QTWO - Earnings call transcript Q3 2021

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Operator

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

Josh Yankovich

operator. you, Thank and third everyone, for us joining Good XXXX thank conference our quarter call. for morning, you With me our on CEO; the and call today is our of Businesses, and Business President Development. David Matt CFO; Jonathan Vice Price, Executive Emerging Corporate Mehok, Flake, our XX, that December quick Day reminder our Investor will we A hosting be virtual on XXXX. now and our the on section of replay website open, the Investor there be will and is available Registration a webcast event. following live Relations significant of forward-looking risks our contains This statements statements future subject to uncertainties, that regarding and call expectations operating are including and QX the for financial performance Holdings. may contemplated by results these materially Actual from differ forward-looking those statements. that forward-looking we give to prove And or any correct. such statements no will of our assurance be can expectations differ forward-looking filed recent in the materially from the will that discuss distributed and factors our today. SEC, Form Important those results XX-Q yesterday statements we afternoon periodic filings reports included subsequent to the in with our the report on most including and could cause quarterly results financial release are reflected press regarding actual

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

the now Matt. call over me to turn Let

Matt Flake

I'll the highlights then over to results businesses he call more Josh. Jonathan sharing Thanks, organization hand quarter you across emerging to I'll our call by from the third give business. oversees. and start today's into the insights

detail of In more Given our call and and sequentially. to strategic third and generated the Service non-GAAP quarter, David well QX discuss then is for X% importance updates the a of fourth share up long-term Banking innovation and his in will joining financial he quarter studio, perspective. today's as provide full results XX% guidance the as revenue $XXX.X million, year. year-over-year we as

as and the that complexity cross-sell catalyst we unify look spite creating banking of customer also have ago, time users, more digital the Throughout year third our year in bookings saw the serving our to sentiment leading optimism quarter like million to a our evaluate solution financial year-over-year transform We as started optimism. had digitally brings from multiple with of and a gradual would uncertainty, a of to quarter Consistent also lending environment at we see the of Net aspects our institutions to we with to new platform. us XXXX. in that growth And recover financial XX.X the of year-over-year XX%. services XXX,XXX competing quarter, across them I've improvement buying the third their their half customers strong channel. they experience for the businesses. progressed, digital and approximately were back in compared banking digital shared year, sentiment, a as is well. to added from continue to both on the the up believe XX% activity industry that renewal the the and sequential users strong same we impacts set, pandemic registered in and consistent close That short-term the our the bookings to priorities, as ultimately general of increase total shared I've that pandemic is

We observing in lending with the and several nontraditional quarter. acceleration wins Banking evidenced FIs key providers, as brands by as this with digital fintechs, all also and are a Service

with highlights that sales strategic including in a and X where this marketplace. financial mix that, some Tier discuss like to new signed digital improvement time with take a favorable customers, buying I'd position to institutions. So our illustrate X start we I'll few in we believe broad the customers' behavior of banking,

digital commercial was to end-to-end management. set our selection, first solution deal XX their a risk union competitive to The driver onboarding signed top is This commercial highly that where of from a credit was banking our banking for suite. key a

several the as opening. with think second had suite X opening We're retail in full set win role products. had management that segment. and spaces the with I many on to solutions played this new where and Smart to banking and broad We us our The solution, fact platform, adding and digital win has X X we meaningful competitors a decided small and a were And net was scenario also a win us Tier risk purchased while that and credit evaluated. both with from QX Tier our now cross-sell. union deal banking. digital retail with risk in wins commercial our including The commercial, selected pleased well, digital as differentiation of XXXX the for of management adopt banking see expansion X studio account commercial Tier well, bank Tier third full X that was activity account a and increase We X digital banking, in a speaks banking business retail the the this big our retail, QX in selected digital side, Tier our signed and digital to a banking platform significant along including that deals, stand-alone win, bank banking in the innovation

our and the banking have full within platform, and of platforms over solutions. digital more quarters, win a like several our We example, existing us, would their institutions expansion this digital also banking highlight I've initial it's agreement digital duration due Highlighting many solutions they incremental origination retail customers, executing purchased growing of lending and part this and as digital the with of for have loan what these discussed banking, simultaneously transformation like we our more running we than the both concurrently, with more of banking the and the signed Wins XXX management, base. we in whether financial past onboarding. diligence relationship start evaluation, commercial consider agreement extended the the retail one or bundling bank opportunity trend, existing a or In which we trend revenue. Tier commercial. digital continue X of to added substantial an risk of customer as aspect And

the deeper existing Going lending activity into to new in quarter, the relationships. we digital continued and expand deals sign

wins our solution. compelling with seeing origination loan are We

lending of institutions our from compete loan traditional to companies mentioned of operations. to operating specialty deal simplify I wins we markets. origination agricultural that addition believe lending modernize I solution, transformation demonstrate the an digital borrower within In lender to experience set the our their finance which enables financial modernize digital use to alternative experiences and their broad for looking earlier, us opportunities will a flexibility signed these internal to their solution

existing front, had quarters pricing case, with purchased the enterprise global On the several In was a ago. platform customer pricing loan client. win large loan our key one this expansion an deal

new During incremental order our their meaningfully of the the our third this This broaden example revenue to bank use lending great quarter, the solutions, ability business digital new with purchased but the with in existing customers, the functionality a relationship. institution. growing of footprint associated functionality is to supported or expand lines our into was as cross-selling extending additional here, geographies into by it's financial case

the management are the being another by performance of from increasingly members. market's in Aite-Novarica space. unique a one acquisition our Thanks. this as ability Customers our quarter. and Recognition look the partners. deliver Jonathan substantially on view adopt in management banking recently experience strength top validated a Studio, Annual in which accelerate we were we of with customers, belief of to IDC to the vendor the Group strategy. breadth industry QX like were So clearly, driver the product analysts more end-to-end important. named as are our they Federal to orchestrate of buying technology when improving And from validation talk validation to IDC and success for by to recent digital well-positioned customer used Vision about acknowledgment and partnership call firms view we evaluating new further Innovation recognized and our in Group's was quarter, third saw cash from the of banking is to portfolio like that where our product in from mentioned QX When the for and customers their for Studio. vendor And Aite-Novarica Credit the you I'm reports environment, our recognized they've openness I'll the vision. has their we sales that, Vision believe encouraged portfolio I digital Union. as build Innovation to one with couple with Banking We sales the to innovation expanded our the pass and to first Service And they

Jonathan Price

Thanks, Matt.

demonstrating Banking space play Likewise, allows and nontraditional institutions as refresh convergence Studio and embed their this brands partner of recognize into momentum shape to not which also solutions, And their best-in-class infrastructure could this several discussed their financial of traditional players financial their to competitive transformation unique to through and as their provide. banking can institutions over fintech only we in come. offerings. to technology they be models. or driver so, ability enables with past applies have we've years generated launch a these helping services are solutions And financial financial or quarters, to financial Banking during their the a we're that many the Innovation to We and Studio, are own with partnerships facilitate strong services. well, And but the to in Innovation the to with our to role to in own markets. the looking Fintech quarter. provide for We find Service transformation third do directly looking both differentiate position partner grow as whether To expertise QX solutions institutions digital to QX fintechs customers. traction our Over with fintechs services to believe both financial ways to where digital a emerging easily Service and companies and regulatory products the beginning a the highly they brands cutting-edge with digital a these business that banking partnerships believe, financial to institutions to institutions, significant technology,

of and supported one example and multiple with relationship platform. we launch traditional BaaS our by has is On existing largest side, large products, type we clients. the is strategic of launched client signed event our now the a BaaS of This with of and a including growth deposit one associate new partnerships. deals, accounts net extended fintechs multiple certificates opportunity BaaS This key powered an the U.S. of savings

increases will also into represents an customers, the Service revenue represent over among to as and expand have set, competitive for which platform, incremental adoption we functionality deal. solution for to advantage over we and the early space meaningful time. in our Banking entry believe opportunity account our launch As a earn business the initial our clients a BaaS will time us This

financial differentiator see beginning to ecosystem a this signed to and the third the new Innovation both Studio our Turning prospects In to program partners digital for existing added serve the banking customers. Studio, institution Innovation to many and several as QX our we quarter, net new platform, customers are of program. with we

digital situation X This and As in with importance prospects existing we studio the closed both Select underscores more growing Matt Tier customer, reason to differentiation mentioned which in earlier, QX, in can market a a strategic our the deliver today's cited Innovation as Studio a of key a innovation customers. QX banking for and our opportunity platform open QX. that

between delivery layers value our of the functionality traditional pace QX in bidirectional and TAM. It QX ability to channels, launch and partnership believe business. we generation in than areas a with on power customers believe strategic QX and innovation. play BaaS expanding deliver into and Innovation capitalize new making new David. digital other investments Studio to financial to role we services. a it this Combined, facilitate enabling is and this to embed I'll to to that time expect QX can faster that, opportunity, institutions convergence and add our highly leverage extend of their platform, Our order to next business, provides emerging we Studio this their And over to pass by with lines traditional that to And financial in continue much time will of fintech are third-party their products able be them ecosystem, differentiated position the help of In these Innovation will models. the accelerate

David Mehok

Jonathan, morning, everyone. Thanks, and good

Following couple delivered bookings on improved of we revenue quarters high by our solid the We we're performance growth a of the QX. activity, in strong deal-related that guidance based encouraged saw delivered as that end of offer. exceeded value well range solutions of solutions benefited we our from revenue customers within of customers growth wide we see as increasing existing organic adoption and as the from the

also investments and which fourth full increase in for the growth. reviewing Total detail and exceeded of of the effectively third up sequentially. high year-over-year in non-GAAP for largely efficiencies solutions, subscription revenue, was for driven XXXX and quarter the in revenue I'll revenue year-over-year as conclude go-lives end begin with customer revenue continue Both in sequential updated operations, in by organic our important of to X% the the resulted growth we even more and year. XX% and quarter quarter result finding delivering EBITDA, make the user increase $XXX.X guidance. our in results an guidance million, by new our continue of to was and ability Our third

XX% as of Transactional in associated due as offset for Transactional In in both the BaaS-related sequentially, services. largely traditional represented also with partially revenue in year sequential the in revenue. period growth quarter. with a revenue was from pay by the revenue revenue implementations consistent services transactional and declined addition, dollars total previous the increase prior total slightly decline bill quarter, Premier to revenue quarter, growth well for

we increase a total and net to The and with backlog, adding in year-over-year the Gross approximately The and from was to increase of the result in innovation We in we will backlog. value bookings. customer third continue of host in year-over-year go-lives new XXXX. and down believe related of in increase quarter increase margin the of made the of required make $XX emerging aligned third in X% for contribution third as our in in were percent commercial of growth. that quarter opportunities third ended was associated of XX.X% sequential or renewal XX.X%, implementation OpEx XXXX have Turning of in expenses banking quarter of in resources and XXXX. largely revenue quarter investments sequential strength. long-term offerings with year-over-year and second the $X.X The attributable XX.X% the as million. million bookings second with year-over-year as quarter invest was in XX.X% a R&D margin quarter through million innovation. with backlog billion and of primarily businesses net the $XX to the booking Total of revenue consistent continue or differentiated addition quarter compared the to XX.X% we new to operating This a expenses was to decline the implementation million or XXXX resources to and lending gross investments in to revenue our new we deliver $XX.X $XX.X includes drive revenue

was intended and $X.X us demand EBITDA XXXX. market and in to million the was rights which position key as with result end headcount XXXX decline part in sales the was naming Adjusted in from first R&D the generating of is used to in expenses result driven final go-lives that $X.X million ended from totaling QX quarter, in direct decline full The million, were second lies percent quarter operations as payout cash, equivalents million approximately on with third ahead. of sequential is $XX.X well to the discussed. We $XXX.X the million. from in by of increase quarter, increases sequential prior Cash for the quarter with the resources and quarter of the revenue in associated at to some driven compared previously attributable a third of associated $XXX.X increase that in the was for demand million in StoneCastle, opportunity a quarter and with programs The stadium generated pandemic of The in addition, cash flow marketing which we largely of R&D. acquisition fewer second a the OpEx a the sequential second the $XX.X the as largely have quarter was revenue of quarter. down within XXXX. In of of the investments down slowdown operations termination agreement as periods ClickSWITCH, of the our $X.X by $X.X growth due in cash incremental concentrated in and of quarter of million million the result year-over-year impact

In the prior payroll run free totaling also the $X.X flow day our million. in items close, to quarter, quarter, in in in X occurring approximately timing a $XX.X of an addition, quarter use These cash payroll the the extra resulted of influenced also resulting million.

with of these in that items, of QX. more flow positive favorable operations We cash seasonality other expect items, working should generated the from coupled normalization in result X capital a

a solutions $XX.X and full as revenue adjusted to XXXX of our million, for $XXX.X in of year-over-year representing revenue EBITDA has results adjusted $XX year. of QX continue Matt I'll ability to guidance to to some XX% $XXX.X we're million, non-GAAP and result, me to summary, over EBITDA. updated Now, as million. increasingly to capitalizing progressed, our our and result, we quarter that, year our closing to we And increasing observed guidance year to the $X.X buying for full $XXX.X And guidance adjusted a In by the EBITDA into quarter delivered full for growth we third XX%. fourth growth improving it $XXX.X year wrap the back of sales let XX%. forecast We the turn better-than-anticipated representing X% With million are an as full we're response revenue to are $X.X in fourth confident and and year XXXX. million in quarter, both million up customer remarks. the have performance to our We representing we for million increasing of on in sharing improving on range revenue environment increasing forecast year million, quarter fourth guidance. year-over-year non-GAAP Based

Matt Flake

David. Thanks,

had activity deals continue. I renewal the strong emphasize we mix of the to year-over-year. quarter in increase net of this hand early market and trend across And year, our back operator that I in opportunity which and Before I and about pipeline both expansion looking substantially, We having the over cross-sell been bookings that new a in the bookings about of lines the your we a want of signed expect good with new us. the materializing. is of was sequentially call quarter bookings to We activity for business net and our feel and the a and execution the optimistic grew We've pleased strong half ahead segments, quarter. is evidence broad and a questions, forward, to was

of we going, the today. with Investor I We capitalize our market are that more and We believe, market, vision XX. extremely services the financial solution With over alike. it is on among digital on that to industry this now business you turn validation perspective is upon a operator widespread and where up on Day and about matches questions. set considered, our we're transformation for all look analysts well-positioned have customers seeing joining in that, December Virtual us. our to strategic thank sharing I'll evolving the to for and forward the With

Operator

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

Tom Roderick

the Tier new deals, in comments start anyway pipeline. the it seems and deals up we if on momentum the mildly X the I guess, number as the we sit clear, days, the first returned, today, cautious time at one pace X of of Congratulations back you. on XX that here it I deals has some pretty Tier guess, you X a product and around timing let loud like these And Matt, in me of could solution success like go just sets. the some at seems it's business quarter. offered

model? guess if love deals think how I in formal the clear to one, booking the on any And And I'd to X mean, as plays kind kind big 'XX. But this through ask right, signal ripples quarter that as of you I issue I the about if that So just I offering Number for thoughts in too know you're kind that, you in that model. into comment the you And momentum well have early might so, it's as renewed directional kind to guidance these of this I kind of more of can hear want through the how to locked point, and passed? the kind P&L? the of strength when really in we on bit renewed should top-line have little all model right? say, see just a ripple do this in the all questions bookings momentum of around Is of when function should pipeline you do the question to as that should that. have second us? a acceleration of momentum that saw the expect the or we how in to I that I all the

Matt Flake

Yes. Thanks, Tom.

be I you pleased the So about I'll Banking talked and extremely data up sign shaping past on -- of bookings transformation talk products, would 'XX obviously, I But to corporate and really digital digital QX banking, is acquisition, off than moving is QX opportunities, one but script out. started quarters. of digital did. QX the products, X the And the that better of platform was that signed And lending. sure, the up quarter, lending, which we one how really plays whether in looks Service, the I or kind than banking the ended think tell and all think differentiating. bank it's David much The not, breadth better I'm model with first clear not things take our have the we and digital digital the deal, a the the banking it's about the first as to looking at are whether

have are We I the in bit. I those within down the talk those But will I very of quite that the customer that a to compete are couple a pipeline difficult growing opportunities deals believe that think materialize road. with really And is think us track base on.

net say So feel I'm clear I to I and this half just the really that's the team up, good of organization on and into and a cross-sell, a sales in things into and 'XX. we as going stepped Service, see you're what to continue There's what But the Banking of lending delivery, the a did with did. living in the lot we're digital world think new quarter, really based momentum now. about execution but banking. little leery QX first hopefully all the

of we into that XXXX. that pleased had X and forward we continuing to group. really with kind So behind quarters the momentum the last look us coming And getting

So add David, to the want do you model?

David Mehok

we revenue we're that's we number the BaaS for as a But to that need which transactional you say right next regards well and that cast plays to itself process, elaborate year is how model, back how right FY about way if could Tom, think continue strength our want on model, our for the XX% finalize QX to basis the start of the had about side. you in manifest the model XX% is the in make imagine, that start this out we we QX if points, and model. excess revenue of as points to in were of to and QX planning this our 'XX. But come Yes, in say upon manifest sure. now the in on, I that that variables 'XX that we can that and business. do the momentum or saw in acceleration the I our model think see in as that in we in we into fact, an bookings floor to for in think there's is see about into growth when middle you XXX which And of really we'd some starts sure then question we look in based important assuming refining revenue momentum XXX way the next year, where we see in to to QX all 'XX

Tom Roderick

I for quick David. to follow-up Really clear you, That really a helpful, that. Super so is just have helpful. floor on XX% XX%

impact you in XX%? of and of those how some some it. bottle solutions about no perhaps pipeline just how the with newer these solutions, say, you consider XX% a And perhaps cycle love those look might to As thinking 'XX? component of there recognition just we of impact or of about, model, the and kind have When if you're to is of that here thematically talking are precision there assumptions? assumption newer clicking that those a the sort think in Do of lender, you impact Jonathan rec rev BaaS. are in component Would transactional laid how certainly might different into some out? that the policies really floor these about at where shorter that it goes you a Is of you kind bit revenue little how there's contemplating

David Mehok

see program data that was of terms right that have the launch I why that said we the on the model, when we’re the was because revenue working planning the in we points more the the around the that to key the launch exactly from these becomes. programs users now that’s when of intelligent one and BaaS and more that Yes, we incorporate the data to in have incremental ‘XX of – more for we really incremental start model transactions these relative to programs our and kick

you give for refine more next want to few a so over planning the that months we can we ‘XX So defined answer. that

arching both as we like for as questions, a what how trajectory into that your part transaction. the we’re of looks model well question next BaaS year and how plays those So on in

give you color you the our meeting in we’ll February. as investor more December to formally in going guidance give We’re as that in well in

that as forward model, talk long-term look more well with give about ‘XX as on our you. little will conversation which having you ‘XX we planning certainly color We’ll So as well. a to

Operator

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

Terry Tillman

commentary in great Congrats It's on bookings XQ the uptick. to and the see as new business well.

may ask a question. I I X to I the of question. think the said lot parts have could operator

So heads just a on that. up

part of Tier tipping thing, first idea The couple kind Studio, on on kind deal? but really we're be like of a exactly more my the of investors stood simple could Studio Studio out part transaction? any this where, and situation that doing keep yes, question open the banking as for I multipart X what in where talking like one of examples what was know a you're of color the that specific the and sort point Innovation of this Innovation to is and Innovation maybe to trying and Matt, understandable, of

Matt Flake

and playing he with can they different ways conversation because kind being me Innovation that we that. runs the the let runs Jonathan But places are customers up But business. innovation was so have to that and to and there cover, FinTech. a of on them, And go ended this use large that a had he of I deserves can business, they with hour say X.X-hour partnership join sees yesterday he we and drive it credit X have out there that that the he lot Studio us slotted would really in Jonathan going it because I'm for with Terry, today, segments how had today. on X-,

Jonathan Price

Terry. Yes. Thanks,

you So this to at, segments get their into about with to specific the do users. the get they're your opportunity engage question, when about more end they all think how looking is really

out tangible business end engage applications consumer, the we're or small these to so, opportunity the trying or has even with financial inside bank in journey figure credit of a in And a user way bank. union of corporate where more a a to the a

product There's a journey and solving experience user. those bank, adjacent that movements, through support. cases technology we that's necessarily get like bring opening most they frequent best-in-class to And into so customer and Areas fintechs bringing said, with their are money consumer lot end-user these anywhere use of a digital channel. we're inside not can basically platform partners the the vendors the end into for small payments SDK, payroll, the like HR there of up I seeing. FI like can areas business, of think financial the how the out by We're that core they incremental where and engagement the across, that So are so

Terry Tillman

the that, then, on And reseller payroll get likewise. relationship? customer money these residuals of some digital Jonathan, tools, X I question? And all like space, would have you make in you you're through a HR not final third-party are -- Would just support,

Jonathan Price

financial And the partners. sharing share FI. the at with arrangements for within in and Yes, also We're Investor into but the we're Terry, a back with to exactly. Day, We'll model, noninterest-related relationships revenue striking But the revenue adoption rev the drive dive channel to try you through we're marketplace help but and make model on of partners the fintechs. these these stream share cases, striking yes, that FIs new deeper with much kind hit many trying attractive institution it. to these the incentivize

Terry Tillman

business. today Jonathan, been BaaS part I'm my Jonathan are curious, or merged, final of my performing, sorry, question, of BaaS seeing and X-part of Just get some have guys new and there's in to And we consolidation like you Matt maybe a since the the is getting vendors design what short that cetera. lot in acquired kind David, Okay. strip all opportunities environment? of any incremental or kind disruption for Are is competitive that's environment you dislocation wins? et you creating takeaway been have on

Jonathan Price

think, start-ups we’re a – of obviously BaaS Yes. network. in a the it’s certainly the consolidation, in fundraising, we our It’s innings early see record very in position market, bank our our differentiated of the lot flexibility, whether activity, space. We with and in scale, new very early

largest watching going it after fintechs that is we’re and so the but And of and targeted we’re the seeing it, segment a brands. Tier we’re market X also very

now. we there we right of players map, that about few move feel really so, can And how, market serve that And that we’re a think are And very that in, differentiating in good scale. right, that’s a continue to at functionality in But we we as invest happening. in account this business we’re you’re lot road and we talked business, the think, position. consolidation is we

makes data, potentially with, programs to of that And leery customers work place to in happening theoretical their market, et where competitors consolidation what between cetera. is some of which the

how and churn early way a it’s opportunities it, So too but consolidation because of market. activity clearly it’s we’re probably could or competitors, tell interesting watching much our existing the within the lot in drive to there’s

Operator

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

Sterling Auty

tone today? question, that you Where hear or on are In sales seeing of what I utilization the capacity environment for And you the within more the side. kind of capacity. in that sales positive to my demand hiring increase supply ask around support bookings. you and other plans productivity to and the to of on terms words, you're great your that want there? kind So force have the that have out improved sales It's are

Jonathan Price

Sterling. Thanks, Yes.

Mike as an out What he's teams be we planning customer. 'XX sales a with of our to added Volanoski So enterprise a a really leverage out from customer lot or structuring account go perspective, get organizations. able together, prospective but is more doing big enterprise experience of putting plan are and joined we're that a Officer, Chief said, Revenue to -- going as lot David existing

big spend the going So, on I a to is, side. are sales be there's think where not now we

to going that the increase think to more seeing On our out drive there to of really the a we're investment one an messaging, there's I be the is little demand because side, as deals. with net David, existing win the Mike's to spend. a keep right I honest well see as here. new folks. customers me now -- within increase doing But expand go don't But both in QX messaging, marketing what gen resonating bit big in messaging

going a that. see I to think, efficiency out lot of of you're

office in our kind people we're to become our customer it's we've pandemic, leverage pretty efficient consulting or of I resources, groups a strategy, without on airplanes. able to to think, remote get able in advisory our of whether of environment we're services premier it's more front the more to working having in get a whether where far where also

So we get more coverage that way.

So we feel beyond. now right taking coverage and it feel really about Chief we into good Revenue and good also the Officer, is our where model Mike, 'XX have about

David Mehok

Yes.

that. to to add Just on

well, like half. that back starting it certainly T&E. but in -- get be back to as year increases this likely of last ahead second and as at of going on is pre-pandemic that's look the to levels to look don't directed programs. marketing top pipeline We're going when And to think with that not sales more it you that terms spend I going be we organization. A next spend be to up of the we see ramp tactical naturally, in be lot 'XX exit see some year. there's year, we expect to we the expect to exited [indiscernible] We funnel than

Operator

Bob Napoli with Your William next question comes Blair. from

Bob Napoli

I the appreciate all information.

is -- I you the changed on of business, into as like broaden that is timing investment out mean, business And have I'm a the expand the and on EBITDA, this incremental XX. But what bit seems those quite the more to a the the Just sure, you'll get a margin EBITDA? margin what mix right gross since opportunities? now you've and model, extended question December the and lot

David Mehok

right, to want do and Bob. sure incremental take we I mean, we of have make advantage investment we Yes, those opportunities, you're opportunities.

and landscape period looking we a we're expand EBITDA our as margins over beyond, substantially of see our can out a to gross and which XXXX we of overall margin However, certainly time.

those course show shape instructive we'll talk that yes, to the it these you in time. over we're the of the next of investments, happen get drive can to to expand as do of of have you going going really you which efficiencies about to think see we December imagine. the color to happening in years, yet. But quite it's not many I making to going see able now. we linear, time to going that over period December. margins. provide be to a the we see because into X to with at we're how specifically important But same not specifics but are It's those that discussions X think, be can be the We'll do while opportunities We opportunity

Bob Napoli

had backlog, in recognition and the growth, there backlog growth and go of you sequential just you year-over-year is the timing backlog over in the the historically? over numbers the And can related -- to the change any and what on is

David Mehok

in its terms all we No. best for Matt we've year-over-year, of makeup saw this this a this in And in to seen net year. was the and quarter entirety. back. year-over-year in add The was X What cross-sell. when backlog really than while which quarters quarter seen backlog buckets: from We new. was in of greater we quarter terms first growth key new then, renewals really in QX great had quarter the bookings a of cross-sell, it at of half to We've backlog you that how that the good add renewals year-over-year, renewals good look all came growth mentioned,

if X great certainly that We business really but all opportunity those see been mix QX of a again we the has it And this QX some how some pull QX. for was historically we're see to deliver. those of QX, quarter. really in on could it us And [indiscernible] put a good feel strong see So we about from pressure renewals QX. areas we backlog, renewal

Operator

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

Andrew Schmidt

environment. the dig little on a I on see to competitive bit banking progress in Good the net new to side. digital wanted

seems If little solutions, bit a is scaled you little capabilities, like to would are your advantage and competitive side that competitive the demanding multiple for like, like about talk how other getting difference current pre-pandemic. on could that, you a seeing It sophisticated, environment engagement? bit curious, evolving if more customers players. we just any of the terms relative pricing what and I'm in anything an seems see you're if

Matt Flake

it's that with would in or as far banking the those new No, whether for bank say we're both, a we very platform, you environment as largely well There's to But, a union retail that credit scenarios. Andrew. commercial Yes. I I surface and a names do continue guys. in have looking competitive come general, to the the Thanks, full or solutions, same. is mean,

stand-alone stand-alone We retail and banking in the are deal, solution a or commercial a want deal retail X. commercial Tier we a corporate on X -- combined quarter

So in deals. competitive highly

to those we So in differentiate continue all categories.

space banking I've pretty before, As is digital the said retail crowded.

we're be those deals. so cautious to And trying in

win been rate think historically. think, steady I it from you to perspective, I look they've if holding a at what that they're

I based move and -- QX and the pipeline. environment. what win it's rates very that we're right there's in into having the we improve for we're our now I'm seeing and on as in 'XX environment, wins well chance forward a doing a think to there's still that very competitive But

Andrew Schmidt

if up doing next in in we that net And environment maybe limited it. new. the strong go-live very XX% -- XX% could you year? organic level then to that that. you're thought an I is given XX% that contribution go-lives, plus air very, in break there's get transactions, then of cetera. 'XX. activity, growth, put sustainable sort terms XX% one where David. in Maybe on pretty for not XX% why Got of organically And comments was some level why into maybe But and for small et the as pocket Appreciate from of the quarter user down we

David Mehok

you'll been Yes. at to is when pandemic ends manifesting reason we to that for got some air about X XX for and months going mean most in row point we're -- our end see we've up to concepts. 'XX mean at in you this I where the terms biggest itself the significantly. in that, of XX, those a pocket up demand/bookings, quarters delivery the continue quarters growth, XX% our We But where complex our in QX been is that be to what X drop a quarters, COVID know revenue And And seeing going quarter now time. of live second that model guidance year-to-date. the I of benefit is -- And from that impacted the with talking this certainly I year. fairly X to see terms you few half impact of right floor off go third next referenced. those Most revenue to and with which obviously, XX% to Xs, quarter guidance start lower, of We I those bookings in is expect year. that Tier now Tier are those and in the next we'll XX% Xs. X about we've talked QX then XX% of maybe QX a of the fourth going

So you next start to late on revenue year. see come that board

we see 'XX benefit that 'XX. exit You FY as acceleration revenue of and that FY in see to start then the real

Matt Flake

here, that if those XXXX. Andrew, if X have you that there bookings. you you XXXX, add, have would but a you at pocket I air pressure thing decision-making think quarters the a you that think had David quarters here and It’s Yes. just wasn’t longer through of and that had through – about the same in about work were slowdown on time, X about we talked we an work

up and that air pocket So for nice sets really ‘XX. through way will ‘XX its work

Operator

The next D.A. from the of Davidson. Pete question Heckmann with comes line

Pete Heckmann

do at $XX next million It the seems on PrecisionLender to company PrecisionLender. is has run a sometime that announcing original your quarters I poised of each for to in loan or expansion and the last to in curious, the deals wanted million I'm acquisition, you or of that up couple think quarters? bit meet of to time X been follow goals here or exceed the new get kind sometimes pricing either rate revenue of $XX in

Matt Flake

but rate comment Yes, we're enterprise activity and they the the really PrecisionLender David working on comment has that had side. a that good. good, pushed run deals even had we But I'll looks for QX into looks and let on strong me, that some I'll that working were 'XX now, the pipeline

that is. the have enterprise we the of right banks. not with feel feel expectations I it's 'XX. they these and meet, as been had are where think going out, about for product with level the exceed rough around building because a PrecisionLender. good that -- now, But we QX around we a in pipeline You them see acquired decision pipe really that but the it I It's very for good 'XX, at I the the go partnership if about the to well BCG business. they And announcement had when making coming as

David Mehok

Yes.

keep obviously, earnings on by business talked mind about PL that and impacted, Just – pandemic. impacted in the numerous on calls fairly this we they that extensively were was

like and momentum the of next original we pipeline the see business rate that certainly other above next referenced, without lining up case the those words, next that over run quarters. the levels take PL we the see the that all the that feel would gotten contemplating coming things within with that achieved strong run you done In few of from out, We that we’ve and impact. So Matt be of that was quarters, that course over quarterly couple that the it or PL quarters revenue couple could you certainly be if rate at referenced. do

Operator

of the comes Sklar James. Alex next from with Raymond Your question line

Alex Sklar

look across and other normally bookings of a the drove activity want but from of the post-pandemic kind quarter? So FIs trends of strong commonality as Matt, I ask you relates to there capabilities slower is it to bookings finish just the to line the starting to see picture some and modernize order to their retain kind digital urgency kind of some that banking in this customers? quarter, are Or on more kind of bigger kind the seasonally of

Matt Flake

Yes. Thanks, Alex.

how I the them about, it's going focus through our were and their the pandemic whatever. as out customers was customers think to PPP #X or talked help we've you're pandemic their whether what they of is during the survive, -- customers, seeing and get

is a where financial in seeing to now as the am in a I so Officer the moves a institutions the in whether lot you And change -- reporting have experience executives I'm Officer, digital structure decision-making. having Banking directly CEO. reporting Digital there's a these of an Digital Chief urgency they're involved of criticality what far it's the sense and more you're back a now forward, or -- of seeing that's

it's so, decision-making around of -- the has to become clear importance it. -- And moving it the are they

they that going some of had out to think, the were 'XX with of made to they decisions make in we're -- just pandemic. kind to I knowing were vendors that were -- to the existing a going what happen was have in market extending change, but with sort just the they were contracts

you're delayed of lot us QX that coming the a in and or pipeline what these so And 'XX are in decisions 'XX now were seeing to and fruition for is 'XX.

multiple And this my to the we our optimism of experience well-positioned number I've momentum of of this. so we customers is times the think, breadth the we extremely that going done with times, platform, type with we're our as And see are integrations, said I bookings -- are have, the continue. we've

customers, my prospects existing continue about think I We where feel employees revenue very aligning and them selling and how just culture good and to extract having to engagement we for. credit the right drive my unions And look from money innovation on the about I and more is software can channel, good we're those customers I to even and so and And for And expand moving with this this have how can with now, execute of in what opportunities about we're our just talk conversations on just a how with things prospects customers? of solve very our as trying meaningful forward. position. and to focus the I studios, opposed customers to generate conversations from And we're relationship company. are banks want revenue-generating cross-sell So experiences them what they're them. which

Alex Sklar

about activity potential wondering, just quarter Got you've it. customer able X a confidence quick I'm potential And to that M&A around your of coming users. follow-up. as kind driver get then of for been We talked the base amongst just more if the last year? any

David Mehok

the been the look have occurred had think year-to-date, total or if we’ve XX acquirer or mean, at Yes. of in equals. you have have of XX we customer merger the – the those acquisitions where and [indiscernible] been I I total base that numbers,

side, where the those And then have think just on XX the merger we’re gone I of acquirer acquisitions, So XX% banking way. digital or with total of XX, our deals year-to-date, equals. the

with long-term going So to have They most which what the strategic financial for regions. are to align the are in partner They, the that me, therefore, going we’ve They’re are along, technology. phenomenal. want financial traction is institutions all with view those said acquirers. Those be numbers [indiscernible] a we taking us. occurs, their on institutions to grow

that. so very numbers difficult are repeat to those And

the mergers I Federal not is activity feel ‘XX. our The really got right only mergers So good much in about backlog has to is the probably and favor. the coming and another acquisitions contribute a around delay – thing challenge going Reserve that’s these to that’s now

some some them. to our is You’re It that, the still road going growing expand at it’s looking opportunity our the but comes X, get base cases, But XX of are maybe and to I’ll something acquisitions. of these in and beyond on, take approval when grows it. with it it down of we months

tailwind. extremely to favorable for activity continues be and the us a So M&A

Operator

with Your BTIG. next question Matt is from VanVliet

Matt VanVliet

in? of these components when the the a in about to innovation like recurring an think these as well, able success the it of I adding banking, uplift on acquisitions it's other lending quarter. of products frequently value? And I the strong net following banking? of earlier side, some contract cross-selling one whether at banking, but new on multiples new guess digital made of lending question one some deals? from a much being revenue digital opportunities you're and of and the some the is then these job even discussed impact from the of guess, you you or both all it around together, Good Should deal adding digital when case, to how studio now this to that what's the in bigger in sell seeing look also deal top and we the over number you're selling quarter, finally on seems case How total then

Matt Flake

Yes, Matt.

our as the the it's we products things fraud like the whether products if digital and a customer, we that Centrix that have, to So then retail our onboarding, through or and through products work you go management of becoming now part customers and we're cross-sell. studios commercial acquisitions, data-driven risk is top products, the cross-sells a or like like innovation big selling so

it. the do very be have -- can depending different wants customer all on or with to on those they So and what uplifts the the can -- significance depend size

-- lending when lending and -- banking not reduce on I those sell As that price prospects customer far digital pressure implementation. are goes, banking, require and digital because the we're those support as digital you you different to seeing products think are got understand and very digital

unions this want deal to and to to of credit and together built not all and the number -- that's technology here go to very with cobble vendor somebody difficult it, story it's side, to but tie other that's think, don't banks So a one on the is tell value together. a you real vendors hard other together, new to integrated, I for they you on compete want put net the with if have because

to feel 'XX that invest better go to customers as it's and earlier, a going business. or customers. the seen win because It's it is whether that And in with differentiation seen well. to we've is revenue as we kind believe leads continue going for than to better the they're I their in of this within So efficiency huge the to going to what expansion us the to and opportunity these to begin opportunity going lead the just kind said healthy have optimism rates their be confident banks I they've technology do past. engagement have drive, into to probably And are of going

provide can you know, I David, but. don't on So color if more it,

David Mehok

original XX%. add management, take then it's deal. of Yes. just you a over We're deal. a of digital there, add original add It's say, if add you becomes multiple XX%, you risk a deal. about and the a digital the what banking And you is expanding account of opportunity solutions, interesting XX%, commercial given customer it hey, time just onboarding, baseline I that's that because or for not multiples in existing you with retail talking mean an lending either you

use So referenced baseline. you to retail that that see of deal opportunity significant amounts that banking as top earlier a on of I original digital

here that thing much a to layer going that's model rich quite really forward this of we be creates also there other about, room The innovation studio. important in frankly. And and transactional to add, flywheel nature different referenced in Jonathan's this, that feel economic we excited with the you and approach is is, one the the really going we're that's

stream start adding of different a And economic digital these relative becomes component innovation more So subscription-based deal the as model, it. it the studio it's to you to revenue when add a you in traditional then have and have as deal. retail and incremental significant a nature model. again, more you And products, the transactional you on banking

Matt VanVliet

presume X-year pocket Very 'XX add back as where of as helpful. something be elevated to you the X of I kind there earlier the cycle that But X time is now quick in point number renewals to to products. at average next mentioned up I'd Should term -- Or expect original 'XX, on the an mentioned of the here? air quarters the for are the last look coming of you're renewal. smoother level sort anything and you extending the little guess getting the kind that, now on we a basis? years, on the we're frame, of renewal road on to you contracts over that that deals go-forward it's you've those kicked sort can follow-up we of down on a duration of the for of last here a cycle these couple a sort

David Mehok

of lot market-driven. saw last and No. Matt, we outsized a of year, an was occur that actually, amount renewals

renew saw about with a us uncertainty As reach customers year, of given we we lot us with out last the talked to to pandemic. proactively the

relief. us as had that some renew with an also care We them give and QX economic to example, programs the program ramped, to we customers incent

only when renewals. year So this in year an included do probably that And mentioned bring some of year a included big a resulted also bringing dip target to will target you it typically be this now not in we outsized see But renewal but was I and typically as in see last out and no in quarter. exception, short-term, this QX then QX. I what earlier,

year purposes, backlog understand thinking modeling next over of play terms outsized next you're to we much that be for how But would just So pulled renewals expect I quarters. of couple about out not so FY starts the 'XX. because year in Matt into an as to

Operator

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

Jonathan Lee

build is earlier. Andrew's This for Jonathan Want to James. from on on question

the potential churn? renewal environment QX? the talk and for improves Perhaps presumably competitors. it improving you about for you're through also bookings expectations the Can thinking you, environment how As pricing for new customer given

David Mehok

really with said X% our we Yes. Sure, position with We're entering Jonathan. I aligned to with now, mean that churn our a of are which sort the year, right customers. was what we're seeing comfortable X% rates range.

of generally renewal So in are seeing. regards year up for provided about an are good. renewal relationships reflection rate what obviously the we earlier feel feel of our what like and customers specifically We to churn you customers, account-by-account accurate in We next we're of those 'XX we is still good an for entering buildup have how all the what with XXXX. we're and

Jonathan Lee

helpful. That's a quick And M&A. it. follow-up Got on

But potential on thinking current customer How about are still about going talked forward? be I opportunistic you can How thinking touch you the about M&A. Do are for that valuations you environment? M&A want You in think to capital strategy your base. you with deployment? QX's

Jonathan Price

can Jonathan, as Candidly, the the I is from a perspective. is the Yes. buyer’s are valuation it’s is as mean it’s looking Jonathan robust always ever pipe on. backdrop But at I M&A. that. reality we challenging been. take

take be to of clear market lot of the to And It’s trying of that backdrop. the and disciplined advantage a are people that so got quality we in assets. valuation

those be throughout question X the the deal there’s and we looking. just X together things we’re been the ClickSWITCH prudent there, together. of we It’s obviously, of and has – those got obviously of something found. to always strategic right and But lots at things looking a last of out But end we’re that find fit opportunity outside, to from valuation the XXXX, marrying going not standpoint and a be the coming interested. got So day, we’re we in always to

Operator

for will now at to speakers the further There the closing questions are call over time. this no turn back I remarks.

Matt Flake

diving of today. joining Thanks, everybody, and the Investor on virtual XX business at us for We Day business our the December deeper look into forward future conference. to the

reach to need forward the a quarter really to very information, about if strong ‘XX. have any and look a strong and out the you we to finish So Josh. year much. you please Thank Excited

and So thank much, you a very have great day.

Operator

today's conference call. concludes This

disconnect. now may You

Q2 (QTWO) 6 Nov 212021 Q3 Earnings call transcript