Q4 202 Q2 Holdings Inc Earnings Call
Good afternoon.
Aaron: My name is Aaron and I will be your conference operator for today at this time I'd like to welcome everyone to the Q2 holdings fourth quarter and full year 2024 financial results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session and if you would.
Aaron: To ask a question at that time, you will need to press star followed by the number one on your telephone keypad to withdraw your question simply press Star followed by the number one again thank you.
Speaker Change: And with that I would like to turn our call over to Josh Yankovich Investor Relations.
Josh Yankovich: Thank you operator, good afternoon, everyone and thank you for joining us for our fourth quarter and full year 2024 conference call with me on the call today are Matt Flake, our CEO, Jonathan Pryce, our CFO and Curt comment, our president who joined US for the Q&A portion of the call.
Josh Yankovich: This call contains forward looking statements that are subject to significant risks and uncertainties equally among other things with respect to our expectations for the future sales operating and financial performance of Q2 holdings and for the financial services industry.
Josh Yankovich: Results may differ materially from those contemplated by these forward looking statements and we can give no assurance that such expectations or any of our forward looking statements will prove to be correct.
Josh Yankovich: Important factors that could cause actual results to differ materially from those reflected in the forward. Looking statements are included in our periodic reports filed with the SEC copies of which may be found on the Investor Relations section of our website, including our annual report on Form 10-K for the full year of 2024 and subsequent filings and the press release distributed this afternoon regarding the financial results, we will discuss today.
Josh Yankovich: <unk>.
Josh Yankovich: Forward looking statements that we make on this call are based on assumptions only as of the date discussed investors should not assume that these statements will remain operative at a later time and we undertake no obligation to update any such forward looking statements discussed in this call.
Josh Yankovich: Also unless otherwise stated all financial measures discussed on this call will be on a non-GAAP basis. The discussion of why we use non-GAAP financial measures and a reconciliation of the non-GAAP measures to the most comparable GAAP measures is included in our press release, which may be found on the Investor Relations section of our website and furnished with our form 8-K filed today with the SEC. We have also published.
Matt Flake: Additional materials related to today's results on our Investor Relations website. So let me now turn the call over to Matt.
Matt Flake: Thanks, Ross I'll start today's call by sharing our fourth quarter and full year results and highlights from across the business I will then hand, the call over to Jonathan to discuss our financial results in more detail and provide guidance for the first quarter and full year before I conclude with a look ahead to 2025.
Matt Flake: In the fourth quarter, we delivered results above the high end of our guidance generating non-GAAP revenue of $183 million.
Matt Flake: And up 13% year over year and up 5% sequentially.
Matt Flake: We also generated adjusted EBITDA of $37 $6 million, representing 26% of non-GAAP revenue an improvement of approximately 630 basis points of adjusted EBITDA margin over the prior year quarter.
Matt Flake: We closed out the year with outstanding sales execution in the fourth quarter, posting the best bookings quarter of the year and the second strongest bookings quarter in the company history.
Matt Flake: Our bookings performance was powered by a balanced mix of net new and expansion wins highlighted by seven total tier one in enterprise deals and was the best cross sell as well as the best renewal quarter in company history in terms of total bookings in particular, we view the renewal success is a strong indicator of customer satisfaction.
Matt Flake: The strength and differentiation of our platform and the overall value we're delivering for customers.
Matt Flake: Our fourth quarter sales performance underscored a great year for our business to capitalize on a favorable demand environment is very strong sales across the board, we help customers address a wide range of challenges and opportunities across retail small business commercial and fraud management, leading to a record year of renewal activity and we delivered consistently.
Matt Flake: <unk> financial results that have us well on pace towards our three year framework.
Matt Flake: After a record bookings year in 'twenty, three we followed it up with another strong year of well rounded sales performance overall, we signed 25 total tier one and enterprise deals are most ever in a single year and within digital banking, we drove significant volume into tier two and three space as well in fact, we signed nearly.
Matt Flake: Twice the number of digital banking deals in these segments as in the year prior.
Matt Flake: Our ability to compete effectively in both areas is a testament to the breadth of functionality, we have across retail small business and commercial use cases and the reputation we have built up market over the last 20 years complementing our success with new and expanded relationships. We also achieved a record breaking year for renewals with bookings from renewals up 80.
Matt Flake: Percent year over year.
Matt Flake: This solid execution demonstrated the resilience and growth of our customers in a challenging market environment.
Matt Flake: Well as their reliance on and confidence in our technology to support their strategic initiatives.
Matt Flake: Also there is no question that Q2 innovation studio is playing a large role in our sales success innovation studio continues to be a valuable differentiator in net new sales being cited as a key reason, we wanted more than 90% of our wins in 2024.
Matt Flake: Throughout the year customer and partner adoption also reached new levels, leading innovation studio bookings to more than double year over year on.
Matt Flake: On the relationship pricing front, we signed a number of meaningful new customers in the tier one enterprise segments to continue to expand and renew our existing relationships. We've talked about the ability for these products to price the entire commercial relationship not just loans.
Matt Flake: And that was key throughout the year in a volatile rate environment, as new and existing customers purchase modules to price non lending products like Treasury services.
Matt Flake: We enter 2025 with solid momentum and are optimistic about the demand environment in the year ahead.
Matt Flake: Our risk and fraud solutions had a tremendous year as well dramatically fraud is one of the most pressing topics on the minds of virtually all of our customers.
Matt Flake: Of the vital role our technology plays our customers look to us to help them manage fraud across the retail and commercial account holder lifecycle from authentication to enact behavior the payments and more in 2020 for our solutions help mitigate more attempted fraud with our customers than ever before.
Matt Flake: From a bookings growth standpoint, our fraud solutions are one of the fastest growing solution sets.
Matt Flake: Given the heightened priority being placed on mitigating fraud in our end market. We expect to continue to see healthy demand for these solutions and we believe we're in a great position to help our customers rise to the challenge in 2025 and beyond.
The key driver of our sales performance throughout the year was the breadth of our platform, which gives us a natural expansion opportunity with existing customers and because we spent 20 years building a strong customer base that opportunity as significant take or commercial customer set for example, while <unk> and wires were in our first lines of code back in 2005.
Matt Flake: We spent more than 10 years investing heavily in building out our commercial functionality and user experience and as a result, we've been successful delivering and supporting some of the largest and most sophisticated financial institutions in the country.
Matt Flake: Today, we have more than 60 tier one financial institutions that utilize our commercial digital banking solutions.
Matt Flake: The result of significant innovation investment and sales success.
Matt Flake: But that means we still have approximately 50 tier one digital banking platform customers that do not use our commercial functionality today, representing a meaningful expansion opportunity to cross sell commercial digital banking and Thats. Just one example.
Matt Flake: This dynamic powered a record year of renewal and expansion success and is a key reason, we did such a high volume of tier one and enterprise deals.
Matt Flake: Because of this single platform dynamic we continue to expect expansion to play an increasingly important role in 2025. In addition to our continued momentum on the net new side.
Speaker Change: In summary, we delivered strong financial results in terms of growth and profitability in 2024, we significantly outperformed our expectations in the first year of our three year financial framework and successfully reached our rule of 30 goal on a total revenue basis in the second half of the year before I hand, the call over to Jonathan I would like to take a moment to recognize the announcement of an <unk>.
Speaker Change: <unk> to our board of directors I'd like to take this opportunity to welcome Andre minutes to the Q2 team Andre brings a wealth of experience in global privacy cyber security and financial technology, having held senior roles meta Newport Group Red Ventures, and Microsoft among others has expertise in data protection.
Speaker Change: <unk> and compliance, particularly in the financial services sector will be invaluable to Q2, and we're excited to add his perspective to our board Andrea officially joined the board on March one.
Speaker Change: I'll now hand, the call over to Jonathan to cover our financial results in more detail and provide an updated outlook for 2025.
Jonathan Pryce: Thanks, Matt we're pleased to announce fourth quarter and full year results that outperformed our guidance and we delivered strong results across several key metrics, which demonstrated continued execution of our profitable growth strategy.
Jonathan Pryce: We've seen robust growth in our subscription based revenues advances in our operational efficiency and noteworthy improvements to our cash flow generation.
Jonathan Pryce: Furthermore, we believe our record backlog and solid subscription growth positions us well for continued success in 2025 and beyond.
Jonathan Pryce: With that let me start by discussing our financial results in more detail and conclude with guidance for the first quarter and full year 2025, as well as providing an update to our three year financial framework.
Jonathan Pryce: non-GAAP revenue for the fourth quarter was $183 million, an increase of 13% year over year and up 5% sequentially.
Jonathan Pryce: non-GAAP revenue for the full year was $696 5 million.
Jonathan Pryce: Up 11% from the prior year.
Jonathan Pryce: The year over year and sequential increases for the quarter were primarily driven by subscription based revenues, resulting largely from the delivery of new customer go lives and additional solutions with existing customers and.
Jonathan Pryce: In addition, our sequential revenue growth benefited from an increase in onetime professional services work in the fourth quarter.
Jonathan Pryce: Our subscription revenue growth for the full year was 16% and represented 79% of our total full year revenue.
Jonathan Pryce: Based on the strength in subscription based bookings we observed throughout 2024, we would expect the mix of subscription revenue to continue increasing as a percentage of our overall revenue mix in 2025.
Jonathan Pryce: For the full year, our services and other revenues declined by 11% year over year. As we've mentioned previously this downward trend is largely attributable to a decrease in our professional service revenues, which tend to be more discretionary in nature.
Jonathan Pryce: Given the consistent pattern, we've observed throughout 2024, coupled with our strategic emphasis on pursuing higher margin growth opportunities. We expect similar trends within our services segment to continue for the foreseeable future.
Jonathan Pryce: Total annualized recurring revenue or total IRR grew to $824 million up 12% year over year from $735 million at the end of the fourth quarter of 2023, our subscription IRR grew to $682 million.
Jonathan Pryce: Up 15% year over year from $594 million in the prior year period.
Jonathan Pryce: In anticipation of the tough year over year comparison against our largest bookings quarter in company history.
Jonathan Pryce: We previously communicated expectations of subscription AOR growth in the fourth quarter of 12% to 14% year over year on.
Jonathan Pryce: On the back of the bookings success in the quarter, we were able to exceed that range and delivered 15% annual subscription AOR growth in the fourth quarter.
Jonathan Pryce: Our year over year subscription are our growth was largely driven by bookings from net new customer wins as well as cross sell solutions with existing customers. Our total IRR growth continued to be pressured relative to our subscription AOR growth by the decline in professional services based revenue we previously discussed.
Jonathan Pryce: Our ending backlog of over $2 2 billion.
Jonathan Pryce: <unk> increased by $189 million sequentially, or 9% and $387 million year over year, representing 21% growth.
Jonathan Pryce: The year over year and sequential increases were driven by bookings success across new cross sale and record renewal activity.
Jonathan Pryce: Our renewal performance was strong in both the fourth quarter and the full year 2020 for the fourth quarter of 2024 marked our strongest single quarter ever for renewable bookings, culminating in 2024 is the best year for renewals in company history.
Jonathan Pryce: For the full year of 2020 for the total dollars added from renewals increased by 80% from the prior year and in the fourth quarter alone, we renewed 10% of our entire digital banking customer base.
As we have mentioned previously the sequential change in backlog may fluctuate quarter to quarter based on the number of renewal opportunities available within that quarter.
Jonathan Pryce: Our trailing 12 month total net revenue retention rate for 2024 was 109% up from 108% in 2023.
Jonathan Pryce: This rate reflects the continued strength in subscription based revenue from our existing customers offset by the expected decline in discretionary services based revenue as we previously indicated.
Jonathan Pryce: When looking only at our subscription based revenues are subscription net revenue retention rate ended the year at approximately 114% compared to a 112% in 2023.
Jonathan Pryce: Our revenue churn for 2024 was four 4% improving from six 1% in 2023 Asics.
Jonathan Pryce: As expected heading into the year, we observed a reduction in overall churn and our digital banking Sharon was well below 5% as we experienced record renewal strength.
Jonathan Pryce: Gross margins were 57, 4% for the fourth quarter up from 56% in the prior year period and from 56% in the previous quarter, both a year over year and sequential increase in gross margin were driven by an increasing mix of higher margin subscription based revenues and increased efficiencies within our delivery and support functions.
Jonathan Pryce: <unk>.
Jonathan Pryce: Gross margins were 56% for the full year up from 54, 5% in the prior year, representing a 150 basis point improvement. This margin expansion was driven by an increasing portion of subscription revenue in our overall mix coupled with enhanced operational efficiencies from our global workforce.
Jonathan Pryce: Total operating expenses for the fourth quarter were $75 4 million or 41, 2% of revenue compared to $74 8 million or 46, 1% of revenue in the fourth quarter of 2023, and $72 6 million or 41, 5% of revenue in the previous quarter.
Jonathan Pryce: The year over year and sequential improvement in operating expenses as a percent of revenue was derived from increased scaling across all operating expense categories with G&A showing the biggest year over year improvements.
Jonathan Pryce: We ended the year with 2483 total employees up from 2000 and 315 total employees at the end of 2023 with the majority of additional resources on board it within our delivery and customer support functions.
Jonathan Pryce: Total adjusted EBITDA was a record $37 6 million up 62% from $23 2 million in the prior year period, and up 15% from $32 6 million in the previous quarter.
Jonathan Pryce: Full year, adjusted EBITDA was $125 $3 million.
Up 63% from $76 9 million in the prior year with adjusted EBITDA margins up by approximately 570 basis points as we continue to mix towards higher margin revenue streams and drive operational efficiencies across the business.
Jonathan Pryce: We ended the quarter with cash cash equivalents and investments of $447 million.
Jonathan Pryce: Up from $408 million at the end of the previous quarter.
Jonathan Pryce: We generated cash flow from operations in the fourth quarter of $43 million, driven by improved profitability and favorable seasonality.
Jonathan Pryce: For the quarter, we also generated free cash flow of 37 million <unk>.
Jonathan Pryce: Resulting in free cash flow for the year of $107 million.
Jonathan Pryce: This represents an 85% conversion rate as a percentage of adjusted EBITDA, which is well above our previously set targets.
Jonathan Pryce: This better than expected conversion rate was attributable to increased focus on profitability across all business units streamlined operational processes and effective working capital management.
Let me wrap up by sharing our first quarter and full year 2025 guidance.
Jonathan Pryce: We forecast first quarter revenue in the range of $184 million to $188 million.
Jonathan Pryce: Resulting in full year revenue in the range of $772 million to.
Jonathan Pryce: To $779 million.
Jonathan Pryce: Representing year over year growth of 11% to 12% for the full year.
Jonathan Pryce: We forecast first quarter, adjusted EBITDA of 36 million to $39 million and full year 2025, adjusted EBITDA of $165 million to $170 million, representing 21% to 22% of revenue for the year.
Jonathan Pryce: In addition to this current year guidance. We're also updating the three year financial framework, we set last year for 2024 through 2026 with our revised targets as follows.
Jonathan Pryce: We are lifting the average annual subscription revenue growth from approximately 14% to approximately 15%.
Jonathan Pryce: As previously communicated we anticipate full year 2025 subscription revenue growth of at least 15%.
And while the growth outlook for 2026 will be dependent on execution throughout the year or early expectation is that subscription revenue growth for 2026 will be approximately 13%.
Jonathan Pryce: Additionally, we are increasing the average annual adjusted EBITDA margin expansion to approximately 360 basis points as compared to the midpoint of the prior range.
Jonathan Pryce: And finally, we are increasing our full year 2026 free cash flow conversion target from greater than 70% to greater than 85%.
Jonathan Pryce: As indicated by the targets in this updated framework, we are focused on eventually achieving and exceeding a subscription revenue rule of 40 as a sustainable long term objective.
Jonathan Pryce: We are updating this framework based on our strong first year performance and our belief in our ability to execute against these targets over the next two years.
Jonathan Pryce: Furthermore, our business model provides us with a high level of visibility and when coupled with our robust pipeline. It is further inform these updated targets positioning us for strong subscription revenue growth.
Jonathan Pryce: In conclusion, we delivered better than expected results for the fourth quarter, we've updated our previous three year financial framework to raise our average subscription revenue growth average annual adjusted EBITDA margin expansion and free cash flow conversion targets and believe we are well positioned to continue capitalizing on the demand we're seeing in the mark.
Jonathan Pryce: While executing against our profitable growth strategy.
Jonathan Pryce: We're excited about the momentum we built in our confidence in our ability to continue delivering strong results in 2025 and beyond.
Matt Flake: With that I'll turn the call back over to Matt for his closing remarks. Thanks.
Speaker Change: Thanks, Jonathan as we kick off 2025, I continue to have tremendous confidence in the future of the business 2024 was a great bookings year across the board highlighted by another year tier one in enterprise success.
Speaker Change: Our record performance in tiers, two and three and a solid year for our relationship pricing solutions all of which is powered by a highly differentiated solution set.
Speaker Change: We also had a record year for renewals, which we believe validates our roadmap and reinforces our customers' trust in us as a strategic partner in their digital transformation.
Speaker Change: Even with all of the booking success on our pipeline remains strong and gives us good visibility into continued sales momentum, particularly in the first half of 2025, we expect the demand environment to remain positive towards our improved win rates in 2024 compared to the prior year. We believe we are well positioned to build on our sales success from the last several years.
Speaker Change: With our strong financial performance and progress towards our three year framework. We believe we're in a great position to continue to deliver value to customers employees and shareholders in 2025 and beyond.
Speaker Change: And with that I'll hand, it over to the operator for questions.
Speaker Change: Thank you very much and ladies and gentlemen at this point, we will take your questions remember if you would like to ask a question today. It is star followed by the number one on your telephone keypad.
Speaker Change: Our first question for today comes from the line of Terry Tillman with Truest Securities. Your line is live.
Speaker Change: Yeah, Hey, Matt Jonathan Curtain, Josh Congrats on the strong bookings in the fourth quarter two questions I won't guarantee their single partners, but the first one is a multi parter on this.
Speaker Change: With Wells Fargo that I think your press release is this relationship pricing and how meaningful is the proportion of the total PL businesses relationship pricing and are there potential synergies with just commercial digital banking deals.
Kurt: Kurt Kirk your team did you want to talk about the success of it and we can yes.
Kurt Kirk: Yes, Thanks Terry.
Kurt: This is really exciting opportunity for us.
Speaker Change: Yes. This is.
Speaker Change: We talked about in this call a year ago in terms of the win that we had in the fourth quarter of 2003.
Speaker Change: Getting something that's live in under a year is really a testament to both teams and also points to the deploy ability of that product something we've been focused on.
Speaker Change: This puts us at about nine of the 15 largest banks in North America are using.
Speaker Change: <unk> lender and so we look forward to building on that.
Speaker Change: And Terry just on the second part of your question is Jonathan just to be clear the relationship pricing terminology really is how we're thinking about the precision lender business as a whole. So the color. We've historically about precision lender that when we say relationship pricing that as that business, how we're talking about it and really based on the fact that we're not just pricing loans with that solution.
Speaker Change: Looking across the entire relationship.
The institution to have on the commercial side, so, hence, hence the reference to relationship pricing.
Speaker Change: And as far as the commercial.
Speaker Change: Digital banking side of the business, we haven't found a lot of crossover from a product perspective, but having a master agreement with a lot of these customers whether it's for digital banking offer precision lender them understanding the way we treat our customers how we respond to the company. There is some intangible value to that that we get out of those.
Speaker Change: And ships and so it's opened doors for us and we've been able to win and we're also seeing expansion opportunities within existing customers for the product, but the product that there's not a lot there's not a lot of the synergies between the two of them.
Speaker Change: Okay, and just a follow up is going to be simpler people always are intrigued by big deals.
Speaker Change: But people really hang our hat on that but as you look into 2005, and you said strong pipeline how.
Speaker Change: How would you characterize the reliance potentially on large tier one enterprise deals versus the volume and velocity of tier two tier three does it seem that much different than potentially what happened in 2004. Thank you.
Speaker Change: Yeah, Terry if you remember coming off of 'twenty three we have I think four of the top 10 biggest deal in the history of the company we told.
Speaker Change: The strength that we were looking at probably skewing more towards tier two and three.
Speaker Change: Volume in which we said in the earnings call, we signed more tier two tier threes.
Speaker Change: In 2004 that we did in 'twenty three but we still had 25 tier one enterprise deals, which I believe is a record as well if I look at 25 and the pipe ahead, I think youre still going to see a steady flow of the tier twos and threes.
Speaker Change: Yes.
Speaker Change: I don't want to front run it, but neither probably back half, but I think youre going to see us get back to some of the larger enterprise deals above $25 billion in assets.
Speaker Change: As the year develops, but we'll still have success in the tier one space $5 to 25 billion as well so it's a pretty balanced pipeline right now, which feels good going into the year, but theres a lot of work and execution that has to get done these things or not whether its a tier three or enterprise. They are not easy to get done.
Speaker Change: But I have full faith and confidence.
Speaker Change: And the sales and success team to knock them out.
Eric: Okay. Thanks, Good luck, thanks, Eric Thanks, Sir.
Speaker Change: Thanks for your questions. Our next question comes from the line of Alex Sklar with Raymond James Your line is live.
Alex Sklar: Alright, thank you.
Speaker Change: Jonathan first question, maybe for you taken up the Tam to $20 billion. It looks like kind of 15% Tam growth over the next couple of years can you just talk about some of the biggest drivers behind that market growth and how we should think about the puts and takes for Q2's growth relative to those market levels. Thanks.
Yeah. So when I think about the changes I think some of the areas that are clearly in there now that have evolved over the last couple of years in particular, we have a much clearer view of our opportunity set when we talk about our fraud products and Matt mentioned that at length on the call and we're really excited about.
Speaker Change: The success to date and the opportunity set there.
Speaker Change: As we think about our helix business when we think about now with the fabric opportunity the ability to really bring that product inside the financial institution landscape and.
Speaker Change: And capturing the opportunity set there.
Speaker Change: That was another driver of that and then the final thing is just as we've sort of crystallize our entire catalyst line of business across all the commercial products, including commercial digital banking and precision lender and everything around that from a commercial standpoint. Those are the areas that have the fastest growth from a market perspective and that had the biggest impact on that change in Tam.
Speaker Change: Okay, Great color, there and then maybe for Matt or Kirk, but a lot of commentary in the prepared remarks about the progress selling full digital banking platform across customers, who have started with one of retail or commercial 75%. I think you said still don't use both so can you just kind of talk about like what are the gating factor.
Speaker Change: Factors, Quebec get up to 80%, 90% over time, what are the puts and takes there for adoption and how are you going to market to those customers that are still only using one solution.
Speaker Change: Yes. The commentary we had 110 customers that are digital banking customers above $5 billion and 60% of them are only using one either commercial or retail and so we have the sales and success team are locked in going and trying to cross sell the other product into them. The single platform drives a lot of value you provide.
Speaker Change: Great customer experience the financials patients more likely to do business with you and we've seen that.
Speaker Change: Lay out the challenge with it is is these are big projects.
Speaker Change: They have to have a budget they have got to be prepared for it and they kind of happen.
Speaker Change: They've got other things they are working on as well but.
Speaker Change: It provides me a lot of confidence as we think forward to the coming years as the ability to convert some of those deals and get them live within its easier to get them live once you've got one of the products energy you've got the integrations you have got the network setup and everything else. So it's it's a huge opportunity for us and that's why we highlight it.
Speaker Change: Alright, great. Thank you both thanks, Alex Thanks, Jeff Thanks for your questions.
Speaker Change: Our next question is from the line of Joe <unk> with Baird. Your line is live.
Speaker Change: Okay.
Speaker Change: Great Hi, Brian Thanks for your questions Tonight.
Speaker Change: When you think about your customers benefiting from deregulation.
Speaker Change: Do you think that plays into the strategy is that my tender involving your technology and is there a right timeframe to think about when that could manifest then bookings benefit.
Speaker Change: Above and beyond the strength you've already answered.
Speaker Change: To some extent.
Speaker Change: The deregulation winter is as it occurs we will.
Speaker Change: Allow them operating efficiency fewer people to have to follow all the regs.
Speaker Change: It will also hopefully help with their ability to.
Speaker Change: Transact that they need to do an M&A pick up banks all of that will be a tailwind for us.
Speaker Change: <unk>.
Speaker Change: Energy behind the banking and credit Union community.
Speaker Change: They have been pretty optimistic about things as we sit here today. So all of it should be a tailwind for us.
A direct correlation between the deregulation in digital banking, maybe not but the fact that theres less burden on the financial institution.
Speaker Change: Still a lot even if you take some of it out but their ability to go.
Speaker Change: Focus and make these decisions and spend less time on regulatory things is a positive for us is less distracting for them. So.
Speaker Change: All positive on our end.
Speaker Change: Okay. That's good.
Speaker Change: Right.
Speaker Change: Just on the updated three year average financial targets I think you've done a nice job in structuring these were their budgets and that a fair amount of conservatism.
Speaker Change: Obviously that gets rolled up into an average calculation.
I guess as you triangulate on that 26 number.
Speaker Change: And yes, again about the 13% sub growth also the margin expansion.
Speaker Change: We're getting closer to that estimates consensus estimates that are out there.
Speaker Change: I just wanted to maybe revisit your guidance philosophy.
Speaker Change: Think about performance.
Speaker Change: To happen over the next 12 months still may be driving upside to whats embedded for 2026.
Speaker Change: Yes, Thanks, Joe I'll take that so yeah as we as we set those targets, we our business model affords us a fair amount of visibility even looking forward two years and it wasn't long ago third and fourth quarter of last year on those calls where we talked about the shape of bookings and the mix leading us to a fair amount of larger deals that we're going to go live.
Speaker Change: 25% to 26, so we do have a fair amount of visibility into 'twenty six.
Speaker Change: Happy to say to the discussion earlier with wells in a couple of other deals we've actually gotten a couple of the bigger deals live faster than we anticipated on both the digital banking side and the precision lender a relationship pricing side. So I think that's given us a more clear view of 25.
Speaker Change: And confidence in that number but then as we think about 'twenty six there is a fair amount of impact from the execution that we have here in the next 12 months, whether it be hitting our bookings plan or whether it be the mix and shape of those bookings that will impact 2026 and above and beyond what we see today. So that's the kind of thing that could drive upside per.
Speaker Change: <unk> to the 13% that we talked about or the EBITDA implied guide in 2006 and at the end of the day as we think about modulating between investing to elongate that subs revenue growth.
Speaker Change: At these elevated levels, that's really sort of what we're giving ourselves room to manage here as we get through $25 to ensure that we have that right balance totally in line with our profitable growth strategy that we've been talking about for the last couple of years. So hopefully that addresses your question.
Yeah, that's perfect. Thank you very much thanks, Joe Thanks, Joe.
Speaker Change: Thanks for your question. Our next question comes from the line of Alan Hodgkiss with Goldman Sachs. Your line is life.
Alan Hodgkiss: Great. Thanks, so much for taking the questions I guess to start Matt just on bank. It spend priorities and 25, there's a lot of talk about lending volumes picking back up, particularly on the commercial side and banks being a little bit more offensive and they're thinking just curious how you think that impacts you guys. If at all.
Alan Hodgkiss: Yes, well I hope picks up for the banks for their sake.
Alan Hodgkiss: But you did.
Alan Hodgkiss: Deposits are still at the center of what runs the bank and the discipline around acquiring the deposit to wanting to use.
Alan Hodgkiss: Our commercial platform that is competitive with what bank of America Wells Chase rollout is important and so if you think about what happened.
Alan Hodgkiss: 2022, 2012 to 2022, a lot of these banks were signing a local marketing the operating accounts now they have a discipline around I need the operating accounts and we're going to do the loan and so that is what's driving this up loan volume picks up youll see more operating accounts come in but they want to have a competitive commercial product to get that and we are.
Alan Hodgkiss: Squarely in the middle of.
Alan Hodgkiss: If you look at win rates our success over the last.
Alan Hodgkiss: Seven or eight years, especially up market and the commercial banking product I think we are well positioned to do that so what's going to come with the loans as are the operating accounts in.
Alan Hodgkiss: And theyre going to have to have a product that's competitive with the banks I mentioned as well as others and that's where we sit right now so I think.
Alan Hodgkiss: I am hopeful that the lending environment picks up I think that's going to be a tailwind to us as well.
Speaker Change: Okay really helpful. And then just on that on that point.
What's the barrier to you guys in <unk>.
Speaker Change: Selling commercial I know, it's obviously a much more complex.
Speaker Change: Product for financial institutions. So what's worked for you in the past and you know what gives you confidence on continuing to be able to do that with new and existing customers going forward.
Speaker Change: Yes, some of it as.
Speaker Change: We're able to talk about 58% of the Forbes 100, most profitable banks use our platform, 42% of the top 200, Forbes credit unions use our platform.
Speaker Change: And so banks look to other banks when they are making these decisions and we have more than anybody that can point to the success and happiness that they have when they are on the product plus the value that they get the ability to use it to compete.
Speaker Change: And so in this environment when we've done.
Speaker Change: X number of deals with certain core and done the conversion.
Speaker Change: The challenge that they go through the risk of moving their crown jewels of the business to a new system and it's hard it's complicated.
Speaker Change: It's fraught with risk for those that Havent done it as much as we have and nobody has done more of those in the modern era, which is what I call since the mobile phones smartphones.
Speaker Change: Smartphones have come out than us and so we're able to lean on that plus we have people can look at the product the screens, but theres also an operating component to this do you have the ability to convert somebody off of the system that they've been on for a long time, how many times have you done it we've done it tends to twenties of times with with almost everybody in the space. It's a.
Speaker Change: <unk> and then you have people there that can process.
Speaker Change: Files wires do you have an operating discipline around that and we've built that over time and it continues to be something we invest in.
Speaker Change: No.
Speaker Change: Those are the things when we get into a sales process that we can point to that we've done and it's not something that a bank or credit Union is going to take a risk on when they have to move.
Speaker Change: The most important clients that they have to a system. So we're going to lean on that that's been our story our reputation and we're going to continue to do that and I think it differentiates us in the sales process as you can tell from the bookings for the last couple of years.
Speaker Change: So we're just going to continue to to rest on those and be competitive.
Matt Flake: Okay really helpful. Thank you Matt.
Adam: Thank you Adam.
Speaker Change: Thank you. Our next question is from the line of Andrew Schmidt with Citigroup. Your line is live.
Speaker Change: Hey, guys. Thanks for taking my questions good results here.
Speaker Change: I wanted to touch on just the longer term EBITDA outlook similar to a question was asked earlier just outlook philosophy when it comes to.
Speaker Change: The out year 2026, maybe talk through are there investments that are kind of contemplated there is it more prudent when we think about just the out year from an EBITDA margin perspective. Thanks, so much.
Speaker Change: Yeah. Thanks, Andrew it's a little bit of both are definitely investments, especially in some of the product areas I mentioned before whether it's fraud innovation studio fabric commercial functionality, where we have planned investments and we need to continue to expand our feature function capabilities overall in those areas.
Speaker Change: But we're also leaving ourselves room, there to be able to make further investments as we see the year play out and we see opportunities.
Speaker Change: Across the business so feel good about our ability to achieve those targets. Obviously, we're looking a couple years out as we think about giving color on 26 today, but.
Speaker Change: But have a lot of confidence in those but.
Speaker Change: We do our planned investments in there, but we also need to be able to modulate between again further investments to elongate that growth curve versus driving as much profitability as we can for shareholders.
Speaker Change: Absolutely that makes a lot sense, Jonathan I appreciate that and then maybe on the tier two tier three step up it's really great to see that.
Speaker Change: Can you talk about just the drivers there or is it more shots on goal when rates combination of those factors. We just just elaborate on whats driving that uptick there that'd be helpful. Thanks, So much.
Andrew Schmidt: Yes, Andrew I think it's a function of.
Andrew Schmidt: As I said earlier these banks are trying to get the operating accounts, it's an environment where you are.
Andrew Schmidt: Loan for 2%, it's easy to get inside of you make your money you've got to get the operating accounts and you have people that are running a legacy technology that doesn't work on mobile phones. They don't talk to each other you have got separate devices.
Andrew Schmidt: When youre trying to get the operating accounts of somebody who's with one of the big four P&C.
Andrew Schmidt: They're not going to move to those legacy Tech systems, and so for US we're able to walk in Jamba product, that's up and running.
Andrew Schmidt: We've got hundreds of customers on it we've done it for 20 years, we're very comfortable of these conversions as I talked about earlier.
Andrew Schmidt: They have to have they've got to go get these commercial deposits for the most of the stickiness of their most profitable you can grow them.
Andrew Schmidt: That's what's driving this demand environment when rates were slightly up from 23, which we had a great 23, and the tier twos and threes are really.
Andrew Schmidt: Some of the demand came to us because they're looking for these products and I think thats going to continue in 'twenty five.
Speaker Change: That's great to hear thanks, so much Matt Thanks, Andrew Thanks, Andrew.
Speaker Change: Thanks for your questions. Our next question comes from the line of Charles Nathan with Stephens. Your line is live.
Charles Nathan: Hi, guys. Thanks for taking my question and congrats on the quarter.
Charles Nathan: I wanted to ask about free cash flow. It's good to see the increase of the cycle guide and it sounds like a lot of that is attributable to working capital improvements and operating leverage but I wanted to ask if there's been any changes to your expectations for Capex spend and then secondly.
Charles Nathan: As a follow up to that I wanted to hopefully get some color around your capital allocation priorities, specifically, where you are investing in product what's on the product roadmap and if M&A is still part of part of the consideration.
Speaker Change: Yes, thanks, Jack So firstly I really pleased with our free cash flow conversion I mean, the team did a phenomenal job when it comes to a whole bunch of under the water line processes to drive better conversion when it comes to free cash flow and so we had just phenomenal DSO performance, especially in the fourth quarter to record levels and that that is a big part of it on top of obvious.
Speaker Change: The profitability that you see in the business today. So there is no no change from a capex perspective, so still a very capex light business and would expect that to continue going forward.
Speaker Change: From a capital allocation perspective organically I think it's very much in line with what we talked about earlier some of the product areas that Matt talked about whether it's fraud, whether it's the entire.
Speaker Change: Apparatus around innovation studio, ensuring that we can build out that partner ecosystem and support those partners and drive adoption by our customers and their end users.
Speaker Change: As well as areas like fabric and commercial functionality and that's that's where our organic.
Speaker Change: Investment in capital allocation is focused relationship for us and relationship pricing, especially on the on the treasury on the deposit side of the operations. There. We're just seeing a lot of opportunity to price that entire relationship.
Speaker Change: When it comes to inorganic opportunities I think clearly the balance sheet strength of free cash flow generation will set us up well to have that optionality.
Speaker Change: Nothing has changed from what I've shared over the last really year plus of we get we get a lot to look at when it comes to the pipeline of M&A opportunities.
Speaker Change: <unk> not a lot of assets that we've been either enamored by from a quality perspective, or where we would get there on valuation. So those things all need to come in line for us to be confident around an M&A deal and we're going to be prudent there given what it means in the bat and how.
Effect of your execution has to be when you do an M&A deal. So it's certainly part of the long term picture and we think we're in a great position to be a strategic acquirer, but we would only do it if everything sort of lined up and made sense strategically and financially there.
Speaker Change: Got it appreciate the color and as a follow up I wanted to ask about professional services. It looks like that line was down about 11% and 24 and it sounds like the expectation is that it will be it'll be down a similar rate in 'twenty five.
Speaker Change: I wanted to get your thoughts on the discretionary consulting piece and some of the assumptions underlying that outlook is that an area that could potentially come back over the next year or two as a result of.
Deregulation and or.
Speaker Change: Consolidation in the bank space.
I mean.
Speaker Change: Yes, I'll say baked into the assumption is that we do not see a rebound in that is it theoretically possible over the next couple of years, yes, but we have not seen an indication of that behavior from our from our Fi sitting here in early 2025.
Speaker Change: When you think about sort of the pace at which interest rates are not moving down as maybe as quick as people had anticipated.
Speaker Change: We are not seeing sort of a pickup in discretionary spending we still see a lot of those same pressures even on deals from a first quarter perspective here in 2025, where our customers are trying to be careful about decisions around length of contract scope of those contracts in some cases pushing those so all of the evidence we have sitting here in Q1 is that we see.
Speaker Change: Those same pressures around discretionary.
Speaker Change: But there are certainly things you could you could see that maybe could that could pick up later in 'twenty fiber into 26, that's not what we're seeing yet though.
Speaker Change: Just to add.
Speaker Change: If the demand does come back.
Speaker Change: To be very selective in terms of how we treated choose to grow that business back we want to make sure. We are doing with high quality long term intent.
Speaker Change: Attention.
Speaker Change: Got it I recall, there was some rationalization of that customer base, a couple of years ago as well. So I appreciate all that color. Thanks again guys. Thanks Chuck.
Speaker Change: Our next question is from the line of Michael <unk> with Morgan Stanley. Your line is live.
Speaker Change: Hey, guys. Thanks for taking our questions.
Speaker Change: Well color just on the renewal bookings growth of eight 8% I know you have had some improvement on the pricing front versus historical trends, but if you had.
Speaker Change: Apply some form of raw faster have you shown our directional framework on how the mix of that bookings growth sort of builds up between incremental cross sell attached price and contract.
Speaker Change: Asian extension I'm, just trying to think about some of the drivers of.
Speaker Change: The FY 'twenty <unk> subscription revenue growth aside from the fact that the comps get tougher and I'm sort of wondering if that is just some some assumption on normalization of some of the renewal dynamics, which obviously have been really strong.
Speaker Change: Yes.
Speaker Change: Hit that last 0.1st because I think that's really important when you think about where we were coming into 2024 around our subs growth expectation at 13% was the original guide.
Speaker Change: A huge part of the driver of that that progression towards what ended up being 16% for the year was the pull in of out of scope renewals, what's the economics on those renewals and just really really strong performance on the cross sale side relative to expectations. So as we think about that here in 'twenty five and even rolling forward into 2020.
Speaker Change: There is some persistence to our strategy and how we're thinking about pricing and packaging both on the cross sell side and the renewal side, but as we as we lay out our plans for this year and start to think about what it could mean for next year, we're not assuming.
Speaker Change: A significant level of out of scope renewals coming in every year way beyond normal like we have a good history and data set to benchmark that off of so.
Speaker Change: Theoretically that would be your upside driver I don't know that I would call that conservatism I would just call. It working off of the data. We have today is sitting here two years out from a full year 'twenty six full picture so when.
Speaker Change: When we think about our opportunity.
Speaker Change: Term and tenure of these deals really hasnt changed were still averaging 66 months. So I wouldn't say, that's an incremental driver it's really coming from the amount of renewals that are coming in outside of the plan in a given year that we saw in 'twenty four and then the economics and the discipline, we're showing on those renewals when it comes to pricing and those are things.
Speaker Change: We certainly hope to be able to pull in renewals and Rcs our customer success team does a great job in positioning the value proposition and the customers are seeing that we're seeing the benefit of that but certainly on the pricing side, we hope to attain better economics and maintain that level of discipline going forward and so that those would be the drivers there.
Speaker Change: Could lead to anything above what we already have provided for the 26 outlook.
Speaker Change: That's helpful. Jonathan maybe just on the terminal pricing structure than does our banking I know this is primarily a seat driven model I'm just trying to think through with the acceleration that's contemplated interest in bank M&A. I know you are Thomas they tend to be a beneficiary there, but you obviously have a.
A lot of levers at your end as far as well to offset.
Speaker Change: Either head count growth within the industry, both with contractual minimums inflation escalator and cross sell our cash, but how do you sort of think about the conditions under which you would.
Speaker Change: Center of shifting that pricing model towards more of asset based price sand consumption model over time versus state and how far away do you think we might be to that if at all.
Speaker Change: And just to clarify Michael has a question about digital banking.
Speaker Change: Yes, yes, so digital banking, we price on a user bay remember so like your baseline there are certainly tiers from an asset perspective, but the underlying driver is number of end users and so that is a practice in the industry for this product that is a model that we are able to capitalize as our financial institutions grow and get.
Speaker Change: More digital adoption.
Speaker Change: And that is.
Speaker Change: Very different than a seat based model so.
Speaker Change: We don't have a lot of products that really work on a true seat based model, yes M&A occur.
Speaker Change: <unk> in that market right here basically accruing more customers under.
Speaker Change: Under a single logos, so that's part of the.
Speaker Change: Economics that helped that.
Speaker Change: A tailwind for us when there is a lot of M&A in our customer base, yes. So we would look and they would look to negotiate what is the combined user count look like relative to existing minimums, and we negotiate that but that would be an upside driver to the economics of a deal after our transaction.
Speaker Change: Yes.
Speaker Change: Hey, Thanks, guys. Thanks, Michael Michael.
Speaker Change: Thanks for your questions. Our next question is from the line of Parker Lane with Stifel. Your line is life.
Speaker Change: Yeah, Hey, guys. Thanks for taking my question here, Matt you called out the continued success of the fraud product and I was wondering if you could sort of breakdown.
Speaker Change: The success of that.
Speaker Change: Along the lines of desire to deprecate legacy tools and improvements in your own capabilities, there or just a greater emphasis on the part of the end market what is contributing the most to the success Youre seeing there.
I mean, it's.
Speaker Change: Unfortunately since the pandemic when you drove.
Speaker Change: Utilization of digital banking products went through the roof.
The weakest.
Speaker Change: Point is the end user the account holder at the financial institution commercial retail and so what's going on there is <unk>.
Speaker Change: Your account takeover you have all these different things that are happening we have tools to stop the authentication to make sure. We're authenticating the right people and then we have tools that monitor their behavior, who they pay when they pay how much they pay than we had tools to monitor.
Speaker Change: The ages of the file is actually accurate I don't want get too much into the weeds there but.
Speaker Change: And then check draw has gone through the roof as well which is.
Speaker Change: A little alarming so it just.
Speaker Change: For every dollar of fraud cost financial accretion $4 and so we have products that have been in existence for 20 plus years and we've got products that we've started building machine learning tools. We start building 2089 products. We built since then along the way there are stopping fraud and so many different ways and so we've invested heavily in it are cut.
Speaker Change: We have a tremendous amount of confidence in us.
Speaker Change: In doing that and it's the single platform gives you a better view, we're able to take all 24 plus million users plus all the commercial customers use that data as a tool to single platform that has a lot of value there plus the innovation and the products we have around it.
Speaker Change: It's not a wholesale fraud stop that.
Speaker Change: It is when you have one system and advantage over having multiple systems that have multiple entry points multiple databases different places to go to so.
Speaker Change: Have a intrinsic.
Speaker Change: Differentiator in the way our platform is designed in how we work with our customers. So there's a lot there but fraud. Unfortunately has just kind of gone through the roof since the pandemic and the increased utilization of digital products.
Speaker Change: Got it thanks for the feedback and one quick one for you Jonathan if I heard you correctly about I think it was about 10% of the digital banking base renewed in the quarter.
Speaker Change: What share of that was out of scope renewals I know you talked about that earlier, but it didn't necessarily quantify it is that so.
Speaker Change: If you could quantify.
Speaker Change: Yes, it's not something we would quantify externally just because it's not something that we see consistently quarter to quarter or year to year, what I, what I would say, though is both in the quarter and in the full year, we saw more out of scope renewals than typical.
Speaker Change: So that was a driver of that but again.
Speaker Change: Seasonally Q4 is the strongest renewal quarter that was obviously the case again and a good chunk of that.
Speaker Change: Base was in scope and.
Speaker Change: Was part of the plan and then when you've taken the out of scope on top of that obviously it led to a <unk>.
Speaker Change: Tremendous quarter and 10% given the length of these deals and one quarter is obviously way above normal yes, the customer success team just.
Speaker Change: Knocked it out of the park and that doesn't happen in the fourth quarter to work they put in in 'twenty three 'twenty four to get in front of these customers talk about the other products. We have talked about the value, we're providing and to get those extension. So I just want to make sure that this stuff doesn't just happen theres a lot of work in the leadership and the success team as well as every single success.
Speaker Change: Remember that team to support organization and the delivery organization.
Speaker Change: It really talks about how you treat your customers and their willingness to continue to sign these longer term arrangements.
Speaker Change: With you so really proud of the work that that team did in 2024 and look forward to in 'twenty five.
Speaker Change: Got it thanks, guys. Thanks, Barbara Thanks, Mark Thanks for your questions. Our next question is from the line of Dominick <unk> with Compass point Your line is live.
Hey, thanks, so much for taking my questions.
Speaker Change: I was just curious if you could talk about the pricing and.
Speaker Change: And competition for new deals versus renewals.
Speaker Change: You are having some profitability success it looks like and do you believe you have had.
Speaker Change: We have pricing power given the demand for your products versus some of the other peers and would you consider your products a premium product that.
Speaker Change: Year banks are willing to pay extra for some follow up thanks.
Speaker Change: Yes, I think if you look at Asps. They were in 2004. They were just slightly down that's more because of the mix that we had.
Speaker Change: In 2003, we did more tier twos and tier threes.
Speaker Change: Every deal is competitive everybody's battling for it you see more pricing pressure on retail than you do on commercial.
Speaker Change: And we do get a premium for our products and.
Speaker Change: There are people out there that are buying business and that's just what happens, but we play the long game. There's a lot of people that we've lost deals too.
Speaker Change: Over the last 20 years, when we pick them back up in the long run so.
Speaker Change: As I said earlier with one of the earlier questions.
Speaker Change: Commercial banking is not something that people are going to take a chance on somebody they're going to build it it's going to be here, we're going to get there they needed to be fully functional with operational discipline and execution behind it and we have the ability to do that and so we don't give that away because theres a lot of value to that and the customers realize that and the prospect to realize it.
Speaker Change: But yes all of these.
Speaker Change: Deals are whether it's a renewal or a net new have a competitive dynamic to it and that's just the market we operate in but.
Speaker Change: The sales team and the success team does a great job of value capture and making sure people understand the.
Speaker Change: The value they get when they get a single platform to run.
Speaker Change: It provides a better user experience creates operating efficiency for the customer single platform allows us to roll.
Speaker Change: Products and features out faster and then ultimately we get all that data and all of that data is becoming more and more valuable for us whether it's fraud as we talked about earlier cross selling products.
Speaker Change: Reising relationships.
Speaker Change: <unk> loans all of that has value to us. So there is a real differentiator in the platform and the sales and success team.
Clearly have done a great job with that over the last.
Speaker Change: Several quarters and years.
Speaker Change: Yes, it seems to US certainly show up in some of these numbers so.
Speaker Change: And then could you just break.
Speaker Change: I was wondering if you could break down the year over year margin improvement on the long term guide to 360 basis points.
Speaker Change: How much of that is due to scale versus cost savings versus product mix mix and is there any one of those that kind of creates an outsized benefit for the total company or is it sort of like a third a third a third any help there would be excellent. Thank you. So much yeah, the way I would say characterize it.
Speaker Change: Overall is clearly.
Speaker Change: The revenue mix shift towards subscription as an ongoing beneficiary to both gross margins and the EBITDA margin guide you see there, but if you want to break down the expense leverage specifically the way I would think about it is in 'twenty and even 'twenty four it was really.
Speaker Change: Roughly roughly 60 40, driven from Opex leverage as opposed to cost of sales and then as you move into 2026, you sort of see that dynamic flip to where you've got quite a bit more leverage on the cost side from the gross margin line on the back of the cloud migration versus Opex still a contributor but to a lesser extent. So it's already kind of got to look at each year independently but.
Speaker Change: In totality, we are clearly benefiting from the overall mix shift and then obviously certain expense initiatives and overall focus on profitability is driving in every year different degrees of Opex and.
Speaker Change: Gross margin scaling.
Speaker Change: Thanks, so much.
Speaker Change: Thanks for your questions.
Speaker Change: Our next question is from the line of Marc Feldman with William Blair. Your line is live.
Hey, guys on here for Chris Today, I guess just.
Speaker Change: Thinking about helix and in 2020 for embedded finance, making the service was a massive target for the regulators under the New administration do you think theres going to be any upside in <unk>.
Speaker Change: <unk> for.
Speaker Change: Embedded finance products from your customers are going forward.
Speaker Change: I think the way I would think about it is on the Fintech side that market has shifted to where the most likely folks that are going to enter this market have to have scale and have to work with.
Speaker Change: Bank Thats really committed to this business because it's all going to run through the financial institution now the days of middleware providers and spreading out all of the different services that are required to run a vast program are all getting concentrated around the top 2030 and over time it'll be more than that bass banks that really know how to run a program soup to nuts.
Speaker Change: From a financial institution landscape as they start thinking about the helix opportunity I think it's interesting to see that their appetite in that context of controlling the entire batch program is looking for other core alternatives to run those programs. So while historically helix might have partnered with a bank of record to go spot.
Speaker Change: Our one of our customers that we go find in the market now the institution is doing at all and they just need a core to go do that west. So that's really how I would characterize the change sitting here in early 2025 compared to <unk> 24, and I think it sets us up well as a differentiated product in the space, but I wouldn't say that the administration change or the regulatory.
Speaker Change: <unk>.
Speaker Change: Headwinds that maybe people saw now maybe are alleviated changes that dynamic are those dynamics, yes, ironically that challenges that a lot of people saw in 'twenty four highlighted our strength.
Speaker Change: And a lot of those strengths, although their regulatory related they're all operational in nature and banks are just very focused on that and we think it.
Speaker Change: Is it good for us in long run.
Speaker Change: Got it no that's super helpful and I guess, just the second one on innovation studio.
Speaker Change: Good to see the bookings doubling year over year is there any way to break that down is it.
Speaker Change: And I know, 90% of wins decided in 2024 innovation city is a driver, but thinking about is it new customers, adding or is it growing new.
Speaker Change: <unk> solutions partner, taking on new solutions from partners there. Thank you.
Speaker Change: Yes, we haven't quantified it we tried to just share that like the magnitude is growing obviously the year over year doubling we've talked about how this is this is a high margin revenue stream because of the net revenue treatment.
Speaker Change: And to answer your last question. It is all of the above it is impacting that new wins significantly when we think about adoption by our customers. We talk about three years ago. When this when we.
Speaker Change: We had about 20 of our financial institutions as early adopters and today, we have over 400 of the 450 live digital banking customers that are using it in some form or fashion today. So we're seeing the two sided marketplace that our customers and these products are finding each other and they are starting to be utilized but we're still in the early innings of really driving the bookings and revenue opportunity.
Speaker Change: That's what we're excited about going forward.
Speaker Change: Thanks, Mark. Thank you. Thank you. Thank you for your questions and we have a final question today from the line of Dan Perlin with RBC. Your line is live.
Dan Perlin: Thanks, Good evening guys.
Dan Perlin: I just had a question on kind of.
Dan Perlin: The level of absolute dollar increases that we're seeing in kind of the backlog here I think an increase sequentially under 99 million, that's up from $78 million last quarter. So.
Dan Perlin: And I know it can be lumpy, but the question I think is.
Dan Perlin: Are there just deal sizes that are just getting bigger as a result of the size of the clients that you now have kind of.
Dan Perlin: In your portfolio or is there just a greater appetite for Inc.
Incremental spending.
Dan Perlin: In the current demand environment.
Dan Perlin: Yes, when you look at it in any one quarter, Dan you really got to look at like for example, the fourth quarter to $189 million you referenced like that is our seasonally strongest renewals quarter and renewals have the largest.
Dan Perlin: Contribution to the backlog just given the term and the size of those deals. So certainly size zone. The net news inside matters.
Dan Perlin: But really in any one quarter the biggest driver of the magnitude of that number will be the renewals in scope and then potentially out of renewals out of scope renewals that got done that I talked about earlier, but that is really the driver. There is clearly upward pressure on the number as overall deal sizes increase too, but the bigger driver in any one period is going to be just the renewal nature of <unk>.
Dan Perlin: Quarter.
Dan Perlin: Got it okay. Thanks, guys.
Dan Perlin: Thanks, Dan appreciate your patience.
Speaker Change: Thank you for your call and ladies and gentlemen, with that that will conclude the Q2 holdings fourth quarter and full year 2024 financial results Conference call. Thank you for attending have a great afternoon, we'll see you next time.
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