Q2 Holdings, Inc.

a question and answer session. And if you would like to ask a question at that time, you will need to press star followed by the number one on your telephone keypad. And to withdraw your question, simply press star followed by the number one again. Thank you. And with that, I would like to turn our call over to Josh Yankovich, Investor Relations.

Thank you, Operator. Good afternoon, everyone. And thank you for joining us for our fourth quarter and full year 2024 conference call. With me on the call today are Matt Flake, our CEO, Jonathan Price, our CFO, and Kurt 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 sales operating and financial performance of Q2 Holdings and for the financial services industry. Actual results may differ materially from those contemplated by these forward-looking statements, and we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in our periodic reports filed with the SEC, copies of which may be found on the investor relations section of our website, including our annual report on Form 10-K for the full year of 2024 and subsequent filings, and the press release distributed this afternoon regarding the financial results we will discuss today. 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. The discussion of why we use non-GAAP financial measures in a reconciliation of the non-GAAP measures to the most comparable GAAP measures is included in our press release, which may be found on the investor relations section of our website and furnished with our form 8K filed today with the SEC. We have also published additional materials related to today's results on our investor relations website. Let me now turn the call over to Matt.

Thanks, Josh. I'll start today's call by sharing our fourth quarter and full year results and highlights from across the business. I'll then hand the call over to Jonathan to discuss our financial results in more detail and provide guidance for the first quarter and full year. before I conclude with a look ahead to 2025. In the fourth quarter, we delivered results above the high end of our guidance, generating non-GAAP revenue of $183 million, up 13% year-over-year, and up 5% sequentially. We also generated adjusted EBITDA of $37.6 million, representing 20.6% of non-GAAP revenue and improvement of approximately 630 basis points of adjusted EBITDA margin over the prior year quarter. We closed out the year with outstanding sales execution in the fourth quarter, posting the best bookings quarter of the year and the second strongest bookings quarter in the company history. Our bookings performance was powered by a balanced mix of net new and expansion wins, highlighted by seven total tier one and enterprise deals, and was the best cross sale as well as the best renewal quarter in company history in terms of total bookings. In particular, We view the renewal success as a strong indicator of customer satisfaction, the strength and differentiation of our platform, and the overall value we're delivering for customers. Our fourth quarter sales performance underscored a great year for our business. We capitalized on a favorable demand environment with very strong sales across the board. We helped customers address a wide range of challenges and opportunities across retail, small business, commercial, and fraud management, leading to a record year of renewal activity. and we delivered consistently strong financial results that have us well on pace towards our three-year framework. After a record-booking year in 23, we followed it up with another strong year of well-rounded sales performance. Overall, we signed 25 total Tier 1 and Enterprise deals, our most ever in a single year. And within digital banking, we drove significant volume in the Tier 2 and 3 space as well. In fact, we signed nearly twice the number of digital banking deals in these segments as in the year prior. Our ability to compete effectively in both areas is a testament to the breadth of functionality we have across retail, small business, and commercial use cases, and the reputation we've built up market over the last 20 years. Complementing our success with new and expanded relationships, we also achieved a record-breaking year for renewals, with bookings from renewals up 80% year over year. This solid execution demonstrated the resilience and growth of our customers in a challenging market environment, as well as their reliance on and confidence in our technology to support their strategic initiatives. Also, there's no question that Q2 Innovation Studio is playing a large role in our sales success. Innovation Studio continued to be a valuable differentiator in net new sales, being cited as a key reason we won in more than 90% of our wins in 2024. Throughout the year, customer and partner adoption also reached new levels, leading Innovation Studio bookings to more than double year-over-year. On the relationship pricing front, we signed a number of meaningful new customers in the Tier 1 and Enterprise segments to continue to expand and renew our existing relationships. We've talked about the ability for these products to price the entire commercial relationship, not just loans. And that was key throughout the year in a volatile rate environment, as new and existing customers purchase modules to price non-lending products like treasury services. We enter 2025 with solid momentum and are optimistic about the demand environment in the year ahead. Our risk and fraud solutions have a tremendous year as well. Thematically, fraud is one of the most pressing topics on the minds of virtually all of our customers. Because of the vital role our technology plays, our customers look to us to help them manage fraud across the retail and commercial account holder lifecycle from authentication to in-app behavior to payments and more. In 2024, our solutions helped mitigate more attempted fraud with our customers than ever before. And from a bookings growth standpoint, our fraud solutions are one of the fastest-growing solution sets. Given the heightened priorities being placed on mitigating fraud in our end market, we expect to continue to see healthy demand for these solutions, and we believe we're in a great position to help our customers rise to the challenge in 2025 and beyond. The key driver of our sales performance throughout the year was the breadth of our platform, which gives us a natural expansion opportunity with existing customers. And because we spent 20 years building a strong customer base, that opportunity is significant. Take our commercial customer set, for example. While ACHs and Wires were in our first lines of code back in 2005, we spent more than 10 years investing heavily in building out our commercial functionality and user experience. And as a result, we've been successful delivering and supporting some of the largest and most sophisticated financial institutions in the country. Today, we have more than 60 Tier 1 financial institutions that utilize our commercial digital banking solutions. The result of significant innovation, investment, and sales success. But that means we still have approximately 50 Tier 1 digital banking platform customers that do not use our commercial functionality today. representing a meaningful expansion opportunity to cross-sell commercial digital banking. And that's just one example. This dynamic powered our record year of renewal and expansion success, and is a key reason we did such a high volume of Tier 1 and enterprise deals. Because of this single-platform dynamic, we continue to expect expansion to play an increasingly important role in 2025, in addition to our continued momentum on the net new side. In summary, we delivered strong financial results in terms of growth and profitability in 2024. We significantly outperformed our expectations in the first year of our three-year financial framework and successfully reached our rule of 30 goal on a total revenue basis in the second half of the year. Before I hand the call over to Jonathan, I'd like to take a moment to recognize the announcement of an addition to our board of directors. I'd like to take this opportunity to welcome Andre Mintz to the Q2 team. Andre brings a wealth of experience in global privacy, cybersecurity, and financial technology, having held senior roles at Meta, Newport Group, Red Ventures, and Microsoft, among others. His expertise in data protection and compliance, particularly in the financial services sector, will be invaluable to Q2, and we're excited to add his perspective to our board. Andre officially joins the board on March 1st. I'll now hand the call over to Jonathan to cover our financial results in more detail and provide an updated outlook for 2025. Thanks, Matt.