QTWO - Earnings call 4 2023 | Q2 Holdings, Inc.

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Operator

Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Fourth Quarter and Full Year 2023 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 fourth everyone, for us joining Good and thank full our quarter call. year for afternoon, you XXXX conference on Strategy portion call. who and will are of today Businesses; and Mehok the Price, the us our our Emerging Executive me President, Coleman, our of David Jonathan our for Matt President Vice join Kirk CEO; CFO; With Flake, call the Q&A

filed statements industry. of subject to prove the and the materially to other from today. that financial in our This could expectation for we website, distributed we to reflected our those Investor be cause services in reports XX-K on significant our and expectations that this those call statements, assurance the actual contains operating among results respect forward-looking uncertainties, Form no of press from forward-looking results of are found on included and such materially future and full may regarding and year correct. Important be things, the differ that are annual with factors performance with these financial QX SEC, our statements may give or Actual of XXXX will contemplated statements including, forward-looking differ afternoon Relations financial to for the report of risks any periodic by forward-looking and including which subsequent discuss release our will filings section copies the the Holdings results the

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

also have to We today's on materials website. published Investor results additional Relations related our

Let turn me over Matt. now to call the

Matthew Flake

emerging I'll start call quarter today's I'll Jonathan over and highlights quarter financial businesses. sharing then for next results, and year the to for call our the strategy Josh. fourth the discuss results to Thanks, years. updated and guidance financial business. and provide full will our David on then targets by discuss from across year X our share hand first updates and full the our provide

financial end our expectations, fourth the to non-GAAP quarter, XX% million, execute of X% at continued the high of $XXX.X In generating up and revenue year-over-year we sequentially.

in signed than total in annualized quarter, adjusted our company $XXX record of million out revenue, in million, backlog sales year for we $XX.X adjusted of and over an $XX added we X record fourth of We was subscription demonstrated XXX margin previous subscription prior representing XX.X% our that Sequentially, largest performance also a XXXX generated EBITDA quarter. We history. of points by execution high or in higher more bookings revenue, quarter. single than million EBITDA the and a total closed outstanding basis with ARR, the XX% over non-GAAP approximately improvement a all-time recurring deals

strength in of win space top a platform was deal and union. highlights solutions. union the of our largest was differentiation retail a a with XX banking a the This deal credit win magnitude opportunity, and digital The to this retail credit

top in deal pricing X relationship a new was with win net largest a company history second U.S. The bank.

the of XX X our of top With pricing American customer, banks North relationship utilize now the solutions. addition this

addition contributed believe to the In segments. The in in XX shifted demand recap net of concluded institutions environments an strongest our deals attracting I'd we've product history, the a of and And quarter the a take rapidly impressive macroeconomic like we're small deposits, strong deals, performance retail, sales help with broad, portfolio expansion year position efforts. solutions digital year. the and banking tailwind created covering from XXXX, few looking fourth to full which and a platform on their minutes record proven quarter our financial puts the years. the that's mix institutions these believe across company Financial provider growing success environment focus capitalize deposits. market all to our grow dynamics. We in single to us business new target of at sizes and our ultimately to was for commercial sales sales most best-in-class financial back to And only to we sales the advantageous seen one to these on with strength a institutions of

sales only of and ever, fit, in terms teams bookings cross renewal. net the and market not in our year on deals, Our new strong demand biggest sales XXXX executed product also making but

total enterprise success addition have X all digital contracted our particularly Tier marquee had which of a We butter in signed with bread XX and the with And as of enterprise segments X year, X Tier in wins, we number and our deals commercial upmarket, deals We X relationship them of time and among won retail, small across the top of of X our and been business. long deals XX ARR. well, in to digital banking and Tier institutions. banking pricing terms business

conversations efficiency. might in machine innovation AI products of On XX new years, customers themes XXXX our and was learning drive discussion industry the they marketing using one for We've our around financial helping and customer fraud our in the almost and in front, biggest in advancements how product better services. our been the impact prevention, operational

new as using we're enhance tenet AI a core and by AI of keep AI-powered our partnering products, whether to to product strategy, intend portfolio. our we forward, innovation Going around existing developing

made XXXX anticipate delivering on the we and to enhance innovative which evolving on industry we're believe use progress our demands solutions going further more continuing be vendors leveraging help the cost employees expect compliant a in of customers that improved business. the have but and AI focus efficiency. We the efficient profitability potential to increasing year lead comprehensive not was revenue effective. Last that have cases by internal are approach across our we to our on addition, with opportunities In domain and deep financial for execute and way to expertise, our considerable institutions operational and their to to subscription AI, higher-margin already has our least, positioned that a which in efficiencies the

the sales improvement broad EBITDA customer We XXX basis drove performance, This experience, an product and and innovation culture. exceptional points full delivering of while our year award-winning nearly record maintaining continued adjusted for an the trajectory as portfolio confidence progress XXXX profitable product growth initiatives, ahead looking and business strength as well and the give differentiated beyond. rapid in our me demonstrate all our to our on model of

hand discuss emerging I'll it businesses. to our strategy updates and on our that, With Jonathan to over

Jonathan Price

the our for company. terms deals of net are And key breakout than digital participating choosing platform Studio, start sales in Studio year. QX QX I'll for It the Matt. Innovation customers the driving banking new XXXX Innovation Thanks, which reason of XX% more banking year today, was had digital a in in ecosystem. XX% as cited success of in in with approximately a

Now of impact increasing an Studio for has roster utilization Innovation customers. financial customer such the strong beginning our QX it's a and partners to drive

this banking solutions told us early have economic QX Innovation customers to our Studio's XX% drove of landscape even Studio their annual number strategic by us excited with innings and contract seeing the savings XXXX. We're of value through for offset to they revenue drive their ability a digital in customers effect, fact, of the over the flywheel long and Innovation In we're cost been our about than more the and able and in in continue the more have term. competitive they differentiating and cost only QX

of our launched and backdrop programs products more with XXXX. couple front, a added year fourth existing wins of of than new a and in Helix the of and biggest customers, we prior the fintech strong new wins challenging in had the some and a On quarter. key in In years, ended we developments customers extended spite number

late to We also focus Helix accounts. deposit expand is in began for cost-effective core our XXXX. a go-to-market cloud-based institutions to Helix to financial deliver

institutions financial began with of this bolster to are it's direct products our to wider value profitable in Given use institutions use for such which cost XXXX digital businesses able our whether strategy, on to believe customers. market the for and financial their and delivering tangible the more economic have to with a to we're our Helix for macroeconomic ROI Innovation in a use as announced generating as with quarter. We backdrop, quarters they're we've improving seen technology transform our bring strategic ahead. and the by QX an helping last a look increase and Helix from which emerging institutions gathering Studio, for back growth cases Fabric, launching in QX bank banking And deposit believe via through of as the natural efficient drive we'll several we strategies, year which by their financial customer the taking and evolution deposit well needs range relationship believe as savings. excited we're their our exciting demand business we revenue Creating financial closer ecosystem to true it base Helix, in institutions to is a we there

the financial With discuss hand over to our that, David I'll to call results.

David Mehok

delivered Jonathan. improved balance with Thanks, that flow across record many margins, cash concluded a performance stronger metrics a and fourth year financial sheet. The quarter key significantly

of our with bookings year the EBITDA fourth at resulting improved the year results, full free drove flow year over end-of-year which growth as of adjusted million, adjusted cash well strong in backlog. and and end balance For full from XXXX, financial we $XX EBITDA quarter, guidance the of doubled than prior as In cash more our subscription $XXX best-ever performance, ARR over record by of delivered million. the high

from our financial by as with XX% detail was million, full an targets. million, Non-GAAP now XX% were for year-over-year primarily from up $XXX.X revenue of will fourth increase respectively, revenue subscription $XXX updated banking I which customer occurred subscription the revenue previously and Year-over-year revenue discuss the and with guidance XXXX fourth associated solutions as and quarter fi in of to year growth our XXXX XXX in go-lives, and financial non-GAAP and contract XXXX, benefited of the quarter basis the X-year contributed mutual in driven XXX for total prior our well for for alt increase the rates. quarter. conclude more termination growth X% quarter results cross-sold the digital and the negatively an our revenue of also and XXXX increases sequential was the year-over-year up results the which points, Total impacted QX year. The sequentially. effect an during disclosed

for XX% subscription revenue bookings overall make growth our the strength Based the of was revenue continue record an revenue expect in mix a XXXX. during observed XX% subscription our was and high on year of Our our to we subscription-based total increasing year, the full revenue. will up in we

total quarter macroeconomic our revenue As of categories transactional declined company pressure Helix revenue by from year-over-year our non-subscription-based for year services impacted by as down been both have services some well XX% X% from continued which of driven by revenues with our quarter as aggregate, in associated in In lower fourth revenue, and year-over-year business, expected, represented nature, are pass-through more fourth and our professional the engagements, which period. the both discretionary prior declined in XX% factors. of the

of we're to profitable the growth previously, experienced our total streams from subscription streams recurring As to profitable strategy, and and we've and our we've most directing investments million, discussed at year-over-year our XX% macroeconomic we've we expect end part drivers annualized given towards services or grew up Transactional the revenue, revenue $XXX.X lower-margin $XXX.X of discussed, that industry trajectory million XXXX. revenue continue. Total in ARR the as

up million $XXX.X the from ARR million subscription $XXX.X XX% XXXX. at of grew end to Our year-over-year

primarily by decline in a with driven revenue. growth Our impacted strong by total for services as bookings performance the other as partially being well ARR and our growth was transactional year ARR

sequentially bookings million XX%. Our approximately by $XXX quarter. strength were of of XX% year-over-year new year-over-year million ending or backlog the $X.X renewal sequential had and and the cross-sale driven increases net $XXX of billion during record increases The and or

seasonality the typically magnitude our we performance. strong increase expect of quarter on year-over-year While sequential the in increase exhibit fourth an and clearly based the of the renewals, exceptionally backlog both bookings

strength XXXX. of was Our existing trailing net in the by XXX% discretionary our existing rate XX-month observed customers. from decline down revenue our customers, in services-based continued expected decline from reflected retention the with for some in offset subscription-based total The derived revenue XXXX annual XXX%, revenue

XX.X% margins previous was and were rates We a banking XX.X% XX% of churn revenue in incremental contract to as with period Our XXXX, related increase discussed impact for year-over-year year. a quarter. up well sales our higher fourth gross workforce. the in of margins more XXX mix XX.X% a resulted was see X.X%, revenue in reduction higher-margin in margin being for subscription prior in cost almost in by up the with quarter prior customer strength were in fourth expansion we also satisfaction. Gross improving by revenue XXXX. X.X% the efficiencies coupled the continued This for in in as on increases efficiencies of digital quarter, year cost XXXX of based increase XXXX. basis flat the below will X% Gross XXX in XXXX spend. The due total believe previously in sequential termination full of were from points year-over-year benefited utilization global favorable and driven churn the XX.X% mix approximately the our of the from roughly the from largely gained points Both which in basis churn through terms the effective and to continued well high year renewal of

sales efficiencies quarter quarter up million of of compared and operating improvement Total within XX.X% $XX expenses our the employees, in the our The with revenue more million million in revenue third revenue were acquiring continue of the revenue expenses year-over-year overall percent customers R&D we by fourth sales new to driven Xx million of the sales marketing $XX.X as XXXX. quarter from year within adjusted the as in additional X,XXX fourth adjusted the with business. was fourth to drive XXX of of The primarily for and million ended operating XXXX, streams EBITDA improvement the a and with full of expenses $XX.X the XX.X% we adjusted and XX.X% XXXX of year majority or of of quarter improved or revenue total and was by and cost we quarter to scaling $XX.X was efficiency. We or margins EBITDA points, for for fourth XXXX of $XX.X year. continue as approximately basis than higher-margin EBITDA adjusted primarily the the end delivered full X,XXX resources on-boarded functions. Total up mix in drive throughout to at cost EBITDA in

the from $XX.X equivalents cash strong end $XXX of operations fourth We management cash to generated favorable attributable the of million ended cash, quarter in and up flow operating the million, and year working strength quarter. investments flow at cash third with $XXX.X seasonality. million. in primarily capital We The was of from the

quarter. the $XX.X during free million generated of flow also We cash

year, million. of million the $XX.X operations generated we For $XX.X cash free flow and from of full cash flow

million flow cash $X customers free XXXX. delaying larger negatively by impacted a from was Our into few invoices over

on for flow As a payouts. quarter first bonus end-of-year a combined annual reminder, seasonally our quarter our is with cash low the payout, commission based

and forward, Looking cash expect EBITDA of free conversion XX% scaling flow to in on capital to XXXX consistent progress management expanding of over working in CapEx we revenue, cash adjusted and resulting our thereafter.

anticipate up the XXXX year wrap by guidance. revenue purchase XX%. in quarter and million, accounting range to revenue note, first We $XXX.X and representing any growth XXXX the beyond. $XXX our range from of of year do to with non-GAAP revenue to sharing deferred million million impact of year-over-year million quarter me associated revenue and first $XXX Let in forecast not to $XXX.X in non-GAAP Please full we full X%

million, forecast So our year. of to same XXXX first of XX% representing is the $XXX million, million full EBITDA revenue period. We $XX non-GAAP adjusted the for to $XXX GAAP million revenue EBITDA approximately as adjusted guidance $XX of quarter revenue the equivalent for and year

a year. to the to of of Rule believe growth our XX in back well half continue basis we're the positioned total target We achieve revenue on

our our performance the of next targets. on of the we year, for had In to new long-term year, targets minimal revenue X our unveiling next that and is for carried longer some reflective the addition profitable for the important XXXX the expectations growth XXXX, subscription the we're we're we our deals financial set It's most years. of to in execution targeting strong continued average This beyond. growth implementation to remember benefit also recent to of for outlook years that into have entering have These current addition strategy. Based pipeline approximately with early XX% in rate bookings in in an visibility provide us we've the of larger timelines while and quarter revenue signed the deals XXXX. X the

addition, In an achieve XXX expansion annual believe our profitability XXX basis with next EBITDA years. margin on that the over will X in we average progress adjusted to points continued of improvements, we

this generation. focus on we previously, flow As also to increased profitability cash mentioned extends

We expect in while few next expect to balance our business. ample EBITDA over free of the debt cash sheet to cash and XX% adjusted we increase run maintaining currently on flow the to our XXXX to years existing conversion over convertible retire

on and pivotal in with improvements drive ability it was objectives. in in to XXXX, our forward. remain the journey, confident key financial a year results meaningful our to on we we're back Looking We our continue pleased our made going progress

align to his call our will invest the to business, turn shareholders best targets. With our with our execute we in efficiencies for while continue areas for profitable back the believe on that, which outcomes Matt continue we returns over to will of and our we remarks. and the customers generate I'll closing strategy, As growth deliver we financial drive

Matthew Flake

than in the stronger XXXX, In is cross, the future off renewals, XXXX, in we resulting backlog of my performance bookings As record we growth. across net-new, business saw record ever. confidence and kick

innovation further on our want excellent thank to deepening We product our customers customer our also of experience, take and built and differentiation. employees. I moment a legacy competitive to

result XXXX Our progress execution. and of a tireless was throughout their direct commitment

impact the last and we're and with years bookings having environment, complex on few Coming off changing the of business. is conditions macro highly especially the pleased performance positive operating rapidly our a it

beyond. And second the acceleration execute in will expect to for to state coupled XXXX in implement we sales in And we expect foreseeable activity targets Thank on back strong to marketplace, future. Overall, the growth, backlog in in focus me the with on associated our to pipeline XXXX our to of We in half just help XXXX. our here profitability gives the financial come what as the subscription X-year with our drive ability the believe look excited deals environment for we improved that I you. And David revenue it I'll hand some XXXX, the I'm and shared. of success at operator the this of and and the larger that, confidence is stay growth questions. demand in is about a signed if deposits continue as we

Operator

[Operator Instructions] Your first Heckmann the Pete with question comes of Davidson. from line D.A.

Peter Heckmann

the to record Good bookings. see

Matthew Flake

really it, with We're Thanks. happy Yes. Pete.

Peter Heckmann

has of longer bit Can a in-house any these be little that might systems might suspects? about take bit talk some who cases, are competitive larger you of a in displacing usual deals, to Or these replace? change there be on you displacement, in some terms little been --

Matthew Flake

then, legacy they that the Yes. Win very were then And probably which always rates are and upmarket are been little at mostly at. it's were above we usual mean players, they've But and usual competed they I levels providers then the suspects. the It's a upmarket, the average. well. Pete. between

Peter Heckmann

can pricing, in it is but relationship cases, And remind in you on underlying revenue? much correctly, many there incumbent ramp those remember I then And how terms of is us, do no if volumes? how solution, Okay. to relation

David Mehok

customer. ramp it's upon David. of and Pete, Yes, is those the the way depends the the typically that complexity size it

the in that up for months larger up customers, solutions, the we XX pricing and one X we So to about a X on Obviously, call months. relationship then on go customers is have take can that Matt they the one. live to the X typical implementation. referenced larger can those But

implement. So that will take to longer

Operator

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

Terrell Tillman

potential say. in as is commercial cash want cycle, of management. right terms bookings guess well right place, the I in some Congratulations but question Maybe commercial words any cycle follow-up. mouth, many I flow. what's put a Yes. the or a opportunities opportunities here focus treasury? the continuing shed unit maybe sense I how don't me cycle? don't improved of, the you, deposits, just then light terms treasury have I and on on in like longevity replacement deposits in and goodness there replacement it on could time a had for with to your this multiyear visibility from And but terms you mean, and on should your of Matt, are, product on seems the I of more here more I this

Matthew Flake

been mean seen I of in doing very the much pretty I've this said, Yes, also internet time, popular. pricing like since I it's, environment relationship banking. Terry. beginning is The and haven't this a a long I demand like

it think what shows looking think products are our acquire deposits of and the power customers I the retain to center at deposits. prospects I and for. are our And of

certainly greenfield lot tremendous. new road retail don't on of is cross-sell signed go hope them as We opportunities obviously we that opportunity existing. if opportunity want for a the of power there'll deal, retail there commercial I largest deal The commercial We though our we a to of platform. was delivery the lose still quarter get plus into be the a have sight in that out So the well. execute down to

continuing successful us. were Studio Innovation -- relationship We really is in good expansion differentiate not really products. with had fraud But not it's we to for We successful were relationship banking. digital our just pricing. It's pricing.

had we of Innovation the banking the signed digital that Tier side Xs Studio included on them. All in

last would out the the would drained little but pipeline a you record the of healthier pipeline bit, think we had year after than it is the it, is kind to this there. So, was close And the year be momentum at time. that performance

You through it. management feel teams where And of the momentum relationship about faith to do the kind I got execute go on now. of products right the in it. But have build the and We confidence are full the that. to sales just and opportunity year the and good seasonality throughout organization go really

Terrell Tillman

wonderful That's to just I ahead financial Matt. surprised maybe thing ]. you. a I all [ have guess hear, just here David, pleasantly get was about to But years' of guess, you is, been I'm I one busy for target X of worth confirmation this curious call. question is the, getting into XX% of X if of the as much from? at where comes looking is EBITDA OpEx outsized items margin As What curious a the terms my math right? We're years. XX% out about gross to how that look I'm opposed of for being expansion? to any we leverage earnings is in margin

David Mehok

for both. Yes. purposes, would I say skewed be your OpEx a It be would of slightly Thanks, going modeling is it scaling. mix Terry. And to towards

of EBITDA XX% about the over the margin gross XX%. driving driving scaling, OpEx years. that improvement And X So expansion about course of

next about you can you as So each out I think that years. model of think X the

Operator

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

Alexander Sklar

up Terry's first on just question. I want Matt, to follow

growth in Can Just on bit some following great more know are a you're of and level last terms what like of being start pipeline up kind bookings just What I color on lasting. giving in in longer your terms terms seeing past at commented confidence? this of seeing you you've year. provide of the in of terms in growth growth of the little in that macro you the on activity? of you commentary this RFP or year

Matthew Flake

was the in pipe but quarter. on have which a builds, seeing of combination it the the larger a I said, we're as the right are in the activity RFP first is the an flight but activity, ago deals is And I that it's now. plus good always there than Well, indicator year it -- number don't

getting holiday gets of carryovers year. just is It and You have end the some the the from way. busy

a foreseeable build all So it and for from when it's pipe based the credit and future. engagement confidence And right I have the we're gives lifeblood combine banks the it of this our lot to around things deposits of on continue unions those the in executives prospects, me at and of should now. environment we getting

Alexander Sklar

Okay. that for bookings this the in you David, The the late fourth just I either. year on to hear saw a Great. renewal the didn't. And activity stage great here. And good start know has That's kind you a exhaust quarter. bigger record didn't that few in in been any Or from the for last talk QX of you expansion area saw company just there? the your other you you're Can renewal? on focus metric what about quarters. tracking this investments

David Mehok

QX. see Yes, talked And we renewals of this typically about previously, Alex. sure, in but lot place we take a

to as your specifically, better our of process, in If ago. how seeing deals year go pricing of you the It's we aligned. And depending ago through what This question a time. in QX. is go we're upon raise and And getting of set. product we're seeing renewals about We're is XX%. back year XXXX, to obviously, relatively opportunities the economics to to saw or about XX% out compounds we our renewals uplift renewal that opportunities this resulting an and all of then that years is expand more maintain priced were over happen

more So like they continue teams the quarters, the subscription starts the on that going have forward build last execute to for revenue to next on few years. few more our the the this

Operator

Sachs. with comes line Hotchkiss Your of Goldman Adam from question the next

Adam Hotchkiss

is Or function top would and forward Any funnel would replacement? with you're there through of evolution just level Are existing go color philosophy companies helpful. change saw in the the management with I solutions curious a change seeing of similar of if proportion of anxiety wider and a stick be an typically pushed be around a guess, QX. you you momentum friction with in Matt, higher I'd that much conversion? seeing this more a

Matthew Flake

we the Big to I you, technology the people Big I customers legacy tech" that the urgency coming as depth went back can corporate to breadth that replace those product, that's of they saying, retail but X. that the experience, solutions. the in sense compelling our X and And more on platform, the with business efficient. bank lot a were went customers product, get of is it the it's efficiency, just from, see A product our user think a it tech went then it of the go, of deposits you single story. a to March, very commercial around well that hey, to all with platform to as a better what couple these, go got drives demand because all came coupled we of small and the to using drive where want makes And data your bank fraud use with you and upgrade off and the got

think just, the I environment that we momentum said, really the something on carries [ itself was had whether a long of fear hate into Tier ] the in I year March they it's in time, -- X X. I lot seen changes. 'XX. got And them a Tier or it but that X, a Tier that's like why a execution, making these that focused haven't and the lot I software. into of to it, And So say ran record

this they digital there. drive platform best acquire this is think a I credit have and to deposits have they experiences in out banks to decision unions and that to environment, have retain making to are that So go the is where user

I and where card get acquire they're do so of the making be, and the and it the those it and payments deposits. core to to kind like run technology can bank up things to think, customer experience So needs retain overlooking they're to they decision

Adam Hotchkiss

guidance way, EBITDA if EBITDA on you and bit revenue for expect you embedded a be the focused when margin sense XXX medium-term were about you for still perspective? what's margin like there dollar the that? you would from are talk you expansion another achieve able I segments guess, basis to better transactional see to services, to performance better David, points. then, more Or Can said give in to a XXX us And mix a lower generation?

David Mehok

Obviously, X land expecting have you that of numbers and lay that over next I the just we're sort Yes. first, out mix. subscription around mean there years. reiterate the average XX% of to the revenue the the

forms period We today, on what services. both revenue, we continued transactional the expecting of on are time just and other based that pressure over the of and know

seen low as the Just declines is it think single-digit which few over we've quarters, of year-over-year. last what

revenue do So see pressure pickup to some of those margins. we if see in any a start streams, on our you gross

very we of business a that in we're types case that certainly of job good would the spend And margins Now, other here. like areas to committing addressing the we've feel of maintain be the to. done our

on upon pressure here. revenue, some based adjust some that margin, that So if we lower given hit make incremental these we've line we that with we'll gross margin spending the items targets of are sure see to our

Operator

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

James Faucette

should we're be? business be of level ultimate if key margin X-year should question you at the about accordingly. clearly, you kind is, et follow to the Great. cetera, is least or how you think where as adjust just beyond I And How said, want we objective horizon? margin your be it's on you what for thinking should a looking achievable even for expenses, are the you'd thinking about,

David Mehok

Yes, James, margin. right I'm now, assuming you're EBITDA about And talking we...

James Faucette

yes. Yes, yes. Yes,

David Mehok

structure look, going that but done. lot get a and mean expand mean, we things X grow think to that's as forward we doing continue as $X of doesn't there's continued the from like to we're to stopping. that to We're 'XX. We're and have time. certain going company number And road, We an continue I this but margins we on business, organization give give term I feel some fixed. We of number. But before, nor we certainly over is, XXX not cost opportunities specifics pleased like can expand. to next XXXX, going it just on to continue the the And as an billion, to provide certainly we're have that a are this are to naturally this we to scale on the sustainable. not those get and that, exact our And it's once the from the going the a we now. not to approaching we're years, XXX we're, is I've company, we We're there's with case the Yes. efficiencies expand opportunities said that we there. build feel across agree driving all we're aspects of certainly this to that's out targets down the out at point over exact

James Faucette

yes. Yes,

some allocation and then order super can your helpful. imagine about make looking, flow uses to levels? enterprise as on how you to And do would the you you release further the us I'd be that improves? in you sense Are how should That's customers. to bring to for Okay. acquisitions? cash you're or flow that equity that generally? should thinking And of how be capital you about allocation, may expand change shift mentioned deliver that value there that. But from free of it more of service down primary To one does cash buybacks free debt, rank the debt we kind capital think capability And conversion can

thinking Just trying to think rank prioritization how now? about order you're right

David Mehok

then retire be pivot focused today, the to of might we over we off, start coming about backdrop debt. But macro but here M&A you used we to that, 'XX, avenue sees things deploy that hand because as today how it one going have and change, they as we 'XX and can here maniacally but standpoint bit Jonathan that may the cash I'll due the debt we environments and He from forward. we're the I'll talk our James. and lay we'll sit do, he landscape, that's to land mean to given Yes, in Jonathan. little on given capital. and a able have generate typically cash today, of I as give the a that the how be continuing obviously, to can sit

Jonathan Price

higher-quality assets. with to James, assets table be months. higher-quality market. we are Even haven't free taken that our skewed last we here adjusted come that flow value come expect feel expectations also more and with up the in pretty place early public but XXXX, cash time that to willing opportunities the M&A several confident to realistic that yet through scale the see the market will that profile, pipeline not the still have And tends converts over to when timing valuations we folks pretty of with as we to well the to work and

into And be sheet the in competitive we'll markets back a of be 'XX you're 'XX, balance credible to from we think a be So position, in going as I those broadly. in think perspective into the I and to get more see stronger M&A deals. more volume we'll

longer-term a it's capital when think think we allocation via M&A. I about so opportunity And

Operator

of next Your question the comes from Canaccord Genuity. Vafi line with Joseph

Joseph Vafi

My pricing is? And just still wondering have the and the congratulations marketplace. as now with well. it a if But dog any landscape. you're start a I Maybe years power like And business sounds just follow-up. it's dog eat have competitive obviously, -- couple generally, ago, competitively in we you're, well doing pricing how a if of then you versus the in environment

Matthew Flake

Yes, Joe. look the you at up, if ASPs they're I are mean, our up. ASPs, pipelines

a that price as we're as prospects, much. price our not too We, the are a are to I shield. game to looking and this We don't our weapon want. the drive we able technology customers, into So get really use guess, ones

of we the people so continue on it's is group probably probably a that is running not, expensive. with cheap they're actually usually going product little to less And

build that support expensive It's to expensive to deliver It's understand they So to it's it. expensive this. it.

be they believe our for, but customers of about on to be growth. our progress profitable are want they're value And They so fair to around. want also us a excited profitable. Many receiving we us

the So for command or the using price the we of road or sell them. efficiency they get for, we to able able deals strategic need continue we're that platform whether to in customer it's be the because of the value kind these to operating experience data down

really the to go as ASPs and in they up shows that in has that differentiated continue all us market, up. So

Joseph Vafi

and now? Great. understanding that are we're how example, about focused really coming lot And converts you're seeing case, if But debt product that on a expand? to kind of areas the paydown. lot these of right the traction, the like. then feel overall in to a the not Are and of just the for do algos next-generation continue suite there were lending you mean, I

secret giving And map? without mean, do I the up this are portfolio strategic sauce, at to the there the areas on to look point? product Just, add road nice you overall how some at

Matthew Flake

the 'XX means that say product Yes, lot and are I and coming or Joe, just in products experience, commercial, relationship Helix, we board. in talked that we're 'XX fraud, 'XX we've user the pricing, things in out, about of That the other a invested AI. investing some would there, across

it. to of all area. XX% on So somewhere We we're those run at going in in committed do We're to and investing that products. to continue still R&D

the better digitize slow end I make tablet don't a we're, customer the whenever tell of me a provide both user so features there's, and more build person experiences. to desktop. for I I'm there's down. But in we're got experience them do phone, And or we've bank to need prospects do right now, to then to the with efficient mobile a as the And that trying trying or bank a as and tell people on phone build that good. functionalities lot a for over you and to well anything every we'll or

to we're what are going those able gives targets to and years. company of to because be all what and durability differentiates continue achieve places X XX it's investing areas to it's over next in we're that us us our do the to So in this

David Mehok

servicing build our because prioritize need The is And on We're to does due. want no has to us investments or in way in the of Joe, most. That from critically just the shape us, debts the point. prevents important Matt's of in and investing been, key That us coming aspect customers retiring that form not and still change the product always debt for continuing our is. product.

Operator

Choudhury from comes with Adib William the next of line Your question Blair.

Adib Choudhury

been days early but guess was you Fabric, been seeing uptick on the last a kind base could And kind if your interest existing lot of realize couple there, since comment you've from initial you've it's of customer I getting on launched? of the months? of over I of product that some

Jonathan Price

lots having yes, is conversations. the we're is That the Adib. focus been existing on has And of Thanks, customers. Yes. early where

Matt's to core. lightweight ties deposits. Fabric, banking their And them they think product opportunity solution have point think around with an I already the leverage around existing orientation an they it's into it back to when our about tied digital for

conversations are velocity looks call of great. It's and early of here for see going early, much so of early we 'XX, tons terms they're growth around deposit And of strategic exciting interest well. it's right we're to pipeline gathering base bookings signs sort the expect in just these it's strategies conversations, how to just, those part too but the in retention from customer of and and seeing our all institutions. so

the and credit sizes asset across spectrum. across all banks it's It's unions. And

pretty but evidence to more give excited you and see the sense, that months making few to color. to come how we're next we and just seeing got execute over conversations is good strategy So fruition these the

Adib Choudhury

years, acquisitions commented Okay. ClickSWITCH, Sensibill. know you over Good of But your opportunities already of last I on of to potentially future. in some the hear. thinking guys your kind about the recent your, or couple And M&A PrecisionLender, of some

deals, you on they reflect of could kind on expectations? of you kind how your maybe to As these performed relative comment generally

Jonathan Price

they're we're cases, cross-sold about side, driving a business. of initiatives I heavily deal in technology most deals it. the on cost their unique ways Sensibill to internally digital some in drive like recent seeing think think being I use the across about prevalent efficiencies and and cases them They're I our mean, where think, and banking the now our deals, very we AI platform alongside using mean out Yes. I are

think recent it. So we're the about about most we certainly deals, when excited

go valuation we time, As obviously, paradigm. back in different

enterprise even upmarket we're as element in that is our deals, about but for the biggest very the product think topical that done there's deposit today, of So banks, we've acquisition pricing strategic, today, the in through very relationship especially space. environment thinking those we ever

see future when what And we're Studio think customers visibility so want adopt unions about and what adjacent really banks we credit their one thing really just a the care their good seeing sort Innovation the M&A that. of we is ton of credit about I'll banks discussion of the on side, unions to the into And technology-wise. and to also feel here about our add get that areas

it need that's to products as in action. company, informative go think to We as see it. to clients those of for but use very their we so about longer-term us the organically get where or a see And we we be inorganically, arc get

in areas important I that whether an to perspective. areas of to exciting today point we we in are a around applications, to that's earlier adjacent one need term, questions so about maybe the how like we And it's the informed think small payments business play the longer-term think that's get where don't that like pretty longer from

in want I to So well. there that throw as just

Operator

Your question Lane with next Stifel. from comes the line of Parker

Matthew Kikkert

on Parker. is saw the Kikkert record you Congrats QX. for bookings and Tier on Matthew This wins large in

that increase that in have First, the revenue any resources given flow the backlog, given quicker? through there you to thought to allocating more

David Mehok

certainly effective focused on and to resources so. years this we in now are delivering manner. do these been XX that how Look, for an to and doing the very slot We've needed understand Yes. these are

be. certainly frankly, capital towards making the can in possibly quite are as we it dedicating implementation So processes the resources place, right as getting and seamless

that yes, So driving efficiencies on through process. that. we're very focused But

Matthew Kikkert

solution to Andi your looking demand it. been and the that And out Got roll spoke? any be add AI to additional been XXXX, what you'd since as Is has then in there you feedback continue Okay. to like we functionality last feature?

Kirk Coleman

feedback. early good It's, that It's take really we've Yes. I'll Kirk. question. had

So we're in pilot with that right now.

who not that feedback live of actually day. just from every using kind bankers getting like teams, commercial really we're are but project from So

of opportunities sort our use as we spread across straight areas in well of both into to as we customers. for to other the products that internally still we're willingness from And us that work early and customers our their in that. life but the that with that's to product engagement getting it's on happy with cycle, we're development kind business, other our look deliver and really So really

Operator

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

Matthew VanVliet

to kind story a continuing on M&A more one great as when, the factors in in just always extension And of the of at customer it that? biggest line monetization new remarks what growth. we you if in as curious the of to of the mentioned that all, you're you're bottom much pipeline. But from a this the is contribution mentioned much seeing as You Innovation how platform, delivering And as sort visibility then driving into and is near value that prepared top maybe also driver? to of Studio be the QX gives viewed the Or directly great isn't term? realize the of do big and P&L

Jonathan Price

still a a think, growth but from mean, we revenue well base. look, talking XX%, north I Matt, let's small outsized say, from perspective, we're would say, I I saw of just

is line winning we business of this conviction both for Longer of line term, so much explicitly the retention a in because impact strategic still that on haven't Studio and have Innovation has our very is And we that entirely new an that item. elements disclosed what tends and revenue in financial net one, deals, this to be the the top but both it it is revenue, that margin terms a and profile impact recognizing also we're model. on

happy a 'XX. where material it's is separately, is that So were have cycle longer other enough it the the a very to still much be with conviction both. to small to lines there we going very relatively we to disclose compared on side we year of forward but this out It's disclosures And on just in business. we our put perspective financial have numbers from the would

Matthew VanVliet

Whether current or do customers at customers terms to we at side maybe the feel to then success angle maintain But set looking finding continue Tier But curious, growth great wallet of terms where you in much to to customer on of like with you growth? at it. your more Okay. existing can it's entire opposite and Very across you expect logos cross-selling have the product going the have out with new helpful. And base? X of, of you're how even share? the compared in

Matthew Flake

it's are billion to customers more think we number $XX XXX a quantify. we But that about hard that have, in Yes, than if you Matt, the have customers assets.

ability you to either You plus number a have significant of fraud or sell our the have relationship pricing, into those, products. commercial retail

these opportunities. really Innovation it's Studio. The have early opportunities, for in You us

cross-sell commercial was That customer. retail did one quarter to a One a of Tier the Tier we of the was Xs Xs. in the

renewals customer That's look of And sticking they a there's the when were we with year-over-year you lot X those So at up XX% quarter. opportunities. another years. you fourth or did, that's the a for that whatever in

going products. the cross-sell able you're typically be more And so means to of to that

that So product AI we're or of the Andi products. and whether the things, road map constantly we ties innovation, our have, any that those it's Copilot new to the building or R&D,

cross-sell years customer So as go there's a and tremendous which base, amount for think us to this a on of and revenue us of into greenfield profitability. we the about provides lot comfort coming

Operator

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

Andrew Schmidt

to to clearly embedded we about Can longer-term a XX% the of that's terms cross-sell in in could talk in longer-term high another. outlook But talk good the what and Perhaps outlook drivers the dig user at have growth other those just may a kind or gets bit level. here. about And in wanted existing the what that new, through you point some little certainly subscription or Just you one appreciate drivers XXXX. the bias growth. of When think probably on way growth net some visibility XX%. at be could through

David Mehok

this I won XX% upon that we based XXXX, factored lot tailwind visibility mean Sure, instance. into numbers into we you're have the And right. Yes. in better and that's large XXXX a the Andrew. the the we provided, do opportunities of in

over from net change We then from a think for see XXXX. the net XXXX. coming that to start you and we've of it's a I forward going coming see is years, less we we of going historically. predominantly But the opportunity we they're But what coming look from next lot to more the you're bit if we A new, think XX% of to those cross. -- dramatically driven going from as too typically don't over seen dramatically, XX% will, year that, with me, you bookings and think half lot to bifurcate, little -- bookings new. But cross new, as I the from I've anywhere go between little be X this we in XXXX converge. try course out to the obviously, the from get bit online, model coming remainder them to continue that's have see you when think don't do start XXXX cross new. to and net converge beyond time, going to and As and by said, XXXX of that to a to excuse in are the net first you this do

Andrew Schmidt

it. then Got just ask And on could if cycle. sales I

into of anything bank view the and with heading about perspective year? from banks executives you've but rest to that and think is adoption through this of topical cycle there's unions. we're credit from maybe malaise if I if the a coming call, kind of time a in hearing back XXXX, a as talked I up. was sort bit So a of about But the and there's, previously of know uncertainty. different election on Obviously, remember there little And the in technology you're you talk a period their sales if result this

Matthew Flake

uncertainty. may our things unforeseen. where then or you play going barring interesting of how a the definitely that what's something yet candidates after done knows a it's around on happen. But, much be with nothing will. But don't going done, I there's know 'XX out. some there's don't customers right decisions those because who get you crystal after was two we heard unique will of around I the But not. the Yes, more have COVID it because prospects call may focused. known commentary don't haven't Andrew delayed, two haven't as unknown it as and two see and know to the election. I'm a was the I it's a get But don't have get But as don't to People land. solid have to looking want any lot now, predict. election going lot you election pipeline, it commodities, done. have you're what to out But at. closer, in decisions -- heard will there I of a year, I the to it's I you And ball. they're think be commodities. long gets sure had I you'll right was November slowdown. 'XX year this you

build in yet, back, So I'm right looking. we'll probably have feel We not there's how pipe like I seeing that's it August But information is now, said, solid. more but of no the report pipe, just as year and the the other what control first half have and manage we to and we can continue control a to we got can going of we're solid to the stuff through.

Operator

comes with final Perlin your RBC. the line question And of Dan from

Daniel Perlin

market you it. these There this know I'm through about deposit just and sit massive is capturing days. this mentality trying of I clearly the like forward demand? right your time at all gave just to the are we as the, concerned gathering about pull things and you the had of optionality make a hitting are question guess, of in targets. think of kind kind you're that I sure here these like I calibrating in this, Like

have pull early kind visibility. and kind was there does obviously So now? sense you about of right year of I'm a of like happening a And then how trying conviction into it part lot tapers think off? I to that? of and you're it next mean of you thinking that's a the do forward continue just But, get

Matthew Flake

I then supply, deposits the which think demand I the for deposits to is future. what's mean money Yes. shrinking critical think be foreseeable going you this for and if driving are about rates,

up. I went don't they going as as fast see down fast Yes, going went. as rates so And down they as

our customers for at as the And being for the of future, I can these, deposits you're universe so see, prospects. foreseeable the far to think have as for center and I going

going the going but while 'XX, I'm So hay to happen shine hard and we're to out doing. that's what to sun say in what's make

relationships So happy out there's win those going deliver opportunities and them, them XX, there. have continue to with go these and them we've and like XX-year to to and try them and We're them to keep at grow customers. try hard done we

Daniel Perlin

totally agree. I Yes.

follow-up to massive backlog. this an you've But Just earlier kind of another, got it's a question.

this for off. take the growth similar the You're really start pretty ARR rate of to aggregate But guide. numbers year terms subscription to see starting in in to is 'XX's the

get the despite not that's total number you're fact a So that materially accelerating big a seeing you revenue demand. bolus and

about, and But an of out there 'XX? So we cycles. is Or really you be trying talked as actually here to implementation opportunity like bit should a material guess, that? see we is that you visibility this like today, good little a sit could coming I with prioritize re-acceleration 'XX comfortable into just just

David Mehok

XXXX. in momentum Yes, Dan. based mention do you In we see acceleration to the subscription prepared saw we a Matt's did that bookings in remarks, expect QX, upon

embedded is, you XX% number sort So average smaller part headwinds bit the see reality of services. But a that time, of over of is Where pressure and becomes transactional that that's that mix. number. in and of smaller the this continued on little a

So to It's mark been well. profitability some and our you've increasing an it soon, on going you has into at XX% is to business how the why the focusing obviously point got as to model breach calculus of fit we've importance which that the subscription. going forward,

Operator

today's conference We for you conclude that And will thank joining. call.

You may now your disconnect lines.

Q2 (QTWO) 21 Feb 242023 Q4 Earnings call transcript