QTWO - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Second Quarter 2022 Financial Results Conference Call. This conference is being recorded. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After turn now over Relations. [Operator would to the of Instructions] I Head like call Yankovich, to Josh

Josh Yankovich

be significant filings, which release yesterday Relations you, David me Vice to statements SEC, Businesses, and on for will we call future uncertainties, thank on our afternoon today second everyone. Executive Flake, filed no our the Good XX-Q and of our the President Important risks CFO; results the those Business filed statements, give of section forward-looking the reflected and our from to quarterly for This found website, press XXXX may results can be on are us Corporate Development. forward-looking report from Form the copies be week our with our financial and periodic that results operating Matt the differ those by statements this assurance CEO; Price, to could of that expectations correct. and included prove Actual may quarter performance in and cause forward-looking statements actual are of With for to materially factors such the any our with subsequent for that reports Emerging our to Investor our Thank contains we financial including regarding distributed differ forward-looking discuss respect QX will you including in call. Holdings. conference today. these are contemplated materially Operator. Mehok, morning, subject of joining And call expectations and Jonathan

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

Let me now the to Matt. turn call over

Matt Flake

Businesses up million, second activity. X% discuss Jonathan non-GAAP in and our will it financial quarter, I from our hand outlook by XX% and revenue start year-over-year of quarter results our the David more then will across then Josh. over second detail. to Thanks, to today’s reviewing will and more highlights provide insights second business. In sequentially. I call into results we the generated half Emerging $XXX.X

We users users. to also of increase our X% banking registered approximately percent. us total added year digital year brings XX.X XXX,XXX million to approximately over platform, That the

services to finally, Annual industry deals and report, the Rocket signing which Jonathan we quarter studios Businesses, we During signed. a banking in outlines by continued unpack our Tier digital second the institutions banking largest second including QX Mortgage, the our partnership the ESG recently financial X of lending was execution with and one X institutions the have of all within communities. financial new to Emerging we quarter, customer mix a signed focus innovation And lasting and lending, highlighted of large announcement Helix, impact partners our adding and the our which ongoing digital and ecosystem of will and across on released ever In create a shortly.

I net on with our history. will of chosen wins With start branch This I’d bank digital banking some largest the to network. quarter. that, particular that’s report. our in proud company like landed banking, additional new no channel activity XX customers, through the a the to deals in provide digital one the several progress are with where brick-and-mortar digital acquire with commentary we including We from that’s of customers reflected exclusively sales

specific the also this strategy solutions of as that digital and evaluation. our to the in Given vision. a they non-interest decision to broad overall driver selected of digital several for banking decision the more aligned its and products. offerings. important rigorous conducted key revenue, acquisition generate to ancillary Even a Studio our a and their importance primacy vendor digital functions comprehensive expanded of portfolio drove digital this their digital full QX retail ability drive signed suite In how for they banking suite, end, features They retail in bank bank’s us Innovation and including was

creates over currently customer they seamlessly as us ability commercial, strong areas with potential business and lending While well other are into prioritizing small strategy, and time. retail help set their this their expansion to expand and apart as

Another important a the with Tier provides launch we it important bank example why and was story quarter their QX win the X believe to catalyst. in of was great

Our lending set online capabilities. due mobile acceleration changed end-to-end partly driven solution banking. the to of expectations and have rapidly to Commercial commercial user pandemic and banking

solution lending commercial commercial longer ultimately technology expand in more us compete, their serve their relationship sizes. commercial this them of competitive banking consumers, was bank valuable keeping result to effectively we help these all in a market. users are as and their unions banks like digital. deal, differentiate and are And to no to Just be relationships. and commercial increasingly primarily In the relationships expressed expect investment seeing and them accelerate personalized, to Meanwhile, and client becoming legacy credit banking institutions financial banking commercial their convenient that

commercial with board customers on digital to an small launched business for initiative business banking, their they QX So commercial bank opening in along The selected digitally. account partner. win modernizing experience digital to starting commercial improve invest banking to their the new with ability and and

for believe a combined recognized vision, our on own, key banking set While digital have I to tools catalyst the entire QX. of disconnect journey is solutions banks like differentiator been commercial their help our banking a as commercial best-in-class

new lending, and digital solutions. expansion to net we across our Moving lending wins saw

One of quarter X deals the in Tier several with the was Australia. from bank

headquartered While they substantial business. with their footprint and originally partnership they have our Canadian there, we a international began are

with Our North client this to we ever ultimately largest in early America Australia, the loan in done. is their success business in with have primary what opportunity origination deal led resulting an

our these highlights Emerging and digital addition lending on continued In to strong Businesses momentum. teams, their our build to from banking

the on So, now, hand detail call I over Studio want and Jonathan Innovation Helix. provide some to to to

Jonathan Price

have fintech ecosystem since QX the just size our start will I where more a Matt. of quadrupled Thanks, with Innovation than ago. launching year we Studio,

consistently partners We as credit adoption are representing new we the fintech a net with QX see customers banking and differentiator business allow addressable by XX% outside in banking And of banks Studio existing bringing talked opportunities have this and our the and Innovation customer presentation key partners solution in over than our with that pleased very believe us in we market how Innovation rapid the our base digital from growth and today. over than year. leverage wins we about platform over to fintechs success address more expand our we XX It’s of Day time extend total Studio alike. first in our will technology digital unions and continue current and set. to More cited Investor seen XXX December,

customers banking go-to-market an the union This will country or largest bank enhance launch offer to And During credit existing digital Rocket mortgage Mortgage, solution to that with Rocket and for our their large a quarter, gives turnkey Mortgage we to distribution QX solution lending Mortgage, holders. platform the is strategy provider by to a channel. expand diversify Studio adding the digital practice and valuable the access a adding to with account customers option mortgage opportunity new easy embed agreement one fast, help provide mortgage finalized Rocket in into their this single can them to and Innovation a an best-in-class altogether. the their

new partnership to our and We add digital experience in a will lending are customers this our market-leading vertical. our ecosystem and win best-in-class an opportunity and large QX provide to help income. lending to additional the Rocket excited in generate like deal net most then major non-interest additional our fee represents first And quarter with notable was believe side, that company the brand on this a Helix,

drive We existing their new are into ways alternative that lenders seeing of customer sources basis to models. platform enables monetize for Helix look and revenue increasingly business build their improve experiences differentiated better our them to and engagement

to this wins believe we in our moving forward. into help As continue verticals we sales new should industries, efforts expand these like

evaluated year Thank had quarter, And just launch partnership our on you. institutions institution strategies another of for our customers, the launch to ecosystem partners a Studio fit to alongside start Another with new strategic time with Studio This notable brand to continuing We was adoption. And an that, Businesses Innovation Emerging would our over to is their a progressive Businesses, from pursue to differentiate their financial the including on discuss deal Innovation the I’d programs of open business. believe we that seeking benefit. right options impact that Rocket business increasing financials. Emerging with the traditional financial additions community and in end. the could QX, pass Overall, activity to which during believe sign Mortgage, call are Helix their was and market. strategy. that the differentiated can to quarter David becoming digital-only and determined over traditional a digital bank we market am drive like has several the segment pleased themselves, target and deals, I focus Across number all which like product a

David Mehok

the updated Jonathan. revenue Total across and quarter, Revenue range percent was reviewing results primarily an for the increase revenue I for the year-over-year and as in the EBITDA guidance and associated business the year-over-year quarter revenue operational XXXX. and revenue range. business. was X% will with the growth $XXX.X full observed sequential go-lives, guidance our growth. also the on Thanks, of quarter subscription for for organic results resulting sequentially. in execution came Service-based The our exceeded as guidance high continued pass-through an second the from high well year-over-year million, end growth we towards increase year in In quarter. our of results conclude begin quarter second the sequential XX% adjusted non-GAAP end the with by and customer our contributed by to focus quarter our third of and Helix driven

total the with was also revenue for total driven sequential the season. quarter. in year-over-year that and prior million, customers year-over-year dollars the bookings. revenue increases new driven the decline and previous sequential revenue Transactional XX% Helix increase to grew X% sequentially. XX% usage business related down The pay. from traditional sale our XX% by seasonal quarter, which and recurring revenue was Helix expected, year of a in period to tax or consistent As based Annualized attributed represented offset in Transactional net and cross growth by in $XXX.X revenue had from a primarily was bill growth sequential ARR up

the solutions. usage addition, In the sequential also from from based quarter increased benefited Helix in revenue growth our

limitations be seasonality $XX quarter we key metric in by approximately as of approximately an of concentrated the past new over our opportunities have backlog, of an as sale ended in increase better renew increase XXXX. We result the was and the can year-over-year the bookings, believe and it four The can a with quarter ARR $X.X While new a in renewal fourth net X% serves impacted given billion to addition net the barometer indicator, performance that activity. million. decline cross backlog organically bookings for of were a quarters year-over-year largely which backlog sequential

previously mentioned, fewer impact opportunities, in sequential will we As will backlog quarters renewal we which growth. have some

lower number ARR quarter, of the the of continue remained balance. new second as expected, opportunities our sequential the evidenced in we net but As to in ending sale in-target deliver bookings and cross growth renewal dollar

XXXX historically. XX.X% seasonality quarter XX.X%, the in the with is million second of the and million the XX.X% margin driven a margin or percent previous associated of EBITDA down the costs was included increase products with third following before was the and gross of quarter. We revenue, in down compared The in XX% have R&D, operating annual in events. which in in lower increased reduced million incremental driven quarter fourth and and solutions, second $XX.X $X.X or expenses or by decline margin observed resources. were taxes increase in in of of and was decline expect revenue margin quarter, with was the an The of the $X.X the of mix operating $XX.X to quarter mix by of increased with in revenue driven to and quarter revenue line sequential and for our decline expenses R&D. revenue Gross benefit for in will related in attributable second in XXXX QX line of equity up opportunities revenue programs quarter million, impacting lower delivery sequential XXXX. gross software by XXXX from pass-through percent $XX.X was of quarter. lower The and the in also marketing, of increasing the XX.X% capitalized an the bonus expenses our travel of and we our from from payout previous quarter Adjusted pass-through second associated payroll marketing annual from Helix revenue second million sales expenses remain million year-over-year with associated increase roughly Total direct predominantly vesting, lower headcount $X.X customers. in quarter third-party some first renewal XX.X% in concentrated as an expenses, within and was year-over-year The

activity the Our adjusted high guidance benefits reduced lower expenses of from which partially exceeded for by EBITDA results claims were driven resulting healthcare. our end

rationalize In working with to addition, to environment. we continued our have flexible facilities align

of free the allow investments to was the macroeconomic the with drive for backdrop seek a we million annual in increase in quarter out flow investments of ended which for value $XX.X continue million, us we Given the and and over timing large business at cash, from to flow period. driven $X.X working associated customers. cash down to $XXX.X the an in believe manner, will of first with business. million. timing generated from second negative our cash uncertainty, capital The to of the the result largely quarter by half second receivables prioritize equivalents normalization some positive in the and of long-term this proactively flow We quarter. expected the the Cash cash efficiencies of to intend the and year invoices is of cash million, accounts $XXX.X some in in operations free bigger We end a quarter operations used in

We previously quarter and range up full third the by non-GAAP $XXX.X provided to third revenue wrap Let quarter our me $XXX.X sharing million of in guidance reiterating our guidance. year forecast million.

range year reiterating third XX%. EBITDA to We year-over-year $XXX.X our representing $XX.X to non-GAAP XXXX X% $XXX.X and million, million full year $X.X are adjusted X% XX% to revenue our $XX.X to forecast for million of full adjusted of million non-GAAP of revenue guide million year. representing reiterating We growth the $X.X of EBITDA of to million, guidance to the quarter

year. XXXX the half scheduled reminder, customers half of the this a back of are back in be As associated the to implemented in bookings with

installations Once large to is guidance. customers reflected exiting EBITDA. full acceleration pressure third we begin and our our which revenue the those second and we revenue better-than-expected guidance EBITDA quarter both see guidance. the reiterated reflected in summary, installed in EBITDA our year bring adjusted results In historically adjusted full is and adjusted for which year quarter delivered year recognition, for some have seen and we EBITDA revenue can expect expense are As near-term

our I over as the Looking emphasis the long-term customers, management EBITDA turn With it on comments. ahead, drive impacts of year. to we for conditions of cost the will Matt while be closing to help the broader prudent we will back closely an and optimize monitoring that, exit business macroeconomic the accretion value on placing

Matt Flake

year Businesses, based digital adoption half programs first key as verticals previously announcement of we product the Emerging solutions, Thanks, our engage strategic us and David. in In the to and for highlighted partnerships broad by banking as was served. well lending conclusion, the allowing in haven’t of our

the we our are on excited the our are customers business, operations. may also potentially we environment monitoring inside macroeconomic While it and have challenging the what’s on going impact and about

as and the adjust market warrant, long-term to proactively our As year value will for monitor while planning closely continue we conditions begin conditions for stakeholders. we ahead, prioritizing

we that partner well-positioned to climate to ahead of a transformation with digital reasons will business believe durability over are the lot continue tougher I it turn weather like model, financial QX. the of the With proven a to for and have institutions we prioritize questions. with our a Thank And you. potentially that, Operator to

Operator

Citi. take Schmidt We Instructions] will Andrew you. at question from Thank [Operator first our

Andrew Schmidt

Hey, for guys. thanks questions Good taking and here. my morning

So I want to....

Matt Flake

morning, Good Andrew.

Andrew Schmidt

for it as obviously, pipeline execution is morning, directionally, revenue if any of of and exiting Good ask we big influence how the talk outlined and the ARR lot. back your might quarter. quarter direction growth and would to But head confidence a there half, you year there for that we about to next a thoughts in back half be we the guys. expect the fourth growth should just kind relates achieving of wanted the helpful. framework XXXX, into ARR deal in I Thanks about in acceleration that

David Mehok

Hey, is, as things as hope one ARR with began of that useful you Andrew. metric. We go something one, know, you. are that regards go-lives you it over half disclosing we quarter we last as a itself second in and is, of strength, lot of year. this half saw of we second well in bookings of year manifest year quarter this activity last as that the this through that that to a And the second the that go in last as in first see year to of we year, year. end the Happy And found is anticipating absolutely we second the of half

have half than entire in of So, to quarter in had go-live fact, the this QX the a actually largest first be year. while, we going that is more

you result, ramp you have through year, go-lives because see a The those the full we number quarter you in get see that will a that is and QX continue to as QX. to to what So, we sequentially in going revenue as QX. of grow that will QX, ARR expect

that model can you So, effectively. out

are is Now, M&A. about the closely a monitoring by are one that activity there. we thing we We talked encouraged lot how

been look of on over side that those months involved are customers on XXX QX last winning opportunities and are we over have now in the them. But has and over that customer more approval you of XX% up of of larger the side these longer dozens them. hung our we opportunities are of are the have process winning anticipated approval most of process with that, the If regulatory the have a to XX than revenue them attached in the

we something closely continue the as six are that monitor going months. it’s So, to go through to we next

Andrew Schmidt

I see.

next you think environment, might be you these winning with call point, the some So or it, later if it front the when see at deals next That’s year. side, sounds way let’s M&A some M&A? about conversion through the conversion lumpiness year, on come while it happens right year this like the could on to

Matt Flake

this Yeah. That Matt. accurate. Andrew, is is

conversion organic as bigger growth then so up thing are in and more bit, credit so are it your small, or become your we and get can held the approval hold ability a running middle freezes gives point business adds new hit or us big cross-sell bigger buy waiting in that if opportunities, the you union. to the to these to the The for for that up get get them is the But other opportunity and obviously in or products, is, bank gets and conversion, up these gets little on a that banks of too. waiting they cross-sell a much that approval a to larger we waiting

Andrew Schmidt

I in, being cautious. the just Thanks Got it. you If macro clarification. the more on comments one question for could Matt. the some sneak obvious backdrop, just had That’s just helpful, about

about there you in or is in So slowness base in a in believe I expected, process the your case a slowing, on slowdown to that anything or aspect? the Thanks be just a want is little clear. is should bit being prudent proactive to lot. just the decision-making in the that that you Are seeing customer leads front -- process deal it a cycle case being or curious just just decision-making

Matt Flake

Yeah. is being prudent. It

the data, year. in half good half were there in if -- about think of I the activity of RFPs at I good look first feel pipeline. I feel about back the the up, up, were is pipeline you year, is the the the demos the up. sales

it’s it’s think up, talk digital union, I unions, charge-offs whether or great the bank X, credit up, simple bank or the out banking, if is, CEOs inflation of macro Tier or X Tier to there. have you a to or with banks something rise, a have charge-offs they manage we and a credit if pretty goes opportunities The environment of X the Tier with lending challenge hit lot you have going or unemployment those. becomes stays formula, continue to on are credit cost rates and union a

no is so the how digital transformation matters matter profitability is, entity of And obviously the important paramount.

doesn’t we at we more point, three an are just were two sales we are of up, an are quarter-over-quarter, those that trend that somewhat elongated But don’t make. that or piece. RFPs of this a in year-over-year are those demos actually coming. a deals already But But we the yeah, said, monitoring. a it’s to sales So, closed that little elongated something down were some tactical bit with deals watching say we I said, but as and the is timeframe cycle -- on maybe cycle are sales want second But -- which just have things up, cycle don’t I a seeing is quarter, closely. the have the have the we

multiple more why and customers are going the prudent gamblers been have are be so, XX in that’s than be they through world. to this riverboat -- sustain and have for been cycles to this and XXX now our they to years out very information and not put able years are there. with And is so doing we of This we just trying we

to shareholders. them are paying want sure are just and -- and our are we with well we it attention to we just know we being just prudent make So

Andrew Schmidt

for Appreciate it Got it. the Thank comments. you guys.

Matt Flake

Thanks, Andrew.

David Mehok

Thanks, Andrew.

Operator

James. next Sklar We will Raymond to at go Alex

Alex Sklar

Maybe, following year, the I that on just coming optimism back of out up the the Thanks. of was Xx pipeline last the half the of of idea think up Matt, kind quarter.

seeing growth opportunity, kind second later through quarter terms of In you the are here? still stage that of

Matt Flake

Yes. Yeah.

I think a are I the we continues for and first still seeing, pipeline obviously, as half first XXXX grow, not to anybody. said, of was great the half

So the great. cards are

at If demos quarters, over it continue RFPs you last and marketplace. we the four look to and see in an improvement the in activity

products our are it’s well, whether well products, with products commercial Our our prospects are our acquisition, digital retail and and resonating fraud, customers. or landing products all very or lending risk those

Alex Sklar

then marketing pipeline the And maybe some the booked? terms continue and existing I of impact that far as of for wins am concerned from Helix in Great. already follow-up there of of as Jonathan, they your the products the behind in customers quarter. consumer from is Okay. kind curious, on appetite a have macro the some

Jonathan Price

question. a seen customer perspective It’s the I of a first towards of year over would profitability shift half the existing an No. say, from Yeah. is their in we this program. have the great the mindset one thing

that not are not it’s they marketing. So,

profitable, to which how means out focused our they most active driving But they within more drive throughout be have events with profitability program. marketing they what users, are challenging are their a more year. forward in how best overall as figuring they really clients are backdrop looking will episodic engagement think a big consumer still will I pushes and on is any

It and the And the it basis spend is not outlook for possible. that’s to as the user again, ensuring strong. Helix, as is just they and far of doesn’t much. versus looking mean that next as So, incremental going means pipeline as current focus on less engaged adding demand as the marketing profitable are a forward

about go which As wins opportunity reality referenceable we are exciting, and is up new us, a leverage. verticals verticals and in into gives the some an that of is because to it anchor script, opening for us these talked the these

So, us. it’s the embed they world is brands the to exciting financial services fintechs there the with as than a for evaluate different and But and are this institution. traditional desire opportunities financial

execute. So we heads are and just down trying our keep to

Alex Sklar

Okay. all. Great Thank you color.

Matt Flake

Thanks, Alex.

Jonathan Price

Thanks, Alex.

Operator

Our Pete next question D.A. Heckmann comes Davidson. at from

Pete Heckmann

questions. morning. Good for taking Hey. Thanks my

to But follow-up Just high-teens but have last four want here of you to uncertainties that’s and kind acknowledging nice the some some certainly these growth of encouraging, the kind the of certainly, seen low-XXs. And we, quarters, ARR, follow-up numbers. on this we fair with macro, the revenue that running that’s in acceleration seen, Is you activity that assuming some appears we continues it levels XXXX? that some for the it upon probability certainly should get say half. based that the in to year’s have of back from

David Mehok

And Yeah. changing the It’s the as is doing uncertain are understands. that every August, right case macroeconomic everybody we process. rapidly. is environment getting this things Pete, is one the now of in ready we planning off right are and year now to kick our XXXX FY

of going just much the going this these a through So at the sure level, making much to will coming we based XXXX for we getting projections the more upon we able better to course and year that are over variables towards the end into you we as inputs get the we year. understand next are then of that assess and all be process months be intelligent and

Pete Heckmann

Okay.

And either that of number much and in really about you this Okay. in can Where or growth? X quarter, little expanded have you the business, of how institutions owned guess, a Tier footprint thinking to digital about from talk bank growth years years, lending the this then come has job on you domestic the part the I over the, three have in bit shifting four business. Australian nice -- versus international

Matt Flake

Pete. Thanks, Yeah.

our Cloud in XXXX. So The expansion, XX%, plus. of the all Lending thing grown you of our made expansion business, part so been multi our part driven tools And is the banking product account if leasing, those -- then I announcement, consumer, the XX% Catalyst about areas of commercial other right? at had which small multiple think think with the solution, customers. QX I fourth of which on-boarding we made layers the is of business -- quarter has is think a acquisition it the done the of we we have opening,

expand used have that that We way. tool to

and the been expand ability or put have whether you within, then to PrecisionLender it’s product lending We lending transaction it’s side for transformational So a customer relationship, their of utilization the business. the and once of now into the the deposits. price onboard the

it’s our So business. transformed

As about the the the obviously, segments we far in have world, different as struggles in talked Europe.

and going have just war market -- solutions of has that we happy lending a how has digital that’s and of that results they the Some -- been that. that But pandemic got and and on continue business good would the have in well. and and transformations like the grow, team the us for on the to happening we to in say as been side products and out build feel I are have really on capitalize there. now the mature whether we to we the methodical we the tied disciplined position a it’s that and are been the Australia out have have Obviously, that’s strong over lending you about everything recession we has of there you inflation,

Pete Heckmann

feedback. the for Thanks right. All

Matt Flake

Pete. Thanks

Operator

We Stifel. next will to go Lane at Parker

Parker Lane

quarter. large that brand the that going digital-only maybe the the how years? next could on deal of many taking Helix provide opportunity in few how Yeah. in banks opportunity scale down be, question. I direction, over the guys. for that the is Hi, you are context Thanks. expect what interesting you side of pretty Thanks the terms on thought Could some

Matt Flake

Hey.

You about the are talking deal, Parker? Helix

Parker Lane

Correct. Yeah.

bankers considering other many with how presence? -- the digital-only brand are going Just

Matt Flake

interesting. Yeah. It’s

XXXX. have seen and throughout more more of We it

certain they organizations sort vehicle the or demographics, think for institution are core to very sales bifurcation cores great of the is millennials power what’s digital-only and business than even have it’s that to. growing digital-only you are of whether are financial through that a their or that executives to like But channel. a on institutions brand it’s national different I what traditional strategically a focused and they operationally, this the the strategy with, financial the interesting target the between used them used is,

we the market challenge this that over focused really case from and that fits have to value the or operating core seeing these equation. where are So case finance box is in forefront, to brands. the is Helix banks understanding And it’s that a the fintechs overcome you the we more are that on all coming like within core cloud-based the of and with it’s Helix in embedded whether and a largely use strategic use more perspective in

a So operational It’s community house making of launching a and new are financial regional and I strategic market, are of with that side we digital-only house of initiatives. the the it’s going to more institutions scenario. these just side are up more it’s a capabilities opening sure and their their see opportunities digital-only in on exciting, the what question think, aligned

Parker Lane

color David, during you bill was that decline more some then, the think And And more should provide helpful. quarter, the Thanks. pay can Very simply impact it. of seasonality? in business Got economic on how we traditional in times? the transactional about secondarily, uncertain the

David Mehok

certainly the was business we in The really for something what closely. it’s Parker, half pay are monitoring bill that total. was something below that first That’s expected. we Yeah.

So continue as through earlier and a we we into that to the it’s second next we talked obviously, be monitor about that XXXX. going are to to as something work be in key I that half, regards year, enter variable in going that’s FY planning going process to to

Parker Lane

Well, thanks it. Got again, guys.

Matt Flake

Yeah.

Operator

McNamara [ph] question at from William comes Our BTIG. next

Matt VanVliet

This Matt VanVliet. Hi. is Yeah.

is even than the difference terms banks, or at through you some are how there looking you expected lending of any guess, out of are that digital-only banks opportunities thinking the some normal the When digital announced in solutions I those question. maybe the the you pipeline? total of Parker’s those coming looking side, maybe and pricing on So, brick-and-mortar different users through banking number deals the a digital coming those related or about build than of just deployment of at

Matt Flake

Yeah. Matt, good question. it’s a

when while, think bank think been you long do a I ago there to many hadn’t but for a time used and start-up we a about them.

evaluate kind to You them a you have got a and is of where partnership the in, the and who have ownership year. to there’s it’s go -- a it’s then we multi-tiered structure of --

time them grow. give to You

them charge at the can’t much You beginning. too

of are if the a deal this be both so group, We -- for great right it little it bit us. a you together both and can on can get betting

members existing that. have that you so signed And to different users that’s they when you is to and are minimum it union, XX,XXX are going convert bank or has on, an construct you and go them a tied than XX,XXX to credit over a a

offer technology of So it be think customer that does balance if to opposed have every on existing relationship, the pricing some financial we an things the the has the everything about of -- have able different dynamics from on-boarding it is, have you are to customer institution it, but to one Because have sheet, we the they onboard already de new single both to banks, to a these about sides relationship. to them base. novo as

lot a So, a acquisition on-boarding have brainer of go tools with to the that it kind of digital make side. to digital and on us we no

Matt VanVliet

your the along like all point in, out some those this do of And deployments, staged deals feel the as more project XXXX have and drag you some concerns last both any maybe time they the look -- there’s sort Okay. Very deal to Xs you late at large signed the this stream? getting Do given from the half of half of then that helpful. revenue like process pretty uncertainty macro year. second year of importantly, of you the on might well are or earlier or you and feel the into lines Tier second XXXX they extend Thanks.

Matt Flake

dozens so signed team’s net just by are skewed signed monitoring was, that’s delays But track, that customers to we those this signed we -- Yeah. them environment. up last the held we QX. go-lives of They David’s No. new us on to are closely. the have job far we are right net delivering being all larger are that’s it now not the delivery new on that and I are it just improving of and QX are the track. and in as as things you comment extend of would the what the year, side, last and year, side on one you out front M&A that doing an reiterate amazing the year one regulatory I that the

We delays no there. but have got big some go-lives,

Matt VanVliet

for Great. Thanks taking questions. the All right.

Matt Flake

Thanks, Matt.

Operator

we go to Truist. And will at next Tillman Terry

Robert Dee

for taking Terry. questions. Great. Thanks the is for Dee This on Robert

expenses, starting in you still the is great with are headcount you how Thanks. actual now top prevalent? Just and on being prudent still difficulty keeping talking seeing are talent highly off, trending employee about more retention or resignation stable

Matt Flake

the this put would culture of our have we and say in Robert, Yeah. sustainability into employees. energy time I lot of our and a that,

look you rates, attrition at you now. our are points below are software voluntary seeing the If X rates, right attrition our in they whatever industry

somewhat. seeing and a think, employees are also the out you of And inflation seeing you wage has a -- stabilization so, are I flattened

we So retention really employees the of employees the also that engagement happy our and with of mission. our around have our

feel now. good that about right So

Robert Dee

hear. to and I more would Thanks. X And just contrast Tier you the great one you compare Tier then That’s and if may, how across serve? fintechs then the macro X on front, demand follow-up banks, banks

Matt Flake

so said up, in and Xs into a and Xs. quite so inflation, and prudent business, The write-off should I tool the ripple between their what’s and going Tier environment well through the is Tier a adjust more Yeah. a how going loans, to have making. sentiment enterprise PrecisionLender are being on is concerns going with happen customers how to lending as the is have with are earlier, those Rates you whether complex we happen Xs similar just Tier they But there. to Keep that that to play going creates mind, Xs come with having and decision are PrecisionLender. the Tier similar what’s unemployment to which it’s to what rates, through few

Robert Dee

appreciate you. color. Thank I Great. the Okay.

Matt Flake

a good Have it. Appreciate Robert. Thanks, day.

Operator

Morgan at We will go next to James Stanley. Faucette

Unidentified Analyst

James. Rocket in general. help process Michael for highly my taking Mortgage question. that for Maybe me unpack the competitive. Thanks process imagine just Fontem [ph] Hi. I It’s was

So me are to like that just how understand, able to help deal relative you win others?

Jonathan Price

for where the already an the challenged brand Innovation be think, that portfolios, process future. banks adopter referenced deal the it’s the adjacent their benefits, the Studio world we that, and a our area are both diligence easy the are they for lot and did I was base work do relevant have we back especially to how and in our it’s mean, existing it. products work the big in of rising where talking rate us, Rocket’s foreseeable of and talked thesis ease backdrop development a partners, and timely it’s look, operating how of within. really the to that us, for No. to openness Yeah. time bring like the of platform This I sides differentiation and all credit going really standpoint unions our and pleased calls for with is with in And credit what banks and and we saw banks the a of with software question. or to of client opportunity to to great regional it’s partners and the great unions the Thanks that’s to. brand the lending the optionality refinance making of lot over and into a around the they kit on environment, done community But from with won drive strategic ability they there prospect the it were again, understand and a long us. is that’s and And early for a existing of universe the home partners, we

to I And is that process provider by management digital into a best-in-class done sidecar where is so, another a going be think that all to pivot into like has the income, paper the opportunity the that a it’s the of brand or business exciting. Rocket fee and

these really build unions just an to are to many of others, banks we credit XX have and partners give we so are pleased signed one that continuing north So innovation. the and and with again we we and ecosystem access quarter in more

Unidentified Analyst

and And names? SaaS like the help other decompose geographically? and Thanks, from much you have So backlog, elongation on in of Great. can some seen we maybe backlog do me cycles seen comprised, of Europe then composition how have sale any you APAC Europe sort specifically Jonathan.

Jonathan Price

Yeah.

the on breakdown. quickly Just

delayed think, And that in mix backlog that covered pressures and/or something decision they are out Matt timeline of of the the Europe, last to come that that and macroeconomic closely, So quite of decision the have I of with from have the years. extensively. mean, couple regards little we monitoring they some deals certainly not making, dealing It’s comes very there’s pretty of but been it for then I honestly.

So it’s going we to of area look are that the certainly closely continue an at. world to

Unidentified Analyst

much. very Great. Thanks

Jonathan Price

Thanks.

Matt Flake

Thanks.

Operator

next at Bob to go will Blair. We William Napoli

Sandeep Chowdhary

taking the Thanks Studio Good to Hi. for if competitive that, intensity market the QX the deals, win shifts for when is a any Bob for Sandeep you sounds are in you on Napoli. key Chowdhary is wanted why needle are competitive they in guys terms guess, to questions. with environment, tell as our to morning, This seeing your on I and are and just guys. ask rates? starting of like Innovation for to it digital move Thanks. banking partner reason customers choosing the I

Matt Flake

solutions retail to particular, competitive there, well continue in markets. those fare digital as out remains, as have is over we you said, X, especially side a Tier the I environment quarters, the lot a the So Tier union in last tiers, environment, credit competitive X, the down several banking work of

there. win have win There’s more have any and rates in don’t have are problems. to X there any and never historically, similar lot rates X, Tier volume X been they there Tier I down and of given then what Tier indication Our we just really

well. more are in a little that selective as area We

are then, talk Studio, and products, So for Innovation the the that the us those QX of select you when our products. things all breadth differentiators people Catalyst, to

Sandeep Chowdhary

compressed a development the M&A, little market, a corporate that Great. And talk in some capital Thanks might appetite bit. of follow-up just about your it as valuations feels up and could like given you color. then opening on the for allocation be current

So, capabilities or would you what of I assets be guess, interested then? most types guys

Jonathan Price

Yeah.

probably in market. the quietest the in you opportunities quarter where that, a from we and can around second in one of perspective, So assets was last of have calls the backdrop the seen years market terms we activity, several get I inbound tell

because think market up activity that expect happened the in I what’s you the of lag year it’s the translates in opportunities, and so private will into half markets slowly and yet the certainly terms the second do expect seeing sellers of and that we we to new start largely while referenced in our and development that quarter happen, and Innovation see what And public where back of and far those of opening we QX wouldn’t So Studio how partner anything’s of focused, didn’t though. more in the I corporate hands and how and it more we assets our and product I other the as within that end are and the markets give do they of launches the customers. across into think more portfolio say perform that insight changed, some us as going now between be have in the to benefit we

see to have now it are and and comes -- new sense. into segments segments of different digital the up makes and think be our we about compliance, lens have peeking interesting, interest. that’s I risk continue digital in to opening interesting. So areas wealth, talked the as I We but across insurance, much far what what more just we to a past market as think interest and just new

Sandeep Chowdhary

Great. much. Thanks very

Jonathan Price

Thank you.

Operator

We to Stephens. next Charles at Nabhan will go

Charles Nabhan

takes you specifically puts should I think Good how us and some anticipate? about tailwinds morning but year, the through the the and appreciate for for headwinds was for second in the taking I and we terms walk as any the the thank of cadence, of you wondering my quarter, if color on gross well question. as half margin of you could the

David Mehok

some that our gross typically pressures QX that And pressure the improve one do second margin have profile. first from Yeah. think margins. half, these will see is, you specifically slightly half And large implementations, the gross do I in profile you in Sure, of very we when the see Chuck. on

you lot such and no the up side P&L. longer we that support and have have QX, hitting because high So resources of hired -- implementation a implementation are resources those on that are customer the concentration end of a capitalized that in implementations

gives long-term a nice winning short-term see these do pressure, So some you after but lift obviously, opportunities. us it

you up end QX, QX. exists that So in uptick pressure an during seeing

to the exit be, we business. a year, We that as going mix also overall the mix pass-through there’s less total this a of of as believe of

So if season tax higher, related you remember, to pass-through some we of talked it that business about activity. being

the pressured So we margins get much lack that gross upon mix. as QX, based as into of are

I from increases would we So, expect in a QX key QX. couple the of you mind But those QX. exit in QX into are would the a variables then in modeling keep get to year to will see standpoint, I as relative and

Charles Nabhan

guidance And for target. not the reiterate did you it. are know XX% XXXX, but going long-term to I in -- specific you give Got

mix tailwinds color if give of So -- gross if over -- catalysts long-term, could and medium- incremental kind and towards specifically the a you just margin? activity, more cross-sell has the us shift curious to that a are which you see cross-sell little you around higher

Matt Flake

Long-term, that you have profit talked are that. opportunities about we in we Jonathan’s one, example a the about if Yeah. is we laying in partners creating. signed talked great towards groundwork about; we of think that to and margin some ecosystem the have the business drivers areas, Innovation Studio and of mix up higher up our the

of to scale think business. the gross from course is to we away to a opportunities cost becomes that’s to higher years road, next to structure a going transactional like business. part that’s have three obviously you pass-through are four the over then more help As the at when utilizing continue mix down margin business in a about that meaningful global labor up from our five effective five I going years. margins. are of to And things towards overall our just years premium going business years, high help going very to in we our business that going standpoint our overall. a to what and Helix have mean, resources grow manner a that the three The more overall mix margin years, That’s business is a

Charles Nabhan

appreciate color. the you. it. Got I Thank

Matt Flake

Thanks, Charles.

David Mehok

Thanks, Charles.

Operator

And at Vruwink next to Joe we will move Baird.

Joe Vruwink

the getting two you more decisions think When made, new the are X bit focusing around dovetails a stands landscape the readying little broader where retail the and towards shift years by on at that win, Great. Hi, some like of proportionately I do is given over step is the level actually everyone. that comparison? landscape that question, with changing system competitive better is shift this has and comments to now commercial commercial. type offerings guess, activity industry something of back back the expectations, you and out skewed And the past look and Tier if QX maybe happening, of

Matt Flake

and Yeah. the I question a as of think, of into helping have some consumer has business with capability move Joe, the out, if them as have practice offerings. mid-sized build largely we I your to them over larger unions business built understand credit on credit correctly, been their forever, unions difference focused years, well small been beginning

platform. built them we have business in small commercial XXXX, commercial and banks, business, when we -- the which were platform -- platform customers on the a For started single retail, to for we

our that investment into the went building years XXXX XX one we banking fuel we but public we of public and before began offerings. to XXXX was product, that in those really fund are So went make we XXXX and in commercial to and reasons

product, commercial mobile Tier small as in has need as in QX you banking difference the of pricing, anybody the look Catalyst or breadth a commercial to now solutions is as banks. so a in house, mid-- and where, product experience, The user desktop, of X And banking of cornerstone we and always deposit significant space. X lead side a And phone digitally. of a it’s whether far that’s been to tablet Tier and or have lending forward, over offer Tier and the relationship, the be the able X

the set which where continue build form. out have a but We large for modern to is players product legacy in have the have it offerings there, corporate, to don’t they technology

our right without commercial and of billion is they there’s they in can are away position a that partnering above people people. are don’t our together customers, differentiated. to there our or -- we not down they come many bank a now, and own solutions sit marketplace so, And with larger highly that are has in close When by QX investment couple with cobbling Catalyst us blown the offerings

So space, it our grow. I the commercial will anticipate to differentiation continue in

are that in with over come that good tools to those these union, I very credit and going of the that position to and so, we invest experience things in a continue how or a years that Well, work are built use it’s conversion, in all are there, advisory think, have because community the We areas bank whether the services. we you here. teams years a

marketplace, highly a anticipate beyond. us we differentiated So to in in the for continue be XXXX differentiator will for that us and

Joe Vruwink

I Yeah. market product commercial I with have been might in And if look guess, stronger a into with pipeline, When over are well. where was a I you the think, commercial you opportunities your seeing recent question, of up strong stands case matching so kind going are really the the opportunity? more product you proportionately the years, than

Matt Flake

Yeah. as Yes. That is true well.

as millions jumped several with that space, consumer, space space say, are would you -- crowded not into banking, accounts cards But crowded. and there whether was consumer Jonathan the it, well, is the the business the that Helix, and started digital customers about debit retail consumer out retail think I have there. If we is well, have -- of

of And in the market, see their type stuff. focus, unions of because credit shifting banks commercial have offer and capital, to so to of of their and ability more being their advantages ACH cost wires and you that

to So that. towards going commercial are and skew we see I pipeline are to the well-positioned think continue you more for offerings

Joe Vruwink

you. Thank Great. Okay.

Matt Flake

Thank appreciate it. you, I Joe,

Operator

call. And session We today’s conference question-and-answer for and the that conclude thank participation. you your does

disconnect. You may now

Q2 (QTWO) 6 Aug 222022 Q2 Earnings call transcript