Q2 Holdings, Inc.

Good afternoon, everyone. My name is Kellyanne. I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q2 Holdings Third 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. I would now like to turn the call over to Mr. Josh Yankovich, Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for the Third Quarter 2022 Conference Call. With me on the call today are Matt Flake, 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 this 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 SEC this afternoon. Let me now turn the call over to Matt. Thanks, Josh.

I'll start today's call by sharing our third quarter results and highlights from across the business. I'll then hand it over to Jonathan to provide more insights into our emerging businesses activity. From there, I'll discuss how we're adapting to current market influences before handing it off to David to walk through our financial results and outlook in more detail. In the third quarter, we generated non-GAAP revenue of $144.9 million, up 14% year-over-year and 3% sequentially. We also added over 700,000 users to our digital banking platform, a year-over-year increase of 9%. That brings us to approximately 20.9 million total registered users. We delivered strong sales execution in the third quarter, highlighted by a digital banking enterprise deal and five Tier 1 wins with both new and existing customers. Our emerging businesses also had solid activity in the quarter. We signed a new huge customer that opens a new vertical for us, and launch key client programs. We're seeing Innovation Studio, our award-winning SDK and partner ecosystem, continue to play an important role in our digital banking sales success. And finally, we announced the acquisition of Sensibuild in early October, a leading customer data platform designed to unlock actionable insights to help financial institutions and fintechs better serve their customers. With that, let me unpack our sales highlights in more detail. I'll start with digital banking, where we signed three tier one deals and landed an enterprise win with a top 50 US bank. Q2 participated in a highly competitive selection process to win this marquee enterprise deal, and the bank will now use the Q2 platform for their commercial and small business clients. It's worth noting that this is the largest deal we've signed in the last three years, and our proven ability to expand enterprise relationships beyond the initial bookings is one of the many reasons we're excited for the long-term potential of this partnership. One of the Tier 1 wins from the quarter was with a $6 billion bank that will also utilize both our retail and commercial solutions. This bank was looking for a technology partner that's not only a best-in-class commercial provider, but one that could also support their acquisition roadmap. They selected Q2 because of our differentiated commercial offering, our speed of innovation, and our track record of helping acquisitive customers grow. We also saw significant cross-sell activity in the quarter. First, an existing Tier 1 credit union customer purchased our retail solutions to add to their Q2 commercial offerings, effectively building out their full digital banking suite on Q2's platform. Similarly, we also expanded our relationship with a top 50 U.S. credit union that added our commercial banking solution to their existing retail banking suite and extended their contractual terms as part of the deal. Digital lending also had a solid quarter, including a Tier 1 win with an agricultural lender looking to implement a new commercial loan pricing tool to better assess the risk and profitability of their commercial relationships. This win represents our second Tier 1 deal in the agricultural lending space this year, so we're encouraged by our growing traction and credibility in this promising vertical. We also landed a cross-sale deal with a large Tier 1 bank that began utilizing our loan pricing solution last year. The success of that initial loss led them to expand their use of our loan pricing platform. This deal demonstrates the multiple expansion opportunities we see with our loan pricing capabilities. In this case, the customer added licenses, enabling more of their lending staff to utilize our solution, and they added a new product module, both of which meaningfully grow the size of this partnership beyond the initial booking. Overall, I'm pleased with our sales performance across digital banking and lending in the quarter. We believe our digital banking platform is well-positioned competitively across retail and commercial, as highlighted by the deals we discussed. And on the digital lending side, we're executing meaningful net new and expansion events. We're saying Q2 Catalyst, our end-to-end commercial solution set, resonating with customers and prospects for its ability to help them manage commercial relationships through the digital channel, from pricing the relationship to onboarding new commercial clients to serving and growing those relationships over time. In fact, every one of the enterprise and tier one customers I just discussed is leveraging at least one of our Q2 catalyst solutions to enhance their commercial strategy. And we believe this ability to help our customers digitize these critical relationships across loans and deposits is highly differentiated in the market. In summary, our sales execution across digital banking and lending remains strong. Our product portfolio is resonating. We saw our win rate improve. We are executing meaningful net new and expansion opportunities, and our pipeline suggests that demand for digital transformation remains strong. Now I'll hand it over to Jonathan to walk through our emerging businesses highlights from the quarter.