Thank you all for joining. I'm Andrew Schmidt. I'm Citi's fintech research team with a focus on software. Joining me is Ashwin Shirvaikar, who leads our global fintech team. It's our pleasure to host today's discussion on bank technology with Q2, and we have a great lineup of folks here who can speak to all things bank tech. With us from Q2, we have Kirk Coleman, President, David Mehok, CFO, Adam Blue, CTO, and Josh Yankovich, head of IR. Thanks again, guys, for joining us. Really appreciate it. Great to be here. Looking forward to a good conversation. Just a quick, logistical point. If anyone has any questions, feel free to email Ashwin or me, or send us a mention on Bloomberg. With that, we're excited for a good discussion, and, what better way to kick off Labor Day than with a discussion on bank technology? As a level set, I think let's start—if we can start with the, just the overall kind of addressable market opportunity. Is there a framework to describe the overall end market for banking group credit union technology? And how do different types and sizes of FIs approach technology solutions? Maybe we'll start there at the high level and then just dig into where Q2 is positioned after that. But thanks again, guys. Yeah, I'll take the first part, and David, you can clean it up. How about that? Let's do that. So when we went public back in 2014, the addressable market for our digital banking services was about $3.5 billion. That has grown today to about $9 billion, and we feel like that's continuing to grow as financial institutions of all sizes continue to double down on their investments in digital banking. Along the way, through our own internal innovation efforts and acquisitions we've done, both in the fraud, lending and Relationship Pricing arenas, we've expanded our TAM to about $16 billion. And again, we feel like that's going to be growing as we look into the future for a variety of reasons. One is that the solutions that we're putting in the market, the capabilities, are right at the core of what banks are trying to do in terms of winning more customers, serving them well digitally, and also driving their efficiency initiatives forward. Yeah, I think what I'd add to that, Andrew, is, you know, some of what Kirk said there is sort of the underpinnings of the what I believe is a pretty compelling financial model. The customer base consists of about 1,400 customers across all of our businesses, a little less than 450 customers in digital banking alone. One of the most important stats for us, the customer is at the center of everything we do, and our average customer tenure is eight years. So obviously once we have a customer, we have great opportunity to expand with that customer over time, and it's based upon some of the products that Kirk said we've developed involved and some that we've acquired over the years. The average customer that we have after about a four-year period will grow its revenue base about 54%. So we have significant expansion opportunity once we do acquire a customer. And it gives us a lot of visibility into what that subscription revenue stream is going to look like going forward. And just very quickly breaking down those revenue streams that we have, subscription is the lifeblood of the business, 75%, highest margin, most strategic component of our business. We have a transactional business that is approximately 11% of the business, and most of that is bill pay. And then we have a services and other business, and that's the remaining mix of the business of roughly 14%. Transactional and services is the areas that have been pressured recently based upon secular and market dynamics. And then the subscription business, which again is by far the most important, is where we've seen a lot of strength, and that's been indicative in terms of the results that we've shown, as well as some of the leading indicators like ARR and the growth trajectory in subscription within ARR. So I hope that's helpful, giving you a little bit of background. Yeah, super helpful. Thank you, David. Thank you, Kirk. And then maybe just, you know, just briefly digging that a little bit into that piece a little bit in terms of just market segmentation. Is there, you know, it, it, as you know, you know, different sizes FIs have different needs. So how do you kind of segment the market in terms of where your solutions are targeted, whether it's a, you know, retail versus commercial, whether it's, you know, by asset size? And maybe that's a good segue into to talking about, you know, how your products and solutions fit in and what your products and solutions address. Yeah. Andrew, thanks for the question. So, you know, we do business with institutions of all shapes and sizes, down to the multi-hundred-billion-dollar or, you know, multi-hundred-million-dollar, banks, all the way up to the largest financial institutions in the world. So our product suites allow us to address multiple problems or opportunities that those institutions are trying to address. But mostly, you know, our best customers, no matter their size, are the ones that want to use technology as a weapon, not as a shield. They see it as a necessity for driving great customer experiences and for also running great institutions. Whether that's our digital banking solutions, which runs the gamut from basic consumer functionality all the way up to very complex commercial and corporate functionality, with everything in between, with SMB in particular being a very important segment within that. Also, you know, on the other side of the balance sheet, you know, our PrecisionLender and Cloud Lending solutions really addressing a lot of the loan origination, pricing, and servicing aspects, both for banks and alternative finance companies. So it gives us a very wide aperture in the market in terms of the types of customers that we're doing business with. We think that that's favorable for a lot of different reasons. One is that, in a kind of ironic way, the events that happened in March with some of the crisis of the deposits crisis that some of the banks experienced actually gave us some tailwinds because a lot of our products very directly address deposit gathering and maintaining great relationships with customers of all sizes. We're a single platform when it comes to our digital banking business. That addresses, again, all those needs that both an individual and a business owner or a large company might need. And those are, you know, as functionality that we built over 19 years, takes a lot of at-bats, you might say, to build up all the innovation that's required to serve the most complex of those customers and the most complex needs. So it's a really wonderfully diverse ecosystem of both financial institutions, credit unions, banks of all sizes, and also fintechs and brands that we're doing business with. Got it. Super helpful. And then, David, I don't know if you want to jump in. Yeah. Yeah, just one thing, one thing I wanted to add is, probably not surprising, as the CFO, I, I love data, I love analytics. And, and one data point that is pretty, pretty telling, and it's, it's around one of the comments that Kirk made, which is our customers are typically going to be using technology and our technology as a weapon versus a shield. One of the best indicators that we've seen of that in terms of our customer success in the Marketplace is we began tracking the M&A activity within our customer base 2.5 years ago. So over the last 2.5 years, there's been 231 acquisitions that have occurred within our customer base. And of those acquisitions, mergers and acquisitions, our customers have been on the acquiring side, or it's been an MOE, 213 times. So 213 out of 231, our customers have been on the acquiring side. So very much indicative of our customers using our technology as that weapon versus a shield. And as you think, you know, going forward, it, it-- you believe there to be more consolidation coming, which we truly do, as, as you get into next year and the year after, we feel that's going to be hugely advantageous for us. Got it. Thank you both for that. I think some of the comments were a good segue into the next kind of set of questions, which is sort of what you're seeing in the industry now and demand trends. Maybe, you know, if you could just comment, you know, on the state of industry right now in regard to community banks and credit unions. How are they thinking about navigating the macro environment, and how might the risk profile of customers differ from that of an SVB, just on average? No, we've. The environment's been really good for us. We've been talking about on our earnings call now for a, a few quarters about the strengths of, of our, of our bookings, and we think that sets us up for a good second half here in 2023. That's going to carry us well into 2024 and 2025. You know, some of that's just it takes once you, once you sell something, you know, some of these solutions, takes a little while to actually implement and for it to start generating revenue. And that's not for any other reason, right? It's just there's, there's a lot to do sometimes in these implementations. But we like the bookings environment. The demand environment is good in terms of the problems and opportunities that financial institutions are trying to address, are very much in our wheelhouse to be able to help them with. What I've seen, Andrew, is that, particularly, you know, the more forward-looking institutions are kind of looking through whatever economic cycle we're in. It's hard to quite land exactly how long this is going to last, what shape it will take. But they're kind of looking through that. They're already thinking about: How do I compete on the other side of this? Where do I grow organically? What inorganic growth opportunities is going to be? In all of those circumstances, they need a really good, solid deposit base. To be able to have a good, solid deposit base, they have to have great digital technology. That's how all of us and business owners do all of our banking these days, is through the digital channel. And they want to be positioned, you know, to take advantage of whether growth opportunities exist for their financial institution, for their chosen strategy. And so, you know, they're continuing to invest through this cycle. We think the percentage of tech spend is actually increasing from a digital perspective and compared to all other tech categories. And again, that's a pretty favorable environment, and it also makes us both strategically important and mission-critical for our customers. Got it. Super helpful. Maybe you could just drill down on the demand trends you're seeing, just what you're seeing currently. I know you've talked about, you know, pipeline bookings, or I should say, pipeline bookings trending up. I guess you could just put a finer point on the demand you're seeing, and how do those demand trends compare with what you've seen historically? Yeah, a couple of things that are maybe noteworthy, worth highlighting. One is, particularly in the small and medium-sized business and also commercial space, very strong demand for digital solutions in those spaces. You know, these are typically the kind of house accounts, the big operating accounts. These are some of the most important relationships in any financial institution, no matter how large or small you are. And so our Catalyst suite of products very directly addresses the needs of those types of end users. And so we're seeing very strong demand from a commercial functionality perspective, commercial and SMB. Similarly, you know, our Innovation Studio and the offerings we're able to provide to our customers through, you know, over, now over 120 fintech partnerships that are available through our Marketplace and Partner Accelerator within Innovation Studio, has been a very key aspect of our wins. It's cited in almost every single win. I think for the last three quarters. And part of that is because of the kinds of optionality that our customers believe that they're going to have going forward. It—they'll be able to tailor the solutions they put into the market to their particular strategy. You know, financial institutions, geographically and from a business strategy perspective, they, they're not just one thing. They're not homogeneous. They're all kinds of different business strategies. And so within that, they want to make sure they have the kinds of flexibility that they need to be able to address very specific customer needs, and Innovation Studio plays a very big role in that. It also puts us at the center of that ecosystem in terms of being able to be a partner of choice for, again, many, many, many Fintechs, and providing easy integration into our customer environments. And that puts new functionality on a consistent basis out into their end users, and that's an incredibly important part of their relationship. So those things are in particular really influencing bookings and pipeline. We're seeing strong demand there. The last one I'll mention is, as institutions are managing, you know, all these relationships they have, our Relationship Pricing offerings, which is part of our PrecisionLender product family, we now refer to it as Relationship Pricing. This is where they're pricing the entire relationship. So you can imagine a commercial relationship, it's got loans and deposits and fee services and all kinds of aspects, many different levers for a financial institution to pull in terms of making sure that they can retain that customer, but also get paid fairly for the services that they're providing. And we're seeing some strong demand there as well. Got it. Super helpful. Yeah, consistent with the trends that we're seeing as well, so that that lines up very neatly. Maybe if we talk about just sales cycles and buying behavior. Obviously, there's been some fits and starts the last couple of years, COVID-related, most of it. But, you know, is it possible to talk about how clients are addressing the sales cycle? Is there hesitancy? Is it normal? Is there sense of urgency? And then how do you think about the sustainability of that behavior? Yeah, I'll comment, and I'll let David, David add on. You know, we haven't seen sales cycles lengthening. We've continued to see customers act with urgency. You know, these are, this is a, you know, major, you know, purchasing decisions- Sure. for customers, and so they're, of course, going through all the diligence and deliberation that you would expect, but we haven't seen those cycles lengthening. If anything, I would say the buyers are getting pretty sophisticated in terms of what they want. So their questions are really good, right? How they do their assessments, I think have become really mature, which we believe is good for us, that we think we play good in that environment. By the same token, again, just to kind of double down on the fact that, you know, high-performing institutions are gonna. They're looking all the way through this cycle. Mm-hmm. They're prepared for growth. They're thinking about- Sure. -What's their internal talent look like? You know, what solutions do they want to put in their hands so they can go win customers and retain business? And so those are all things that are driving some of the demand environment, which I think those conditions remain in place for some time. Got it. No, very clear. The only I'd add is, a lot of this culminates in sort of what we're seeing in terms of deal size, and we've talked about this in the last few calls, but the average ASP that we've seen in the first half of the year is up about 30% year-over-year from the first half of 2022. And if you look at the ASPs that we have exiting last year, those are up almost 80% from where they were five years prior. So it's a combination of the relative breadth of product offerings that we have, as well as moving upmarket in some instances, and having larger opportunities with larger clients. So those things combine to really drive a lot more revenue for each one of those opportunities. Now, to Kurt's point, if you take it discretely and say, okay, you've got a certain, you know, certain TCV opportunity relative to a TCV opportunity a few years ago, cycle hasn't really changed, but because of the larger deals that we're doing, the larger the deal, the longer the cycle time will be, obviously. That's something that we certainly have seen, but we know that going into a deal with a larger customer or a bigger opportunity. Got it. Okay, super helpful. And then, yeah, just sticking on demand for a second. You know, as you all well know, there tends to be a lot of inertia with incumbent solutions. And, you know, it's interesting because if you think about it, you know, with 5-7-year kind of terms on these digital banking deals for, you know, incumbents or across the board, you know, there's only been a few refresh cycles. So, you know, that might imply that, you know, maybe as we get further along, like, banks and credit unions might be taking a closer look and kind of reevaluating versus incumbent solutions, maybe alternatives that might be best in breed or point solutions. I guess the key question is, do you feel like that, you know, incumbent inertia is starting to break down, which might implore, imply more opportunities each year, or is it more kind of status quo in the current environment? Yeah, very, very simply stated, you know, any executive team that had doubts about the value of digital pre-COVID, that's, that is a settled matter now in terms of its importance. And then you fast-forward into some of the deposits, you know, I don't know, I'll call it a crisis, but some of the, you know, what we experienced in the spring. And what happened is that, you know, when you have a customer that's on an incumbent solution that's maybe a little bit long in the tooth, and they, for their own risk management, need to go look at other institutions, maybe a larger institution. They get to experience firsthand what some of that technology looks like. You know, it can sometimes be a stark contrast, and that's where we start to see, you know, a lot of CEOs sort of turning around and sort of saying, "I've gotta, I've gotta do something about my digital capabilities, right? Because I cannot fall behind." And that gap feels like it's getting wider. And because it takes a little bit of time for them to make the decision and get it implemented, like, they really need to get going on that. And so we think that that is certainly driving some of the demand. There's still... You know, institutions have different business priorities, right? And so sometimes we'll hear, yeah, you know, not yet, as an answer, which, you know, look, we'll be patient. We'd be glad to have them as customers in the future as they move on. But right now, it feels like there's a kind of a widening gap. I'll just mention also, and this might be an interesting place to bring Adam in for a comment, which is that a key part of our solutions, and particularly digital banking solution, is, you know, we have more than 1,000 integrations into these bank and credit union legacy environments. That's a really key thing for us because no matter what core they're running, what all the different ancillaries that they might be using, you know, we've built integrations into those. We have a lot of experience of doing the conversions and implementations, which really helps with change management and risk reduction and implementation and things like that. And it's something we probably don't talk as much about, but it's an absolutely key part of our solution and our strategy. Got it. And that was good. I'm glad you brought Adam in because you can't ignore Adam, because that's one of the crux of our conversations here. We had Adam here in March of... actually March of last year, talking about Tech Stack. We'll get to - we'll get back to Adam in a few minutes. But maybe before we get to the technology side, we'll just kind of round out the sort of, you know, demand and competitive environment. I'll turn it over to Ashwin for just a few questions on the competitive environment and what you're seeing. Thanks, Ashwin. Sure. Yeah, absolutely. No, this is already quite quite useful. But in terms of competition, if you can maybe walk through the competitive environment across your product set, you know, different sizes, types of FIs, or if you want to split it by consumer, commercial, fintech. You know, who do you typically see in the Marketplace? And as you move upmarket, as ASPs start going up and so on, has the competitive set of who you typically see, has that changed? Yeah. Thanks, Ashwin. It's a great question. Definitely changes as you go upmarket. So as you get into larger institutions, I would say around the $2.5 billion-$5 billion in assets mark, that's where you really start to see, you know, the competitor landscape change. And a big reason for that is because that's kind of the size at which institutions are looking very carefully at the commercial capabilities that they have. Because if you're a $2.5 billion dollar bank, you're thinking about being a $5 billion. If you're a $5 billion, you're thinking about being a $10 billion, and so on. And they know that to be able to... As they get bigger balance sheets and their customers, you know, that they can bank, are a little bit more complicated and sophisticated, their needs grow, and so the competitive landscape changes as you get larger. So in the consumer space, there tends to be maybe a broader set of players as a result. But then as you get into some of the larger, more complex institutions, again, not that super big, right? But kind of in that sort of right below $5 billion, maybe $1 billion-$5 billion mark is kind of where you start to see their needs start to change. And then, of course, you have the kind of the incumbents that are in many of the larger institutions. As you get up to the very, very largest institutions, the top five banks, the top 10 banks, you know, it's yet again a very different kind of buying environment. So in our digital banking space, right, we feel really great about our ability to be able to address both the consumer, basic consumer, everyday bread-and-butter consumer banking that a small institution might need, all the way up to the very complex commercial functionality that very large institutions, you know, over $200 billion in assets, would need to be able to bank their customers. We've actually been recognized recently in the industry by Aite, most recently, as having the best commercial banking solution in that regard. So that's really gratifying. What we really care most about, though, is that our customers also win awards for how they're doing their banking, and that's been a positive trend for us as well. But because the competitor landscape changes throughout that, but we're there, and we can compete in all those different segments and in all those different ways, it allows us to kind of meet the customer where they are, depending on where their journey is. Particularly a larger customer, you know, usually you're not running dual platforms until you're over, you know, $20 or $25, maybe $30 billion in assets. And they might have very good reasons, internal reasons, for why they might want to buy one side or the other, consumer or commercial, and do that conversion first. And we're very happy to work with them on a kind of a split platform basis, because we believe in the long run, right, they'll be able to consolidate all their business onto our single platform, because we can do that just fine for them. It makes for an easier operating environment for them, and we think ultimately more efficient. When you look at some of our other product lines, our Centrix product line, which really focuses on different kinds of fraud solutions in the market, that spans all ranges of institutions, up to some very, very large institutions, right down through the long tail of smaller banks and credit unions. And that's... You know, look, fraud's on everyone's mind right now. There's a lot of fraud out there, so those are solutions that are in high demand. And then lastly, I'll just mention, our PrecisionLender products, our Relationship Pricing products. Historically, that has skewed. Well, there's actually a broad range, but you might sort of say that, like, it, it's definitely, we, we have some of the largest institutions in the world pricing, you know, their entire, one of the largest ones, pricing their entire middle market book globally using our Relationship Pricing. But we also see that, you know, again, that demand in the smaller institutions, once they start thinking more seriously about their commercial business and the diversity that that brings to their balance sheet, and knowing that they need to price that well. So we feel like that, although that's a very sophisticated buyer that's, that's buying something like PrecisionLender, we feel like that's very much in the sweet spot for what institutions are focused on right now. Last thing I'll just mention is fintech space is still going through some transformation, we might say. It'd be one way of putting it. And so that whole ecosystem is a fairly fluid and complex place for a bank CEO or a credit union CEO to be able to figure out on their own. We think through our Innovation Studio, and the Marketplace and Partner Accelerator business that we have within Innovation Studio really helps them address their needs and kind of decipher what might they be able to do and how to do it, and simplifies the equation for them a little bit. That, that's a great description of your positioning across, across the spectrum there. When I think of how, you know, investors, you know, look at the space from a competitive standpoint, normally think of Jack Henry as small to mid, a lot of community banks and so on. Think of Fiserv as kind of a little bit of small, but mostly mid, heading to, heading to large, and then FIS is mid to large and with a focus on large. But, you know, when you sort of think of, say, Jack Henry launching a Banno for Business, for example, right? That kind of stuff, would you consider that a competitive threat, in terms of FIS, you know, and all the stuff that they've been going through? We get questions about, you know, displacement, right? Are those opportunities that come from a competitive standpoint for you? And you know, I'm assuming you're probably not going to shy away from speaking of competitors. Yeah. So, astute investors will discern some of the, the, what might be considered distractions within some of the large incumbents and, you know, Fiserv and FIS. And look, there's a lot of things they do really wonderfully well. And so I don't want to, I'm not disparaging them at all. It's just the fact of the matter is, you know, whether or not they're fully focused on the areas that we address most directly. You know, I think that's... People would have to make their own assessment of whether or not they believe that. When we get to Jack Henry, you know, Jack, you mentioned it, Jack Henry's, you know, market, you know, segment tends to be, you know, kind of more in that 5 billion and below, although certainly they have some business that's larger than that. When we talk about Banno for Business, as an example, certainly we would see them as a competitor and see them in the market. One thing I think is worth noting, whether that's Jack Henry or any of the other competitors that have been more traditionally smaller institution, consumer-focused, is that we should not underestimate the amount of time that it takes to build a full suite of commercial functionality into a digital banking platform. And that's not just a matter of understanding and knowing what the features and functions are. You have to do it in real life. You have to do it hundreds of times over, right? So that you know all the nuances, you know all the different kinds of requirements, you've integrated all the different kinds of systems, right? And you are able to address kind of this really broad set of highly variable needs that commercial customers might need. So a title company needs, you know, solutions that look very different than a large commercial manufacturer and so on. And so those kinds of capabilities just have to be built up over a very long period of time. And what we know about banks is that as they get larger, there's no such thing as, like, a $10 billion consumer-only bank. There is no such thing as a $10 billion, you know, even just only SMB. There's a few models that kind of look like that, maybe, but, you know... But at that size balance sheet, you really have to be, winning and serving, you know, true commercial customers. And that's who they're lending to, that's who they want to lend to. Their lending limits go up, and they can win some really fantastic business, but you can't just lend money anymore, right? You've got to be able to win all the deposits. And to win deposits, you have to have a great digital banking platform. And so that's kind of how we see it, sort of see that competitive, landscape in terms of, like, who's really focused on this area? How much time in the market do they have to be able to build up that functionality that they need? And then, you know, if you're sitting in the C-suite of a prospect, you're asking yourself some very serious questions about the risk related to kind of testing out someone who's less proven... with the most important and sophisticated customers that your bank might have. Understood. Understood. I've got a couple of questions from, from investors that have come in. I'm going to combine that with the question that we had on win rates. You guys have mentioned elevated win rates. I wanted to get into the drivers, but also there are others, including Jack Henry, that have mentioned pricing has become more competitive. And when we've spoken with consultants, they've also said, you know, there's more price transparency in the RFP process. So, you know, I just kind of want to talk broadly about win rates. What's important? How important is pricing? Are you seeing some of the same pricing type trends, openness and so on? Yeah. Dave, you want to take the- Yeah, sure. some of the numbers, and I'll fill in with- Yeah, Ashwin, the win rates that we've seen recently are sort of historically high, or at least in recent history. For the first half of the year, we were over 50% win rates. Q1 was even stronger than that. We're seeing that across the product set. And a lot of it is, again, based upon the comprehensive nature of what we're able to provide relative to others in the competitive landscape that are either nascent in regards to that comprehensive set. Or as Kirk said, you know, when you start going upmarket, the competitive set tends to narrow. And we feel like we have a significant opportunity as we continue to broaden the opportunities with these prospects. As we're seeing more and more products being added to these potential RFPs, we feel like our win rates go up, and we see that in the data behind it. Understood. Understood. In terms of this, you know, with regards to those elevated win rates, and you've obviously talked about single platform, right? But serving both retail and commercial clients. The question's more about complexity, maybe going back to the point that you were making, Kirk. You know, how much incremental complexity is there? You know, what are the level of difference serving banks versus credit unions and higher? If you could, can I give us some of the underlying color for that? Sure. I mean, if we just start- This might be an opportunity for Adam to step in too and talk about the complexity also. Yeah. Yeah. So let me put, set up the business context, and Adam will round it out with kind of from a technological perspective. So from a business context, Ashwin, what I would say about this, we just sort of think about, you know, how banking works. And, you know, you start down the smallest institutions, right? You tend to have a fairly homogenous set of business functions that you're trying to address on behalf of your users, your customers, whether that's credit union members or bank customers. And right, that's consumer, it's maybe, you know, the kind of very basic business banking. That tends to be... It's really important. There can be some high volume in there, but it's not that complex at the end of the day. It might be complex to people outside the industry, but inside the industry, it's not that complex. As you go up market, and you start thinking about larger institutions or even small institutions who have a very specific commercial focus. We have quite a few customers that are like that. They're what we might dub smaller institutions, but really their business is built around commercial banking. You can't bank just one sort of commercial customer, right? You have to have a portfolio of customers. You want to spread your risk out across different types of customers, different types of industries, right? You want to have portfolio diversity as you're managing risk inside your bank. And the only way to do that is to be able to serve their needs directly. Again, you can't just lend them money, right? You can't just be a great lender. You have to be able to win their deposit relationships as well. And so to be able to do that, you have to have a solution that has the requisite functional density to be able to address their needs. Otherwise, those businesses simply can't bank with you. And so that is the kind of functionality that just takes a long time to build up. Again, it's not... You can intellectually know what those functions are, but it's quite different to put them in practice and have, you know, lots of implementations. And so that's how I would kind of highlight that. Maybe Adam would want to talk a little bit about what that looks like from a technological perspective. Yeah, for sure. So, one of the fascinating things about a bank is that it's built up of a series of relationships that accumulate over time, right? And so if you want to really understand the tenor and the nature of the way in which a bank relates to its community, go look at the way they operate in the small business, commercial, and treasury areas. And so the intersection of the customers they've acquired and the work that they do and the way they go to market, how they specialize, how they think about lending, where their particular proclivity is for entering the market, all of that shows up in commercial in a way that it really doesn't show up in retail. And so what this means is that there are more integrations, right? The long tail of integrations at a commercial bank is substantially both more complex and more operationally sensitive than the set of integrations around retail. It also means that you're going to need features along the lines of, like, real-time fraud stop, which we've had natively with our own intellectual property since 2010, 2011. You have a new kind of scale around the end-user relationship. A complex retail customer has 5, 6, 7 accounts, maybe more, if they're a bank employee. An entry-level medium-sized corporate customer is going to be in the 100 account range, and some of them will go as high as 1,500-2,500 accounts. The way that you have to think about both the UI and the user experience for someone with 1,500 accounts who wants to log in and see data within a couple of minutes and then start making wires and ACH transactions, it's radically different than it is on the retail side. And so when you stack up those pieces and then you think about a retail mistake is in the $200-$1,000 range, a commercial mistake is frequently in the $100,000 to $1 million-$10 million range. So the level of operational scrutiny and the level of mission criticality of that set of features is just completely different. So on every axis that you would think about the challenge of building great experiences with software in a complex integration environment, just stretch every axis of that challenge, probably by, you know, a factor of two or three, and you have a problem that's an order of magnitude more complex than the retail problem. Got it. Thank you for that, Adam. And I think... Yeah, thanks, Ashwin. So I think, you know, Adam, that's a, that's a good segue in terms of how you, how Q2 internally deals with complexity. So, you know, a question we often get is whether, you know, Q2's technology architecture is single. We talked about this last year, but it's always good to rehash. Sure. Whether Q2's technology architecture is single or multi-tenant, and maybe go through that, and then in your view, which is more competitively advantageous and why? Yeah. I think the way we think about it is banks and credit unions want the intersection of flexibility to do what they need to do in their market. Security, for reasons I think that are obvious, and I'm not going to go through, and then stability, right? And so when I have conversations with customers, we talk about tenancy models. We talk about our specific, what we call Isolated Multi-Tenancy model, which we've moved more and more technology to and is resonating with customers in a powerful way. We talk about how 98.5% of our customers are on the current version of the platform, and then we have, about 80% of customers on the most recent version of the UI, with about 15% of those on an early adopter version. Those are the things that really matter to banks, right? One of the things that's really important, regardless of our specific tenancy model and how we deploy different components in the application, though, is that we have no branched code for customers. We had one component for one very large customer that we did some code development on, for reasons that I think we all understand. We've moved away from that with them, and we're in talks to move them back to mainline product, depending on where that relationship ends up going. But at the end of the day, the set of components that delivers the digital banking experience is the same code for every customer. The way in by which we choose to deploy those varies. One of the things that can give us that's really powerful is a lot of flexibility in the way we operate customers and a lot of flexibility in the way we go to market with them, right? And I think that there are participants in the space that would say, "Hey, we've got it all figured out, and we deliver the solution in the same way for all of our customers." And that's probably true. I don't think that they would say anything that was untrue about that. But what it suggests to me is they may not be entering or acquiring customers with enough sophistication and a depth of value proposition to their customer base, where they actually have to do much that's very interesting or very difficult. So our approach has been to figure out how to take the technology and make it scale by delivering the same platform product for every customer, and then use Innovation Studio to allow tailoring those experiences in a way that is completely perpendicular to forward product upgrades. That's how we're at 98.5% on current platform and 80% on current UI stack. In the background, there's a team of some of our most senior engineers that has been working through the integration stacks and the baseline infrastructure of the product set to say, "What's the right way to take this into public cloud? What's the right way to do this with Isolated Multi-Tenancy that preserves data separation but gives us all the value of multi-tenancy?" And so I would say we're about 25%-30% of the way through that now, as we're another year on. You're starting to see that accelerate, and it pays off in ways that are predominantly internal for us. But what it means is that when I go talk to a customer in the sales cycle, when I go talk to a customer that's in deployment, we can talk to them about keeping their data absolutely safe and isolated, but giving them the ability to take incremental releases, incremental functionality, or extend the product without breaking the fundamental single platform nature of the product itself. And I think that's what customers really respond to. Got it. That, that makes a lot of sense. So moving to more configuration, obviously, there's... You know, it sounds like, maybe correct me if I'm wrong, going on a go-forward basis, there's not customization of code. Is that, is that correct in terms of how to- Yeah. Yep. By way of example, we used to deliver on ACH functionality, which is, you know, crucially important. Mm-hmm. And we had an ACH component, and we would build it. Yep. and then we would advance that component as we got other customers. The customers each had their own instance of that component. So, starting last summer, this was done probably about nine months ago, we put every single customer on essentially a single instance, but deployed in a container stack of one component- Mm-hmm. one set of code. So everybody was running the same code before, just different instances, depending on what their specific functionality was. So we had flattened and collapsed all that. So as you might imagine, the operations, the support, the product management, the delivery, and the engineering of ACH functionality are substantially more streamlined at this time. And so we'll keep stamping out that process for those integration components and some of the core components of the product over the next 24-36 months. I'll just chime in on this, 'cause I think this underlies a really important point, right? Which is that because of what Adam just described as an example, the platform is constantly renewing itself, right? So it's not just one big monolithic thing, right- Yep. With kind of huge upgrade cycles, right? It is, you're constantly renewing it at multiple levels of the tech stack, and that's what keeps the product both fresh and relevant in the market. Yep. Got it. Super helpful. Then maybe you could talk about just add in the process to deploy new code, the velocity at which you can sort of deploy. You mentioned, I think, 90.5% on the current setup, but maybe talk about code deployment, velocity, and then just to skip ahead and to ask it as kind of a, you know, let's call it a two-part question, both for you and David, you know, how holistically kind of the changes that you're making and deployment to the cloud affect, you know, margin scalability over time? So kind of maybe a functional question, then a high-level kind of financial model question. Yeah. I'll leave considerations and margin for David, but I'll talk to you about how we think about the other piece. Sure, makes sense. In its most conceptual form, we have the pieces of software that touch the end user directly, right? UI, mobile, what have you. We have the platform itself, and then we have the integration layer. So today, the integration layer has substantially moved and continues to move towards Isolated Multi-Tenancy, which means we deploy one set of wire integrations, one set of ACH integrations, core integrations, we did a turn-up recently with a customer in the same model. Those evolve with very little, if any, customer engagement outside of a notice saying, "Hey, we're gonna drop a new version of whatever. You'll switch to it." The middle tier of the platform works much the same way. Features first must exist in the middle tier of the platform, the capabilities for them. This is where business logic, entitlements, basic workflows live. That set of code also deploys on an automated scheduled basis to customers now, both in private data center and public data center, because we've partnered with HashiCorp to drive a set of tooling that is cloud agnostic, which is a really important part of our strategy to avoid a specific vendor lock-in. At the place where the software touches the actual end user, as you might expect, banks don't want to be surprised about what it looks like or how it works. And so we have a model we call Seamless Upgrade, where for those customers, they have the existing version of the software in production. Then we deploy the new version of software in what we call a forward environment in parallel, so they can test both of them, and then we simply switch over to the other environment when they're ready. So for customers that want to go to a new version of the UI, pick up incremental features, deploy things in Innovation Studio, there is a high-velocity CICD pipeline that we use. That's continuous integration, continuous delivery. And the customer makes the choice of when they drive that change to the end user. But for us, those are automated activities because they're built on this pipeline structure. And so that's how we're at 80% on current version of the product at the UI layer, with 15% on an early adopter version, and then about 98.5% of customers are current on everything from the UI surface and API down. And so that's been about 4 years of work, realistically, to get to, as we transition from some of the other models. But the nice thing about that is all of that work was done with modern container-based technology. So we deploy containers into private data center, we deploy containers into public data center, we deploy them on an active-active basis. And so we can now dial in, do I want that in AWS? Do I want it in, you know, our Dallas data center? Do I want it in another data center? And then most of the perimeter services, which are predominantly concerned with security and routing and, and kind of internet presence, those moved to Cloudflare over a year ago, and that stuff is 100% cloud-based. And so, just the transition over the last 24 months is pretty substantial. As you can imagine, what this means is that engineers have gone from fixing problems in environments to fixing problems in a baseline container set or container environment. Yep. It means that the product delivery has changed in a subtle way, but a way that's pretty powerful, and that's where we plan to get more velocity, more flexibility, and more stability by leaning into these alternate models of deployment. But just to be clear, this is not... We took a bunch of code that we ran in a private data center, and then we just picked it up and threw it into the cloud and said, "We're in the cloud now." That was the exact opposite of how we wanted to approach this problem. So our movement towards evolved infrastructure models has been accompanied by primary work we've done, some of it actually even under patent, in coupling with the way we can go to cloud and public cloud in an effective way. So we really rethought a lot of how we handled compute challenges and scale challenges and, tailoring challenges with the customer base. Then the payoff down the road is smarter people can work more effectively on smaller parts of the problem, and that makes them more efficient. Then I'll leave that to David to talk through how that pulls through on the bottom line. It's a lot of work. Thank you. ...Yeah, Andrew, I mean, you, you've seen it in terms of our guidance and our first half results, but, you know, we're driving efficiencies throughout the organization. The efficiencies we're driving, combined with the improved revenue mix, and that mix skewing much more towards subscription, which is higher margin, is why you're seeing the EBITDA doubling, essentially year-over-year, if you take the midpoint of the guidance that we're giving this year. Specifically in what's, you know, Adam's been addressing, I think there's a long game and a short game. And the long game is sort of the cost of compute aspects of this, which we don't see really driving material benefit for 3-4 years. So there's a lot of work being done in the background to make sure we do this right and do this thoughtfully. Eventually, we are gonna see some unit economic benefits. But short term, you know, Adam talked earlier about some of the efficiencies that we're driving internally through all of this. That you're seeing manifest itself in the P&L now, and we're in the early innings in a lot of this. As you know, we're up about 200 basis points from a gross margin standpoint this year. We feel like there's plenty of opportunity to continue to drive that gross margin up over the coming years. And ultimately, what we see is a P&L that's much more... You know, you all compare us to other SaaS players, but much more SaaS-like in terms of the nature of the subscription business that we drive with, within Q2. If I can jump in and go back to Adam, I guess. So as it relates to serving your customers and the questions on AI, you know, if you could kind of talk about how Q2 has been using, of course, broadly AI, but then also talking about large language models and generative AI, in terms of what you're doing today and perhaps what the path forward is. Yeah, absolutely. So, if I broke AI kind of broadly into two models, predictive and generative, we've been doing predictive AI with machine learning since 2008, 2009. Our anti-fraud products are based on relatively sophisticated machine learning models. And what's important about that, as we enter the new era of generative AI, which is also very, very exciting, is that there's an understanding in the business. I think Cathie Wood from ARK made this statement recently, which is she's interested in investing in companies that have domain expertise and deep, already taxonomized data, because that's what will drive the success of AI. AI, as a technology, is extraordinarily data hungry. We have more data over a longer period of time for a richer set of interactions than any of our competitors, and we have been focused on building models and understanding the domain of that data in a way that's different, I think, than a lot of other people have thought about it. So for us, predictive AI and traditional analytic-based AI that's driven by machine learning, we have a great handle on, and we have a lot of tools and products that sit on top of that. generative AI has been exciting, probably in part because it is so different than the other kinds of AI that have been available. So for us, we believe that there is a set of products, some of them that are probably internally facing to Q2, some of them that are banker facing, and some of them that are end user facing, that use different kinds of generative AI to map awareness of where a customer is in a financial journey. Because that's really what a lot of banking and a lot of the banking interaction is about. We believe that we're well positioned to take advantage of those, and we have an entire team that is off working on generating early prototypes and some things that are approaching, you know, productization, particularly internally, that take advantage of the data that we already have and have built up in exciting and interesting ways. Because we now have data from both sides of the balance sheet, from the deposit and transaction side, and from the lending and relationship management side, we think, in particular, for deeper relationships at banks, i.e., commercial relationships, we have a particular advantage in being able to bring generative AI to bear. That space is moving very rapidly, so I wouldn't want to commit to a particular feature or a particular product, but I can tell you that early on, we set aside a set of engineers with very specific, very advanced skills in this area, so they could focus specifically on saying, "Of the infrastructure and data pool that we have today, how do we use generative AI to create experiences that are richer, more effective, and more, I think, precise than many of the experiences customers are getting? Just to add, to round that out, that risk, regulatory, and security requirements and having specific, you know, firsthand knowledge of how to to work with our customers on that is an important part of this journey, because they're gonna have to answer to their internal and external stakeholders on these matters. And we've been doing that with mission-critical strategic, you know, technology for a long time. So we feel like we've kind of won the right to to be able to delve into this new area of products as well. Got it. Got it. If, if I can just go back to the point that you, you had on data, and maybe combine it with the previous point, this relationship with HashiCorp and, you know, multi-cloud and, you know, infrastructure, automation, things like that. Those steps that you've taken over the last 24 months, in, in what way do they sort of position you perhaps better from a data perspective, if I'm, if I'm understanding that, that appropriately? And, you know, one of at least my views has been that just exactly the type of data that you're referring to, which I'll just call it private data, as opposed to all the stuff that ChatGPT can use. If, if you could talk about the advantage of that and maybe pull it all together, ... Yeah, I think data in and of itself has value, but it's, it's potential value, like potential energy, right? In the physics sense. You have to place data into a context in which a person can use data to make an effective decision in a timeframe where it actually makes a difference in their life or their business. That's the important part. One of the things that's fascinating about our business is, we're there when people make financial decisions. We're there when they apply for a loan. We're there when they open a new account. We're there when they make payments. We're there when they start their businesses and pursue additional lending. So we have a footprint, an application surface, where we are part of people's important financial decisions. That piece is really, really critical. The second piece that's important is we understand the data because we use it to drive these workflows, and we understand the data because it arises out of our systems, right? So that data has been cleansed, that data has been classified, that data has been placed into a feature-oriented taxonomy, and that's the kind of data that's very effective for generative AI as well as predictive AI. The last piece is some of the changes we've made around the way that we deliver the infrastructure and deliver some of these components, allows us to capture data in a way that's more efficient and more direct, right? So having one point through which all of the ACH data passes, for instance, makes things like data engineering and data collection more simple. Some of the functionality on the PrecisionLender side, around the way loans are priced and credit is managed at financial institutions, that's extraordinarily valuable data, right? So the key for us then is to say, as we become more mature and more sophisticated in the capturing, tagging, and taxonomy of the data, and as we take our understanding of the financial domain problems that banks and bank customers really face, how do we bring predictive AI to that in a way that enriches that experience and brings people more value by helping them make better decisions, helping them be more comfortable about where they are, or educating them about opportunities that are available? And I think, that's an easy sentence to say, I think. But the work it takes, the raw fingers on keyboards, product management, talking to customers, making mistakes, refining those mistakes, exercise of building great products, that's something we've done for 19 years now. And so our ability to take that discipline, listen to a bank, listen to a bank customer, bring the data into play, deliver an application experience, and refine that experience, that muscle is the same muscle we've had in place. We just have this fascinating, fascinating new tool we can use to try and take that to the next level. I'll tell you when, when you talk about understanding a lot about an end user, and then you think about saying, "Well, how do I put that in a user interface, right?" You can spend a lot of time swirling on that. It turns out, writing a paragraph about a person and where they are in their financial journey is a really effective way to communicate. 12 months ago, I didn't have that option, right? It was charts or graphs or bars or whatever. Today, I can say, "Hey, ChatGPT, private model that is not exposed to the public, that we license and secure in ways that are appropriate, can you tell me everything I need to know about this customer from this set of data in two paragraphs, so that a call center agent can have a meaningful interaction?" Those are things we literally could not do before November of, you know, 2022. And so the shift in the availability of large language model... And look, they've got a way to go. They eat a lot of power, they take up a lot of space, sometimes they hallucinate, but that's every technology in its early phases. How you put the guardrails around that, how you figure out how to leverage that, how you figure out how to cleanse the data, that's what will make the difference between, right, like Mazda's Wankel rotary engine and somebody with a great idea that went nowhere. And so, I think there's a multi-year arc here for making AI really relevant in the financial services space. But if you don't understand customers, if you don't understand retail and commercial, if you don't have deep integrations and well-categorized data, I don't know where you're gonna stand when you reach for what comes next. That's a great place to leave it. Yeah. Yeah. Yeah. No, I was just gonna say, that is a passionate answer if I ever heard one. I only know one way to do it. I'll leave it with you. Yeah. Thanks a lot, Ashwin. And we went way over, guys, but I'm happy we got to that those topics, because that was a super interesting discussion. But thank you all for the time. Appreciate the extra time, and look forward to catch up with you soon. But great discussion. Thank you very much. Thanks, everyone. Thanks, everybody. See you all soon.