Q1 2025 Q2 Holdings Inc Earnings Call

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After the Speakers' remarks, there will be a question and answer session.

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Operator: We kindly ask that you limit your questions to one and one follow-up with additional questions being received if time permits.

Josh Yankovich: I would now like to turn the call over to Josh Yankovich, Investor Relations. Sir, please begin. Thank you, operator.

Speaker Change: I would now like to turn the call over to Josh Yankovich Investor Relations. Sir please begin.

Josh Yankovich: Good afternoon, everyone. And thank you for joining us for our first quarter 2025 conference call. With me on the call today are Matt Flake, our CEO, Jonathan Price, our CFO, and Kirk Coleman, our president, who will join us for the Q&A portion of the call.

Josh Yankovich: Thank you operator, good afternoon, everyone and thank you for joining us for our first quarter 2025 conference call with me on the call today are about fleet, our CEO, Jonathan <unk>, our CFO and Kirk Hoffman, our president will join 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, including, among other things, with respect to our expectations for the future operating and financial performance of Q2 Holdings and for the financial services industry. Actual 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.

Speaker Change: Call contains forward looking statements that are subject to significant risks and uncertainties, including among other things with respect to our expectations for the future operating and financial performance of Q2 holdings for the financial services industry.

Speaker Change: Actual 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 quarterly report on Form 10-Q for the first quarter of 2025 and the press release distributed this afternoon regarding the financial results we will discuss For more information visit www.FEMA.gov 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 an obligation to update any such forward-looking statements discussed in this call.

Speaker Change: 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 quarterly report on Form 10-Q for the first quarter of 2025 and the press release distributed this afternoon regarding the financial results, we will discuss today.

Speaker Change: 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, other than revenue, will be on a non-GAAP basis.

Speaker Change: Also unless otherwise stated all financial measures discussed on this call other than revenue will be on a non-GAAP basis, a 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 is available on the Investor Relations section of our website and in our form 8-K filed today with the SEC.

Josh Yankovich: This concludes our discussion of why we use non-GAAP financial measures and a reconciliation of the non-GAAP measures to the most comparable GAAP measures that's included in our press release, which is available on the investor relations section of our website and in our Form 8K file today. We have also published additional material related to today's results on our Industrial Relations website.

Matt: We are also publish additional materials related to today's results on our Investor Relations website, Let me now turn the call over to Matt.

Matthew Flake: Let me now turn the call over to Matthew. Thanks, Josh. I'll start today's call by sharing our first quarter results and highlights from across our business.

Matt: Thanks, Josh I'll start today's call by sharing our first quarter results and highlights from across our business.

Matthew Flake: I'll then hand the call over to Jonathan to discuss our financial results in more detail and provide updated guidance. In the first quarter, we delivered results above the high end of our guidance, generating revenue of $189.7 million, up 15% year-over-year. We also generated adjusted EBITDA of $40.7 million, representing 21.5% of revenue. generated a free cash flow of $37.8 million. We started the year with solid sales performance highlighted by 5 total enterprise and tier 1 deals, complemented by continued execution in tier 2 and 3. In terms of net new highlights, we signed a Tier 1 relationship pricing deal in the quarter with a bank that will use our solutions to improve commercial relationship profitability across both lending and deposit products.

Matt: I will then hand, the call over to Jonathan to discuss our financial results in more detail and provide updated guidance in the first quarter. We delivered results above the high end of our guidance generating revenue of $189 7 million up 15% year over year.

Matt: We also generated adjusted EBITDA of $47 million, representing 21, 5% of revenue.

Jonathan: We generated free cash flow of $37 8 million.

Jonathan: We started the year with solid sales performance highlighted by five total enterprise in tier one deals complemented by continued execution in tier two and three.

Jonathan: In terms of net new highlights we signed a tier one relationship pricing deal in the quarter with a bank that will use our solutions to improve commercial relationship profitability across both lending and deposit product lines.

Matthew Flake: The enterprise and Tier 1 success in the quarter was also driven by significant expansion activity within our existing customer base. For example, we had a top 50 U.S. banks sign an expansion deal for our risk and fraud solutions in the country. In our last call, we talked about the rising cost and complexity of fraud management. And this deal demonstrates the growing demand we're seeing for best-in-class fraud solutions. In this case, the bank signed a deal to expand their utilization of one of our fraud products, adding roughly the equivalent of a Tier 1 digital banking deal in bookings value to the partnership in the process.

Jonathan: The enterprise in tier one success in the quarter was also driven by significant expansion activity within our existing customer base. For example, we had a top 50 U S Bank signed an expansion deal for our risk and fraud solutions in the quarter.

Jonathan: In our last call, we talked about the rising cost and complexity of fraud management.

Jonathan: And this deal demonstrates the growing demand, we're seeing for best in class fraud solutions.

Jonathan: In this case the bank signed a deal to expand their utilization of one of our fraud products, adding roughly the equivalent of a tier one digital banking deal with bookings value to the partnership and the process broad.

Matthew Flake: Fraud mitigation is a top priority for our customers. and one we believe will remain prioritized regardless of the macroeconomic backdrop. We also continue to see Q2 Innovation Studio drive both net new momentum and stronger relationships with existing customers. As an example, United Federal Credit Unions uses a variety of Q2 solutions and innovation studio partners, including targeted features aimed at payment flexibility and member-driven interactions, to more than triple digital engagement with those features across its member base. While we continue to drive investment into R&D, the breadth of our partner ecosystem continues to separate us in the market because of our ability to deliver innovation quickly.

Jonathan: Fraud mitigation is a top priority for our customers and one we believe we will remain prioritize regardless of the macroeconomic backdrop.

Jonathan: We also continue to see Q2 innovation studio drive, both net new momentum and stronger relationships with existing customers. As an example, United Federal credit Union uses a variety of Q2 solutions and innovation studio partners, including targeted features aimed at payment flexibility and member driven interactions.

Jonathan: To more than triple digital engagement with those features across its member base.

Jonathan: While we continue to drive investment into R&D, the breath of our partner ecosystem continues to separate us in the market because of our ability to deliver innovation quickly and stories like United provide a great example of the kinds of outcomes customers are able to drive with the combined power of our platform an innovation studio.

Matthew Flake: And stories like United's provide a great example of the kinds of outcomes customers are able to drive with the combined power of our platform and innovation.

Matthew Flake: We also have another strong quarter of renewal activity, which is particularly exciting on the heels of the single largest renewal quarter in company history in fourth quarter of 2024. In the first quarter of 2025, we signed renewals with three of our top 10 largest customers across digital banking, Helix, and relationship pricing. These large renewals are a vote of confidence in the strength of our partnership and the criticality of our solution. And in times of economic uncertainty, we have historically seen expansion and renewal activity accelerate. As we have discussed on previous calls, we have had strong renewal bookings over the past several quarters, and we believe we will see a similar renewal opportunity set in 2025 and 2026 compared to what we had available over the past two years.

Jonathan: We also had another strong quarter of renewal activity, which is particularly exciting on the heels of the single largest renewal quarter in company history in the fourth quarter of 2024.

Jonathan: In the first quarter of 2025, we signed renewals with three of our top 10 largest customers across digital banking helix and relationship pricing.

Jonathan: These large renewals are a vote of confidence in the strength of our partnership and the criticality of our solutions and in times of economic uncertainty, we have historically seen expansion and renewal activity accelerate.

Jonathan: As we have discussed on previous calls we have had a strong we have had strong renewal bookings over the past several quarters and we believe we will see a similar renewal opportunity set in 2025 and 2026 compared to what we had available over the past two years.

Matthew Flake: Looking ahead, I do want to provide a few remarks on our outlook for the remainder of the year. I believe our business is durable due to the mission-critical nature of our products, our strong and diverse customer base, and the fundamentals of our model that have helped us execute well in other recent periods of macro uncertainty. The pandemic, rising rates, and the events in the banking sector from March of 2023 underscored the importance of deposit gathering, and our solutions are essential in helping customers attract, retain, grow, and protect deposits. We expect that focus on deposits to persist and has been a tailwind to our sales efforts over the last several quarters.

Jonathan: Looking ahead I do want to provide a few remarks on our outlook for the remainder of the year I believe our business is durable due to the mission critical nature of our products are strong and diverse customer base and the fundamentals of our model that have helped us execute well in other recent periods of macro uncertainty the pandemic rising rates.

Jonathan: In events in the banking sector from March of 'twenty, three underscored the importance of deposit gathering and our solutions are essential in helping customers attract retain grow and protect deposits. We expect that focus on deposits to persist and it has been a tailwind to our sales efforts over the last several quarters.

Matthew Flake: We have a highly strategic and diverse customer base across our solution areas, and we believe our regional and community financial institution customers play an essential role in supporting the economy, including in challenging times.

Jonathan: We have a highly strategic and diverse customer base across our solution areas and we believe our regional and community financial institution customers, playing a central role in supporting the economy, including in challenging times.

Matthew Flake: In terms of what we see here in early May 2025, we continue to see a solid pipeline for the remainder of the year with a strong overall renewal and expansion opportunity ahead of us.

Jonathan: In terms of what we see here in early May 2025, we continue to see a solid pipeline for the remainder of the year with a strong overall renewal and expansion opportunity ahead of us with that I'll hand, the call over to Jonathan to discuss our financial performance from the first quarter in more detail and provide our updated guidance for 2025.

Jonathan Price: With that, I'll hand the call over to Jonathan to discuss our financial performance from the first quarter in more detail and provide our updated guidance for 2025. Thanks, Matt. We started 2025 with a great first quarter, delivering strong results across several key metrics, including revenue and adjusted EBITDA, both of which exceeded the high end of our previously issued guidance. These results underscore the continued execution of our profitable growth strategy, reinforced by another quarter of solid bookings execution and record-free cash flow generation.

Jonathan: Thanks, Matt we started 2025 with a great first quarter delivering strong results across several key metrics, including revenue and adjusted EBITDA, both of which exceeded the high end of our previously issued guidance.

Jonathan: These results underscore the continued execution of our profitable growth strategy reinforced by another quarter of solid bookings execution and record free cash flow generation.

Jonathan Price: I will now discuss our financial results in more detail and conclude with our updated guidance for the second quarter and full year 2025. Total revenue for the first quarter was $189.7 million, an increase of 15% year over year and up 4% sequentially. Our revenue growth was primarily driven by subscription-based revenues, which grew 18% year-over-year and 5% sequentially. Subscription revenue as a percentage of total revenue continued to grow, ending the quarter at 81 percent, highlighting the ongoing shift in our revenue mix towards a higher margin revenue stream. The year-over-year and sequential revenue growth was primarily driven by a combination of new customer goal lives and expansion with existing customers.

Jonathan: I will now discuss our financial results in more detail and conclude with our updated guidance for the second quarter and full year 2025.

Jonathan: Total revenue for the first quarter was $189 7 million, an increase of 15% year over year and up 4% sequentially.

Jonathan: Our revenue growth was primarily driven by subscription based revenues, which grew 18% year over year and 5% sequentially.

Jonathan: Subscription revenue as a percentage of total revenue continued to grow ending the quarter at 81% highlighting the ongoing shift in our revenue mix towards our higher margin revenue stream.

Jonathan: The year over year and sequential revenue growth was primarily driven by a combination of new customer go lives and expansion with existing customers.

Jonathan Price: Our services and other revenues declined by 7% year-over-year, primarily driven by a reduction in our professional service revenues, which are more discretionary. While we continue to anticipate that ongoing pressure on discretionary services demand will drive further increases in subscription revenue as a percentage of total revenue, This shift also aligns with our strategic focus on higher margin recurring subscription.

Jonathan: Services and other revenues declined by 7% year over year, primarily driven by a reduction in our professional service revenues, which are more discretionary in nature.

Jonathan: While we continue to anticipate that ongoing pressure on discretionary services demand will drive further increases in subscription revenue as a percentage of total revenue.

Jonathan: A shift also aligns with our strategic focus on higher margin recurring subscription revenues.

Jonathan Price: We believe this evolution in our revenue mix positions us well for sustainable, profitable growth in the long term. Total annualized recurring revenue, or total ARR, grew to $847 million, up 11% year-over-year from $761 million at the end of the first quarter of 2024. Driven by strength in our subscription ARR, which grew to $702 million, up 14% year-over-year from $615 million in the prior year period. Our year-over-year total ARR growth saw continued strength in net new bookings and expansion with existing customers, partially offset by the decline in professional services-based revenue we previously discussed. Our ending backlog of approximately $2.3 billion increased by $74 million sequentially, or 3%, and $379 million year-over-year, representing 20% growth.

Jonathan: We believe this evolution in our revenue mix positions us well for sustainable profitable growth in the long term.

Jonathan: Total annualized recurring revenue or total <unk> grew to $847 million up 11% year over year from $761 million at the end of the first quarter of 2024, driven by strength in our subscription.

Jonathan: Which grew to $702 million up 14% year over year from $615 million in the prior year period.

Jonathan: Our year over year total IRR growth saw continued strength in net new bookings and expansion with existing customers, partially offset by the decline in professional services based revenue we previously discussed.

Jonathan: Our ending backlog of approximately $2 3 billion increase.

Jonathan: <unk> increased by $74 million sequentially, or 3% and $379 million year over year, representing 20% growth.

Jonathan Price: The year-over-year and sequential increases were primarily driven by expansion with existing customers as we renewed three of our largest customers in the first quarter. 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. But as Matt mentioned, we believe we will see a similar number of renewal opportunities available to us in 2025 and 2026 as we did in the prior two years. Gross margins were 57.9% for the first quarter, up from 54.9% in the prior year period, and from 57.4% in the previous quarter.

Jonathan: The year over year and sequential increases were primarily driven by expansion with existing customers as we renewed three of our largest customers in the first quarter.

Jonathan: As we have mentioned previously the sequential change in backlog, they fluctuate quarter to quarter based on the number of renewal opportunities available within that quarter, but as Matt mentioned, we believe we will see a similar number of renewal opportunities available to us in 2025 and 2026 as we did in the prior two years.

Jonathan: Gross margins were 57, 9% for the first quarter up from 54, 9% in the prior year period and from 57, 4% in the previous quarter.

Jonathan Price: The sequential and year-over-year increases in gross margin were driven by an increasing mix of higher margin subscription-based revenue. The sequential growth in gross margin was partially offset by a seasonal increase in compensation costs, which is typical for our first quarter. Total operating expenses for the first quarter were $77 million, or 40.7% of revenue, compared to $73 million, or 44% of revenue in the prior year quarter, and $75 million, or 41.2% of revenue in the fourth quarter of last year. 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.

Jonathan: The sequential and year over year increases in gross margin were driven by an increasing mix of higher margin subscription based revenues.

Jonathan: Sequential growth in gross margin was partially offset by a seasonal increase in compensation costs, which is typical for our first quarter.

Jonathan: Total operating expenses for the first quarter were $77 million or <unk>, 47% of revenue compared to $73 million or <unk>, 44% of revenue in the prior year quarter and $75 million or <unk> 41, 2% of revenue in the fourth quarter of last year.

Jonathan: 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 improvement as we continue to focus on operational efficiency and our ability to scale, while maintaining investments in best in class innovation to meet.

Jonathan Price: with G&A showing the biggest year-over-year improvement as we continue to focus on operational efficiency and our ability to scale while maintaining investments in best-in-class innovation to meet our customers' evolving needs.

Jonathan: At our customers' evolving needs.

Jonathan Price: Total adjusted EBITDA was a record $40.7 million, up 61% from $25.2 million in the prior year period and up 8% from $37.6 million in the previous quarter. We ended the first quarter with cash, cash equivalents, and investments of $486 million, up from $447 million at the end of the previous quarter. We generated cash flow from operations of $44 million, driven by improved profitability and continued effective working capital management. and generated pre-cash flow of $38 million. Although we typically experience weaker cash flow in our first quarter due to seasonally higher cash costs associated with our annual bonus and year-end commission payouts, our cash flow performance this quarter exceeded typical seasonal patterns, benefiting in part from favorable timing with larger customer invoices.

Jonathan: Total adjusted EBITDA was a record $40 $7 million.

Jonathan: Up 61% from $25 2 million.

Jonathan: In the prior year period, and up 8% from $37 6 million in the previous quarter.

Jonathan: We ended the first quarter with cash cash equivalents investments of $486 million.

Jonathan: Up from $447 million at the end of the previous quarter we.

Jonathan: We generated cash flow from operations of $44 million drew.

Jonathan: Driven by improved profitability and continued effective working capital management and generated free cash flow of $38 million.

Jonathan: Although we typically experienced weaker cash flow in our first quarter due to seasonally higher cash costs associated with our annual bonus and year end Commission payouts, our cash flow performance. This quarter exceeded typical seasonal patterns benefiting in part from favorable timing with larger customer invoicing.

Jonathan Price: This contributed to stronger-than-expected pre-cash flow conversion in the quarter. We expect second quarter free cash flow to be lower than the first quarter, but continue to expect second half free cash flow to exceed the first half of the year, while remaining on track to achieve greater than 85% conversion for the full year.

Jonathan: This contributed to stronger than expected free cash flow conversion in the quarter.

Jonathan: We expect second quarter free cash flow to be lower than the first quarter, but continue to expect second half free cash flow to exceed the first half of the year, while remaining on track to achieve greater than 85% conversion for the full year.

Jonathan Price: Let me wrap up by sharing our second quarter and updated full year 2025 guidance. We forecast second quarter revenue in the range of $191 to $195 million, and we are raising our full year revenue to the range of $776 to $783 million, representing year-over-year growth of 11 to 12 percent for the full year. We forecast second quarter adjusted EBITDA of $41 to $44 million and are raising our full year 2025 adjusted EBITDA guidance to $170 to $175 million, representing 22% of revenue for the full year. We previously communicated the expectation for full-year 2025 subscription revenue growth of at least 15%, and we are now raising that outlook to at least 15.5%.

Jonathan: Let me wrap up by sharing our second quarter and updated full year 2025 guidance.

Jonathan: We forecast second quarter revenue in the range of $191 million to $195 million and we are raising our full year revenue to the range of $776 million to $783 million representing year over year growth of 11% to 12% for the full year.

Jonathan: We forecast second quarter, adjusted EBITDA of $41 million to $44 million and are raising our full year 2025, adjusted EBITDA guidance to $170 million to $175 million, representing 22% of revenue for the full year.

Jonathan: We previously communicated the expectation for full year 2025 subscription revenue growth of at least 15% and we are now raising that outlook to at least 15, 5%.

Jonathan Price: In summary, we started 2025 with strong performance across the board, delivering first quarter results that exceeded our previous expectation. This performance, coupled with our outlook for the remainder of the year, has given us the confidence to raise our full year guidance. Despite ongoing macroeconomic uncertainties, we believe our strong financial foundation, including our healthy balance sheet, significant free cash flow generation, and continued focus on operational efficiency. positions us to navigate potential challenges while prioritizing our customers' long-term success.

Jonathan: In summary, we started 2025 with strong performance across the board delivering first quarter results that exceeded our previous expectations.

Jonathan: This performance coupled with our outlook for the remainder of the year has given us the confidence to raise our full year guidance.

Jonathan: Despite ongoing macroeconomic uncertainties, we believe our strong financial foundation, including our healthy balance sheet significant free cash flow generation and continued focus on operational efficiency positions us to navigate potential challenges, while prioritizing our customers long term success, we remain.

Matthew Flake: We remain confident in our ability to continue executing our profitable growth strategy and driving long-term value for our shareholders.

Jonathan: Confidence in our ability to continue executing our profitable growth strategy and driving long term value for our shareholders.

Matthew Flake: With that, I'll turn the call back over to Matt for his closing remarks. Thanks, Jonathan. As we conclude the first quarter, I'll reiterate my confidence in the fundamentals of this business. First, we had a solid start to the year that underscored a few key themes. Expansion and renewal activity were both strong, and we see plenty of opportunity in these areas for the rest of the year. Fraud management, which is a growing priority for financial institutions, was a key driver of our bookings performance and something we expect to play an increasingly important role in our customer relationships.

Matt: With that I'll turn the call back over to Matt for his closing remarks. Thank.

Speaker Change: Thanks, Jonathan as we conclude the first quarter I'll reiterate my confidence in the fundamentals of this business.

Speaker Change: First we had a solid start to the year that underscore a few key themes expansion and renewal activity were both strong and we see plenty of opportunity in these areas for the rest of the year fraud management, which is a growing priority for financial institutions was a key driver of our bookings performance and something we expect to play an increasingly important.

Speaker Change: <unk> role in our customer relationships we.

Matthew Flake: We have positive momentum and a solid pipeline for the remainder of the year.

Speaker Change: Positive momentum and a solid pipeline for the remainder of the year looking at the Big picture, we remain confident in our outlook, which we believe is predicated on a few key factors first our solutions are essential to our customers' success, particularly in attracting and retaining deposits, making more informed decisions with tools like precision lender.

Matthew Flake: Looking at the big picture, we remain confident in our outlook, which we believe is predicated on a few key factors. First, our solutions are essential to our customers' success, particularly in attracting and retaining deposits, making more informed decisions with tools like Precision Lender, and providing best-in-class risk and fraud solutions. Second, our customers represent a broad spectrum of financial institutions who play a key role in supporting the economy. And third, the visibility of our model combined with our improving profitability profile give us confidence around the financial outlook for the business.

Speaker Change: <unk> and providing best in class risk and fraud solutions.

Speaker Change: Our customers represent a broad spectrum of financial institutions and play a key role in supporting the economy.

Speaker Change: Third the visibility of our model combined with our improving profitability profile gives us confidence around the financial outlook for the business.

Operator: Thank you, and with that I'll hand it over to the operator for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We kindly ask that you limit your questions to one and one follow-up, with additional questions being received if time permits. We will pause for just a moment to compile the Q&A roster.

Speaker Change: Thank you and with that I'll hand, it over to the operator for questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: We ask that you limit your questions to one and one follow up with additional questions being received if time permits we will pause for just a moment to compile the Q&A roster.

Parker Lane: Your first question comes from Parker Lane with Stifle. Please go ahead. Hey, guys, thanks for taking the question and congrats on the quarter. Matt, clearly there at the end, you were talking about the traction you're seeing in fraud and how this is a big priority for your end market. I just wanted to give us a sense of the relative level of penetration you're seeing there and some of the pipeline that you see, how often is fraud, you know, part of the evaluation that these customers are doing as part of the whole digital banking RFP?

Parker Lane: Your first question comes from Parker Lane with Stifle. Please go ahead.

Parker Lane: Hey, guys. Thanks for taking my question and congrats on the quarter, Matt clearly there at the end you were talking about the traction you're seeing in fraud and how this is a big priority for your end market. I was just wondering if you could give us a sense of the relative level of penetration you're seeing there and some of the pipeline that you see how often is fraud.

Parker Lane: Part of the evaluation that these customers are doing as part of the whole digital banking.

Matthew Flake: Yeah, Parker, it's, it's both part of a net new deal, it's a different chair for us, especially on the commercial opportunities. So you see it on the net new side. And obviously, we had some big expansion wins, especially up market with it. So I think it's broad based. You know, we have, obviously we have a lot of customers that use the products, but we've added additional products to the... Q3 Holdings, Q4 Holdings, Q5 Holdings, Q6 Holdings, Q7 Holdings, Q8 Holdings, Q9 Holdings, Q9 Q2 Holdings Inc. Got it.

Parker Lane: RFP.

Parker Lane: Yes Parker.

Parker Lane: It's both.

Speaker Change: Part of our net new deal, it's a differentiator for us, especially on the commercial opportunities.

Speaker Change: So you see it on the net new side and obviously, we had some big expansion wins, especially up market with it. So I think it's broad based it's.

Speaker Change: We have obviously, we have a lot of customers that use the fraud products that we've added additional products to the to the offerings that we have so.

Speaker Change: A lot of Green space to go get after with the fraud products and we're going to continue to innovate in that area.

Speaker Change: Both with the products, we're building as well as partnering with some some of our partners like alloy and other ones in our innovation studio. So a lot a lot of opportunity there and unfortunately fraud has really picked up with.

Speaker Change:

Speaker Change: Continued utilization of digital products, whether it's attacking the end user the commercial customer for the bank.

Jonathan Price: And Matt, you also mentioned a lot of confidence in the renewal opportunities you're seeing in scope for 2025 and 2026. Just wondering if you could talk about if that's the absolute number of customers relative to what you've seen that you're expecting, or is that total contract value, any additional granularity on what's giving you that confidence around 2025 and 2026?

Speaker Change: Got it and then you also mentioned a lot of confidence in the renewal opportunities you are seeing in scope for 25% and 26, just wondering if you could talk about if thats the absolute number of customers relative to what you've seen.

Speaker Change: Were expecting or is that total contract value any additional granularity on what future confidence around 25 and six.

Jonathan Price: I'll have JP take that. Yeah, Parker, it's Jonathan. So the easy answer to that is it is the reference to the metric that Matt made in the call is the number of opportunities, meaning the number of logos that are up for renewal during the period of 2025 and 2026 relative to what we saw get done in 2023.

JP: J P take that yes.

Speaker Change: Parker, Jonathan So the easy answer to that is it is the reference to the metric that Matt made in the call as the number of opportunities, meaning the number of logos that are up for renewal during the period of 25 and 26 relative to what we saw got to get done in 'twenty, three and 'twenty four.

Parker Lane: Understood. Thanks again, guys.

JP: Understood. Thanks, again, guys. Thanks Bart.

Alex Sklar: Your next question comes from Alex Sklar with Raymond James. Please go ahead. Thank you.

Alex Skylar: Your next question comes from Alex Skylar with Raymond James. Please go ahead.

Matthew Flake: Matt or Jonathan, just in terms of the macro comments you made at the outset, I know you've got a high degree of visibility in the model for 2025, but did you incorporate any different potential macro assumptions into the raised outlook relative to last quarter? No, not from a macro perspective. Obviously, we have a lot of visibility into the 25 numbers and with the benefit of Q1 behind us and the Q2 guide out there, there are some things that can happen throughout the year when it comes to cross sale and renewal activity that can have an impact.

Alex Skylar: Thank you Matt Jonathan just in terms of the macro comments you made at the outset I know you've got a high degree of visibility in the model for 2025, but did you incorporate any different potential macro assumptions into the raised outlook relative to last quarter.

Alex Skylar: No not from a macro perspective, we obviously, we have a lot of visibility into the 25 numbers and with the benefit of Q1 behind us in the Q2 guide out there.

There are some things that can happen throughout the year when it comes to cross sale and renewal activity that can have an impact but from a P&L perspective.

Matthew Flake: But from a P&L perspective, we have a lot of confidence in the 2025 outlook.

Alex Skylar: We have a lot of confidence in the 2025 outlook.

Matthew Flake: We'll look towards 2026 based on the execution that we ultimately deliver here in 25. And then when it comes to bookings that we'll see as the year goes on and obviously that will have the biggest impact on any changes relative to what we've already shared. Okay, great.

Alex Skylar: We'll look towards 2026 based on the execution that we ultimately deliver here in 'twenty five and then when it comes to bookings that that we'll see as the year goes on and obviously that will have the biggest impact on any changes relative to what we've always already shared on 2026 P&L.

Matthew Flake: And Matt, maybe one follow up for you. You talked about strength beyond the tier ones. In the presentation, it looks like the credit union mix of error stepped up. It's something that we've talked about a ton recently.

Alex Skylar: Okay great.

Alex Skylar: Maybe one follow up for you.

Speaker Change: You talked about strength beyond the tier ones in the presentation. It looks like the credit Union.

Alex Skylar: <unk> stepped up.

Matthew Flake: What are you seeing from that section of your market in terms of priorities there? Is there any increasing focus on the commercial side of the house or with fraud that's seen you put focus more there on that section of the market?

Alex Skylar: We've talked about a ton recently what are you seeing from that section of your market in terms of priorities. There is there any increasing focus on the commercial side of the house or withdraw that's seen you put focus more there on that segment of the market. Thanks, Yes.

Matthew Flake: Thanks. Yeah, on the credit union side, you know, we're performing well there. We really are upmarket in the credit unions, 40% of the top 100 credit unions are customers of ours. And a lot of those credit unions are looking to diversify their book and to get more commercial customers. And so when they have the retail platform in, it's a single platform, they can add on demand the commercial functionality they want. And they usually go micro and small business first and then grow into larger commercial, at least that's their hope. And so we're just a great fit for them.

Alex Skylar: On the credit Union side.

Alex Skylar: We're performing well there.

Alex Skylar: We really are upmarket in the credit Union to 40% of the top 100 credit unions are customers of ours and a lot of those credit unions are looking to diversify their book and to get more commercial customers and so when they have the retail platform and it's a single platform. They can add on demand the commercial functionality they want and they usually go micro and small business first and then.

Alex Skylar: Grow into larger commercial lease ups, there hope and so we're just a great fit for them and then you couple it with the.

Matthew Flake: And then you couple it with Q2 Holdings Inc All right, great.

Alex Skylar: Fraud solutions, we have the operate operating discipline that we have around running a commercial bank we have <unk>.

Alex Skylar: <unk> that can help them build their practice, it's a really nice fit for us I think it's a big opportunity for us as it has been in the past and it will be moving forward.

Matthew Flake: Thank you both.

Speaker Change: Alright, great. Thank you both.

Terry Tillman: Your next question comes from Terry Tillman with Truist Securities.

Alex Skylar: Thank you.

Speaker Change: Your next question comes from Terry Tillman with Truest Securities. Please go ahead.

Jonathan Price: Please go ahead. Yeah, hey, Matt, Jonathan and Josh, thanks for taking my questions and congrats on the quarter. And sorry in advance here if there's any background noise. But my first question is, I appreciate the idea of the number of opportunities is pretty similar in 25 and 26 versus 23 and 24. I'm curious though, in 25, Jonathan, because people do look at, you know, kind of backlog and certain KPIs each quarter, is it pretty linear across the quarters in terms of the renewals base that you're looking at? And what kind of uplift are you seeing in these bigger renewals?

Terry Tillman: Yeah, Hey, Matt Jonathan and Josh Thanks for taking my questions and congrats on the quarter and.

Speaker Change: Sorry in advance here, if there's any background noise.

Terry Tillman: First question is.

Terry Tillman: Appreciate the idea of the number of opportunities is pretty similar in 'twenty, five and 26 versus 'twenty three 'twenty four I'm curious, though in 'twenty five Jonathan because people do look at kind of backlog and certain kpis each quarter is it pretty linear across the quarters in terms of the renewals.

Terry Tillman: Base that youre looking at and what kind of uplift are you seeing in these bigger renewals and then I had a follow up.

Terry Tillman: And then add a follow up.

Jonathan Price: Yeah, so it is definitely not linear. So it's, you know, we don't guide obviously, the number of opportunities by quarter, but over the course of the two, what we're trying to make sure that the investor base understands is that over the next two years, that we have a similar size of opportunities that in terms of the number of logos, I think there was a narrative on the back of Q4, which was our largest renewal quarter in the history of the company, that that would act as a headwind or that we pulled forward, because the commentary about out of scope renewals last quarter, and I think we just wanted to make clear that as strong a year as 2024 was, in particular from renewals, we have an equally strong opportunity ahead of us over the next two years.

Terry Tillman: So it is definitely not linear so we don't guide obviously, the number of opportunities by quarter, but over the course of the what we're trying to make sure that the investor base understands is that over the next two years that we have a similar size of opportunity set in terms of the number of logos I think there was a narrative on the back of Q4, which was our largest renewal quarter in the.

Terry Tillman: History of the company that that would act as a headwind or that we pulled forward because of the commentary about out of scope renewals last quarter and I think we just wanted to make clear that as.

Terry Tillman: Strong a year as 2024 was in particular from renewals, we have an equally strong opportunity ahead of us over the next two years, so I wouldn't interpret it any more into that than that and then as far as quarters because of the timing of these things are like a deal with much shorter sales cycles potentially but you never know when the actual renewal may come in.

Jonathan Price: So that I wouldn't interpret it any more into that than that. And then as far as quarters, because the timing of these things are like a deal with much shorter sales cycles, potentially, but you never know when the actual renewal may come in relative to the termination date on the contract. So there's just a lot of volatility in the specific timing of which quarter it Understood.

Terry Tillman: Relative to the termination date on the contract. So theres just a lot of volatility in the specific timing of which quarter. It will fall in.

Terry Tillman: And maybe just my follow-up question is Innovation Studio. I think a couple quarters ago, you know, the business plan for what Innovation Studio could do for one of the customers that was going to help fund the deal, whether it's those kind of aha moments or just, you know, potentially when RevShare or some of the partner fees could start to, you know, kind of add up to something meaningful on the income statement.

Speaker Change: Understood and maybe just my follow up question is innovation studio I think a couple of quarters ago.

Speaker Change: The business plan for what innovation studio could do for one of the customers kind of help fund the deal whether its those kind of I'll call moments or just.

Speaker Change: Essentially when Rev share or some of the partner fees could start to kind of add up to something meaningful on the income statement just anything more you can throw on innovation studio strategically. Thank you.

Matthew Flake: Just anything more you can share on Innovation Studio strategically. Thank you. Yeah, I can share some thoughts. And Kirk, you can jump in if you have anything to add. But the metrics, all of the things you mentioned in terms of the stories, the value that we're bringing to customers continue to be strong. We have our client conference coming up here in a couple of weeks, where we're going to have our customers on stage sharing new stories and new anecdotes of the impact it's having. So I guess what I can say, Terry, is that the flywheel is continuing to turn, and we're seeing more and more traction and progress against all of those KPIs.

Speaker Change: Yes, I can share some thoughts and Kirk you can jump.

Speaker Change: But if you have anything.

Speaker Change: Can add but.

Speaker Change: So all of the things I mentioned in terms of the stories value that we're going to see the customers continue to be strong we have our client conference coming up here in a couple of weeks, where we're going to have our customers on share on stage sharing new stories and new anecdotes of the impact is happening. So I guess, what I can say areas that the flywheel is continuing to turn in where.

Speaker Change: We're seeing more and more traction and progress against all of those kpis.

Kirk Coleman: And we're just really pleased with the adoption. We're at a record high number of FIs that are using this now. And as we've talked about several quarters in a row now, virtually every deal on the Net News site is citing it as a key reason for choosing us. So our motion around helping the FIs is better, and we're seeing the results. Yeah, the only thing I'd add is breath, you know, really strong breath.

Speaker Change: And we're just really pleased with the adoption were at a record high number of <unk> that are using this now and as we've talked about several quarters in a row now virtually every deal on the net new side of citing it as a key reason for choosing us. So we're our motion around helping the advisors better and we're seeing the results.

Speaker Change: I think I would add is really.

Speaker Change: Really strong breadth in terms of the application of innovation studio across consumer small business and commercial really like to see that diversity. So we see it growing strong in all three fronts.

Terry Tillman: All right, thank you all.

Speaker Change: Alright. Thank you all thanks Peter.

Adam Hotchkiss: Your next question comes from Adam Hotchkiss with Goldman Sachs. Please go ahead. Great, thanks so much for taking the question.

Speaker Change: Your next question comes from Adam Hotchkiss with Goldman Sachs. Please go ahead.

Matthew Flake: Matt, you mentioned three renewals with your top customers, any commonalities in your conversations with those customers and what they're focused on? I think you've mentioned fraud. We've heard in the market a lot of excitement around things like account opening. I'm just curious if anything has changed maybe over the last three to four months given everything that's going on in terms of FI priorities. Yeah, well, these were all you know, what we said in the script was, it was one of the largest digital banking customers, one of the largest Helix customers, and one of the largest precision lender customers.

Speaker Change: Great. Thanks, so much for taking the question, Matt you mentioned three renewals with your top customers any commonalities in your conversations with those customers and what they're focused on I think you've mentioned fraud, we've heard in the market a lot of excitement around things like account opening I'm just curious if.

Speaker Change: Or anything has changed maybe over the last three to four months given everything that's going on in terms of EFI priorities. Thank you.

Speaker Change: Yes, well these were all what we said in the.

Speaker Change: Script.

Speaker Change: It was one of the largest digital banking customers want a large helix customers.

Matthew Flake: So you've got broad swath of type of companies, of businesses there. But first of all, I think that the renewal is a statement that we're doing a great job for them and they want to continue to work with us. But largely, it's what am I going to switch to? These are the best products in their categories and they're going to stay on them and they want to stay on them. So it's really a validation of how we're doing in the marketplace. They get to see whether we're winning and losing. They go look at everybody else's solution.

Speaker Change: One of the largest precision lender customers so you've got.

Broad swath of type of companies businesses there, but.

Speaker Change: First of all I think the renewal is a statement that we're doing a great job for them and they want to continue to work with us.

Speaker Change: But largely it.

Speaker Change: What am I going to switch to these are the best products in their categories and they're going to stay on them and they want to stay on them. So it's really a validation of how we're doing in the marketplace. They get to see whether we are winning and losing they go look at every everybody else's solution everybody gets to do their dog and pony and they stick with us. So that's really what I take from it there were there was not any commentary around the economy.

Matthew Flake: Everybody gets to do their dog and pony and they stick with us. So that's really what I take from it.

Matthew Flake: There was not any commentary around the economy.

Jonathan Price: Okay, yeah, that's helpful. And then, Jonathan, I wanted to ask around gross margin improvement. I think you've had a number of quarters now of sequential gross margin improvement as we sort of work towards the 60% range.

Speaker Change: Or anything like that.

Speaker Change: Okay. Yeah. That's helpful and then Jonathan I wanted to ask around gross margin improvement I think you've had a number of quarters now of sequential gross margin improvement as we sort of work towards the 60% range. How should we think about gross margin progression over the next one to two years and one of the drivers there. Thank you.

Jonathan Price: How should we think about gross margin progression over the next one to two years? And what are the drivers there? Thank you. Yeah, thanks, Adam. Yeah, we're going to continue to see progression, I think, between continued progress when it comes to pricing and packaging and value capture overall, both on the net new side, net new side and at renewal and cross sale, as well as some of the cost efficiency measures we've taken, they continue to yield benefit for us. And then as we get into 2026, as we've talked about before, that's when we see the more significant step up, as we migrate out of the data center into the public cloud fully on the digital banking product.

Speaker Change: Yeah. Thanks, Adam Yeah, we're going to continue to see progression I think between kantar.

Speaker Change: Continued progress when it comes to pricing and packaging and value capture overall, both on the net new signed net new site and at renewal and cross sale as well as some of the cost efficiency measures we have taken.

Speaker Change: They continue to yield benefit for us and then as we get into 2026 as we've talked about before that's when we see the more significant step up as we migrate out of the data center into the public cloud fully on the digital banking product and that has the biggest impact.

Jonathan Price: And that that has, you know, the biggest impact in calendar 26. So, you know, it's a whole set of initiatives that take time that we've talked about over the last couple years, and we'll continue for the next couple, as well as, you know, pricing initiatives on the top line, and then the cloud migration You know, we think we'll get us to 60% and beyond.

Speaker Change: In calendar 2006 so.

Speaker Change: It's a whole set of initiatives that take time that we've talked about over the last couple of years and will continue for the next couple as well as pricing initiatives on the top line and then the cloud migration that we think will get us to 60% and beyond as the next couple of years rollout.

Jonathan Price: Great, thank you both very much.

Speaker Change: Great. Thank you both very much.

Dan Perlin: Your next question comes from Dan Perlin with RBC. Please go ahead. Thanks. Good evening, guys. I just, Matt, I wanted to cycle back a little bit on just kind of the near-term macro conversations that you've had with clients lately. Are you seeing any, you know, indications of client behavior changes? You know, one of your competitors just more had mentioned kind of nervousness around discretionary spending, which I know is a little bit different for you guys in terms of what you define as discretionary, and they do. But, like, it did sound like things were getting a little more cautious, not on the sales motion necessarily, but, like, on things that could get paused were putting on pause, and I'm just wondering if you're having any of those similar conversations today.

Speaker Change: Thanks, Adam Thank you.

Speaker Change: Your next question comes from Dan Perlin with RBC. Please go ahead.

Dan Perlin: Thanks, Good evening, guys, I guess, Matt I wanted to cycle back a little bit on this.

Dan Perlin: Just kind of the near term macro conversations that you've had clients lately.

Dan Perlin: Are you seeing any indications of client behavior changes one of your competitors had mentioned kind of nervousness around discretionary spending, which I know is a little bit different for you guys in terms of what you define as discretionary and they do but it did sound like things were getting a little more cautious not on the sales motion necessarily but like on things that could get paused, we're putting on.

Dan Perlin: Pause and I'm, just wondering if you're having any of those similar conversations today.

Matthew Flake: Yeah, we're having a lot of conversations with customers and prospects. And I know nervousness is probably the right word to use, but they're not seeing it show up in their credit books or on the deposit side. But if you look at the top of the funnel, the pipeline we have, the deals were working, there's been no slowdown. You know, our top of the funnel. We had strong growth in the first quarter, and that kind of feeds the rest of the year. So, other than the conversations we all have around what's going to happen, they're going to get deals done, is there a recession, whatever all the topics are, you know, they feel good about their business.

Dan Perlin: Yes, we're having a lot of conversations with customers and prospects.

Dan Perlin: I don't nervousness is probably the right word to use but they are not seeing it show up in their credit books or on the deposit side, but.

Dan Perlin: If you look at the top of the funnel the pipeline we have the deals we're working there's been no slowdown in those are top of the funnel.

Dan Perlin: We had strong growth in the first quarter and that kind of feeds the rest of the year. So.

Dan Perlin: Other than the conversations we all have around what's going to happen, they're going to get deals done.

Dan Perlin: Recession, whatever all the topics are.

Kirk Coleman: They're in a good spot. So, there's nothing out there.

Dan Perlin: They feel good about their business. They are in a good spot. So there was nothing theres nothing out there Kirk you want add anything on that you talked to a lot of banks as well.

Kirk Coleman: Kirk, do you want to add anything? Yeah, I'd just add... There are our customers, we mark them against the field, we pull all their call reports, and they help form their peers. We have a really strong customer base. They're continuing to stay focused on being great operators. So yeah, there's some uncertainty out there for sure, and you saw that. So I'd say, you know, everyone's kind of trying to look around the corner and figure out, you know, kind of where the economy is going to go. At the moment, they're not changing their priorities.

Dan Perlin: Yes.

Dan Perlin: There are customers, we mark them against the field they put all their call reports.

Dan Perlin: There appears to be a really strong customer base.

Dan Perlin: We continue to stay focused on being great operators that are well reserved in terms of where they stand from their loan books and so yes. There is some uncertainty out there for sure and you sort of saw that some of the commentary on their earnings calls, but they had very solid first quarter earnings So I would say.

Dan Perlin: Everyone's kind of trying to look around the corner and figure out kind of where the economy is going to go but at the moment, they're not changing their priorities in terms of what they're focused on and so you have a great digital experiences controlling for fraud pricing their relationships correctly. These are all still top priorities for them.

Jonathan Price: Yep, nope, that's great color. And then just quickly on the cash flow, again, like really strong free cash flow this quarter. And as you pointed out, you're kind of exceeding the seasonal patterns. I just want to make sure I understand what that means. I mean, you kind of get the cadence for the year, but you called out larger client invoicing, and it would seem as though you kind of continue to kind of punch, you know, above your weight going up and up and up in terms of client sizings, winnings, renewals. And so I'm just wondering, is there going to be a point at which it's going to just change naturally, and we need to be mindful of that, understanding like the conversion will still be in the kind of mid 80s.

Dan Perlin: Yes.

Dan Perlin: Great color.

Speaker Change: And then just quickly on the cash flow again really strong free cash flow this quarter and as you pointed out you kind of exceeding the seasonal patterns just want to make sure I understand what that means I mean, you kind of get the cadence for the year, but you called out larger client invoicing and it would seem as though you're kind of continue to connect.

Speaker Change: Punch above your weight going up and up and up in terms of client sizing winnings in renewals and so I'm just wondering is there going to be.

Speaker Change: It's going to just change naturally we need to be mindful of that understanding like the conversion would still be in the mid <unk>, but the cadence seems like it's changed a bit and I'm. Just wondering if that's a one off or if that's something we need to be prepared for it yet.

Jonathan Price: But the cadence seems like it's changed a bit. And I'm just wondering if that's a one off or if that's something we need to be prepared for?

Jonathan Price: Thank you. Yeah, I mean, it's a good question. At the end of the day, I think we're continuing to execute really well, obviously, on the profitability side, but then converting that to cash flow. There was, I'll call it an anomaly in the first quarter where we had one very large customer switch from a monthly cadence to an annual payment. And we collected that at the end of the first quarter. So that's really what I would call sort of a pull forward from what would otherwise have been spread throughout the year into the first quarter. So that that certainly inflated the first quarter outcome.

Speaker Change: I mean, it's a good question at the end of the day I think we're continuing to execute really well obviously on the profitability side, but then converting that to cash flow there was.

Speaker Change: I'll call it an anomaly in the first quarter, where we had one very large customer switch from a monthly cadence to an annual payments and we collected that at the end of the first quarter. So that's really what I would call sort of a pull forward from what would otherwise have been spread throughout the year into the first quarter. So that certainly inflated the first quarter outcome and Thats, where on the call I mentioned.

Jonathan Price: And that's where on the call, I mentioned that the second quarter, you might see a dip, but the full year prognostication remains. And to your point, I think we feel really strongly about our ability to convert EBITDA to free cash flow at a very high rate, and we're just getting better and better at it. So there is one dynamic though, so it's a good call out from a first quarter perspective, but it doesn't change the way we think about the rest of the year and beyond.

Speaker Change: The second quarter, you might see a dip, but the full year of prognostication remains in and to your point I think we feel really strongly about our ability to convert EBITDA to free cash flow at a very high rates and we're just getting better and better at it. So there is one dynamic though so it's a good call out from a first quarter perspective, but it doesn't change the way we think about the rest of.

Speaker Change: The year and beyond in terms of continuing to push that number up.

Speaker Change: That's great. Thank you so much.

Joe Vruwink: Your next question comes from Joe Vruwink with Baird. Please go ahead. Great, thanks.

Matt Jonathan: Thanks, Matt.

Speaker Change: Your next question comes from Joe <unk> with Baird. Please go ahead.

Matthew Flake: I want to ask about the commercial suite. Matt, I think you brought it up as strong in the credit union space. Some of your peers have been mentioning higher attach and their activity certainly has seemed to be a focus of banks near to date. I guess my question is, does that sentiment change at all in response to tariffs? You know, I'd imagine business accounts are the ones that are really going to have to contemplate additional pressures. Does that cause your bank customers to refocus on the consumer side at all? Does it change the overarching directives?

Speaker Change: Hi, great. Thanks, I wanted to ask about the commercial fleet, Matt. Thank you Brad.

Speaker Change: Strong in the credit Union space.

Speaker Change: Carriers have been mentioning higher attach in their activity.

Speaker Change: Certainly.

Speaker Change: Seem to be a focus of banks and year to date I guess my question is does that sentiment change at all in response to <unk>.

Speaker Change: Yes.

Speaker Change: And then business accounts are the ones that are really going to have to contemplate additional pressure as does that cause your bank customers.

Speaker Change: Okay.

Speaker Change: Tumor side at all does it change the overarching directives.

Matthew Flake: I haven't heard that from any bank. They want, what they want to do is they want to have more engagement with those commercial customers. After March of 23, when the... Whatever that was with the crisis with Signature and Silicon Valley.

Speaker Change: I haven't heard that from any bank they want what they want to do is they want to have more.

Speaker Change: Engagement with those commercial customers after March 23, when the.

Speaker Change: Whatever that was with the crisis with signature in Silicon Valley.

Speaker Change: In particular, you saw a big lift in our pipeline because they realized they were just using it for balance transfer capability and they wanted to begin to have them operate their business with it whether it's.

Matthew Flake: Q2 holdings in HCLassroom! They generate revenue off of these customers more than they do retail. It doesn't mean they're not paying attention to the deposit side with the retail customers, but if anything, you want to lock in more with your customers. because they're hard to get new ones. So it should drive more utilization of the product, more products, and I think you're seeing some of that with the expansion results.

Speaker Change: ACTH wires entitlements reporting and fraud products and so I think what happens is as they really lock in on these customers and try to drive more products in there so that they can make them sticky and keep in mind. These are.

Speaker Change: They generate revenue off of these customers more than they do retail doesn't mean, they're not paying attention to the.

Speaker Change: The deposit side with the retail customers, but.

If anything you want to lock in more with your customers.

Speaker Change: Because they're harder to get new ones. So it should drive more utilization of the product more products I think youre seeing some of that with expansion. The expansion results that we had in the quarter.

Matthew Flake: Yeah, okay, great.

Jonathan Price: And then just on the subscription ARR, I think it grew maybe a point faster than the registered user growth in the quarter, just given all the attention, you know, on commercial and the fraud products, the expansion activity. Do you think the ARPU growth might actually start picking back up through the remainder of the year? Yeah, I mean, there's a lot there, because we did see in the first quarter a significant jump in the number of registered users on the retail accounts, the metric we just posted publicly. And that was a lot of drivers, but one of the big ones was one of the large go-lives we had in the quarter with the top 10 credit union.

Speaker Change: Yes, Okay, great and then.

Speaker Change: On the subscription.

Speaker Change: I think it may.

Speaker Change: Maybe I'd point faster than the registered user growth in the quarter, just given all the attention on commercial auto.

Speaker Change: The fraud products. The expansion activity do you think the RPM growth might actually start picking back up through the remainder of the year.

Speaker Change: Yes.

Lot there because we did see in the first quarter a significant jump in the number of registered users on the retail counts the metric, we disclose publicly and that was.

Speaker Change: A lot of drivers, but one of the big ones. It was one of the large go lives we had in the quarter.

Matthew Flake: And so that certainly pushed up the number of users in that count. But when you think about your ARPU point going forward, the reality is, is that the mix of commercial continues to grow, that will typically come at higher ARPU, but with less user ads inherent in a commercial bank relative to a retail bank. So we're watching both numbers.

Speaker Change: The top 10, or a credit union and so that certainly pushed up the number of users in that account, but when you think about your <unk> going forward. The reality is the mix of commercial continues to grow that will typically come at higher <unk>, but with less user ads inherent in our commercial bank relative to a retail back so.

Matthew Flake: I don't think that retail metric, the 26-plus million users, is a great barometer for thinking about long-term economic business, especially if you think about ARPU as it's more to Great, thank you very much.

Speaker Change: <unk>.

Speaker Change: We're watching both numbers I don't think that the.

Speaker Change: Retail metric the 26 plus million users is a great barometer for thinking about long term economics of the business, especially if you think about <unk> mix more to commercial.

Speaker Change: Yeah.

Speaker Change: Great. Thank you very much thanks, Joe.

Michael Infante: Your next question comes from Michael Infante with Morgan Stanley. Please go ahead. Hey guys, thanks for taking our question. One of your competitors earlier today had discussed the fact that they're starting to see higher levels of bank M&A broadly amongst their base.

Speaker Change: Your next question comes from Michael <unk> with Morgan Stanley. Please go ahead.

Speaker Change: Hey, guys. Thanks for taking my question one of your competitors earlier today had discussed the fact that they are starting to see higher levels of bank M&A broadly amongst their base anything you would share just in terms of what you're seeing amongst your customers and whether or not your typical win rate in those situations is in line with historical trends.

Matthew Flake: Anything you would share just in terms of what you're seeing amongst your customers and whether or not your typical win rate in those situations is in line with historical trends? Yeah, Michael. Well, Q1 was the lowest number of transactions in the last three years that I can see. I think there was 46 of them. The good news for us is we had 21 acquisitions or MOEs in our customer base, and we were the surviving entity in 20 of them. So that data, it holds true. It's been 90% plus over the last three years, and I guess that's 95% doing quick math.

Speaker Change: <unk>.

Speaker Change: Yes, Michael.

Speaker Change: While Q1 was the lowest number of deep of transactions in the last three years that I can see I think theres 46 of them.

Speaker Change: The good news for us as we add 21 acquisitions of <unk> and our customer base and we were the surviving entity in 'twenty.

Speaker Change: So.

Speaker Change: That data.

Speaker Change: It holds true it's been 90% plus over the last three years and it said that I guess, that's 95% doing quick math, but.

Matthew Flake: But I think in this uncertain environment, it's slowed down a little bit. I would think there's going to be some pent-up demand whenever we get through this, assuming we get through it in the next couple quarters, and you'll see it pick back up. But like I said, it was the lowest quarter we've seen in the last three years in Q1. But they are talking about it.

Speaker Change: Hi.

Speaker Change: I think in this uncertain environment, it's slowed down a little bit I would think there can be some pent up demand whenever we get through this assuming we get through it in the next couple of quarters and you'll see it pick back up but like I said it was the lowest quarter. We've seen in the last three years in Q1.

Jonathan Price: You got to have a buyer and a seller in this situation, and I think it's probably going to take a couple quarters before it comes out. Very helpful.

Speaker Change: But they are talking about it you got to have a buyer and a seller in this situation I think it's probably going to take couple of quarters before it comes out.

Jonathan Price: And then Jonathan, just on the three large renewals that you cited, is there anything you would call out in terms of pricing or duration evolution in those renewals specifically? I take your commentary on having to execute over the next few quarters from a bookings perspective, but if I just think through some of the drivers of the subs revenue growth decel that you expect in 26, aside from the comp getting tougher, you're still not really seeing that normalization in the renewal opportunity. You still have a similar number of logos over the last couple of years. The tier 2 and tier 3 cohort is still really strong.

Speaker Change: Very helpful and then Jonathan just on the three large renewals that you cited is there anything you would call out in terms of pricing or duration evolution in those renewals specifically I take your commentary on timing to execute over the next few quarters from a bookings perspective, but if I just think there is some of the dry.

Speaker Change: <unk>.

Speaker Change: The subs revenue growth that you expect in 2006 aside from the comps getting tougher you're still not really seeing that normalization and the renewal opportunities still have a similar number of logos over the last couple of years, the tier two and tier three cohort is still really strong and now you are taking up your 25 subs growth expectation.

Jonathan Price: And now you're taking up your 25 subs growth expectation. So just wanted to make sure we're sort of thinking about some of the pricing and duration dynamics. Thanks. Yeah, they were actually pretty typical. Again, Matt mentioned of the three that we called out on the call, large customers in each of digital banking, Helix, and Precision Lender. And the duration, and candidly, the terms were very typical for those respective businesses. So on the digital banking side, those tend to be a little longer in duration, whereas more typical on the Precision Lender or the Helix side are three-year deals.

Speaker Change: So just wanted to make sure.

Speaker Change: We're sort of thinking about some of the pricing and duration dynamics. Thanks, Yes, they were actually pretty typical again, Matt mentioned.

Speaker Change: Three that we called out on the call large customers in each of digital banking helix and precision lender and the duration and candidly. The terms were very typical for those respective businesses. So on the digital banking side those tend to be a little longer in duration, whereas more typical on the precision lender or the helix side are three year deals. So.

Jonathan Price: So those were standard. All three were very happy with the terms we got. So nothing there that was unusual or notable when it comes to either duration or excess terms. But like a lot of the renewal performance we saw in 2024, Q1 was marked by strong renewal economics across the portfolio. So, obviously, if that continues, we feel that impact to some extent, obviously, in 2025, given we're just done Q1, but that also rolls through into the forward year. So, you know, we just got to keep executing like that as the year rolls on, and that'll benefit us as we move on to 26 as well.

Speaker Change: Those were standard.

Speaker Change: All three were very happy with the with the terms, we got so nothing there.

Speaker Change: That was unusual or notable when it comes to either duration or excess terms, but like a lot of the renewal performance. We saw in 2020 for Q1 was marked by strong renewal economics across the portfolio of deals that we did so obviously if that continues we feel that impact.

Speaker Change: Im extent, obviously in 'twenty five given where just on Q1, but that also rolled through into the forward years. So we just got to keep executing like that as the year rolls on and that will benefit us as we move up to 26 as well.

Jonathan Price: Thanks, guys.

Thanks, guys.

Chris Kennedy: Your next question comes from Chris Kennedy with William Blair. Please go ahead. Good afternoon. Thanks for taking the question. Just wanted to follow up on the last question. As we think about 2026, Subscription revenue growth, you put the floor of 13% out there. Any more color on that?

Speaker Change: Thank you.

Chris Kennedy: Your next question comes from Chris Kennedy with William Blair. Please go ahead.

Chris Kennedy: Good afternoon. Thanks for taking the question just wanted to follow up on the last question as we think about 2026.

Chris Kennedy: Subscription revenue growth do you put the floor up 13% out there.

Chris Kennedy: Any more color on that.

Jonathan Price: I'm not not sitting here today yet, Chris, obviously, we talked about when we put that out, the variability that exists and the comfort level we have is based on, you know, our plan at the beginning of the year. And, you know, we have a lot of time left in 2025 to go and execute. And, you know, as we talked about, feel really good about the P&L in 25, but there's plenty of variability in terms of the 26 P&L when you think about bookings, attainment, the rest So we're not going to be commenting on 26 further until we have the visibility to give more on it.

Chris Kennedy: Not not sitting here today at Chris Obviously, we talked about when we put that out the variability that exists in the comfort level. We have is based on our plan at the beginning of the year end.

Chris Kennedy: We have a lot of time left in 2025 to go and execute and.

Chris Kennedy: As we talked about feel really good about the P&L in 'twenty, five, but theres plenty of variability in terms of the 2006 P&L. When you think about bookings attainment. The rest of this year and so we're just we're not going to be commenting on 26 further until we have the visibility to give more on that but still feel really good about what we have out there.

Jonathan Price: But still feel really good about what we have out there, both in the three-year framework as well as the 26 subs growth target that we put out there, but don't have any more to add to that yet until we see it.

Chris Kennedy: And the three year framework as well as the 26 subs growth target that we put out there but.

Chris Kennedy: But don't have any more to add to that yet until we see more of this execution play out.

Jonathan Price: Understood. Thanks for that.

Jonathan Price: And then just real quickly, capital allocation, there's been a lot of M&A activity out there in the market. Any observations on valuations of private companies or anything you want to I mean, there have obviously been, especially in Q1, we saw a few deals in our space, including one on the account opening side, some of our larger peers doing some large deals. But yeah, I mean, the ones we looked at, you know, we still felt valuation was incredibly high. And probably more importantly, just each one, we have a different strategy when it comes to the product itself in those cases.

Speaker Change: Understood. Thanks for that and then just real quickly capital allocation and Theres been a lot of M&A activity out there in the market any.

Speaker Change: Observations on valuations of private companies or anything you want to.

Speaker Change: Talk about there.

Speaker Change: There have obviously been especially in Q1, we saw a few deals in our space, including one.

Speaker Change: On the account opening side some of our larger peers doing some large deals, but yes, I mean, the ones we looked at we still felt.

Speaker Change: <unk> was incredibly high.

Speaker Change: And probably more importantly, just each one we have a different strategy when it comes to the product itself and in those cases so.

Jonathan Price: So, you know, we're watching the corp dev pipe is active.

Jonathan Price: We think we're in a strong position, both with the balance sheet strength and the free cash flow generation to be a strategic partner in the long term, but finding the right assets, finding them at the right valuation and with the right profile that matches our new profile that we've developed over the last couple of years. A lot of things have to line up, and so we have not seen that happen yet, and candidly not yet.

Speaker Change: We're watching the Corp Dev pipe is active.

Speaker Change: Think we're in a strong position both with the balance sheet strength of the free cash flow generation to be a strategic partner in the long term, but finding the right assets finding them at the right valuation with the right.

Speaker Change: Profile that matches, our new profiles that we've developed over the last couple of years. There's just a lot of things have to line up and so we have not seen that not happened, yet and candidly not even that close.

Dominick Gabriele: Thanks for taking the questions. Your next question comes from Dominick Gabriele with Compass Point.

Thanks for taking the questions. Thanks.

Chris Kennedy: Thanks, Chris.

Speaker Change: Your next question comes from Dominic Gabriel with Compass point. Please go ahead.

Jonathan Price: Please go ahead.

Jonathan Price: Hi, good evening, everybody. Thanks for taking the question. I was just curious if you could discuss the subscription growth that you're seeing in the quarter, which was, you know, better than expected, versus the slight deceleration you're seeing in the ARR growth year over year. What could cause the difference, the differential there? And, you know, which one of those do you think is going to follow the other, I guess, as you look ahead? Thanks so much.

Dominic Gabriel: Hey, good evening, everybody. Thanks for taking the question.

Speaker Change: I was just curious if you.

Speaker Change: You could discuss the subscription growth that you're seeing in the quarter, which was.

Speaker Change: Better than expected.

Speaker Change: Versus.

Speaker Change: <unk> deceleration you're seeing in the AOR growth year over year, what could cause the difference the differential there and you know what.

Speaker Change: Which one of those do you think is going to follow the other I guess as you look ahead. Thanks, so much yes.

Jonathan Price: Yeah, so. Firstly, the subs ARR metric will be the leading indicator to subs revenue. So if you look at last year's subs ARR metrics, I think what we're seeing in 2025 is really a reflection of the pattern we saw in subs ARR last year, meaning last year, first half, we saw subs ARR reach higher levels in the 18, 19% range, then decelerating down to sort of 17, down to 14, 15, exiting 2024. And that's what you're sort of seeing in our subs revenue growth here in 2025, obviously starting the year with an 18% year-over-year growth.

Speaker Change: Yes so.

Speaker Change: Firstly, the subs a metric we will be the leading indicator to subs revenue. So if you look at <unk>.

Speaker Change: Last year, our subs <unk> metrics I think what we're seeing in 2025 is really a reflection of the pattern we saw in subs.

Speaker Change: Last year, meaning last year first half we saw subs are our reach higher levels in the 18, 19% range.

Speaker Change: Then decelerating down to sort of 17 down to $14 15, exiting 2024, and Thats, what youre sort of seeing in our subs revenue growth here in 2025, obviously, starting the year with an 18% year over year growth. So the way you should think of it as the <unk> metric is more of a leading indicator these things don't tie perfectly.

Jonathan Price: So the way you should think of it is the ARR metric is more of the leading indicator. These things don't time perfectly at all. It's not like you should look at the Q1 subs ARR and it's going to be a perfect match to the following year's Q1 subs revenue growth. But directionally, it gives you the pattern, and that's sort of the dynamic. Think of the subs ARR number as really what we're booking and ultimately have to deliver to get to revenue, and then the subs revenue growth is the actualization of that revenue. Thanks so much.

Speaker Change: We at all it sounds like you should look at the Q1, that's up there aren't it's going be a perfect match to the following year's Q1 subs revenue growth, but directionally. It gives you the pattern and that's sort of the dynamics of the subsidy IRR number is really what we're booking and ultimately have to deliver it to get to revenue and then the subs revenue growth is the actualization of that revenue.

Speaker Change: On the P&L.

Speaker Change: Thanks, so much.

Operator: There are no further questions at this time.

Speaker Change: Thanks Tommy.

Ladies and gentlemen, this concludes.

Speaker Change: There are no further questions at this time, ladies and gentlemen, this concludes.