Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Bob Gujavarty, VP of Investor Relations, please go ahead.

Welcome to the Q2 Holdings conference call for the second quarter ended June 30, 2017. I’m Bob Gujavarty, Vice President of Investor Relations. And with me today on the call are Matt Flake, our CEO; and Jennifer Harris, our CFO. As a reminder, today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available on our Web site following the call. By now, you should have received a copy of our press release that was distributed yesterday afternoon. If you have not, it is available on the Investor Services section of our Web site. Before beginning, we must caution you that today’s remarks in this discussion, including statements made during the question-and-answer session, contain forward-looking statements. These statements are subject to numerous important factors, risks and uncertainties which could cause actual results to differ from the results implied by these or other forward-looking statements. Also, these statements are based solely on present information and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in the forward-looking statements. For additional information, please refer to our filings with the Securities and Exchange Commission and the risk factors contained therein and other disclosures. We do not undertake any duty to update any forward-looking statements. During this call, we will be referring to both GAAP and non-GAAP financial measures. We believe that non-GAAP measures are representative of how we internally measure the business, and they are reconciled to GAAP in the tables attached to our press release, which is available on Investor Services section of our Web site. The non-revenue financial measures we will discuss today are non-GAAP unless we state the measure as a GAAP number. Any non-GAAP outlook we provide has not been reconciled to the comparable GAAP outlook because, among other things, we cannot reliably estimate our future stock-based compensation expense, which is dependent on our future stock price. Since we expect our future stock-based compensation expense to have a significant impact on our future GAAP financial results, reconciliation is not available on a forward-looking basis without unreasonable effort. Let me now turn the call over to Matt Flake.

Thanks, Bob, and thanks to all of you for joining us on today’s second quarter 2017 earnings call. Today, I'll share some highlights from the second quarter before turning the call over to Jennifer to provide a more detailed look at our financials and provide our guidance for the third quarter and full year 2017. We generated revenue of $47.6 million in the quarter, up 32% year-over-year and 7% sequentially. We also added over 600,000 users in the quarter, bringing us to approximately 9.6 million registered users and representing 25% growth year-over-year. I’m pleased with the improvements in our sales execution during the second quarter in both net new and cross sale. On the net new side, we saw meaningful improvement in bookings from a year ago, signing a mix of tier 2 and 3 bank and credit union clients. Our execution in the credit union space remains solid and I’m pleased with the momentum we’ve been able to maintain over the last several quarters. I’m also increasingly optimistic about the bank market where improved market conditions are starting to serve as a tailwind for banks decision making. We saw a multiple bank clients in the second quarter and I feel good about our pipeline in this space. We cross-sold a broad mix of products to existing customers in the second quarter. Coming off a record setting CONNECT conference, those deals included multiple corporate cross sales which further demonstrates the power of our corporate product suite as a cross-sale tool. On the operations side, we continue to execute at a high level working in partnership with our customers to deliver the products and services they need. One of those clients is Trustmark National Bank, a $13 billion financial institution which just went live on our corporate banking product. Trustmark provides…

Thanks, Matt. We’re pleased to have delivered second quarter results which exceeded the high end of our guidance. I will briefly review our results for the second quarter before finishing with updated guidance for the third quarter and full year of 2017. Total revenue for the second quarter was $47.6 million, an increase of 32% year-over-year and up 7% from the previous quarter. Our increased revenue in the second quarter was the result of growth in subscription and services revenues. Subscription revenue growth was driven by a combination of organic user growth and customer go-lives in the quarter, while services revenue benefited from some one-time professional services during the period. Transaction-based revenue in actual dollars was up sequentially and represented 16% of total revenue in the second quarter, consistent with the previous quarter and down from 18% in the second quarter of 2016. As we turn to gross margin and operating expenses, please note that unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis. Gross margin was 52.6%, up from 51.1% in the second quarter of 2016 and as expected up only slightly from the previous quarter. The year-over-year improvement was primarily attributable to continued growth in subscription revenue and improvements in services margins. Total operating expenses were $26.1 million, up 16% from one year ago and up 6% from the previous quarter. Sales and marketing expenses were $10.3 million, up 13% year-over-year and up 11% sequentially. The year-over-year increase was largely due to headcount, while the sequential increase was primarily due to our annual client conference held in April. Research and development spending was $8.9 million, up 24% year-over-year but up only slightly from the previous quarter. The increased R&D spending year-over-year reflects increased headcount and professional services to support our product…

Thanks, Jennifer. In closing, I’m pleased with our execution during the second quarter. We had another solid quarter of user adds, an uptick in sales activity and continued innovation on the product front. Looking ahead, I’m optimistic that improving market conditions will continue to drive solid financial performance in the back half of the year. Thanks to all of you for joining today’s call. And with that, I’ll hand the call over to the operator for questions.

Thank you. [Operator Instructions]. Your first question comes from the line of Tom Roderick from Stifel. Your line is open.

Hi, guys. Good morning. Thanks for taking my questions. So, Matt, on the first comments that you made relative to strong bookings in tier 2, tier 3, I was wondering if you can just go into a little bit more detail about sort of how you think about the proper blend of the overall picture? I know that the historical focus has been maybe a little too heavy on did you land at tier 1, did you not land at tier 2 but a little bit more about the importance of tier 2 and tier 3 as they sort of fit into your bookings projections for the quarter and the year, and how they sort of make up the overall addressable market in terms of importance relative to the tier 1 pipeline?

Yes. Thanks, Tom. The tier 2, tier 3 space has kind of been our bread and butter since the beginning and I think to your point there’s a lot of attention paid towards tier 1. We went after that market and we’ve been very successful in it. And as we said in the press release, I’m very optimistic about the pipeline going forward. But the tier 2 space is kind of Steady Eddy for us and we segment that into bank and credit union. And the credit unions that I mentioned in the prepared remarks have been just – the picture of consistency over the last couple of quarters. Tier 2 bank, we’re feeling really good about the momentum we’re seeing there. I think the stability around the economy and there’s not going to be more regulation coming down for them is beginning to create a tailwind. Our products fit both of them but our corporate banking – I think we probably sold corporate banking close to 10 times in the quarter. That’s a mix across in net new and those were mostly the banks. So they are a key part of the sales component. But if you think about it, we have bank credit union, tier 2, tier 3 and then tier 1, all of that makes up about 98% of the financial institutions in this country. And we have targeted sales teams in each one of those segments. And a big part of the market is the tier 2, tier 3. So we put a lot of time and energy into that and we continue to compete favorably in all of those categories. So we just needed – if I think about it a year ago, this time, the momentum and the tone has changed drastically and that’s just kind of where we are. We’re looking to capitalize on that in the back half of this year. Naturally, Q3 is not a great quarter. You have two months of summer and then you jump into September. Last year, we had a record breaking Q4 and I’m pretty optimistic about the second half of this year as well.

Great. And then Jennifer, with respect to the model and the rev rec and sort of the compares relative to last year on the revenue line, I remember we had a bunch of tier 1 deployments that went live in Q3, Q4. Are there any left from last year and the year before wins that are still left to go live as far as tier 1 deployments, or are we kind of all the way flushed through that? And then the related aspect to that is, how do you sort of look at your services capacity for the ability to handle larger deals coming down the pipe in the back half of the year?

Yes, so let me start with the implementations for the tier 1s. All but one of our tier 1 customers that we signed during the previous three years are now in various phases of implementation. But remember that several of the larger tier 1 customers, including First Republic Bank, are moving their accountholders to the Q2 platform in waves. And so it will likely be the first half of 2018 before you actually see the full impact of all the tier 1s. And yes that does mean that we took of the tier 1 customers that we signed in Q4 of last year live during this quarter as well. What I would point out there is that’s not typical. It was a $13 billion bank in the northeast that signed with us in Q4 of last year to replace both their legacy consumer and business platforms. And while we worked with them and were able to get them live ahead of schedule bit on the consumer customers, it’s still likely going to be the first half of 2018 before they’re live on the full corporate platform as well. So I would caution you again that that’s not a typical timeframe. Tier 1s are closer to 12 months. And then on the services capacity, we’ve always said that remember we forecast not only the dollars of bookings but also the units and the types of units that comprise those bookings so that we can accurately forecast our implementation capacity needs and hire in advance. So we’re always looking 9 to 12 months forward and that’s hitting our growth margins. And I think as you see some of these tier 1s continue to complete their wave, that also frees up additional implementation capacity to then move on to new. So I think we’re good where we’re at and I expect that gross margin will be up sequentially in Q3 and again in Q4, and it will be up year-over-year as well. The magnitude though really depends on how quickly some of these large tier 1s roll through their phases.

Wonderful. Really helpful detail. Thank you, guys.

Your next question comes from the line of Terry Tillman from SunTrust. Your line is open.

Hi, Matt, Jennifer and Bobby. How are you all doing?

Hi, Terry.

Hi, Terry.

Hi, Terry.

It’s great to talk about that $13 billion bank getting up and running faster than expected; nice job there and nice job on the quarter. Matt, my first question relates to you used the phrase sales execution or improved sales execution. I always thought of you guys as having solid sales execution and monetizing the market. But could you maybe delve a little bit more into what you meant by there? Was it just process changes, just evolution of your go-to-market strategy, just a little bit more around the sales execution side?

Yes, sales execution was literally just signing contracts. We have made changes – we’re always making changes to more messaging and some moves around go-to-market. But at the end of the day when I was referencing sales execution, it was about signing contracts and getting them closed.

Okay. And just two quick follow ups. And I guess in the spirit of maybe an obscure product question. You guys put out a press release recently around Centrix in terms of the dispute tracking. I’m just curious how big is that business actually? And does that end up being potentially going forward a lead generation opportunity to drive your digital banking business more broadly?

Yes, so Centrix is a meaningful part of the business. We acquired it in the summer of '15 and what we have seen – they have the products that about 40% of their products are installed in the Q2 base or we’re paired up with them. And then the rest of that’s out on non-Q2 customers up and running in production. And so what we’ve been trying to do is to connect the two of those. And as we’ve integrated the product, if we go to a standalone Centrix’s customer and show them how their Centrix’s products can work in their digital banking, it’s very compelling for that customer when their time is up to look at a system to bring us in to give us [indiscernible]. So the Centrix acquisition has been amazing. The teams up in Lincoln are really hard chargers and they innovate and just knock stuff down. So it does create some leads for us but it’s a very valuable cross-sell as well on the commercial side of things. And then dispute tracking, the press release you put out there, that is something that resonates with both credit unions and banks. So we’re getting a lot of leverage out of that. But couldn’t be happier with the Centrix team and their performance, and then maybe it’s helping us generate some new opportunities and we’re helping them generate some opportunities as well.

Great, that sounds good. And I guess on the cap software side, Jennifer, I think you talked more broadly about R&D probably getting more leverage going forward or some adding, if you will, in terms of just the degree of spend. Should we think about cap software continuing to trail off? And again, thanks. Nice job on the quarter.

Yes, I do think you’re going to see it continue to trail off. If we started moving some of the products like corporate earlier in the year and then Q2 SMART this quarter and the general release so the capitalization on those new products have now ceased. And we still got a few smaller things in the works and I think you’ll see some new projects come up over the next 12 to 18 months but not to the magnitude that we had with corporate and SMART.

Thanks, Terry.

Your next question comes from the line of Sterling Auty from JPMorgan. Your line is open.

Great. Thank you. Hi, guys. It’s Jackson Ader on for Sterling this morning.

Good morning, Jackson.

Morning. Just a couple of questions from us; the first I guess more broadly. So when you segment the tier 1, 2 and 3 space into banks and credit unions, it would be our assumption that there’s more runway under credit unions being more penetrated than the banks. Is there any way that you can somehow quantify how penetrated you are in each segment and which one is really driving the growth right now?

Well, I think if you look at it, we’re less than 4% penetrated in the total banking space. I haven’t broken it out into tier 3, tier 2. One of the things I always talk about is we’re a steaks, not hamburgers shop. It’s really about finding the right prospect to turn into a customer, meaning we’re looking for the credit union or the bank that wants to use technology as a way to compete and differentiate and have a long-term of their investment in that. So I don’t know if I broke it out by segment what the penetration would be but there’s a lot of runway ahead of us. If you think about we had – I think we ended the year last year with 380, somewhere in that number of customers and there’s 12,000 credit unions and banks in the market. But we are very targeted and focused on a particular type of a financial institution. So I don’t have the breakout for you on that, Jackson, but we have a lot of runway in front of us.

Okay. And then the implementation of the corporate side that went live with the tier 1 this quarter, Trustmark. Is 12 months basically what we should be thinking about as a baseline for implementation time for corporate as well as on the retail side?

I think if you remember, Trustmark’s a big financial institution, a flagship if you will and they were taking – they were using a legacy corporate provider that had a lot of functionality that was built over the last 20 years. So 12 months in that example is probably pretty realistic but some of these – some of the cross sells we did last quarter, they don’t have a corporate product. And so there’s nobody to convert off of. It’s more about training them on how to use it and then them building their go-to-market strategy and how they’re going to take it. So I wouldn’t say 12 months. I think it’s probably going to skew like we see in our tiers, which is the tier 1s will take longer and the tier 2s and tier 3s will be a little quicker and the credit unions, which we’re seeing a lot of success there as well, we’ll come to market in the three to six-month timeframe. It just really depends on their situation.

Okay, that makes sense. Thank you.

Thanks, Jackson. Have a good day.

Your next question comes from the line of Mayank Tandon from Needham & Company. Your line is open.

Thank you. Good morning. Matt and Jennifer, based on the comments you made around increased momentum in the business and just the pipeline conversion and also the leverage in the model, could you help us frame '18?

Yes, so I would say I’m still comfortable with the 25% year-over-year growth rate that I provided earlier in the year. While we did see momentum building in the bank space during the second quarter and we’ve got a solid pipeline, we have not yet signed any tier 1 banks this year and the execution and the mix of the deals that we signed in the back half of this year will really drive where the 2018 growth can ultimately land. Remember tier 1 deals on average take 12 months and so if all of them end up signing in Q4, it’s likely not to impact revenue in 2018 but rather 2019 and forward.

Great. And how should we think about the EBITDA margin expansion opportunity in '18 once you get to your '17 targets?

So I think you’ll continue to see expansion in 2018 from both the sales and marketing organization as well as the G&A organizations. And then as I mentioned in my prepared remarks, we’re hopeful that that trend is going to continue in R&D as well. So I do think you’ll see improvement into 2018.

Great. And just one more margin question. I know you have a target model out there and I just wanted to get a better sense of, if I have the numbers right I think you had mentioned in your presentation back that the target was I believe 15% to 20% on a non-GAAP operating income basis. Is that correct? And I guess I’m wondering what kind of revenue level do you need to achieve to be able to hit that target model?

So I think if you just run out the numbers that we’ve used in the past, you get to somewhere in the 230 million to 240 million per year of revenue run rate.

Got it, okay. Thank you.

Thanks, Mayank.

Your next question comes from the line of Brian Essex from Morgan Stanley. Your line is open.

Good morning. This is Ivan Holman sitting in for Brian. We’ve seen several transactions in the industry where acquiring banks have adopted their target’s technology and the adopted systems were ones that had brought our features and functionality on the processing side. Could you help us understand what you see from your end with this respect and what do you see as potential for next year business model as these circumstances may or may not end up with the best [indiscernible] technology winning essentially?

Thanks, Ivan. I think what we’ve seen is – let me take it up one notch. On the M&A side, it’s a very active M&A market and I spoke earlier about how targeting our customers is very important. I think we were talking about and prepping for this call that we’re probably going to share some more detail on the M&A front in the November call to give you guys a picture of kind of the ins and outs. And I believe again this year we’ll be the beneficiary of more end users acquire than we will have lost. And what we see typically is the model where an acquisition happens and the acquirer keeps their existing technology and then replaces the – and then gets rid of all the acquiree’s systems. We have seen some cases where that is not the case and we are working several deals where we do have acquisitions to try to win those deals over. Our single platform is very compelling in those scenarios especially for an acquisition-focused bank. But that being said, it is something that is – we have to contemplate and that’s one of the reasons why we put a lot of time and energy into selecting the right customers. And that simply means that if you’re thinking about buying – we are priced at a premium, the most modern digital banking system, you’re probably not thinking about selling your bank. If you start the conversation with how cheap can you get it, you may be thinking about that. So targeting the customers is very important. And I have seen typically that is the model of the bank being acquired gives up their technology. But we have seen multiple examples of us being able to turn the table on that. We’ll continue to try to do that. But I believe with the types of customers we have that we’re going to continue to be the beneficiary of more acquisitions than we are of our customers being acquired.

Great. Thank you very much.

Thanks, Ivan.

Your next question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

Hi, guys. Thanks for taking my questions. I believe Active-Active DR was launched last quarter. I’m curious, maybe I missed it, but any update on how that product did and maybe any interesting customer wins to note?

The Active-Active, it’s been well received by the customers. We continue to work through the process of moving them to an Active-Active environment. It’s a matter of trying to get slot in the right projects and get them teed up, and then we’re working through the early stages of rolling that out. So it’s been a huge benefit for us in the sales process as well as it also makes the customers understand we’re investing in our infrastructure because uptime has been a big differentiator for us in the past and we’d like to keep it that way. And then the other question was around what?

That was, any interesting customer wins. It sounds like they’re progressing now.

Yes. We had a solid quarter. Trustmark’s go live was kind of a big deal for us. We talked about ESL, the big credit union in the previous quarter but a lot of good wins; none to highlight on the call though.

And then maybe – I appreciate the color on the tier 2 and tier 3 wins and I know you guys haven’t signed a tier 1 this year. They tend to be more backend loaded. Is the expectations still – Matt, I think you said the pipeline was strong and I believe that was maybe for more the bank market in particular, but just overall thoughts on the tier 1 pipeline. I think in the past you may have said maybe 2 to 7 this year more backend loaded. Is that still kind of the right way to think about sort of the pace of that market?

Yes, the tier 1 space, it is naturally backend loaded. They usually take a little longer to come out. I have big expectations for the tier 1 team and they’ve got to execute and I feel good about where we are in the pipe. And we’re going to continue to push. But I would anticipate Q4 is going to be a bigger – where most of the deals materialize.

Got it. Thanks, guys. Well done.

Thanks, Matt. Have a good day.

Thanks.

Your next question comes from the line of Richard Davis from Canaccord. Your line is open.

Thanks for letting me on the call. Two things; one, if you kind of think about your business of driving kind of customer accounts, you had a good quarter. As you said it was over like 9.5 million. Is there a way to kind of drive that growth more than it is kind of organically? You can’t like walk into the banks’ customers and make them adopt the product but is there a way for you to kind of create customer support, customer success teams that help drive that or best practices? So is there a way to modulate that up? Thanks.

Yes, Richard, good question. We actually do help our customers in driving more people to the digital channel whether it is pushing people to use e-statements, driving people to do BillPay, talking about the ease of being able to reorder checks or whatever it might be. So we do have campaigns that we help our customers with to roll those out. And so that’s a way to enhance the organic growth on the numbers. Remember, you look at Bank of America, Wells, Chase, those guys are all in the 95% adopted penetration rate in their customers, accountholders that use digital. Most of our customers are still below 60%. So we’ve got a long way to go. And also they’re adding new accounts. People are moving from those big banks to the community ones. So there’s a lot of opportunity there and we are making sure we capitalize on them. But it’s a good question.

Got it. And just a follow up if that’s all right. We did some checks where we were just talking to random banks and stuff like that. So one of the things that struck us was that there is a lot more interest now in kind of cyber security, particularly authentication, account activity monitoring and kind of mobile malware and stuff. If you have, to some degree, some functionality there, how would you describe kind of the functionality you have, where you want to be and where do you take this kind of hardening of the product so that it’s safe from the bad guys? Thanks.

Yes, Richard, it is priority number one for us when you think about it either an attack on one of our banks or on us creates some serious problems for us. So we look at it as, we have – our data analytics story started with fraud analytics and we have the most differentiated fraud analytics product in the marketplace, a multifactorial authentication we use all over on systems. We also partner with different players in the market for security. We use Prolexic to help with denial of service attacks. So we spend a lot of time and a lot of money. Our Chief Security Officer and Chief Compliance Officer are both managing things internally and externally. So there’s a lot of opportunity for us there and we think our single platform is differentiated. And that we are able to see all of the behaviors on all the devices to get a better understanding of who the end user is and that usually is the weakest point, the end user. And so the more information we can have on their behaviors and when they get anomalous, we stop the fraud. So a huge separator for us and a differentiator but it’s something we have to continue to invest in and make sure that we’re always on guard.

Super. Thanks a lot.

Thanks, Richard.

Your next question comes from the line of Brad Berning from Craig-Hallum. Your line is open.

Hi. Good morning, everybody. I wanted to get, Matt, your view on when you’re selling steaks in a world that’s selling hamburgers a little bit. If you could talk a little bit more about the self assessment on product innovation gap versus the hamburgers but also how you think about the product innovation gap versus the bigger banks that you’re trying to help the regional banks compete against? And just talk about win-loss ratios, talk about your product roadmap on that self assessment, where do you need to step up innovation and where do you see your strengths on innovation? I think obviously you guys I think from an innovation standpoint have done a fantastic job over the years and continue to lead here. Just help us see the bigger picture here.

Yes, Brad, a good question. Innovation starts with the people that work for you and then being engaged in the business. We spend a lot of time on culture because talent acquisition is the key to this. And I would argue that one of the biggest differentiators we have is that we have an award winning culture that can get behind the mission. We have developers, newcomers to this space as well as experienced developers that come here and realize that they can have an impact on community financial institutions and communities across the country. They can see their work being dropped into production. So we spend a lot of time on making sure that all the employees are engaged in what our mission is. And that usually results in happy employees, happy employees translate into acquiring the best talent in the marketplace. And so from an innovation perspective, it is a never-ending process. We are always pushing to move ahead. I would say that we don’t look at the technology providers in this space. The legacy folks are not really where we spend our time directionally. We try to look at – there’s multiple places, right. You want to look at what’s Bank of America, Wells, Chase, and Citi, what are they doing? That is one of the drivers for us. And then you try to look at what’s happening on the players on the fringe, whether it’s PayPal or Amazon, what are they doing? And then where’s the rest of the technology world going? And we try to put that on a roadmap to the best of our ability to create a compelling set of technology for our customers, community, financial institutions to differentiate. Q2 Open is a great example of that. We rolled that out. We’re partnering with a fintech company. That fintech company is partnering with one of our customers. So the ability to move fast and with simplicity and allowing it to be open is a serious differentiator for us in the marketplace when a lot of the players are becoming more and more closed. So we think that’s going to be a big differentiator for us. API has the ability for whether it’s somebody at the bank, somebody – a partner there is a developer or maybe us can help them augment and enhance our strategy with our platforms. So we think we’ve got a nice lead and we’re going to continue to extend that lead.

A couple quick follow ups on that. On Q2 Open, and you touched on it, the APIs for bank partner or us which I think is a key issue here on this area. It’s obviously a wide open market to develop on the B2B side, in particular, with software providers to build stickiness with their own customers and differentiate themselves. Do you feel like that you’re going to have to help your banks build the open API infrastructure in connections with the software providers for the deal packages at the SMBs or do you see the software companies embracing and ready to help build that? I’m trying to just think about the cost aspect of really making this business work. I’m just kind of curious how you think about that strategic direction on that?

Yes, I think ultimately it’s going to be a mix. But in general, the early adopters of this technology are usually the larger financial institutions. And then what comes out of those guys will roll down to the smaller financial institutions. Now we do have some smaller ones that are actually participating and playing in this space. But usually what happens is the funding occurs with the larger financial institutions, 5 billion, a 1 billion and above. And then that technology works its way down. It could be various things. And then partnering with whether it could be payroll companies or whatever to do that, that’s going to take a little more time but I think you’re seeing Bank of America and BBVA start to do that. So it may happen sooner than we think.

Last quick follow up on product innovation, where are you at on rolling out the new ability to open checking account remotely?

Yes, on account opening we’re making good progress there. We have multiple customers tying it into multiple backend systems and working through those workflows. So I’m pleased with the progress. We’ll continue to update you on that. But it’s been well received in the market both from customers and prospectors.

Excellent. Thanks a lot. Great work on innovation.

Thanks, Brad.

Your next question comes from the line of Arvind Ramnani from KeyBanc Capital Markets. Your line is open.

Hi. Just a quick question. Can you help us understand puts and takes that enable you’ll to come in at the upper end of your guidance range?

Yes, Arvind, really all the puts and takes are driven by the time to revenue. Remember that cross-sales are quicker to revenue and then the tier 1s obviously are the longest to revenue at approximately 12 months. So those are the extremes and the mix shifting to any one of those extremes is what can drive it up or down a bit quicker.

Great. That’s helpful. Thank you.

Thank you.

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Good morning, and thanks for taking the questions. So obviously some strong user growth this quarter. I just want to understand if we think about the user growth within the existing customer base, what kind of driver has that been historically of your revenue growth? And if I think about penetration of your existing financial institutions, where are we in that evolution today?

So historically we’ve talked about this before. It’s a little bit of a grey area because it’s sometimes hard to tell whether you would have gotten that user, whether you rolled out new functionality or not. But what we did was we took a subsection of customers where as best we could tell they hadn’t rolled out any new features or functionality. They just had the basic platform and the functionalities that they initially rolled out for the last 12 months in place and looked at their organic growth. And on average, it was in the high single to low double digits, so kind of in that 9% to 11% historically. And then the last part of your question was penetration. And as Matt mentioned before, I think most of our financial institutions are still under 60% penetrated. And remember we’ve been saying kind of that 50% to 60% for a while but the other thing to remember is that penetration we’re still continuing to get adoption because people are banking more with local institutions. So they’re also getting new accountholders which is keeping that penetration in that 50% to 60% even as they add and grow organically on their online users.

Got it. That’s great color. Thank you.

Thank you.

Our last question comes from the line of Joseph Vafi from Loop Capital. Your line is open.

Hi. Thanks for taking the question. I was wondering some of the large banks have rolled out today a new peer-to-peer payment platform Zelle and I think it’s being driven through online banking. And I know they’re building a large consortium of banks. I was wondering where you stand on adding some of the peer-to-peer payment functionality given the banks are trying to counter Venmo and PayPal to a certain degree? And then secondly, I was wondering if there’s any update on international expansion plans? It’s kind of a land grab out there and perhaps bringing your solutions internationally, maybe with a partner or something to start tapping that opportunity too? Latest thoughts on that. Thanks a lot.

Yes, thanks, Joseph. On the P2P side, we partner with a company called Acculynk, which is a first data company. We’re exploring the Zelle network in partnership with other folks who are also looking at alternative partners to just the ones mentioned. Nothing major to report there. We continue to – we’re not seeing a lot of growth there but we’re anticipating it could be at some point. As far as international, we’ve always had the stance that we’re less than 5% penetrated in almost every category, whether it’s banks, accountholders or TAM. We are always exploring and looking at those ideas, but I don’t anything to report on international right now. We’ve got more than we can say grace over and we want to execute on this and try to focus on having a solid '17 and '18. But we’re open to conversations and different deals that come our way.

Thanks very much.

Thanks, Joseph. Have a great day.

And there are no further questions at this time. This does conclude today’s conference call. You may now disconnect.