Q2 2025 Q2 Holdings Inc Earnings Call

July 30, 2025

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.

I would now like to turn the conference over to Josh Yankovich.

<unk> Investor Relations.

Sir Please go ahead.

Thank you operator, good afternoon, everyone and thank you for joining us for our second quarter 2025 conference call with me on the call today are Matt Flake, our CEO, Jonathan Pryce, our CFO and Kirk Coleman, our president who will join us for the Q&A portion of the call.

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 as of 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.

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 second quarter of 2025, and the press release distributed this afternoon and filed in our form 8-K with the SEC.

Regarding the financial results, we will discuss today.

Forward looking statements that we make on this call are based on assumptions only as of the date discussed and 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.

So unless otherwise stated all financial measures discussed on this call other than revenue will be on a non-GAAP basis.

And 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.

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.

Thanks, Josh good afternoon, everyone and thanks for joining us I'll start today's call by sharing our second quarter results and highlights from across the business, then I'll hand, it off to Jonathan to share more detail on our financial performance and updated outlook before providing final thoughts we delivered strong financial results in the second quarter building on the momentum we established in Q1 and continue.

Our execution against the priorities, we outlined at the start of the year.

We generated revenue of $195 million and adjusted EBITDA of $46 million, both coming in above the high end of our guidance.

Revenue grew 13% year over year, our adjusted EBITDA margin reached 23, 5% and we generated free cash flow of $42 million.

These results are a reflection of our execution across the business and the demand for the mission critical solutions, we delivered to financial institutions of all sizes.

Our bookings in the quarter were highlighted by six tier one wins through a mix of net new and expansion deals further expanding our footprint among some of the largest institutions in the market. He.

Complemented that with success in the tier two and three segments as well, which represented a meaningful portion of our bookings performance.

We also had notable M&A activity amongst our customers in the quarter, we had two scenarios, where an existing customer acquired another financial institution, each resulting in incremental bookings that carried the equivalent of a tier one size deal.

In one case, the newly combined entity will be a top 100 U S bank and will expand the use of our digital banking platform and relationship pricing solutions across the bank.

And the other a commercial institution opposite to retain our relationship pricing solutions and expanded their use across the newly combined entity.

Because our platform is already fully trained on the bank's policies and commercial customer base, the bank's solid as a way to provide consistent pricing across their merged teams.

And to help their new commercial relationship managers rapidly become productive.

As we've said in the past we have tended to be the beneficiary of M&A among our customer base and these deals underscore that dynamic we believe expansion through M&A is a compelling potential differentiator for us as customers. In these scenarios have frequently continued to choose our technology to help them integrate smoothly operate more efficiently and.

I'll post acquisition.

We also saw solid bookings results for our risk and fraud solutions, which continue to be our top cross sold products and represented one of our tier one expansion wins from the quarter.

A sign of the growing strategic importance and scale of these fraud related deals and as <unk> has seen an explosion of point solutions in recent years innovation studio is increasingly becoming a key differentiator in this space.

Not only by complementing our existing risk and fraud solutions, but also by allowing our customers to easily access deploy and manage many other best in class solutions from the broader fraud tech vendor ecosystem.

In the second quarter. We also hosted our annual customer conference connect and the energy among the attendees was strong the big takeaway. This year was the financial institutions remain deeply focused on strategic digital initiatives and there are several key areas, where we're seeing investment engagement accelerate many of which were front and center at <unk>.

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First the level of focus on risk and fraud is very high while the pace of change in the broadband scape is increasing and as I touched on a moment ago, new fraud technology vendors are emerging rapidly to solve many individual pain points across the bank, which is an increasingly complex challenge for our customers to manage from a technology and vendor management.

Perspective, we believe Q2 is differentiated ability to help our customers manage the growing fraud challenge more holistically.

The power of our platform is that we have visibility into account holder data across the entire customer lifecycle in both retail and commercial context.

And because we manage the workflows. We also have the ability to intervene and stop fraud in real time in many cases, something many point solution providers are not able to do Holistically. We're also using the innovation studio ecosystem to give customers access to best in class fraud solutions across a range of complementary use cases and <unk>.

Great them seamlessly into their digital banking platform.

Potentiate the ability to help our customers manage the growing fraud challenge more holistically.

This gives our financial institution to single pane of glass to manage their fraud tech capabilities and address the fraud vendor management challenge in a more holistic integrated and cost effective way.

Yeah.

The power of <unk>.

The power of our platform is that we have visibility into account holder data across the entire customer lifecycle in both retail and commercial context.

So we have visibility.

Cost.

Retail.

Finally.

Yes.

We're continuing to drive AI innovation across our product portfolio and we believe fraud is one of the areas with the greatest near term potential for further enhancement for example, and connect we shared a recent innovation called enhanced pay match, which uses artificial intelligence to detect and prevent check fraud more accurately and efficiently.

And because we manage the workflows. We also have two please.

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We're also using innovation.

And customer access.

And class a drugs crossrail.

Across a range of complementary use cases.

And integrate them seamlessly.

We continue to see check in for our grow as a percentage of fraud attacks in the financial industry, making it a major focus area for our customers and protecting their commercial banking relationship.

A great them seamlessly into their digital banking platform.

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This gives our financials.

This gives our financial institution to single pane of glass to manage their fraud tech capabilities and address the fraud vendor management challenge and a more holistic integrated and cost effective way.

Payments.

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And based on feedback we received a connect I believe our customers are glad to see us driving innovation with AI to deliver even stronger fraud capabilities and.

Integrated cost effects.

Finally, we're.

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We're continuing to drive AI innovation across our product portfolio and we believe fraud is one of the areas with the greatest near term.

We're continuing to drive.

All of our products.

Another theme from connect was the continued demand for commercial innovation and not just with established commercial banks, but across our customer base, what's resonating with customers is our ability to deliver retail small business and commercial functionality from a single platform, enabling them to scale their capabilities over time without complex conversion.

We believe broad.

Greatest near term.

Matthew Flake: Incentive to fraud attacks in the financial industry, making it a major focus area for our customers and protecting their commercial banking relationship. And based on feedback we received at Connect, I believe our customers are glad to see us driving innovation with AI to deliver even stronger fraud capabilities. Another theme from Connect was the continued demand for commercial innovation, and not just with established commercial banks but across our customer base. What's resonating with customers is our ability to deliver retail, small business, commercial functionality from a single platform, enabling them to scale their capabilities over time without complex conversions or migrations. We also continue to invest in solutions that help our customers compete up markets for larger and more sophisticated corporate clients.

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We also continue to invest in solutions that help our customers compete upmarket for larger and more sophisticated corporate clients at connect we announced a new direct ERP integration product that allows institution to embed Q2 digital banking functionality directly into their customers' ERP systems placed in Q2 at the <unk>.

A major focus area for our customers and protecting their commercial banking relationship.

And based on feedback we received at connect I believe our customers are glad to see us driving innovation with AI to deliver even stronger broad capabilities.

Center of commercial reconciliation workflows.

Product is designed to improve automation enhanced security and reduced reconciliation errors, while helping institutions compete for and retain large corporate customers.

It's a natural evolution of our existing commercial offerings and has been very well received by early customers.

<unk> were migrations.

And finally innovation studio is central to the conversations that connect as it continues to be a cornerstone of our platform and a driver of measurable impact for our customers. During the conference our customer share to a range of outcomes that are delivering through innovation studio across some of their most pressing and strategic initiatives for example.

Matthew Flake: At Connect, we announced a new direct ERP integration product that allows institutions to embed Q2 digital banking functionality directly into their customers' ERP systems, placing Q2 at the center of commercial reconciliation workflows. This product is designed to improve automation, enhance security, and reduce reconciliation errors while helping institutions compete for and retain large corporate customers. It's a natural evolution of our existing commercial offerings and has been very well received by early customers. And finally, Innovation Studio was central to the conversations at Connect as it continues to be a cornerstone of our platform and a driver of measurable impact for our customers. During the conference, our customers shared a range of outcomes they're delivering through Innovation Studio across some of their most pressing and strategic initiatives. For example, one customer reduced account takeover fraud by 50% year over year by implementing an authentication partner.

Center of commercial reconciliation workflows.

Product is designed to improve automation enhanced security and reduced reconciliation errors, while helping institutions compete for and retain large corporate customers.

One customer reduced account takeover fraud by 50% year over year by implementing an authentication partner another customer is using a combination of several partners to grow deposits starting a material increase in new deposits in just one month from a personalized CD campaign custom.

It's a natural evolution of our existing commercial offerings and has been very well received by early customer.

And finally innovation studio was central to the conversations that connect as it continues to be a cornerstone of our platform and a driver of measurable impact for our customers.

Customers are using it to drive operational efficiencies with one financial institution, deflecting, 65% or more of support traffic using AI powered chat and messaging.

During the conference our customer share to a range of outcome there delivering through innovation studio across some of their most pressing and strategic initiatives. For example, one customer reduced account takeover fraud by 50% year over year by implementing an authentication partner another customers using a combination of several partners to grow depart.

Today over 85% of our digital banking customers utilize innovation studio in some capacity and we're continuing to see this adoption growth both in volume and strategic importance.

In an environment, where efficiency growth and differentiation matter more than ever innovation studio continues to help our customers do more with what they have and do it faster than ever before.

Matthew Flake: Another customer is using a combination of several partners to grow deposits, citing a material increase in new deposits in just one month from a personalized CD campaign. Customers are using it to drive operational efficiencies, with one financial institution deflecting 65% or more of support traffic using AI-powered chat and messaging. Today, over 85% of our digital banking customers utilize Innovation Studio in some capacity, and we're continuing to see this adoption grow, both in volume and strategic importance. In an environment where efficiency, growth, and differentiation matter more than ever, Innovation Studio continues to help our customers do more with what they have and do it faster than ever before. As we look to the second half of the year, our pipeline remains solid, and our outlook is positive.

It's starting a material increase in new deposits in just one month from a personalized CD campaign cut.

As we look to the second half of the year, our pipeline remains solid and our outlook is positive.

Customers are using it to drive operational efficiencies with one financial institution, deflecting, 65% or more of support traffic using AI powered chat and messaging.

With our performance to date, we expect the majority of the enterprise tier one activity for the year to land in the back half of 2025.

We remain confident with the financial framework, we shared at the beginning of the year and Jonathan will speak to our updated full year guidance and increased outlook for 2025, and just a moment with that I'll turn it over to Jonathan to walk through our financials in more detail.

Today over 85% of our digital banking customers utilized innovation studio in some capacity and we're continuing to see this adoption growth both in volume and strategic importance.

In an environment, where efficiency growth and differentiation matter more than ever innovation studio continues to help our customers do more with what they have and do it faster than ever before.

Thanks, Matt our second quarter results demonstrate continued strong execution across several key metrics, including revenue and adjusted EBITDA, both of which exceeded the high end of our previously issued guidance. These.

As we look to the second half of the year, our pipeline remains solid and our outlook is positive.

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

Matthew Flake: Even with our performance today, we expect the majority of enterprise and tier one activity for the year to land in the back half of 2025. We remain confident with the financial framework we shared at the beginning of the year, and Jonathan will speak to our updated full-year guidance and increased outlook for 2025 in just a moment. With that, I'll turn it over to Jonathan to walk through our financials in more detail.

Even with our performance to date, we expect the majority of the enterprise tier one activity for the year to land in the back half of 2025, we remain confident.

Confident with the financial framework, we shared at the beginning of the year and Jonathan will speak to our updated full year guidance and increased outlook for 2025, and just a moment with that I'll turn it over to Jonathan to walk through our financials in more detail.

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

Total revenue for the second quarter was $195 1 million.

An increase of 13% year over year and up 3% sequentially.

Jonathan Price: Thanks, Matt. Our second quarter results demonstrate continued strong execution 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 progress with our profitable growth strategy, reinforced by another quarter of bookings execution and record-free cash flow generation. I will now discuss our financial results in more detail and conclude with our guidance for the third quarter and full year 2025. Total revenue for the second quarter was $195.1 million, an increase of 13% year over year and up 3% sequentially. Our revenue growth was primarily driven by subscription-based revenues, which grew 16% year over year and 3% sequentially, and ended the quarter at 81% of total revenue. The year over year and sequential revenue growth was primarily driven by a combination of new customer go lives and expansion with existing customers.

Our revenue growth was primarily driven by subscription based revenues, which grew 16% year over year and 3% sequentially and ended the quarter at 81% of total revenue.

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

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

Our services and other revenues increased 1% year over year, reflecting a modest improvement compared to the prior quarter's year over year trends.

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

Total revenue for the second quarter was $195 1 million.

This growth is being driven by higher professional services revenues tied to core conversions M&A activity and other implementation related engagements.

An increase of 13% year over year and up 3% sequentially.

Our revenue growth was primarily driven by subscription based revenues, which grew 16% year over year and 3% sequentially and ended the quarter at 81% of total revenue.

These increases helped to offset ongoing declines in more discretionary professional service offerings, which remain under pressure.

Looking ahead, we expect total services and other revenue to be roughly flat year over year for full year 2025 in the first half services revenues were down approximately 3% year over year, a trend we expect to continue into 2026.

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 increased 1% year over year, reflecting a modest improvement compared to the prior quarter's year over year trends. This growth is being driven by higher professional services revenues tied to core conversions, M&A activity, and other implementation-related engagements. These increases helped offset ongoing declines in more discretionary professional service offerings, which remain under pressure. Looking ahead, we expect total services and other revenue to be roughly flat year over year for full year 2025. In the first half, services revenues were down approximately 3% year over year, a trend we expect to continue into 2026. The second half will benefit from an easier comp as we lap the impact from First Republic Bank, which will increase year over year services revenue growth in the next quarter.

Our services and other revenues increased 1% year over year, reflecting a modest improvement compared to the prior orders year over year trends.

The second half will benefit from an easier comp as we lapped the impact from first Republic Bank, which will increase year over year services revenue growth in the next quarter.

This growth is being driven by higher professional services revenues tied to core conversions M&A activity and other implementation related engagements. These.

Total annualized recurring revenue or total IRR grew to $861 million up 10% year over year from $783 million at the end of the second quarter of 2024.

These increases helped to offset ongoing declines in more discretionary professional service offerings, which remain under pressure.

Driven by strength in our subscription IRR, which grew to $716 million up 13% year over year from $634 million in the prior year period.

Total IRR growth was fueled by subscription based bookings from both new and existing customers, partially offset by declines in discretionary services based revenue.

Second half will benefit from an easier comp as we lapped the impact from first Republic Bank, which will increase year over year services revenue growth in the next quarter.

Our subscription IRR growth was pressured by higher than typical churn concentrated within the second quarter, even with that concentration full year churn expectations remain in line with our original assumptions with lower churn levels anticipated in the back half of the year.

Jonathan Price: Total annualized recurring revenue, or total ARR, grew to $861 million, up 10% year over year from $783 million at the end of the second quarter of 2024, driven by strength in our subscription ARR, which grew to $716 million, up 13% year over year from $634 million in the prior year period. Total ARR growth was fueled by subscription-based bookings from both new and existing customers, partially offset by declines in discretionary services-based revenue. Our subscription ARR growth was pressured by higher than typical churn concentrated within the second quarter. Even with that concentration, full-year churn expectations remain in line with our original assumptions, with lower churn levels anticipated in the back half of the year. Our ending backlog of approximately $2.4 billion increased by $61 million sequentially, or 3%, and $403 million year over year, representing 21% growth.

Total annualized recurring revenue or total IRR grew to $861 million up 10% year over year from $783 million at the end of the second quarter of 2024, driven.

Our ending backlog of approximately $2 4 billion increased by $61 million sequentially, or 3% and $403 million year over year, representing 21% growth.

Driven by strength in our subscription IRR, which grew to $716 million.

Up 13% year over year from $634 million in the prior year period.

Total IRR growth was fueled by subscription based bookings from both new and existing customers, partially offset by declines in discretionary services based revenue.

The year over year and sequential increases were primarily driven by expansion with existing customers and was broad based across market segments.

We saw continued success in the tier two and three segments, which represented a meaningful portion of our bookings performance for the quarter as.

Our subscription <unk> growth was pressured by higher than typical churn concentrated within the second quarter.

Even with that concentration full year churn expectations remain in line with our original assumptions with lower churn levels anticipated in the back half of the year our.

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.

Our ending backlog of approximately $2 4 billion increased by $61 million sequentially, or 3% and $403 million year over year, representing 21% growth.

Gross margin was 57, 5% for the second quarter up from 55, 7% in the prior year period and slightly below the 57, 9% we saw in the previous quarter.

Jonathan Price: The year over year and sequential increases were primarily driven by expansion with existing customers and was broad-based across market segments. We saw continued success in the tier two and three segments, which represented a meaningful portion of our bookings performance for the 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. Gross margin was 57.5% for the second quarter, up from 55.7% in the prior year period and slightly below the 57.9% we saw in the previous quarter. The year over year increase in gross margin was driven by an increasing mix of higher margin subscription-based revenues. The sequential decline in gross margin was driven by increased costs, including costs related to our cloud migration, which we continue to expect to be complete by early 2026.

The year over year increase in gross margin was driven by an increasing mix of higher margin subscription based revenues.

Year over year and sequential increases were primarily driven by expansion with existing customers and was broad based across market segments.

The sequential decline in gross margin was driven by increased costs, including costs related to our cloud migration, which we continue to expect to be complete by early 2026.

We saw continued success in the tier two and three segments, which represented a meaningful portion of our bookings performance for the quarter as.

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.

As the transition progresses through the rest of the year, we expect the gross margin to be roughly flat in <unk> with sequential expansion in the fourth quarter and we now expect full year gross margin expansion of at least 200 basis points up from our prior outlook of 150 basis points.

Gross margin was 57, 5% for the second quarter up from 55, 7% in the prior year period and slightly below the 57, 9% we saw in the previous quarter.

Total operating expenses for the second quarter was $75 million or <unk> 38, 2% of revenue compared to $74 million or <unk> 42, 7% of revenue in the prior year quarter and $77 million or 47% of revenue in the first quarter.

The year over year increase in gross margin was driven by an increasing mix of higher margin subscription based revenues.

The sequential decline in gross margin was driven by increased costs, including costs related to our cloud migration, which we continue to expect to be complete by early 2026.

The year over year and sequential improvements in operating expenses as a percent of revenue was driven by increased scaling across all operating expense categories with G&A and sales and marketing showing the biggest year over year improvements.

Jonathan Price: As the transition progresses through the rest of the year, we expect the gross margin to be roughly flat in three Q with sequential expansion in the fourth quarter, and we now expect full-year gross margin expansion of at least 200 basis points, up from our prior outlook of 150 basis points. Total operating expenses for the second quarter were $75 million, or 38.2% of revenue, compared to $74 million, or 42.7% of revenue in the prior year quarter, and $77 million, or 40.7% of revenue in the first quarter. The year over year and sequential improvements in operating expenses as a percent of revenue was driven by increased scaling across all operating expense categories, with G&A and sales and marketing showing the biggest year over year improvements.

As a percentage of revenue G&A showed the largest sequential improvement in the quarter benefiting from lower payroll taxes tied to annual vesting and bonus payouts concentrated in the first quarter, which positively impacted all expense categories.

Total operating expenses for the second quarter was $75 million or 38, 2% of revenue compared to $74 million or 42, 7% of revenue in the prior year quarter and $77 million or <unk>, 47% of revenue in the first quarter.

Total adjusted EBITDA was a record $45 8 million.

About 53% from $29 9 million in the prior year period, and up 12% from $40 7 million in the previous quarter.

We ended the second quarter with cash cash equivalents and investments of $532 million up from $486 million at the end of the previous quarter.

Jonathan Price: As a percentage of revenue, G&A showed the largest sequential improvement in the quarter, benefiting from lower payroll taxes tied to annual vesting and bonus payouts concentrated in the first quarter, which positively impacted all expense categories. Total adjusted EBITDA was a record $45.8 million, up 53% from $29.9 million in the prior year period and up 12% from $40.7 million in the previous quarter. We ended the second quarter with cash, cash equivalents, and investments of $532 million, up from $486 million at the end of the previous quarter. In the second quarter, free cash flow was once again strong, benefiting from timing-related collection activity, including a material cash payment that is now expected to land in the third quarter. We generated $49 million in cash flow from operations, driven by improved profitability and continued effective working capital management, and delivered $42 million in free cash flow.

In the second quarter free cash flow was once again strong benefiting from timing related collection activity, including a material cash payment that is now expected to land in the third quarter.

We generated $49 million in cash flow from operations, driven by improved profitability and continued effective working capital management and delivered $42 million in free cash flow.

Total adjusted EBITDA was a record $45 8 million.

53% from $29 9 million in the prior year period, and up 12% from $40 7 million in the previous quarter.

As a result of the timing shift, we expect third quarter free cash flow to moderate relative to the second quarter.

We ended the second quarter with cash cash equivalents and investments of $532 million up from $486 million at the end of the previous quarter.

That said, we continue to expect second half free cash flow to slightly exceed the first half with a more balanced distribution than in prior years.

In the second quarter free cash flow was once again strong benefiting from timing related collection activity, including a material cash payment that is now expected to land in the third quarter.

As usual, we anticipate the fourth quarter will be our strongest free cash flow quarter consistent with typical seasonality.

And based on our performance to date and expected second half strength, we are raising our full year free cash flow conversion outlook from 85% to 90%. We're also lifting our full year free cash flow conversion expectations to 90% for 2026 as well.

We generated $49 million in cash flow from operations, driven by improved profitability and continued effective working capital management and delivered $42 million in free cash flow.

Jonathan Price: As a result of the timing shift, we expect third quarter free cash flow to moderate relative to the second quarter. That said, we continue to expect second half free cash flow to slightly exceed the first half, with a more balanced distribution than in prior years. As usual, we anticipate the fourth quarter will be our strongest free cash flow quarter, consistent with typical seasonality. And based on our performance to date and expected second half strength, we are raising our full year free cash flow conversion outlook from 85% to 90%. We are also lifting our full year free cash flow conversion expectations to 90% for 2026 as well. Let me wrap up by sharing our third quarter and updated full year 2025 guidance.

As a result of the timing shift, we expect third quarter free cash flow to moderate relative to the second quarter.

Let me wrap up by sharing our third quarter and updated full year 2025 guidance.

We forecast third quarter revenue in the range of $196 million to $200 million and we are raising our full year revenue to the range of $783 million to $788 million.

That said, we continue to expect second half free cash flow to slightly exceed the first half with a more balanced distribution than in prior years.

As usual, we anticipate the fourth quarter will be our strongest free cash flow quarter consistent with typical seasonality.

Representing year over year growth of 12% to 13% for the full year.

In addition, we anticipate full year 2025 subscription revenue growth of at least 16% an increase from the 15, 5% outlook. We previously communicated.

We forecast third quarter, adjusted EBITDA of $44 million to $47 million and are raising our full year 2025, adjusted EBITDA guidance to $177 million to $181 million representing.

Let me wrap up by sharing our third quarter and updated full year 2025 guidance.

Jonathan Price: We forecast third quarter revenue in the range of $196 to $200 million, and we are raising our full year revenue to the range of $783 million to $788 million, representing year over year growth of 12% to 13% for the full year. In addition, we anticipate full year 2025 subscription revenue growth of at least 16%, an increase from the 15.5% outlook we previously communicated. We forecast third quarter adjusted EBITDA of $44 million to $47 million and are raising our full year 2025 adjusted EBITDA guidance to $177 million to $181 million, representing 23% of revenue for the full year. In summary, we delivered a strong financial performance, which exceeded the high end of our previously issued guidance.

We forecast third quarter revenue in the range of $196 million to $200 million.

Representing 23% of revenue for the full year.

And we are raising our full year revenue to the range of $783 million to $788 million.

In summary, we delivered a strong financial performance, which exceeded the high end of our previously issued guidance. This performance coupled with our outlook for the remainder of the year has given us the confidence to raise our full year guidance on both revenue and adjusted EBITDA and increase our full year outlook for subscription revenue growth and free cash flow conversion.

Representing year over year growth of 12% to 13% for the full year.

In addition, we anticipate full year 2025 subscription revenue growth of at least 16% an increase from the 15, 5% outlook. We previously communicated.

We forecast third quarter, adjusted EBITDA of 44 million to $47 million and are raising our full year 2025, adjusted EBITDA guidance to $177 million to $181 million representing.

We remain dedicated to delivering growth profitability expansion and improved capital efficiency and believe that our results to date collectively illustrate our progress and potential as we continue to evolve the business and drive shareholder value.

Representing 23% of revenue for the full year.

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

In summary, we delivered a strong financial performance, which exceeded the high end of our previously issued guidance. This.

Thanks, Jonathan before we open it up for questions I'll close with a few final thoughts we.

Jonathan Price: This performance, coupled with our outlook for the remainder of the year, has given us the confidence to raise our full year guidance on both revenue and adjusted EBITDA and increase our full year outlook for subscription revenue growth and free cash flow conversion. We remain dedicated to delivering growth, profitability expansion, and improved capital efficiency and believe that our results to date collectively illustrate our progress and potential as we continue to evolve the business and drive shareholder value. With that, I'll turn the call back over to Matt for his closing remarks.

This performance coupled with our outlook for the remainder of the year has given us the confidence to raise our full year guidance on both revenue and adjusted EBITDA and increase our full year outlook for subscription revenue growth and free cash flow conversion.

We delivered a solid first half of the year with strong financial results and key wins across the business connect our client conference during the second quarter underscored that our customers are more committed to digital transformation and investment than ever before and their interest in Q2 to help drive the next wave of innovation across key areas like fraud.

<unk> AI commercial growth and profitability and platform extensibility through innovation studio as we look to the second half of 2025 and beyond we remain focused on disciplined execution capitalizing on the market demand and expansion opportunities delivering operational excellence and helping our customers address their most important.

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

Matthew Flake: Thanks, Jonathan. Before we open it up for questions, I'll close with a few final thoughts. We delivered a solid first half of the year with strong financial results and key wins across the business. Connect, our client conference during the second quarter, underscored that our customers are more committed to digital transformation and investments than ever before, and they're entrusting Q2 to help drive the next wave of innovation across key areas like fraud, AI, commercial growth, and profitability, and platform extensibility through Innovation Studio. As we look to the second half of 2025 and beyond, we remain focused on disciplined execution, capitalizing on the market demand and expansion opportunities, delivering operational excellence, and helping our customers address their most important strategic initiatives. Thank you. And with that, I'll hand it over to the operator for questions.

Thanks, Jonathan before we open it up for questions I'll close with a few final thoughts we.

<unk> strategic initiatives.

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

To ask a question simply press star one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster.

And they are entrusting Q2 to help drive the next wave of innovation across key areas like fraud, AI commercial growth and profitability and platform extensibility through innovation studio.

Your first question comes from the line of Alex <unk> with Raymond James. Please go ahead.

Yeah.

Great. Thank you Matt occur.

As we look to the second half of 2025 and beyond we remain focused on disciplined execution capitalizing on the market demand and expansion opportunities delivering operational excellence and helping our customers address their most important strategic initiatives. Thank you and with that I'll hand, it over to the operator for questions.

The prepared remarks kind of struck a more positive tone on the demand environment, we've seen bank earnings to be a little bit stronger this quarter and the Deregulatory agenda. It seems like it's progressing are you seeing any of that kind of show up in your own pipeline growth or new opportunities relative to the last couple of quarters.

Operator: To ask a question, simply press star one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Alex Schuyler with Raymond James. Please go ahead.

Yes, Alex Thanks for the question.

To ask a question simply press star one on your telephone keypad.

The pipeline is strong and I think it's.

We'll pause for just a moment to compile the Q&A roster.

The fact that those things are coming through I think they anticipated so I haven't seen a big lift, but I'm happy with where the pipeline is.

Your first question comes from the line of Alex <unk> with Raymond James. Please go ahead.

Hopefully it.

Kerry Tillman: Great, thank you. Matt or Kirk, in the prepared remarks, kind of struck a more positive tone on the demand environment. We've seen bank earnings be a little bit stronger this quarter, and the deregulatory agenda seems like it's progressing. Are you seeing any of that kind of show up in your own pipeline growth or new opportunities relative to the last couple of quarters?

Great. Thank you Matt occurred.

<unk>.

Decisions quicker and that gives them more confidence and.

In the prepared remarks kind of struck a more positive tone on the demand environment, We've seen bank earnings be a little bit stronger this quarter and the Deregulatory agenda seems like it's progressing.

The future so that usually drives more deals for us, but I haven't seen a big lift in the pipeline, but the pipeline has been healthy.

Quite a while so that's.

I think about it.

Are you seeing any of that kind of show up in your own pipeline growth or new opportunities relative to last couple of quarters.

Okay, and then maybe just in terms of the enterprise activity you referenced.

Called out a stronger second half expectations.

Kirk Coleman: Yeah, Alex, thanks for the question. The pipeline is strong, and I think it's the fact that those things are coming through. I think they anticipated it, so I haven't seen a big lift, but I'm happy with where the pipeline is. Hopefully, it brings, you know, decisions quicker and then gives them more confidence in the future. And so that usually drives more deals for us. But I haven't seen a big lift in the pipeline, but the pipeline's been healthy for quite a while. So that's how I think about it.

Yes, Alex Thanks for the question.

The pipeline is strong and I think it's.

Are you seeing from that segment of the market exactly and just remind us how incremental would enterprise activity. This year versus what you saw in 2024.

The fact that those things are coming through I think they anticipated. So I haven't seen a big lift, but I am happy with where the pipeline is.

Well as we talked about you kind of those those deals take a while to build them up in the pipelines of work of the decisions usually come slower. So we had we had a strong finish to the year last year in the pipe and the sales teams are working those deals so what's happening there evolving we're going through all the processes you've got to go through.

Hopefully.

Brings.

Decisions quicker and that gives them more confidence and.

The future so that usually drives more deals for us, but I haven't seen a big lift in the pipeline, but the pipeline has been healthy.

Right a while so that's.

I think about it.

Kerry Tillman: Okay. And then maybe just in terms of the enterprise activity you referenced, Matt, you kind of called out stronger second half expectations. What are you seeing from that segment of the market exactly? And just remind us, how incremental would enterprise activity this year be versus what you saw in 2024?

Okay, and then maybe just in terms of the enterprise activity you referenced Matt you kind of called out a stronger second half expectations.

It significantly.

More exhaustive diligence process and so.

We see we see the engagement and so we feel good about that.

Are you seeing from that segment of the market exactly and just remind us how incremental would enterprise activity. This year versus what you saw in 2024.

The number of opportunities and we've talked about that at the beginning of the year, it's going to mix more to <unk>.

A larger deals in the back out and so now the team has got to go out and close them and that's what we're focused on right now but feel good about it incrementally.

Kirk Coleman: Well, as we talked about, you kind of those deals take a while to build them up in the pipeline. You work them. The decisions usually come slower. So we had, you know, we had a strong finish to the year last year in the pipe and the sales team job working those deals. So what's happening, they're evolving. We're going through all the processes you've got to go through. It's a significantly more exhaustive diligence process. And so we see the engagement, and so we feel good about, you know, the number of opportunities. And we talked about that at the beginning of the year. It's going to mix more to larger deals in the back half. And so now the team's got to go out and close them, and that's what we're focused on right now, but feel good about it incrementally. I don't.

Well as we talked about kind of those those deals take a while to build them up in the pipeline to work on the decisions usually come slower. So we had we had a strong finish to the year last year in the pipe and the sales teams out working those deals so what's happening there evolving we're going through all the processes you've got to go through.

Yes, I would just I would add it's Jonathan.

Our mix in 'twenty four you saw a much heavier than I would say typical mix hit.

Historically of tier two and three.

Deals and as we look at 2025 mass set at the beginning of the year and would reiterate here in the second half that it's a much more normal mix, where you have more of the tier one enterprise level deals and those within 25 were concentrated in the back half of the year if that makes sense.

It significantly.

More exhaustive diligence process and so.

We see we see the engagement and so we feel good about the number of opportunities and we've talked about that at the beginning of the year, it's going to mix more to <unk>.

Alright, perfect. Thank you both.

Thanks, Alex.

<unk> deals in the back out and so now the team has got to go out and close them and that's what we're focused on right now but feel good about it incrementally.

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

Jonathan Price: Yeah, I would just say I would add, it's Jonathan. I would say from a mix in '24, you saw a much heavier than I would say typical mix historically of tier two and three deals. And as we look at 2025, Matt said at the beginning of the year and would reiterate here in the second half that it's a much more normal mix where you have more of the tier one enterprise level deals, and those within '25 were concentrated in the back half of the year, if that makes sense.

Yes, I would just say I would add it's Jonathan.

Hey, guys. This is Jason <unk> on for Adam Hodgkin's with Goldman. Thank you for taking the question you talked a little bit about the risk and fraud opportunity and that being a number one cross sold products within the base I was wondering if you could sort of quantify.

Our mix in 'twenty four you saw a much heavier than I would say typical mix here.

Historically, our tier two and three.

<unk> penetration there just on those specific products within the existing base.

Yeah.

Yes, I guess, what I would say there is we have when it comes to the centrex portfolio and that's a product we've owned since 2025th 2015. When we did that acquisition, we have hundreds of standalone clients for that portfolio and then we have a meaningful component of our digital banking customer base that also has centrex products along with our other risks.

Kerry Tillman: All right, perfect. Thank you both.

Alright, perfect. Thank you both.

Kirk Coleman: Thanks, Alex.

Thanks, Alex.

Operator: Your next question comes from the line of Adam Hotchkiss with Goldman Sachs. Please go ahead.

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

Josh Yankovich: Hey, guys, this is Grayson Scobell. I'm for Adam Hotchkiss at Goldman. Thank you for taking the question. You talked a little bit about the risk and fraud opportunity and that being the number one cross-sold product within the base. I was wondering if you could sort of quantify the penetration there just on those specific products within the existing base.

Hey, guys. This is <unk> on for Adam Hodgkin's with Goldman. Thank you for taking the question you talked a little bit about the risk and fraud opportunity and that being a number one cross sold products within the base I was wondering if you could sort of quantify.

Rod solutions that are native to the digital banking platform as well as our innovation studio partners. So.

Depending on how you slice it penetration is tough to quantify I think what we're saying is it is a pain point that that is top of mind for all financial institutions right now and we're helping them solve that pain point through products that are native to the digital banking platform. When it comes to real time fraud prevention products that are part of the central portfolio that we've been.

<unk> penetration there just on those specific products within the existing base.

Yeah.

Jonathan Price: Yeah, I guess what I'd say there is we have, when it comes to the Centrix portfolio, and that's a product we've owned since 2015, when we did that acquisition, we have hundreds of standalone clients for that portfolio. And then we have a meaningful component of our digital banking customer base that also has Centrix products along with our other risk and fraud solutions that are native to the digital banking platform, as well as our Innovation Studio partners. So, you know, depending on how you slice it, you know, penetration is tough to quantify.

Yes, I guess, what I'd say there is we have when it comes to the centrex portfolio and that's a product we've owned since 2025th 2015. When we did that acquisition, we have hundreds of standalone clients for that portfolio and we have a meaningful.

Distributing in developing for many years since 2015, and now an innovation studio ecosystem of fraud partners that were also selling it to them and helping them address those challenges. So really strong penetration in terms of individuals having one or more of those but lots of opportunity to continue to sell additional fraud products into into all of them.

Components of our digital banking customer base that also has centrex products along with our other risk and fraud solutions that are native to the digital banking platform as well as our innovation studio partners. So.

Jonathan Price: I think what we're saying is it is a pain point that is top of mind for all financial institutions right now, and we're helping them solve that pain point through products that are native to the digital banking platform when it comes to real-time fraud prevention, products that are part of the Centrix portfolio that we've been distributing and developing for many years since 2015, and now an Innovation Studio ecosystem of fraud partners that we're also selling into them and helping them address those challenges. So, you know, really strong penetration in terms of individual F5s having one or more of those, but lots of opportunity to continue to sell additional fraud products into all of our customers.

Our customers.

Got it. Thank you and then I just wanted to quickly touch on the.

Slightly higher than normal churn in the second quarter anything to call out there on what drove that as well as.

What's baked into your expectations for that sort of normalizing in the second half. Thank you.

No I would just say when we when we look at the shape of 25 and the churn that we expected the concentration was higher in the second quarter than the back half of the year, which is what we mentioned in the prepared remarks, and then I would also say when in a couple of instances.

There was some M&A transactions, where that was also known for a couple of quarters now where that manifests itself in the second quarter. So that was really just the pressure that was localized in the second quarter, but again, when we think about full year churn. When we think about second half churn, it's where we expected it and feel good about churn being lower in the second half.

Our customers.

Josh Yankovich: Got it. Thank you. And then I just wanted to quickly touch on the slightly higher than normal churn in the second quarter. Anything to call out there on what drove that, as well as what's baked into your expectations for that sort of normalizing in the second half? Thank you.

Got it. Thank you and then I just wanted to quickly touch on the.

Slightly higher than normal churn in the second quarter anything to call out there on what drove that as well as.

What's baked into your expectations for that sort of normalizing in the second half. Thank you.

In the first half.

Jonathan Price: Yeah, no, I would just say when we look at the shape of '25 and the churn that we expected, the concentration was higher in the second quarter than the back half of the year, which is what we mentioned in the prepared remarks. And then I would also say when in a couple of instances, there were some M&A transactions where that was also known for a couple of quarters now, where that manifested itself in the second quarter. So that was really just the pressure that was localized in the second quarter. But again, when we think about full year churn, when we think about second half churn, it's where we expected it and feel good about churn being lower in the second half than the first half.

Yes, no I would just say when we when we look at the shape of <unk> 25 in the churn that we expected the concentration was higher in the second quarter than the back half of the year, which is what we mentioned in the prepared remarks, and then I would also say when in a couple of instances.

Great. Thank you guys. Thank.

Thank you.

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

Hey, guys. Thanks for taking the question here today.

Another risk and fraud side of the business I know, there's a lot of products under the Hood. There are you finding that and a lot of the cases youre winning here. This is incremental solutions for our customers something they've never really addressed before or is there a number of different vendors that you are having success displacing out there for that piece specifically.

Hey, Mark this is Kurt I'll take that so we're seeing a little bit of both in some cases, what we're seeing is that again. This is a pain that so acute inside banks and credit unions.

In the first half.

Josh Yankovich: Great. Thank you, guys.

Great. Thank you guys. Thank.

Jonathan Price: Thank you.

Thank you.

Operator: Your next question comes from the line of Parker Lank with Stapel. Please go ahead.

That may be products that they had that were a little bit behind from an innovation perspective, they're looking for better solutions and so that's where we're seeing some replacement of existing product.

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

Josh Yankovich: Hey, guys, thanks for taking the question here today. Sticking on the risk and fraud side of the business, I know there's a lot of products under the hood there. Are you finding that in a lot of the cases you're winning here, this is incremental solutions for customers, something they've never really addressed before, or is there a number of different vendors that you're having success displacing out there for that piece specifically?

Hey, guys. Thanks for taking the question here today.

Another risk and fraud side of the business I know, there's a lot of products under the Hood. There are you finding that and a lot of the cases youre winning here incremental solutions for our customers something they've never really addressed before or is there a number of different vendors that you are having success displacing out there after that piece specifically.

And that's been very healthy growth for us worth mentioning there that part of that also is like in our <unk> product family that is also like positive pay products that theyre, turning around and selling to their customers thats kind of an important part of that chain of value. The second part is is that there is definitely new innovation.

Kirk Coleman: Hey, Parker, it's Kirk. I'll take that. So we're seeing a little bit of both. In some cases, what we're seeing is that, again, this is a pain that's so acute inside banks and credit unions that, you know, maybe products that they had that were a little bit behind from an innovation perspective, they're looking for better solutions. And so that's where we're seeing some replacements of existing product. And that's been very healthy growth for us. Worth mentioning there that part of that also is like in our Centrix product family, that is also like positive pay products that they're turning around and selling to their customers. That's a kind of an important part of that chain of value. The second part is that there's definitely new innovation, most notably in some of the releases we've done earlier in the year around Alloy and tools like that.

Hey, Barclays Kurt I'll take that so we're seeing a little bit of both in some cases, what we're seeing is that again. This is a pain that so acute side banks and credit unions.

Most notably in some of the releases we've done earlier in the year around alloy and tools like that.

That may be product that they had that were a little bit behind from an innovation perspective, they're looking for better solutions. So that's where we're seeing some replacement of existing product.

I would say about that is that back to jonathan's point on innovation studios as Theres like this portfolio of capabilities that we can put into the field that we feel like we're uniquely prepared to kind of orchestrate across all of them and so that net new functionality for our customers and getting them new capabilities to fight fraud.

And that's been very healthy growth for us worth mentioning there that part of that also is like in our centric product family that is also like positive pay products that theyre, turning around and selling to their customers. That's a kind of an important part of that chain of value. The second part is that there is definitely a new innovation.

Understood and then one for you Jonathan just a clarification on the gross margin uptick and the outlook for this year is that a reflection of faster than expected migration to the cloud and maybe some benchmarks being achieved there or is that just a mix shift of revenue.

Most notably in some of the releases we've done earlier in the year around alloy and tools like that what I would say about that is that back to jonathan's point on innovation studios as theres like this portfolio of capabilities that we can put into the field that we feel like we're uniquely prepared to kind of orchestrate across all of them and so that net new functionality for.

A little bit of both actually I think what you saw in the second quarter with the slight sequential decline was a little bit of a pull forward of costs as we got further into the journey.

Kirk Coleman: And what I would say about that is that, back to Jonathan's point on Innovation Studio, is that there's like this portfolio of capabilities that we could put into the field that we feel like we're uniquely prepared to kind of orchestrate across all of them. And so that's net new functionality for our customers and giving them new capabilities to fight fraud.

Than planned and so you have some higher costs in the second quarter and so as we get into the back half you see the reciprocal of that happened and so we see some lighter costs, especially in the fourth quarter. When it comes to some of the remaining cloud migration activity and then to your other point as we continue to see what is typically a seasonally strong fourth quarter subs growth.

Our customers and getting them new capabilities to fight fraud.

Josh Yankovich: Understood. And then one for you, Jonathan, just clarification on the gross margin uptick in the outlook for this year. Is that a reflection of a faster than expected migration to the cloud and maybe some benchmarks being achieved there, or is that just a mixed shift of revenue?

You see the mix shift occur and that also AIDS in the back half margin dynamic.

Got it.

The feedback here.

Jonathan Price: A little bit of both, actually. I think what you saw in the second quarter with the slight sequential decline was a little bit of a pull forward of costs as we got further into the journey than planned. And so you had some higher costs in the second quarter. And so as we get into the back half, you see the reciprocal of that happen. And so we see some lighter costs, especially in the fourth quarter when it comes to some of the remaining cloud migration activity. And then to your other point, as we continue to see what is typically seasonally strong fourth quarter subs growth, you see the mix shift occur, and that also aids the back half margin dynamic.

Mark.

Little bit of both actually I think what you saw in the second quarter with the slight sequential decline was a little bit of a pull forward of costs as we got further into the journey.

Yeah.

Your next question comes from the line of Matt.

With Cantor. Please go ahead.

Hey, good afternoon, thanks for taking the question.

I guess first on innovation studio is as you've now gotten that into a vast majority of your customers.

Has there been any evolution of the monetization strategy, there or should we expect that to be a more meaningful contribution of revenue growth going forward or.

Do you see the mix shift occur and that also AIDS in the back half margin dynamic.

Are you still thinking about that more as just the demand engine and kind of.

Josh Yankovich: Got it. Appreciate the feedback here. Thanks.

Got it I appreciate the feedback to you. Thanks, Thanks Park.

Jonathan Price: Thanks, Parker.

Qualifying customers and getting more entrenched maybe just what are you thinking about that and any impact on the the raised margin guidance going forward.

Operator: Your next question comes from the line of Matt Van Vliet with Cantor. Please go ahead.

Your next question comes from the line of Matt.

Good morning.

Cantor. Please go ahead.

Yes, a few things I would add from my perspective.

Josh Yankovich: Hey, good afternoon. Thanks for taking the question. I guess first on Innovation Studio, as you've now gotten that into a vast majority of your customers, has there been any evolution of the monetization strategy there? Should we expect that to be a more maybe meaningful contribution of revenue growth going forward, or are you still thinking about that more as just a demand engine and, you know, kind of qualifying customers and getting more entrenched? Maybe just what are you thinking of that and any impact on the raised margin guidance going forward?

Hey, good afternoon, thanks for taking the question.

Impact we do think the impact will continue to grow in terms of the financials. Both from a revenue perspective and as you know the model is such where Thats very high margin dollars. So we feel really good about that from an evolution standpoint, I would just say, it's less around the model and the fact that we're trying to monetize it it's more around as adoption grows we're seeing revenue.

I guess first on innovation studio is as you've now gotten that into a vast majority of your customers.

Has there been any evolution of the monetization strategy, there or should we expect that to be a more meaningful contribution of revenue growth going forward or.

Are you still thinking about that more as just the demand engine and kind of.

Grow alongside it so we're seeing all the strategic Halo effects of the impact it's having on our net new win rates the impact is having with existing customers and retention, but as we're selling more and more we're driving more adoption, we're seeing more meaningful revenue. So yes, we feel good about it it's a long journey to go when we say, 85% plus adoption.

Qualifying customers and getting more entrenched.

Just what are you thinking about that and any impact on the the raised margin guidance going forward.

Jonathan Price: Yeah, a few things I would add from my perspective. The impact, we do think the impact will continue to grow in terms of the financials, both from a revenue perspective and, as you know, the model is such where that's very high margin dollars. So we feel really good about that. From an evolution standpoint, I would just say it's less around the model and the fact that we're trying to monetize it. It's more around the, as adoption grows, we're seeing revenue grow alongside it. So we're seeing all the strategic halo effects of the impact it's having on our net new win rates, the impact it's having with existing customers and retention. But as we're selling more and more and as we're driving more adoption, we're seeing more meaningful revenue. So yeah, we feel good about it. It's a long journey to go.

Yes, a few things I would add from my perspective.

Impact we do think the impact will continue to grow in terms of the financials. Both from a revenue perspective and as you know the model is such where Thats very high margin dollars. So we feel real good about that from an evolution standpoint, I would just say, it's less around the model and the fact that we're trying to monetize it it's more around as adoption grows were seeing red.

And that means <unk> is using it and one of the programs of at least one product and so as you think about the journey to go from one product to multiple products as you think about the journey from launching one of those products and then getting broad based adoption within the institution.

Theres, a long arc, there, where we have to grow and drive adoption alongside BSI.

<unk> grow alongside it so we're seeing all the strategic Halo effects of the impact it's having on our net new win rates the impact is having with existing customers and retention, but as we're selling more and more we're driving more adoption, we're seeing more meaningful revenue. So yes, we feel good about it it's a long journey to go when we say, 85% plus adopt.

Okay very helpful and then on the helix side of the business.

With I guess, a more open or at least more.

Noon.

Our approach to the digital assets and crypto overall from the current administration.

Jonathan Price: When we say 85% plus adoption, that means an F5 is using it in one of the programs of at least one product. And so as you think about the journey to go from one product to multiple products, as you think about the journey from launching one of those products and then getting broad-based adoption within the institution, you know, there's a long arc there where we have to grow and drive adoption alongside the F5.

That means <unk> is using it and one of the programs I have at least one product and so as you think about the journey to go from one product to multiple products as you think about the journey from launching one of those products and then getting broad based adoption within the institution.

Are you seeing that as a potential opportunity to grow that business again or any of your current partners or customers looking to expand whether it's unstable coins or other digital assets may be thinking of how that business might grow on a go forward basis.

Theres, a long arc, there, where we have to grow and drive adoption alongside the Fi.

Yes. This is Kurt I'll take that so from a stable claim perspective does it say more broadly across as debt.

Josh Yankovich: Okay, very helpful. And then on the Helix side of the business, with, I guess, a more open or at least more known approach to the digital assets and crypto overall from the current administration, are you seeing that as a potential opportunity to grow that business again, or any of your current partners or customers looking to expand, whether it's on stablecoins or other digital assets? Any thinking of how that business might grow on a go-forward basis?

Okay very helpful and then on the helix side of the business.

We are seeing.

With with I guess, a more open or at least more noon.

Seeing a lot of.

Our cooperative cooperation across our customers and partners to make sure that they can all participate stable coin and as they think about how theyre going to.

Our approach to the digital assets and crypto overall from the current administration.

Are you seeing that as a potential opportunity to grow that business again or any of your current partners or customers looking to expand whether it's unstable coins or other digital assets.

Thanks again to serve as issuers are custodians are gateways or all three when you couple that with the need for that kind of regulatory clarity that you were mentioning in kind of infrastructure maturity.

Consumers and businesses kind of catching up to the use cases for what they're going to do some of that pretty early but we do see opportunity there.

Of how that business might grow on a go forward basis.

Kirk Coleman: Yeah, it's Kirk. I'll take that. So from a stablecoin perspective, I'll just say more broadly across is that, you know, we're seeing a lot of cooperation across our customers and partners to make sure that they can all participate in stablecoin. And as they think about how they're going to, banks are going to serve as issuers or custodians or gateways or all three, when you couple that with the need for that kind of regulatory clarity that you were mentioning and kind of infrastructure maturity, you know, consumers and businesses kind of catching up to the use cases for what they're going to do. Some of that's pretty early, but we do see opportunity there for us and for our bank customers more than a threat.

Yes, Kurt I'll take that so from a stable point perspective business say more broadly across as debt.

For us and for our bank customers more than a threat from a helix perspective.

We are.

Seeing a lot of.

There is obviously there is some crossover there, but I would say that.

Cooperating cooperation across our customers and partners to make sure that they can all participate stable coin in as they think about how theyre going to thanks.

Current regulatory environment.

At least settled out kind of what those business models look like from a tech perspective.

Thanks again serve as issuers are custodians are gateways or all three when you couple that with the need for that kind of regulatory clarity that you were mentioning in kind of infrastructure maturity.

All through this kind of cycle over the last few years, we've really focused on kind of a high quality operators are and we've had some nice wins along the way some good expansion with existing customers and we're seeing some green shoots there which is encouraging so we're pleased with that performance.

Consumers and businesses kind of catching up to the use cases for what theyre going to do some of that pretty early but we do see opportunity there.

Great. Thank you for taking my question.

For us and for our bank customers more than a threat from a helix perspective.

Got it.

Yes.

Kirk Coleman: From a Helix perspective, you know, there's obviously some crossover there, but I would say that the current regulatory environment has at least settled out kind of what those business models look like from a fintech perspective. You know, all through this kind of cycle over the last two years, we've really focused on kind of who the high-quality operators are. And, you know, we've had some nice wins along the way, some good expansion with existing customers. We're seeing some green shoots there, which is encouraging. So we're pleased with that.

There is obviously there is some crossover there, but I would say that.

Your next question comes from Alan Smith with Jpmorgan.

Current regulatory environment.

Good evening. Thank you for taking my question. So first as you move up market and win additional tier one in enterprise digital banking customers.

The settled out kind of what those business models look like from a tech perspective, all through this kind of cycle over the last two years, we've really focused on kind of who is a high quality operators are.

<unk>, our competencies of Q2 helped secure these deals.

Yeah. Thanks for the question I think.

And we've had some nice wins along the way some good expansion with existing customers and we're seeing some green shoots there which is encouraging so we're pleased with that performance.

Whether precision lender a relationship pricing tool, which we have I think nine of the 14 largest banks in North America, we're firmly entrenched there and you can sell.

Josh Yankovich: Great. Thank you for taking that question.

Great. Thank you for taking my question.

Kirk Coleman: Thanks, Matt.

Yes.

And then the dataset, we have around deposits and loans.

Operator: Your next question comes from Ella Smith with JP Morgan.

Is really the differentiator for them they are trying to price the relationships on the digital banking side. The fact that we have best in class retail small business and corporate banking all on the same platform.

Your next question comes from Alex Smith with Jpmorgan.

Ella Smith: Good evening. Thank you for taking my question. So first, as you move up market and win additional tier one and enterprise digital banking customers, what core offerings or competencies of Q2s help secure these deals?

Good evening. Thank you for taking my question. So first as you move up market and win additional tier one in enterprise digital banking customers what core offerings. Our competencies of Q2 helped secure these deals.

Where youre seeing the expansion we have an opportunity we had expansion opportunity with about $40 billion bag. When they took the commercial lives and then they've signed for the retail business with us in the quarter. So the fact that the platform single platform. So you get a better user experience one login I'd one password for our customers.

Kirk Coleman: Yeah, thanks for the question, Ella. I think, you know, whether it's a precision lender or relationship pricing tool, which we have, I think, nine of the 14 largest banks in North America, we're firmly entrenched there. And you could sell, and the data set we have around deposits and loans is really the differentiator for them when they're trying to price the relationships. On the digital banking side, the fact that we have best-in-class retail, small business, and corporate banking all on the same platform, that's where you're seeing the expansion. We have an opportunity. We had an expansion opportunity with about a $40 billion bank when they took the commercial live, and then they've signed for the retail business with us in the quarter.

Yeah. Thanks for the question I think.

Whether it's precision lender a relationship pricing tool, which we have I think nine of the 14 largest banks in North America, we're firmly entrenched there and you can sell.

The small business owner and they can see the retail accounts and a business account where it's at.

And the data set we have around deposits and loans.

Corporate customer.

They can see their small business accounts or whatever it is the single platform drives a better user experience.

A more efficient to operate one system one back office system.

Upgrade to manage your customers one set of interfaces to all of the different back office systems, and we can get to your technology faster since it's a single platform.

Thats, where youre seeing the expansion we had an opportunity we had expansion opportunity with about $40 billion bank. When they took the commercial lives and then they've signed for the retail business with us in the quarter. So the fact that the platform. It's a single platform. So you get a better user experience one login I'd one password for our customers there.

Once that code it upgrades all the different features across the board.

Kirk Coleman: So the fact that the platform, it's a single platform, so you get a better user experience, one login ID, one password for a customer, whether they're a small business owner and they can see their retail accounts and their business accounts, or it's a corporate customer that can see their small business accounts or whatever it is. The single platform drives a better user experience. It's more efficient to operate. You have one system, one back office system to upgrade to manage your customers, one set of interfaces to all of the different back office systems. And we can get you technology faster since it's a single platform. We write one set of code that upgrades all the different features from across the board. So that, coupled with all of the data we get from all the customers, is more informative to the customer.

That coupled with all of the data we get from all the customers is more informative to the customers. So that story, whether Europe $400 billion bank or a $400 million bank resonates with them and that's why we have.

The small business owner and they can see the retail accounts and a business account with a corporate customer.

You can see their small business accounts or whatever it is the single platform drives a better user experience.

40% of the top 100 banks at 40% of the top on a credit unions do business with US today. So we continue to expand in that space. Both on the net new side and with the existing customers.

It's more efficient to operate one system one back office system.

Upgrade to manage your customers one set of interfaces to all of the different back office systems, and we can get to your technology faster since it's a single platform.

That's very helpful. Thank you and for a quick follow up beyond retiring your 2025 and 2026 convertible debt what are you seeing as the most attractive uses of capital.

Once that covenant upgrades all the different features across the board so.

Yes, thanks al.

That coupled with all of the data we get from all the customers is more informative to the customer. So that story, whether you are a $400 billion bank or a $400 million bank resonates with them and that's why we had.

You sort of traditional answer there in terms of where we're always exploring the M&A environments in a lot of things have to lineup. We have a very different financial profile now so the criteria for M&A.

Kirk Coleman: So that story, whether you're a $400 billion bank or a $400 million bank, it resonates with them. And that's why we just, you know, 40% of the top 100 banks and 40% of the top 100 credit unions do business with us today. So we continue to expand in that space, both on the net new side and.

Obviously value expectations and being disciplined on value, but then when it comes to the criteria in terms of our growth expectations margin requirements are just tougher and the environment. When I look at the Corp. Dev pipeline you still don't see all of those things lining up where we see great assets that have the financial profile, we're looking for at reasonable value. So in the long run I think we're a very.

40% of the top 100 banks at 40% of the top on a credit unions do business with US today. So we continue to expand in that space. Both on the net new side and with the existing customers.

Ella Smith: That's very helpful. Thank you. And for a quick follow-up, beyond retiring your 2025 and 2026 convertible debt, what are you seeing as the most attractive uses of capital?

That's very helpful. Thank you and for a quick follow up beyond retiring your 2025 and 2026 convertible debt what are you seeing as the most attractive uses of capital.

<unk> strategic acquirer and we can think about the right deals that makes sense for this business.

Jonathan Price: Yeah, thanks, Ella. I mean, you sort of traditional answer there in terms of we're always exploring the M&A environments. You know, a lot of things have to line up. We have a very different financial profile now. So the criteria for M&A, obviously value expectations and being disciplined on value. But then when it comes to the criteria in terms of our growth expectations, margin requirements are just tougher. And the environment, when I look at the corp debt pipeline, you still don't see all of those things lining up where we see great assets that have the financial profile we're looking for at reasonable values. So in the long run, I think we're a very strategic acquirer, and we can think about the right deals that make sense for this business.

Yes, thanks al.

A lot of those things have to line up and we're not going to be on disciplined when it comes to M&A execution.

You sort of traditional answer there in terms of where we're always exploring the M&A environments in a lot of things have to line up we have a very different financial profile now so the criteria for M&A.

Obviously things will always look at is where we can reinvest back into the business isn't that we think can talk more as we enter 2026 around the opportunity for more EBITDA margin expansion. There is that question of how much more incrementally do we want to invest back into the business versus dropping it to EBITDA and free cash flow in 2006 and beyond.

Obviously value expectations and being disciplined on value, but then when it comes to the criteria in terms of our growth expectations margin requirements are just tougher and the environments. When I look at the Corp. Dev pipeline you still don't see all of those things lining up where we see great assets that have the financial profile, we're looking for at reasonable value. So in the long run I think we are.

And to ensure that elongated growth rates and so that's a big part of capital allocation and then the last one would be opportunities around return of capital, which we haven't done historically, but we will always consider and be thoughtful around it.

Various strategic acquirer and we can think about the right deals that makes sense for this business.

Jonathan Price: But a lot of those things have to line up, and we're not going to be undisciplined when it comes to M&A execution. The other obvious things we'll always look at is where we can reinvest back into the business. And as we think and talk more, as we enter 2026 around the opportunity for more EBITDA margin expansion, there is that question of how much more incrementally do we want to invest back into the business versus dropping it to EBITDA and free cash flow in '26 and beyond to ensure that elongated growth rate. And so that's a big part of capital allocation. And then the last one would be opportunities around return of capital, which we haven't done historically, but we will always consider and be thoughtful around if that makes sense. So hopefully that gives you a bit of a picture.

But a lot of those things have to line up and we're not going to be on disciplined when it comes to M&A execution.

That makes sense. So hopefully that gives you a bit of a picture.

Very helpful. Thanks, so much thanks Alan.

The other obviously things will always look at is where we can reinvest back into the business isn't that we think can talk more as we enter 2026 around the opportunity for more EBITDA margin expansion. There is that question of how much more incrementally do we want to invest back into the business versus dropping it to EBITDA and free cash flow in 2006 and beyond.

Your next question comes from the line of Terry Tillman with <unk> Securities. Please go ahead.

Yes, Thanks for taking my questions, Hi, Matt, Jonathan Kirk and Josh.

Im just curious.

More of a bigger picture question, when you're talking to customers and prospects.

Is there any kind of tilting of the conversation from deposit gathering and retention of deposits versus blending and maybe more of a lending friendly friendly environment. The reason why I'm asking this is <unk> had really good tailwind on the deposit account or the on the deposit side. So with your digital banking on retail and commercial just trying to understand what kind of ongoing tailwind you see there.

Ella Smith: Very helpful. Thanks so much.

Very helpful. Thanks, so much thanks Alan.

Jonathan Price: Thanks, Ella.

Operator: Your next question comes from the line of Kerry Tillman with Truist Securities. Please go ahead.

With a focus on deposits and then I had a follow up for Jonathan.

Your next question comes from the line of Terry Tillman with <unk> Securities. Please go ahead.

The deposits are still fundamental to the banking with rates, where they are and they're.

Kerry Tillman: Yeah, thanks for taking my questions. Hi, Matt, Jonathan, Kirk, and Josh. I'm just curious, and this is more of a bigger picture question. When you're talking to customers and prospects, is there any kind of tilting of the conversation from deposits gathering and retention of deposits versus lending and maybe more of a lending-friendly environment? The reason why I'm asking this is y'all have had really good tailwinds on the deposit account, on the deposit side. So with your digital banking on retail and commercial, just trying to understand, you know, what kind of ongoing tailwinds you see there with a focus on deposits. And then I had a follow-up for Jonathan.

Yes, Thanks for taking my questions, Hi, Matt, Jonathan Kirk and Josh.

Fairly today this thing theyre staying where they are.

I'm just curious and this is more of a bigger picture question, when you're talking to customers and prospects.

It's a real competition to get deposits. So I think that historically over the last hundred years Thats. The way its been we had a little bit of a.

Is there any kind of tilting of the conversation from deposit gathering and retention of deposits versus lending and maybe more of a lending friendly friendly environment. The reason why I'm asking this is <unk> had really good tailwind on the deposit account or the on the deposit side. So with your digital banking on retail and commercial just trying to understand what kind of ongoing tailwind you see there.

Unique environment in 2012 to 2022, so I.

I don't think this is a trend that's going to go away and I think there's even more competition for deposits. So I think the deposit.

The drive to retain and grow deposits in the most profitable ones or commercial as we've talked about is still out there on the lending side haven't seen a big pickup there.

With a focus on deposits and then I had a follow up for Jonathan.

Kirk Coleman: Well, deposits are still fundamental to the bank and look great to where they are. And apparently today they're staying where they are. It's a real competition to get deposits. So I think that historically over the last hundred years, that's the way it's been. We had a little bit of a unique environment from 2012 to 2022. So I don't think this is a trend that's going to go away. And I think there's even more competition for deposits. So I think the deposit, the drive to retain and grow deposits and the most profitable ones are commercial, as we've talked about, is still out there. On the lending side, I haven't seen a big pickup there, but hopefully that will start to pick up back half of this year, early '26.

The deposits are still fundamental of the banking with rates where they are.

But hopefully that will start to pick up back half of this year early 'twenty six.

Did I understand they are staying where they are.

I'd just add.

There is a real competition to get deposits. So I think that historically over the last hundred years Thats. The way its been we had a little bit of it.

At each of the each of those deposit accounts represents a relationship where they can also generate fees. So it's really important to the bottom line is bank, obviously and.

Unique environment in 2012 to 2022.

When the rates are at a more favorable place. It also represents lending opportunities for those things.

No.

I don't think this is a trend that's going to go away and I think there's even more competition for deposits. So I think the deposit.

That deposit account being the anchor rather than when you go back years, where the lending quite a bit of anchor to the relationship I think is an important shift.

The drive to retain and grow deposits in the most profitable ones or commercial as we've talked about is still out there on the lending side haven't seen a big pick up there.

That's helpful. Thanks, Matt and Curt and I guess, just Jonathan for you in terms of it looks like the subscription <unk> and I know that is kind of that can move around a little bit, but do you have a tough comp for <unk>, but hearing Matt talk about kind of the lining up have the strong pipeline for second half could you foresee subscription they are picking up some from what we saw in the first half. Thank you.

Hopefully that will start to pick up back half of this year early 2006 it.

Kerry Tillman: Terry, I just added that.

Terry I would just add that right each of those each of those deposit accounts represents a relationship where they can also generate fees. So it's really important to the bottom line of the bank obviously.

Kirk Coleman: Right. Each of those deposit accounts represents a relationship where they can also generate fees. So it's really important to the bottom line as a bank, obviously. And when the rates are, you know, at a more favorable place, it also represents lending opportunities for those banks. So that deposit account being the anchor, rather than when you go back years where the lending might have been the anchor to the relationship, I think is an important shift.

Yeah.

When the rates are at a more favorable place. It also represents lending opportunities for those things that deposit account being the anchor rather than when you go back years, where the lending might have been the anchor to the relationship I think is an important shift.

Yes.

It's a tricky one because you are right. We were facing we are starting to face more difficult comps versus the subs IRR growth metrics you saw essentially throughout all of 'twenty for until the fourth quarter, where the more difficult comp came into play against Q4 of 23. So it's sort of where we are now in terms of the baseline of IRR and sub Sahara in particular, it feels like we are.

Kerry Tillman: That's helpful. Thanks, Matt and Kirk. And I guess just Jonathan, for you, in terms of it looks like the subscription ARR, and I know that is kind of, I can move around a little bit, but you have a tough comp for three Q. But hearing Matt talk about, you know, kind of the lining up of the strong pipeline for second half, could you foresee subscription ARR picking up some from what we saw in the first half? Thank you.

That's helpful. Thanks, Matt encourage and I guess, just Jonathan for you in terms of it looks like the subscription <unk> and I know that is kind of that can move around a little bit, but do you have a tough comp for <unk>, but hearing Matt talked about.

Sort of at a level, that's sustainable and durable.

There will be variability quarter to quarter, depending on the bookings in totality as well as the mix, we had a quarter here in the second quarter, where you had a little bit of suppression due to localized churn that I already talked about but when you think about the last several quarters and as we look ahead. It seems like sequentially. These quarters are typically shaking out in the 2%.

Kind of aligning up have the strong pipeline for second half could you foresee subscription they are picking up some from what we saw in the first half. Thank you.

Jonathan Price: Yeah, I mean, it's a tricky one because you're right. We were facing, we are starting to face more difficult comps versus the subs ARR growth metrics you saw essentially throughout all of '24 until the fourth quarter where the more difficult comp came into play against Q4 of '23. So sort of where we are now in terms of the baseline of ARR and subs ARR in particular, it feels like we're sort of at a level that's sustainable and durable. You're right, there will be variability quarter to quarter depending on the bookings in totality, as well as the mix. You know, we had a quarter here in the second quarter where you had a little bit of suppression due to localized churn that I already talked about.

Yes.

It's a tricky one because you're right. We were facing we are starting to face more difficult comps versus the subs IRR growth metrics you saw essentially throughout all of 'twenty for until the fourth quarter, where the more difficult comp came into play against Q4 'twenty three so sort of where we are now in terms of the baseline of IRR and sub thereon in particular it feels.

The 4% sequential growth a quarter and in the absence of a mega quarter like Q4 of 23, but it feels like this this range of call it call it 12% to 14% subs IRR growth.

We're sort of at a level, that's sustainable and durable.

Is is where we feel comfortable on where we feel their sustainability and durability at that level.

You're right, there will be variability quarter to quarter, depending on the bookings in totality as well as the mix we have.

Okay. Thank you.

Please go ahead Sir.

A quarter here in the second quarter, where you had a little bit of suppression due to localized turn that I already talked about but when you think about the last several quarters and as we look ahead. It seems like sequentially. These quarters are typically shaking out in the.

Our next question comes from the line of Dan Perlin with RBC.

Jonathan Price: But when you think about, you know, the last several quarters, and as we look ahead, it seems like sequentially these quarters are typically shaking out in the 2% to 4% sequential growth a quarter. And, you know, in the absence of a mega quarter like Q4 of '23, but it feels like this range of call it 12% to 14% subs ARR growth is where we feel comfortable and where we feel there's sustainability and durability at that level.

Please go ahead.

Thanks.

So Matt I wanted to come back to your comment around notable M&A in the quarter and I guess the question. There clearly the narrative is that there's a lot of that going on.

2% to 4% sequential growth a quarter and in the absence of a mega quarter like Q4 of 23, but it feels like this this range of call it 12% to 14% subs IRR growth is is where we feel comfortable in where we feel their sustainability and durability at that level.

I feel like last quarter I think you called out like you were involved with 21 transactions. I think you went out in 20 of those so is it picking up relative to what we've seen and then just maybe again as a reminder, at least for US just why you feel so confident that you typically are beneficiaries in that in that type of transaction.

Kerry Tillman: Okay, thank you.

Okay. Thank you thanks.

Jonathan Price: Thanks, Terry.

Thanks Darren.

Kerry Tillman: Terry.

Operator: Your next question comes from the line of Dan Perlin with RBC. Please go ahead.

Our next question comes from the line of Dan Perlin with RBC.

Yes.

M&A environment is.

Please go ahead.

Josh Yankovich: Thanks. So Matt, I wanted to come back to your comment around notable M&A kind of in the quarter. And I guess the question there, clearly the narrative is that there's a lot of that going on. You know, I feel like last quarter, I think you called out like you were involved in 21 transactions. I think you won out in, you know, 20 of those. So is it picking up relative to what we've seen? And then just maybe again, as a reminder, at least for us, just, you know, why you feel so confident that you typically are beneficiaries in that type of transaction?

It's still the actual transactions or so I think theres been a 150 in the first half of the year.

Thanks.

Matt I wanted to come back to your comment around notable M&A kind of in the quarter and I guess the question. There clearly the narrative is that there's a lot of that going on.

And so.

But the amount of conversations we're having with banks about M&A.

There's a lot of talk talk about it happening I think sellers and buyers have to get aligned and the more transactions that happens memorial established evaluation disease.

As banks, but my confidence comes from I think year to date, we had 52 M&A events within Q2 customers in 49 of those Q2 was the acquirer of the surviving engineered moab's up 94%.

At least for US just why you feel so confident that you typically are beneficiaries in that in that type of transaction.

Kirk Coleman: Yeah, Dan, the M&A environment is still the actual transactions are slow. I think there's been 150 in the first half of the year. And so the amount of conversations we're having with banks about M&A, there's a lot of talk about it happening. I think sellers and buyers have to get aligned, and the more transactions that happen, the more they'll establish the valuations of these banks. But, you know, my confidence comes from, I think, year to date, we have 52 M&A events within the Q2 customers, and 49 of those Q2 was the acquirer or the surviving entity MOE. So 94%. Historically, we've been 90% to 95% the successor in those. And that's really the nature of our clients. They're buying a new digital banking system. They're paying more than they were.

Yes.

M&A environment is.

Historically, we've been 90% to 95% the successor in those and that's really the name.

It's still the actual transactions or so I think theres been a 150 in the first half of the year.

And so.

Nature of our clients are buying a new digital banking system. They are paying more than they were.

But the amount of conversations we're having with banks about M&A.

They are committed to the digital channel and they believe it's how they're going to grow the bank in the future as opposed to some that are.

There's a lot of talk talk about it happening I think sellers and buyers have to get aligned and the more transactions that happens memorial established evaluation disease of these banks, but.

Trying to sell the bank and we typically don't.

Sign those types of customers. So my confidence comes from historical numbers doesn't mean, that's what's going to happen to move forward, but we certainly hope it does.

My confidence comes from I think year to date, we had 52 M&A events within Q2 customers in 49 of those Q2 was the acquirer of the surviving engineered moab's up 94%.

But I do think youll see M&A pick up in the back half.

Later in this year and then in 'twenty, six I think youre going to see quite a bit more but.

Historically, we've been 90% to 95% the successor in those and that's really the.

Numbers are not.

Accelerating any more than they were last year.

Nature of our clients are buying a new digital banking system, they're paying more than they were.

Okay, that's great that's great color.

I also wanted to circle back on the risk and fraud solutions I know, there's a few questions on this already but.

Kirk Coleman: They're committed to the digital channel, and they believe it's how they're going to grow their bank in the future, as opposed to some that are trying to sell the bank. And we typically don't find those types of customers. So my confidence comes from the historical numbers. It doesn't mean that's just going to happen moving forward, but we certainly hope it does. But I do think you'll see M&A pick up in the back half later in this year. And then in '26, I think you're going to see quite a bit more. But the numbers are not accelerating any more than they were the last year.

They are committed to the digital channel and they believe it's how they're going to grow the bank in the future as opposed to some that are.

The commentary around like a lot of new point vendors.

Trying to sell the bank and we typically don't.

Expanding broadly I guess the question is.

Sign those types of customers. So my confidence comes from historical numbers doesn't mean, that's what's going to happen to move forward, but we certainly hope it does but.

It's pretty clear like it sounds like the clients are gravitating towards your solutions, but as you have so many of these incremental need vendors points, which is kind of coming in the market are they are.

But I do think youll see M&A pick up in the back half.

Later in this year and then in 'twenty, six I think youre going to see quite a bit more but.

Are they creating like moment to pause because it has like this decision tree that your clients have to kind of go through just embedding what theyre offering relative to you or do you feel like because there's so much of the noise. That's been created by them than it actually is benefiting.

The numbers are not.

Accelerating any more than they were last year.

Josh Yankovich: Okay, that's great. That's great color. I also wanted to circle back on the risk and fraud solutions. I know there's a few questions on this already, but the commentary around like a lot of new point vendors, you know, expanding broadly. I guess the question is, it's pretty clear, like it sounds like the clients are gravitating towards your solutions. But as you have so many of these incremental new vendors, point solutions kind of coming into the market, are they creating like moments of pause because it has like this decision tree that your clients have to kind of go through just embedding what they're offering relative to you? Or do you feel like because there's so much of that noise that's being created by them that it actually is benefiting kind of your holistic product today?

Okay, that's great that's great color.

I also wanted to circle back on the risk and fraud solutions I know, there's a few questions on this already but.

Your holistic product.

Okay.

The commentary around like a lot of new point vendors.

To be clear a lot of those vendors are coming to us to sell to the banks and they are doing it through renovation studio because we have the integration to the customer for their core on their payment systems and then we have.

Spending broadly I guess the question is.

Pretty clear like it sounds like the clients are gravitating towards your solutions, but as you have so many of these incremental need vendors points, which is kind of coming into the market are they are.

The transaction takes place in our system, so authenticating the customer ensuring that theyre paying users, who they intend to pay that somebody else's and paying them.

Want to work with us and we have so many commercial customers, which is what people are concerned about the retail probably that's usually not the same scale as the commercial customers. So a lot of these vendors are partnering with us and we are packaging them that our solution through innovation studio to offer a comprehensive fraud solution that we have our own products.

Okay.

Kirk Coleman: Yeah, Gail, to be clear, a lot of those vendors are coming to us to sell to the banks. And they're doing it through Innovation Studio because we have the integration to the customer for their core, their payment systems. And then we have where the transaction takes place in our system. So authenticating the customer, ensuring that they're paying through who they intend to pay, that somebody else isn't paying them. They want to work with us. And we have so many commercial customers, which is what people are, they're concerned about the retail problem. That's usually not the same scale as the commercial customers. So a lot of these vendors are partnering with us. We are packaging them in our solution through Innovation Studio to offer a comprehensive fraud solution. Now we have our own products, but some of these other vendors are nice add-ons to us.

To be clear a lot of those vendors are coming to us to sell to the banks and they do it through innovation studio because we have the integration to the customer for their core on their payment systems and then we have with the transaction takes place in our system. So authenticating the customer ensuring that there.

But some of these other vendors are nice add ons to us and we partner or we put them in and we cross element, there and theyre up sells for us.

Got it okay. Thank you for that point of clarification I kind of thought you were thinking there was other competitive dynamics out there. So that's great. Thanks, Thanks, Dan appreciate it.

Paying users, who they intend to pay than somebody else's and paying them.

We want to work with us and we have so many commercial customers, which is what people are concerned about the retail floor. That's usually not the same scale as the commercial customers. So a lot of these vendors are partnering with us and we are packaging them that our solution through innovation studio to offer a comprehensive solution that we have our own.

Yes.

And our final question comes from the line of Chris Kennedy with William Blair. Please go ahead, yes.

Yes. Good afternoon. Thanks for taking the question can you just give us an update on your cross selling initiatives I think that's one of the bigger opportunities that <unk> had had a lot of renewals recently, just how the cross selling.

<unk>.

Some of these other vendors are nice add ons to us and we partner or we put them in and we cross sell them and Theyre and Theyre up sells for us.

Is going.

Kirk Coleman: And we partner and we put them in and we cross-sell them and their upsells for us.

Yes, we've had obviously a solid year.

The things that always drive more cross sell as our client event and it was in late May of this year and so typically they leave the event they've got.

Josh Yankovich: Got it. Okay. Thank you for that point of clarification. I just kind of thought you were thinking there was other kind of competitive dynamics out there. So that's great. Thanks, then.

Got it okay. Thank you for that that's a point of clarification.

What you were thinking there was some other kind of competitive dynamics. Okay. That's great. Thanks, Thanks, Dan appreciate it.

Kirk Coleman: Thanks, Dan. Appreciate it.

The inventory list of all the products, we have theyre excited about it and so I think youre going to see a strong back half of the year.

Josh Yankovich: Yep.

Yes.

Operator: And our final question comes from the line of Chris Kennedy with William Blair. Please go ahead.

And our final question comes from the line of Chris Kennedy with William Blair. Please go ahead.

And not just the risk product innovation studio.

Chris Kennedy: Yeah, good afternoon. Thanks for taking the question. Can you just give us an update on your cross-selling initiatives? I think that's one of the bigger opportunities that you've had, and you've had a lot of renewals recently. Just how the cross-selling is going.

Yes. Good afternoon. Thanks for taking the question can you just give us an update on your cross selling initiatives I think that's one of the bigger opportunities that you've had you've had a lot of renewals recently, how the cross selling.

It could be.

Commercial banking cross sell but theres a lot of energy behind it. The team has done an amazing job on the renewable side and we're doing it a greater value and they're focused on that in the back half of the year. So we should have a strong back half of the year on renewals as well.

He is going.

Kirk Coleman: Yeah, we've had obviously a solid year. One of the things that always drives more cross-sell is our client event, and it was in late May this year. And so typically, they leave the event. They've got the, you know, the inventory list of all the products we have. They're excited about it. And so I think you're going to see a strong back half of the year in not just the risk products, Innovation Studio, and it could be a commercial banking cross-sell, but there's a lot of energy behind it. The team has done an amazing job on the renewal side and renewing it at greater value, and they're focused on that in the back half of the year. So we should have a strong back half of the year on renewals as well.

Yes, we've had obviously a solid year one of the things that always drive more cross sell as our client event and it was in late May of this year and so typically they leave the event they've got.

Great. Thank you for that and then just as you think about the <unk>.

Data center migration to the public cloud can you just talk about the longer term benefits of that thanks for taking my questions.

Yes from a financial standpoint, I think the.

The inventory list of all the products, we have theyre excited about it and so I think youre going to see a strong back half of the year.

There are many benefits I think the most near term one we can get to long term in a minute because I think there are some strategic ones. We can talk about but when I think about it from a financial standpoint, the near term benefit comes through as we enter 2026, the exiting of the data center just has a very quantifiable cost.

And not just the risk product innovation studio.

It could be.

Commercial banking cross sell but theres a lot of energy behind it. The team has done an amazing job on the renewal side and we're doing it a greater value and they're focused on that in the back half of the year. So we should have a strong back half of the year on renewals as well.

<unk> that goes away for us that we've historically had so.

Chris Kennedy: Great. Thank you for that. And then just as you think about the data center migration to the public cloud, can you just talk about the long-term benefits of that? Thanks for taking the questions.

And sort of if you will at the end of the double bubble or right near the end and so there's a clear benefit there and you see that in the 2006 gross margin expansion that we've talked about.

Great. Thank you for that and then just as you think about the date.

Data center migration to the public cloud can you just talk about the longer term benefits of that thanks for taking my questions.

Beyond that as we think about the next leg of being in the cloud Theres, a whole opportunity around Dev ops and how do we think about optimizing for elasticity and once we have been in the cloud for some period of time understanding how to manage the cost structure more efficiently is a common app.

Jonathan Price: Yeah, from a financial standpoint, I think there are many benefits. I think the most near-term one, we can get to long-term in a minute because I think there's some strategic ones we can talk about. But when I think about it from a financial standpoint, the near-term benefit comes through as we enter 2026. The exiting of the data center just has a very quantifiable cost component that goes away for us that we've historically had. So yeah, it's sort of, if you will, the end of the double bubble or right near the end. And so there's a clear benefit there, and you see that in the '26 gross margin expansion that we've talked about. Beyond that, as we think about the next leg of being in the cloud, there's a whole opportunity around DevOps and how do we think about optimizing for elasticity.

Yes from a financial standpoint, I think that there are many benefits I think the most near term one we can get to long term in a minute because I think there are some strategic ones. We can talk about but when I think about it from a financial standpoint, the near term benefit comes through as we enter 2026, the exiting of the data center just has a very quantifiable cost.

Exercise that we're already starting to think about how do we take that next leg up I don't know if <unk>.

Kirk you'd add anything from like a strategic perspective, when you think about yes, I would just add that it's an exciting time to be completing our cloud transition and one of the reasons for that is kind of a transformational opportunities that lie ahead of us whether that's cloud native technology, which continues to AI is getting a lot of the headlines that cloud technology continues to evolve rapidly the tools.

Component that goes away for us that we've historically had so yes.

And sort of if you will at the end of the double bubble or right near the end and so there's a clear benefit there and you see that in the 26 gross margin expansion that we've talked about.

Well to us kind of the industrial strength kind of development environments that are available to us.

Jonathan Price: And once we've been in the cloud for some period of time, understanding how to manage the cost structure more efficiently is a common exercise that we're already starting to think about how do we take that next leg up. I don't know if Kirk, you'd add anything from like a strategic perspective when you think about it.

And it might and returned to our customers.

And then I think also in terms of the role that all the various kinds of AI is going to play in that cloud environment. I think is really exciting is we're bullish on the opportunities ahead of us.

Exercise that we're already starting to think about how do we take that next leg up.

Kirk you'd add anything from like a strategic perspective, when you think about yes, I would just add that it's an exciting time to be completing our cloud transition one of the reasons for that is kind of the transformational opportunities that lie ahead of us whether that's cloud native technology, which continues to getting a lot of the headlines that cloud technology continues to evolve rapidly the tool.

Great. Thanks for taking my questions.

Kirk Coleman: Yeah, I would just add that it's an exciting time to be completing our cloud transition. One of the reasons for that is kind of the transformational opportunities that lie ahead of us, whether that's cloud-native technology, which continues to, you know, AI is getting a lot of the headlines, but cloud technology continues to evolve rapidly. The tools are available to us, kind of the industrial strength kinds of development environments that are available to us that are in the pipe in return to our customers. And then I think also in terms of the role that, you know, all the various kinds of AI is going to play in that cloud environment, I think is really exciting because we're bullish on the opportunities ahead of us.

Thank you.

And we have one final question, Michael <unk> with Morgan Stanley.

Yeah, Hey, guys. Thanks for squeezing me Ann Thompson, I Couldnt might be obligatory question on 26 pass us by.

Two part question there.

Well to us kind of the industrial strength kind of development environments that are.

Was it was the net new subscription are are you added on a sequential basis in line with your expectations sort of when you strip out that atypical M&A related churn do you mentioned and two how is the deal composition and just the mix between larger and smaller deals that you saw in the first half and expect in the <unk>.

And the fight and returned to our customers.

And then I think also in terms of the role that all the various kinds of AI is going to play in that cloud environment. I think is really exciting we're bullish on the opportunities ahead of us.

Chris Kennedy: Great. Thanks for taking the questions.

Great. Thanks for taking the question.

Kirk Coleman: Thank you.

Thank you.

Back half factoring in there.

Operator: And we had one final question, Michael Infante with Morgan Stanley.

And we had one final question from Michael <unk> with Morgan Stanley.

Yes. So yes, if you if you were to back out the sort of concentrated churn and even if you look at sort of <unk> trends from last year, you sort of directionally the sequential subs.

Josh Yankovich: Yeah, hey guys, thanks for squeezing me in. Jonathan, I couldn't let the obligatory question on '26 pass us by. So two-part question there. Was the net new subscription ARR that you added on a sequential basis in line with your expectation sort of when you strip out that atypical M&A-related churn you mentioned? And two, how is the deal composition and just the mix between, you know, larger and smaller deals that you saw in the first half and expect in the back half factoring in there?

Hey, guys. Thanks for squeezing me in Tom can I couldn't it might be a regulatory question on 26 patents by two part question there.

As where we would've expected and certainly would have been in a good place relative to expectations absent that concentration of term. So feel good there and then from a from a deal composition and mix standpoint. It was very much in line with what we said at the beginning of the year and then what we're reiterating now where while we did have the six tier ones that we talked about.

Was it was the net new subscription are are you added on a sequential basis in line with your expectation sort of when you strip out that atypical M&A related churn you mentioned and two how is the deal composition and just the mix between larger and smaller deals that you saw in the first half and expect in the <unk>.

The volume of tier two and three deals was really high and the bigger tier one opportunity set is more in the back half and so while we have the tier one deals the biggest opportunities fall in the back half and so that sort of explains a little bit of the mix shift that we saw in the first half and again right in line with expectations.

Factoring in there.

Jonathan Price: Yeah, so yes, if you were to back out the sort of concentrated churn, and even if you look at sort of two Q trends from last year, you saw directionally the sequential subs ARR at is where we would have expected and certainly would have been in a good place relative to expectations absent that concentration of churn. So feel good there. And then from a deal composition and mix standpoint, it was very much in line with what we said at the beginning of the year and then what we're reiterating now where, well, we did have the six tier ones that we talked about. The volume of tier two and three deals was really high, and the bigger tier one opportunity set is more in the back half. And so, well, we had the tier one deals, the biggest opportunities fall in the back half.

Yes. So yes, if you if you were to back out the sort of concentration of churn and even if you look at sort of two key trends from last year, you sort of directionally the sequential subs they are at.

Where we would've expected.

Helpful. Matt, maybe just a higher level one for you. Obviously there has been a lot of commentary coming out of certain banks that.

It would've been in a good place relative to expectations absent that concentration of terms. So feel good there and then from a from a deal composition and mix standpoint. It was very much in line with what we said at the beginning of the year and then what we're reiterating now where while we did have the six tier ones that we talked about the volume of tier two and three deals was really high.

Have the intention to begin to charge third party aggregators for ATI access to customer account data is there anything we should be aware of in terms of.

Percentage of your subscription business that relies at least in some form or fashion on data aggregators and as that proposed pricing should not sure of the concept of it becomes.

And the bigger tier one opportunity set is more in the back half and so while we have tier one deals the biggest opportunities fall in the back half and so that sort of explains a little bit of the mix shift that we saw in the first half and again right in line with expectations.

Jonathan Price: And so that sort of explains a little bit of the mix shift that we saw in the first half. And again, right in line with expectations.

<unk> across the banking landscape, how do you think about the impact both on your customers on your margin is wise. Some opportunities you have on the margin side. The ERP integration initiative that you have underway. Thanks.

Josh Yankovich: Helpful. Matt, maybe just a higher level one for you. Obviously, it has been a lot of commentary coming out of certain banks that, you know, have the intention to begin to charge third-party aggregators for API access to customer account data. Is there anything we should be aware of in terms of the percentage of your subscription business that relies at least in some form or fashion on data aggregators? And if that, you know, proposed pricing structure or the concept of it becomes, you know, pervasive across the banking landscape, like how do you think about the impact both on your customers, on your margins, as well as, you know, some opportunities you have on the margin side with the ERP integration initiative that you have underway? Thanks.

Helpful. Matt, maybe just a higher level one for you. Obviously there has been a lot of commentary coming out of a certain banks that.

Have the intention to begin to charge third party aggregators for ATI access to customer account data is there anything we should be aware of in terms of the percentage of your subscription business that relies at least in some form or fashion on data aggregators and as that proposed pricing structure on the comps.

Jonathan I'll cover some of that but it's a very small amount of customers that were actual aggregations, taking place where I think you have any.

Yes, it's early to quantify I think as we think about it with the partners. We work with when it comes to the universe of Aggregators and then we think about what the potential economic implications are working through with them I agree with Matt I don't think from a materiality standpoint, we're worried about it I think its something were watching and monitoring and I think as our partners.

And then it becomes.

Facing across the banking landscape, how do you think about the impact both on your customers on your margins as wise. Some opportunities you have on the margin side ERP integration initiatives that you have underway. Thanks.

<unk> begin to engage with us on it I think they still think this is very early in terms of how this is going to play out and what it will mean for their business in terms of passing that cost along to the end user versus who would who would be incremental.

Kirk Coleman: I'll have Jonathan cover some of that, but it's a very small amount of customers where actual aggregation is taking place where I think you have any issues.

Jonathan I'll cover some of that but.

Very small amount of customers that were.

Actual aggregations, taking place where I think you have any.

Fees that are that are being proposed so nothing there that we're worried about but we're watching it and again I wouldn't say, it's an issue from a materiality standpoint.

Jonathan Price: Yeah, it's early to quantify. I think as we think about it with the partners we work with when it comes to the universe of aggregators, and then we think about what the potential economic implications are, we're working through it with them. I agree with Matt. I don't think from a materiality standpoint we're worried about it. I think it's something we're watching and monitoring. And I think as our partners begin to engage with us on it, I think they still think this is very early in terms of how this is going to play out and what it will mean for their business in terms of passing that cost along to the end user versus who would eat the incremental fees that are being proposed. So nothing there that we're worried about, but we're watching it.

Excellent. Thank you guys. Thanks, Mike.

Okay.

And with Bob.

Thank you for joining US today. This does conclude today's conference call you may now disconnect.

Fees that are that are being proposed so nothing there that we're worried about but we're watching it and again I wouldn't say, it's an issue from a materiality standpoint.

Jonathan Price: And again, I wouldn't say it's an issue from a materiality standpoint.

Josh Yankovich: Makes sense. Thank you, guys.

Excellent. Thank you guys. Thanks, Mike.

Okay.

Operator: And with that, thank you for joining us today. This does conclude today's conference call. You may now disconnect.

And with Bob.

Thank you for joining US today. This does conclude today's conference call you may now disconnect.

Okay.

Yes.

Yeah.

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Yeah.

[music].

Okay.

Yeah.

Okay.

Yeah.

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