Good morning. My name is Angel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Holdings third-quarter 2019 financial results conference call. [Operator Instructions] I will now like to turn the call over to Steve Calk, Director of Investor Relations.Sir, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for our third-quarter 2019 conference call. With me on the call today is Matt Flake, our CEO; Jennifer Harris, our CFO; and Carl Ryden, EVP and general manager of PrecisionLender. This call contains forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of Q2 Holdings.Actual results may differ materially from those contemplated by these forward-looking statements, and we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and subsequent filings, and the press release distributed yesterday afternoon regarding the financial results, we will discuss today. Forward-looking statements that we make on this call are based on assumptions only as of the day discussed, investors should not assume that these statements will remain operative at a later time, and we undertake no obligation to update any such forward-looking statements discussed in this call. Also, unless otherwise stated, all financial measures discussed on this call will be on a non-GAAP basis.A discussion of why we use non-GAAP financial measures and a reconciliation of the non-GAAP measures to the most comparable GAAP measures is included in our press release which may be found on the Investor Relations section of our website and in our Form 8-K filed with the SEC yesterday afternoon. Now let me turn the call over to Matt.

Thanks, Steve. On today's call, I will share our result and key business highlights from the third-quarter 2019 before handing the call over to Jennifer for a detailed look at our financials and updated guidance. In the third quarter, we generated revenue of $79.7 million, up 32% year over year and up 3% sequentially. We also added close to 500,000 registered users in the quarter, which brings us to approximately 14.1 million registered users and represents a year-over-year increase of 14%.I'd like to begin by discussing some highlights from across the business, starting with our sales performance during the quarter, then share a few updates on our acquisition of PrecisionLender. On the sales side, we had another quarter of well-balanced performance across the business. The digital banking teams added a number of new clients from both the credit union and bank markets in the quarter highlighted by the addition of a top five credit union. We've talked a lot about our corporate product suite as a way for us to land and expand with new clients.And corporate was the key driver of this deal, leading the way for a number of additional Q2 products, including Q2 SMART, our data-driven marketing and analytics tool. While we have traditionally positioned Q2 SMART as a retail-focused solution, we are beginning to include it in additional business use cases. For this Tier 1 credit union, it will allow them to aggregate their business customers into segments based on common traits. For example, customers that use third-party merchant services and then target those customers with specialized marketing messages that promote the credit union's own services or other commercial offerings.And I should note, we've been pleased with the continued adoption of Q2 SMART in general. In the third quarter, Q2 SMART was a component of every…

Thanks, Matt. I'll begin by reviewing our results for the third quarter before finishing with updated guidance for the fourth quarter and full-year 2019. Total revenue for the third quarter was $79.7 million, an increase of 32% year over year and 3% sequentially. The sequential revenue increase was driven primarily by an increase in subscription and services revenue related to the Q2 platform business as a result of organic user growth on our digital banking platform, and new customer go-lives during the quarter.In addition, revenue from the businesses we acquired at the end of 2018 contributed to both the sequential and year-over-year growth. Transaction revenue represented 15% of total revenue for the quarter, down from 16% in the previous quarter and 17% in the prior-year period as a result of the continued slowing growth in bill pay transactions. As we turn to gross margin and operating expenses, let me remind you that unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis. Gross margin was 53.6%, up from 52.8% in the previous quarter and down from 53.8% in the prior year.The sequential improvement is attributable to growth in subscription revenue and expanding revenue contribution from the businesses acquired in 2018. The slight year-over-year decrease is primarily attributable to the lower than normal margins on the acquired businesses due to the impact of purchase accounting adjustments. Total operating expenses were $40.1 million, down 2% from the previous quarter and up 37% from the prior year. The year-over-year increase in total operating expenses is largely attributable to headcount additions to support continued growth in the core business, as well as additions associated with businesses acquired at the end of 2018, and the investments we have made to integrate the back-office systems and shared services of these…

Thanks, Jennifer. In closing, we are very pleased with the quarter and believe it reflects the benefits of the significant investments that have been made in the business. We continued to see solid sales execution, including signing several Tier 1 organizations across our digital banking suite and cloud lending platforms, I was excited by Credit Karma's recent announcement of their savings account product, which is being launched in partnership with our Q2 Open Banking as a Service group. Finally, with the closing of the PrecisionLender acquisition, we are enthusiastic about the impact we believe they can have on our business.Even a week after formally closing the deal, we've already seen them executing against their well-developed pipeline. We believe their products and talent will strengthen our own for years to come. And perhaps most importantly, equip our clients with modern technology that can help them issue smarter loans and create stronger client relationships. We will certainly continue to update you on our integration of PrecisionLender over the quarter to come.But for now, I'd like to, once again, welcome their passionate employees and dedicated customers to the Q2 team. Thanks again for joining us today. And with that, I'll hand it over to the operator for questions.

[Operator Instructions] And your first question comes from the line of Sterling Auty. Please go ahead.

Thanks. Hi, guys. So on the PrecisionLending side, I guess, there's two points that I'd like to better understand. Number one, who is the kind of point person inside the organization that really makes the decision, and is the connection with the customer? And then second, as you look at the investment, Jennifer, thank you for the commentary around 2020, is it fair to take the EBITDA run rate that you talked about in terms of the historical versus the mid to high teens negative comment for 2020 and look at that as your area of investment in the business? And what are those investments? Is it additional R&D? Is it all sales and marketing, where do those investments actually go?

Thanks, Sterling. I'll have Jennifer answer that, one second, but since we're joined here by Carl, I'll have him walk through the point person and then a little bit on the sales process for PrecisionLender. So Carl?

Yes. So the point person varies from bank to bank, mostly by size. The large bank, it will typically, somewhat a global bank, it will be someone who's in charge. The largest person in charge of growth and profitability as a commercial book of business in the commercial portfolio.So it might be someone leading wholesale transformation, someone leading commercial lending transformation, or commercial lending sales effectiveness, overall, our sales strategy. At the smaller bank, it's typically bought by the C-level folks, the Chief Lending Officer, Chief Credit Officer, Chief Financial Officer, and ultimately, the CEO of the bank will make the decision to do it because it affects how they go to market and how they address their customers.

And so on the investment, Sterling, yes, if you look at the historical nine months plus the guide for the two months and then estimate the month of October that won't be included in those numbers, 2019 adjusted EBITDA for PrecisionLender is roughly negative $15 million, is what we anticipate for the full year. And I would expect it to be relatively flat in absolute dollars. However, we are still going through the final 2020 planning process. So one of the guide that we're putting out there right now to have a little bit more flexibility, thus, the mid to high negative teens.And where the investment is going, in PrecisionLender is still an early stage company, and it has been heavily focused on development of the product. So the majority of those 150 employees that we acquired were really more on the development compliance side, and they were just getting to the point where they were starting to build out their infrastructure. So we do think there's going to be some investment in both sales and marketing to capitalize on the pipeline that they've built as well as G&A-type infrastructure.

Our next question comes from the line of Terry Tillman with SunTrust Robinson. Please go ahead.

Hi. Thanks, and good morning. Can you hear me OK?

Yes, we've got you.

Yes.

OK. So I'm going to be savvy here. We can only ask one question. I have a three-part one question.So and it's on PrecisionLender. We've done a bunch of work, we're getting a lot of questions and there's curiosity about it. What I'm curious about is you mentioned a couple of Tier 1 wins, Matt, I think, in October. So what I'm curious about, and maybe Carl could chime in, in terms of where PrecisionLender is in terms of sales activity with Tier 1s, just kind of what inning? And then the second part is, these Tier 1 wins, do they start small or can they can be seven-figure type ACV transactions? And then the third part is, the 50% growth next year, is there anything contemplated there, your all size and reach driving revenue synergies from the Q2 side?

Yes. Thanks, Terry. Carl, do you want to go through the Tier 1 question, and I think, and Terry, just for clarification purposes, Q2 uses, the platform businesses use Tier 1 as kind of $50 billion between $5 billion. I think, when you're referring to Tier 1, you're referring to the enterprise accounts, which are the top 100 in the world.

Yes, we probably need to get our language in line a little better. PrecisionLender, we talked about community mid-tier regional, which is below $50 billion. And then we talk about Enterprise, which is above $50 billion in assets. And so for us, in terms of where we are on the pipeline on a lot of the enterprises, we have a active pipeline and a lot of activity.Those typically go down by -- we win a single line of business or a single geography and then expand throughout the bank, either part of a larger rollout, or you kind of sell one and sell the other and move on through there. But we have -- we were quite far, I would say, where are we in terms of the innings with those? I think, it's hard to say --

And from a penetration perspective, it's early with -- we've -- obviously, you can look at the website, you got Bank of America and some of those big ones out there, but there's a lot of room for Precision to go add plenty of deals. And when we talk about the pipeline, I feel really good. If you think about the third quarter, they signed about a $20 billion financial institution and $100 billion financial institution, and we're working deals that are similar and larger -- larger and smaller in size to those. So feel really good about where we are with the pipe, and we're trying to execute in the fourth quarter and also continue to build it for 2020 [indiscernible]

I'd just show in. I think Carl touched on it, but the enterprise deals in the greater than $50 billion in assets area are very similar in size to a large Tier 2 or Tier 1 digital banking deal. But I would caution you that like a Tier 1 digital banking deal, as Carl mentioned, they may originally enter into one line of business or one geography. And then expand over time to other lines of business or other geographies in a phase rollout, much like our Tier 1 clients choose phase rollout.So they may not be a seven-figure ACV from the very beginning, but they certainly will typically grow to that. And then on the 50% growth, that's our early estimates of a combination of just the PrecisionLender organic growth, as well as some impact from cross-sells into our base, and remember, that we'd already signed a partnership with PrecisionLender in May of this year. So we have some traction there, but it's still early.

Yes, I would just say anecdotally, Carl and I were talking yesterday, and one of the things that we just heard from one of the sales reps at PrecisionLender was that they've already received 5 leads from some folks over on the Q2 platform side of the business, and one of those leads has a contract in front of them. So we're seeing good cross-pollination between those two organizations.

Thank you.

Thanks, Terry.

And our next question comes from the line of Tom Roderick with Stifel. Please go ahead.

Hi. Thanks, and good morning. So I guess Terry took the three good questions on PrecisionLenders. So I'll ask you a one part, one question here on Cloud Lending.So Matt, curious if you've had any more thoughts about the international opportunity, as you look at Cloud Lending. And then as you layer in the PrecisionLender part of the story, how does that sort of add to the international opportunity?

Yes. Thanks, Tom. So we're continuing to invest in the specific geos that we're in. So Europe and ANZ, very targeted in those areas.And there's been good momentum in both of those geographies. I actually went over to Europe and met with both teams earlier in October. There's a lot of synergies between the two of them, but they're also very focused on executing on their pipelines. And so we'll bring those teams together.And in both Europe and Australia. But the opportunities, I think, there's going to be a lot of synergies between the pipe and the relationships, and how we can begin to have conversations with the cloud lending customer on the Precision side and vice versa. So I feel very good about where each team is in the geography and that we're not -- there's not really any overlap. It's more we get a lot of leverage out of each one of the teams.And then the talent of the team is very diverse, and they have different types of relationships. So I think we -- Carl and I, both agree that the opportunity, and the timing and the overlap is very nice for us, and we think it's going to continue to generate more wins in the regions.

And our next question comes from the line of Peter Heckmann with Davidson. Please go ahead. Please go ahead.

Good morning. Thanks for taking my question. Can you talk a little bit about -- more about how the customers that are -- the financial institutions that are not customers of PrecisionLender, how they may be treating this solution? Do they have a homegrown pricing tool? Who would be the competitors in this space? And then kind of a linked question is, it appeared from the website that PrecisionLender had a strong historical relationship with nCino. And I'm curious about how that might evolve post acquisition?

Yes. So Carl why don't you take those?

Yes. So the the first question. In terms of customers who aren't PrecisionLender competitors, our number one thing we disliked even, and it may surprise you, but even at large banks, is a massive excel spreadsheet. At small banks, and typically, at a large bank, it's the massive excel spreadsheet that's been connected to some kind of database at one of the top banks in the world that we're pretty deep in the process with.They currently have an excel sheet connected to an access database that they use to manage the pricing at a bank, and this is a top 20 bank in the world. And those things are disconnected from all the other systems. So as they roll out a cloud lending, or any other digital transformation projects, sales force dynamics, nCino, any of these things. Stuck in the middle of that entire process is an excel spreadsheet that's cobbled together that doesn't connect to anything.So being able to connect that end-to-end is really powerful. At the small banks, you end up with a lot of times, the wet finger in the wind, they do nothing. They just kind of match the competition, or hope they match the competition. And so a lot of times, we're selling effectiveness at the small end.We're selling efficiency and effectiveness at the high end. And, and that works really well, particularly as part of the digital transformation journey and connecting into the larger, larger value chain in the commercial lending. On the relationship with nCino, we've had a long relationship with nCino. We're installed alongside of them at a lot of banks.We connect really tightly into sales force. So on the CRM side, the dynamics, we've maintained the position at PrecisionLender of being kind of Switzerland, being neutral, in all this. And ultimately, where that comes from is a desire, we're going to solve for our customers. We're going to make the Q2 solutions really great.We're going to have a great experience for cloud lending and PrecisionLender, we've great experience for nCino and PrecisionLender. We've great experience with sales force and dynamics. And ultimately, this gives us more surface area that kind of become connected with those customers and add value and prove that we can add value and continue to grow those relationships.

And I'm 100% supportive of that as well. So thanks for the questions, Pete.

Thanks.

And your next question comes from the line of Matt Hedberg with RBC Capital Markets. Please go ahead.

Hey, it's Dan Bergstrom for Matt Hedberg. Say, Matt, 2019 has been a really good year for the company transformative year, if you will, expanded TAM capabilities, model evolution, really great traction all around, nice M&A deal here, recently. If you think about your total capabilities now looking into 2020 versus rewinding a year ago at this point, looking into 2019, what gets you most excited here?

Yes, that's a great question, Dan. I think, if you look at the quarter that we just put up, it really highlights, I think where the opportunity is going, you start with one of the largest credit unions in the North America signed a corporate banking deal with us, and we think that's going to lead, hopefully, to a retail opportunity. We had a record as the companywide cross-sell in the third quarter, which is traditionally a slower quarter, but a lot of that's built up from the client conference that happened a little later in the year. Cloud Lending signed a top 20 financial institution in the world for a small business lending product, creates a lot of opportunity for us.Q2 Open, we were able to put some color behind the blue-chip, fintech, like Credit Karma, that's rolling out a savings account, and there's a lot of positive things happening on that side of the business. And then PrecisionLender does a $20 billion and $100 billion bank, and we're out talking to a lot more than that in the quarter. So it really sets us up for a nice 2020 to be able for them to offer a solution for both sides of the balance sheet, whether somebody is looking at Digital Banking, onboarding capabilities with our growth products, our corporate banking product is doing really well, we continue to see continued momentum there, we've added value in the commercial banking, lending value chain with cloud and PrecisionLender, excited about the Q2 Open stuff. And then it's -- I don't think it's not lost on people, this is nine straight quarters of signing a Tier 1.And as I always say, that our focus is on signing financial institutions that want to be competitive. But when you're signing nine Tier 1s, three last quarter and one this quarter, it's a barometer for how your products are doing competitively in the market because everybody shows up to those deals. So we're doing very well competitively. The platform continues to evolve.We're really focused on integration and customer experience in '20. So I think, it lays out, not only for a great 2020, but for the next couple of years, we have a nice little run ahead of us. As long as that we can continue to execute and focus on customers and employees.

Thank you.

And our next question comes from the line of Joseph Vafi with Canaccord. Please go ahead.

Hey, guys. Good morning. I thought, we just circle back to the core business here. We've talking about PrecisionLender, and maybe talk about the pipeline in the core digital banking business here? I know, Q4 is usually a strong seasonal quarter for you.So some color there would be helpful.

Yes, I think I feel good about the Tier 2, Tier 3 and Tier 1 pipelines for Q4, there's a lot of work to be done before the end of the year, a lot of these things naturally push to the holidays. And so we've got to make sure we're focused on driving these deals to a conclusion, but I feel really good about that. I'm paying attention to how much cross-selling we had in the third quarter, and making sure that we didn't empty all of our barrels, but I feel like we've got a good cross-sell opportunity out there. Some of that's the depth of the product offerings that we have.But we continue to see success on the corporate side of the business, the retail banking piece. We talked about Q2 SMART, the success we're seeing there, the Centrix products are just steady eddy, consistently every quarter, people want to use those products. So just really focused on closing them. I think, we're going to have another solid quarter.From a bookings perspective, you can look at the backlog, it's gone up significantly. And then also remember, Q4 is always a big quarter for us on renewals and extensions. And so we're putting a lot of energy into that. Taking customers and extend them out and providing more visibility into our revenue numbers. So I feel really good about the core business for Q4, just got to continue to focus on execution.

And your next question comes from the line of Brad Berning with Craig-Hallum. Please go ahead.

I just want to follow up on that conversation just a little bit further. If you could go into talking about kind of the growth rate of more of the pipeline versus the bookings, especially given that banking as a service usually doesn't get into the bookings number, given how the accounting works? And maybe, you can kind of go through each of the core areas. And what you're seeing as far as trends in the pipeline from digital, cloud, Banking as a Service and PrecisionLender?

Yes, thanks, Brad. I would kind of reiterate the comments I just made, which is as we see the blue chips fintechs that are beginning to materialize. But as they go sign up, and they get in the sandbox, they start working with Q2 Open, they put a lot of energy into the marketing of these new products and then they launch them. And to your point, those bookings aren't always captured in the backlog when we do these deals.So I think, you're going to continue to see Q2 Open punch above its weight class. On the platform side of the business, the exciting part is, is I think this year, we've signed three or four cloud lending deals with existing platform customers. And so we're really starting to catch our speed on those and cross-sell those deals plus the cloud lending opportunities continue to pop up, not only in North America, but as I mentioned earlier, in Europe and Australia, and those teams are executing very well. The PrecisionLender side, keep in mind, I'm very new to this.But I have been -- whether it was meetings that I had in Europe or meetings that I've had here, or working with the sales team, I'm just -- I continue to be impressed by the process that they use, the sophistication for a company of this size. They're well ahead of where we were in the $20 million range on how we looked at deals, forecasted them. So I feel very confident that they're going to execute on this pipeline that's in front of them. And it's our job to put all this together in a consistent story, which we're working hard on, on global branding and messaging, so that we can make sure it's clear to prospects and customers exactly what all of this technology does for them in their transformation.But the pipeline numbers, the win rates, all those things continue to improve as we add more products and deliver those. And I think, that's somewhat representative of -- you don't sell a lot of products, you don't cross sell a lot of products, if you're not executing. So it's just coming together nicely, but I don't want to get ahead of ourself. We have to execute, and we'll hopefully have some good news to share with you on the February call.

And your next question comes from the line of Brian Peterson with Raymond James. Please go ahead.

Hi. Thanks for taking the question. So if I turn back the clock to the analyst day earlier this year, you gave some margin targets for 2020. Clearly, that didn't incorporate PrecisionLender.But I'm curious, given the cross-sale strength you've seen. Is there any change toward the investment philosophy in the rest of the business, and how we should be thinking about margins next year?

No, I think you're going to continue to see investments across the business, not just in Cloud Lending and PrecisionLender to capitalize on those opportunities. But the core business as well to continue to advance the corporate product, the integration with these new acquisitions, etc. But I think the core business, I still believe was trending very nicely toward kind of where the Street had us next year, which was roughly 10% of where the Street has the revenue. And that's kind of what we talked about at our Analyst Day.And I think, if you factor in the negative mid to high teens with the PrecisionLender brings, that's bringing you down to where in absolute dollars year over year will be relatively flat on adjusted EBITDA. But I still feel like that the core business, absent the PrecisionLender acquisition, was tracking to kind of where the Street had us.

And your next question comes from the line of Brett Huff with Stephens.

This is Joel Heffer on for Brett. I wanted to get your thoughts on your innovation lead versus competition and building out to complete platform. How do you guys stay ahead of the curve and grow your lead?

Yes, thanks, Joel. Well, I think anchoring off of Carl's comments earlier about trying to solve our problems -- trying to solve the problems for our customers is where we start. We literally had 25 customers in October that were C-level executives with the financial institutions. And it's an event where we share -- where we try to get from them where they want to go, the problems they're trying to solve, and then we share where our road maps are, and we align with those.And then we -- as you know, if you look at our financial statements, we put about 18% to 19% of our revenue into R&D, so there's a real commitment to delivering on those. I think, we have aligned our product and dev teams to where they are working in a more focused way on solving specific problems. But it's really a commitment to listening to the customers, and trying to take the problems that they're trying to solve, and using our technology is the way to do it in partnership. We've found that when we go into a room, and think we're the smartest people that it usually means more -- we got to reiterate over and over, and so just partnering with our customers to solve their problems.But also paying attention to what's going on, what's Facebook and Amazon, or what's happening on the outside of the world that they may not be aware of and sharing those and collaborating on those problems. So we got to help our customers compete with whoever they're competing with in their markets. We've got to help -- we got to think about things that they may not be thinking about. And then you have to operationalize the software to make sure it's allowing them to become more efficient in how they run their business.So that's how we take a view on R&D, but it's collaborative, and it's -- and there's a lot of energy and effort that goes into it. But I think we have -- I think we've proven over the last 15 years that our ability to continue to innovate is -- we're highly differentiated. And I think, you see that in the marketplace, whether it's the Tier 1 wins, or the revenue growth, or the success we have on some of the clients that we referenced.

Great.Thank you.

Thanks, Joel.

And your next question comes from the line of Bob Napoli with William Blair. Please go ahead.

Thanks for the question. Just on -- one more on PrecisionLender? And then maybe a little color around the BaaS business, if you could. What do you expect the long-term metrics to be for PrecisionLender gross margins? And how -- what is the growth rate? I mean, obviously, very high-growth rate now. Can it stay at 30%-plus growth rates over the next three to five years? And how is management tied in? Because it was an all-cash deal, how can we be confident that the management that, I think, you've suggested is very critical to this business is committed.

I'll take the first part of that, and then I'll let Matt comment on the management piece of it. But as we told you, in my prepared remarks, the nine months ended September 30, 2019, PrecisionLender posted just north of 70% gross margins. Now there is going to be some investment, as we invest in infrastructure and systems and processes to install these enterprise clients that they're bringing on, and I think, you'll see gross margins here in 2020 dip down below 70%, but I think, they'll still be accretive to the overall company gross margins. And I think, you'll see them returning to 70-plus percent in 2021 forward.I think the three to five-year time frame on growth, I certainly think that we're still seeing 50-plus percent growth in '20 and '21, but give us some time to kind of bring together their long-term model and our long-term model before I comment on a period out farther past that. But, I certainly expect 50% growth still in 2021 from them.

Yes, Bob, on the retention piece, I think, one of the things that we talked about was, yes, it was probably $510 million all cash, but the mission alignment is, I think, what means the most to the leadership team and the people at Precision, they were highly focused on accomplishing something. And they had a lot of options in this process that they went through, and they selected Q2, economic was obviously, you had to be there. But I think, where we wanted to go and where they wanted to go aligned. So I would just start by saying that us helping them accomplish their mission of helping financial institutions be more competitive and continue to exist, is a big driver for the leadership team, whether it's Carl, or Ken, or the rest of the folks over there.But we also -- to ensure that we have them, we put together competitive packages with equity. And that divest over a period of time. And from a cash compensation, they're aligned with what people should make, if not a little bit more than that. And they're highly incented to be successful through compensation and -- but ultimately, I think what matters to this group of people is, are they able to accomplish what they set out to accomplish and have a good time doing it and enjoying the people that they work with.And I think, we're in alignment there, and we're going to continue to focus on their ability to fulfill that mission, and it aligns with ours. So it's a win-win for us.

And your next question comes from the line of Mayank Tandon with Needham & Company. Please go ahead.

Thank you. Good morning, Matt. Thanks for the commentary on Q2 Open. Could you just talk, maybe broadly, about the opportunity on the BaaS side for you? And congrats on the Credit Karma relationship.But just in that light, how big is the opportunity? When does that start to really show up in terms of the growth contribution? And how do you monetize this vis-à-vis against your core digital banking platform?

Yes. So I'll have Jennifer talk about how it layers in, but the opportunity for us, it continues to evolve. It's dynamic. We feel like we are well out in front of people on the fin -- on partnering with fintechs.We were talking with some brands, but our model of partnering a fintech with the community financial institution to where they can begin to develop against our banking -- our core processing platform, in a cloud within two weeks and begin to drive whatever user experience they want, and then, their subscription revenue that comes from the accounts, but there's also participation in interchange and float, which is unique, and it helps the community banks, or credit unions, and it helps the fintechs as well, drive more revenue through their business model. So we think, we have a unique and highly differentiated business model on that space. It's evolving, as I've said, we continue to work our way into, what I consider to be, the premier fintech names in the marketplace. And they've shown scale, they have customers, and they have a real marketing strategy and good funding.And so we're very targeted there. We believe moving into brands is an opportunity. And then we were recently at the Money20/20 conference, and there were significant conversations with many of the top 50 financial institutions in the world about how they can use our platform as well. So there's a lot of opportunity.There's a lot of execution ahead of us. But we're bringing in a different type of customer than a community bank or credit union, but we're also helping community financial institutions by partnering them with these fintechs, so that they can participate in some of the games as well. And, Jennifer, do you want to comment on the profile?

Yes, on Credit Karma's deal, just given the size and number of account holders that Credit Karma has. I would expect that their high-yield savings product, utilizing our corporate platform is going to start out similar in size to one of our Tier 2 bank deals. And, not all fintechs are that large with that big of an account base, but we certainly believe that Credit Karma is going to be very typical in size to one of our Tier 2 bank deals.

Thanks.

And your next question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

Hey, guys. This is Jonathan on for James. All right, given the Precision under acquisition, is there anything that needs to change in terms of your go-to-market strategy and sales force as it relates to integration? And can you remind us of the cross-sell opportunities there, not only as it relates to current Q2 customers interested in PrecisionLender, but also PrecisionLender customers looking at Q2 offerings?

Yes, Jonathan, so the go-to market. I think, one of the things when we looked at putting the companies together was PrecisionLender really has a strong enterprise, or what we call, the top 100 banks in the world sales team that's out there. We didn't have that -- we didn't have people in that spot. So we'll continue to leverage that organization that they have, and how they're talking to those folks.And then PrecisionLender and Q2 struck a partnership in May of this year because of our distribution network and $50 billion and below space, and our sales organization, as well as our relationship management organization to be able to cross-sell those products. And so we're going to continue to have the PrecisionLender enterprise team, as well as their community and regional team that sells in partnership with our sales organization. So it fits very nicely. Cloud Lending, there's a little bit of overlap there as well.But in general, PrecisionLender had not fully built out their sales organization. And that was one of the reasons why it was so logical to partner up with Q2. And from a cross-sell opportunity within PrecisionLender customers, I think, on the community and regional side, the platform, the Q2 platform, whether it's corporate banking or the small business stuff will be a nice fit to add technology that's on the noncredit side -- income on the noncredit side of the business for many of our partners, and PrecisionLender has such a great name with these customers that it's a trusted provider. It's vendor consolidation.It helps them quite a bit. So PrecisionLender will help us on the community and regional side. On the enterprise side of the business, I think, whether it's Cloud Lending or Q2 Open, which may be one degree of separation from the buyer, but there's a relationship in there that we can get to. And I think, you'll see PrecisionLender, in the long run, and ultimately, drag some of these products in to go cross-sell.I think that's a longer-term deal for us to be able to have, whether it's Cloud or Q2 Open in these opportunities in '20 through PrecisionLender because they're getting them turned on. They're signing the deals, but that is definitely a place that we look at. In the long end, it's going to be an opportunity for us. We've got -- we just got a couple of minutes.So I want to get this last question in.

And for your final question comes from the line of Andrew Schmidt with Citi. Please go ahead.

Hey, Matt, Jennifer, Carl. Thanks for having me. Quick -- first, so on the corporate banking side, you guys have, clearly, had a lot of traction there since you relaunched the product in 2017, I believe. Could you talk about why you're winning deals, and maybe the profile of the banks that you're winning? And then if you dig a little bit more into the linkages between PrecisionLender and the corporate banking product, that would be helpful.

Yes. So let me talk about the corporate banking product, stand-alone, and then I'll have Carl talk about what -- how he views some of the synergies on the corporate banking product -- how corporate banking partners with PrecisionLender. Just to clarify, we began doing commercial banking with the very first release of our digital banking platform in 2004 and '05. So the platform initially started out with ACH wires and tax payments.In 2011 and '12, we decided to begin to go deeper into that functionality with broader payment types, information reporting, entitlements engine, and so we made a large push to begin investing in what next-generation corporate banking will look like. And that was really a part of the IPO for us. The funding was to go to really put some wood behind the arrow on that. And, so as we've been developing the product over the last six, seven years, it takes a long time to build these, but the differentiator for us has been that we -- our clients are showing technology on mobile phones and tablets, the ability to do wires, tax payments, authorizations.You can be -- the CFO can be on a golf course and approve a wire from his mobile phone. And that is what corporates are looking for as the younger generations begin to be controllers and VPs of finance and CFOs. And so our technology is highly differentiated from a user experience perspective, it's modern, but it also drives deep functionality. And as we've said over time, a lot of the legacy players have been building corporate banking products for 30 years, and there's deep functionality there that is going to take us a while to replace, but we've been methodical in signing a deal, identifying what those features are that we've got to go to replace and building them one at a time.And that's where you're seeing our success, whether it's a $20 billion bank or $1 billion financial institution, we're driving that. We're one of the top five credit unions in the United States. So it's been -- there's been a lot of work, and a lot of time, it takes a lot of time to build these functionalities that takes deep partnerships with customers to solve those problems, and we continue to invest in that heavily. And it's a huge opportunity for us.And with that, I'm going to hand over to Carl to talk about how you view the PrecisionLender opportunity with Q2's corporate banking suite.

Well, yes, I'll go quickly on this because we're at the end. But we named the product PrecisionLender, but it really is about relationship banking in total. And it has to be for the economics of banks. I mean, most of the capital in the denominator of the return equation comes from the capital and the credit side.The majority of the numerator for a profitable relationship at a commercial bank comes from noncredit revenue. So almost two-thirds or better of that numerator will come from noncredit revenue. So to drive noncredit revenue, you have to have a tool that helps you price and structure complete relationships, both loans, deposits, other fee-based business, such as corporate treasury and those sorts of businesses as well. But you also have to have good products and delivery with great user experiences.And that's where Q2's corporate stuff comes in. And I think, we're seeing a lot of synergy, even there's some things in the pipeline where folks are buying the Q2 corporate product for building their product set and delivery capabilities, and then they're using PrecisionLender to coach their sales team and their bankers to be able to sell that and be able to drive business there. One other piece that layers into this is the data. And so the data of being able, in PrecisionLender we like to say, for a customer like this, with a deal like this, and a relationship like this, at a bank like this, and in an industry like this, here's the things we need to coach that RM to talk to that customer about, the types of business that they would buy, the types of business that they would value.And being able to look at the data from the Q2 corporate side and blend it with what we see on the opportunity side, on the portfolio side, and PrecisionLender allows us to better coach sales -- those bankers in the sales process on driving that cross-sell revenue that doesn't carry with it the capital that really drives the returns of the bank.

Thanks, Carl, and thanks, everybody, for your time today on the call. We were really able to get all the questions in, and we look forward to seeing you out on the road. In the coming weeks, we're going to be quite at quite a few shows. So get with our Investor Relations. Thanks, everybody, and welcome PrecisionLender to the Q2 family. Have a good day.