Q2 Holdings, Inc.

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings First Quarter 2022 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, you'll need to press star 1 on your telephone. Thank you. I would now like to turn the call over to Josh Yankovich, Investor Relations. Sir, please begin.

Thank you, operator. Good morning, everyone, and thank you for joining us for our first quarter 2022 conference call. With me on the call today are Matt Flay, our CEO, David Mihawk, our CFO, and Jonathan Price, our Executive Vice President of Emerging Businesses, Corporate, and Business Development. This call contains forward-looking statements that are subject to significant risks and uncertainties, including with respect to our expectations for the future operating and financial performance of Q2 holdings. 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 10Q to be filed this week, and subsequent filings, and the press release distributed yesterday afternoon 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. 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. Also, unless otherwise stated, all financial measures discussed on this call will be on a non-GAAP basis. A discussion of why we use non-GAAP financial measures and a reconciliation of the non-GAAP measures to the most comparable GAAP measures is included in our press release, which may be found on the investor relations section of our website and in our form 8K filed with the FCC yesterday afternoon. Let me now turn the call over to Matt.

Thanks, Josh. I'll start today's call by sharing our first quarter results and highlights from across the business. I'll then hand it over to Jonathan to provide more insights into our emerging businesses. David will then discuss our financial results in more detail. In the first quarter, we generated non-GAAP revenue of $134.3 million up 15% year-over-year and 1% sequentially. We also added over 500,000 users to our digital banking platform during the quarter, resulting in a year-over-year increase of 8%. That brings us to approximately 19.7 million total registered users. Our Q1 results exemplified many encouraging themes. First, we saw solid execution across our sales teams. We signed two enterprise deals with our loan pricing solutions, as well as four tier one deals across banking and lending. We're pleased with the breadth of deals we continue to win, both in the diversity of institutions choosing Q2 and the variety of products being selected across those deals. Our emerging businesses also had a strong first quarter. Q2 Innovation Studio was cited as a key differentiator in the vast majority of our net new digital banking wins, and we continued to see rapid adoption from our customers and a growing partner ecosystem. And with Helix, our banking as a service solution, we continue to win new deals across a broad range of verticals, and we launched an exciting new program with NYDIG, a leading Bitcoin provider, all of which Jonathan will discuss in more detail shortly. Our product innovation also continues to be recognized by leading industry analysts. This quarter, IDC named Q2 a leader in their IDC marketscape for North American digital banking customer experience platforms. referencing the innovation studio as a key driver of our ranking. While we were pleased with our sales performance from the quarter, we believe this type of third-party acknowledgement supports our vision and product strategy in the new frontier in financial services and highlights the hard work of our talented product and engineering teams. With these themes in mind, I'd like to walk through our sales wins from the quarter in more detail. We had another strong quarter in the enterprise in Tier 1 segments with our lending solutions. This is the second quarter in a row with a multiple net new enterprise wins, further exemplifying that the demand environment in the enterprise segment has improved and we're succeeding in converting demand into new customers. One of our enterprise deals in the quarter was with a top 10 U.S. bank. This bank sees our loan pricing tools as a valuable way to enable their commercial bankers with actionable in the moment insights, enhance the efficiency and experience of their staff and help them better serve their clients. Our technology's ability to seamlessly integrate with other critical systems, like their CRM solution, was a key reason we won the deal. And the strength and size of our customer base is a significant value to our lending customers and prospects because these solutions use loan data from across our customers to make real-time recommendations to commercial lenders. The more data they have, the more effective the pricing engine becomes. And as we've said in the past, we have demonstrated an ability to expand our enterprise loan pricing relationships over time. With some of our largest enterprise customers, we've more than doubled the contracted average recurring revenue in the first two years. So while landing these enterprise accounts is significant, we believe each one represents a substantial expansion opportunity beyond the initial booking. We now have roughly half of North American banks over $100 billion in assets using Q2, including the five largest Canadian banks. which are all using our loan pricing capabilities in some capacity. Another one of our Tier 1 deals from the quarter was the cross-sell of our loan origination solution to an existing Tier 1 digital banking customer. This is just another example of the importance of our strategic relationships with our customers, which puts us in a favorable position to cross-sell into other areas of the business. And having recently shifted to an enterprise selling motion in which our sales force is enabled to sell virtually the entire Q2 portfolio, we expect to see more of this expansion activity over time. We also continue to add tier one customers on the digital banking side, signing three net new tier one banks in the quarter, complementing those tier one wins. We also had a solid quarter in the tier two and three segments. Our broad-based success underscores an emerging trend in our digital banking business over the past few quarters. We're signing a wide variety of progressive financial institutions from across the market, tier one through three banks and credit unions, retail and commercial, that are looking to upgrade to a premium digital banking platform as part of a widespread technology refresh accelerated by the pandemic. To give a better sense of the kinds of financial institutions choosing Q2's digital banking platform, I'd like to share a few specific wins from the quarter. One of the tier one deals we signed was a roughly $10 billion financial institution with a progressive growth strategy centered around their strong FinTech partnership business. This is a great example of a bank that's heavily invested in using technology to strategically grow their business. They selected Q2 for both retail and commercial digital banking in the quarter. And given how progressive this bank is, I believe this win is a testament to the strength of our single platform architecture, our approach to user experience, and the flexibility we provide through Q2 Innovation Studio. Our second tier one win was also unique. As we've shared in recent quarters, our customers frequently tend to be on the acquiring side of M&A transactions, which can benefit Q2, as the acquiring institution typically rolls the acquired entity onto their digital banking technology. But during the quarter, we actually had a tier one win emerge from a scenario where an existing customer was acquired by a non-Q2 bank. Rather than the acquiring institution rolling the Q2 customer onto their legacy online banking system, the bank evaluated Q2 and chose to adopt our digital banking platform across the entire combined entity. Given how atypical it is for an acquiring institution to adopt the technology of the acquired bank, I'm really proud of this win. Rather than choosing the path of least resistance and keeping their legacy system, the bank made a strategic, long-term investment in our solutions. a strong endorsement of Q2's platform. We also had success in the Tier 2 and 3 segments as we continue to see customers include more Q2 products at the time of their digital banking decision. In fact, the largest digital banking deal from the quarter from a bookings perspective came from a Tier 2 institution that adopted not only digital banking, but also our onboarding, fraud management, and marketing intelligence solutions. Finally, we just crossed the one-year anniversary of our click switch acquisition. and the sales performance has been impressive on multiple levels. We've attached ClickSwitch to a majority of net new digital banking deals over the past year, and we're seeing interest from fintechs, clients who are looking to leverage ClickSwitch to drive primacy with their customers. ClickSwitch has also proven to be a valuable product to help us land new accounts as a standalone solution, particularly in the enterprise space. During the first quarter, we signed a top 25 U.S. bank, along with several tier one ClickSwitch deals. All important relationships that we will look to expand over time. As the broad mix of deals from the quarter demonstrates, we believe financial institutions are actively looking for opportunities to invest in technology. And one area that we have seen as an increasing priority is modernizing the commercial banking experience. Yesterday, we announced Q2 Catalyst, a new solution set comprised of our commercial banking and lending capabilities. With Q2 Catalyst, we're positioning ourselves as a single strategic partner to help financial institutions digitize the commercial banking relationship from winning and onboarding new clients to serving and growing those relationships over time. While the products within Q2 Catalyst, like treasury onboarding, loan pricing, and corporate digital banking are already established in the market, we believe taking them to market as a combined solution set with unique integration values will be a powerful differentiator for us in commercial banking and lending. Before I hand the call over to Jonathan to share some updates from our emerging businesses, I want to reiterate how pleased we are with the way we started the year. The demand environment has continued to improve, and when you couple that with our robust solution set and broad sales execution across our lines of business, we believe we are still well positioned for the reacceleration of revenue growth exiting 2022 and heading into 2023. Thank you, and with that, I'll hand the call over to Jonathan.