Subscription Growth Outlook
Q: Can you frame the factors behind the 15% subscription growth guidance for next year?
A: The company has seen strong subscription ARR growth, averaging about 17% over the last five quarters. Some large deals from Q4 last year and Q1 this year will go live mid-next year, impacting the full year's growth by 2026. Therefore, while benefiting from current ARR growth now, the full subscription revenue impact will stack up as they exit next year.

RPO Growth and Execution
Q: What is driving the strong sequential increase in RPO this quarter?
A: The significant $426 million year-over-year growth in backlog, up 28%, is attributed to solid execution in expansion activities like cross-sell and renewals. This expansion adds considerable backlog, and the team has been improving in this area over the past six quarters.

Gross Margin Expansion
Q: Where do you see subscription gross margins trending in the medium term?
A: The target remains to achieve 60% gross margin over the next few years, through 2026. The company is improving efficiencies in implementation and support, and the mix shift toward subscription revenue enhances the overall gross margin profile. For subscription services alone, gross margins are typically around 70% post-renewal.

Services Revenue Decline
Q: Is there a timeline for services revenue to normalize?
A: Based on current knowledge, the decline in services revenue is expected to continue for the foreseeable future. The company has seen a reduction in net new services work, and existing customers have pulled back on services like rebranding and M&A projects. Additionally, a large customer that was acquired continues to reduce its services component gradually over time.

Banking-as-a-Service Opportunity
Q: Does the recent BaaS vendor failure create opportunities for Helix?
A: The vendor's failure has created noise but also opportunity in the space. The company is being prudent in selecting customers, focusing on those that fit well. Their position as a core provider and their experienced bank partners are differentiators, especially in an environment with increased regulatory focus on BaaS.

Expansion-Based Subscription Strength
Q: What's driving the stronger-than-expected subscription expansion?
A: It's a combination of team execution—focusing on renewals and extracting better economics—and market-driven demand for products like Centrix in risk and fraud. Teams are articulating the value added over contract terms, leading to better pricing alignment.

Guidance for Q3 and Q4
Q: Why does guidance show a dip in Q4 growth to 10%?
A: The sequential guide for Q3 is roughly flat due to seasonality in the Helix business, which peaks during tax season. Professional services are also facing pressure, with known roll-offs over the next three months. In Q4, revenue is expected to ramp up by 2% to 5% sequentially from the Q3 baseline.

AI Adoption and Andi Copilot
Q: How are banks approaching AI, and what's Q2's strategy with Andi Copilot?
A: Banks show a lot of interest in AI but are taking a measured approach due to risk considerations. Q2 is focusing on responsible, ethical, and practical AI solutions that embed efficiencies in existing products. Andi Copilot aims to make bankers more efficient by providing assistance and advice at the right time.

Demand Across Bank Tiers
Q: Where is demand generation strongest among bank tiers?
A: Demand is particularly strong in the Tier 2 space, with Tier 1 building back up. The company expects a solid back half of the year, including Tier 3, Tier 2, and Tier 1 banks.

Impact of M&A Trends
Q: Is slower M&A affecting long-term targets?
A: It's hard to predict M&A activity, which depends on administrative policies. If historical trends pick up, M&A would be a tailwind for the company. Currently, they are performing well despite the uncertainty.

Exposure to Smaller FIs and Win Rates
Q: Have you seen an impact on win rates with smaller financial institutions?
A: The company has had success in Tier 2 and Tier 3, with win rates at or better than historical levels. They focus on banks that view technology as a strategic asset, regardless of size.

PrecisionLender Update
Q: What's the demand for PrecisionLender, and future opportunities?
A: PrecisionLender is seeing consistent demand not observed in 2020 and 2021, picking up since late 2022. The addition of Premium Treasury Pricing addresses key revenue areas for banks, and there's significant opportunity ahead.

Subscription Growth Outlook Beyond 2024
Q: Should we view the 14% three-year subscription CAGR as a floor?
A: While the company feels good about the current strength and drivers for subscription growth, they are not ready to update the three-year guidance at this time. They will assess demand over the coming quarters before providing further updates.

Common Themes in New Wins
Q: Are there common themes driving net new customer wins?
A: Increased utilization of digital products post-pandemic has driven demand. Banks with outdated products that lack investment struggle to keep up, leading them to seek comprehensive solutions like Q2's single platform.

Free Cash Flow and Conference Expenses
Q: How should we think about free cash flow conversion in H2 and conference expenses?
A: There will be a dip in cash flow from operations and free cash flow in Q3 due to working capital normalization, followed by a seasonally strong Q4. The Connect conference expenses last quarter were about $1.5 million.