Q2 Holdings, Inc. (QTWO) Earnings Call Transcript & Summary

All right. We're going to keep everything on time here, starting right at the top of the hour. Thank you very much for joining us. this afternoon for this session of the Morgan Stanley FinTech Conference. Very pleased today to have much of the senior management team of Q2 Holdings with us this afternoon. I'm James Faucette, a senior research analyst at Morgan Stanley. Before we get started, let me I've got a quick disclosure to read, and then after that, I'll go through it and have Matt and the rest of the team introduce themselves and their roles, et cetera. So please see Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. So like I said, maybe we'll start with you, Matt, just kind of run down the line time at the company, background, role, et cetera, we'll just go down the list here.

Yes. Thank you, James, and thanks, Morgan Stanley, for having us. My name is Matt Flake, I'm the CEO of Q2. I've been with the company pretty much since the beginning. Prior to that, I was selling digital banking early on in the late '90s.

David Mehok, CFO of Q2. Been in the company for 2.5 years now. Prior to this, I had 2 other CFO jobs over the course of 6 to 7 years with privately held companies and 18 years at Dell, previous.

Kirk Coleman, I'm President. I'm actually new to the President role is of about 45 days ago, but we've been with the company for 18 months. Prior to that, I actually knew Q2 as a customer, I helped run a large commercial bank and was a customer there. Long career at Accenture prior to that.

Jonathan Price, lead strategy and emerging businesses for Q2, been at company about 5.5 years, and prior to that, about 14, 15 years in investment banking.

Great. Appreciate it, everybody. So I'll come back to you. For those of us or those that may be sitting in or listening who aren't familiar, could you give us a brief overview of your business? And in particular, what problems is Q2 trying to solve and where do you fit in the financial services value chain from an offering and customer base perspective?

Yes. So Q2 was founded 19 years ago, as I said, and our focus has really been about -- it's a mission-driven company about how do we prevent there from being 4 banks left in the world to determine who can have a loan or a checking account. And so it's ambitious. But when you think about it, technology is the great equalizer and all of this. And so we built a technology, a digital platform that allows people to do everything that they can do in person digitally. And so we operate on both sides of the balance sheet. We have a deposit solution and a lending solution. that offers people the ability to manage their accounts, make payments, it could be a consumer or a small business or a corporate in the lending side of the business, we can originate loans, we can price relationships could be loans or deposit relationships. We have about 1,400 customers globally. Digital banking comprises about 80-plus percent of the business. There, we've got about 450. Interestingly enough, we have about 75 that are greater than $5 billion in assets. So we really -- that $5 billion and above space is -- we're uniquely positioned in that with our experience and our platform. And in the value chain side of the business, what we do is we provide the experience that people feel when they interact with a bank digitally, whether it's for a loan or deposit account. And if you think about for years, banks spent money on Mahogany and Marvel and pillars out front for people to walk in and feel like their money was safe. So digital banking, for us, we've got to create that same feeling. And then if you think about as we move further into that, we get more data. We can use all the data, the behavioral data, the transactional data, the payment data that they have to understand them, cross-sell them products, serve them in a way that is different than you do in person and probably better. So that's what we do. Also I'd like for Jonathan. Jonathan runs our emerging businesses piece, and we have a Banking as a Service business, which is Helix, as you're aware of. And then our all finance business. Can you maybe talk about that because it's a little different.

Yes. So we put this emerging businesses unit together under the premise that the banks and credit unions were feeling this convergence trend from fintechs and brands and all faces who all wanted to play in financial services in different ways. . And so today, in emerging businesses, we have Q2 Innovation Studio, which we'll talk about, but is really a way for fintechs and other technology applications to embed themselves inside digital banking. We expose our SDK in a set of APIs that let them plug in and access our 22 million end users, 4.6 billion log-ins a year. So it's a really attractive channel for them, and it brings the banks more engagement, more innovation and more monetization opportunity with our customers and us. And then our Helix business, different technology platform. It's our cloud-based core. It's what we use to go power fintechs and brands that want to enter banking, but they don't want to be a bank and they don't want to become one either. And so they need up one of our bank partners. They need our technology stack, which is a cloud-based core and they need the services to actually go and launch a banking program. And then finally, our global lending business, same thing, a lot of loan servicing applications. But again, the primary constituent in that business is the non-bank. It's all by lenders and it's other folks that want to do lending within their client base and that customer base is all over the world, whereas the digital banking business is domestic.

Got it. Got it. So let's talk about I guess, the current and most recent environment. Investors from across the banking software landscape have really been focused on linearity of demand after some of the recent banking issues and headlines. You called out about 35% of your bookings in the most recent quarter were delivered after kind of that March 10 date, which was certainly significantly better than many had feared, including us. As you've been tracking the quarter-to-date trends, is there anything that you would call out that are either positively or negatively, like what's that persistence been like?

Yes. I would take it a click above, which is for 19 years, we've been building this business and for 18 years of it, it's basically been a decreasing rate environment. So we built the business in a world where loans were the center of the universe and all they were doing with loans and deposits were easy to come by. About 1.5 years ago, you may have heard that they started taking rates up and deposits started to shift pretty quickly. And so deposits have become the driving force in the lifeblood of a bank right now and retaining them, especially after March 10 when you had a run on the bank or whatever you want to call it, for the government not standing up for these smaller banks. And so as that occurred, many people thought, okay, based on what happened to the stock, Q2 is in trouble. Reality is the Silicon Valley Bank, Mutual Bank, Silvergate, are very different business models than what the vast majority of our community and regional financial institutions do. They bank Main Street. The bank the baker, the restaurant, the lawyer, the commercial real estate person and the small business and entrepreneurs in those towns. And so -- and they have their deposit thresholds aren't that high, but they did feel an exodus of deposits. And so how that results all the way from a year ago has been we had at the back half of last year, we started to see a pickup in bookings at the second half of the third quarter. We had record bookings in the company, historic record bookings in the fourth quarter something very unusual as we had another record bookings quarter in the first quarter, digital banking. So I've been doing this a long time. Usually, when you have a big quarter, the next quarter is a little tough. So record bookings in the fourth, record bookings for digital banking in the first a greater than 60% win rate in the first quarter, 40% lift in ASPs. So we had a lot of success in that first quarter. And what people need to understand is our product is the deposit retention and attractive tool. Operating accounts live in these systems. And so for us, our customers are using a platform that works on mobile phones, tablets, desktops, looks modern, has all the feature functionality you need, whether you're a retail small business or corporate but our prospective customers are running on legacy tech. And what has happened is the acceleration of this transformation is due to, number one, they cannot lose these deposits. And if you don't have a modern technology, you're likely to lose them. And then if you have an event like March 10 that occurs when people went and put money in Bank of America, Wells, Chase and Citi, they got to see their technology, and they're coming back to our prospects and saying, your stuff is pretty out of date, and it doesn't work. And so that's why the demand environment is where it is, where we had a record Q4, record Q1 and the pipeline is still strong and the win rates are up. and we're very uniquely positioned with our products, the breadth of feature functionality, the depth of integrations that we have. So the backdrop for March 10 has confused people, but I think we are seeing increased demand. We're seeing increased win rates and we're able to hold price and if not, raise prices on net new deals in this marketplace.

So what's your sense, Matt for when like the behavior shift and changed? Because it seems like you said there was a lot of like concern about -- and we saw at the bigger banks like new account formations, et cetera, some deposit moves. It sounds like your customers are trying to respond to that to better retain and attract their own deposits. Like what's your sense for when that could balance itself out or normalize in terms of like behavior on the part of the consumer?

Well, I think deposits are going to be critical. They've always been critical, but they're going to be hard to come by, and it can be a very competitive market for them. for quite a while, especially as rates keep going up, and there's not a lot of lending happening right now. So on our loan origination services, there's not a lot of people asking us for software to automate the loan origination process that's not happening right now. So they're getting rid of people rather than technology. But on the deposit side of the house, they're saying, I need something that gets these people to use this system. We have average 23, 24 log-ins a month, 4 billion times. And so that's the demand for us is I don't see it slowing down, and we're seeing larger deals come to the table. Being in this business a long time, it's very difficult to get momentum. And once you get momentum, it takes a while for it to slow down. So I feel like we're at the beginning of that momentum on the booking side and certainly, hopefully, it can continue. But how long this demand for deposits is going to go on. I think it's going to -- I think we have quite a bit of time or they're going to need these deposits.

Got it. Got it. Got it. So I wanted to decompose and break down growth generally is reports basically 3 primary sources of revenue, subscription, transactional and services with subscription being around 75% of the business and service is another around 15% transactional around 11% at last report. And our experience, investors sometimes get confused about what's being considered subscription versus transactional, particularly as it relates to things like the Helix business. Can you help us clarify what's driving each of those 3 segments and how to think about that? David?

Yes, sure. I'm happy to do that, James. And first to level set that, that 75% mix that we're seeing in subscription is actually the highest mix that we've seen in over 5 years. Think of that as the most important strategic and recurring aspect of our business. highest margin component of our business as well. Then when you break down that services business, there's 2 main components and a smaller component that makes up a third. We do call that line item service and other, and I'll tell you what that other is in a second. The biggest component of it is about 55% is associated with discretionary services. So think about consulting like services that we provide predominantly to our bigger clients. that's seen a lot of pressure, and we can talk about that a little bit more based upon the current macro backdrop and the margin profile on that is relatively low. Then there's the implementation services think about that is very closely aligned with the growth rates that we see in subscription. The subscription revenue growth this past quarter was 19% year-over-year. And then finally, there's the other bucket. The other bucket is generally the pass-through business that we see in Helix part of our business. And remember, Helix, as Jonathan described, Banking as a Service. So the vast majority of this business is going to see growth or -- excuse me, is going to see some growth pressure then there's the implementation, which is going to be closely aligned with subscription, and we have seen some growth pressures in the pass-through business. And we've talked about some of the pressures that we're seeing in that business it large. And then finally, there's transactions to your point, James, 11%. Is this decline year-over-year this past quarter. That was not a surprise to us. The biggest makeup of that business is bill pay. And there's other transactional business that goes into that coming from the Helix business, including interchange, Visa transactional fees, which are high man relative to bill pay, which is dilutive to our overall margin profile.

Got it. So let me just follow up on that is that given some of the headwind we've seen in transactional revenue and including last quarter, how would you characterize or help us put together your calendar year '23 revenue outlook of 9% to 11% year-over-year growth by segment? Can you help us break that down?

Yes, happy to do it. We don't give specific guidance on these line items. So I'm not going to get too specific, but it's important to sort of paint the picture of what we're seeing and what we are seeing is an acceleration in our subscription growth. So we were up 19%, as I said earlier, last quarter. We see that to be a mid-teens grower this year to mid- to high teens grower this year. So a lot of strength in subscription. Now what we're seeing in transactional and services is a slightly declining business for the rest of the year. So you aggregate that together and you get to the 9% to 11% growth. So hopefully, that helps paint a picture of where we're seeing strength, subscription, high margin, highly recurring, where we're seeing some pressure right now as expected in transactional and then some of the recent developments have resulted in incremental pressure on this consulting type of engagements where it's discretionary in nature for our customers.

Got it. And so that -- if that's how you're kind of putting together a meeting this year's outlook, what do you think is the right normalized mix of growth for each of those components?

Well, subscription, obviously, is going to be the lifeblood of the business. And that's the area of focus. And when Matt talks about booking strength, when we talk about ARR strength and we talked specifically about the strength that we saw within ARR and subscription that's where our predominant focus is. Now there are certainly areas of the business that are going to fluctuate a lot more, and those are the other 2 line items. And within those 2 line items; one, implementation is not going to fluctuate as much quarter-to-quarter, year-to-year, that's going to be very much a line of subscription. You're going to see the fluctuations in the transactional piece of it as well as in the discretionary services piece of it.

Got it. Got it. Got it. So then you talked a little bit or alluded to kind of the margin structure. But I wanted to dig in there a little bit more. So if we look at the headwinds you've seen in terms of customer exposure and the transactional revenue or are creating downward pressure on revenue growth. The headwinds are predominantly concentrated in what are presumably some of your lower-margin businesses. I think that's kind of what you alluded to. Given there are several moving pieces on top line. Can you help us unpack or understand what the relative margin files are these respective businesses with a little more detail, just so like we're -- have improved sensitivity there?

Yes. And mix is a big component of our margin expansion story. And one of the things that we talked about in our earnings call and then inherent in our guidance is about a 450 basis point expansion in our EBITDA margins for FY '23. A big component of that is mix as we're mixing up to subscription, it is the highest margin business that we have in terms of that revenue dissect. When you look at the services business, I talked about this a little bit, but breaking it down a little bit further. The consulting type businesses, the discretionary services. They run a typical consulting type margins, 35% -- 25% to 35% in that range. And then the lowest margin is the implementation. And the pass-through, which, again, very small component of that service is and other, think of that as a 0 to 15-point gross margin business. Transactional is going to be slightly dilutive to our overall P&L. So not hugely dilutive, but it's going to be below the overall 54% that we delivered last quarter.

Got it. Got it. So I want to talk about just like how this then starts to rebuild up into some of your targets is. And there, you've talked about achieving a Rule of 30, which is revenue growth plus adjusted EBITDA margins by the second half of '24. What do you think about the right mix or what is the right mix between revenue growth and adjusted EBITDA margin? And is that still the right time frame to think about hitting that Rule of 30 target?

I mean, James, one of the things we liked about that target and why we feel strongly about it is there's some aspects of it that we control, which is cost. So depending upon what the growth environment is giving us, we obviously can adjust the cost component of it accordingly to make sure that we're going to hit that target, and we still are confident we will hit that target. Based upon some of the pressure that we're seeing right now in discretionary services, we are -- and we have been since the end of August, been taking aggressive cost actions across the business just in terms of driving more efficiencies in terms of utilizing global resources more effectively. And in terms of just driving a lot more blocking and tackling around utilization of facilities and procurement, things that we're getting to really build a muscle is as an organization. So all of those things to find are driving a lot of that margin accretion that we have into next year. So to get to that Rule of 30, you're going to see a lot more of it coming from EBITDA expansion than you will from revenue growth. And remember, we talked about in the call and in our filing that FRB was roughly 2.5% of the revenue and we're assuming that, that revenue comes out next year. That's obviously a short-term hit when you look out to '24. Longer term, again, keep in mind that's the predominant mix of that was discretionary services. So not a high-margin aspect of our business.

FRB is First Republic Bank.

Yes. First Republic. So on First Republic, with them being that amount of drag, like I think that's a good time line assumption. But when you get better clarity as to when that revenue will start to wind down and what that rate of wind down is going to look like? .

Yes, it's too early to call right now. We're obviously still in ongoing discussions with them, and we're going to work through that over the coming months. And obviously, once we get more information. We'll disclose that accordingly, probably in the next earnings call, if we do have any updates. .

Okay. Do you have any updates. So back to implementation. Historically, your services revenue has been tied to ample implementations where we would see the margin pressure that you just described or at least it's lower margin associated with large implementations. And especially how you priced that work. How do we think about like the durability of gross margin? And I guess the time frame for which you really get paid because like what I would for like what could be confusing for investors is that if all of a sudden, you sort of have lots of implementations, they could put downward pressure on the margins. But ultimately, that should be conceived or received as a positive thing, right? So can you help us kind of work through like that component and how to better taking into account like, okay, this is implementation driven margin pressure versus anything else?

Yes. And we -- Matt mentioned this, but we've seen a lot of strength, obviously, in bookings starting at the end of Q3 of last year and some of those bookings were in larger customers, so large in Tier 1 type customers. When we have those implementations, there tend to be its history is measured, there tend to be some cost overruns, so you see some margin pressure around the implementation time frame. . A couple of things I'll tell you is; one, we're getting more efficient. One in terms of scope of out and obviously utilizing global resources, which I mentioned briefly before, so that our cost profile as we're delivering these implementations is more favorable than it may have been a year or 2 years ago. And obviously, we're trying to make sure that we're slotting these accordingly and appropriately and the resources that we're allocating to it are much more aligned with the needs of the customer. So it's us becoming a lot more efficient and effective. So we hopefully don't have as many cost overruns as we have historically. And we think we're getting better at that. We're going to continue to work at it. But the reality of it is, those types of deals benefit us tremendously long term. If you think about 5.5 years contract duration, you think about how recurring and low churn we have when we get to the renewal time period, those are all good things for us. So if there's a short-term margin impact around implementation, that is very short-term lived. And we feel that there's a lot of longer-term upside that should be the focus.

So with those improved efficiencies, et cetera, like, will that -- can that manifest itself through better than historical implementation margins? Or is it just a allow you to charge less and improve the elasticity of demand, if that makes sense? .

So we are absolutely focused on improving our implementation margins, and we had some good results already based upon the work that we did in the second half of last year and the beginning of this year. We're going to continue to work at that. And the other line item there within COGS that's going to help drive margins up as improved efficiencies and our customer support. So those 2 areas combined are part of what you're seeing in terms of the uplift of gross margin combined with the mix component.

And can you talk a little bit about the improvements in customer support, like what's the source of that? And how much leverage can you get from that part of the expense base right now?

Yes. I mean there's one that's probably pretty logical, as I've already mentioned it in terms of implementations, but it's utilizing global resources more effectively. Another is using AI. So if you think about the Level 1 support that we have, the Triage prospect is much more efficient when those are incoming, there's not 20 calls that are going after different parts of the organization to solve a customer problem. We have information at the disposal of the customer support rep so they can solve those issues much more effectively and efficiently. And there's an increased amount. In fact, it's almost a 50% year-over-year in Q1 of self-service. And our customers like the self-service as well where it's applicable. So all of those things combined helped drive the cost component down for support.

Got it. Got it. So now I want to come back to -- and you kind of mentioned this at the outset was just kind of where the pressures are and the motivations are for your banking credit union customers. But if we look at our conversations with banks and credit unions, it seems like the top 3 priorities in today's environment are, from our perspective, and I'd love to hear what your view is, but deposit growth, loan growth and then operational efficiency. Is that consistent with what you're seeing? And how would you draw out any nuance in terms of where the priorities are for your banks and customers are today?

Yes. I mean I don't know that loan growth is just a muscle that they have there's no loan growth happening....

Yes. No. The rate of loan growth is slowing for sure.

That's one way to say it. Deposits, operating efficiency are where the priorities are. Kirk, he's rehabilitated banker himself and he spends a lot of time with customers. Why don't you chime in on what you're hearing from people around the top of their priorities.

Yes, just going to say it's kind of like deposit retention, deposit growth, deposit growth to be top priorities. So a couple of different things. Obviously, the -- it varies a lot by segment and geography. So I think we need to be careful of not using the headlines to kind of cast such a broad picture across the entire industry. But no doubt, across the industry, the deposits are -- there's an outflow of deposits. So having said that, people are very focused on making sure that they're pricing their best customers, serving them the best way, giving them the digital technology that they need to run their business. If we go back pre pandemic to today, the number of average log-ins across our entire user base is up about 75%. So this is just a really material way that their customers are interacting with their institutions. Strategically minded executive teams are kind of looking all the way through whatever cycle we're in and positioning themselves for growth on the set either organically or through M&A as they come out of this, whatever the cycle is. And to be able to do that, they have to have great products to be able to offer their customers to be able to capture that new business. And so we think our products play really well into that. From a pricing perspective, if you think about all the restructuring loans that might be happening and all of the complex treasury relationships that's in many of these commercial banks, those are complex pricing calculations. There's a lot of judgment that goes into that, but there's a lot that could be discerned about what's going on in the market. Pricing the SIC code, this geography, right, this type of customer and this kind of risk weight. And so our PrecisionLender product dresses both sides of that balance sheet really well. So you add all those things together with the kind of work a day operating efficiency that everyone's always striving for to drive down the efficiency ratio. Those are certainly the priorities. We think we lined up pretty good against all those.

So I'm wondering if you can expand on that a little bit, and you mentioned some of the products, but how are your like how would you position your products or which ones would you call out to address the needs, particularly where deposits are kind of the focus right now? And in particular, are there any case studies that you can share maybe giving some example, ROI realization from a typical bank or a credit union customer. Just trying to get a little bit more of a narrative or story around that.

Sure. So I'm going to start with commercial deposits, right. Any fees made in deposits, right? So almost entirely in the commercial side of the book, right? Because that's where you get the treasury management fees and the enhanced services and things like that. And as a banker, you can trade that off for other kinds of things you might want from the relationship, but that's an important part of any bank's growth story, right? If you're a $1 billion bank, you're thinking about your next commercial customer and on all the way to the larger spec. So in terms of I think about the software that we're providing, our digital banking platform, than the breadth of services that you're able to offer to your customers matters a lot because that breadth equals a greater surface to generate fees and create steak on this. So you have that in traditional ways, whether that's like information reporting and batch ACH and all the other things that businesses do to manage their day-to-day. But also and very importantly, Innovation Studio, and I'll let Jonathan comment on that in the second in terms a lot of the capabilities we're putting into those same customers' hands from expanding the kinds of products that the bank can offer to their customers, which makes them all at stickier. And our Innovation Studio is not just a consumer-oriented marketplace, right? It's is very balanced across commercial SMB and consumer. And there's some compelling statistics, I think. .

The one thing I would say to build on what Kirk was saying is our treasury. So our Q2 catalyst, which is an onboarding solution for banks, commercial banks in particular. If you think about what happens, you're running your own business and the bank starts with the line of credit that they issue. So you get the line of credit. To Kirk's point, that's just one piece then you want to get the operating accounts. So we built a treasury onboarding solution that allows the bank to say to the line of credit customer, move your operating accounts over then, I kind of want to do that it's such a nightmare. Well, part of the deal as we need. So we can in a study that they did, we've shortened that process from 28 days to 3 days. we automate moving the payroll files, the receivables, the entitlements, all that over to the customer. And then they get on the digital banking platform. And then you have the deposits, you have the fee income that's coming from that. And so for us, that is driving a lot of momentum in our space right now. So that was one of the things I think that in Kirk was kind of the creator of that 18 months ago, and we're seeing a lot of momentum because the bank is trying to get those operating accounts and make it as easy as possible a long time to do that. And then you take Innovation Studio, which Jonathan can chime in on about what that ecosystem is meaning to our customers now as well.

Yes. So where we were with this a couple of years ago, we had 20 of our 450 digital banking clients as early adopters and about 7 partners. Say, we have over 125 partners and about 325 of our banks and credit. So both sides of a 2-sided marketplace have scaled and now they're starting to come together. Probably one of the ways I'd answer the question about ROI and how we think about the value prop of when we attach something like innovation studio to our banks and credit unions. There was a bank in Texas. We did a recent case study with that only serves business clients. They're 100% SMB focused and they went live with 9 applications inside digital banking that cover everything from payroll for their SMBs, time tracking, scheduling, accounting and invoicing B2B payments, that type of thing. And so they're sort of moving themselves to the center of actually helping their business customers run the business. And so if you think about their relationship with our business clients because all of this is around the theme of attack to retain and grow deposits and from that point, the commercial deposit is the largest, most important to these institutions. So if you can do it with more than just traditional banking products in our platform but actually leverage all the innovation out there that matters to the customer and bring that inside digital banking and sort of win-win for everyone. And importantly, with these 9 apps, they're in year 1, and they're projecting over $1 million in tangible P&L value this year from those 9 apps either through the rev share that we negotiate with the partners in direct cost offsetting. So think about things like they pay for an integration for these partners where they pay minimums to these partners. We waive all of that in this model. And then other things like we have -- they use an app where they defer call center volume at $8 a call. So they quantified for us like in year 1, that will save them $300,000 day -- like year 1. So you stack that all up and all of a sudden, mission-critical enterprise software and they're making money and saving money using the applications that are embedded in digital banking, it makes us very sticky and it makes the way they can engage with their customers far more strategic.

Got it. Got it. I've been monopolizing questions here. If there's anybody from the audience who wants to ask a question, raise your hand, and we'll get you a microphone. I think there's one right here. He's got it. .

Company IPO-ed 2014, $13 a share. Stock is now at $26. Double in 10 years is okay, but not great. Mission-critical software is a word you just utilized, 3x EBITDA revenue looks very cheap to me. Would love to hear your thoughts what the Board is saying about valuation and the way forward for the business in the public market.

A whole journey between 2014 and 2023.

A lifetime.

Yes. I would say that clearly, we think there's a valuation dislocation at this point. March 10, we lost 20% to 30% of our value for something that actually has accelerated our business, which is -- it's tough to get your arms around. We moved to profitable growth. We announced it last August we have achieved -- we've gone beyond what we said we were going to do on adjusted EBITDA. We are focused on setting the right expectations and beating those and we're off to a good start at this point. And so it's a matter of we're going to build a great business. We're going to take care of our customers. We're going to continue to innovate. And right now, win rates, ASPs, all that stuff I talked about earlier, record bookings. It will come back around 1 way or another when you start to deliver the numbers. And so the world got flipped on its head for vertically focused, barely profitable SaaS company. And so -- and that's what we were. And so we're moving to this model where we're talking about Rule of 30 by the end of next year. We had -- last quarter, we had 17% subscription revenue growth, and I think EBITDA margins were in 11%, 12% range. So you're beginning to see real traction in those numbers and quarters are different. There's different timing to things. But we're showing there's a lot of opportunity in the stock to go up, and we're focused on as long as we execute to take care of our customers just keep winning deals that momentum will drive great outcomes for shareholders. So I appreciate the question.

So I want to ask just as a follow-up on that point. I think one of the overhangs that we have and we were talking about this before we came up on stage. I think at least a lot of the investment community, including us has been surprised that we have not seen a slowdown in bookings rate of closes, et cetera. And so that all seems really good. I mean, and we haven't heard that just from you, but we've heard it from others that operate in the space. On the other hand, there does seem to be this overhang or concern that the changes in regulations that may push increased consolidation? Like how are you thinking about consolidation activity across the banking space from your perspective and vantage point? And what's the ultimate impact that, that could or would have on see in user accounts?

Yes. I think it's a great question. I think it's important to clarify, too, for people because we're on the right side of that trade as well. If you go back to 2021, and that's just pretty recent history. There's been 218 acquisitions or MOEs in our customer base. We were the acquirer of the MOE, and 200 of them. So we have customers that are strategic thinking long term. You don't buy a new digital banking system, go through a conversion and pay a premium for it. If you don't have long-term plans around building a great bank or a credit union. And that's the law of the traction that occurs is why when consolidation occurs, we're on the right side of the trade. I think there's -- it's almost inevitable that you're going to continue to see consolidation occur. It may take some time for people to sort out the public markets versus the private markets and the regulators and everything else. But in '24 -- Travis is in here, he knows more than I do, but I think you're going to see M&A pick up and you're going to see the $1 billion banks, by $500 million banks, the $5 billion banks, by $1 billion banks, the $20 billion banks by $5 billion and $10 billion banks and so on and so on. And that's where we are. And you're going to see us grow. When we went public in 2014, we had 1 bank above $10 billion in assets. Now we have more than 50 above $10 billion . Those weren't all signed net new. Some of those were signed at $5 billion and they grew to that. So that is a tailwind for us. We will continue to add users when they acquire these. We tend to add more users in the space. And so I really like our positioning in this. And when it picks up, I think we're going to be on the right side of the trade and the data would suggest that.

It's an interesting point just to wrap up, right, is that if you have a management team that's wanting to go out and make the investment for implementing the best of breed and what Q2 can deliver to its customers, like those aren't typically managements that are looking to sell, right? Like they're looking to grow the business and find opportunities that.

Well, that's all the time we have for Q2 today. Matt, David, Kirk and Jonathan, thank you very much for joining us. I really appreciate your comments.

Thanks.

Appreciate your time. Thank you.