Alexander Markgraff

Alexander Markgraf questioned the 15x EBITDA multiple paid for the recent acquisition, noting it was outside the company's typical sweet spot, and asked if this was a unique transaction or if more such high-multiple opportunities were in the pipeline. He also asked for an update on the progress and benefits of the product investments planned for 2026.

Answer

Geoff Smith, Chief Financial Officer, justified the higher multiple by citing the acquired company's 20%+ organic growth, potential synergies, and over 50% EBITDA margins, calling it a 'unicorn.' Rick Stanford, President, confirmed it was a unique deal and that the current pipeline aligns with their usual 7x-10x sweet spot. Mr. Smith also confirmed that the product investments for 2026 were proceeding as planned and were a coordinated, beneficial strategy.

Alex Markgraff of KeyBanc Capital Markets questioned how the increased investment in personnel would impact the company's long-term margin expansion target of 50-100 basis points annually and sought clarity on the types of roles being added.

Answer

CFO Geoff Smith stated that he would not guide away from the 50-100 basis point annual margin expansion target, as the investment is expected to be offset by corresponding revenue growth. He clarified that the new roles are primarily in product development and quality assurance, not sales, to support bringing new products to market.

Alexander Markgraff asked for context on the RemainCo's annual recurring revenue (ARR) growth trend and inquired about the market readiness and interest level among i3 Verticals' customers for its newly introduced artificial intelligence products.

Answer

CFO Geoffrey Smith noted that ARR growth was slightly down sequentially due to payments revenue but expects it to rebound in the second half of the year and typically lead organic growth. Chief Revenue Officer Paul Christians addressed the AI question, stating that customer interest is 'really high' because the AI applications are designed to solve specific, tangible pain points, which makes adoption easier and more tangible for clients compared to broad, enterprise-level AI initiatives.

Alexander Markgraff of KeyBanc Capital Markets sought to expand on comments about integrating payments, asking if the focus was on existing customers or new business. He also requested a reminder of the growth and profitability thresholds for M&A targets.

Answer

CRO Paul Christians clarified that while integrated payments are offered with new software, there is also an active effort to approach the existing customer base, particularly in the government vertical, to add payment solutions. President Rick Stanford reiterated their M&A criteria: targets with ~10% revenue growth, margins in the low 30s to avoid corporate average dilution, and a purchase price generally not exceeding 10x EBITDA.

Alexander Markgraff sought clarification on the FY25 margin expansion guidance and its drivers, and also asked about the margin profile and potential upside in the Healthcare segment.

Answer

CFO Geoffrey Smith confirmed the guidance of 50 to 100 basis points of margin expansion for FY25, explaining it will be driven by revenue growth outpacing corporate overhead, an effect magnified post-divestiture. He noted Healthcare margins are lower due to labor-intensive RCM services, but there is long-term upside as the mix shifts to software and technology improvements are implemented.

Alexander Markgraff of KeyBanc Capital Markets asked for an outline of the product and go-to-market priorities for Intuit Enterprise Suite (IES) in fiscal 2026, given its current momentum.

Answer

CEO Sasan Goodarzi detailed a three-pronged strategy for IES. First, the company will focus on migrating the hundreds of thousands of eligible customers within its existing base to QBO Advanced or IES. Second, it aims to create a flywheel effect by deepening partnerships with accountants. Third, Intuit will continue its quarterly product release cycle to accelerate penetration of its current addressable market and expand into new ones.

Alexander Markgraff asked for specifics on what drove the Consumer Group's revenue to outperform guidance in the second quarter.

Answer

CFO Sandeep Aujla explained that the outperformance was driven by a strong start to the tax season for TurboTax Online, with better-than-expected results in both customer units and average revenue per return (ARPR). He specified that higher ARPR was a result of increased customer engagement with expert help and add-on offerings like audit defense and faster refund access.

Alex Markraff from KeyBanc Capital Markets inquired about the economics of recent bank partnerships like PNC and JPMorgan, asking who controls the user experience, the scope of services offered, and the expected timeline for these services to ramp up.

Answer

CEO Brian Armstrong described the offering as a fully white-labeled 'Crypto as a Service' infrastructure, where partners like PNC retain complete control over the user experience. CFO Alesia Haas clarified that revenue from these partnerships will be reflected in existing line items, such as institutional trading and custody assets, rather than a new, distinct revenue stream.

Alex Markraff from KeyBanc Capital Markets asked about the recent bank partnerships with PNC and JPMorgan, seeking details on the economic model, which party controls the user experience, the scope of services offered, and the expected timing for these services to ramp up.

Answer

CEO Brian Armstrong described the offering as a fully white-labeled infrastructure solution, where partners like PNC control the entire user experience. He positioned it as a 'one-stop shop' for custody, payments, and rewards. CFO Alesia Haas added that revenue from these partnerships will be reflected in existing line items, such as institutional trading volume and assets under custody, rather than being broken out separately.

Alexander Markgraff from KeyBanc Capital Markets inquired about Coinbase's M&A strategy following the Deribit deal, asking if other large, strategic acquisitions should be expected as the company seeks global leadership.

Answer

President and COO Emilie Choi positioned the Deribit acquisition as a prime example of their M&A strategy to bolster their institutional platform. She stated that Coinbase is in its strongest-ever position to pursue further M&A, citing a robust balance sheet and increasing regulatory clarity. She indicated that the market is ripe for deals and that investors should 'expect a lot more from us' in the coming years.

Alexander Markgraff of KeyBanc Capital Markets Inc. asked if the wide sales and marketing outlook range is a new forecasting approach and requested a picture of how non-crypto native companies are using the Coinbase Developer Platform (CDP).

Answer

CFO Alesia Haas clarified the wide guidance range is a function of current volatile market conditions, providing flexibility to invest in marketing. CEO Brian Armstrong described a multi-stage adoption path for non-crypto natives: starting with treasury management (holding Bitcoin), progressing to B2B payments, and eventually using on-chain tools for sophisticated applications like customer rewards and governance.

Alex Markgraff of KeyBanc Capital Markets inquired about the potential for future partnerships similar to the Mercoin deal, the monetization strategy for its volume, trends in marketing spend and customer acquisition cost (CAC), and the outlook for share-based compensation (SBC) expenses.

Answer

CEO Gary Simonson addressed the Mercoin partnership, noting that while other opportunities exist, it is too early to provide revenue guidance, but the volume would likely be treated similarly to marketplace revenue. CFO Jason Sandberg explained that customer acquisition cost (CAC) remained consistent, while marketing spend was reduced from the prior quarter. Both executives clarified that the quarter's high share-based compensation was largely a one-time event related to the company's SPAC transaction and should not be considered a recurring quarterly expense.

Alex Markgraff of KeyBanc Capital Markets inquired about the growth potential beyond the new Mercoin partnership, trends in marketing spend and customer acquisition costs (CAC), and the forward outlook for share-based compensation (SBC).

Answer

CEO Gary Simonson described the Mercoin partnership as a significant opportunity given Mercari's large user base, but noted it was too early for specific revenue guidance. CFO Jason Sandberg stated that CAC was held consistent and marketing spend was reduced from the prior quarter. Both executives clarified that the quarter's high SBC was largely a one-time event tied to the company's 2024 merger and should not be considered a recurring quarterly expense.

Alexander Markgraff asked about Remitly Business, seeking insights on the competitive landscape, the pricing dynamics of B2B versus P2P remittances, and the strategy regarding first-party development versus partnerships.

Answer

Co-Founder and CEO Matt Oppenheimer explained that Remitly Business targets an underserved segment of freelancers and small businesses who were already using the consumer product. He noted this segment prioritizes reliability, speed, and affordability—Remitly's core strengths—over complex features. He expressed confidence in the ability to move upmarket over time and capture a significant portion of the expanded $22 trillion TAM.

Alexander Markgraff from KeyBanc Capital Markets asked to quantify the growth opportunity that was previously inaccessible due to more restrictive sending limits.

Answer

CEO Matt Oppenheimer explained that the previous system was based on rigid, dollar-based tiers, which created friction. The new, more sophisticated risk-based approach uses data and machine learning to dynamically assess risk. This has unlocked a significant opportunity by making it easier for trusted customers to send larger amounts, a segment that was previously underserved due to friction in the process.

Alexander Markgraff asked about the difference between the updated 2025 revenue outlook and the preliminary guidance from the prior quarter, and requested color on expectations for gross adds and retention.

Answer

CFO Vikas Mehta clarified that the full-year revenue growth of 24-25% is expected to moderate sequentially each quarter from the higher Q1 growth rate. He reiterated that active customer growth would align with revenue growth, driven by increased transaction frequency. He cautioned against focusing on quarterly net adds due to statistical noise, stating that the growth of RLTE (revenue less transaction expense) dollars remains the company's primary success metric.

Alexander Markgraff asked for the rationale behind using 'marketing expense per quarterly active customer' as a key metric and sought to understand how it reflects spending on new versus existing customers.

Answer

CFO Vikas Mehta explained that the metric is a composite way to evaluate the efficiency of marketing spend across both new customer acquisition (driven by performance marketing) and existing customer engagement (influenced by brand spend). He clarified that while the majority of spend drives new acquisitions, the ultimate goal is to optimize lifetime value to acquisition cost (LTV/CAC), and the company's payback periods remain very solid.

Alex Markgraff of KeyBanc Capital Markets asked for details on crypto monetization on the core Robinhood platform and any effects seen from the smart exchange routing feature.

Answer

CFO Jason Warnick explained that customers can trade via a market maker model, where the rebate was recently moved to 85 bps, or via the smart exchange router, which offers volume-tiered discounts down to 10 bps. He noted that direct-to-exchange traders are bringing more volume and generating more revenue per trader despite the better rates. The blended rate was 58 bps in Q2 and moved to the mid-60s in July.

Alexander Markgraff of KeyBanc asked how Robinhood manages contribution margins as it launches and scales new products with different monetization levels and economic characteristics.

Answer

CFO Jason Warnick explained that the company's primary goal is to optimize for increasing earnings per share and free cash flow per share over time. He emphasized that as a technology company, Robinhood is well-positioned to serve various businesses at a low incremental cost, leading to high incremental margins and significant operating leverage, as evidenced by revenue growing much faster than costs.

Alexander Markgraff asked about the company's approach to deposit incentive offerings in 2025 and requested clarification on whether the $50 million revenue from the Legend platform is entirely incremental.

Answer

CFO Jason Warnick stated that while it's still early, the company is confident there is 'strong incrementality' from Legend. CEO Vladimir Tenev noted that deposit incentives are becoming more personalized, such as APY boosts for Gold members, and that the economics of these programs remain very attractive for growing assets.

Alex Markgraff from KeyBanc Capital Markets asked for clarification on the 200-hour deployment goal, seeking a comparison to current timelines. He also inquired about the potential impact of faster delivery on the timing of revenue recognition.

Answer

CEO Sean Desmond characterized the 200-hour goal as a bold target, contrasting it with current project timelines that range from 2-6 months for community/regional banks and 6-18 months for enterprises. The goal is to shift from months or years to days. CFO Greg Orenstein clarified that faster deployments would not impact subscription revenue recognition but would be key to improving professional services gross profit and margins over time.

Alexander Markgraff asked for management's view on a normalized retention rate for the business and the expected ramp time to productivity for new sales representatives and segment leads.

Answer

CFO Greg Orenstein indicated that while the subscription revenue retention rate will moderate, he expects the newly introduced ACV net retention rate to improve and highlighted it as a key metric to watch. He also stated that the company assumes an average ramp time of about six months for new sales reps.

Alexander Markgraff of KeyBanc asked for details on the AI "agents" strategy, including the user experience and its potential impact on the business model through metrics like transaction intensity or wallet share.

Answer

CEO René Lacerte outlined a vision where AI agents automate mundane financial tasks, freeing up SMBs. He highlighted BILL's unique ability to deliver this, based on two core assets: a deep understanding of SMB pain points and a massive, proprietary data set from processing nearly 1% of U.S. GDP. He believes this will allow BILL to build uniquely contextual agents that drive significant value and adoption.

Alexander Markgraff asked about BILL's potential to launch treasury and banking products, similar to competitors, and inquired about the ultimate potential reach of the BILL platform within the SMB back office.

Answer

CEO René Lacerte stated that BILL is already active in this area with its 'BILL Balance' product, which he described as an early-stage treasury solution enabling instant payments. He emphasized his long-standing mission to democratize treasury functions for SMBs by providing cash flow management tools, with transaction execution at the core of this strategy.

Asked about the assumptions in the full-year guidance regarding the transaction/principal dynamic, the company's agility on OpEx, and the reason for the sequential decline in digital revenue from Q4 to Q1.

Answer

The guidance assumes the trend of lower transactions and higher principal per transaction continues but moderates toward year-end. The company has limited OpEx flexibility outside of managing planned digital marketing spend, as the cost base is already lean. The sequential decline in digital revenue was attributed to normal seasonality, as Q4 is a much stronger quarter than Q1.

Alexander Markgraff of KeyBanc Capital Markets asked about the assumptions within the full-year guidance regarding the trend of higher principal and lower transaction volume. He also inquired about remaining OpEx agility and the reason for the sequential decline in digital revenue from Q4.

Answer

CFO Andras Bende explained the guidance assumes the transaction dynamic continues but improves toward year-end. He noted OpEx agility is limited as the company is already lean, with future G&A growth driven by planned digital marketing. CEO Robert Lisy and CDO Marcelo Theodoro clarified that the sequential digital revenue decline was purely due to seasonality, as Q1 is the weakest quarter of the year while Q4 is typically the strongest.

Alexander Markgraff requested an update on the company's cross-border payment initiatives and any opportunities created by Mastercard's recent moves in that space.

Answer

CEO Michael Praeger explained that while the cross-border capability (partnered with Wise) is performing as expected, it is not a primary growth vector. He noted that AvidXchange's core industry verticals are highly localized, with over 95% of its supplier network being U.S. domestic, thus limiting the natural demand for cross-border payments on the platform.

Alexander Markgraff of KeyBanc Capital Markets asked about the net effect of the top-of-funnel strategy shift on new customer revenue contribution and sought more color on whether the yield pressure was broad-based or concentrated.

Answer

CEO Michael Praeger stated the objective is to hit the sales plan, and year-to-date new customer adds are ahead of last year. The shift in marketing spend allocation is yielding more efficient, higher-quality leads. CFO Joel Wilhite added that the yield dynamic is fairly broad-based across verticals and not specific to any one area.

Alexander Markgraff asked if the recent improvements in automation, using AI and bots, could accelerate AvidXchange's path to achieving its 55-60% digital transaction penetration target for 2025.

Answer

CEO Michael Praeger confirmed that new AI tools do help advance their goals by enabling the electronic processing of small-dollar transactions that were previously not cost-effective to automate. While this increases electronic penetration, he noted that because they are small-dollar transactions, the impact on overall volume is modest, but it remains an important strategic lever.

Asked about the overlap between tax refund and payroll direct deposit users, the strategy to convert them, and for an indication of inflows growth excluding tax refunds.

Answer

Amrita Ahuja clarified that paycheck direct deposit inflows grew faster than overall inflows, neutralizing the seasonal tax impact. She described the tax product as a discovery initiative for Cash App's broader financial services. The main strategy for conversion is not specific to tax users but focuses on improving the overall product suite and then using compelling bundling and pricing to attract users.