approximately payout totaling

Now million, million, $X.X year-over-year We guidance quarter And million growth of guidance our non-GAAP million. to third year let guidance. revenue million. to EBITDA revenue we we updated me We delivered up XXXX XX%. our through are full $XXX.X growth $XXX adjusted million third of wrap for to year we XX% to results In both revenue XX%. financial year representing to third to quarter second and customers, we increasing full and full million range the summary, EBITDA $X.X $XXX.X year. and adjusted quarter And forecast increasing sharing of adjusted of our for $XX.X by $XX.X guidance million effective EBITDA full $XXX.X year-over-year in are to forecast to to and the for in increasing better-than-anticipated our timely of delivery the XX% representing solutions quarter our are

We in and will strategic benefit value. long-term continue which we believe our opportunities, create to invest customers

We of turn to executing in operational the investments Matt these With some are over the able remarks. in to efficiencies for it to fund back ability and a half have of through our continue portion year. closing I’ll confidence back that,

Matt Flake

lines Thanks, we continuing We origination and business David. new in of adding see sales momentum. opportunities. had wins signs clients execute cross-pollination continue important banking-as-a-service, expand of In banking, pricing to business, across on closing, our to and improved strategic while relationships existing loan and digital

financial Innovation further our to innovative before. continue which quickly institutions users to than and products more enable solutions portfolio end to with like develop design, distribute their QX differentiate We solution ever Studio,

beginning Looking to ahead, improve. our we’re encouraged that is market

of We’re it with more customer we and through end the that, the questions. a and Thank for And sales year. over improve engaged prospect in more opportunities and expect turn I’ll time to lines decision-making you. pipeline, operator creating to strong the

Operator

from first line Tom Your Stifel. with Instructions] comes question of Roderick [Operator the

Tom Roderick

environment on numbers point they’re the looking of wanted I I backdrop -- good. of of maybe finer kind very little to Matt, the I’m business the mean a here. put bit at a

to perhaps pipeline you’re like just that be of seem would bit there. a I’m expectations, that’s But your backlog decision-making caution about be near-term did of you’re to sequentially. down trying David, it beating in little maybe lot And that raising the nature. excited that just and pushing a things You’re guidance to building and marry versus comments, and then

the bit in put what’s of little half? the you’re a decision-making enthusiasm to can for a be So on deal pace you might and and new point coming finer in second respect of versus activity the what with what seeing pipeline

Matt Flake

Tom. Thanks, Yes.

and and But the adjust we’ve being I cautious -- good that So we we see our come guess, that. are distractions -- is with had quarter, this to to with we are beginning fifth pandemic, quarter. had the about in a deal

If deal, enterprise look as a you really a Tier it -- banking an at X small on like the a that side a Tier Tier X. X had resemble looked Xs digital

So come people beginning and activity, decisions coalesce X of in starting It’s Tier the see side. we’re to the North in wins. well But the as side some there’s lending space the together the also had space on end America. Tier banking to X good at day, the around digital on

in the on the So kind we’re half, X numbers, ‘XX. it’s build back beginning -- hoping of to to and remarks, from trying and we’re pandemic in just together as pandemic some be that like come guess, into decisions should it a explaining cautious, see it’s the that I momentum like feels certainly pre look said in prepared quarters to of, but we’re I

but are to put So to it I there. I’m got feels only just delta come we’ve this going transparent going but things be been like cautious trying together. starting variant the to once, with to out do caution on, like always and what’s

in, activity feels pipeline thing the because that geographies So depending but just it, can’t the going it’s that be will come or forecast piece. that really good. like they’re I numbers to I’m that would be -- and But I the different I have, to sure only would you’re that we the on it that and the say whether response up.

we’re our XX% XX% We’re of quarter year, RFPs ‘XX. -- sequentially, better the much fourth from looking XX% are over the up demos XX% up were fourth of quarter at up numbers. last

like the to that well -- So expansion existing we’re we’re we’re deals, come beginning the we’ve in this of activity continue talk I customers also to about a base we lot see feel that positioned of within opportunity and together. built.

good. of feel all those So things

Just pandemic want looks to looks have going like. like that to pre-pandemic the back we’re caution or what normal get to

David? good. looks it So

David Mehok

the you ends. backlog close we’ve year last saw When would be renewals We Yes, the of X/X our Tom. renewed we And XX% bookings number overall. Historically, talked unprecedented little an fact bookings that a had That last quarter of or of pre-pandemic, about at last pressured look things, bit about coming customers to to X/X approximately if backlog was our renewals. new side we on from of cross-sell. thought year. this of of business we mix new go either X/X down the you year,

now in range. seeing what So pre-pandemic we’re is that we’re back historical

is feel drivers of how trajecting we this backlog. but So at point, good some the that’s about business sort of of the

With like backlog the did is going program we some and the last year, year this little from standpoint. bit feel we of pressured CARES renewals certainly a be a to

Tom Roderick

really sense. Yes, helpful. makes One follow-up. good That’s quick

talk So the when enthusiastic to BaaS hard you be piece banking-as-a-service, it’s different not in wins of these different verticals. some about the

last Credit in does guess those sort about the numbers a ask think margin. it because think talked interchange move point quarter, bit start I margins what about David, about to place I a seem you pure this particular, the I be little more? of to At I’d even and into gross And pass-through impacts Karma. where you

little So chessboard transactions gross What do a of that move might start it to margins the pieces sort start impact a you’ve turn little sort when drives like would an that? to the bit. and to got the up on for on And bit. seem of see waiting even we just

David Mehok

to a extensively have. decent talked to the launched that of launched, going When what’s fees going play But We to opportunities program. that be longer Yes, actually programs quarter. because this is transpires these we the are out. pass-through about when a one amount Tom, last to these we typically this win analogy way it’s isn’t pretty of with that checkers, chess take is it happen is good they going there’s

fees the low upon place had QX, time program be gradual to referenced in issued. pass-through saw We that with you mix still seeing cards margin, we’re interchange that so that launches obviously of are once the margin. in transactions going it happen based to And are are fact, in then taking obviously start those over are the no now. which And happen, increase see we and those a fees,

So to time, there’s start a pass-through But we’re something happen going to meaningful be percentage larger like few X- now have see of to time fees the margins X-year and of the more a happening. few interchange It’s much to to over a going feel or associated quarters. gross meaningful. lift even we become as those this horizon we to with a more that’s a months is going more fees, but not it over course

Operator

question the Truist of Terry Tillman comes from next Securities. Your line with

Terry Tillman

to hear good new always innovation. it’s about Matt,

about just And a then a so studio bit David. framework? kind to this little And little I technology And of monetization? about more I love a hear had and would follow-up like bit the Studio. for Is low-code the more the Innovation a

Matt Flake

Yes. Terry, for the question. thanks

For quite us, on We’ve did something time. been it. isn’t quarter. we working excited really last This this some about for

for integrated in experiences retail business get their do whatever whatever up able or want they If it to they for and a and whether -- us third to users, or #X get faster, it’s be, particular. function. really our you it, things four differentiation function whether might allows market party we That does and to do a helps unique running it about it, speed technology does it. it drive think us clients, they’re to

allows you’re a So unique brand. that them drive to driving experience their

drive it the could could more more product. third drive institution software, work very on on which we’re Third payables, goes that CRM will be the side, there integrate is be the the to utilization thing different share engagement. to financial is driving that SDK, activity. accounting it’s one here revenue is It activity, of And will the more to piece, between revenue and logins, basically But more could It to. interesting be us. it the parts going is, technology it’s with. of parties a providers, open that’s It

to from from a differentiate of be money customers exist, economy And so and compete of bank a we are are or as extract where revenue credit products going now this from. they’re part to much we are their a are possible help to trying split model generating much moving union, we revenue out that and which I’m to or about we they’re going this talking how to selling as

So as up pushing very selling shifted more noninterest others revenue, generate we taking income, to our we’re really to, clients, ARPU can and by products CEO’s money it rate their that this which are important gets in, have you help from is conversations more drive in interest ears. the environment

marketplace. a and very but this. there’s lot in the about of early, strong excited So activity It’s in it a very reception it to

excited about very So it.

Terry Tillman

business healthy BaaS sounds competition. great. It like a it’s to competition here, That Jonathan’s sounds

Matt Flake

market the Jonathan is emerging stuff. overall,

himself compete So saying to on he’s going he’s with it.

Terry Tillman

in or And the lending deals revenue do follow-up closed new you like unions. on banks understand I the ClickSWITCH, business of if any could digital light had it quarter. just these faster the or Then David. just value did even I shed you banking quick a or things -- size the big credit notably the time what more just the past when like But a recognition for of that then you Gro, in totally in April a deal for kind with is versus for ClickSWITCH Yes. to the Can deal? prop and

David Mehok

One mid-single a seen of terms for few the be guidance it to and We of going we’ve was much point in opportunities banking proof be a to dozen closed of for hear mid-single-digit and absolutely, still that’s ClickSWITCH. from to time digits me to for believe Yes, is some a you going this the negative enter we quicker ClickSWITCH the when business was to to case. Good that contribution there’s revenue low year. digital like ClickSWITCH And we revenue for Terry. EBITDA we the given low success customers. this existing thought pipeline year, had our

activity the that and that the we’re base. with our pleased really we’re to right existing solution into ability cross-sell So now seeing

Operator

Your line Auty next with from the Sterling comes JP of question Morgan.

Sterling Auty

to -- go we off kind this contribution, think that’s maybe I X want XX for you reacceleration and wins, about when question about we traditionally, way. So How ask to should listen back Tom in think of Roderick’s win, to the months implementation, especially revenue it get revenue. Tier X for

for in guidance within be side what we again? line? as to the might about for? we should decline potential should our limited And the we into backlog any starts you -- look other move we given backlog the when top how talked be elements about a indicate should we X With grow but there on context, is forward? the the guidance, and to quarters reacceleration think pandemic, of looking only all it you’ve Should Or indicators when see the

David Mehok

I’d foremost, quarters and X Sterling, it’s revenue. say answer you stated that to in remember, what first David. And is, from about X this, and to it to takes question bookings

straight So And COVID mentioned, that impacted now X we’ve demand. we’re to revenue of Matt through. work starting had pocket, quarters creates a natural just as air

going that we’re expecting to ‘XX. the So revenue benefit half, our the improved second in bookings trajectory environment in that’s really

‘XX that the of already an end improved into with is first improvement in the more revenue to new more relative see ‘XX. we’ve in the a mix manifest of which last and to seeing to year. And of itself starts start and year of time, to importantly, trajectory, the then becoming into going that backlog obviously, mix quarter-to-quarter, over we’re half period of you’re what course more, the So stated, not

Sterling Auty

loan all hard for one then origination these you’ve got When wrap around All you bank is some head to the Top-XX mortgage because right. talk Understood. And win their loan loan other pieces. origination, -- origination about follow-up. investors

You’ve business. the wins are what where forward? that So against against Ellie old got this be Encinos, how us who at vendors does from you’re conceptually or you’ve to willing type in? if moving And players fit competed Maes you’re the extrapolate more of you able name different might to least the them that competing tell for to to

Matt Flake

Yes.

So Sterling, leasing opportunity. was a this

external. and customers. of do go I do they lease roll it to The division don’t is through the to leasing bank both competition was out where -- they themselves. So internal need products a can this leasing their the names, they

we matter on Cloud a side so for internationally. just pretty strong have it’s And Lending go book leasing of a you us, -- the

an opportunity so And financial us, it’s within us to expand just for institution. for the

at same entity same time. ClickSWITCH also to sold We that the

to get more and in of more it’s more these and more your leasing way foot are institutions And and doing of door sell and the in it. So a a leasing. lot financial

the bank So the of simplify that them process. there, the front an workflow to in the a the originate from it’s way from we lease to it’s the all borrower but to ability put opportunity

Operator

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

Brian Peterson

and I’m of decisions kind point in. IT kind backlog how that just was interesting that lot second of the acquiring M&A. those on Is of something you’d a quickly or vendor are revenue as an I’m you it XXXX? how we quickly Matt, customers want that that post the half? So does the into where expect impact. curious on about what they of kind your get mentioned curious M&A, make Or think in do pushed made decisions

Matt Flake

we’ve customer really was and for the thanks the and base, were never XX we but bit but on question. it was XX, total into it, X. the than It XX, -- looked at gotten data, buyer Brian, on acquisitions, were a buyer little more something all Yes, the we we It’s

So customers, strategic growth becoming customers may you on grown the through our it acquisitions. or into that impact. of products, a and customers, X into top on headline line that different of that’s different them work top -- XX the Xs that thinking is thing have Tier of about Tier the have But as our -- our our

continue that see think is happen. what we so we’re pattern to to this going a And

us, you conversion. banks as approved, hit see as do it really far want they line you it have it’s as the do revenue you’ve for that approval So when soon some through the got as to want go because to gets regulatory tricky to

won’t announcement and really it. going impact. of probably revenue at of a that tap larger sell that the to from a that is Some found, that I think But systems. there’s XX It they out take stat look within months for tailwind And we big base really a to are, us could will go anywhere If to banks longer they And just these the an between expand. those how XX sit But to to is time point have the the creates more is little to want to and and cross and we numbers. think your the products this a obviously, more one, happen know wait it’s I faster. small interesting other consolidate that don’t I these figure many together. opportunity put vendors

David Mehok

And at is other the Brian, with an opportunities cross-sell one. down the thing to contractual gives a only existing us sit two, point. the that extend add And as duration it and opportunity customer I’d also there’s well then

Brian Peterson

That’s Exactly, to was kind of getting exactly. there. what I

seasonality hear. to So typically lot period for a thrown third Matt, of you’re great comments expecting a the out maybe second figure clarity a we’re some on out that all I big isn’t to as you curious, the gave as this But third here. optimism know trying of quarter understanding there. kind on COVID I’m versus quarter gets But kind follow-up fourth of me, quarter. the the still any right? and half fourth bookings window, what that’s of quarter,

Matt Flake

anticipate quarter. that’s a I where Yes. the feel are bigger third I fourth third true. things typically But mean about would I quarter. good in than

the or side by Tier more banking I I year. get we X of the more think of the side, things, activity the hopeful down. on you’ll anticipate see could think end in going you’ll X deals digital X I would see of those

So there’s a lot of activity good there.

Tier Tier and side in even in under are feel years the the on the then a deals, well. to doing going But of X continue X stuff. of both things I Tier X, those. deliver path as pipeline, interesting the and some and BaaS and very promise And this the lending over there happening X of where good We’re on about business, lot we there’s of

around So tricky. is quarter it a -- little third your the point

ultimately, summer weeks, a coming the history get and that here think biggest But to probably all in the somebody’s going or of summers deal it’s our deals the think I good vacation the of get we’ll when I in done. at they’re activity lifetime, about up. to you’re least I are year in trying think you’re this to return gone of decision-making my pipeline see And start to we and a wrapped and then feel from in half some I But cycles. back strong going where these the us.

Operator

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

Robert Napoli

adding look confident with of bit. what is the up. trend we’ll year. backlog, as in a around XXXX just numbers think How your follow quite currently, end you we’ve which are if to beat targets the are or organic digital line, your Lending? in pure in PrecisionLender growth the you Is going to the it -- piece? Cloud And is But see you -- a different know the backlog this I just that? it Is top is it Maybe suggesting XXXX into products and it I on your banking be you’re Or would. attaining most by BaaS?

David Mehok

on Bob, comment to that. earlier about color my David. add a of just And sort it’s more Yes. bit little

the this variable have framework, seeing in you over where that’s a still seeing time factor this to or to some reacceleration looking long-term in. mind period important We trajectory, air believe framework growth case, quarters, X X like And growth but we what that keep you second have a pocket. are period that that in the of an compressed time. work you the pockets once to in up we growth. through to But put place, this, -- from delivery you that but to is And long-term air of have a forward we really half you when is that do can see end X

‘XX, we to just for bookings flow of giving the at COVID-impacted the understand you do that this revenue a important we’re you from So think now guidance as sure of the seeing not coming know, point make reacceleration fact it’s but and we’re in quarters. out time

thinking to as to how that’s are about of variables going the going in. factor trends to this you’re important couple those -- years, So over next be

Robert Napoli

would then you I that margin, guess, pressure that BaaS margin, Okay. the I mean the or interchange, gross on it gross the accretive. revenue, recognizing would, -- it’s it’s transaction again, if be are And the would if net, gross that just gross, net?

David Mehok

does Bob. eventually, effectively. we Again, a the cards. out regards hands It’s on it margin to why did to going transact good thing Cards gross because the are because overall getting programs they’re in impact. have on compression. it And in an gross, that’s have gross remarks some prepared short-term margin launching it it’s it shows out are impact called that the a and these users of end But those in

Robert Napoli

around you But if think U.S., only the And then PrecisionLender, could Europe doing? PrecisionLender lastly, progressing, but huge is changes or commentary how there? not update any And on any is opportunity. in I any internationally just a give how that’s

David Mehok

after is Europe customers, very good. quarter considering in, the Yes. anticipate having The No, of quarter they I of year, in lagging is existing cross-sell one wins maybe quarter little North side the still more XXXX back the consistency get the Asia PL, they a had to in things. after X us looks pipeline the in pipeline well. America the in we the on half growth as that a there’s X like in be Tier really would did active. continues good I quarter.

activity are we’re places also, as America, very about are those deals where they’re North the behind beginning motions in as And part out to just we’re So of just PL there. we optimistic it’s that part seeing. the become new pipeline that the that well net we’re -- of cross-sell but putting signing and

I growth that you’re just job, it. but So see pleased product, such going team a differentiated doing in a The it’s think great continue business. and to very with is to

Operator

of line the from Schmidt comes Citi. question next with Andrew Your

Andrew Schmidt

more you it investments technology delivery Is gross that on impact Talk color helpful. a the the hoping on investments be little Is there? it was could elaborate a infrastructure? little of would about little A I bit bit margin. making teams. on you’re the line

David Mehok

investing solutions invest of what the to Yes, But we’re I grow. what from pockets that on One which our customer long-term a there’s we technology we experience. for, focus profile. And the in of lot is have asking overall is focus to finding mean on doing Obviously, benefits to capabilities. what you. is have, that ways also that to invest scale. can few hear good a Andrew, A are investments is the by customers so our lot the that’s stack of margin investing and the there. data

automated ways As XX%. of essentially what fashion, to reducing able to an have be seamless that workload we’re the is continuous investing And to much delivery. by a more north we’re in going customers in example, means upgrade

P&L. it regards the But of So through effectively years, right we’re these and point start investments, we delivery in you start more to we that the following and time. that some as scale require does to now to and see benefits like the things going flowing next short-term feel into seeing in at much we’re get year to investments

Andrew Schmidt

getting and simply the side, see Got clients it. changed from a the Cloud from then has a win should or But on Very product helpful. just pipeline big a perspective, function to marquee the capability give build pipe. a perspective continue to help Lending anything And go-to-market perspective. there win of marquee from the

Matt Flake

I mean the we enhance to product. continue

We’re doing banking platform. the into integration a lot digital of

how digital Other for a banking highly corporate you customers, it, our integrates it credit people easier to differentiated. bank become it don’t where the move competing -- solution. to or is onboarding union, union think make with about prospects that to do from credit your our have treasury to bank it’s resonating customer You your and

makes it in very PrecisionLender, with offering. for a compelling You tie it

and build manages balance suite making together to asset the or out sides continuing that credit classes, we’re functions the bank with for entire sure tying feature both So that it’s of sheet union. our

to continue in just it. So invest

live. We business couple nice Cloud the functionality. and the customers Solution commercial in go-lives on quarter of small for We’re taking a or Lending commercial really had

and a team to time really at one the and So step continue the they’re with make progress there. progress happy making just

Operator

question the comes line Matthew with from VanVliet next BTIG. Your of

Matthew VanVliet

banking-focused bit obviously, wide how there’s in expansion terms sounds But a of sort of interesting like in of opportunity? solutions? to you’re wanted on curious business. fintechs neobanks, net to side. been less the of of casting of an as the maybe I side? What on kind least are they suite in to full some little a user having NYDIG these And then of at that, more a Bitcoin addition end about of into what conversations you after, them the ask the terms of on are was add wanting is types the with getting get that to lending the some services BaaS announcement on banking in try It involved

Matt Flake

Matt. Thanks,

and For -- I smaller we us, fintechs that last out pointed their think sea to environment that just year, a we the an where up were are starting trying legs. -- had we little maybe get

it’s into lightweight going a them very and sandbox, our piece. have We

inbound may that So blue we’re embedded focused are that on finance those be bank, Xs still in much, as that chip be and for doing those Tier place. as deals, a then as an but us others may we’re much not -- be not may it companies not

that we’re you retailers, sorts HR, different all X can with payroll, of on at side. the talking look So Tier

fintechs, activity whether of So there. Tier a lot or out X there’s brands it’s

very value prop these. a have unique We to

as We brands that that as network. can have use credible talk group our of the a to large are well about products we references banking

we’re neobanks, but for ‘XX some like in also So and have these to cover of than our I some more Tier that we players, really just have expanded banks, and us fintechs really beyond. could X chasing implications interesting net said, think I

the that have -- amount are incredible. If their referenced, acquisition you think customer their in they engines about of amount some of the and customers marketing just ones we’ve retail of

differentiated, us, obviously, the and unique the very of opportunity So for growth a area expand our lot good seeing there. it’s value a is to momentum but been we’re space in prop and

Matthew VanVliet

side, rise, there you how upsell, the on of number of coming up if total and unfortunately. attempts how renewals some And solutions? the certainly on conversations rate in us these you then is of have an frequently crime your are much the that’s terms and as cross-sell in a customer attach to Centrix cyber update phishing opportunities? you and curious go Obviously, just But penetration kind these of give using base Great. on other could curious in that

Matt Flake

to want just I make Centrix. sure, you said

Matthew VanVliet

Yes.

Matt Flake

yes. Yes,

of know attach Centrix, I hundred. don’t the we would exact have So rate, couple a think I

acquired have since before started We them. partnered we even we those with guys

that you’re and couple think transactions use, keep amount paying you’re product rolled and in at have risk looking who our for commercial tool you’re So paying, ‘XX we paying, customers. how to of frog often began XXXX we we’d our risk protects a to when and mind, our that analytics is the see continue that hundred. data I in and out also a But and that enhance

our X stuff it’s more you of of all And our occur. it’s -- technology, with XXXX, risk every unfortunately digitally, or us. learning fraud, cross-sells people it’s X whether quarter machine the one fraud saw or for top Centrix So top and more is move as whether

that so our a sales team just and us it’s the we incredible it. continue -- just does and in in to job just it’s for a staple product it’s with enhance, Lincoln rock-solid up And process an

as online So more people it’s obviously been product. more -- it’s always and but important, come even use the

Operator

with of Your Stanley. next Morgan question comes from the line James Faucette

Jonathan Lee

Jonathan improves? is potential This environment around optimism about the environment. you Barring the variant how sales related, are for thinking James. Appreciate on customer delta the as sales anything churn

Matt Flake

churn. more That’s

Jonathan Lee

Yes.

Matt Flake

down what I talk really high as X far problems, to retention We a and of plus in we diving last think renewing how solving scores -- second direction. been from visits, perspective, as our CEOs while. see with us We’ve quarter can the are quarter Tier about a on our in that the about our X in with together. X/X and thinking strategize strategy as perspective, X in had doubled year, customers NPS we logos customers a -- just this and they’ve did as came

good far is. like line, M&A, some And should churn. number keep it as feel X% of typically mind, or about the our that’s as it some I product be in So number, churn revenue that’s churn of X% in

are about the excited half anticipate good very pickup the we -- about we the back in feel and of year. this that so where And seeing

Jonathan Lee

be M&A are And capital are allocation? current on still you And walk How Can in there going us through you forward? valuations do the one M&A. thinking last Helpful think color. your to with opportunities approach opportunistic environment? about you

Matt Flake

including into of side. is. are the what our Valuations look the product the It there. data, functionality model, high opportunities whether that and maybe out deals lot for look for Yes. a opportunity us, Absolutely. those are on just right for banking, depends whether digital at are at If on now. it’s it it’s plugging we whether retail for commercial lending, for for functionality, all it’s BaaS opportunities We

as the so out, set it’s customer are The M&A we our of of us. continue on to interesting huge the us into the and for whether for then go the M&A expand that and base base all think how much. go about having ability environment seeing lending we’re that the winning we have, and the a opportunity And the side of within build we’re the to our customers customers opportunity doing so and to house side that house, more cross-sell for the side product a deposit is to

report M&A, to now right our we We’ll that. things nothing are the on the of to in there deals out that So be that we add be could we’re in evaluating at thoughtful looking do. are them. there’s judicious but value business But active We’ll that customers. in

I that’s questions. all the think

quarter forward you, you everybody. to at We during to a the people the and seeing talking investor day. Hope thank great look So have conferences.

David Mehok

Thanks, everyone.

Operator

today’s that participating. gentlemen, conference We and conclude thank Ladies for does call. you

You may Goodbye. disconnect. now

Q2 (QTWO) 8 Aug 212021 Q2 Earnings call transcript