Q2 (US:QTWO)2024-05-02 02:30Financial Data and Key Metrics Changes - The company generated total non-GAAP revenue of $165.5 million in Q1 2024, exceeding the high-end of guidance and representing an 8% year-over-year increase [3][123] - Adjusted EBITDA reached a record $25.2 million, up from $16.5 million in the prior year period, indicating strong profitability improvement [30][121] - Free cash flow for the first quarter was positive at $6 million, marking a significant improvement from historical patterns of negative cash flow [14][121] Business Line Data and Key Metrics Changes - Subscription-based revenues grew 13% year-over-year, driven by new customer go-lives and strong expansion sales [123] - Total annualized recurring revenue (ARR) increased to $761 million, up 13% year-over-year, with subscription ARR growing to $615.1 million, an 18% increase [126] - The backlog reached approximately $1.9 billion, a 25% year-over-year increase, the largest dollar increase in company history [127] Market Data and Key Metrics Changes - The company signed four Tier 1 digital banking deals in the quarter, including two net new and two significant expansions, highlighting strong demand across various asset tiers [12][16] - The company has approximately 1,400 total customers, with significant expansion potential within its Tier 1 customer base [10] Company Strategy and Development Direction - The company aims to deepen existing customer relationships through its single-platform value proposition, which facilitates vendor consolidation and operational efficiency [9][132] - The focus on digital transformation and enhancing user experience is critical, with ongoing investments in AI and partnerships with FinTech companies to drive innovation [48][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment and pipeline strength, anticipating continued expansion dynamics to play a key role in bookings performance [5][16] - The company expects to achieve its three-year financial targets shared in February, supported by strong growth in subscription ARR and revenue [17][31] Other Important Information - The company anticipates second quarter non-GAAP revenue in the range of $169 million to $172 million, with full-year revenue growth projected at 10% to 11% [31] - The company is hosting its annual conference, Q2 Connect, which is expected to impact sales and marketing expenses by approximately $1.5 million [13] Q&A Session Summary Question: What is driving the Tier 2 resurgence? - Management noted that Tier 2 and Tier 3 financial institutions are increasingly recognizing the competitive advantages of using the company's technology, leading to a resurgence in demand [79][81] Question: Can you provide an update on the visibility of getting booked ARR live? - Management indicated that the percentage of booked ARR not live has decreased from 18% to 15%, providing better visibility for future revenue recognition [20][22] Question: How does the company view the expansion opportunities within its existing customer base? - Management highlighted that many Tier 1 customers are only utilizing one component of the platform, presenting significant cross-sell opportunities [59][61] Question: What is the company's strategy regarding AI and Innovation Studio? - The company is focusing on enhancing user experience and operational efficiency through AI, with a strong emphasis on partnerships to deliver innovative solutions [48][70] Question: How does the company plan to manage headcount in relation to growth opportunities? - Management acknowledged the need to add resources to capture growth opportunities while also exploring efficiencies through partner utilization [56][58]