Ncino Aktie

My name is Cris Kennedy. I'm a research analyst at William Blair, who covers the fintech and payment space. For a complete list of research disclosures and/or potential conflicts of interest, please visit our website at williamblair.com.

Next up, we have nCino. From the company, we have the CFO, Greg Orenstein; and in the audience, Harrison Masters from IR. The company was founded in 2011. They provide software that helps their clients become more efficient and ultimately grow. The company has evolved over the years, but they -- and now they're clearly focused on AI, banking and providing that solution. I think the important thing to know is this is a highly complex, highly regulated market that's not easy to disrupt. I'm sure Greg is going to talk about that. So let me pass it over to Greg.

Great. Thank you. Thank you all for joining us here today. It's a pleasure to be here talking about nCino and what we do, as you know, the platform for agentic banking. Of course, we have to go through the forward-looking statements disclaimer. So please note the attach. So our lawyers are happy. So thank you for noticing that.

Expanding upon what Cris mentioned, we were founded to help financial institutions across the globe, digitize, automate and streamline their business processes, really boosting efficiencies. Efficiency is a keyword you'll hear today and as you learn more about the company and creating better banking experiences for our customers' customers.

For nCino's customers, we serve as the system of record for the operational processes and resulting decisions that drive revenue growth and importantly, mitigate risk. Today, we serve some of the largest institutions across the globe as well as community banks, regional banks here in the U.S. and credit unions and independent mortgage banks. And we help them more efficiently and effectively do 4 things: onboard customers, make any type of loan, open any type of account and ultimately monitor portfolios. And we do that through a single unified technology platform that is powered by artificial intelligence.

Our depth and breadth of customer relationships, the unique data set that we have, our history of technology innovation that has been built on over 1.5 decades of deep domain expertise inside the highly regulated world of banking, it really uniquely positions us to lead the AI-based transformation happening in the financial services industry.

You'll note financial results for fiscal year 2026 on the slide, which for us ended on January 31. So this is just a snapshot of last year, where we made a meaningful progress on increasing profitability while reaccelerating top line revenue growth. Last year was also the best sales year in the history of the company. And the fourth quarter specifically was the best sales quarter that we've had in the history of the company. So we exited last year and entered this year with a lot of momentum around the globe.

The nCino platform brings together AI and data in one place, eliminating the chaos of disconnected systems and giving financial institutions a unified foundation, again, to onboard clients faster, originate loans smarter and more deeply understand their customers and their business. With intelligence embedded across every solution, our customers can see what's coming, act quickly on what matters and build relationships that last with their customers.

One of the things that makes nCino's platform different isn't just a specific single feature, it's how everything works seamlessly together. AI operates invisibly in the background, delivering results in seconds while maintaining institutional knowledge and compliance standards our customers can validate and most importantly, trust, not only for their internal purposes but in connection with their -- with the regulatory oversight that they're subject to.

The nCino platform has been built to surround and provide a complete 360-degree view of a customer's customer, which contrasts to legacy technology infrastructure that historically has been organized by financial institution line of business. With nCino, a customer can originate any type of loan, open any type of account and onboard any customer across primary lines of business of commercial, small business and consumer, including mortgage. We do that on a unified platform that is scalable for a bank of any size, and that's something that's very unique to nCino. The same code that runs a small community bank here in the United States, runs some of our -- the largest banks here in the United States as well as globally. And again, that's very unique in the competitive landscape.

Most of the competition we see on a global basis is actually concentrated here in the United States, down market in the community bank and credit union space. And those vendors have had a challenge historically of demonstrating the ability to scale. And so when a bank thinks about growth, thinks about wanting to grow, whether it's organically or through acquisition, nCino really is the alternative for them to have that platform that they know they can grow on and not have to worry about replacing the platform over time.

One of the other unique things about nCino is our ability to serve banks across the globe. As noted on the slide, we have customers in over 25 countries and over 20% of our subscription revenues last quarter were generated outside of the United States. We can handle over 100 currencies and languages and financial institutions across the globe, they're faced with similar challenges, right? While there are regulatory and cultural nuances to solve for, we always joke the old adage a loan is a loan is a loan and other similarities hold true on a global basis.

Our value proposition resonates. There's not an institution that I've spoken to in my over 2.5 years at the company that does not have a desire and need to focus on becoming more efficient. And that is exactly what we're here to help them do. And that is very natural to us. That's the business that we've always been in, helping our customers become more efficient. We did that when we took them from on-premise technology to the cloud. And again, now with AI, we actually have just a newer technology that helps us create further efficiencies with our customers.

We are probably unique in our ability, again, to serve globally, not particularly in our vertical with a single platform and a single common code base. We lean into opportunities specifically in EMEA. We originally were focused in the U.K. and Ireland, where we had very early success and built up a very nice customer base. And our attention continuing to support and expand that over the last year or 2 has been more aggressively moving on to the continent. Our largest logo last year was actually from a bank in Austria, driven by our EMEA team, which we're really proud of.

Another geo that we've been very excited about and continue to be very bullish about is Japan. In the fourth quarter last year, we cracked into the mega banks with an over $2 trillion financial institution to pick us to help standardize their operations. We also have operations in the Middle East and customers there, and we see increased opportunities for growth in Southeast Asia.

If you take a step back and look at our SAM, we have a sizable global opportunity. And today, we have a very well-established go-to-market motion. We measured our SAM at $10 billion at the time of our IPO back in 2020. And since then, we've almost been able to double it through the addition of projects and expansion from a geographical perspective. This SAM calculation was derived by extrapolating ACV in our existing base to relevant financial institution assets, which is how we think about the opportunity going forward, given our new pricing model, which allows nCino to participate in the growth of our customers' assets.

We see a large greenfield opportunity on the continent in Europe as well as in APAC, as I touched upon a few moments ago, and a tremendous opportunity to cross-sell within our installed base where we have already helped our customers realize a lot of business value and where we have deep long-standing, very positive and constructive customer relationships.

At nCino, we measure success based on the outcomes we deliver for our customers. When you can have a conversation about how you've helped the bank grow their loan portfolio, increase deposits or how you've helped them remove time and expense from a process, that elevates you from being just a vendor to being a strategic partner, and that is the position that we want to be with our customers.

We frequently hear C-suite executives referring to nCino programs when they speak to their shareholders on public earnings calls because the value proposition has been demonstrated again and again, and it sends a clear message to the market that they -- that financial institution is committed to becoming more efficient.

We have a proud heritage of success and customer outcomes with some more recent ones depicted on the statistics at the top of this slide. These outcomes have been achieved largely with the technology that's been available to our customers over the last decade and almost half. And now obviously, we've got new technology that we're incredibly excited about as are our customers, which is AI. And we believe that we are uniquely positioned to deliver AI to our customers to reshape the work of banking, much of which is already performed on our platform today.

We have a foundation of contextual data. We have the governance and security infrastructure. We have the trust, most importantly, of our customers, and we own the process, right? And we've demonstrated for almost 1.5 decades that we can make financial institutions more efficient, and we've been iterating on our product every day to continue that over the history of the company. AI is just a new and very exciting tool available to make our solution even better.

There are 3 components to our AI strategy. The first one is banking adviser. And you can think about that as the chat interface and foundational set of generative AI tools for nCino. The second one is digital partners. That's our term for agents. Think of those as persona-based agents that leverage the banking adviser tools to accomplish work that would otherwise be performed by human bankers. Now the banker is an orchestrator with human judgment preserved in the process where and if it makes sense.

And the last one is we've got the third leg as our MCP or API interconnectivity layer. And at our customer conference a few weeks ago, we talked about and unveiled the agentic operating system, which is the architecture on which we at nCino have built our AI capabilities. In the AOS, what it really does is it supports 3 things. One is it provides governance and observability in orchestrating AI. The agentic operating system is how we direct agents today.

The second thing is it provides customers the ability to build their own agents. And the third thing is it provides the connectivity and interoperability with other systems. So for example, if a bank has developed a call center agent, that agent can traverse the customer's nCino environment to access client data to facilitate a support call. We actually have a short demonstration video I'd like to share so you just get a small appreciation for some of the value that we can deliver to our banking adviser and digital partner capability. Let's see this.

[Presentation]

And again, I think one of the things that's very exciting for us as a technology company is the trust that we have with our customers, the relationships we have with our customer. Obviously, there's a lot of noise in the market about AI, and we see them looking to us to help lead them on this AI journey.

Our AI solutions are unique and then they've been specifically tailored to the challenges faced by financial institutions, automating the tedious manual work that previously consumed banker time and robbed business value. nCino has the domain expertise to identify where AI can be applied to deliver measurable efficiency improvements like increasing deal velocity and mitigating risk before they impact the P&L of a financial institution.

We also have benchmarking data that informs our AI road map and is also available to our customers so they can appreciate the outcomes they're getting from our platform and how they compare on an anonymized basis to their peers. I'm not aware of another competitor in the market with the same positioning and ability to deliver AI that nCino has. And just as we ushered our customers into the era of the cloud, nCino is emerging as the trusted partner that can lead them on this AI transformation journey.

Switching gears from strategy to an update on our financials. We released earnings a week or so ago, and we posted a really strong first quarter of fiscal '27, achieving the Rule of 40 a couple of quarters earlier than anticipated, which we define as subscription revenues growth plus non-GAAP operating income margin. We outperformed guidance across all key metrics and have guided to accelerated organic subscription revenue growth for this fiscal year.

A key enabler of the accelerating subscription revenue growth has been an acceleration in organic international subscription revenues. We are pleased to report this was again accretive to overall subscription growth in the first quarter, and we are seeing the fruits of renewed focus in Continental Europe with our largest deal last year. And again, Japan, we had a great win there. And last year, we tripled the size of ACV in our Japanese business. Again, continue to be very excited about the opportunities we see in that country.

And lastly, I'm especially proud of how the organization has continued to operate more efficiently. In the first quarter of fiscal '27, non-GAAP operating income increased 79% over the first quarter of fiscal '26 and free cash flow increased 54% to $80.8 million, which is nearly the amount of free cash flow we generated all of fiscal '26.

Recognizing that free cash flow has increasingly become the common denominator for valuations in our space, we have, for the first time this year, provided annual guidance for that metric. And the increasing free cash flow that we have been able to generate and that we see our ability to continue to generate has enabled us to repurchase 11 million shares of our stock for approximately $219 million over the last 5 quarters, including 6.1 million shares in the first quarter of fiscal '27 at a price of $15.20 a share.

So in sum, we're really pleased with our latest financial results and the progress made over the last several quarters at the company. We are incredibly excited about the position we find ourselves in as a trusted vendor in the highly regulated world of banking as we lead our customers on the AI journey to again transform the way they operate their financial institutions. And with that, Cris?

Yes. Just I'll start out with AI. I mean now you have a presence in the largest of the largest institutions all the way down to the community banks. Just talk about what you're hearing from your customers and how they're viewing AI.

Yes. Obviously, it's top of mind for most, if not all, folks. But really, what we're seeing them look to us towards is to be a trusted partner. Again, I mentioned it earlier, there's a lot of noise and confusion out there. They're being inundated with ideas and opportunities. And what our job is to help hold their hand, if you will, and walk them on this AI journey. And so for us, it's an incredibly exciting time. We've got a lot of product out there live and referenceable. We had customers up on stage at our user conference just a couple of weeks ago talking about the efficiency gains that they're already seeing. And ultimately, that's the position that we want to be in, which is to help them understand the value of it, the efficiency gains that they can get from it. And again, look to nCino to help take them on that journey.

And so for us, yes, this is just a massive opportunity that we see, and it's been a very energizing one. It almost feels like, again, earlier days of the company, creating this category called cloud banking, which did not exist. We find ourselves again kind of creating new ground. And again, I think we are uniquely positioned to provide benefit and efficiency gains for our customers.

Understood. You clearly have a product road map. Can you just talk about the opportunities for you to monetize some of the newer products you have in AI?

And so we started a couple of years ago on a journey of transitioning away from seat-based pricing to -- for us as our foundation asset pricing based on the assets that a financial institution has on our platform. We formalized that going into last year. We commented on our call last week that we have now over 40% of our customer base on platform pricing. But really, we saw with the efficiency gains that we were driving that over time and the more that we were able to automate over time, a customer will need fewer and fewer seats, which is obviously not a great business model.

And so we are more aligned with them with asset growth from a value standpoint. So as their assets grow, we're able to have -- be able to participate in that growth. And so we do that by bands, asset bands. So a customer will get a price for a particular asset band. And then each year on the anniversary date of the customer contract, we'll go and recalculate the assets that are sitting on our platform. And to the extent that they move from one band to another band, the invoice or the price for the new year will be based on the new price band.

Historically, asset growth has tracked GDP. And so we see the opportunity with each customer to be about 2% to 3% uplift each year based on that asset growth. Not every customer is going to move assets. Some may move multiple assets depending on growth. But at least from an opportunity standpoint, intra-contract to be able to raise prices as we continue to drive value for our customer, we're able to participate in there.

In addition to that, with AI, we've got intelligence unit consumption opportunities, which is really for us, if you go back, is a new growth opportunity, right, one that 18 months, 2 years ago really didn't exist. And so we are selling bundles of what we call intelligence units. We have over 200 customers that have purchased our AI technology that have purchased these intelligence units.

And in order to use our AI technology, you need to be on our new pricing platform. So it's actually been a catalyst for customers to renew early, which has been a great trend to see, right? Because in order to use AI, again, they need to be on the pricing model. And the way it works is each month, they get a monthly allocation. And to the extent they exceed that allocation, they would need to come back and buy more.

We've been very transparent and vocal about our focus for the short term, which we said as we think about this year is on adoption. If we do the adoption thing right, the revenues are going to come. And it's great to see usage going up. We gave a statistic that since October, to go back to our Q4 call at the end of March, we had seen usage increase over 25x towards the end of March and have used that same October starting point over 38x through the third week of May in terms of increased usage. So I think the trends are great. The adoption is going well. And ultimately, the receptivity or desire for our customers to use our AI technology, I think, has exceeded our expectations.

Got it. And on the flip side of that, there are costs associated with tokens. Just how are you managing or thinking about that as this business continues to grow?

Sure. And there's an internal and external component to that. Obviously, internally, as you think about leveraging cloud code and things like that, it is something that we're monitoring closely and very importantly, making sure we're getting the returns on the investments that we're making. We talked about on our earnings call last week, some of the statistics and some of the efficiency gains that we're seeing. And so I think we feel good about that, but it is something that we're monitoring and making sure we have the right guidelines and infrastructure in place so that people are using the right models to solve the right problems, right? And so that's from an internal perspective.

A year ago, we talked about an initiative, for example, in terms of some of the returns for our professional services organization as we've been very focused on increasing our gross margins in professional services. We had something that we called internally Project Subzero to bring that time line down and get our margins up. And so we were very pleased in Q1 to show 10% margins for our professional services organization, which was a very nice leap. And again, that's driven in part by some of the AI investments that we've made and some of the efficiency gains that we've seen from them.

From an external standpoint, I think a few things. One is I think about least-cost routing in terms of model use and which model you need to solve what problem. The other thing I'd highlight, and I noted this on our earnings call, not every one of our intelligence units that gets consumed actually requires a third-party LLM. We have things like our auto spreading capability, which is proprietary machine learning data that we have that we leverage that helps drive the results from that, that's internal. It does use intelligence units. But ultimately, that's an internal product that we have. And again, that would come at a very high margin for us. So I think that mix also because we have all of this other data that we're helping drive intelligence and provide information to our customers with is part of the additional value add that we can provide from an AI standpoint.

The CEO came in maybe a year -- just over a year ago, you kind of outlined 5 strategic initiatives. Can you just provide an update on those initiatives?

Absolutely. Again, wanting to get back to growth, right? And again, hopefully, we've been able to demonstrate continued consistent improvement from an operating margin standpoint, but want to make sure this business is growing at a rate that is reflective of the quality of this business, and we haven't been happy where that was. There are some external factors that impacted that. And obviously, always there's things that we can do better. But driving reacceleration of growth, it was nice to see that trajectory change this year. And that was in large part due to the 5 initiatives that we talked about that you mentioned, Cris.

One is international. Again, last year, internationally, we had the highest gross bookings year that we have had outside of the United States. That is accretive to growth, we said. And so that's been very nice to see. And again, I think we see continued opportunities there as again, it makes up about half of our overall SAM.

The second one is we formed a credit union team. We've been selling to credit unions for years, but we really wanted to make sure we had a team that was just exclusively focused on that market. There's some nuances there between credit unions and banks, and it's important that we're sensitive to those. So they had a good year last year, not only getting the team organized and up and running, but also building pipeline. In the first quarter, we announced that they signed their largest deal to date, that team. And so real pleased to see that. That was a multiproduct platform sale. So pleased to see that.

The third thing would be mortgage, cross-selling our fantastic mortgage solution into our large bank and credit union customer base, particularly going upmarket. And we were able to announce in the fourth quarter, signing a top 35 bank, an $80 billion asset bank for mortgage, which was a great cross-sell as they use other solutions from nCino.

The other one is AI, which obviously we've talked about. And then the final one is onboarding. And there's kind of 2 components to that really through acquisition. One was we acquired a company called FullCircl in the U.K. I've been pleased with that. That business, it's evolved into a client life cycle management opportunity and not just in the U.K. where it was initially based and focused, but again, as we move more aggressively on the continent, we're taking that product with us from an onboarding perspective.

And then in the U.S., we had an acquisition we did called DocFox. We've talked over the last quarter or 3 that the integration of that post acquisition took us longer than we wanted it to. But I think as we sit here today, we feel really good about that product being fully integrated into the overall platform experience. And our expectation as the year progresses is that we'll have some nice data points to talk about there. So all those have been moving along very nicely, and I think pleased to see that. And that, again, helps drive that reacceleration of growth that we've been so focused on.

Great. The company started in the commercial segment and then they evolved into the consumer segment. Consumer is probably, I don't know, under 15% of ACV or so. Can you just talk about the journey in the consumer segment for nCino and the opportunity there?

Yes. It has been a journey. We had great success initially with our commercial offering, kind of expanded into small business and then the consumer. I think appreciated there are differences between the consumer, not only regulatory environment, but also just expectations from a user standpoint. And so ultimately, we've -- the consumer, what we really see resonates as part of our platform story. We've had good success, both upmarket, selling a $200 billion bank, but particularly, I'd say, in the credit union space and the community bank space. And so we have a very compelling consumer offering, and we feel good about that is.

It's more, I'd say, singles and doubles just in terms of kind of size of deals, right, versus commercial tend to be larger. And so sometimes they get a little more attention on the commercial side than the consumer side when you have 5 bullet points to highlight in a particular moment. But we have a competitive and I think compelling consumer stand-alone product. And then I think it becomes even more compelling as part of our overall platform story where a financial institution is able to standardize their commercial, small business, consumer, mortgage, onboarding and account opening all on nCino and get the efficiencies from doing that versus having multiple different point solutions, which is historically how they purchased their software.

You talked about it in your presentation, just once again, just talk about the competitive moat within this bank tech market.

Yes. Look, I think in this world and everyone is concerned about changes in technology, from our perspective, we have been and continue to be in the change management business, right? What we drive our customers to do is change the way that they operate their financial institution to be more efficient, to be more competitive. And so again, now there's a new technology to do that. We have a customer base of a couple of thousand customers across the globe, including banks of all sizes. And I think that trust factor, the fact that this is what we do, right? We now have new tools to do it even better is exciting. We have demonstrated an ability, unlike any other competitor out there, to scale, again, all the way up to the largest banks in the world.

We have housed our customers' data for almost 1.5 decades. And that trust component, which I keep coming back to, is evidenced by the fact that we have over $11 trillion of assets that sit on our platform that our customers have given us consent to use the data supporting that to help some of our product initiatives like the benchmarking that I referenced earlier in my prepared remarks.

And so while new technology comes and goes, and obviously, this is an exciting time, we sell to a very conservative, highly regulated market. And I think most importantly for them is that they can trust their vendor. They know they've got a vendor that innovates, right, and that they're getting the return on their investments that they make and who can safely lead them on this AI journey, frankly, at a pace that they're comfortable with. We see customers who are jumping kind of feet first at first, if you will, and others who are going to be more on the tail end. They all have different speeds. They all have different risk tolerances. We understand that. And again, I think that's why we're uniquely positioned to be a huge beneficiary of AI and banking.

All right. We're going to end it there. There is a breakout upstairs. Thank you all for your time.

Good day, and thank you for standing by. Welcome to the nCino First Quarter Fiscal Year 2027 Financial Results Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations.

Good afternoon, and welcome to nCino's First Quarter Fiscal 2027 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business.

These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions.

nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.

With that, I will turn the call over to Sean.

Thank you, Harrison, and welcome, everyone. Before we turn to highlights from our strong first quarter, I want to take a moment to remind you of nCino's mission in the market. nCino was founded to help financial institutions across the globe digitize, automate and streamline their business processes, boosting efficiencies and creating better banking experiences.

NCino serves as the system of record for the operational processes and resulting decisions that drive revenue growth and mitigate risk for our customers. We serve some of the largest financial institutions in the world as well as regional and community banks, credit unions and independent mortgage banks, helping them more efficiently and effectively onboard clients, make loans, monitor portfolios and open accounts through a single unified platform powered by AI.

Our depth and breadth of customer relationships, unique data set and history of technology innovation built on almost a 1.5 decades of deep domain expertise inside the highly regulated world of banking uniquely positions nCino to lead the AI-based transformation of the financial services industry.

Turning to the first quarter. We delivered a great start to the year, outperforming guidance across all key metrics, including accelerating subscription revenues growth to 12% and improving our non-GAAP operating margin to 28%, achieving the Rule of 40.

The entire organization continued to execute with focus and discipline across the strategic initiatives instituted in fiscal '26, and I couldn't be more proud of their hard work and efforts. Customer conversations continue to reinforce that every financial institution is thinking about how they can leverage AI to be more efficient, and they are recognizing that to make AI work for their organization, they need a trusted partner like nCino.

We help our customers harness AI specifically for banking by providing the context and data needed to deliver reliable outcomes while also providing the governance infrastructure required to satisfy legal, risk and regulatory requirements. Every AI interaction on our platform is auditable, traceable and governed by the same standards our customers apply to their human workforce because in banking, intelligence without accountability isn't intelligence.

It's a liability. Banking adviser is the first expression of our Agentic operating system, the intelligent layer that orchestrates AI across the full range of banking operations that we unveiled 2 weeks ago at Insight, our annual customer conference. Our digital partners, purpose-built AI agents for distinct banking roles from executive strategy to loan processing to client engagement represent the next wave of capabilities built on this infrastructure.

This isn't a single chatbot. It's a platform designed to embed nCino intelligence into every workflow a financial institution runs. Customers that want to leverage nCino's AI capabilities must first adopt our new platform pricing model that correlates our business model to our clients' outcomes. At the end of Q1, over 40% of our ACV has already transitioned to this pricing model, which we believe demonstrates the heightened urgency in the market to embrace nCino's AI technology.

We generally monetize our platform with platform fees and also through the sale of AI token bundles, which we call intelligence units. Customers use these intelligence units to execute various AI tasks on our platform. Some tasks are as simple as chat usage where users can ask a question like, is this borrower in compliance with their covenants while others are more complex and compute-intensive like agents that continuously monitor the credit performance of an entire loan portfolio.

As of the end of Q1, over 200 of our customers have their initial bundle of intelligence units. We've been very intentional about how we package these initial bundles of intelligence units as our near-term strategic goal is to maximize and accelerate the adoption of our AI features.

To this end, we thoughtfully size initial bundles to provide enough room for customers to comfortably experiment with, deploy and ultimately build reliance on a core group of AI capabilities without worrying they will exceed their initial allotment and get saddled with unexpected invoice for overages.

Our customers span a wide continuum of readiness and enthusiasm to adopt these AI features. And depending on how widely they initially deploy the technology across their institution and how many AI capabilities they start off using, an average customer might have their initial bundles last them about a year.

Our strong point of view is that by taking this deliberate approach rather than prioritizing near-term revenue opportunities, customers will be able to more quickly and easily realize the value of our AI technology. We expect as customers get more accustomed to this value and become more reliant on the benefits it provides them, they'll adopt even more of our AI capabilities and purchase more bundles of intelligence units.

Additionally, as more compute-intensive Agentic capabilities like continuous portfolio monitoring, Agentic deal creation and Agentic Multistep loan origination workflows are adopted, we expect the number of intelligence units consumed per task and workflow to increase meaningfully, creating natural expansion in consumption beyond simple user growth.

We are already starting to see signs of this in the field. Consumption of intelligence units has continued to inflect higher month-over-month with banking adviser usage up over 38x so far in the month of May from October, with a few business days still left for additional usage this month. This gives us tremendous confidence in our ability to optimize subscription revenues growth from intelligence unit consumption over the medium and long term.

While some of our customers are just getting started experimenting with nCino's AI technology, others are more advanced in their journey, including those that want to run in front of the pack by welcoming our team of forward deploy engineers on site to help them embrace our banking adviser and Agentic capabilities.

Several of these customers were on stage with us at Insight, where we welcomed over 1,600 attendees, representing an Insight user conference record of over 300 customers and prospects to Charlotte, North Carolina for what has evolved from a software user conference to a symposium for intelligent banking. Frank Sorrentino, CEO of ConnectOne, shared the stage with me to discuss his bank's experience to date with Banking adviser and notably referenced his plan to reclaim half of his team's time for revenue-generating activities by leveraging nCino's AI capabilities.

ConnectOne, a $14 billion institution in the Northeast and an nCino customer since 2017 that already boasts one of the best efficiency ratios in banking, contracted for their first bundle of intelligence units and began their banking adviser rollout in the fourth quarter of fiscal '26.

The bank engaged with our team of forward deploy engineers in March for a quick win engagement to assess current benchmarks with our operations analytics functionality and pinpoint friction points they could quickly address with banking adviser. This initial forward deploy engineering engagement put foundational banking adviser capabilities in the hands of all the bank's nCino users, and they couldn't be more excited about the time they're getting back.

As a simple example of this, rather than manually creating relationship records, the banker tells banking adviser to do it for them. As compared to the TDS one-by-one process of creating and updating collateral records, banking adviser does it on demand in mass.

NCino's forward deploy engagements serve a dual purpose. They accelerate value for our most ambitious customers while simultaneously informing our product road map with real-world application of our Agentic and other AI solutions that we can then scale across our entire customer base. We are already planning a follow-on FTE engagement at ConnectOne to raise the bar even further with our digital partners, nCino series of persona-based AI agents.

Our forward deploy engineering team is fully utilized with engagements spanning the spectrum of our customer base, including a $5 billion community bank, an $80 billion regional bank and a top 4 enterprise bank in the U.S. as well as customers in EMEA and APAC. I would like to highlight another development on the AI strategy front. I'm especially proud of given my heritage and customer success. We are seeing the returns on investments we've made in our professional services organization over the past year, developing AI tooling and methodologies that are already compressing professional services hours per engagement by over 40%.

As Greg will elaborate on shortly, it was great to see this show up in our professional services gross margins this quarter, but beyond the positive gross margin impact, I believe the bigger return will be materially shorter implementations and lower program costs for our customers that will ultimately drive better pipeline conversions for nCino.

We are enabling customers and system integrator partners with the same tools to help them continually optimize their deployments and prepare their environments for our latest innovations. On the product development and engineering front, we're seeing development cycles that used to extend beyond a year now compress under 90 days with teams operating approximately 34% more efficiently over the past year with AI, which allows us to invest more aggressively in Agentic and other AI capabilities while continuing to fulfill foundationally functional commitments to our customers.

In the first quarter of fiscal '26, about 21% of our code was written with AI assistance. That percentage increased to approximately 57% as of the first quarter of fiscal '27. But writing more code is not the goal. The goal is to be faster in the entire product life cycle from idea to production.

We estimate writing code represents roughly 30% of the work it actually takes required to ship a product. The rest is product definition, quality assurance, security reviews, compliance validation and the coordination required to deliver Tier 1 mission-critical software to financial institutions of all sizes.

We believe there is no better blend of technical talent and financial services domain expertise anywhere in the industry than right here at nCino. And these tools and efficiency gains are exciting enablers of product development velocity and potential leverage on our path to sustaining the Rule of 40 and beyond.

In summary, I'm extremely proud of the way the team is executing our strategy, excited by the tenor of conversations coming out of Insight and eager to build on the momentum from Q1 to continue helping financial institutions around the world turn AI ambition into measurable outcomes.

As one of our stockholders noted in an April white paper on the rise of AI, companies with mission-critical workflows, deeply embedded customer relationships, regulatory complexity that serves as a moat rather than a burden and the free cash flow generation required to absorb and accelerate through the transition will not be victims of AI.

They will be AI's next beneficiaries. We believe that statement accurately reflects nCino's strategic positioning and reinforces our confidence that nCino is uniquely positioned to be an AI beneficiary and to lead the financial services industry into the world of AI-powered banking. The reason we are confident is straightforward.

Our AI capabilities are shaped by almost 15 years of operational banking data across global, regional and community banks, credit unions and independent mortgage banks, embedded in the actual workflows where loans get made, risk gets managed and compliance gets enforced. This combination of domain-specific intelligence, regulatory trust and workflow integration is not something that can easily be replicated by a general purpose AI provider or easily assembled from scratch.

And with that, I will turn the call over to Greg.

Thanks, Sean, and thank you all for joining us today. Please note that all numbers referenced in my remarks other than revenues are on a non-GAAP basis unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. In Q1, total revenues were $159.4 million, an increase of 11% year-over-year.

Subscription revenues were $140.9 million, an increase of 12% year-over-year or 11% in constant currency. Note that the first quarter represented a significant sequential dollar increase in subscription revenues at approximately $7.5 million. This was enabled by a record gross bookings performance in Q4 of fiscal '26 with earlier deal closing timing in the fourth quarter and straight-line revenue recognition under our new pricing model, yielding more subscription revenues relative to the prior quarter than we have generally seen historically.

As noted on Slide 14 of our earnings presentation, subscription revenues overperformance included a foreign currency tailwind of approximately $1.3 million, favorability of approximately $500,000 from U.S. mortgage and approximately $200,000 of execution-based overperformance. U.S. mortgage subscription revenues were $19.7 million in the first quarter, up 4% year-over-year.

Professional services revenues were $18.5 million, flat year-over-year. As I have previously highlighted, we believe our progress with professional services is best measured by looking at the growth in professional services gross profit dollars rather than professional services revenues as we continue to apply and refine new implementation methodologies, leveraging AI to reduce project time lines.

Non-U.S. total revenues were $36.4 million, up 15% year-over-year or 11% in constant currency. Non-U.S. subscription revenues were $31.3 million, up 21% year-over-year or 16% in constant currency. Non-GAAP operating income was $44.5 million or 28% of total revenues, an increase of 79% year-over-year.

Non-GAAP professional services gross margin improved meaningfully in the first quarter to 10%, up 1,100 basis points year-over-year, contributing approximately $1 million to the non-GAAP operating income overperformance in the quarter. Approximately $1.7 million of the overperformance of non-GAAP operating income was from the delayed timing of expenses, including for various marketing activities that we thought would occur in Q1, but now expect to incur later in the year.

And the balance of the overperformance was from the gross profit resulting from subscription revenues overperformance as noted on Slide 14 of our earnings presentation. Free cash flow was $80.8 million in the first quarter, up 54% year-over-year.

As a reminder, the first quarter is typically our largest free cash flow quarter of the year following seasonally high bookings in the fourth quarter of the prior year. Turning to an update on our share repurchase programs. In the first quarter, we repurchased approximately 6.1 million shares of our outstanding common stock under the December 2025 stock repurchase program and the March 2026 accelerated share repurchase program at an average price of $15.20 per share, totaling $93.1 million.

This includes 5.5 million shares received upfront as part of the $100 million ASR program announced in March, and we expect to receive the remaining shares in the second quarter. $65 million remains available for future repurchases under the December 2025 stock repurchase program.

Turning to guidance. For the second quarter of fiscal '27, we expect total revenues of $157.75 million to $159.75 million, with subscription revenues of $140.25 million to $142.25 million, an increase of 7% and 8% year-over-year, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our second quarter subscription revenues guidance assumes constant currency subscription revenues growth of 9% to 11%, you will recall the second quarter of fiscal '26 included U.S. mortgage subscription revenues growth of 22%.

Our second quarter guidance assumes elevated mortgage rates suppressed the seasonal benefit we realized last year, making for a difficult year-over-year compare for our U.S. mortgage business, and we are forecasting negative 2% year-over-year subscription revenues growth for U.S. mortgage in the second quarter, as noted at the bottom of Slide 10 in our earnings presentation.

Non-GAAP operating income in the second quarter is expected to be $35.5 million to $37.5 million. Our annual user conference and other marketing activities are expected to contribute approximately $3 million sequential increase to sales and marketing expenses in the second quarter with timing of expenses in our annual merit process contributing the rest of the increase in operating expenses assumed by our non-GAAP operating income guidance.

We are very excited about the size and quality of our sales pipeline and the sales momentum and activity we see across our business. For fiscal '27, we continue to expect net additions to ACV of $60 million to $65 million on a constant currency basis, representing cumulative ACV of $662.5 million to $667.5 million, up 10% over fiscal '26 ending ACV at the midpoint of the range.

As a reminder, the first quarter is historically our smallest gross bookings quarter of the year and the fourth quarter is our largest. For fiscal '27, we now expect total revenues of $642 million to $646 million, up from our prior guidance range of $639 million to $643 million, representing approximately 8% growth at the midpoint of the range.

For fiscal '27, we are extrapolating the approximately $200,000 execution-based subscription revenues overperformance through our full year guidance. In keeping with our guidance philosophy for mortgage that we established last year, we are not extrapolating the first quarter overperformance in U.S. mortgage subscription revenues.

For fiscal '27, we now expect subscription revenues of $571.5 million to $575.5 million, up from our prior guidance of $569 million to $573 million, representing 10% growth or 9% in constant currency at the midpoint of our range. Our updated guidance continues to assume annual U.S. mortgage subscription revenues growth of approximately 1% and assumes subscription revenues growth, excluding U.S. mortgage of 11% to 12% year-over-year.

Our updated guidance does not assume any additional currency tailwind beyond the first quarter. We are raising our non-GAAP operating income guidance and now expect fiscal '27 non-GAAP operating income to be $166 million to $171 million, up from a prior range of $165 million to $170 million. This represents an approximately 30% increase over fiscal '26 at the midpoint.

You will note we did not pass all of the Q1 non-GAAP operating income overperformance through in light of the shift in timing of expenses as well as the desire to maintain some operating flexibility at this early point in the fiscal year, similar to the approach we took last year.

We continue to remain focused on driving the Rule of 40 mix in future quarters more towards subscription revenues growth than non-GAAP operating margin. We are also raising our free cash flow guidance for fiscal ' 27 to be $135 million to $140 million, up from the prior range of $132 million to $137 million. We expect the second quarter to contribute a majority of the remaining annual free cash flow represented by our guidance.

With that, I will open the line for questions.

[Operator Instructions] Our first question comes from Adam Hotchkiss with Goldman Sachs.

I wanted to start, Sean, with your comments around the AI efficiencies you're seeing in the Professional Services segment, particularly the engagement costs being down by engagement per hour cost being down by over 40%.

Just talk a little bit about what exactly is driving that? To what extent do you -- what is it within your business that you're seeing drive that so quickly? I think that's a pretty precipitous move given the time since you've started to implement some of these AI changes. So maybe just go into a little bit more detail around some of those drivers.

Sure. Thanks for the question. Firstly, I would say the most important AI efficiencies that our forward deployment engineering teams are delivering are the outcomes for our customers, and that's what I'm most excited about. And that's what I believe we're most focused on.

At the same time, we have been on a journey that I have been communicating to you all for some time to increase the velocity with which we deploy our solutions. And so it might seem like that's been overnight, but we started on this journey beginning of last year.

And as our forward deployed engineering teams are lockstep in alignment with our product development and engineering teams, we are really looking at the entire life cycle from how we build our software to how we deploy our software and get it into our customers' hands quickly so they can receive outcomes.

And that's why banking adviser is being deployed in a matter of weeks versus months, and we're seeing the efficiencies that we're seeing, and it's also translating to the bottom line.

Okay. Great. Really helpful. And then, Greg, just on the mortgage revenue point, I know we saw a pretty large pickup in industry refi volumes over the last 6 to 9 months. I'm just curious how that -- how investors should think about that within the context of mortgage revenues.

It looks like the mortgage revenues are a little bit more seasonal and in line with purchase mortgage trends maybe rather than refi mortgage trends. Just as we think about the business moving more towards some of the volume-exposed pricing model that I know is newer for you guys, how should investors think about tracking that with some of the KPIs that we see out there?

Thanks for the question, Adam. As we look back at the quarter, I think in the first half of the quarter, we did see nice volumes coming through as rates went up, as the quarter proceeded, we saw some of the impact from that. And so basically, we're just kind of looking at run rates from April and extrapolating those through, again, being consistent with the, call it, prudent guidance philosophy we took to mortgage last year and just continuing to take that approach.

And so again, we see the industry data and it's calling for higher numbers, which would be great. But again, we want to be prudent as we go through the year and hopefully continue to surprise on the upside for mortgage.

Our next question comes from Ryan Tomasello with KBW.

I wanted to ask about the evolution of the AI offering. I guess now that you're potentially seeing more renewals of your early platform pricing cohorts, what evidence are you seeing within that of customers expanding their intelligence unit allocations beyond the initial bundles? And then more broadly, what have you learned so far about the monetization uplift at renewal that might be able to help us size the incremental revenue opportunity tied to these AI consumption units?

Sure. Thanks, Ryan. And listen, if you think about the evolution of our AI strategy, you heard me talk last year about the 3 pillars being banking adviser, agents and our integration gateway. And that all converging at this year's Insight event a couple of weeks ago and the unveiling of the AOS for nCino.

So the momentum is real and the customer feedback is really strong in terms of how we're partnering with customers to imagine agents exponentially proliferating within the customer base. Specific to the initial bundles that we provision to our customers, what I think is really exciting to share on this call and is new news is that we have had our first customers reach the limit in their bundles.

And so they have proven that we're delivering outcomes and they're consuming the intelligence units that we are tying to the value proposition we provide with our 5 core digital partners, right? And so long as we continue doing that, while this whole industry is finding its footing, there's nothing in the model that we've put in here, but I am fully confident that by the time we get to the end of this year, we will monetize by re-upping the customers that are reaching their limits. So that's exciting news for nCino.

Great. And then sticking on the AI topic, I wanted to ask about how you frame the opportunity set between U.S. and international. I guess on the AI side, are there different use cases or adoption curves and maybe monetization dynamics that meaningfully differ across geographies? And how -- in general, is that influencing how you're prioritizing your go-to-market investments on the AI front internationally?

Yes. Listen, I would say on the zoom out sort of exec summary, we're solving the same problems the world over with our solutions. When you think about the value we deliver across onboarding, loan origination, portfolio monitoring, the conversations are pretty similar across geographies.

Yes, there are some nuances, both culturally and from a regulatory perspective that we need to contemplate. And some of that shows up in the governance conversations we have with our customers around compliance. And we need to kind of build that locally, and that's exactly why we have a global PDE team with local presence in EMEA and Asia Pac.

But the framework we have in place, the strategy we have in place, the vision for the Agentic operating system, the technology infrastructure partners that we have thoughtfully chosen to go to market with scale globally, and we're largely solving the same problems with the same technology.

Our next question comes from Saket Kalia with Barclays.

Sean, maybe for you, I'd love to zoom out a little bit and maybe get a state of the union on your commercial banking customers in particular. And so Sean, the question is for you because I know you spend a lot of time with customers. What are they saying as we sort of get deeper here into calendar '26? And how do you maybe feel about just demand in kind of U.S. commercial banking here?

Yes. As you know, Saket, that's a core part of our heritage, our flagship solution in commercial loan origination remains a very fundamental part of our business, and we still see strong demand and expansion across some of the largest customers that we have, and we still see new logo opportunities in this space.

And we still see opportunities from a geographic standpoint internationally in commercial loan origination with a lot of room for upside, and that's showing up in our readout in our revenue growth. What I'm also seeing that I think is exciting is that some of these banks now have commercial lending leaders that are working in concert with folks that have been appointed within their institutions to play specific AI leadership roles, right?

So some of our largest enterprise banks -- we'll have somebody who's responsible for the adoption of AI across the bank that's working directly with the head of the Commercial Bank to provide the right governance framework in place. And those folks are reaching out directly to nCino to ensure that we can comply with those standards, and those conversations are going very well.

Got it. Got it. That's great to hear. Greg, maybe for you, just to pick up a little bit on that topic. I think we said that there was something like 38x increase in usage in Banking Advisor, I think, May versus October. And you correct me there if I'm wrong. But maybe the question is, how do you think about Banking Advisor maybe contributing to the business here this year or over the next couple of years?

Understanding it's early, I think we're seeing customers go beyond their usage limits, but how do you sort of think about the revenue or ACV opportunity here with Banking Adviser specifically?

Thanks for the question, Saket. I think, again, it's exciting times and again, Sean being able to highlight that and that trend continuing month-over-month of usage growing up into the right. So it's great to see that.

But going back to Sean's comments, I mean, we continue to focus on near-term adoption. And again, we expect if we do the adoption thing right, that will lead to long-term top line subscription revenue growth from leveraging our AI and our intelligence units.

And so there's nothing in the model for this year for that, that would be upside. But again, our focus this year is making sure that we execute on the adoption front and it contributes next year and beyond. And I think the trends we're seeing are incredibly encouraging.

I think the feedback we got at our Insight user conference 2 weeks ago was also very encouraging and exciting. And again, I think we feel like we're really uniquely positioned to drive this new world of AI-powered banking in the financial services industry on a global basis for banks, credit unions, IMBs of all sizes.

And so it's an exciting time. And ultimately, again, I think from a model perspective and a forecasting perspective, we are taking a prudent approach this year, but setting ourselves up for next year and beyond.

Yes. And Saket, if I could just jump in here as well. On the one hand, yes, I'm excited to share that our first customers are consuming their entire bundles because that's a question you all have been asking, and I'm happy to be able to share that news. But more importantly, make no mistake, intelligence unit consumption is the future of this company, right?

And while we have steadily reaccelerated growth on our asset-based model plus intelligence units, not even having that baked in and the upside with customers getting the outcomes you've heard from our forward deploy engineering teams just gives us nothing but cause for optimism here on that front.

And just to touch upon that a little further, if you think about the model change that we've gone through, put the IU opportunity aside, right, changing from the fixed seat-based pricing to asset, right, that's separate apart from AI and the IU opportunity. Again, I think that set us up for growth that we didn't have intra-contract previously.

So I think that model change from a foundational standpoint is exciting and again, points us in the right direction. And then incrementally on top of that, we have now added this IU opportunity. as well. And so to Sean's point about where we're going, I think the overall model that we've evolved to, I think, sets us up well for continuing reacceleration of growth with the opportunities that we have in front of us that we just need to keep executing on to capitalize.

Our next question comes from Alex Sklar with Raymond James.

Sean, maybe I'm going to follow up on some of the Banking Adviser questions here, but you showed some of the dashboarding at Insight around operations analytics. Where do you stand today in some of those early adopters realizing measurable ROIs?

And then as it relates to those FE engagements you spoke to, how are you going to go about replicating kind of the before and after improvement that your customers are seeing without -- with the customers being able to get it out of the box?

Sure. Thanks, Alex. Listen, the outcomes that I've talked about being first and foremost in our mind, when we can stand side-by-side with a customer who's articulating that in the world of the traditional 20/80 rule in terms of available hours in a year, he's saving 1,000 hours per employee that he can direct them toward higher-value activity directly attributed to the Banking Adviser solutions.

That's something we're proud of. When our credit analyst agent is delivering 60% or more efficiency on credit reviews, that's something we're proud of. How do we replicate that? We've got some of our best and brightest at the company at the tip of the spear on this forward deploy engineering team that are not only out there deploying Banking Adviser, but then packaging up how we unwrap it for the next customer and making that repeatable and scalable.

In some cases, that we wouldn't necessarily need to be on site to do that, right? We could do this all remotely, all digitally. In other cases, I will share candidly that sometimes I chuckle and think that the term forward deploy engineers is just a fancy word for what we've called consultants for years, right?

It's folks who sit side by side with bankers and help them solve business problems with our technology and deploy it in a way that makes sense. And so all this is working really well. I think the big force multiplier for us is and always has been the partner and system integrator ecosystem.

You know that's been a big story for us from day 1. And the largest system integrators in the world have helped us build and scale this company. In the early day, the paradigm was configuring an open, flexible, configurable solution for our customers.

And that paradigm has simply shifted to deploying agents everywhere, agents in our swim lanes where we play in onboarding, account opening, loan origination and portfolio monitoring and then agents that are going to exist in the banking landscape side-by-side with ours and connect to those. And we think that's a tremendous opportunity for the SI ecosystem to be highly utilized and profitable and doing that with nCino. So we're busy training on that model today.

Okay. I appreciate that. Great answer there. Maybe just a follow-up, Sean. Just on credit unions, you had your largest new logo win this quarter. It felt like a big uptick in credit unions attending Insight this month. What are you seeing from that part of the market in terms of moving from adoption of portfolio analytics to kind of broader platform adoption?

And maybe just a quick follow-up for Greg. How should we think about the mix of kind of those smaller singles and doubles in the pipeline this year versus larger enterprise deals as it relates to the ACV outlook?

Yes. In the credit union market, our solutions, in our opinion, have always resonated very well in terms of the problems that we solve for that segment of the market. I do think that a year in now from activating that go-to-market credit union team, one that culturally speaks the same language to that community, and we've got many members of that team that come from the credit union space, and I met with several of those customers with those teams in Charlotte a few weeks ago is starting to pay off, right?

I think that people realize that, again, those same problems we're solving the world over for financial services institutions resonate with our credit union customers, and that's showing up in the logos that we're signing as well as the expansion. Portfolio analytics has always been a very powerful sort of point solution in its original heritage, but us integrating that fully into the platform is enabling us to actually imagine a pipeline of products and services we can deliver to the credit union market that you'll hear more from us about in the future.

And Alex, just to your comment, we really like that credit union business, just like we really like our C&R business, and we like all of our businesses. But those are nice singles and doubles, if you will, just in terms of overall deal size compared to our average. And so again, advancing runners around the base, that's a good business for us.

We think we've got a great offering for credit unions. And ultimately, again, standing up that team, right, so we could focus very much exclusively on them with that team, I think, is paying dividends for us.

Our next question comes from Chris Kennedy with William Blair.

On the last call, you talked about how the new Chief Revenue Officer could help accelerate subscription revenue growth. Can you just give an update on kind of his key priorities and areas of focus?

Sure. First and foremost, revenue. And Keith and I spent some time earlier today and the pipeline momentum that we have continues under his leadership. He brings a unique lens from having operated in this ecosystem in other areas and is injecting some new ideas and thinking to the team as well.

But as we continue on the momentum that we've been reading out with our pipeline year-over-year. Keith comes in, and I think he also starts to bring ideation around how we think about that partner ecosystem. I talked about expanding from not only SIs and traditional tech partners, but to the hyperscalers in the industry where he has deep roots and connections and has a great nose for the balance of functionally positioning our problem solving for customers, but also letting our demos shine.

And from a technical presales standpoint, doing that in the most efficient and elegant way that we possibly can. So those are some areas that he's looking, but he's making the rounds globally. He's already been over to see our European team. And we're excited that we seemingly haven't missed a beat with Keith stepping in as a true veteran into this role. It seems like he's been here a long time already, and it's only been a few months.

Great. And then can you just -- it's great to hear about the uptake in intelligence units. Can you just remind us of how you're thinking about managing the cost of tokens as this business continues to grow?

Yes, it's a big part of the equation, no doubt. And we're paying close attention as we see some of the largest names in the industry sharing that they've consumed all of their tokens year-to-date, and we're not even halfway through the year.

We are not in that position, but we are watching carefully. And so as we think about the usage that we have for everything from leveraging Claude code to leveraging tokens internally for every job and every function at nCino, we have revenue dashboards for IU consumption, and we have cost dashboards that we need to correlate.

I would say right now, I'm comfortable that we're calibrating that appropriately, and we're not too far out over our skis, but we certainly are leaning into the opportunity and encouraging our folks to leverage the most efficient technology to solve problems, and we'll calibrate the spend over time.

Achieving the Rule of 40 in an era where we are already leveraging AI to do our jobs is something I'm super proud of. It did not take us sideways on achieving that goal.

Yes. And Chris, one more thing just to add, as we think about IUs or our intelligence units, and the cost. Not all of our intelligence units require LLMs. And so we have our own models, we have our own math. We have our own analytics. And so from a cost standpoint, again, there's a different cost equation depending on the skill that we're leveraging versus, again, each IU being dependent upon some type of third-party LLM.

Our next question comes from Aaron Kimson with Citizens.

Sean, nCino help move financial institutions lending operations to the cloud, now you're helping move them into an AI world. Can you compare and contrast financial institutions relative urgency and pace of adoption with AI today versus what you saw at a comparable point of financial institutions adopting cloud solutions?

Love to. That's a topic that we discuss often around here because to a certain degree, the more things change, the more they stay the same, right? There is a different technology imperative at this point in time, but there is the same psychological trepidation around adopting that new technology.

And it all revolves around security. It revolves around scalability, compliance, regulation and comes back to the industry that we serve, right? And in this industry vertical, having a deep understanding and contextual data that helps inform how we serve up these experiences to our customers, I think, really reinforces the confidence they have in a partner like nCino.

I still stand before you and share that I don't talk to any CEOs in our customer base that are eager to automate their business on public cloud data. alone. They're looking for a trusted partner who's navigated transformations like this in the past, whether they be technology shifts or cultural transformations.

At the end of the day, we are changing the way people do their jobs. That's what we've always done. Now we're simply injecting the dual workforce methodology into our customer base. And so that's a different change, but it requires the same sort of sense of urgency that we would push and be provocative in terms of how our banks understand that there will be first-mover advantages.

And the folks that embrace the change will separate from the pack and the folks who want to be last are probably certainly susceptible to acquisition. So that hasn't changed at all.

Got it. And then as a follow-up, you're now up to more than 40% of ACV on the updated pricing model versus 38% at the end of January. Has there been any slowdown in early renewals? Or is it just seasonal? And is there any give and take between duration and pricing on early renewals that investors should be aware of?

Yes. Aaron, I'd say nothing to note. Q4 is always our biggest quarter. And I think as we've noted on the call, Q1 is generally our lightest bookings quarter. So I think we feel good about where we are 1 quarter into the year. And yes, nothing new from what we've talked about over the last quarter or 2 in terms of the appetite to renew as well as the step-up that we've been targeting and achieving as part of that renewal.

Our next question comes from Charles Nabhan with Stephens.

A couple of quick ones on mortgage for me. As we think about the cadence of revenue for the full year, I think you said second quarter would be up around 2%, which would imply something in the down 3% range for the back half, which I could appreciate has a degree of conservatism.

Is it fair to think about the third quarter as the trough given, I think, 13% revenue growth last year? And then secondly, within that business, are you seeing more of your clients operating above their contractual minimums, which would you -- which I guess, would position you potentially to capitalize on volume overages within that part of the book?

Thanks for the question, Chuck. Yes, from a comp perspective, Q2 and Q3, which I think would be fairly flattish between the 2 is something that we've assumed as part of the guidance that we've provided. As you look at Q4, remember, Q4 is generally seasonally a slower quarter for mortgage, if you think about the holidays and just the buying cycles for homes.

So we came into the year forecasting about a 1% increase in mortgage for the year, and we reiterated that this year, noting that from a linearity perspective, it would kind of play out with Q2 and Q3 being more trough versus last year and again, Q4 having more of the seasonal flavor to it. In terms of folks exceeding their committed or minimum commitments, again, it really varies from customer to customer.

And you see some that are. Again, we highlighted a nice expansion that we did with a customer as part of the press release, right, getting more under contract, which, again, we think is great and provides more visibility for us. And so it really is customer by customer. Some folks may be a little bit more heavy on refi than purchase.

And so as refi ticked up earlier in the quarter and then maybe calmed down a little bit as rates popped up, you can see some impact there. But that really hasn't changed as we've talked about that you really need to go customer by customer and see where they are and frankly, how aggressively they are operating in the market.

Got it. And as a follow-up, I wanted to touch on international. pretty strong performance, up 21% year-over-year. And I know you've made some changes on the management level. I was wondering if you could expand on some of the drivers of that business in the quarter, specifically where you're seeing strength from a geographic standpoint? And any of the initiatives that you've implemented under new management that are particularly contributing to that outperformance or that strength?

Yes. We are seeing strength on Continental Europe, seeing strength in our Japanese market and the opportunity in Southeast Asia is one we're leaning into. And I would say in terms of what is driving that in addition to having new leaders in place for some time that have now retooled their teams and reenergized the field, we also have some imperatives around expanding our data partnerships to lean into the opportunity around onboarding and full client life cycle management, which is a big part of the conversation in Continental Europe.

And so we're starting to see some of the larger financial institutions in that region come our way, the active conversations there. I was over there just about a month ago, a little more, and I'm spending a lot more time on the continent than I am just in the U.K. and Ireland these days, and that's where we have a lot of the pipeline movement.

Our next question comes from Michael Infante with Morgan Stanley.

I wanted to ask on nCino integration gateway, particularly just given the AI deployments require the integrated access both across core systems and data. How is the growth there and the attach rate as you see customers sort of standardize more of their AI and automated workflows on nCino?

Yes. The growth is strong. I mean, listen, the customers cannot fully take advantage of the offering -- the AI offerings we have without having connectivity to the data, right? So when we think about the foundational infrastructure traversing our data layer to all the way to the MCP layer, LLMs in place, sometimes some not, as Greg talked about earlier, all of this connectivity matters.

It's exactly why we made the strategic acquisition of Sandbox Banking, and that is now serving as the framework for the Agentic operating system that we're evolving into. So integration is part of our platform. And I don't think in the future, we'll talk about it separately.

Makes sense. And then just to circle back on Kris's question regarding some of the compute costs. I just wanted to understand how pervasive the adoption behavior of some of those compute-intensive Agentic capabilities are versus some of the more standardized chat capabilities?

And if there's really any context that you can provide based on the sort of costs that you're seeing today as to how you're thinking about both the near- and medium-term gross margin profile of the Banking Advisor product?

Yes. To your point, they're not all created equal in terms of how we consume the cost on our side. So we are watching carefully. In general, the cost that we've been able to manage, and we're certainly outrunning the cost with the consumption of the intelligence units.

But in some of the more heavy -- when you think about auto spreading, which is one of our more mature capabilities, we're having really good success on the adoption and the results we're delivering to our customers and keeping the cost well under control.

So as we roll out more skills, we'll calibrate that, and we're really putting in a place to kind of rationalize spend across the board. So we don't have to manage that separately within each individual skill down to each intelligence unit that may be in a common framework that we can manage the cost.

Yes. And the other thing, Michael, you continue to hear us talk about outcomes. And again, I think as we look at some of the capabilities that we are providing as we think about the value that drives how we're charging for it as well, making sure, again, we keep the cost in mind, but really focusing on the value that we're driving with the functionality and the technology that we're providing with our AI and banking adviser skills.

Just one more thing to add. I would say with respect to the overall anxiety that's out there in the market and the things we read every day about the hype cycle around consumption of AI outrunning forecasts. I am proud of our engineering teams and pleasantly surprised that the cost relatively is low here at nCino compared to what I read out there in the general ethrough.

Our next question comes from Ella Smith with JPMorgan.

So first, because financial institutions are notoriously risk-averse, I want to ask, I understand that much of your customer base is full steam ahead on AI and already consuming their entire token bundles. But what are the concerns they're voicing to you and the guardrails they want to establish as they venture on their AI transformation with you?

Yes. They want to make sure that we are in adherence to the policies that they have established internally. You have to remember, some of these banks have tens of thousands of employees, right?

And if you were to think of each individual employee in each individual role experimenting with a different AI provider, right, and then bringing those ideas up to the top of the house, that's absolute chaos, right?

So they need to put in some sort of governing structure that gives guidance on how people should think about using AI within their jobs. And then they're looking to not necessarily reinvent the wheel. They're looking for folks.

When I give the example of the credit analyst agent, the banks don't necessarily want all their credit analysts experimenting and how they could build their own agent, when nCino already serves that up very straightforward and elegantly. And so those policies are typically documented. They'll be served up in documentation packs that oftentimes these banks provide external links to that we can then sit down with our engineering teams. And it typically comes down to, in summary, building a few APIs.

Yes. Ella, I don't think we can emphasize enough the importance of the trust and governance factor. besides the regulatory framework our customers live under, again, they can't afford a hallucination, right? They can't take that risk, right?

That risk could have millions and millions and millions of dollars of exposure on top of potential regulatory risk. And so again, I think we -- just as we did with the cloud, getting back to an earlier question and how we transition our customers from on-prem to the cloud and got them comfortable doing that, we're holding their hands along this path for AI as well.

And again, I think we are uniquely positioned to do that, and it does come down to, I think, the history that we have of supporting them, of scaling with them and supporting them and appreciating the regulatory environment and the governance framework that they have to operate in, in order to comply with the obligations that are placed on them.

Great. Very clear. And for a quick follow-up, can you tell us more about the current competitive landscape and how and if it's evolved in the past few quarters? Do you see any new players, AI native players or any sort of shift in intensity from existing vendors?

What I would tell you is that the platform continues to win in the market. And there -- in the AI era, we don't have a single competitor that has the breadth and scale that nCino does with respect to the things that we do and where we do them, the solutions we serve up across lines of business and across the globe.

So we continue to see a healthy competitive dynamic out there and competition is good, whether those are some of the old time, long-time competitors or new entrants, they are all point solutions that largely focus on one of the things that we do, but not serve up a platform experience connected by 15 years of data across customers, giving incent to participate in a pool that serves up insights in real time at the point of production. So the landscape, I would say, while maybe a little more crowded is certainly similar in terms of point solution versus platform.

Our next question comes from Ken Suchoski with Autonomous Research.

You guys talked about some customers going beyond their usage limits on IU. And I think the thinking earlier this year was once they hit those limits, salespeople are going to have conversations with those customers. So what happens to those customers that have consumed their units before year-end?

Are you granting them the same number of units that they received originally? Or are you starting to have conversations with them about potential pricing and contracts? Presumably, those are more super users that are getting more value out of that offering?

Yes. The conversations are very active, not only with our sales teams in the field, but I'm personally involved in these conversations. My product leaders are involved in these conversations. And we're certainly learning. And I would share with you candidly that the first customers we talked about that have consumed their bundles, we have customers that have addendums in front of them today to re-up their units. And so that's exciting. And we also have the reality that in some cases, we feel like we underestimated the intelligence units they needed because they started using more skills than anticipated on day 1.

So there really is a case-by-case reality. I mean you think about some of the customers that have been on the journey with nCino for quite some time, we are absolutely applying some discretion to those conversations. And most importantly to me is if we can direct line read the outcomes, then we certainly have customers that are willing to pay a premium for re-upping those bundles. And it's imperative on us to partner with our customers and deliver the outcomes. And when we do, there's nothing but upside.

No, that makes a lot of sense. That's really clear. You could be flexible on timing there. Maybe just on international, and I think Chuck might have asked about this, but maybe just following up there, like the FX-neutral revenue growth.

I think that's all organic. I know fiscal 4Q had a bit of a tougher comp, and maybe that was like low double-digit sort of normalized growth. But it does seem like the international business on an organic FX-neutral subscription revenue growth basis is accelerating, and it does feel like the comps get a little bit easier throughout the year.

So is the thinking that we should expect that international subscription line to continue to accelerate for the balance of the year and be above this sort of mid-teens type of range?

Yes. Thanks, Ken. Yes, I think, look, the output that you're seeing in Q1 reflects the good end of the year that the international team had, very solid end of the year, which gave us our largest quarter of gross bookings ever and what was our largest year of gross bookings ever. And so ultimately, it's just around keeping the momentum up. But I did say on the last call that we did expect our international subscription growth to be accretive to our overall growth this year.

And again, I think we feel real good about the sales pipeline and the level of activity that we see. As Sean mentioned, he was over in Europe not too long ago and also noted that Keith Patel, our new CRO, has already been there. And so it's exciting opportunities outside of the U.S. as well, and we're seeing the activity here.

Our next question comes from Andrew Schmidt with KeyBanc Capital Markets.

I wanted to ask about win rates. Maybe you could talk about just how win rates are trending across the business. I know it's early, but obviously, we have the assumption embedded in ACV that win rates are going to be lower what you -- versus what you realized in FY '26. So I'm curious just how you're trending to start the year even though it's early.

Yes. Thanks, Andrew. It is early, but we feel good. We feel good about what we're seeing in the market, getting back to my prior response, the level of sales activity on a global basis. The ACV guide, yes, we did take, I think, a prudent approach where we guided above -- or below our win rates of last year, but above what we assumed last year. But there's nothing new to report. I think we feel good about the activity, and we just need to keep executing.

Perfect. Understood, Greg. And if I could follow up just a 2-parter on the Agentic's strategy. Just the first one, if I interpret the comments about AOS correctly from the user conference, it sounds like there's obviously ambitions beyond lending. I heard treasury deposit. Maybe talk about your ability to execute sort of beyond core lending ops.

And then just as a secondary question, obviously, you're rolling out your own agents, which makes a lot of sense. Does it make sense at some point to allow third-party agents or bank run agents also participate in the platform as well and have nCino be the governance platform for nCino agents and then third-party agents as well?

The answer is yes. It absolutely does, and that is the absolute vision for the AOS with nCino. While we do want to serve up prepackaged and easily deployable agents for the core business that we focus on and the solutions that we have the most investment in, we fully recognize that our customer base as well as the SI ecosystem is going to want to build agents around those and build agents even things that are outside those lanes like even call center and contact center and service side of the business.

Think of those agents meeting to not only communicate with the agents that we're serving up, but also tap into that same data layer that we talk about as being a differentiator. And so while we build the agents, the customers are consuming intelligence units, and we're monetizing that, while the customer or the partner builds the agents, we're actually monetizing that through the data layer.

Our next question comes from Hannah Rudoff with Piper Sandler.

Two quick ones. Sean, it was really encouraging to hear about the record attendance at Insight. I just wanted to hear if there is anything that really surprised you coming out of the event. And then for Greg, as the conference becomes more of a symposium, you guys have talked about an AI adoption becomes increasingly relevant. I guess I'd imagine there are more prospects that are coming to the conference. Would love to hear any color around pipeline build specifically resulting from Insight and maybe how that compared to prior years.

Yes. I will tell you my biggest surprise coming out of the event, and I'll remind you that I'm a CEO comes from a customer success heritage, and I wake up in the morning, making sure we deliver outcomes and have strong NPS and customer satisfaction scores.

And I spent a lot of time talking to my customer base as well as our employees that while we're excited about the future and the AOS and the Agentic possibilities and the entire market is involved in the hype cycle, we simply need to fulfill the existing commitments we made to our customers.

And what I would tell you is that there was very few and far between at our biggest event of the year where we have thousands of folks and 300 unique customers that people pulled me aside to say that we weren't fulfilling those commitments. This is a tough business. right?

We're solving difficult problems for customers. And I'm really proud that the teams are actually fulfilling on all those expectations while innovating at the pace we are. And that was a surprise. That's the first thing that comes to mind when you ask that question.

And in terms of prospects, which is relatively new over the last couple of years, inviting prospects versus customers as that's evolved. I'd say probably around 10% of those 300 were prospects, which would be a record for us. And what was great to see for folks who walked around is it was a global conference.

And so there were folks from all over the world there. And the fact that they take the time and incur the expense to come, I think, says a lot about them and their commitment to nCino and going on this journey with us, particularly as we focus on AI banking. So to me, I always judge those conferences by our sales folks and how they're feeling, and I left there very, very encouraged and excited by the conversations I had with our sales team post Insight.

Our next question comes from Terry Tillman with Truist.

It's Jon Carlo on for Terry here. I just wanted to ask, what are some of the difference between customers who are using a high amount of credits for some customers that might be having a lower amount being spent? And what could explain that delta? And what are the strategies, I guess, to get that lower end up?

Yes. I would tell you that the #1 correlation between our customers that are most aggressively adopting intelligence units is the posture of the leaders in those institutes. They need to set the tone and create the space and the conditions to adopt new technology, right?

And then those are the folks that we run toward with our forward deploy engineering teams. And those are the folks that are eager to have those conversations on site and innovate together and understand while we're deploying agents, they are already thinking about the art of the possible with the AOS. So a lot of this is about change management and leadership posture.

I would now like to turn the call back over to Sean Desmond for any closing remarks.

Thank you all for your interest in the continued momentum here at nCino this afternoon. We appreciate it, and have a great evening.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the nCino Fourth Quarter and Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President of Investor Relations.

Good afternoon, and welcome to nCino's Fourth Quarter and Fiscal Year 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on [indiscernible] current views and expectations, entail certain assumptions made as of today's date, and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. .

nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. as well as the earnings presentation on our Investor Relations website at investor.nCino.com.

With that, I will turn the call over to Sean.

Thank you, Harrison, and thank you all for joining us today. I want to start by saying how proud I am of the entire nCino team for the results we achieved in fiscal '26 and especially in the fourth quarter. We exceeded our financial guidance across every key metric and delivered an exceptional ACV results, up 17% year-over-year. which we believe was largely driven by customers embracing our AI strategy and product innovation.

The team executed incredibly well, and we're seeing the momentum in the market as more prospects are engaging with and choosing nCino and existing customers are expanding and deepening their commitments to us in large part because of how we are embedding AI throughout the nCino platform. I'll get into the details shortly, but with over 170 customers of all sizes, including global, enterprise, regional and community banks and credit unions having already purchased AI intelligence units as of the end of fiscal '26, we believe nCino is rapidly becoming the de facto AI platform for financial institutions across the globe.

For those of you just getting familiar with our story, and nCino plays a mission-critical role for our customers and the global financial services market. Financial institutions will continue to struggle with legacy fragmented systems that limit growth, tender financial performance restrict their ability to leverage data as a competitive advantage and create poor user experiences. nCino solves these problems with AI-powered intelligent automation on a unified, scalable platform. We are the only platform for managing lending, onboarding, account opening and portfolio management across all major lines of business for financial institutions across the globe.

This is why the nCino platform serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in now over 25 countries. Throughout fiscal '26, I talked about the confidence I have in our team, our technology and strategy and our market-leading position. I also said the foundation was in place and that our fiscal '26 performance would come down to execution, including against our AI strategy. This past year's results only strengthened my conviction about what's ahead for nCino as we walk hand-in-hand with our customers into a new era of AI or data context guardrails, security, trust and a deep understanding of how financial institutions operate matter more than ever.

As banks further embrace automation and think about using AI as an accelerant to do this, they're choosing nCino because nCino is their process. We connect their data, operate as their system of record and enable them to comply with numerous rules and regulations. nCino is an essential Tier 1 mission-critical platform that amplifies their ability to more profitably generate revenues in a regulatory compliant manner. At the start of fiscal '26, I laid out a few strategic initiatives where I believed we had an opportunity to excel with focused execution.

I'm very proud of what the team delivered in these areas. And the fourth quarter put an exclamation point on what was a tremendous year for the company. First, in the U.S. enterprise market, we delivered our best sales quarter in over 4 years, which included a mortgage expansion with the top 40 bank and cross-selling commercial to our largest consumer lending customer. Second, in EMEA, we leaned in with new leadership, a new go-to-market strategy and a clear execution plan. We delivered our largest deal of the year with a marquee net new customer win in Austria and I'm thrilled with the momentum the EMEA team is seeing.

I'm also thrilled with the momentum we continue to see in Japan, as highlighted by the fourth quarter signing of 1 of the largest banks in the world for a commercial lending transformation. I want to congratulate the Japanese team for tripling their total ACV in fiscal '26 from fiscal '25. Third, it's gratifying to see our existing customers continue to validate our AI strategy as they move to our new platform pricing framework to access our growing AI capabilities.

We saw expanded commitments from some of our largest accounts, and our ACV net retention rate improved to 112% or 109% organically, and in constant currency, up from 106% in fiscal '25. Consistent with what we saw throughout fiscal '26, we closed a number of early renewals in the fourth quarter, including a fresh 5-year commitment from our largest customer by ACV. And those customer commitments go beyond dollars. Critically, they come with trust. More and more customers are choosing to share data with us because they want the insights and benchmarking that only nCino can deliver.

Today, almost 500 financial institution customers representing over $11 trillion in assets have granted nCino the right to process their data into a proprietary and anonymized data set, 1 that powers the development of our products, fuels, best-in-class industry insights and sharpens the accuracy of our intelligence services. This proprietary data set that nCino is carefully aggregated and curated for the better part of a decade gives nCino a unique unmatched global perspective on how to more profitably and efficiently operate a financial institution. How work moved seamlessly through the bank where bottlenecks form where exceptions happen and what great looks like at scale.

We have already put this data set to work through our product called nCino Operations Analytics, which helps customers pinpoint inefficiencies, track cycle times and win rates and benchmark performance against anonymized peers. That benchmarking provides valuable and actionable insights as customers get a true baseline, a clear path to ongoing operational and process improvements and real-time demonstrable ROI as they adopt our AI capabilities. It also informs how we build AI and deploy agents that are practical, relevant, reliable and trustworthy in real bank environments.

And it goes a step further. Because of our API foundation and integration gateway, we can seamlessly connect data across a bank's technology stack as well as the key third parties. That broad 360-degree view of a financial institution's customers has been nCino's calling card in the market since we started the company.

Before I turn things over to Greg to talk through our financials in more detail, I want to spend a few minutes addressing the elephant in the room as we have all heard the narrative that AI will replace SaaS. For some categories of software, that may very well be true. But the highly regulated business of banking is different. And nCino's position and value proposition in banking is different from what you're seeing across the broader SaaS landscape.

Bottom line is, we believe AI will be a tremendous tailwind for nCino as it becomes central to have financial institutions operate and compete and how we're scaling and operating the company. Here's how we see the world evolving and how nCino fits it. AI is moving quickly from help me write and help me search to help me complete meaningful, productive task, so I can focus on other work to grow my business more efficiently and profitably. And in a financial institution, the work is not generic. It's onboarding. It's underwriting, it's credit reviews. It's monitoring, assessing and managing risk. It's opening accounts. It's work where the data is sensitive, strictly adhering to the rules is essential. Regulatory compliance is nonnegotiable and the cost of being wrong can be extremely high, not only financially but reputationally.

To make all this work, AI needs a foundation to run off. In banking, that foundation is the data and regulatory infrastructure nCino provides. That's why we feel extremely confident about our position. We are the system of record and user experience for many of the most important processes in a financial institution and every capability has been built with regulatory compliance in mind. As AI becomes more capable, that makes our platform even more relevant because AI needs a place where it can safely understand context and then take action in an efficient, controlled, secure, trusted and regulatory compliant way.

You'll hear a lot of discussion in the market about AI, commoditizing the application layer. We understand why people raised that point because it's undeniable that AI-driven software makes writing code easier and cheaper. But in the highly regulated mission-critical world of banking deploying that code in a safe and compliant way is harder. Because of this, we believe AI agents actually increase the value of our underlying platform and system of record. An agent can't operate in a vacuum. It needs trusted data, industry contacts and guardrails and it needs to be traceable and auditable. And the platform that connects the user to the data and records the actions taken becomes the natural home for these AI-driven experiences. nCino is that platform.

All this leads to how we're approaching AI agents. Our role-based agents what we call digital partners were designed to work alongside banking professionals inside the Encino platform, guided by what we've learned from almost a decade of usage patterns across our lending customer base and what those patterns mean for speed, consistency and results. Now let me connect that strategy to what we're seeing in the business today. First, Adoption is real and usage is growing. While much of the SaaS industry continues to debate how best to respond to the agent economy, community, regional, enterprise and global banks, credit unions and INDs are already using nCino's AI capabilities in production today, not just as a pilot or beta but as part of how they do lending and banking work.

Customers are not just buying AI access, they're using it, and we can see that directly in the increasing consumption of intelligence units on our platform. with banking adviser usage up over 25x in March compared to usage in October. For years, we have said that nCino is not only in the software business, we are in the change management business and moving every customer from contract signing to implementation to pilot to using nCino's AI and production as an integral part of the day job is the sole focus of our forward deployed engineering team. We also continue to see the halo effect we talked about before. nCino AI innovation and product strategy is showing up as a clear differentiator in competitive conversations.

I have mentioned over the past couple of quarters that it's helping drive earlier renewals and it's becoming another reason new customers are engaging with and choosing nCino and current customers are expanding their relationship with Encino. Second, when we talk about AI, we try to keep it simple. We care about outcomes. The question is, in how many features or how many agencies exist. The question is how much time and money did the financial institution save? How much risk was serviced earlier and mitigated? And how much did consistency, efficiency and profitability improve, all while helping to ensure the financial institution operates in accordance with various rules and regulations and provides an enjoyable and compelling user experience for its customers.

That's why when we look at banking adviser and our digital partners, we focus on practical wins. In the past, a single relationship review meant painstakingly pulling documentation from systems, manually identifying the relevant data points, followed by hours and hours of analysis. With agented credit reviews, Release is part of the analyst digital partner family last quarter, nCino summarizes in seconds, what changed, highlights the drivers, sites the underlying data and helps draft the follow-ups.

And the work stays inside nCino with the right permissions, the right documentation and the right audit trail. The bank gets faster answers, more consistent reviews and more capacity for higher-value work, like being in front of customers and growing relationships. This focus on outcomes is exactly why we transitioned our pricing model, and I'm pleased to report that as of the end of fiscal '26, we have already moved approximately 38% of our ACV away from seat-based pricing to platform pricing. Third, our data is not just a competitive moat. It is the foundation for a new category of proprietary intelligence capabilities, benchmarking, predictive risk, operations analytics and other capabilities and products you will hear about as the year progresses that we believe will create entirely new value for our customers and new revenue streams for nCino. We strongly believe that proprietary domain-specific real-world data is the most valuable asset in an AI economy and no other company has the data nCino has. And that data moat compounds with every customer we add in every line of business we expand into.

Finally, I want to emphasize something that is especially important in banking. trust. In a regulated environment, close enough isn't good enough. AI has to be deployed in a way that respects policies and data privacy, aligns with the bank's risk tolerance, which varies from institution to institution and produces results both the institution and regulators can confidently rely on. One of our stockholders recently conveyed they were reminded how embedded nCino is within a bank's internal and external controls, risk management and governance processes when a top 5 U.S. bank explained to them that they have over 500 exemption workflows configured in nCino that guide every deterministic step of the lending process and that they rely on that process to manage risk, regulatory compliance and audit trails. That's why we're building AI into the nCino platform, where our customers already have the industry context, the controls and the ability to measure outcomes over time.

As the Agentic operating system for financial institutions, nCino will be the backbone delivering AI with the same compliance guardrails, the same regulatory audit trails, the same institutional policy logic and the same lending decision framework they have grown to trust and rely on. And that's also why we believe our approach will uniquely scale, not by asking banks to bolt generic AI onto complex processes, but by delivering banking-specific AI that reflects how banks actually operate on a platform that has demonstrated time after time the ability to scale to support some of the largest financial institutions in the world.

So stepping back, we feel really good about where we are. While still early, we're seeing strong excitement and increasing momentum in AI adoption and growth in usage as measured by intelligence unit consumption. Our sales pipeline looks great, and we believe our AI agents make nCino even more valuable and sticky to our customers because we connect the user, the process and the data in a trusted, controlled, regulatory compliant environment. In summary, we believe the agent economy expands our addressable market. The outperformance against our financial guidance, the acceleration of ACV bookings, the reacceleration of subscription revenue growth and the improvement and strength of our retention KPIs are all reflections of the impact AI is already having on the business, and we're just getting started. As I wrap up my prepared remarks, I want to welcome a new member to the nCino leadership team. I cannot be prouder of how our sales and marketing teams performed in fiscal '26 and to build on that momentum, we are further investing in our go-to-market organization.

Today, we are excited to announce that nCino has hired Keith Kittel as our new Chief Revenue Officer. Keith is a seasoned operator who brings deep financial services enterprise sales, large global company and scaling expertise to the company. We believe Keith's experience and vision are a great addition to the company to help us further accelerate our subscription revenues growth and take nCino to the next level.

With that, I'll hand the call over to Greg to walk through our financial results.

Thank you, Sean, and thanks, everyone, for joining us this afternoon to review our fourth quarter and fiscal year 2026 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call.

Turning to our fourth quarter results. Total revenues were $149.7 million an increase of 6% year-over-year and $594.8 million for fiscal '26, an increase of 10% over fiscal '25. Subscription revenues were $133.4 million in the fourth quarter, an increase of 7% year-over-year and $523.1 million for the full year an increase of 12% over fiscal '25. Organic subscription revenues were $132.2 million in the fourth quarter, up 6% year-over-year and $505.9 million for fiscal '26, an increase of 8% year-over-year.

As a reminder, our fourth quarter organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from onetime subscription revenues that occurred in our international business in the fourth quarter of fiscal '25 as the result of a contract buyout. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our subscription revenues over performance.

International total revenues were $32.9 million in the fourth quarter, down 1% year-over-year or down 6% in constant currency. International total revenues were $131.5 million in fiscal '26, up 13% year-over-year or 11% in constant currency. International subscription revenues were $28.4 million in the fourth quarter, up 1% year-over-year or down 4% in constant currency in light of the difficult comparison from the onetime contract buyout last year previously noted. International subscription revenues were $109.5 million in fiscal '26 and up 19% year-over-year or 16% in constant currency and 5% organically.

We had our largest international gross bookings year in company history, and with ACV as a leading indicator of future subscription revenues growth, we look forward to our international subscription growth rate once again being accretive. Professional services revenues were $16.3 million in the fourth quarter, a decrease of 1% year-over-year. Full year professional services revenues were $71.6 million, flat year-over-year. As we have previously highlighted, we are emphasizing professional services gross profit growth over professional services revenues growth and expect to see this reflected within our financial results by the second half of fiscal '27 due in large part to our ongoing initiatives, leveraging AI to accelerate our implementations.

Non-GAAP operating income for the fourth quarter of fiscal '26 was $34.7 million or 23% of total revenues compared with $24.4 million or 17% of total revenues in the fourth quarter of fiscal '25. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our non-GAAP operating income over performance. Non-GAAP operating income for the full year was $129.4 million or 22% of total revenues compared with $96.2 million or 18% of total revenues in fiscal '25.

Non-GAAP net income attributable to Encino for the fourth quarter of fiscal '26 was $42.8 million or $0.37 per diluted share compared to $22 million or $0.19 per diluted share in the fourth quarter of fiscal '25. Non-GAAP net income attributable to nCino for fiscal '26 was $122.7 million or $1.07 per diluted share compared to $84.5 million or $0.72 per diluted share in fiscal '25.

As expected, churn year-over-year continue to trend down towards historic norms and settled to a 3-year low in fiscal '26 of $18.2 million or 4% of prior year subscription revenues. We ended the quarter with cash and cash equivalents of $88.7 million, including restricted cash. Free cash flow was $12.5 million in the fourth quarter of fiscal '26 and up from negative $10.4 million in the fourth quarter of fiscal '25. Free cash flow for fiscal '26 was $82.6 million up 55% compared to $53.4 million in fiscal '25.

We repurchased approximately 1 million shares of our common stock in the fourth quarter at an average price of $25.84 per share for total consideration of $25 million under the $100 million repurchase authorization announced on December 8, 2025. When added to the stock repurchases made through the third quarter last year, we repurchased a total of approximately 5 million shares of our common stock in fiscal '26 at an average price of $25.18 per share for total consideration of $125 million. In addition to the $75 million that remains available under the December 2025 share repurchase authorization, today, we announced a $100 million accelerated share repurchase program.

We expect to fund this repurchase program with available free cash flow and with a portion of the $200 million term loan expansion of our existing credit facility, which we also announced today and which was funded by some of our largest customers. A portion of the proceeds from this term loan will also be used to reduce the outstanding balance under our revolving credit facility. We ended the year with 620 customers that contributed greater than $100,000 to fiscal '26 subscription revenues, an increase of 13% from fiscal '25. Of these, 114 contributed more than $1 million to fiscal '26, an increase of 9% from fiscal '25 and 14 contributed more than $5 million to fiscal '26 subscription revenues flat with fiscal '25.

ACV as of January 31, 2026, was $602.4 million, an increase of 17% year-over-year. On an organic constant currency basis, ACV grew 13% year-over-year in fiscal '26. ACV net retention rate in fiscal '26 increased to 112% or 109% on an organic constant currency basis, up from an ACV tension rate of 106% in fiscal '25 and reflecting growing demand for our AI-powered platform and solutions among our customer base and success implementing our new asset-based pricing framework. Subscription revenue retention rate in fiscal '26 was 110% or 106% on an organic constant currency basis compared with a subscription revenue retention rate of 110% in fiscal 2025.

Note that the subscription revenue retention rate was negatively impacted by the difficult compares in the third and fourth quarters this past year. Additionally, a significant amount of the existing customer expansion that drove the ACV net retention rate improvement occurred in the fourth quarter -- so the subscription revenues from those deals are not yet reflected in the subscription revenue retention rate. Turning to guidance. For the first quarter of fiscal '27, we expect total revenues of $154.5 million to $156.5 million, with subscription revenues of $137 million to $139 million, an increase of 8% and 10%, respectively, at the midpoint of the ranges.

Non-GAAP operating income in the first quarter is expected to be approximately $38 million to $40 million. Please note that effective for fiscal '27, we will be providing annual guidance for free cash flow in lieu of quarterly and annual guidance for non-GAAP net income attributable to nCino per share, as we believe annual free cash flow is a more meaningful measure of our financial performance. For fiscal year '27, we expect free cash flow of $132 million to $137 million up 63% year-over-year at the midpoint of the range, which reflects our guidance range for non-GAAP operating income less certain assumptions, including approximately $15 million of interest expense, $6 million in cash taxes and $1.5 million of fixed asset purchases. Please recall that our cash collections from customers is highest in the first quarter which does introduce seasonality to free cash flow.

Turning to ACV. For fiscal year '27, we expect net additions of $60 million to $65 million on a constant currency and organic basis which would bring our fiscal '27 ending ACV to $662.5 million to $667.5 million, representing 10% ACV growth at the midpoint of the range. After a few difficult years for the banking industry, large deals have again become a healthy part of our business and our sales performance during the fourth quarter included several multi-7-figure net new and upsell wins. While we are confident in our go-to-market organization and the repeatability of the sales activity that drove these multi 7-figure wins in fiscal '26. These large deals can be inherently difficult to predict in both their timing and eventual sizing.

In order to continue to prudently manage expectations on the bookings side of the equation, our ACV guidance framework reflects win percentages that are higher than the approach we took for ACV guidance in fiscal '26, but lower than the win percentages we actually achieved last year. Also, recognizing that the fourth quarter has historically been, and we expect it to continue to be the largest gross bookings quarter for us each year. Similar to this past year, you should not anticipate quantitative revisions to our ACV guidance throughout the year.

For fiscal '27, we expect total revenues of $639 million to $643 million, with subscription revenues of $569 million to $573 million, representing growth of 8% and 9%, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our guidance assumes 10% to 11% year-over-year subscription revenues growth. Please reference Slide 15 in our earnings presentation for assumptions around our subscription revenue guidance. As you will note, consistent with the guidance philosophy we instituted last year, -- our guidance assumes approximately 1% growth in U.S. mortgage subscription revenues. While we recognize mortgage industry volume forecasts are currently indexed higher than what this growth rate reflects -- for guidance and internal business planning purposes, our intention is to continue to be prudent around expectations for U.S. mortgage.

To help you reconcile our subscription revenue guidance with our fiscal '26 ACV result, please consider the following: one, A portion of the ACV booked in fiscal '26 contributed to subscription revenues last year. Two, recall that we define ACV as the highest annualized subscription fee under a customer contract and when subscription fees increased during a contract term, the revenue recognition rules require that they are straight line, which leads to subscription revenues being less than ACV for such contracts. Three, Churn experienced in fiscal '26 would have generally been from legacy contracts under our old seat-based activation model where ACV more closely approximated subscription revenues.

And four, subscription revenues from mortgage overages are not included in ACV. We expect non-GAAP operating income for FIS 27 to be $165 million to $170 million. Finally, I'll leave you with a few additional comments to assist with your modeling that should be construed as supplemental to our formal guidance. First, international subscription revenues are expected to be accretive to overall subscription revenues growth in fiscal '27 beginning with the first quarter. Second, we expect to reduce stock-based compensation expense in fiscal '27 as a percentage of total revenues by approximately 100 basis points year-over-year from the 12% reported in fiscal '26.

As a reminder, during our initial Investor Day in September 2023, we referenced a long-term stock-based compensation expense target of 6% to 8% of revenues. Third, effective January 2026, nCino is self-insuring for medical benefits, which may introduce some volatility to health care expenses in fiscal '27 as we make our way through the first year of the program, but ultimately, we expect this approach to be a more cost-effective alternative to traditional third-party insurance. And finally, our subscription revenues outlook includes revenues from both contracted and planned ACV bookings that we attribute to our AI products.

Our customers are validating our AI strategy reinforcing that it is innovative and compelling and the month-over-month increase in the consumption of intelligence units is trending quite well. At the same time, our experience has taught us that overall, financial institutions are going to adopt AI at a very deliberate pace. Accordingly, and consistent with our guidance philosophy, while we expect to sell incremental bundles of intelligence units this year, our fiscal '27 subscription revenues guidance does not yet contemplate this.

In closing, I want to thank my nCino colleagues for all of their hard work and efforts successfully executing on our fiscal '26 operating plan. We entered fiscal 2027 with a ton of sales momentum in our sales pipeline, which Sean noted, looks great, is up meaningfully from this time last year even after achieving the best gross bookings fourth quarter in company history. The intelligence unit usage trends we are seeing are very exciting and reinforce that our AI capabilities and AI strategy are resonating incredibly well with the market.

We have the data, the products, capabilities and global reach a unique and unmatched AI strategy, a reputation for innovation and for taking care of our customers and a phenomenal customer base that trusts nCino to successfully guide them on this AI journey. It is an incredibly exciting time to be part of nCino, the company leading the financial services industry into the world of AI-powered banking, just as we led the financial services industry into the world of cloud banking. As evidenced by our financial guidance, we feel really good about our head count and expense plan and our ability to continue generating increasing non-GAAP operating income and free cash flow.

Our financial guidance also reflects reaccelerating subscription revenues growth, and we believe the pieces are in place for that upward subscription revenues growth trend to continue. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of this fiscal year. And while the high end of our financial guidance for fiscal 2027 suggests a rule of 40 mix of around 10% subscription revenues growth and 30% non-GAAP operating income margin in the fourth quarter, we are keenly focused on driving that mix more towards subscription revenues growth.

With that, I will open the line for questions.

[Operator Instructions]

our first question comes from Alexander Sklar with Raymond James. .

Sean or Greg, on the positive sales pipeline commentary and the ACV outlook, can you just frame what you saw in terms of the change in close rates or win rates in the back half of the year versus prior years? -- you referenced coming in above? And then how you approach the ACV outlook from a pipeline coverage perspective versus last year? .

Yes. Thanks, Alex. First of all, we did highlight early in the year, our renewed focus on the execution discipline of pipeline growth and our emphasis and prioritization around demand generation in the marketing machine, right? So -- so I think some of that played out in the back half of the year is our pipeline increased conversion rates were healthy, but we just had a larger pipeline, and we're seeing that continue into this year over last year as well, and that's why we're so excited about the outlook.

Overall, by solution by geography, it's pretty balanced. And obviously, we're seeing nice momentum in our international business that we highlighted on the call. But I think a lot of it is around the discipline of just pipeline management overall. And when you have a larger pipeline, conversion rate stay pretty steady and you'll have a larger ACV outcome.

Okay. Great. And then, Sean, you gave a lot of great color on the banking adviser adoption. 170 customers now on the platform. I think you have over 100 skills now versus a year ago. Can you just frame where you're actually seeing the greatest usage across that portfolio of capabilities and skills. And then in terms of the magnitude of a 25x growth in credit usage versus October, maybe help frame how many of those customers are approaching kind of the upper end of their purchase credit allotment. .

Yes. listen, first and foremost, our executive leadership team as well as the entire company is maniacally focused on adoption of banking adviser and our agenetic solutions. And I think we've been very thoughtful about selling our customers large enough blocks of intelligence units upfront to give them the runway that will enable them to navigate the adoption curve and see the benefits and kind of settle into the new experience, which is really important as you're managing the change. The last thing a customer wants is to feel nickel and dimed when they're adopting something new. -- right?

So we didn't want to put them in a position where we sell blocks in small portions immediately they have to re-up. And I think we can draw some parallel and analogies to the personal experiences that we have, right, with whatever chat interface you might use. The last thing you want is in the first month to be asked for an increase in your monthly subscription, right? So what we're focused on, first and foremost, is that adoption. And we're pivoting a lot of the energy of the field towards sitting side-by-side with customers and getting them comfortable with that.

And then I would expect, over time, as this settles in, we'll look into the next block of intelligence units. But in particular, your question around what are we seeing traction in our agenda credit reviews are really exciting, which falls under our analyst digital partner umbrella. Locating file has been a mainstay since day 1 that we launched banking adviser -- and we're seeing a lot of traction with credit monitoring as well as auto spreading.

Our next question comes from Joe Vruwink with Baird.

Great. Just to stay on some of the AI debates. Lending is a very complicated process. And part of that complexity, I'm sure we can appreciate ties to all the different systems and data and decisions that go into it. I guess the risk is that AI models can be good at orchestration. Are you seeing that type of capability and it starts to eat into Encino's differentiation? Or does it cause you to think about how the platform is currently architected and maybe doing some things differently to match up against what AI makes possible. .

Yes. Thanks, Joe. Appreciate the question and certainly understand a lot of the narrative that's going on in the market today and some of the realities had changed with the AI capabilities. no doubt. For instance, we all know the coating has never been easier, right? And what we need to focus on is the reality that -- there's a difference between standing up an overnight user experience and deploying that code and maintaining that code in a highly regulated industry. That's still hard. If you weren't built from day 1 in a compliant way for the regulators, if you don't own the workflow, if you don't own the data and you don't have the trust relationship then these AI tools aren't going to stand you up overnight.

All that being said, we've acknowledged that workflow is relative old news. And what we're focused on is an agentic operating system future where we can instrument the platform with agents that tap into our own embedded intelligent workflows and mine that data and provide a differentiated experience. And we believe that is very unique. And the right question right now is not necessarily who's best positioned to deliver overnight because I've yet to see somebody to take a customer live even in the past year that was threatening that posture this time last year. what I think the right question is, who's best and most uniquely positioned to capitalize on AI and banking, and we think that's nCino.

That's helpful. On the Intelligent credits, do you have any metrics you can share maybe around efficiency gains or P&L impact that customers using the credits have so far? Or maybe is there a spectrum of outcomes you're seeing between heavy and light users? Can you kind of present to your customer base that here are examples where greater consumption is actually translating into greater benefits and you start to build referenceability in kind of that way. .

Yes, and thanks for highlighting the focus on outcomes that we have here at Encino, Listen, I don't really wake up in the morning excited about people adopting AI. I get excited about them. getting real outcomes. And when I talk to bank CEOs around the world, they care about what impact we can have on their top line and what impact we can have in the bottom right, as well about revenue, efficiency and cost savings. And so I think we're seeing really good gains and traction specifically around credit monitoring, which is why I highlighted that an analyst.

And in some cases, we're seeing months to days and days to minutes in terms of getting to a -- we plan on highlighting that some direct outcome stage sharing their experiences on leveraging those units. But it's safe to say that as I wake up every morning with the CEO agent stack of Byon that highlights intelligent unit consumption, there is a direct correlation between the outcomes our customers are getting and the intelligent units they're drawing down on across the spectrum of banking adviser.

Our next question comes from Michael Infante with Morgan Stanley.

On pricing, obviously, it sounded like a really strong result with 38% of revenue now on the new pricing model. Any incremental commentary you can share just in terms of price realization for the fiscal 4Q renewal cohort versus your plan? And in the instances where customers did push back. Can you sort of speak to some of the instances or initiatives you have in place to retain those customers, either in terms of ancillary product detach things like banking adviser and/or lower price realization. .

Yes. On the pricing front, first and foremost, I want to highlight that we started on the pricing journey nearly 3 years ago. And I really point that out because we're not reacting to anything here. We had a vision for how outcomes would be the endgame for software companies like nCino. And so we prepared for this. The pricing has now been out there for a little over a year. And what I would tell you is that we are exceeding our internal plans and targets, and that momentum even picked up in Q4 versus the prior quarters.

And while nobody likes a price increase and nobody likes change, I think that we're very prepared for that. And by and large, those customers are going very well and proud of our account teams in the field. Those aren't necessarily easy conversations. But what I would say is they're more focused on education and enablement and drawing direct lines to the outcomes that our customers are going to get over time versus the old per user per seat model.

So the value exchange is becoming apparent to our customers. And because of that, we're seeing early renewals. We're exceeding our targets, and we're leaning in heavily. It's been really accretive to our business.

Helpful, Sean. And then maybe just a quick follow-up on gross margins. I know it's fairly early in terms of thinking about banking advisory monetization. But do you expect the consumption of those incremental credits to be gross margin accretive? Should we be focusing on incremental gross profit dollars? How are you sort of thinking about the inference cost and customer usage intensity when usage exceeds expectations. .

Yes. Listen, I would absolutely expect these to contribute toward gross margins and really both, right? I mean what we're doing in terms of instrumenting our customers with the ability to come to decisions faster over time. we expect the value exchange to play out, right? And I think they're going to be in a position where they can exchange some of the labor cost and add their labor force to more high-value activities and put their employees in front of the customer, right? And that's where they want to be. And we're going to automate the things that happen in the middle and back office, and that's going to drive margin efficiency for our customers. Ultimately, that will flow through to nCino as well.

And Michael, just to add, I mean, 1 of the benefits of seeing the usage tick up quite well is that it gives us the opportunity to stress test our gross margin model as we ramp up -- and so we've been able to see that over the last few months is again 25x from October to March. And again, so far, we feel good about it.

Our next question comes from Chris Kennedy with William Blair.

Can you provide an update on the credit union initiative?

Yes, something we're very excited about. We mobilized the team, as you know, early last year that wakes up and sleeps eats and breezes as well, just that credit union market. I'm proud of the way they've run toward the opportunity, have established relationships and credibility in that space and understand the problems we're solving for those customers. I think that's a matter of really being able to tell the same in Sino value proposition story in a way that resonates more deeply with the credit union space, and that's given us the opportunity to even envision how we can think about road map in a different way and how we kind of augment the platform and the experiences that we deliver and think beyond some of the traditional experiences we serve up.

So we've got good momentum there. The team is fully activated. The pipeline is growing as we head into this year, and we plan on selling the entire platform to our Credit Canion customer base.

Great. And then just as a follow-up, historically, you've given ACV by category can get an update between mortgage, commercial and consumer.

Yes, Chris, we don't have that for this call, maybe at another public form and we'll be able to provide that breakdown for you. .

Next question comes from Ryan Tomasello with KBW.

I guess starting with the organic subs guide. You're talking about 10% to 11% growth ex mortgage for the year. I appreciate the commentary on international being accretive this year, but I was hoping you can just put a finer point on the drivers there. ex mortgage, particularly with respect to the U.S. business ex mortgage in terms of subs growth outlook?

Yes. Thanks, Ryan. I mean, overall, I think business perspective, whether it's by product or geo, I think we feel really good about the sales momentum that we're seeing in the market. Our customer base generally is quite healthy. Balance sheets are healthy. lending activity has been up. And I think that is driving, again, demand for nCino for our products. And I would also go back to AI is a big driver for that as well. you can't leverage AI, you can't leverage this revolutionary technology unless your house is in order.

And that's the business that we're in. We're in coming in and transforming your bank so that you can operate on a platform and to be able to leverage not just your data, but the data that nCino has across our whole customer base that's given us the rights to leverage that data as part of our product offering. I would point you to the appendix in the back of the earnings call presentation that we put up, you'll see a nice walk in terms of our year.

And the other thing I'd highlight again is the continued downward trend in churn which, as we know over the last couple of years, has been unusual for us, right, heightened churn, but that coming back more towards historic norms has been a big positive to getting our growth trajectory back towards back towards an upward motion and 1 that we can build on.

I appreciate that, Greg. And then just following up, just kind of on the subs cadence for the year. The 1Q guide round numbers looks like 9% to 11% organic subs growth versus 9% to 10% for the full year. Just trying to reconcile that with your comments earlier, Greg, about being confident in being able to continue to drive this acceleration in subs growth and just how we should think about this cadence throughout the year with respect to that Rule of 40 target.

Yes. Thanks, Ryan. I think you should assume that mortgage comps in the second and third quarter are a little bit tougher. So that from a trajectory standpoint, is something that you should take into account in your modeling. .

Our next question comes from Marion Kimpton with Citizens,

Sean, can you talk about why now is the right time to bring Keith in to run sales? And what is type 2 priorities will be in fiscal '27? It seems like the sales team is executing well. .

Sales team is executing phenomenally well. And we are -- we have been marching towards a point in time where we were going to appoint a global Chief Revenue Officer. -- that's going to help us scale to $1 billion and beyond in terms of where we're going on the revenue growth side. And that has been in the works for some time. What I would share with you is that we had a model in place where Paul Clarkson, who ran our North America sales operation is stepping aside for personal reasons, and Keith is coming in to consolidate the global org and we'll have a tight partnership not only in North America, but in EMEA and Asia Pac and with our organization and Keith has a lot of experience in these areas.

He's been somebody we've known for a long time in our network, not only is days at Salesforce, but also at alloy. And we're super excited about his leadership. He's not only a great experienced leader who's operated in this vertical and has deep relationships with our customer base, but also is a great culture fit. -- for Encino. So yes, the sales organization is operating fantastically well in large part due to Paul Clarkson's leadership. And Paul is stemming aside for personal reasons. And Keith is the perfect guy to step in at this point in time and take us to the next level.

Understood. And then as a follow-up, it's good to see the mortgage win with a top 40 bank where they also use your commercial lending, small business lending and treasury products. Are you getting to a point in mortgage sales cycles now where you have a better idea of how the move up market with Mancino Mortgage is going now that you're 3 quarters in there from when you really rolled it out after the Investor Day last year at Insight and at the larger FIs, you finding that existing relationships and other parts of the bank are helping you get a foot in the door on the mortgage side of the house or that the buyers are just generally separate in those big organizations? .

The answer is yes. We are learning from experiences there. As you know, we made the jump from our mortgage solution in the IMB space belong towards some of the largest banks in the world. And we're excited that we have a top 30 bank in the U.S. on the platform, and that naturally gets the attention of the peer group and the cohorts to the point where we start getting some inbound calls for nCino to participate in forms at that level.

We're also getting traction in the community and regional bank space as well as the credit union space with the mortgage solution. And I think our teams now have some of the experience and quite frankly, some of the attitude and confidence that it takes to go aggressively sell that across lines of business. It's not uncommon that I would be meeting with our customer base, whether it's a CEO or Chief Lending Officer, or somebody in the C-suite that would proactively bring up on their side and recommend that we talk to the mortgage leader in their business. So that is happening. It's happening pretty organically.

Our next question comes from Saket Kalia with Barclays.

A nice finish to the year. Craig, maybe for you. I think we said we've got about 38% of ACV on platform pricing now, which is great to hear. I'm curious, have any of your top 20 banks made that transition yet. And were there any learnings from those customers in particular that you feel you could build upon?

Yes. Thanks, Saket. The answer is yes. I mean, I think with every deal, you learn something new. We certainly try to. But to Sean's point, this is something that we started in terms of this pricing transition going back about 3 years. First off, internally and testing with our customers. Again, 1 of the great things about the wonderful customer base we have as we work very closely with them to get their thoughts and input.

And so the rollout has frankly exceeded my expectations. -- not just from the uplift that we've talked about, but as well just in terms of the execution and you would have heard Sean's prepared remarks, our largest customer by ACV renewed for a 5-year deal, and that would have been on the new platform pricing model. So we do have some of our larger customers already on it. And again, I think it's gone quite well. please. We're quite pleased with the execution there.

That's great to hear. Maybe for my follow-up. It was great to hear you reconfirm the Rule of 40 expectation. Is it may be fair to say that, that rule of 40 is achievable based on the ACV that you've already booked here in fiscal '26? Or is it dependent on some of the new bookings that you anticipate this year as well?

It would include some new bookings. Again, the slide I referenced earlier, sacked in the appendix, I think it's Slide 15 -- you'll see a nice walk that we tried to lay out, so you could see the contribution from bookings last year and what we came into the year with, which is quite a bit of visibility. But we do have to -- we do have some work to do this year. And again, I think as we look at our pipelines, as we look at the activity in the market, and frankly, as we look at the excitement that we see in here and feel around AI, we come into this year feeling good about the plan that we have. And it's actually Slide 16, if you look in that deck. .

Our next question comes from Charles Nabhan with Stephens. .

Just 1 quick 1 for me. Looking back over the past couple of years, you've done several acquisitions. Just wondering if you could provide us an update on the progress you've made on Sandbox and Dock Fox, -- any positives or negatives? And just an update on the traction you're getting on those solutions in the market. .

Of course, taking those each on its own from a sandbox standpoint, that has actually become the foundation in the backbone of our integration gateway and the MCP layer that we expect to control how agents access data in the Encino moat, right? So that's very strategic. We're not necessarily selling -- looking to that as a stand-alone revenue engine, but as foundational platform that sets us up to be the identic operating system of the future for banks. So we're really excited about that.

And from a [indiscernible] standpoint, we remain very compelled by the opportunity with complex commercial onboarding that continues to come up in nearly every conversation as an adjacent problem our customers are solving to the one that we solve so well around commercial loan origination. And so those opportunities in the pipeline are growing. We have acknowledged in past calls that it was going to take us the better part of the prior fiscal year to complete the technology integration work.

And now we're looking to convert some of that pipeline here in the first half of this fiscal year. So we're really excited about onboarding coming into full focus as it's kind of been mainly in the background and the R&D room. Now it's coming into the sales machine.

Next question comes from Adam Hotchkiss with Goldman Sachs.

Sean, where are bank CIOs leaning in most to AI from your perspective, whether that's Encino or otherwise? And how does that differ across financial institution side? I'm just curious if smaller to midsized banks or maybe more likely to lean into packaged AI use cases -- and are you seeing any appetite for some of the larger banks, in particular, to try to do anything in how I'm just trying to understand ultimately what banks are out there trying versus not trying from an experimentation perspective and then how it fits into that. .

Sure. And in our landscape and as you've acknowledged, I appreciate the team up there and market segmentation. Undoubtedly, the further down market you go, the bigger the appetite those customers have for prepackaged solutions that we would serve up the agents, right? And we would actually build and deploy the agents. And what's so powerful about our platform as we render those in the existing workflow, right? nCino, AI lives in the workflow, so the context is already there. The user doesn't have to change their behavior and the trust and compliance are inherited and the data moat is leveraged. So those banks absolutely get that.

As you go upmarket, the same value proposition applies but you absolutely have what I would say, more curious in experimental groups within the organization who are being chartered with, hey, if we build our own agents, what would that experience look right? And those customers, just the same need context, they want trust and compliance and they want to tap into nCino data. So we have thoughtfully architected a platform as we evolve in our journey that would enable customers to do both. And we're seeing enterprise banks that are asking us to actually sit side-by-side and co-develop some of these agents and look at those experiences.

So it's all exciting. I do think that what comes up most for me when I'm talking to customers about the outcomes they want to go back to that credit monitoring experience is very powerful. The ability to reduce the time spent analyzing the scores and reams of documentation and data to get to a proactive monitoring position over time, and that's not only upfront to do a deal, but that's maintenance. That's pretty common.

And then, of course, you know that we have banking adviser skills embedded across the experiences. So that's 1 that stands out. They are looking for low-hanging fruit there looking for quick wins, and we can serve those up, and that's exactly how we've architected our digital partners.

Okay. That's really helpful, Sean. And then Greg, just on the Slide 16 that fiscal '27 algorithm, I really appreciate the detail there. Any way to think about how that contribution mix between contracted in the prior year and forward bookings compares to ultimately what you did in fiscal '26 just from a mix perspective would be helpful to understand.

Yes, Adam, I think you can assume it's comparable.

Next question comes from Terry Tillman with Truist Securities.

Greg Harrison. I'll keep it to 1 question, but as typical, there's probably multi parts to it. On the early renewals, it seems like that's a good sign of the interest in the new innovation. But could you all quantify how much early renewals impacted or benefited the strong 4Q ACV. -- or the in-year ACV target? And the kind of the second part of this is with the early renewals, I think you did say that 1 did a contractual renewal at 5 years. But what is the duration looking like on early renewals versus the original contract? And then just do they tend to consume or sign up for more banking adviser or skills versus the non early renewals? Just double-clicking more on early renewal activity would be great.

Yes. So in terms of the renewal trajectory and momentum, I'd point you to the AC mentioned that we disclosed going from -- it was 102, I think back in fiscal '24 up to 106 and then up to 112 or 19% at constant currency organic basis, Terry. So again, really like that trend. And I think that's reflective of, again, the customer relationships that we have and also, again, just the breadth of our product that we can go back to our customers and sell them more. And again, a lot of those discussions actually AI, whether it ends up being an AI discussion or not being able to go talk about AI, provides an opportunity for us to explore where else we may be able to add value to our customer base. And so all that's exciting, and I think all that's helping to drive the momentum that we saw last year and that we came into this year with.

Our next question comes from Koji Ikeda with Bank of America.

This is Ron on for Koji. Keith. I appreciate you guys taking our question. And I know that you guys already talked about the relationship between sub revs and ACV. But I kind of wanted to ask this simplistic question, and apologies if it's a bit redundant, but if you could humor me. So fiscal year '26 sub revenue came in higher than ending fiscal year '25 ACV. But the initial guidance for fiscal year '27 sub revenue doesn't quite get us to ending fiscal year '26 ACV. What's kind of the relationship there? And how would you kind of describe the level of conservatism in this fiscal year '27 sub revenue guide?

Yes. Thanks for the question. Just going back to some of the earlier comments, there's a few things to keep in mind when you're trying to reconcile the ACV performance in our sub-rev guide. One is, again, a portion of the ACV that we got actually contributed to subs revs last year. So you need to take that into account. Again, the way that we've always defined ACV is the high point of a contract. And when there's increased pricing during a contract, right, the rev rec rules require you to straight line that.

And so your actual revenue is going to be short or fall short of what your ACV is and what that exit contracted amount is would be another thing to take into account. The third thing is churn that we experienced last year would generally have been from our older seat-based pricing model. And the ACV and subscription revenue would have been more aligned under that historic model that we had. And then finally, again, as you think about sub revs, keep in mind that our mortgage overages don't fall into ACV.

And so those are some of the deltas to take into account when you're trying to reconcile the ACV performance we had in fiscal '26 and the initial guide that we've given for sub revs for fiscal '27.

Our next question comes from Eleanor Smith with JPMorgan.

I think I'll keep it to 1 as well. I know many products can be implemented in a matter of weeks or months. But when you land a large new customer as you did in Japan this quarter, how long does it take to implement a large customer like that? And when do you begin recognizing revenue? .

Sure. And listen, I think on average, it's a reality with the efforts we've put into rotating a lot of our energy in our field, PSO organizations toward our for deploy engineer as well as applied intelligence groups to reducing overall implementation times. And that's showing up and they're compressing nicely, and we're getting customers live in time frames that are actually exceeding my expectations. Specific to the large Japanese deal, that's a multinational deployment that probably unique in its own regard with respect to some of the coordination that needs to happen upfront before we even start thinking about deploying nCino.

So there's some of that that's happening right now. once we get hands on keyboards with Encino, I expect that we'll hammer through that project in months. But there's a lot of upfront prep work when you're bringing a global organization together across '26 countries that needs to happen, that will probably elongate the time that we can announce something very exciting with respect to a go-live on that particular bank.

Yes. Ella, with respect to the rev rec, just recall with platform pricing, it's going to be straight lined over the term. And it would generally start a month or 2 after contract signing, when we would start billing just based on the terms of the contract. .

next question comes from Nick Altmann with BTIG.

Awesome. Just on the renewal base. I know you guys mentioned 38% of the ACV base is renewed to the new pricing. But can you just talk about where you expect that mix to trend as it relates to the 2027 ACV guide and whether that contemplates some continuation in the early renewal activity that you guys have been seeing?

Yes. Thanks, Nick. Yes. As it relates to fiscal '27. I mean, we would expect a similar performance as we had in fiscal '26 in terms of the renewal cohort that comes up. Recall historically, the average contract length of our bank operating customers is upwards of 4 years. And so break that down generally a quarter over that 4-year period. We are seeing accelerated renewals. And so I think we're ahead of plan for that. So again, we would expect a similar performance. Keep in mind in terms of the comp because it's a similar performance, you won't see that onetime kind of step-up that we had this past year, which was the first year really of the step up. And so just keep that in mind from a compare standpoint as move into fiscal '27.

Next question comes from Ken Suchoski with Autonomous Research.

I'll keep it to 1 as well. I wanted to dig into the long-term vote of the business a little bit because it seems like people are investors are questioning the terminal value of these software companies more broadly. You mentioned how banking is a highly regulated business and how that's different. Could you just talk a little bit about how nCino works if and how Antena works with regulators and how that might impact the ability to remain entrenched and prevent new companies from coming into the space. .

And then secondly, it sounds like data is going to be 1 of the key sort of aspects to the longer term. So are we at the point where the network effects of the data are strong enough to keep Encino in the lead? Or is there this sense of urgency across the business to try to build up that aspect of the mode?

Thank you. And yes, we do believe that the future long-lasting durable software companies that are going to be the generational companies that can survive inflection points like these. -- are going to be able to deliver AI embedded within existing business processes and in particular, in this banking vertical, that lend context and within the guardrails of regulation. And beyond regulation, you have to consider things like security, there's trust and there's that data mode that you talked about. And we believe that what's unique about nCino is we started accumulating this data 14 years ago, right?

So we are absolutely not sitting here reacting and aggressively trying to build up our data mode overnight because that was the original vision of nCino. When I joined this company in 2013, I had a conversation with our founding CEO on the power of sitting at the intersection of the things that we do and where we do them. And if we could serve that data up with meaningful insights that would be very compelling. And we just happen to now be in the era of AI. So while other companies are scrambling to deliver user experiences overnight with no foundation of data, we're actually continue to build on years of buildup.

And we just -- we're not arrogant about it, but we believe our data mode is unparalleled and unique, and nobody else has the type of contextual view on how capital flows through workflows in financial institutions. So we're excited about that, and we believe that's going to propel us we'd lean into it. As far as the regulation, I would first point you to the fact that we have hundreds of bankers that work in an nCino, they come from that world, right? In many cases, sitting in these chairs side-by-side with the chairs of the regulators for careers before software. And that's very unique in terms of how you think about product management. And now in the world of prompt engineering and imagining experiences very quickly, doing that without that human riding shot again with you? is where I'd be nervous, right? That's where you start getting into hallucinating on public cloud data that you think regulation lives in the public cloud.

It does not and the bankers understand that. And that's why we're excited about that, and we maintain the relationships with these types of people in the space.

Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks.

Thank you all for joining us today. We do look forward to seeing many of you at Incyte, which is our annual user conference in May, where we will be showcasing many of these genetic experiences we're talking about with customers on stage delivering outcomes. Hope to see you there.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Excellent. Well, hey, good morning, everyone. Welcome to Day 1 of the Barclays TMT Conference. My name is Saket Kalia. I cover software here at Barclays. Really honored to have with us Greg Orenstein, Chief Financial Officer of nCino. We've got about 30 minutes together. Let me take the first 20 or 25 minutes to go through some fireside chat with Greg, which I know is going to be fun.

A lot of stuff to talk about from last quarter. And then we'd love to make this interactive. So if anyone's got any questions, just pop up your hand, and we can get a mic around for the benefit of the webcast. So with that, Greg, thanks so much for being with us here today.

Pleasure being here. Always good to spend time with you.

Wouldn't be Barclays Conference without nCino. So, for those of us that remember nCino back from the 2020 IPO, we remember a leading platform in commercial lending here in the U.S. and a growing international story. Can you just talk about how the story has evolved since then? And what focus areas and new markets are sort of top of mind? Maybe we'll start there. .

Sure. It does seem like quite some time. And the company has evolved quite a bit. So you're right. We started as focused on commercial lending, but we always had this vision of building out a platform across the financial institution. We started with commercial, expanding into small business, consumer, ultimately, mortgage.

And we do that through lending, right? account opening, onboarding and then portfolio monitoring. And we do that all on a single unique platform, and we do it globally. And the same platform that we can serve a community bank here in the U.S. that scales to Bank of America and Wells Fargo. Also is the same platform that we are thrilled to say, supports Barclays in the U.K.

And I think that's one of the unique things about the company, the geographic presence that we have as well as in that platform that's demonstrated an ability to scale upmarket to the largest banks in the world as well as globally. In terms of the international expansion, we really started in the U.K. In U.K., we had some nice success.

We are very focused on expanding on the continent. We see that as a really nice opportunity in Japan is a geo that we've been quite bullish about. And over the past several quarters, you've seen some nice commentary around some wins that we've had with that there.

Overall SAM is actually about half outside of the U.S. And so it's right now about 21% of sub revs, and we see a big opportunity globally while we continue to take customers and gain market share here in the U.S.

Yes, absolutely. I want to zoom in just a little bit, right? I mean we just reported third quarter results last week. Maybe just for the benefit of the group, can we just recap some of the key takeaways that maybe you were most proud of as you look back at nCino's third quarter.

We thought it was a very solid quarter. Thank you. Thank you. Another really solid quarter of execution. So really proud of the team and the focus that we've had throughout this year. And so another beat and race quarter, which we're excited about. I think a particular note was the 600 basis point increase year-over-year and quarter-over-quarter in our operating margin.

I think that stood out. And the other thing I think that stood out was the traction that we're getting with our AI and our banking advisor. We announced over 110 customers have now signed up to use banking advisor and that's really exciting. We have a lot of initiatives focusing on making sure the adoption is where we want and expect it to be.

But I think overall, just solid results from the team and for the quarter and I think right now, we're feeling good. We still have to finish out the year. Fourth quarter, as you know, is always our biggest quarter bookings wise. But I think in terms of the sales activity that we see, we're feeling like we're in a good spot right now. We just need to keep focused on executing as we have throughout this year.

Absolutely. Maybe that's a good segue just to talk about your end market and kind of maybe how that's evolved. Obviously, we had an uptick in interest rates and kind of the liquidity crisis a couple of years ago, which led to some sluggishness, I think, in kind of end market spending.

But over the last few quarters, it kind of felt like things have picked up nicely, right? I mean just going back to your point just on bookings and year-to-date and hopefully looking into Q4. Maybe the question, Greg, is how would you say the end market is faring currently? And sort of what do you feel like is as you keep your finger on the pulse, what's customers willing to suspend and invest right now .

Overall, and we spend time with our customers every day, right? And overall, I think it's a positive environment. Financial institutions, balance sheets in general are healthy, right? And we did come through some difficult challenges as an industry. Obviously, rising interest rates, rising at such a speed over such a short time period, really shook the industry, obviously, leading to the liquidity crisis.

The farther that's gotten behind us, I think, more we've evolved back to a more normalized environment from our perspective. And so with bank spend feels good. And you can't deny that AI, obviously, it's top of everyone's mind, but it is a catalyst for discussion, right? It's a catalyst to engage with customers and with prospects. And I think that has also increased the sales activity that we see out there, particularly in light of all of the innovation that we've been investing in and we're able to showcase with live product out in the marketplace.

And so yes, it feels much better. I mean we had such headwinds that just the headwind subsiding, I think is a big change for us. We always welcome tailwinds, but yes, right now, it feels good, and I think it feels more like what we were used to, frankly, going back to pre-COVID days and then you had the the COVID hangover after that. So again, it comes back to focus and execution and accountability. That's what Sean Desmond our CEO, is constantly beating the drum on. And I think that the entire organization has embraced that drumbeat.

Yes, absolutely. Maybe we can dig into some of the specific businesses here, and I want to start with U.S. commercial lending. So that's really where nCino got a start. And I think an investor question that I get once in a while is -- how much more runway is there for growth in U.S. commercial in terms of like adding new bank logos, for example, right? Like the story international is very clear, right? But in the U.S., how do you think about where we are in kind of that adoption curve?

We still think there's plenty of opportunity. And even if we have a logo, we still think that there's opportunity in many cases, within the commercial part of the bank that we haven't fully been deployed at. And so just because we have a logo don't assume that, that has ended the opportunity we have for whatever product that we may have with that financial institution. Even last quarter, we announced 2 expansions with top banks, right? And so that product continues to, I think, leave the market on a global basis. .

And the other thing I think that we're able to leverage with that product is across the financial institution, and this is why our platform story, I think, is so important and it resonates. We can land, I think, with any one of our products, but once we land, we can expand across the bank.

So if they did buy us for commercial, and let's just say that we are fully saturated, right? I think our customer base is generally a very happy customer base. And we have the opportunity because of the face that they put on us and the trust they have to go back and say, okay, we had such success with commercial, let's go to small business. Let's go to consumer, right? Let's go to mortgage. Let's account opening. And so I think all of that provides opportunities for sales.

And then within the commercial side of the bank, this gets back to our banking advisor AI functionality as well as onboarding with an acquisition that we did. We have more things to go back and sell into that same bank if just kind of the general commercial lending if they're fully adopted there.

Got you. Got you. Maybe we can talk about the other side of the lending business, which is international. Those markets can be a bit of an S-curve, right, in terms of getting your initial reference customers you brought up some great examples from Japan and where you started in U.K., for example.

Maybe a 2-part question. Remind us what are some of the other key international markets where nCino has the presence. And then secondly, how would you sort of describe the competitive landscape? Because I think one of the strengths of the business here in the U.S. is that this is really the leading platform when it comes to U.S. commercial lending. Is it the same internationally as well?

From our perspective, absolutely, I mean we don't see a competitor that does what we do. And so our biggest competitor by far we always say is just do nothing, right? Just kick the can down the road. You historically saw a little bit more build mentality or buy a framework and build on that. But again, with the success that we've had at the largest institutions in the world on a global basis, I think we have a very compelling thing, why would you want to go through that pain, right? And take the risk of it not being successful, when you had demonstrated such success on a global basis.

And so I think competitive landscape for us is very, very favorable. And it's really more about us focusing and executing. And so we did get our start internationally in U.K. We had a lot of early success there. It was great. We do see opportunity on the continent. This year, earlier in the year, we talked about Spain and the Nordics being focused areas. We were pleased to see our first Spanish logo in the second quarter.

You had a new leader there, if I'm not mistaken, right?

That's right. He came on at the end of last year and so again, we've been obviously tracking the progress. And I think so far, we've been pleased -- we've been very pleased with what we've seen from him and the team that we've built around him. And so we'll continue to kind of go country by country, right? Stay focused. The first win is always the hardest right, get that customer live successful and then generally, our success is driven by word of mouth.

And then again, I mentioned Japan earlier. I can't -- can't reinforce the opportunity that we see there with one of the largest financial services markets in the globe. So feeling good. And then again, focus, execute, hold people accountable.

Absolutely. So we've talked about kind of commercial lending, right, both U.S. and internationally. I want to maybe move to consumer banking as well since I think at Investor Day back in May, we heard that, that was the fastest-growing portion of ACV, and you correct me there if I'm wrong. But would you say that most of the opportunity in consumer banking is white space kind of similar to what commercial was, I think, earlier in the journey. And maybe relatedly, how is that competitive landscape sort of -- maybe talk us through the competitive landscape on the consumer side.

Yes. I think at Investor Day, we were highlighting its growth, not necessarily that it was the fastest growing .

Understood.

Growing product, no, no, but to that point, it was growing and has been growing nicely for us. It is a rip and replace for the most part with that product. And that's -- and so we see competitors out there. Again, I think we have a different value proposition, not just with the functionality that we've built for consumer but also as part of our single platform story, right?

And so again, if you have us for commercial for example, it makes sense to have us for consumer in small business and mortgage, right, and really have all that information around the customer versus having different tech stacks where a customer can interact with you with one tech stack. But if they go into a different part of the bank, that bank actually has no idea who you are as a customer because it's a completely different system, right?

And so where we see a lot of success, I'd say where we see the most success with our consumer is that platform play. And commercial customers adopting it. That said, at Investor Day, there was a $200 billion bank, that's still on stage and talked about them adopting consumer. That was actually where we landed with that financial institution, right? And so I think that reinforces the fact that product is best of market. We can land with it and then drag commercial along, right, which is something that we focus on doing as well .

So feel good about that. To me, it's kind of just steady as she goes progress -- and I think that product has matured quite a bit. I think our spend has been aligned with the market as we kind of go over some investment hurdles. And now again, it gets back to executing. .

Got it. Got it. I think the pricing model for consumer banking is platform-based. So I'm going to use this as a segue to touch on that topic because I think it's important. Remind us how -- Greg you talked about a $200 billion bank, I mean, remind us how platform pricing works versus kind of the current seat-based model on the commercial side? And maybe where -- what inning are we in and sort of that transition, if you will, the platform pricing?

So all of our pricing now is based on assets commercial consumer mortgages based on loan volume, right? So let's leave mortgage to the side for a minute. We started that officially this year in terms of transitioning, as you know, from our old seat-based pricing model to based on assets and its assets that are actually sitting on the nCino platform. And we did that for a couple of reasons. The main one was we saw the efficiency gains our customers were getting from our software and therefore, the need for less seats over time. And we said that's not really an ideal business model, right? .

But we also saw the growth that they were getting from an asset standpoint. And so by transitioning to platform pricing we've been able to align to the value that they're getting. If their assets grow, we get a little piece of that. They're happy, we're happy, and you keep going together. And so we officially started that this year. We did quite a bit of testing over the last -- over the prior year.

At the end of the third quarter, we said about 27% of our overall ACV was on the new platform pricing model, and that does include mortgage, about 1/4 of it on mortgage. And -- that is our only model going forward. And so whether it's a new sale or someone comes up for renewal, that's the discussion that we have. And the other thing that we've been really excited about is in order to use our banking advisor AI skills, you need to be on the new model, right? And so not only have we seen that helping us getting deals closed with net new customers and moving things along the pipeline.

But also from a renewal perspective, accelerating some renewals. Our average contract link stack is about 4 years, as you know. So in theory, it would take about 4 years to convert the whole base, but we see opportunities to accelerate that and get more folks converted sooner because they want to start using our AI capabilities.

Maybe that's -- I mean, a good reminder. I mean, I think that 27% just a few quarters through. I think you've talked about this phenomenon of kind of early renewals -- is that what's driving it? Do customers really want to get that banking advisor and that's why maybe they're coming back to the table a little sooner than they typically would talk about that early renewal kind of kind of aspect that we've seen.

We've absolutely seen that. And I would expect as that momentum continues to build, that we would see more of that, which is great. And so yes, in order to use the AI capabilities, you need to be on the platform and the pricing -- and we also use -- if we're going to go sell them something new, let's say, they're a consumer customer, we're going to go sell them commercial -- we also use that as a pivot point to get them on to new platform pricing.

So aligning value and outcomes, right, with what they're paying, we think is -- makes a lot of sense. And it's gone very well. We've talked about, again, a lot of planning went into this. We got a lot of lessons learned from seeing other folks go through pricing transitions. And so we feel good about that. And we also feel good so far about the price uplift that we're getting just purely on an apples-to-apples basis, we said that we were targeting about a 10% price uplift, and that would include getting an initial bucket of AI credits to use.

And so far, we felt good about getting that overall. We said before, people plug it in their model, let's get through Q4 because this is our biggest renewal quarter. But I think that's gone well, primarily under the old seat-based model, price was locked for the term, right, when average was 4 years. And so as inflation ripped over the last few years, our customers weren't compensating for that. And so I think it makes for an easier conversation to go in and say, kind of let's start with making up for lost time and then we can build from there. .

Yes, yes, absolutely. So we've talked about commercial. We've talked about consumer. I want to hit on one of the last pieces here, which is mortgage, which has actually been growing pretty nicely this year, right? So -- and I think some of that has been driven by just sort of mortgage volumes as interest rates have eased a little bit.

Talk to us a little bit about that business. What's your outlook on kind of how mortgage volumes could kind of contribute? Maybe just a quick detour on the mortgage business and kind of the state of the union.

Very pleased with the mortgage performance. As you know, the second quarter, it was up 22% year-over-year. This quarter, we had a tough comp. As you know, if you exclude that, it was also up over 20% in the third quarter. And I think that's really a reflection of a few things. One is I do think the mortgage market in the U.S. overall has become more stable.

Obviously, there's an expectation that rates are going to come down and ultimately translate into lower mortgage rates, even though we haven't really seen that play out. And I also think that it's really a byproduct of a lot of hard work and effort from our team during I'll say, some of the mortgage turmoil going back 2 or so years ago where the team stayed very focused on executing the strategy and the plan. I believe we took market share.

And I believe that you're seeing some of the output of those customers coming on to nCino's mortgage platform, getting live and loan volume starting to go through the platform. And so while it's obviously been difficult few years, that mortgage business has grown every year that we've owned it, right, even in those more difficult time periods.

And so I do think as we think about potential tailwinds going into next year and beyond, coming from what I believe is a state of general stability, I think that we have -- I think that could be a nice tailwind for us. And hopefully, we build from here.

That's great to hear. That's really...

Great, technology and we've been able to take that technology outside of mortgage and expand further across the various parts of nCino as well. So we feel good about where we are now, again, after a tough couple of years.

Well, what's great about mortgage businesses having covered Ellie Mae in the past. I mean, as you gain share in tough markets, the upswing only becomes that much more fun, right? So knock on wood, right, that...

We're looking forward to that second.

Absolutely. Absolutely. I want to shift over to the model a little bit. And maybe start with ACV, which is a new disclosure you made this year and has been super helpful. You've been able to raise the revenue guide through this year, all while keeping your ACV guide unchanged. Can you just talk about that dynamic a little bit? And I think more importantly, how should we think about ACV this year being a leading indicator for revenue in future years?

So we did come out with a whole new guidance framework and philosophy this year, which we've gotten a lot of good feedback on, which is great. And we took a lot of feedback in what we ended up kind of finalizing one for this year. So we very much appreciate our investors and their thoughts. And so for ACV, it was a new KPI for us. We said it was an annual guide. We've always been I'd say reluctant or concerned to get into that quarterly game, where, again, because our customers are generally -- we say they're generational customers and they make generational buying decisions.

The last thing you want to do is make a short-term decision to meet what is ultimately just a random KPI, right, that gives up value over what could be 10, 15, 20 years of that customer being -- and so we thought it was an annual metric. And I think as we've challenged ourselves through the year, that's made sense. That said, qualitatively, we have given commentary both after Q2 and Q3 around where our heads were in terms of the progress and noting that we've felt incrementally better after Q2 and Q1 and incrementally better after Q3 than Q2.

And so we believe we are well positioned. We have to finish the year and execute. No doubt about that. But I think it is helpful to get to your point, we said that if we hit our ACV guide, that should be -- help reaccelerate revenue next year.

Organically.

Organically, that's right, which we're around exiting this year based on the guide around 8%. That has been going down, whether it's been churn, unnatural churn or macro.

And so just to have that inflection point pivot and then us to be able to build from there is what we're focused on. And again, right now, it's heads down, let's finish the year strong and set ourselves up for that reacceleration that we're excited about. And in the meantime, if we're able to go do that, going back to where our operating margins are going and operating income, and so creating value on the bottom line as well.

That path to Rule of 40, right, by the exiting next year, right? I think it's always been that North Star. So maybe that's a -- do you want to talk about -- I want to keep on -- maybe one last question on ACV. ACV revenue, one of the things about the new platform pricing model was maybe maybe a change in rev rec, right, like faster rev rec because going back to the IPO, this was a seat-based kind of activation model, so it would really take a long time for kind of bookings to waterfall into revenue. But I think with platform pricing that could potentially change.

Remind us, is that happening right now? Is there anything that we should be thinking about that with that rev rec item vis-a-vis platform pricing going into future years? If that makes sense? .

It does. And yes, the model changed, and that does drive different rev rec, right? Before we would have someone commit to a certain amount of seats. And again, we would work with them and when those seats will turn on and actually flow through revenue. Now they're committing to a platform pricing, and so we'll see the revenue start. It gets straight line through the term just based on the accounting rules.

Sometimes from a cash flow in the first half of the contract term, you'll see less cash, because we can ramp a deal, right? 3-year deal as an example, you'll pay us $1 year 1, $2 a year 2 as you ramp and then kind of exit at year 3. The rev rec is $2 across each one of those years. Cash will get $1 in year 1, $2, 2 and 3. And we have a slide in our earnings presentation for folks to be able to see that.

But that's right. And so we feel good about that. We've had good visibility on revenue. It does focus us on making sure from a deal and timing standpoint. We're aligned with that comes as we do planning. But that is the model. And again, we tested it out for a while. We feel good about it. And then it just gets back to just continue to execute on the sales front as we feel like we've been doing.

Absolutely. Maybe just to move to margins, right? Going back to kind of that Rule of 40 that you've talked about. I think nCino was up to over 25% operating margins here this past quarter. Again, you've been targeting to get back to get to Rule 40 exiting next year. Kind of through a combination of reaccelerating organic growth, as we talked about, and then also continuing to expand margins. Maybe the question, Greg, is what are some of the key levers for margin expansion that come to mind as you think about that plan, right, kind of exiting next year? .

One of the things that we've highlighted going back to our Investor Day in May is an opportunity to improve our gross margins for our professional services. And so the team has done a good job of getting more prescriptive from an implementation standpoint. And also we've invested in tooling internally. We have something we call Project 0, which is leveraging AI to help accelerate implementation time lines. And so we said with that, focusing on improving that margin is our focus versus driving more professional services revenue because, frankly, the more efficient we can get the, the more efficient we can implement something, right?

The shorter it should take us to do that. And actually, we can go in with -- for a customer and give them maybe a better price point, right, to implement it and us actually have better margins from that. And so that is, I think, a lever. And then I think also, we've continued to tweak the organization in terms of where we see pockets of opportunity. We did hold back some dollars and savings from the reduction in force that we did in May.

We held back $2 million in the third quarter. We didn't see really an area to spend it. So we passed that through. We still have 2 million-ish that we held for this quarter. And we'll do the same thing, we'll pass it through if there's something that we think is going to drive growth. We still think there's a massive growth opportunity with this business. Then happy to come and say we took X dollars and invested it here, and here's the return that we think we're going to get .

Yes. I think that professional services item is really interesting. And kind of the -- obviously, this is a SaaS business, that's really that higher gross margin piece. That's very high lifetime value as well. Talk to us about sort of where you think the services revenue mix goes right? Because there are 2 aspects to the gross margin, you could obviously improve things like utilization and pricing and whatnot, right? But then also as a mix of the total business, that headwind can also kind of change over time. So what's the right mix of professional services revenue as you think about the future?

Yes. From a percentage standpoint, we've been saying this for a while because for us, we're a product company, right? And we've really -- we've got great SI partners historically that we've worked with, where they've been the lead for implementations, particularly at larger financial institutions around the globe. So we've really never tried to focus on growing that. But over time, because of I think the subscription and the software and with that mindset, the mix has continued to creep more and more towards the subscription line -- and so we've been trending down towards and past the 10%.

We would expect that to continue slowly trending down, particularly as we get more and more efficient with implementations and can implement them quicker. Again, it saves money from a customer perspective. for us, we want that margin to increase and both of us would be real happy with that approach. .

Yes, absolutely. I want to wrap up here just on capital allocation, nCino, I think, did a $100 million buyback authorization that finished this past quarter. And of course, this week, we -- you authorized a new $100 million buyback to replace it. And I think this was the first time we've kind of -- this is kind of the first time that we've returned capital through buybacks before -- how do you -- how do you and Sean and the Board kind of think about just about that capital allocation strategy going forward? -- open ended?

Sure. And I touched upon this a little bit on the call. as we thought about going into this quarter and to the end of the year, obviously, we had been active from an M&A standpoint over the prior 12 to 18 months. I think we've been very vocal about our focus internally on making sure we're comfortable with the integrations, and we're comfortable ultimately getting the return from those investments and acquisitions before we went off and potentially pursue others.

We keep our eyes and ears open because it is a quickly changing market. But again, I think we feel very good about the product portfolio we have. Right? And there's not, as I sit here today, some big hole that I say we need to go fill. -- frankly, like when we are lending company, we didn't have a mortgage solution to us, that was something that we needed to go to -- and so I talked about really a combination of stock buyback and/or building up some cash on the balance sheet, which is obviously as a CFO is never a bad thing as well as we do have a credit line and potentially paying that down.

But ultimately, again, as we see where we were at the end of last week, I think we certainly spoke up in terms of where we view the trajectory of the business and the excitement and optimism that we have while continuing to beat the drum. We got to keep executing. But it was great to see the Board's confidence in the strategy. And ultimately, our shareholders are pleased to see that as well. .

Yes. I think I couldn't think of a better place to end. So with that, Greg, thank you so much for the time. Really enjoyed it.

Always a pleasure coming here. Thank you very much.

Thank you.

All right. Good morning, everyone. My name is Alex Sklar. I'm one of the application software analysts here at Raymond James. Very pleased to have nCino with us again this year. We've got Greg Orenstein, Chief Financial Officer. We also have Katie summing in the audience, who is the VP of FP&A, if you have any questions after. We're going to do a fireside chat. If there's time at the end, I'll open up to the audience for questions. But Greg, thanks for joining us.

Always good to see you, Alex.

So maybe just to get us started, background on nCino. How do you serve financial institutions? What are the key value propositions of the nCino platform?

We focus on 4 main things, right? Lending, any type of lending, whether it's commercial, consumer, small business or mortgage; account opening; onboarding of customers; and then portfolio monitoring. And we do that all on a platform, a single unique platform across the financial institution.

Same platform serves community banks here in the U.S. all the way up to Bank of America and Wells Fargo, which we're pleased to have as customers. Same one travels internationally, folks like Barclays in the U.K., Macquarie in Australia. Approximately 21% of our revenues -- subscription revenues last quarter were outside of the United States. And so we're able to grow with the financial institution throughout their life cycle.

And the other thing that we do with that is we leverage the data that we have to inject AI, of course, obviously, top of mind as well as to inject information to help financial institutions make better decisions when they need to make them. And so that's what we focus on doing.

Yes. We'll definitely hit on some of that, especially the AI here. But you just reported third quarter results last week. Very nice results. In terms of the amount of upside, it was, I think, a little bit higher than prior quarters, really nice beat on the profitability side. What were the key kind of takeaways from your seat in terms of the quarter? Anything you thought was maybe underappreciated?

Yes. So it was a solid quarter. Really pleased with the team for focused execution. Another beat and raise quarter. I'll call out our 600 basis points year-over-year and quarter-over-quarter increase in operating margin as something to highlight as well.

Our U.S. Mortgage business, if you exclude the tough comp from last year, grew over 20% again for the second quarter in a row. And then I'd also say, if you exclude U.S. Mortgage in the U.S., our organic subscription revenue growth accelerated 200 basis points to 9%. So pleased with the overall performance and just also just with the overall momentum.

In terms of underappreciation, Alex, to me, I think it does get back to the AI story. We announced over 110 banking adviser customers. That's our AI family that we've come out with. And as I sit and think about just the beginning of the company, I think it took us about 5 years to get to 100 customers. And most of those 110 have happened this calendar year. And so I think we've got a lot of momentum there, and I think we are uniquely positioned to be the worldwide leader in AI banking.

Yes. Maybe we jump ahead and we go into AI right from that. But I think I had some conversations coming out of the quarter, effectively the proof points of the amount of adoption on your AI tier at 110 with kind of getting early renewals to get there. What's kind of -- what is it that people are getting value out of now? Or what is it they're testing to see what kind of value they could get out within your kind of AI suite? Any solutions that are moving the needle? And then talk about what that actually means financially in terms of uplifts from adopting Banking adviser or what the usage component can mean for the model?

Yes. Over time -- look, over time, we expect our whole software to evolve to be AI, right? People say, what's your AI revenue? Over time, it's all going to be AI revenue, right? But we have -- from a capability perspective, we've come out with -- we started last year, we had 2, what we call banking adviser capabilities. We increased that by 16 at our user conference in May, and we said that exiting the year, we expect to have over 100. And so a tremendous amount of innovation from our R&D team.

And it's various things. It can be simple in terms of just chat communications, right, your basic stuff, locate and file, which can automate finding, recovering and filing away stuff to save time to more substantive things like continuous credit monitoring, right? You go home, you get a sleep, you wake up through our AI technology, wake up in the morning and you get to work. And you can actually have red flags highlighted for you because of potential concerns with some of the loans in your portfolio.

So tremendous value add we're bringing. And the other thing that we're doing with that, Alex, is through our operations analytics functionality. We actually have a dashboard that we present to our customers so they can see the efficiency gains that they're getting with our technology and certainly be able to extrapolate that in terms of value for them using nCino.

Is that seeing how fast they can generate and fund a loan? Is that -- what are some of the things that people are tracking in terms of the efficiency side on getting value out of it?

Great example. And that's something we've always done, right? We're in the business of making our customers more efficient. AI now is just a new technology to help accelerate that and take that to even the next level. And so yes, so it's things like that.

And Sean talked about on our earnings call last week, customers taking loan approval times from 23 days down to 2 days, right? And so that's always the business that we've been in. And for us, like I said, this is just a new technology to help make the efficiency even more efficient, if you will.

And the other thing I think about AI that we highlighted, of course, there is a revenue impact in terms of using the AI itself and what we call intelligence credits that get used up through capabilities being addressed. But also, we've seen it accelerate sales, right, for folks who bought into our strategy as well as accelerate renewals.

And so what we see in the marketplace is customers who are looking to nCino to help them on this AI journey. And for us, it's somewhat of a -- it reminds us of when we started the business, when there was no such thing as cloud banking, and we created this category called cloud banking where banks looked at us to take them on that cloud journey.

And when you look at kind of your portfolio of AI skills today, talk about like what can't be replicated. So you have 110 customers. That means they're opted into sharing their own data. I don't know maybe it's the data aspect of it, maybe it's embedding into the workflows that they're already doing process-wise. What is it that you think you bring from a vertical specific that can't be replicated?

First off, it's the deep banking knowledge that we've got, right, that's in the DNA of the company. It's the fact that we've got hundreds and hundreds of customers where we understand as well as anyone in the world, we have a very unique view of how banks should operate, right?

And historically, customers, we've been able to point to them and say, "Hey, stage 3 of your commercial loan, it's taking you x amount of time, where it's taking the bank down the street a significantly less amount of time. Let's work with you to revisit that stage so you can be more efficient." Now we're using that same type of discussion to have those conversations, but also know in terms as we prioritize where to build agents. Let's have the agents go do some of that work that may have been slowing down the process, right? Because at the end of the day, what the customer cares about is, "Am I approved and how quickly am I going to get the money." And so it's just a continuation from our standpoint of the business that we've been in since we started the company.

Got it. So maybe switching gears, new KPI this year, pretty top on all the quarterly calls is around ACV growth. And I think the messaging this year is kind of -- the target is to kind of accelerate ACV versus where it's been in the last couple of years. You've got, I think, a target for 8% to 9-ish percent growth. How do you feel about the progress to that year-to-date?

Yes. That is a new KPI. As you noted, we came out with it on our Q4 call in April. And we said it was an annual metric. It's the first time we're going through it. So we've talked about while we haven't quantitatively updated it throughout the year, which was the expectation that we gave, I'd say after our second quarter call, we talked about our confidence in meeting or exceeding that number. And then on this call as well, talked about the fact that we felt like we were very well positioned relative to that, while acknowledging, yes, we have to go finish out the year. But overall, I think we felt better incrementally after Q2 than Q1 and then incrementally better after Q3 than we did Q2. So...

Definitely had some inbounds trying to diagnose the word choice of exceptionally well positioned versus kind of well positioned to meet or exceed. It clearly seemed like an uptick from our end?

Yes, we are feeling incrementally better. And yes, we're a choice, we appreciate what matters. And we were trying to provide some context for people in light of the fact that, hopefully, they appreciated that we were not going to update that throughout the year, certainly not the first year of having a new metric for us.

So Q4 historically is kind of your biggest bookings quarter, assume no different this year. But what are some of the big swing factors kind of investors should be aware of, whether it's timing of renewals, whether it's kind of broader demand environment? What else are you kind of watching from your seat as you kind of progress towards those targets and specifically kind of going into this Q4 selling season?

Yes. I think it's just execution. I think we feel good about the business that's out there. I think we feel good about the sales activity, as I commented on the call. And so it's just heads down execution. And I will contrast this. If I go back 2 years ago, I think that it's a better market for us. Our customer base is generally healthy, right, healthy balance sheets. AI is a catalyst for discussions with every customer and prospect, right? So I think that increases the interactions as well, which leads to opportunities.

And so -- and I think also, we're seeing just deals -- just overall from a pure geographic perspective, we're just seeing better deals in terms of size, right? That was certainly something that we saw post Silicon Valley Bank and liquidity crisis, some of those larger deals that we've historically been used to getting kind of dry up specifically with the enterprise banks here in the U.S. And on a global basis, we've seen some of that come back, which I think positions us well. And like I said, then it just comes down to we just got to finish the game to finish the quarter.

So on the execution front, go-to-market, there's been some changes in Europe. New Head of Sales has been in place for a little over a year now. Sean, as CEO has been in place, I don't know, a few quarters now. What's kind of been the big changes on the go-to-market side? What kind of in your seat do you feel better about incrementally in terms of the team actually executing here exiting this year and for kind of the years to come?

Yes. So the consistent constant drumbeat from Sean is focus and accountability. And I think that everyone appreciates that throughout the organization. We have, as we've -- over the last year or 2, as we've looked at our sales organization and the opportunities that we see, we've appreciated the fact that we started as a one-product company, right, specifically in the U.S., we went international, and that was commercial lending.

And I think we had early success having former commercial lenders come in and sell for us, right, because they could talk to their former peers across the table and say, I know exactly the problems that you have and nCino is here to solve them. We still have that in the company, which is great and very useful.

But over time, we've evolved to a global enterprise sales company. And we've appreciated that it helps to insert some different DNA into the sales organization to balance some of that kind of banker sales. And so that's what we've done, and we've been focused around that. And we've got, I think, a great sales organization, again, very focused. It's -- again, it's a better environment for them, right, kind of slogging it out 2023 into 2024 post liquidity crisis. And so everyone's heads down looking to finish the year strong.

So better operating environment, getting a little bit better productivity, it sounds like as well. You did hire quantity-wise, I think you talked about double-digit kind of growth in sales capacity. What's been kind of the growth you've seen from -- are those folks productive yet? What have you seen in terms of growth from that kind of new cohort?

Yes. As we came into this year, we were investing in sales and marketing. And again, I think that's a reflection around the opportunity we're seeing and the improved macro. I think if you go back 24 months ago, you could have thrown as many salespeople out in the market as possible, but just the environment wasn't there as a lot of banks were internally focused, making sure they weren't going to be subject to regulatory scrutiny post SVB.

And so yes, I think we've -- Europe, here in the States. We continue to be very bullish about our opportunity in Japan. And so continue to make sure we've got the right number of folks on the ground. We also stood up a credit union team to specifically focus on credit unions here in the U.S. And so that was an expanded go-to-market motion as well.

You have good international coverage already. Is there still more room kind of on sales capacity as you think about going into next year? Is that something that's still talked about in the executive team?

Yes. I think overall, we feel good about our headcount. But yes, we will continue to look for opportunities to add sales capacity where we think the market is receptive to it and warrants it. I mentioned Japan, that's a perfect example of where I could see additional headcount and then continuing to build out as we get more and more aggressive on the continent in Europe, continue to build out our sales force -- our sales force there.

So you've got the team on the ground you need. It sounds like there's some pockets maybe of opportunity. But one of the things that I think has been particularly exciting for the stock this year is the incremental margins have really stepped up. And so you've done this kind of potential reacceleration in growth with some leverage. What's kind of the outlook on the margin side? Where are some of these efficiencies coming from? How much is still to come as you think about maybe framing it as part of your Rule of 40 target that's out there for the end of next year?

Yes. So we went through the difficult process of having a reduction in force in late May, something we thought through, and again, always difficult to do. But as Sean says, let's start with the folks who do the work and work backwards from there in terms of who we need and let's make sure we don't have managers, managing managers, managing managers.

And so it really was an effort to streamline the organization and to be more efficient, and frankly, just to make everyone's day easier to get their work done. And so you did see, like I said, a 600 basis point increase year-over-year and quarter-over-quarter in margin. Hopefully, that gives folks confidence in terms of our ability to manage that bottom line towards that Rule of 40 target around the fourth quarter of next year.

And then it gets back to the growth. We definitely want as much of that Rule of 40 driven by subscription revenue growth as we can. We've got 5 growth initiatives we came out this year that we've been trying to update as the year progressed in terms of the progress that we made. We talked on the call about each one of those being accretive either to ACV or to our pipeline, right? Some of them are just a little bit -- take a little bit longer.

And as we go into next year, I would expect not only to continue those, but to add another initiative or 2, again, continue to sprinkle these growth seeds. We sit and see ourselves with a $20 billion SAM, and we're just shy of $600 million this year in revenue in our last guidance. And so there's plenty of opportunity for growth.

Why don't we kind of hit on some of those growth vectors? We talked about AI already. So maybe I'll start with mortgage. I think it's 15-ish percent of revenue. It's starting to get accretive to growth again after what's been a tough few years just given interest rate environment. What are you seeing on kind of the gross new booking opportunity side and as far as that driving some of the reacceleration this year versus what's been just a more stable volume environment?

So we're in the lending business. We didn't have a mortgage solution, and we went and bought what we believed. And I think time has reinforced as the best solution out there. Despite the headwinds in the mortgage market, that business has grown every year that we've owned it, which to me is incredibly impressive in an incredibly difficult market.

And then again, when you think about the last 2 quarters, removing the tough comp from Q3, over 20% growth. And so we are incredibly excited about that. It's a great product. We've been able to leverage that technology beyond mortgage in our organization. And as I think about the U.S. mortgage market right now, clearly, there's optimism around interest rates coming down and ultimately reduction in interest rates translating to a reduction in mortgage rates, right?

But right now, it feels like the market is generally stable. And for us, building from here, we are -- we think it's a great baseline. Churn has dropped significantly and has fallen into our hopes and kind of aligning towards historic numbers. And so I think that bodes well. And I think one of the things that we're really proud of is the team did a fantastic job during some of those challenged times, getting market share and taking logos. And we've seen some of that with some of those new logos coming on board.

You sign them, you got to implement them, you got to get them live and then you got to roll the software out throughout the organization and then you need the loans to start coming through the platform. And I think that's been some of the, call it, overperformance we've seen is from some of those great logos that we were able to add. And so overall, we feel good about it. It's, again, great product, great gross margins. And the headwind that we navigated, to think that there may be a tailwind out there is exciting for us.

Do you feel like your overall visibility is kind of significantly improved given some of those headwinds have gone away? Like are customers kind of operating at a consistent level when you look at the apples-to-apples amount of volume coming through that might change or how you kind of think about providing an outlook in that sector, which has a little bit more volatility? Or it's kind of the thought process is we're happy with how we've been approaching on an external standpoint and probably keep more of the same there?

Yes. Right now, I think -- look, what we -- so last year, we made some assumptions and we ended up -- it ended up biting us, right? And I think we decided that if all the folks who predict mortgage volumes can't get it right, why do we think we know better. And let's just be very transparent about the numbers.

And so we took a conservative approach and again, have been highlighting in detail the overperformance so people can see it and make their own assumptions. That approach and the feedback we have gotten this year has been incredibly well received. Will we change that going into next year? That's something we'll talk about as we prepare for our Q4 call and the setup for next year. But I think it has been very well received this year.

Okay. You talked about one of the things, the other benefits you got from mortgage is you were able to bring that front end that you acquired from SimpleNexus and bring it to other parts of the organization. So on the consumer non-mortgage part of the business, what kind of unlock have you seen since you kind of fully stood up and launched kind of the new front end for that solution?

Yes, it really helps from a sales cycle because, again, the cross-sell motion between consumer and mortgage, if the end user has the same experience, it just makes sense, right? And that's very consistent with our single platform approach that we've taken, get out of all these different silos that organizations have grown up where maybe the commercial business line would have their own tech stack, the consumer line would have their own tech stack, mortgage their own, et cetera, and be able to have the organization have one 360-degree view of the end user wherever they interact with the institution.

So yes, it resonates and we expect continues to drive some of that cross-sell motion. We did comment on the call, a mortgage user, I think, a $5.5 billion institution that started with mortgage and indirect lending with us, expanded to commercial and consumer. And that, again, uniform user experience, standardizing on one platform, I think, really resonates for an institution.

It's still newer. Do you think that's an opportunity down the road where you could actually see lands that include mortgage and consumer collectively at kind of the outset for a new customer? Is that something that you're seeing kind of bubble up in the pipeline at all?

Yes, that's certainly part of the go-to-market motion and one of our tools in the sales bag, if you will.

Yes. Okay. On international, it's one of the biggest pieces of the TAM. Obviously, a slightly different value prop in different geographies. But ultimately, you've got proof points in some of the major geos you're operating in. What kind of needs to happen from your seat to reinflect the international business to start being accretive to growth? I think this year, you called out the most recent quarter, mid-single-digit type growth. What's out there in terms of aggregate opportunity? And what kind of changes things from an inflection standpoint?

Yes. So in the third quarter, we had 3% growth internationally. And that's really a byproduct of the bookings from last year, which we've been transparent, were disappointing. Great team, great opportunity, but we made some changes and particularly around the sales organization.

And we do have a tough comp in Q4 that I'll call out internationally, but we would expect executing on our plan this year that, that will drive accretive growth next year. And so in terms of overall SAM, it is about half of our SAM. We see great opportunity in various geos. Japan, we've called out. But on the continent, EMEA, including also just our UKI business, which is where we kind of started and had early success.

We did make an acquisition, the FullCircl, a little over a year ago, and that's to help drive the onboarding opportunity and experience. And we see broader application of that and the ability to take that on the continent as well. And so yes, heads down, let's finish the year strong, execute on our plan. And if we do that, then it should lead to accretive growth next year.

And when you talk about accretive growth for next year, is that the kind of reported subscription growth? Or is that how you think about future kind of bookings for that region?

Well, ultimately, the bookings from this year translating into accretive subscription revenue growth for next year.

Yes. So one of the other new things kind of that you started this year is the platform pricing model shift. So moving from what historically on the commercial side of the business has been a seat-based model to more of an asset-based pricing model. Can you talk about kind of the drivers behind that, the progress to date, what it actually means for the financials as you've gone through that progress?

An important transition for us. It's something that we started talking about now a couple of years ago. With the efficiency gains we were bringing our customer, we saw that they're going to need less seats, right? And that's not a good business model, Alex. And so a lot of time spent thinking through what the right model was and ultimately transitioning to an asset-based pricing model is where we ended up.

We did some testing if we go back last year in terms of getting feedback from our wonderful customer base and ultimately kind of locked it down into the year as we came into this year. And so as we -- through the third quarter, we've now transitioned 27% of our customers to platform pricing. About 1/4 of that is mortgage. Our biggest renewal customer quarter is the fourth quarter just based on historic sales activity.

But we feel really good about that. And it really, I think, aligns us from a value standpoint with our customers. As their assets grow, we get a little piece of that based on the efficiency gains that we're bringing to them. And so the transition has gone very well so far. And we feel good about it. Customers get it. Some of the other vendors in the space, some of the cores, particularly, they price on an asset-based model, and so it's not new to them. And it gets us out of the seat game, right?

And I think particularly with AI coming, from a timing perspective, I'd like to say well thought-out plan. Maybe sometimes it's good to be lucky as well or have some luck along with it. But I think it positions us really well as we ultimately do monetize AI with our customer base.

We have said that we've been targeting about a 10% uplift on an apples-to-apples basis from a product standpoint. So far, we feel pleased with that. We do want to get through the fourth quarter before we kind of more definitively say, lock that into our model, not quite there yet. But so far, I feel good. And things have gone, I'd say, better than we would have expected or hoped. So I feel good about it.

Okay. Another future kind of growth tailwind bubbling up is your end market bank M&A, so the customer M&A. You gave a new stat on the quarter. I think you said over maybe a decade-long period, there's been 270 customer transactions and you were the winner effectively in 95% of those. So maybe just as bank M&A starts inflecting again, maybe talk about what that's kind of meant for the model historically. And especially under the new pricing model, could it actually be more of a driver going forward than it has in the past?

So under the new model, yes, because particularly if you have 2 nCino customers. When there's M&A done, I mean, you inherit 2 contracts and you end up working with your customer and bringing them together and working through the economics. But ultimately, you would think there would be less seats, right, because there would be some efficiency gains by bringing the 2 organizations together.

With the asset-based model, it's based on assets. And M&A, that is a trigger point to go recalculate upon the closing of a deal to go recalculate the assets on the platform and have an opportunity to change the price accordingly. And so for us, yes, over 270 M&A deals in the U.S. for banks over the last 10 years that we saw our customers involved in. As you noted, go-forward platform, 95% of the time.

I knew it was high, Alex. To me, I didn't appreciate it was that high. So great work by the nCino Research Institute to come up with that. But when I take a step back to me, it actually makes sense. If you think about our customers, generally forward thinking, cloud adopting. But again, I get back to we're the only platform that's ever demonstrated an ability to scale from a community bank all the way up to the largest banks in the world.

So if you have any growth aspirations and you want to have a platform that you know you can grow on forever, from our perspective, we're the only one to do that with. And so to me, when you think about it from that perspective, it resonates why that would be such a large percentage versus if you had 2 small community banks who merged and maybe that wouldn't be such a focal point for them.

All right. More to come there. Maybe we'll open up to the audience if there's any questions. All right. So you've got -- you made several acquisitions over the last, I'll call it, 18 months. But as you've been integrating Sandbox and FullCircl and DocFox, how are you seeing those kind of start to impact kind of aggregate pipeline growth?

We feel good about those. We have talked with DocFox, the integration. I think we had hoped to get it done a little bit sooner, but it was complicated, and I think we feel good about where that is. And so we unveiled that at the end of May and then you go into your general 6- to 12-month sales cycles. And so we'd expect as we exit this year into the first half of next year to start seeing some bookings progress on DocFox.

If you look at FullCircl, Sandbox and Allegro, the indirect lending, again, I think we feel good about those -- the time lines, the customer receptivity and the opportunity. Sandbox is a great example, which was the most recent one that we did. We talked about 2 deals that we were able to cross-sell into our base at nice uplifts. One was the first international deal for that technology at a Czech bank and then we also had another bank here in the U.S.

And so additive. And again, I think we feel good about all 4 of those acquisitions. We do look forward to highlighting DocFox's success more as we get into next year. But we do think that onboarding opportunity is real and that every one of our commercial lending customers will want that -- what was the DocFox technology that we've now integrated. And really, from our perspective, competitively, it's unique. And so we're helping them understand how they can change the way that they onboard complex commercial customers in a much more automated fashion.

And maybe with the exception of FullCircl, which today is mostly U.K., Ireland, maybe going to Mainland Europe, but applicability across your entire installed base for the rest of those. Is that a fair way to think about it?

Yes, Allegro would be indirect lending in the U.S. The other 3 would be global applicability, just really timing. Yes.

Okay. Maybe just we're out of time here, so just to wrap up. But I don't know if this is coming out of the quarter or the year, but what do you think is still kind of the most underappreciated aspect of the nCino story? And what might change that as we kind of go into calendar '26?

Yes. Our hope is that folks have seen us very focused on execution and delivering solid results. As I think about what's underappreciated, I'd probably go back to where we started, which is our AI strategy. The conversations we're having with our customers every day around AI, what they're looking for, what they need, I think, is in stark contrast to what we're hearing from investors as they think about concerns in the marketplace.

We think we are uniquely positioned with the trust that we have with our customers, the relationships that we've built, being in a highly regulated, historically very conservative vertical market with a data set that is unique to anybody. And so we see our customers looking to us to take them on this AI journey, and we're in a position to go at whatever speed they're comfortable going, right? Some may be more aggressive, some are going to be slower to adopt.

And so I'm not sure people appreciate when you talk about over 110 customers in a year in terms of buying into that vision, and we go back, it took us 5 years with our flagship commercial lending process to get over 100 customers. To me, I don't know if people understand how uniquely positioned we are.

And still obviously very early days. There is more to come.

Still, very early. To come...

All right. Well, thanks, Greg, for joining us. Thanks, everyone, in the audience.

Appreciate it. Thanks, Alex.

Good day, everyone, and welcome to nCino's Third Quarter Fiscal 2026 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President, Investor Relations, Harrison Masters. You may begin.

Good afternoon, and welcome to nCino's Third Quarter Fiscal 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer.

During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings, and other publicly available documents, the financial services industry and global economic conditions.

nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.nCino.com.

With that, I will turn the call over to Sean.

Good afternoon, and thank you for joining us to discuss nCino's Third Quarter Fiscal 2026 Results.

Before reviewing our third quarter performance, I wanted to remind you of nCino's value proposition and the mission-critical role we play for our customers. Financial institutions continue to struggle with legacy fragmented systems that limit growth, hinder financial performance and create poor user experiences. nCino solves this problem with AI-powered intelligent automation on a unified, scalable platform. we are the only platform for managing lending, onboarding, account opening and portfolio management across all major business lines for financial institutions across the globe.

This is why nCino serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in over 20 countries. During my first earnings call, as nCino's CEO in early April, I spoke about the tremendous confidence I had in our team, our technology and our market position. I noted that the foundation was in place and that it was all about execution, then we needed to execute at a level that reflects the strength of our market position and the ambitions we have for this business.

As you can see from our financial results, that is exactly what the company did in the third quarter. I'm extremely proud of the accomplishments of our team this past quarter. Sales and product development, both picked up momentum in Q3, and I'm very pleased with the level of demand we are seeing from our customers and prospects across market segments, geographies and products. The traction we are seeing in the business has further increased my conviction in not only achieving our sales and financial goals for fiscal '26, but also in the journey ahead for nCino.

The successful outcomes our customers are seeing continue to reinforce that nCino's platform and strategy are resonating more than ever an end market that is seeking significantly greater operational efficiency paired with providing exceptional user experiences and continuous product innovation. nCino customers routinely report improvements in standardization and consistency on the platform, including a $5 billion U.S. bank eliminating 86% of duplicate data entry and a $1.2 billion institution automating 100% of their policy exceptions. nCino customers also report compressing time lines dramatically, including $25 billion farm credit institution, achieving 91% faster decisions, a $2 billion bank achieving 93% faster booking utilizing auto decisioning and a $5.2 billion institution reducing underwriting from 23 days to 2 days. The nCino Research Institute recently conducted a comprehensive analyst of 112 nCino customers and compared them to 378 peer institutions across the United States and determined that nCino's customers exhibit on average, a 64% better return on average assets and a 75% superior return on average equity relative to their non-nCino peers.

While it would be difficult to isolate nCino as the sole contributing factor to these impressive results, one thing is clear from this analysis. Financial institutions using nCino demonstrate significant market outperformance across critical profitability metrics as compared to their peers. nCino is a competitive differentiator and a difference maker for our customers. We believe this will be even further reinforce as we leverage the vast amount of data we have and inject more AI, automation and intelligence into our products and platform. .

Our AI strategy is rapidly expanding the opportunity we have to partner with our customers. I spend quite a bit of time on the road, meeting with customers this past quarter and heard time after time that financial institutions don't just need AI tools. They need an AI partner, a partner they trust who deeply understands banking has a proven ability to drive industry-wide change, possesses the data foundation necessary to build truly differentiated banking-specific AI capabilities, and can guide and support them on their AI journey at whatever pace they are comfortable with, while taking their credit policy and risk tolerance level at the highly regulated environment they operate in into account.

nCino is that partner, and we are beginning to feel a bit of a halo effect as a leading AI innovator in the industry. We are seeing this in the form of new customer wins with financial institutions that are excited by the AI solutions we already have live in the market and by our AI strategy and road map. We are also seeing this halo effect in the form of early renewals of customers that want access to our AI features immediately instead of waiting until their standard renewal dates. We saw increasing adoption of our AI capabilities in the third quarter within the over 110 customers that have now purchased Banking Advisor Intelligence units. This includes seeing an early cohort of customers advance through the stages of first deploying banking adviser skills in test environments and then making the tools more widely available to their employees.

While we are, of course, looking forward to the incremental subscription revenues, we expect will come from broader consumption of intelligence units, including from the introduction and usage of nCino Agents, for the time being, our primary focus continues to be on simply getting our customers familiar with and comfortable using our AI technology and driving adoption of our capabilities. We are advancing AI capabilities at a pace well ahead of customers' ability to adopt them. Given our customers, which operate in some of the most highly regulated environments, a clear and steady road map for adopting next-generation technology as they are ready.

As an example of that pace of innovation, we expect to have approximately 100 banking adviser capabilities available by the end of the fiscal year, up from the 18 we announced in late May at our Inside User Conference. AI is becoming so embedded across our platform that banking adviser is shifting from a set of stand-alone features to a pervasive experience. In that context, the number of discrete banking adviser capabilities is becoming a less useful measure than any outcomes and total value they deliver across the nCino platform.

We also continue to receive great feedback on our new operational analytics functionality. For those of you who are not familiar with it, nCino Operations Analytics is the only banking-specific analytics tool that transforms operational data into strategic intelligence with peer benchmarking from our data community of global financial institutions. Through this functionality nCino customers are able to uncover bottlenecks, analyze their impact on key metrics and drill down by role, employee or stage. Measure employee KPIs to identify opportunities for optimization and performance improvement, measure cycle times, volume, win rates and other critical metrics to assess performance and drive improvements, compare performance against industry peers to identify strengths and drive competitive advantage with anonymized data and evaluate the time and resources spent across processes to identify inefficiencies and streamline workflows.

The actionable intelligence offered by nCino Operations Analytics not only provides our customers with a blueprint for continuously improving their operational efficiency. It also informs the development and flows of our AI agent strategy. As you may have seen shortly after the close of Q3, we announced the release of the first in a series of role-based AI agents we intend to bring to the market over the next year. These agents, which we refer to as digital partners are trained on the usage data of over a majority of our lending customers from which we can correlate greater processing consistency and enhanced loan processing speed to superior financial results among peer institutions. AI has helped us further harness the data. We've been intentionally accumulating for over a decade on how to optimize the processes behind financial services products, and we are making that the cornerstone of already built agenda AI strategy specifically for financial institutions of all sizes on a global basis.

Before I turn the call over to Greg to walk you through our financial results, I did want to mention at least a few sales highlights from the third quarter. In the U.S. community market, a $5.5 billion bank that started their relationship with nCino as a customer for mortgage and indirect lending, added commercial, small business and consumer lending, which more than doubled their annual commitment to nCino and brought them over the 7-figure ACV mark.

In the U.S. enterprise market, we saw healthy expansion opportunities across our existing customer base, including 2 top 15 banks increasing their commercial commitments into contract, 2 renewals with top 100 banks to expand adoption of nCino Mortgage and another top 100 bank expanding their adoption of our consumer lending solution.

Strong sales traction was also visible outside of the U.S. with our newest customer in Japan, one of the largest regional banks in the country, signing with nCino for mortgage lending. This new customer win, along with 3 expansion deals with existing Japanese customers in the third quarter continues to reinforce our excitement about the opportunities we see ahead for nCino in this market.

In EMEA, our Integration Gateway API infrastructure solution acquired with Sandbox Banking at the start of this fiscal year, is demonstrating global applicability across our customer base and was included as part of a renewal with a $90 billion bank in the Czech Republic, the first integration gateway deal outside of the U.S.

Our Integration Gateway Solution was also included as part of a renewal with a $9 billion credit union. These 2 deals gave us ACV uplift on existing contracts of 13% and 48% respectively, underscoring our confidence in how additive the Integration Gateway API infrastructure can be to our existing suite of solutions.

With that, I'll hand the call over to Greg.

Thanks, Sean, and thank you all for joining us today. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Total revenues in the third quarter were $152.2 million, up 10% year-over-year. Subscription revenues were $133.4 million, up 11% year-over-year on a reported basis and 7% organically.

As a reminder, our third quarter year-over-year organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from onetime subscription revenues that occurred in the third quarter of fiscal '25. As noted on Slide 15 of our third quarter earnings presentation of the approximately $3.9 million overperformance against the high end of our third quarter subscription revenues guidance, approximately $1.4 million reflect successful execution against our plan and about $1.8 million was from our U.S. mortgage business where we saw subscription revenues of $21.1 million, up 2% year-over-year against a tough compare.

While bank M&A has continued to be a healthy tailwind for nCino, we did have one deal in the quarter that went against us. This resulted in a contract buyout, which contributed approximately $500,000 of the overperformance. Finally, approximately $200,000 of our third quarter overperformance was from favorable FX relative to plan.

Professional Services revenues were $18.8 million, a decrease of 1% year-over-year. As I have addressed in previous quarters, our focus is on gross profit growth in our Professional Services business rather than revenues growth. We continue to make progress with our internal efforts to incorporate AI tooling and have more prescriptive deployments in our professional services practice and we continue to expect this will start to translate into better professional services gross margins in the second half of next year.

Non-U.S. total revenues were $33.6 million, up 13% as reported and in constant currency. Non-U.S. subscription revenues were $27.9 million, up 21% as reported and in constant currency and 3% organically. Non-GAAP operating income was $39.9 million or 26% of total revenues, representing 600 basis points of operating margin expansion, both year-over-year and quarter-over-quarter. As noted on Slide 17 of our earnings presentation of the approximately $6.4 million overperformance versus the high end of our prior non-GAAP operating income guidance, over performance against our subscription revenues guidance contributed approximately $3.1 million of incremental gross profit, the realization of net savings from the May restructuring contributed an additional $2 million and approximately $500,000 was timing-related spend that we now expect to incur in Q4 instead of Q3.

The remaining $800,000 balance of our overperformance in the quarter reflects ongoing efforts to drive greater efficiency and cost discipline across the organization, including from leveraging various AI tools and initiatives. Non-GAAP net income attributable to nCino in the third quarter was $35.8 million or $0.31 per diluted share. We ended the quarter with $87.9 million in cash, including restricted cash and $203.5 million outstanding on our line of credit.

As a reminder, free cash flow generation is seasonally lower in the second half of the year, and we expect a meaningful influx of cash in the first quarter of fiscal '27. We repurchased approximately 1.4 million shares of our common stock in the third quarter at an average price of $27.71 per share for total consideration of approximately $39.7 million. When added to the stock we repurchased since announcing the buyback in April, we have completed the $100 million authorization, repurchasing approximately 4 million shares at an average price of $25.02 per share.

We will continue to assess on an ongoing basis how best to allocate capital, whether by purchasing additional shares of nCino stock, reducing the amount of debt outstanding on our credit line, building up additional cash on our balance sheet or some combination of the 3. This assessment will be done in the context of maintaining a balance sheet that provides us with an appropriate amount of flexibility and optionality and the dynamic and quickly evolving technology landscape we are operating in.

Our platform pricing transition continues to proceed quite well and according to our expectations, including price uplifts and we have now converted approximately 27% of our ACV to platform pricing, up from 21% last quarter, with about 1/4 of that attributable to our U.S. mortgage business. We continue to see a desire from various customers to renew early and adopt our new pricing framework, which we believe is due in large part to demand for our AI capabilities and AI strategy.

Turning to guidance. For the fourth quarter of fiscal '26, we expect total revenues of $146.75 million to $148.25 million and subscription revenues of $130.75 million to $132.25 million, an increase of 4% and 5% year-over-year, respectively, at the midpoint of the ranges, including approximately $1.1 million of inorganic subscription revenues from Sandbox Banking. As a reminder, our fourth quarter year-over-year subscription revenues comparison is negatively impacted by an approximately 3% organic headwind resulting from onetime subscription revenues that occurred in the fourth quarter of fiscal '25.

Referring to Slides 15 and 16 of our earnings presentation, you will see that for the fourth quarter, we are flowing through approximately $700,000 of the third quarter execution-based beat and increasing our full year subscription revenues guidance by $4.5 million. We are increasing our outlook for U.S. mortgage subscription revenues growth for the full year by the approximately $1.8 million overperformance in the third quarter.

In keeping with our guidance philosophy this year around U.S. mortgage, we are not extrapolating this overperformance to the fourth quarter. We expect U.S. mortgage subscription revenues to be down sequentially in the fourth quarter, consistent with historical seasonality, but U.S. mortgage subscription revenues growth of approximately 7% for fiscal '26, up from our prior guidance of 5%. Non-GAAP operating income in the fourth quarter is expected to be $32.5 million to $33.5 million and non-GAAP net income attributable to nCino per share is expected to be $0.21 to $0.22 based upon 116.5 million diluted shares outstanding.

Please turn to Slide 17 of our earnings presentation for additional details regarding our non-GAAP operating income guidance. Note that the sequential step-down represented by our fourth quarter non-GAAP operating income guidance is due to the following factors: first, our total revenue guidance implies a seasonal step down in professional services revenues of approximately $2.8 million, which directly impacts the bottom line; second, we assume the impact of the gross profit benefit from the mortgage overperformance, FX and contract buyout in the third quarter does not repeat in the fourth quarter; third, as previously noted, we expect to incur approximately $500,000 in spend that shifted from Q3 to Q4; and finally, consistent with our guidance philosophy this year, we are going to continue to hold back savings from the May restructuring to preserve operating flexibility as we finish out the year and continue to position the company for growth in fiscal '27 and beyond.

For fiscal '26, we now expect total revenues of $591.9 million to $593.4 million, up from our prior guidance of $585 million to $589 million, representing growth of approximately 10% at the midpoint of the range and 10% in constant currency. For fiscal '26, we now expect subscription revenues of $520.5 million to $522 million, up from our prior guidance of $513.5 million to $517.5 million, representing 11% growth at the midpoint of the range or 7% organically and 11% in constant currency.

We now expect our fiscal '26 non-GAAP operating income to be $127.2 million to $128.2 million, up from our prior range of $117.5 million to $121.5 million, representing an approximately 33% increase over fiscal '25 at the midpoint. Non-GAAP net income attributable to nCino per diluted share is now expected to be $0.90 to $0.91 based upon a weighted average of approximately 117 million diluted shares outstanding, which does not factor in any additional share repurchases beyond those we have made to date.

This guidance assumes interest expense incurred under our credit facility of approximately $15 million for the fiscal year. Finally, our fiscal '26 outlook for ACV remains $564 million to $567 million representing growth of 10% in constant currency at the midpoint of the range. Our guidance represents net additions to ACV of $48 million to $51 million in the year including $4.5 million from the acquisition of Sandbox Banking. Recognizing, of course, that we must continue executing and timely close the Q4 opportunities in our pipeline. Our bookings progress year-to-date along with the level of sales activity we see in the market, position us exceptionally well relative to our ACV guidance.

In closing, we are very pleased with our execution and the results we achieved in the third quarter including in both bookings and operating margin expansion. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of fiscal '27 as stated on our fourth quarter fiscal '25 earnings call.

With that, we will open the line for questions.

[Operator Instructions]

It comes from the line of Michael Infante with Morgan Stanley.

Greg, I just wanted to ask on margins. If I look at the incremental AOI margins in the quarter, I think they were close to 90%. If I look at fiscal 4Q, at least as it relates to the high end, it's closer to about $130 million. That would basically put your full year incremental AOI margins around 60%. Like how should you -- how should we be thinking about the leverage you're driving in the business this year? And whether or not some of those AI efficiencies give you some incremental confidence in terms of delivering on your medium-term free cash flow and operating margin targets even faster.

Yes. Thanks for the question, Michael. Going where I just ended my prepared remarks in terms of our confidence in hitting our rule of 40 target around the fourth quarter of next year. We continue to see opportunities in the business for further efficiency. And yes, we're seeing it from AI as well as, again, I think, just very healthy cost discipline across the organization. And so that is part of what the success that you see in the third quarter as well as, again, what we would expect to be able to continue to drive from an efficiency standpoint.

The other thing I think is just from a mix as it relates to gross margin. That continues to be an opportunity for us not just from a platform perspective in terms of some of the things that we have on AWS. But also, as you've heard me talk about going back to the May investor conference at our Insight User Conference, the gross margins from professional services, which is something we're very focused on leveraging initiatives like Project Sub Zero that you heard us talk about.

And so I think the team has done a very good job focusing on becoming more efficient. And I think one of the things that we've learned post the difficult May restructuring is operating leaner, you can actually operate more efficiently and quicker, and so I think that mindset is throughout the organization right now, we're going to continue to execute with that mindset.

That's helpful. And then just for my follow-up. Obviously, you made the comment just in terms of having conviction in your ability to deliver on the full year ACV target. But as we think about both fiscal 4Q and beyond, like how are you thinking about your level of visibility into, call it, NTM subscription revenue just based on what you see either already contractually committed and the associated sort of backlog conversion to subs revenue. I'm just thinking about not only fiscal 4Q, but beyond and how you think about your level of visibility at least relative to what you've characterized as your historic visibility into forward subscription revenue.

Yes. Thanks, Michael. I think in terms of forward visibility, obviously, we're going to refrain from talking about next year until our Q4 call. But I think you would have heard in Sean's remarks as well as mine, in terms of the sales activity we're seeing on a global basis, we feel good. We feel good about the business right now. And the pipeline, I think as we sit here and talk today, we feel incrementally better than the last time we spoke with you. And so we have to continue to execute. That's the drum we continue to beat here. We saw the team respond incredibly well in the third quarter, and we expect that to continue to be the focus is just execution.

But the business is out there. And again, I think the story is resonating. I think what we're doing from an AI standpoint, leveraging the customers that we have and the innovation that this company has always been front and center on really is resonating right now in the marketplace. And so we feel, as Sean noted, somewhat of a little bit of a halo effect from that. We want to keep driving that innovation, keep driving discussions with customers, so they can understand more and more how we can help them become more efficient. And that's the focus right now of the entire organization.

Our next question is from Saket Kalia with Barclays.

Sean, maybe just to start with you. I want to dig into Greg's comments a little bit about feeling good about the ACV guide for the year, which is great to hear, right? So you clearly feel good about underlying demand. I was wondering if you could just add some color to that. Is that coming from big customers around commercial lending, is it international? You gave some great examples of Japanese banks in there? Is it consumer banking? Clearly, we don't need to talk about the guidance and the numbers as much, but just some color contours around what you're hearing from customers, what's the health of the underlying base? Because I know you spend a lot of time with customers.

Yes, sure. Thanks, Saket, appreciate the question. Listen, firstly, I would call out that the team across the board here is from an execution point laser-focused on not only building our pipeline, but converting that pipeline. And so the activity across sales, marketing, product and service and the collaboration we have is really the goal that we set out this year from that execution cadence. And I'm seeing that just come together really nicely.

Secondly, yes, I have visited with over 25 customers in Q3 alone, not only here in the U.S. but in several countries in Europe as well as in Japan. What they're telling us is that banks remain very aggressive on their tech investment with AI driving the narrative. In fact, most of the customers we talk to have an increase in their IT budgets this year. And the strategic imperative for those banks is pretty clear. It's efficiency and modernization.

So while discretionary spending is hard to come by, banks are viewing technology as absolute table stakes for competitive survival in this landscape. And so we're seeing a shift from what I would consider like the legacy mindset of multiyear transformations to very precision implementations, which plays exactly into our strategy. You've heard us talk about Project Sub Zero and deploying solutions more quickly to the market and delivering outcomes.

Listen, on the macro environment, while there is still a narrative on the credit concentration risk in commercial, we're not seeing that impede our results whatsoever. In fact, the most disciplined banks are doubling down on risk management infrastructure right now. as well as automation, right? And while everybody else is talking about AI, gratuitously we're talking about automating outcomes. And so these credit pressures are actually driving some of the imperatives here.

And then I guess the other narrative I would share with you that I'm hearing in the market is, while early in the year, the conversation was more about what is AI, right? And you heard me both at Investor Day and an insight talk through our 3-pillar strategy around banking advisor agents and the integration gateway. I was on the call yesterday with the customer said, guys, we don't need to talk about what it is. We just need to talk about how you can get it in my environment as fast as we possibly can consume it. right?

So that shift feels a little bit similar to the early days of nCino when we're explaining to people what is the cloud and how can I operate securely there, and then we cross that chasm. So I'm excited about all of those things, driving momentum into our execution and conversion of pipeline into ACV.

Got it. Got it. That's super helpful. And maybe on banking device, it's a good segue Greg, for my follow-up for you. I think this is the second quarter that we've talked about customers renewing early, which is great. But I'm curious, does it surprise you just given the uplift in spending that would correspond to that? And maybe relatedly, is there anything from -- it's a deliberately an open-ended question, are there any modeling impacts that we should think about that we should keep in mind with those early renewals as we go into next year?

Yes. Thanks, Saket. I don't want to say -- I don't think it's surprising because, again, I think what our customers see from us, and I think it differentiates us from a lot of the competitors in the marketplace is continuous innovation. And if you look back over the years, as you're aware, prices were fixed and our old seat-based pricing during the term of the contract and they did not go up. And so over the last few years, as inflation was obviously very top of mind. We didn't see the benefit of that or get compensated for that. And so that's really a starting point from a discussion standpoint is kind of making up for lost time, if you will.

And I think when you combine that with the innovation that we've brought to our products and to our product portfolio really does lay the groundwork for a productive discussion. Obviously, some of those discussions can be more difficult than others. But overall, again, I think we work very closely to partner with our customers and really work with them. As Sean noted in his prepared remarks about the outcomes that they can get using nCino.

And you heard some of that with some of the statistics that Sean noted, and that's really what the focus is. And so we really focus on the value that they get from nCino. And again, I think that they appreciate that, and I think they appreciate the way that we approach those discussions.

Our next question comes from the line of Alex Sklar with Raymond James. .

Sean or Greg, just first on the 2 top 50 bank commercial expansions, both really significant increases, could you elaborate a bit more on what those banks were using nCino before within the commercial loan space and what they're doing now with the expansion? And how much white space you still still see within kind of the core enterprise commercial lending within your U.S. installed base?

Thanks for the question, Alex. Yes, those are -- we consistently talk about that even if we have a logo for part of a bank, even within that business line that there's opportunities for expansion. And I think this is just reflective of that. And so 2 customers where, again, they have more need for us in the business line that they were operating in. And so happy to get those deals closed in the quarter with 2 very good customers. .

Okay. Great. And then maybe, Greg, a follow-up for you. Just on customer M&A. So the end market dealmaking has obviously picked up here in the last 6 months. Can you just talk about how it's going to impact nCino over the next 1 to 2 years as some of those deals start to close.

Sure. We've historically discussed M&A, specifically bank M&A being a tailwind for nCino. We did call out the one transaction this quarter, which -- we called it out because we got some onetime revenue that we wanted to make sure was visible to you guys, but also really because it's an anomaly for us -- actually nCino Research Institute recently did an internal study nCino Bank customers that have been involved in M&A over the past 10 years. And there's over 270 M&A events that they tracked.

And out of those, we had about 95% where we were the go-forward platform. And that could be an nCino customer buying an nCino customer, an nCino customer buying a non-nCino customer and a non-nCino customer buying an nCino customer. And so we feel good about the environment. And it really goes back to something that you've heard me discuss before, which is our platform has demonstrated uniquely the ability to scale to support institutions of all sizes and in all sizes on a global basis.

And so the financial institutions that are forward looking, and that ultimately are looking to grow we really are, I think, the default platform for them, the platform of choice. And I think that statistic, which is specifically around U.S. banks that 270 number that I quoted over 270. I think that reinforces that we are the platform of choice for banks that want to grow.

Our next question is from the line of Joe Vruwink with Baird.

I wanted to ask on the execution-based upside in 3Q, $1.4 million, I guess that's $5.6 million if we give credit for 4 quarters, so almost a point of growth. Can you maybe contextualize where that's coming from? I would imagine the deals in your pipeline are very visible. So are the deal sizes coming through bigger where the conversion rate is higher than you budgeted. And then just related to this execution factor, why doesn't it all flow through fully the 3Q magnitude becoming a 4Q magnitude?

Yes. Yes. So from an execution standpoint and listen, just referring back to the script and the diversity of our portfolio, where we focus on our solutions across onboarding, account opening, portfolio monitoring and loan origination and doing that across the major lines of business of commercial, consumer and mortgage and doing that globally, right, across 2,700 customers. we do really value the platform value proposition and the platform wins in the end.

And so having a balanced portfolio of solutions and geographies is something that we covered, and mitigates our risk of being wildly up or down in one particular area. We continue to mitigate churn as well with the outcomes that we deliver and read back to our customers, and we could do that in a more rapid fashion with the solutions and the agents we're bringing to bear as well. So we feel good about that balanced portfolio. And while we don't necessarily call out specific sizes per solution area, we have a healthy mix and the concentration across the entire portfolio.

And just to add to that, Joe, we have, I think the team has done a very good job on the churn front. We've talked about our expectations going into this year that churn would continue to trend down towards historic norms. That's what we've seen. And so we're very pleased with that trajectory, to date. And then just in terms of the flow-through, I think you should just assume it's consistent with the guidance philosophy approach that we've taken all year to manage to achievable expectations. And we like the approach this year that we've taken and the feedback that we received on that approach from investors.

Yes. No doubt about that. I wanted to ask, you shared a lot of good stats about banks that are on nCino, end up doing better financially and now you're taking that experience and making it the foundation of understanding that powers your AI and digital partners I mean the 110 customers, are those primarily some of your larger customers? Is there really no issue with scaling even down to the smallest customer? And does there come a point where if you're not part of the 110 and you're part of the other thousands that are out there, you kind of look over and start paying attention that you're maybe being left behind by not adopting or early renewals going to become kind of an increasingly important factor here. if you are delivering kind of the ROI best possible?

Across those 110 customers, and we expect beyond, we're seeing adoption at all market segments at all sizes, top-tier banks have been live and in production and gone through intense testing phases and now are deploying widely to their users in mass as well as some of the smallest community banks and credit unions in the marketplace that are looking at banking adviser and looking to our thought leadership on agnetic solutions. The reality is we're providing the same capabilities and they're just being deployed at different scale, right? When you think about a proactive portfolio risk monitoring and early warning detection, this is something that we're going to deploy in a similar fashion across the landscape and banking adviser can transform banks from being in a reactive position to being in a much more proactive position.

And so while traditionally, folks are doing this in a very labor-intensive way, it's just not scalable for even a small bank to monitor thousands of accounts nightly for covenant breaches, for collateral deterioration, for credit score changes, you name it. So what we're doing is we're allowing those relationship managers to have banking adviser and our Agentic solutions do that work while they sleep, right? And they wake up in the morning and to get prompted on where exactly they should spend time with their customer in the next day. And that's exciting and it's scalable, it's deployable, like I said, at every segment in our customer base, and we're seeing that.

Our next question comes from Charles Nabhan with Stephens. .

I wanted to unpack the mortgage business outperformance this quarter a little bit. Clearly, consistently outperformed expectations through the year. And I know some of that is a bit of conservatism built in, but could you talk about some of the drivers of that outperformance, whether that's coming from new logos, same-store sales within your existing customer base? And -- any -- I know there's a bank component to that customer base, a nonbank component. You moved into the homebuilders as well. Any areas of strength or weaknesses conversely that you could call out? Just looking for some color around that business.

Yes. So we are seeing, as we called out in the script, some expansion in top 100 banks into mortgage. So we're excited about the interest there and the problem we're solving and how that resonates. In the IMB space, we're seeing traction and continued momentum as well at the top end of that market as well as pretty evenly distributed. We had some normalized revenue growth in line with industry volumes that we've seen this year, and we expect that to continue. And that means that some customers are outperforming depending on where they are in that spectrum. So we remain very focused and committed to our mortgage solution across the IMB as well as the traditional bank segments.

And you may recall, last quarter, we talked about during some of the more difficult times in the mortgage market over the last couple of years, the team doing a fantastic job of getting logos and taking market share. And I think we're seeing some of the benefits and fruits of that effort now as volumes go through those customers and get on our platform.

And as a follow-up, I just had a high-level question on AI adoption in the bank space. Clearly, we're still in the very early stages, and we're a little further ahead than we were last quarter. But as we think about the path ahead, do you envision sort of a slow adoption curve? Or as we think about '26 -- calendar year '26 calendar year '27, do you see adoption of AI ramping up more rapidly in the bank space? Just curious how you think about the curve going forward. .

Yes. And listen, again, pointing out that the conversation is turning for what I would call the most progressive and early adopter, but what is AI to how can I deploy it quickly, right? And then you're going to have the next wave of banks that are going to follow. And then at some point, I think when you get that middle wave, you bring everybody along. So I do expect we will have a spike in the adoption over time. We're still in the early days. We are very aggressive in our posture in terms of sending our field forward deploy engineering resources on site, with some of our early adopter customers, and we've had conversations with just in this past several weeks and collaborating with them on the adoption of banking adviser and being the first to go to market deploying our digital partners across the executive analyst service processor and client channels.

Our next question comes from Ryan Tomasello with KBW.

I wanted to ask about DocFox. If you can provide an update on the pipeline there, and when you might start seeing that on should be more meaningfully to ACV? And then on implementation and the sales cycles, how long are those typically for DocFox, and I think relative to some past numbers you've given for the typical ACV uplift, if there's any update on what that could look like as DocFox rolls out.

Yes, sure. And listen, as you know, we've -- we covered the onboarding experience from the DocFox acquisition. We have integrated the technology, and we called that out as one of our 5 core growth initiatives at the beginning of the year. What I'm really pleased about is, at this time of the year, since we put our growth initiatives in place, all 5 of our core growth initiatives have been accretive to either pipeline or ACV beyond the pace of the overall company, which means that, that's a tailwind, and that's pulling us forward. Onboarding specifically has been a year-over-year pipeline increase, specifically the back half of this year as we've been more aggressive in the story about integrating the technology, and we expect that to convert into ACV next year. Those are about 3- to 6-month sales cycles. And we remain very excited and here onboarding come up as a problem that the majority of our customers, specifically down market, have not solved.

Great. And then also on the new credit union sales force. If you can just provide an update what you're seeing there? And then I think last quarter, you called out the number of wins and cross-sells in that space. So if there's any way to give us an update on that category. .

Yes. Very pleased with the traction of the credit union go-to-market team. We activated that team in the beginning of the year. They are on track to meet the internal targets that we set, and that's exciting for us. I also -- and just very pleased in terms of the posture that I feel like we're gaining in that market being relevant at all the right industry events and in all the right conversations in the credit union space that I don't feel like we're fully entrenched in prior to putting a focused team together. And so we are seeing good activity there as far as specific number of deals, I don't think we're calling that out today. We might be able to follow up on that offline.

And I think the other thing, Ryan, with credit unions, I think one of the things that has really resonated over the last couple of quarters is just the platform sale. I think the platform resonates to those institutions being able to standardize on nCino across the institution. And so that's something that's been very encouraging to us as the year is progressing that feedback. .

To the next question. It comes from the line of Adam Hotchkiss with Goldman Sachs. .

Sean, I wanted to go back to your comments around the intelligence units and the 110 financial institutions now purchasing. Could you just maybe take a step back and give us the common playbook that you've observed from testing the functionality and test environments to actually going out and deploying and buying intelligence units. What's the time frame that you've seen that take place in for maybe some of your earliest cohort customers? And then any commonality around the skills that are resonating most would be helpful. .

Yes. Listen, I think the common playbook is we have a very quick deployment cycle on banking advisers. So we're getting that into test environments in a matter of weeks. And then customers, depending on the size and scale of the financial institution are in testing anywhere from 1 to 4 months, and then ready to deploy that at scale and we saw that at a top-tier bank this year on that 4-month sort of a time frame to get through testing to full deployment.

I would say one of the most common -- in terms of interest around proactive portfolio risk monitoring and leveraging our architecture there to deliver credit analysis. I talked about going from reactive to proactive. We're also seeing a lot of interest just in our general located file scale across solution sets in auto spreading as well. But in an area where right now, we're pretty good on the customer pain point of credit risk I think people are really seeing the light bulb go off on how they can manage that with nCino banking adviser, and that's an area we're getting the most interest.

Okay. Great. That's really helpful color. And then, Greg, for you, just, I know historically, you've talked about the sort of seasonal linearity of bookings through the year? And I know you've made comments historically around first half, second half. Any commentary around now that we're in December, how that linearity has sort of shaken out throughout the year versus maybe what you expected going in?

Yes. I think overall, Adam, and thanks for the question. Again, I think we feel good about the progress throughout the year. As you know, Q4 has always historically been our biggest bookings quarter and this year is no exception. But going back to my prepared remarks, based on bookings to date and based on the sales activity that we're seeing across the globe, we feel like we're very well positioned to finish the year strong and set ourselves up for a good next year and beyond. .

Our next question comes from Ella Smith with JPMorgan.

So you alluded to this earlier, but perhaps we can go a little deeper. If you parse out your various growth vectors, whether it's serving credit unions, your mortgage or onboarding products, AI offerings or continued traction in EMEA. Are there certain areas that are particularly driving ACV growth?

Yes. I mean -- and we're getting momentum across all core areas. I would say, our focus and retooling of our EMEA leadership team, is bearing results in terms of the growth that we see in the pipeline and the conversion we expect here moving forward. And so the international opportunity, in particular, not only EMEA I was in Tokyo the week before Thanksgiving. We hosted our Summit event, we had north of 200 customers. I would tell you that it feels very much like early day nCino in the U.S. core commercial community bank market in Japan right now, where it's a follow the herd type of a mentality. And it's a small tightened ecosystem where folks talk to one another. And so we're seeing traction in that pipeline.

So the international business in specific, I would say, we expect to outpace the overall company growth line. But there is -- as I mentioned earlier, we called out 5 growth initiatives at the beginning of the year and every single one of them, whether it's in ACV or pipeline is exceeding the growth rates that we have at the overall company level.

That's very helpful. And for a quick follow-up regarding your rule of 40, do you expect your path to Rule of 40 to be linear throughout next year?

We are committed to being in position that we would approach the rule of 40 right around the end of next year. And we're very convicted about that, and we can see that very clearly. Some of the bottom line cost management initiatives that we put in place this year, put us in a position where I feel like we're leaner we're more focused and we haven't missed a beat. In fact, we've reaccelerated our bookings growth at a time when we've gotten leaner on our cost. And so we can see a clear trajectory towards the rule of 40 right around the time that we exit next year.

Our next question is from Chris Kennedy with William Blair.

For all the detail. Can you just give us an update on your consumer business, kind of how the bookings are tracking relative to your initial plans?

Yes. So our consumer business, we continue to see momentum, not only in our bank space. We called out in the script, the expansion into consumer with the top 100 bank, we have interest in the consumer -- continued interest in the credit union market. And so that's an area where we continue to make sure we've got our investments aligned with our returns and where bookings are coming from. But overall, in the current macro environment, consumer credit quality remains generally sound. And banks are entering this cycle with pretty strong capital positions. And so we see continued interest in consumer. We don't call out specific bookings by solution.

Understood. And then just as a follow-up, regarding the Rule of 40 target. Have the components kind of evolved, whether it's revenue growth or margin, has that kind of evolved your thinking about reaching that target?

The target is to target, right? 40 remains 40. The reacceleration of this year's bookings and leading to next year's revenue, we would expect to be as aggressive as we can be on the growth side of that, but the target remains 40 and we are committed to getting there as we really reaccelerate growth. .

Our next question is from Aaron Kimson with Citizens.

It sounds like driving agent adoption is going to be more of a change management problem than a technology problem for nCino. You've mentioned Project subsea a few times already. as you're rolling out agents and expanding banking advisor's capabilities, do you see any credence to the idea that vertical software vendors need to hold their customers a bit closer through the implementation process for AI products versus historically. .

Listen, I think my heritage coming from the customer success Arena here, and nCino prior to stepping into the CEO role, I would say we've always been focused on holding our customers closely and and being side-by-side with them on the journey. I would also point out that as we lean into the field forward deploy engineer model, and we send out some of our agent-based resources to sit side by side with our customers. That's an area that I think we're going to really be able to teach customers that it's maybe not as hard as they think it's going to be, right?

You've always got to get past some of the early day anxiety and some of the myth-busters around what it takes to deploy this stuff. But at the end of the day, for us, our role-based agents are simply purpose-built to work alongside financial institution professionals and create that dual workforce. I think actually going to come to the realization that managing the human and the digital partner side by side is going to be the different motion versus actually deploying the technology.

The technology itself should work. It's built on 13 years. of domain expertise that we've accumulated with a process-centric point of view on real-world curated financial services data. So this stuff works, right? Now banks are going to get into the change management motion of how do I manage my digital partners as my humans are doing the work. And what are the digital partners are going to be doing where the humans are out in the field and building relationships with customers. And we're focused on all of that, not only the deployment but the change management aspect.

I don't -- I wouldn't categorically say it's going to be more intense, but we remain focused on our customers.

Understood. And then to follow up on Alex's question on the 2 top 50 bank expansions of 30% and 60%. Would you talk those up to timing? Or is there something broader here investors should be aware of as far as an incremental change in the demand environment that could drive a buying cycle in core commercial for other expansions with large U.S. FIs and maybe even the 20 or so of the top 50 banks you don't have.

Aaron, I think you could talk -- chalk it up to timing, specifically M&A was a tailwind for some of those discussions.

And as we've said before, even within a core commercial line of business at a large enterprise bank, we still have customers that have been with us on the journey that haven't deployed nCino across every single product line within commercial, right? And so we see some of those instances year-to-date as well.

Our next question comes from the line of Ken Suchoski with Autonomous Research. .

Greg, you talked about converting 27% of the company's ACV to platform pricing. I think you said in the past that fiscal Q4 is going to be the biggest cohort this year. So maybe talk about how you're feeling about shifting this cohort of customers to the new pricing model, especially in the context of the demand for AI solutions. And then I guess on the lift that you're seeing on a like-for-like basis, is that still around that 10% level?

On the lift, we continue to feel good about the target that we laid out. As I've noted, we want to get through Q4 to kind of have that solidified and we can update that as we get into next year and talk about next year. In terms of the first part of the question, we I think the team has done a very good job and each one you learn and you get better and better in terms of the talk track in terms of some of the questions or concerns customers may have. But I feel like the team is doing very well executing, I'd say the playbook.

And I think, again, it's been very well received. It's proceeding in accordance with our expectations. Q4 is the biggest quarter Again, historically, that's our biggest bookings quarter. So it would be appropriate to assume that's our biggest renewal quarter as well. And we go in, we don't just go in and talk about price or the platform. Again, we're always talking about how we can create more value and improve outcomes for our customers across the platform. right?

And again, that's unique in terms of what we have from an offering perspective versus other vendors out there. And to Sean's point around us always trying to hold our customers close we work very closely with them throughout the years, right? This isn't kind of a sale and you move on to the next sale. We work closely with our customers on an ongoing basis. And so I think we've got very good relationships. And I think they appreciate that we really try to do our best by them. And again, I think all that leads to productive discussions. You're always going to have some hard renewal discussions. That's just the way that it is. But I think people get the platform pricing. And I think most importantly, they appreciate the continued innovation that we invest in and the value that we bring them and the outcomes that they're getting because they're nCino customer.

No, absolutely. And then I guess as a as a follow-up, just on the organic FX-neutral international subscription growth, I mean, it seems to be tracking in the sort of low single digit to mid-single digit growth range. I think it used to grow well into the double digits. And you guys obviously just announced some new wins. So congrats on that. I know you had some personnel changes in Europe, but maybe talk about your ability to reaccelerate growth in this business, what drives the acceleration? And any details on when we might do that.

Thank you for the question. To Sean's point, I think we feel very good about what we're seeing internationally. Both in Japan, which I'll remind folks is the second largest banking market there is out there. outside of the U.S. as well as in EMEA. And we've been very pleased with what we've seen with the team in EMEA. We think they're making excellent progress. Again, you mainly have large banks in EMEA right? And those sales cycles are generally a year long, give or take. We made a GM change there around this time last year.

And I think we've been focusing people as we get into Q4 and then early into next year, we would expect to see some of the initial fruits of all the efforts notwithstanding that we got our first deal in Spain in the second quarter already. And so international for us is part of the growth acceleration story for next year and that's really driven by bookings that we would expect to happen in the fourth quarter as well as what we saw in the third quarter.

And I think focus matters, right? We did call out at the beginning of the year with an addition of retooling the team specific geographies in the Spain and Nordics, beyond the U.K. and Ireland, where we're going to focus specific solutions on commercial and client life cycle management onboarding as well as mortgage. And so I think the teams are really focused and lasered in on where those opportunities exist, and that's helped us convert as well.

We have a question from the line of Koji Ikeda with Bank of America. .

Just one for me, and I wanted to follow up on the expand deal commentary and kind of the questions here. And so I understand that M&A and kinding is likely a factor with the expand deals this quarter. So thinking a little bit more high level, what might need to happen that can drive a real shift in mindset from existing customers that could result in even better expansion activity over the next several years? .

Yes. Listen, I think that, first of all, M&A has always been a tailwind contributing to nCino. It is not ever anything we put into our forecast models or to be this year. It's just a reality of consolidation in the landscape over time. There's a narrative out there that M&A may pick up here in the next several years. And we benefited from M&A from time to time over the years and expect that we will continue to benefit from M&A.

But beyond that, just having that balanced portfolio, if we have an existing let's just say, commercial customer and an enterprise bank that understands the value and the maturity of the intersection of AI and operations analytics and it's not fully taking advantage of those capabilities today. we say that as a massive opportunity that's resonating and getting a lot of headlining in the conversations we have with our customers. Folks that have gone with us on the origination journey, but I still haven't solved the onboarding problem, that's a big expansion opportunity for nCino as well. And so I think that portfolio play, we called out expanding into mortgage in 2 top 100 banks, across the things we do in the lines of business where we operate. The goal is to make every platform -- make every customer a platform customer, right, that they would go across commercial, consumer and mortgage with nCino. And so that playbook is one we're running everywhere.

And we have a question from the line of Terry Tillman with Truist Securities.

Conor Passarella on for Terry. Just on Banking Advisor really quickly, just as you think about the focus being getting customers to adopt in the early days, what kind of internal KPIs or metrics are you using to evaluate the success of that product so far within the base? .

Yes. I mean listen, there's -- from an outcome perspective, what I care most about are the efficiencies the banks actually gaining, right? If they can get a 90% reduction in time to answer portfolio risk assessment questions, that's a win for the customer, they're in turn, going to consume more intelligence units over time. If they can get a 20% to 30% average productivity gain, a cost reduction in real-time monitoring, automate their triggers in early warning indicators. These are the things that cause customers to not even think about intelligence in its consumption because getting outcomes for their customers.

So we're focused on those. Our forward deployed engineers will be sitting side-by-side with customers starting with a baseline with operations and analytics of where our customers and then trending that over time. And then, of course, we expect that, that will result in intelligence unit consumption and the adoption of that will spike over time as we head into next year and beyond.

Thank you. So this will conclude our Q&A session for today. I will pass it back to Sean Desmond for final comments. .

Yes. Thank you for the questions today. We appreciate your interest and our focus on execution here at nCino. I'm proud of the entire executive management team as well as all our employees globally, contributing to our momentum of reacceleration of growth. And we look forward to talking to you next time. .

Ladies and gentlemen, we conclude today's conference. Thank you for participating, and you may now disconnect.

Good afternoon. My name is Brent Bracelin, Co-Head of Tech Research here at Piper Sandler. Thank you all for joining us this afternoon. The next fireside chat discussion here is going to be with nCino. We have Greg, the CFO. Welcome to Nashville.

It's great to be here. Always a pleasure to see you, Brent.

Absolutely, absolutely. So listen, if I think about and take a step back on nCino's business. This is a business that actually has tripled ARR since the July 2020 IPO. Growth has clearly slowed. Obviously, we've seen the media and SaaS software company growth rates now at about 13% this year. I'd be curious, putting on your hat what's art of possible, what would need to go right to double ARR again over the next 5, 6 years to $1 billion. What's -- as you think about the art of possible, walk me through that potential doubling.

So we are incredibly excited about our positioning to do that. And that $1 billion threshold across is something clearly we have and that we focus on, right? We're quite a competitive bunch. And so you have to have targets out there and goals to go ahead, and we certainly see that. And so I think the main thing that we need to do is just focus on execution. We've spent quite a bit of time putting together what I think is a very unique, broad and deep product portfolio. So I think we feel very good about where our products are. And then we've also spent time and energy and made investments from a presence perspective around the globe to make sure we're in locations where we see opportunities to grow.

And so we clearly have had some headwinds from a market standpoint over the last couple of years going back to whether it's interest rates or liquidity crisis, and I think we find ourselves now in a pretty exciting time. Not only has our product portfolio matured, right? And we feel really good about each 1 of our products being best in market and our ability to land at a customer with any of them. And then bring the platform that we sell along. We're obviously at a technology inflection point with AI. And for us, we created this category called cloud banking. When we started the company, they said banks will never put their data in the cloud. Obviously, that's evolved.

And I think we are uniquely positioned to be the worldwide leader in AI banking as well. And some of the excitement around the technology is very prevalent in our discussions, but I think also having discussions around AI and to your point, what is possible creates conversations that maybe otherwise wouldn't have an opportunity to see. And I think some of that's driving some of the activity we see in the pipeline on a global basis as we sit here a little more than halfway through the year.

The AI product road map seems like it's a very critical door-opener conversation starter, even if maybe the products aren't necessarily shipping but having that vision is super important. Let's double-click into a couple of the areas that we get questions on.

Commercial. You guys have been a commercial juggernaut in the U.S., right, built that core commercial business. Maybe frame what's your market share kind of in the commercial space? What are the levers to grow and expand the commercial opportunity before we dive into the newer areas you're going after?

In commercial, again, I think we are clearly the leader on a global basis in commercial banking, is something we're very proud of. So I think there's a few things in terms of growth in market share. First off, it's about a $5 billion SAM. And so if you look at the size of the company for just commercial, we have plenty of runway. In the U.S., we've been very fortunate to have signed and gotten live and referenceable a nice number of customers, including 15 of the top 30 banks in the U.S. And so we see continued opportunities with those. If you look at our Q2 financial results, we actually announced 2 expansions with the 2 top 50 banks, specifically for commercial in the U.S. as well as a top 5 bank in Canada.

So within each 1 of those logos, we see opportunity to expand just in that core commercial business, right? As well as, again, I think plenty of just greenfield opportunities we don't have all of those top 30, right? So there's opportunities there.

50% market share logos share...

Logos share, yes.

Of the top 30, I think Veeva talks about top 20 pharma companies, they've been able to get to over 80% market share. So as you think about the potential in commercial, is it a winner kind of take most opportunity. Do you think there is a longer-term path to get to an 80% plus market share.

We're certainly focused on doing that. I think 1 of the things that's very unique about our platform, if we're talking just specifically in the U.S. -- on a global basis, but U.S. right now. We're the only platform that's demonstrated an ability to scale. And so we serve community banks. And with that same platform, we scaled to Bank of America and Wells Fargo and a whole bunch of other quite large financial institutions in the U.S. And so I think our biggest competitor there is do nothing, right? And our job is to make sure that the value proposition is meaningful enough for them to actually prioritize coming with us. So we had a nice win in Q4, which was a nice top bank logo in the fourth quarter.

And I think 1 of the things that we've seen is we've kind of gotten farther and farther away from the liquidity crisis, which did impact our top market because we saw -- that's where we saw most of the deals slowdown, headwinds. A lot of those banks were very internally focused, making sure from a regulatory standpoint, they were in good shape. As we get -- as we've gotten farther from that, we've seen activity pick up in the U.S.

Any sense your footprint. You talked about 2 big bank expansions this quarter. What's that footprint at the top 15 that you already have existing footprint at? Do you think there's an opportunity to increase revenue there by 50% just through footprint expansion? Or is it more like 20% more expansion and the real growth is going to come from new logos?

So I think if with new logos, there's still plenty of opportunity here, both again, upmarket as well as we go down into the regional and community bank space. So plenty of green space for us here in the States. If we think about new logos again outside of North America, I think you'll see a lot of new logo growth because, again, for us, that's a lot of brand-new opportunity for us. Spain, for example, is a new company -- a new country that we entered into it's our first logo there in the second quarter and so new logos again as we move more aggressively outside of the U.S., I think you'll see that.

Within our customer base, we're doing 2 things. One is because we have a platform, we're trying to go across the bank. So leverage our commercial stronghold, right, and go to small business, go to consumer, go to mortgage. But within the commercial bank, whether it's onboarding, which is a newer offering for us or banking adviser, or AI strategy and skills, being able to bring that to what is a very happy customer base overall.

Got it. So incremental opportunities across those new products into that existing installed base, probably the biggest lever outside of new logo growth. Let's shift gears to that retail consumer mortgage, that feels more net new, big cross-sell potential, what your market share there? You have 50% of the top 15 in commercial, what's your share in that retail consumer mortgage space?

And we do have a $200 billion bank on consumer. That was actually our land. Our friends at First Citizens, who at our Investor Day back in May, were up on stage talking about -- that was our first enterprise for consumer.

So 1 of the 15 now is consumer.

And it was a land. So that was our first product with them, which I think is important as you think about cross-selling as you think about cross-selling. But from a -- if you think about consumer and mortgage together, it's about a $10 billion SAM for us. And so it is very early, right? And we've been focused on maturing our consumer product. I think we've been very transparent about it taking us longer to get to a best in market product as we wanted to. But I think we've also highlighted the fact that we think we're there. And I think that's evidenced by -- in Q4, we had over 20 consumer lending wins last year including 2 over $50 billion in assets.

So again, I think we feel like we have, again, another best-of-market product that we can land at and/or cross-sell into our customer base.

Is there a value prop, if I'm a bank to do both commercial and all of my mortgage, all of my retail, all my SMB on 1 operating system, essentially Cloud Bank.

I think that's 1 of the differentiators for us is that platform and being able to standardize...

The cost benefit to the bank.

There's a huge cost benefit, there's an efficiency benefit just in terms of the ability to use the software. But I think as important as those, it provides the bank with 1 single 360-degree view of their end customer. And so no matter how you interact with the bank, they know who you are, they'll have your data, they can treat you like they should treat their customers. Historically, financial institutions purchased software by business line.

So the commercial part of the bank would have their own tech stack, the consumer, the mortgage, you could be a great commercial customer of a bank, you may go in on the weekend to get a car loan, and they wouldn't have any idea who you are, right, different system, right? Instead, under us, we have all your data, right? We can link it to you as that end user and ultimately make that car buying experience, in my example, a very positive one. And you'll leave there with that experience that you expect now just like if you're doing Amazon, right?

5 years into the IPO first big top 1 customer that's leaned into both commercial and consumer, is it changing? Is the appetite like compare contrast appetite to do both consumer and retail and consumer changing? And if so, why? Why now? Or is it still slow? These are banks.

They are banks, which, again, is a great customer base to have. They do move slow. But again, ultimately, you're there. And I think them looking to us, which again is one of the reasons why we're so excited about AI. Looking for us to take them on the journey, right? And whether it's AI or just one of our products we can move as quickly as they want. Or again, to the extent folks want to kind of crawl, walk, run, we can take them on that journey as well. And so we see the platform resonate on a global basis. I think historically, we've seen it resonating primarily in the community bank, credit union and up to the regional bank market.

Larger banks, again, historically have still purchased more in silos. But again, you see opportunities to cross-sell. You see opportunities to leverage the relationship and the success that you've had in 1 part of the bank. And we see opportunities for some of those larger banks to have multiple nCino applications.

As you think about lots of opportunity, lots of runway to grow, but there is some threats. There are some challenges. In 1 case, I feel with AI while it's a great opportunity, there are opportunities for these big banks that have lots of personnel and lots of IT staff to build custom, build their own, leverage their own data, build their own bank software alternative. What do you see there? Have you seen some experimentation on the bank side that trying to do something custom and then coming back to you saying that was just too hard or walk me through how viable and how big a threat is just a custom alternative to nCino.

So if I go back, I have been selling software to banks for 25 years. And when I started, a lot of banks did their own build, right. Back then, it was on-premise stuff, right? Fast forward today, and there's really a small number of banks who have the resources, both from a capital perspective and maybe as importantly, if not more, from a people perspective, right, to build, right? If you think about the kind of war for talent, right. It's tough to compete against some of these software companies if you're a bank to get the best and the brightest help drive.

And so if you take a step back and look at the customer base, I think community banks, credit unions, up to a certain size regional bank, very much are going to outsource that, right, just as we've seen with their cloud operations to date. And again, look for nCino, we would expect to help educate them and take them on that journey, like I said, at a pace that they're comfortable going. As you look up market, there's a little bit more, I'd say, optionality that we want to make sure that we facilitate. We've had very healthy conversations with customers around codeveloping agents, for example.

But I think what's really important for us to do, and it's still early, right? It's still early in terms of some of the adoption is making sure they understand what our road map is, where we're focused on, whether it's leveraging banking adviser and our GenAI capabilities or where we're building agents. So they can see that. It allows them to go focus maybe on other things, right? And ultimately leverage our agents.

But if they want to build some of their own agents, we can work with them around that as well. And again, that gets back to the data that we have that may be again we're able to provide access to our customers, which I think is pretty unique.

You mentioned banking adviser a couple of times when you're talking about AI. Well maybe just for this audience, what is banking adviser? What does it do? And like what's resonating most? You mentioned on the last call actually opening doors with banking adviser winning some business because of the road map around banking adviser, but let's step back. What is it and what's resonating with some customers.

Yes. So maybe to take a step back before. If you think about where we focus in the financial institution. We focus historically on the middle and back office. That's where all the processes are, right, the automation. And so if you think about AI and what AI does, it's just ripe, right, to help further automate what we've already automated by going to the cloud, right? This is just a newer technology to help continue that evolution of the software. And so if we think about our AI strategy, there's 3 pillars. Banking adviser being the first one, which is really our generative AI strategy.

And think about us automating various tasks. A couple of examples is we've got data validation. So if you're trying to look through and process a mortgage application, you make sure all the data is there, make sure it's all right. We can automate that. Generally, those things take 20 to 30 minutes a piece without automation. So we can significantly accelerate that, right? Credit memo narrative is one that I think we've -- it's resonated quite well. If you've ever done a commercial loan, you need to put a credit memo together. You need to walk through the opportunity, the industry, the company, the financials and ultimately. It's all manually done. It takes time, right? Credit memo narratives automates that instead of spending maybe hours putting that together. It does it seconds, minutes, and then you can just spend a little bit of time checking it, making sure it's right and going.

So think about how quickly you can accelerate a loan decision, right? And how quickly you can get back to your customer and let them know if they were approved and for how much.

I can see how the bank loan officer would want that, but is the bank willing to spend on that?

Again, it comes with nCino. And as you use banking adviser, there's a usage opportunity for us, right? The more you use it, right, you get credits and you'll go through those credits. But yes, it does because ultimately, what we're doing with banking adviser, we have an operational analytics dashboard. And as we drive efficiency, we present that back to the customer. So they see the efficiency gains that they're getting and they can take that information and extrapolate it to their P&L and truly see the savings that they're getting, right, which will allow them to make decisions about do we need to hire more, do I need less. Do I want to take -- have 2 people don't want to go put 1 person and have them more focus on business building business outside of the office, while this person can handle all of the back-office tasks, if you will.

So I think it's exciting. We had 2 skills last year. We came out with 16 more this year in May. But ultimately, over time, that's just how the software will evolve. And imagine down the road, we'll stop talking about banking adviser and it will just kind of be part of the software.

Part of the software, part of the automation spend. Yes, it feels like people don't necessarily buy AI, they buy a solution and they buy automation so interesting. Walk me through this business model change. We have a lot of discussion around SaaS pricing changes, right? And this move away from seats and maybe walk through how the product was historically priced, what the new platform pricing is going to be and where we're at on that journey.

So we saw -- going back now a couple of years, actually, that the software we were providing, we're making our customers more efficient, which is great, right? They're happy, we're getting the outcomes that they want, and we're doing our job.

Automation software works.

Right. The challenge from our perspective is the more efficient we make them, the less seats that they need, and we had a seat-based model, right? And that particularly, I think, came to us because commercial was much more high touch, low volume. So that seat thing wasn't as much of an issue. But as we went into consumer, we see it it's much more low touch and high volume. And so we saw the opportunity to automate the way all seats and all human intervention, again, subject to the financial institutions comfort levels with risk.

And we said, we're going to -- seat model won't work, right? So we spent a lot of time over the last couple of years evolving our model away from seats. Our new model, which formerly went into effect on Feb 1 even though we've been testing it for quite some time. So we've had plenty of it -- is an asset-based model. And so you're going to pay us based on your assets. And then every year, we go back and calculate the assets that you have on nCino. And to the extent that your asset growth has gone from 1 tier -- they are bands, I should say, 1 band to another. The next year, you're going to pay us under the new band.

Okay. And the umbrella there would be, if you're only doing commercial, that's just the commercial assets they have.

That's right, on nCino.

If you layer in retail, it's a whole new revenue opportunity.

That's exactly right. That's exactly right. And so for our customers, I think they purchased software frequently. A lot of the core is priced that way. So that asset-based model wasn't new to them. And I think for us, getting away from seats, how many seats do you need and our contracts are 4 years on average. And so for someone to predict how many seats they need 3 years from now, actually is a little bit more complicated than it may sound in terms of...

In terms of 4-year contracts on average, you just started in February. So think about this as a 4-year transition kind of.

That's right. That's what it should be. We're actually...

And it changes upon renewal.

Yes. And so we're about 21% of the way through. About 1/3 of that is mortgage, so about 14% on the non-mortgage base of our ACV. And yes, in theory, you'd have 25% each year. it gets a little fluid because when someone comes back to buy a new product, we would use that as an opportunity to pivot. And then Sean mentioned this on our earnings call a couple of weeks ago, the AI discussion because in order to use our AI capabilities, you need to be on the new model. And we've actually seen that as an accelerator of certain conversations.

So early renewal to the new pricing if they want to have some AI capabilities. Could that speed things up twice as fast to have move things over or it's hard to say.

It's hard to say, but I think we do view that as a catalyst to accelerate it. And so yes, our focus is moving them as quickly as we can. And when we see an opportunity, whether it's through a new product purchase or an for banking adviser or AI stuff to do that.

Early days. But once you get a customer on asset-based platform fees, does it reduce the procurement barrier to expand? Or would it have to still go through a whole new procurement process to add consumer or add mortgage.

It's going to depend on the bank and their procurement processes. But generally, the great thing is you have a contract in place. And so adding a new product, it's -- it should be a much more streamlined process because the framework is there. And so generally, you have a little amendment with a new product and those we can do very quickly.

Sure. Yes. Let's spend time on the growth algorithm as you think about this business, and maybe over a 2- or 3-year period, lots of opportunity in consumer. You have opportunities still in your core commercial product. You have this whole banking adviser, AI opportunity. You get opportunity around the change to asset-based pricing. Yes. Three years from now, out of possible. Is there a path to get this back to a 15%, 20% kind of grower? Or do you think the banking world you live in it's regulated, they move slow mid-teens growth is probably the right way to think about your business?

So I will not look that far into the future. As we've evolved our guidance philosophy this year and want to make sure we stay -- you see me smiling, we don't get ahead of our skis. But look, I said on our Investor Day in May, in September of 2023, we put out a rule of 50 framework. And we said that was 35% non-GAAP operating margin. And I reiterated that we felt confident and maybe even more confident in that in light of some of the efficiency opportunities we were seeing with AI, even going back several months ago.

So that's a Veeva-like model then. You're talking mid-teens kind of growth with a 35-plus percent up margin model to get to rule of 50.

Right. So as we said, we believe that framework is still intact from when we first set it. That said, again, in light of our revised guidance philosophy, we also said we're not going to talk about the long-term growth algorithm. First, we're going to focus on rule 40, before we talk about rule 50. And we said around the fourth quarter of next year, we would be a rule of 40 company. We did not make an assumption around what the components would be, but hopefully, we've been consistent in terms of the market opportunity. We think we have the early stages now I think we're at a new inflection point with AI and an opportunity to truly ride that wave and lead that wave on a global basis.

And so we do want to err on the side of growth and we would certainly love to see growth drive as much of that rule of 40 as possible. But again, we made the commitment around the fourth quarter of next year of getting there one way or the other.

Fair. One last question for me. Any from the audience here before I ask my last question. Great. So I'd like to think about future facts, right? I think Jimmy Dimon talks about leaders focus too much on what's happened in the past. I don't spend enough time thinking about what could happen. And so thinking out a year from now, what's that trend or a product or something in your business that you think investors would be really excited about there, they're not really talking about today.

I'm not really talking about today. There's probably a couple of things I would highlight. In fact, I'd probably put it under the 5 growth initiatives that we laid out at our Investor Day. So AI, obviously, being a big part of that. And in terms of not talking about, I think, maybe the data asset that we have in terms of the data from our customers that we have, and we've got rights to use under various circumstances as well as in that process data, right, where we truly understand how the bank operates and how we can make them better, right?

So I think that, I think, hopefully, that appreciation comes out more and more as we help folks understand that better, right? So that's something we're focused on doing. But AI. The second thing that we've talked about is the credit union space. As our consumer lending product matured, we formed a credit union team is such a big part of credit unions is consumer lending and we see a nice opportunity there.

And I think that platform story resonates where consumer, small business, mortgage, commercial standardizing on that platform, we think there's an opportunity there. And again, landing anywhere, right? And so if someone doesn't want to change consumer right now, we can start with small business. We can pull consumer in later, pull mortgage in, et cetera. So I think we're excited about that. International.

It's been a big push for the last couple of years, still untapped.

Still untapped. We think there's opportunities that from an execution perspective that we have made some changes for us to go focus better, particularly in EMEA on the continent. So again, we brought in a new leader, built that team around them. So far, we are very pleased with what we've seen. And so we're excited about that as well as Japan. I think you've heard us talk about Japan for a while. Great geo, I think, opportunity for us. It moves at a pace that it moves. So never as quickly as I want. But again, we see a lot of opportunities. So international would be the third piece. And then the final 2 would be mortgage.

Our mortgage business as challenging as that market's been has grown every year that we've owned it, which I think is exceptional, including growing 22% year-over-year last quarter. And so that cross-sell motion into the depositories and into our customer base in addition to continuing to focus on the IMB space, I think, is an opportunity, particularly upmarket. A lot of our best customers when they made their mortgage buying decisions, we did not have a mortgage solution, right? We do now. And we've invested to make sure that from a scalability standpoint, we've got all the boxes checked. And so we're excited about that.

And then the final one is onboarding. We made some strategic acquisitions over the last little over a year with DocFox and then FullCircl in November. And we think onboarding is a global opportunity for us, particularly as we think about the commercial lending and kind of close off where we started the opportunity in commercial, the onboarding of complex commercial customers we think we have a unique offering where it's on an integrated basis so you can onboard a customer and go immediately into doing a loan or opening an account. And we think that is a unique functionality in the market.

Well, great. We're out of time. Thank you so much for sharing insights here. Thank you.

Always a pleasure.

Great. Well, we can get started. Sorry, not to throw it right at you, but I saw the time get going -- my name is Adam Hotchkiss, I covered the emerging software space here at Goldman. Really excited to have Greg Orenstein, CFO of nCino here with us today. Thanks so much for being here.

It's a pleasure to be here.

So you've been in nCino since 2015. You've seen the company through a lot of phases, a number of acquisitions this newest AI wave that you've been making with banking adviser and other products. Maybe just talk a little bit about the history of the company and how we got to where we are today.

You bet. Again, thanks for having us, and it's good to see everyone here today. nCino started back in late 2011, 2012, actually, it was part of a bank based in Wilmington, North Carolina, where there's an opportunity to make the lending process more efficient. Ultimately, that software was spun out of the bank, and we took that really with the vision of building out a platform, a single or a unique platform that goes across the bank to help banks become more efficient. -- and frankly, to change the way that they were doing business and the way they've historically purchased software. And so over time, we've built out and we really focused on doing 4 things since then. One is lending. The second one is account opening. Third 1 is onboarding customers and the fourth 1 is monitoring portfolios. And we do that across commercial part of the bank, small business, consumer, including mortgage. And we do that on a global basis.

About 21% of our revenues -- subscription revenues last quarter were outside of the United States. And we also do that with 1 product and 1 platform. And so the same platform that serves a community bank here in the States also serves Wells Fargo, Bank of America. We have 15 of the top 30 banks. And again, I think, ultimately, with under that I should say, we have a lot of data, as you mentioned, AI, which obviously is top of mind for folks. I think we have a very unique data asset. And I think we are uniquely positioned to help our customers on that AI journey just as we help them on the journey to the cloud, when we started the company, they said that banks would never put their data in the cloud and here we are today.

Yes. Maybe talk a little bit about -- if we go a little bit further back in time for those not as familiar, what was it about sort of back office within a bank or a credit union that wasn't working that you found the opportunity to go displace.

We had seen a lot of money spent from financial services companies on payments, a lot of investment in payments and then a lot of investments on, we'll call it, digital banking now, I think Internet banking. But where we do not see there being innovation and investment was ultimately in the middle and back office of the financial institution. Kind of the bowels of the bank where, frankly, a lot of the work is done, right? And so we saw that as an opportunity to address. And again, all around making the banks more efficient, right? We always said we don't want to automate your inefficiencies, but really go to the banks and help them rethink how they run their institutions. The cloud was a great catalyst for doing that, right, for thinking differently. And then again, I think AI, this inflection point with this technology is also another opportunity to help make our financial institutions more efficient, help them reduce their expenses, grow their top line SP-2 And that's what we do.

Okay. Great. Maybe before we dig into the business, let's talk about the most recent quarter, beat and raise on revenue, raised the full year guide. You sort of gave tea leaves around bookings and you have the same ACV growth guidance for the year. I know there's a lot of complexity in that in the revenue versus the ACV and some of these metrics. So maybe distill that for people and give us the message that you're trying to give on the second quarter call.

Yes. Proud of our second quarter results. And again, congratulate and thank all my colleagues and their hard work and efforts. But I think ultimately, the first half of the year, I talked about us on a net bookings basis. plus what we're seeing from a deal activity perspective in the pipeline, feeling confident in meeting or exceeding our ACV guide. It's been a difficult couple of years for us as we navigated interest rate environment, liquidity crisis. And as we sit here today, I think we emerged from that with a very broad, deep product portfolio. And I think our customers and prospects from a balance sheet perspective are in good financial shape. In the U.S., again, I think there's some optimism around deregulation. Certainly, when the new administration came in, that was a focal point.

Obviously, a lot of discussion around tariffs, as that's kind of played out, I think, back focusing on deregulation. We're seeing M&A in the market with banks, which for us historically has been a tailwind. It's been a good thing, primarily because we really are the platform, the only platform out there that's demonstrated an ability to scale up market. And so if you are a forward-thinking bank, if you're thinking about growing organically, but certainly, if you're thinking about growing from an M&A perspective, nCino is the platform to drive that growth and drive that integration and drive that consolidation. So that was it for the quarter. From an ACV perspective, we did give a new KPI this year, which is an annual ACV guide. And again, kind of highlighted our confidence in meeting or exceeding that. And that's what we're focused on doing.

The deal activity also noted is better than I've seen in quite some time, certainly since I've been in this chair. And I'd say that on a global basis as well.

Maybe talk a little bit about that deregulation point a little bit. How has that changed your conversations with financial institutions broadly? And how is that a tailwind for your business?

It's a tailwind because, again, I think that they believe that over the next 3.5 years, right, there's going to be less red tape, whether that's freeing up of capital or ultimately just allowing them not to have to invest in certain things from a compliance perspective. So I think it allows them to lean in a little bit. I think it allows them to be a little bit more optimistic as they think about being strategic and not just operating very tactically, right? I think the last couple of years post liquidity crisis, concerns around the health of financial institutions making sure there wasn't systemic risk, right, post Silicon Valley Bank, very internally focused. And again, I think even if they had budgets to go execute on strategic initiatives, kind of the capacity and willingness to do it just weren't there. The farther we've gotten away from that, I think the more people realize they do need to do some strategic things, number one.

And number 2 is, again, with this inflection point with AI, I think that becomes a catalyst for discussions and for helping people rethink maybe setting up their tech stack for the next 10, 20 years.

Okay. That's really helpful. We've heard a lot about the depth of software in recent weeks and months across a number of different applications because of what's happening in the large language model layer, in particular, and what you're seeing on the infrastructure side? Talk a little bit about nCino's moat and maybe take it from 2 different places, right? The company itself and the data that you actually have and maybe the financial services end market as a whole from your perspective.

Yes. And I think those converge right? And so yes, people talk about the death of software. I can't speak for other markets. But I think from the markets that we serve, right, financial institutions globally, it is the most highly regulated, probably most conservative industry there is out there. And so what we see from our customers is them looking to us and from prospects as well is for them looking to us to help them on this AI journey. Again, for us, it reminds us when we started the company, as I referenced folks looking for help in the cloud journey. If you think about, again, the high regulation the conservative nature. I think it starts with trust and reputation. And ultimately, again, I think we have demonstrated and built that trust and reputation in the marketplace. And what we are showing our customers is innovation, right? We're showing them AI. We're showing them banking adviser skills.

We talked about releasing agents starting next quarter. And so we can take them on that journey as quickly or as slowly as they want to go, right? And I think that is a unique position for us to be able to do that because, again, we've already been housing their data for almost 14 years now. And we have this data asset and ultimately, through their consent to use that data on an anonymized basis, we're also able to help them understand and get insights into various decision-making, okay? And I think that's unique in terms of that data asset. The other thing I think that's unique about the data that we have is the process data right? We spoke about the middle and back office, right, all of the processes. We have hundreds and hundreds of customers where we understand exactly how the institutions work. We know where to focus agents on we know where to focus AI opportunities on to go out and solve and make our customers more efficient.

And so I think that data set that we have, again, on a global basis makes us uniquely positioned to help lead the CI journey for our customers.

Yes. And I think it's a really good point around the data moat in particular. Maybe just give us a couple of examples digging a little deeper into the data opportunity as to what specific guardrails there are or aren't in using financial institution data. You mentioned it's heavily regulated industry. Are there any limiters on what you can do with the data even on an anonymized basis? And then maybe just at a high level, how specifically are you utilizing the data? Is that data being fed directly into some of these models that you're using with these financial institutions, maybe just parse that out for us.

You bet. So ultimately, nothing is more important than trust in security, right? So that overcomes and overtakes everything as we think through it. But we have housed this data. And again, ultimately, we can help banks understand where there's opportunities for them to become more efficient and also use that data to provide insights to them. We launched in May at our user conference a research institute, right, because of the data that we have some of the visibility we have into different loan transactions, whether it's mortgages or commercial loans on a global basis and be able to help our customers understand what we see going on in the market, right, and ultimately, how it may be able to benefit them. And so I think from a unique data set perspective, again, I think that we are able to provide them with insights that other folks can't.

And that goes on top of, again, that process data, where, again, we can look at and know exactly where to focus efficiency opportunities with AI that without the laundry list of customers we're fortunate enough to have, people wouldn't appreciate that. I think the other thing getting back, as you mentioned, LOMs with trust and reputation Again, I can't comment on other markets. But to me, I think it's a big hurdle, a pretty high hurdle or a big hill to climb for folks to think that financial institutions are going to just kind of outsource their decision-making their lending decisions to LLMs, right, which by the way, we have access to all those as well in addition to the unique data set that we possess.

Yes. And I know about your close relationship with Salesforce. What role are they playing or not playing in terms of your innovation at this point? I know you had a really close relationship and there are certain areas now where they're a little less involved with you guys specifically. Maybe just give us a high-level overview of where that relationship sits today?

Yes. We've had a great relationship with Salesforce since we started the company, and that continues today. I think it goes back to December of '23, we announced another extension of our long-standing agreement with them for another 7 years. And so nothing to update there. They obviously have their AI strategy. We have our AI strategy. We explore and look for ways to work together. But ultimately, we're focused on executing and making sure we are providing whatever AI skills and technology and specifically agents if you're talking about agent force, for example, for our customers, how they want to use them. And so as we think particularly upmarket, for example, we're open optionality. We're going to have agents. We work with our customers to help them understand our road map discussions about codeveloping agents, for example. But want them to see where we're going, which will allow them maybe to build agents elsewhere, right?

And so they can leverage our agents, they may want to leverage agents for use agents or maybe there's another third party's agents that they want to leverage. And what we're focused on is making sure folks accessing our data, it's done in a secure way. And ultimately, we're able to monetize it on behalf of our shareholders.

And maybe give investors a sense for how you work alongside integrate with Salesforce Financial Services Cloud. I know that's a big part of a lot of financial institutions. So how does where does nCino sit in the stack relative to that product?

If you think about FSC, I mean, they're in the CRM business right? And we are not right? But ultimately, we do have a tight integration with them, and we have for years. And so again, it really becomes a seamless experience. Ultimately, we always see when there's a decision made, that's where nCino takes over to help facilitate them where they would be more on the front end of facilitating the sales process and the marketing and then ultimately handing it off to nCino.

Got it. Very helpful. So I want to go to banking adviser, right? Now since we're on this AI topic. You announced 16 new capabilities at inside. I think you call them skills. And I think the way you've described initial uptake at your customers, although it's early, is quite strong, and I know you're doing a lot of training there. Maybe just give us the latest, I know we heard a lot on the latest earnings call, but give us the latest around banking adviser, customer uptake and how you're seeing that flow through your customers as you bring them onto the new pricing model, which we can get to as well in a second.

Sure. Very excited our own banking advisory. You noted the 16 skills on top of the 2 that we previously had. On our earnings call, we announced that over 80 customers have signed up for this and so if you think about kind of in different cohorts, we've got folks who were earlier adopters who are live, folks who are in implementation. And it's -- for us, it's a relatively short implementation but one you need to go through and then folks who we've just signed up. And so we feel good about that momentum and the excitement around it. And Sean mentioned on our earnings call, our focus right now is on adoption, right? And we do not have any overage from banking adviser and our financial results for our financial forecast for this year. So we really are focused on adoption, which really comes down to change management. you're, again, changing the way that our customers use our software. And we are incentivizing teams internally, our customer success team.

For example, we currently have a contest going on, who can drive the most adoption, get some excitement around that. So that, again, we help our customers appreciate the power of AI and ultimately, again, work with them so that they think about using our software differently than maybe they were just as we did when we again started the company when using our cloud-based software was maybe different than using their old on-prem software.

Has anything surprised to you when you are talking to customers, you're bringing a Bank Advisor in and you're having those initial conversations around contests and how to use this training usage, et cetera, which longer term, presumably, that usage is an upside driver to your revenue. Any surprises in the way initially that's being received? Or how well skilled folks in banks are to use products like this? Just any high-level color for that cohort of power users and where they are versus where you might have expected them to be.

I think the excitement is there, right? And then again, then you just kind of need to work through the change management process. But I think people appreciate and are gaining a better appreciation for the power of the technology and the fact that it can make their lives easier. Take some mundane skills and automate them. And so they don't have to do that, provides opportunities for our customers to -- and the employees of our customers to maybe spend time on more value-added tasks. And so I think there's a receptivity and an excitement around it. But again, then you kind of need to go through the blocking and tackling of here's how you use it, right? You no longer need to drag and drop this file, right? It will do it for you, right? You no longer need to go through a mortgage application and validate the data, which maybe took 30 minutes before because one of our banking adviser skills will do that for you, right?

You no longer need to draft a credit memo as part of your commercial lending underwriting decision. One of our banking adviser skills will do that for you and all you need to do is check it. And so you just need to work through that and kind of just build up the repetition just as you would -- if you started using any new software.

Okay. Really helpful. And maybe take a step back and on the pricing model change itself. Maybe for those in the audience not as familiar, why make the change that you did? How much of the base from an ACV perspective is on the new pricing model now and what should we expect in terms of both the cadence of that pricing model being adopted going forward and impacts to your top line?

We made the change. It really starts probably 2 or so years ago. if you think about the efficiency gains that our software brings for our customers, we appreciated that the better we are right, the worst it hurts our business model because it was a seat-based model historically. And we saw, particularly as we focused on expanding our consumer lending product. And as that matured, that ideally, there'd be no human intervention, right, subject to whatever comfort level the bank may have from a regulatory perspective. We talk about getting to this path of one where you just need one person in the loop to approve a loan. And so we quickly saw that C-PACE model was not the right long-term model. And so we evolve that to a platform pricing model. It's generally driven by assets at the financial institution. And so it's based on tiers. But based on the size of the financial institution, you're going to pay us a certain amount. And then each year, we go back and we calculate the assets that they have on our platform. And to the extent you trip a tier, then the next year, you would be billed and invoiced for the new pricing. And that differs on that annual opportunity to get price uplift, which asset growth has generally tracked GDP and think 2% to 3% a year.

We're excited about that opportunity because historically, we were under our seat-based pricing model, the price was fixed during the term with an average contract length of 4 years. right? So for example, as inflation took off over the last few years, we did not address that as part of our lot contracts. This gives us an opportunity to do that. And I think also helps in some of our renewal discussions where I think some of our customers appreciate that they weren't paying and maybe they would otherwise have been if it was a different contract. We do have about 21% of our ACV under the new platform pricing model. About 1/3 of that is for mortgage. I mentioned our average contract length 4 years. And so if you think about it, about -- it should take about 4 years to cycle through. We do see opportunities to accelerate that.

And one of the main drivers of that, that we see is AI because in order to use our AI technology, you need to be on the new pricing model. And so Sean mentioned this on our earnings call a couple of weeks ago, it has been a catalyst for accelerating some of those renewal discussions, which is great. But I think we feel real good about the pricing model. And I think ultimately, it sets us up well in this AI world where, again, seat reduction, leveraging agents is out there. And again, we're focused on growth in assets, which again, I think, aligns the value that we provide with our customers quite well.

I want to get into some of the other growth drivers. But before that, you mentioned the path of one, right, and having 1 human in the loop -- is that how banks think about how they ultimately want their back offices to look in the future? Is there any pushback either internally from software power users or the banks themselves around the idea that they will be such a lean headcount organization in that function? Or would you say there's a lot of receptivity to that?

I think that there's a lot of openness to that discussion. Again, whatever their comfort level is for us is to provide them the optionality. So it's one thing to be able to do it. It's one thing if they decide to do it, right? And so again, to me, this is very much a crawl walk run. No one's going to wake up tomorrow and go from 8 to 10 folks as part of a commercial loan approval process down to one. But again, I think as the technology evolves as they get more comfortable using it, it provides them the opportunity to potentially do that. Two things that I saw over the last few weeks or even months on CNBC, One was they had a little banking and AI segment where they interviewed a large unnamed bank, okay? I assume it was a U.S. bank. And they said, by 2030, they expected their headcount to be reduced solely because of AI by 35% to 50%, okay.

Another one I saw one of our customers was actually on CNBC not too long ago and referenced that same 50% potential opportunity. Now whether they pursue that or whether they do a lot with the same, again, to us, it's providing the optionality to the financial institution to figure out what's best for them.

Okay. very useful. Let's get into another growth driver of yours, which is mortgage. That business has outperformed. I know you've sort of taken the guidance philosophy around that, that you don't want to call a macro environment. But maybe just agnostic of the macro, talk to us a little bit about the cross-sell opportunity there, how you think you've done in taking that mortgage product? I know it's been a number of years now, but cross-selling that into your base and then maybe just talk about conceptually how we should think about the upside as I think most, if not all, of that base is now over to the new pricing model that focuses specifically on assets and volumes.

Yes. For that, it's loan volumes to your -- last comment -- and we've got now over 50% of that base turn on that new platform pricing loan model. Look, that's been a business that in a very difficult time grew every year since we've owned it, even in the darkest days, including growing 22% year-over-year last quarter. And so I think that's a reflection of it's great technology. I think it's a great organization in terms of providing customer support, and I think we've got wonderful people. And I think during kind of the darker days of the mortgage environment, if you go back the last couple of years, the team did a fantastic job of going out and getting logos, many of which were competitive takeaways. And we did that under this new pricing model, betting that when volumes came back, right, we would be able to benefit from that. And we did see a little bit of that in the second quarter. We called out a homebuilder as well as an IMB or 2, where we saw overages that drove about $1.7 million of overperformance for us in the quarter.

And again, if it can do that still with this, I would say, still relatively consistent volume, right, from a mortgage volume perspective. We haven't seen mortgage volumes spike consistently, right? And then again, I think that positions us well as we think into the coming quarters. Obviously, the administration seems very focused on getting interest rates down. And hopefully, mortgage rates would follow that, which I do think would drive additional mortgage volumes, which ultimately should benefit us. To your point, though, we're going to remain conservative and not predict mortgage volumes and just stay out of that business and just make sure we're very transparent in terms of the impact it's having on our financials. So our investors can get that information and then ultimately figure out what's best for them in terms of how they analyze it.

Okay. Switching gears to the account onboarding account opening space. We've heard not just in the commercial space, but also in the retail space, there seems to be a lot of focus from financial institutions on onboarding and account opening. Talk a little bit about why that is, and then we'll dig into some of your products.

I think onboarding has been a challenge for companies or financial institutions on a global basis. I mean, we've experienced it ourselves, trying to open accounts, particularly outside of the U.S. There's a lot of regulation, KYC, KYB AML in terms of being able to onboard that customer, a lot of it still is very manual. And again, from a time perspective and from a user experience perspective, it is an unpleasant experience, right? It takes a long time. It's a challenging customer experience and ultimately ends up being a very frustrating way to maybe start a relationship with a financial institution. And so we see a big opportunity there on a global basis. Two of our acquisitions that we did going back to last March with DocFox and last November with FullCircl, we're in that onboarding space.

And we see that as an opportunity to provide our customers not just with a technology to automate the onboarding process, but also to do it in an integrated fashion because no 1 goes to a financial institution that says, onboard me. right? You go there because you want to get a loan or you go there because you want to open an account. And so having all of that is part of the same system, the same workflow, I think a great experience for our customers, employees, right, and onboarding those customers as well as for their customers. And so we're excited about that. We went through the integration of DocFox, which we launched the first integrated version at our user conference in May. And so busy in the sales cycle for that. But again, I think to your comment, I think every one of our commercial lending customers should want that. And again, I think it's a problem that we're able to solve on a global basis, particularly as those products continue to mature as part of our overall platform offering.

Yes, let's talk a little bit about new customers, right? And I know that this is part of that broader strategy. But as you think about, in particular, the core commercial business, both -- and I guess we can take this in 2 ways in the U.S. and internationally, what in your mind is the catalyst to get some of that net new activity picking back up? I know it's sort of you've seen it in the growth rates start to bottom out, and we may see that in flexion. So it seems like that is turning around a little bit in your business today. But maybe just walk us through on the net new side, how you're viewing that opportunity where we are today and what the opportunity looks like longer term.

We see healthy activity on the commercial lending part of our business, both here in the U.S. as well as globally. I would say, globally, it's more of new logos as we go into new territories, which is very exciting. We announced our first logo in Spain in the second quarter. And we've been pretty vocal about our focus on expanding on the continent with Spain being one of our target markets. And so it's great to see that. But in the U.S. as well, not only with new logo opportunities, but on our Q2 earnings call, we announced expansion with 2 large customers in commercial, right? So then buying more from us. And so -- we view those commercial logos as assets. Not only do we have opportunity to expand within the commercial part of the bank, if we've got a logo in many cases, but also to expand outside of that leveraging the reputation and relationships that we've built in that part of the bank. And so commercial, again, I think will continue to be a good driver for us as we think about the opportunity for reacceleration of growth.

And then the other thing is, again, whether it's onboarding, right? That's taking that, for example, we're able to take that to our commercial customers, right? Natural add-on for them, banking adviser take that to our commercial customer base, right? And so I think there's an opportunity to continue to add logos right, expand in current logos and then go deeper in the current logos. And so I think that bodes well as we look to reaccelerate growth next year and beyond.

Great. And then on the commercial side, Who are you competing with? Or I guess, said differently, if you don't really see any one competitor, what is the driver of a bank deciding to go ahead with nCino or run an RFP that includes you versus not, right? Is it really down to budget constraints and regulatory or capital requirement burdens. What is the driver? Would you say of an inflection in the number of companies coming to market and your win rates?

So for commercial, if there was an RFP, we weren't included, I would be surprised. In light of our market position and reputation as the worldwide leader, certainly in commercial lending, but we say cloud banking. Our biggest competitor on a global basis, I'd say, by far, is do nothing. Kick the can down the road, maybe there's another priority that they have. It's good enough for now. And so our job is to help them appreciate what they're missing out and the efficiency opportunities that they could get with nCino. If you want to look at it from a third-party vendor standpoint, I would say most of our competition globally is actually concentrated here in the U.S. down market with a couple of private equity-backed providers. But it's very much a different value proposition. Again, we have the best commercial lending solution out there, but we're selling a platform, right?

Where commercial, again, is a great product that we have. but also we can land with consumer. We can land with small business, we can land with mortgage. And again, what we want the bank to appreciate, don't buy software, how you used to, which was by business line. So you'd have a different tech stack for commercial versus consumer versus mortgage, et cetera, standardize on nCino. And you can have all these on 1 platform, right, with a 360-degree view of your customer, which is going to make your life easier, make your bank, you're credit union more efficient, and it's going to provide a significantly better user experience for your end user. And so again, I think we feel really good about our market positioning with commercial. But again, I think there's still plenty of runway for us on that.

Yes. That's really helpful. In the last couple of minutes here, I want to just touch on the margin equation. And I know you've talked about rule of 40, right, and that obviously includes margin expansion. So how are you thinking about balancing growth reacceleration with margin expansion in this environment?

We always want to air on the side of growth. Obviously, we had some headwinds in the market, which impacted, I think, our ability to grow. I think we've been transparent to some things we could have done better that I think we've addressed. And again, I think we're excited about some of the changes that we've made in the organization. But we do want to err on the side of growth. We still think it's very early in this opportunity to transform the financial services landscape. And again, I think AI provides the next wave of growth for the company, and I think we're uniquely positioned to capitalize to become the worldwide leader in AI banking as we were in or in cloud banking. That said, we did make a commitment that around the fourth quarter of next year. We would hit Rule of 40. We did not specify an assumption around growth. We just said we would get there.

And so clearly, we want growth to be the driver, right? That said, we do see opportunities for margin expansion starting on the gross margin line. I've talked about our PSO margin specifically, some initiatives that we have internally around becoming more efficient in our implementations significantly reducing implementation time lines, leveraging AI is a big part of that. And as we continue to make progress on that, I know that it will take a little bit of time to show up in the financial results as we finish up and wind down some legacy projects and in parallel, ramp up kind of the new way we're doing it. I think you see that as a nice lever. And then again, from an OpEx perspective, I think we have the opportunity to continue to tweak and become more efficient in areas.

And I think AIS is a part of that. And we have been investing in our people to make sure that they've got the AI tools they need. And then also just from a headcount perspective, again, before we run out and hire people. right? We've got technology. Can we leverage that technology to become more efficient and do it in a more cost-effective way, right? And I think AI, we see already examples of that happening, and I think that's exciting to kind of doing more with the same headcount that you have versus, again, reflexively needing to just add more headcount, which I think was the mindset if you go back a few years ago.

And then if you think a little bit further forward on capital allocation, obviously, you've made some acquisitions recently. Any natural adjacencies we should think about for you in terms of further M&A activity, any way we should be thinking about just broader capital allocation priorities for you going forward?

Right now, we're focused on executing on our stock buyback -- we announced a $100 million stock buyback on April 1 on our Q4 call. Through the second quarter, we were just over 60% or over $60 million of the way through that. And then making sure from an integration perspective and from a go-to-market perspective, we are getting the return that we expect from those acquisitions. And so we continue to keep our eyes and ears open because it is a rapidly evolving market. Frequently, M&A opportunities come up when you don't want them to. But right now, our focus is on the assets that we have. I think we feel very good about our product portfolio, the number of products we have to bring to our customer base and just execution.

Okay. Last one for you. I know we're coming up against time. What is the biggest priority for you over the next 6 to 12 months? And then if you look beyond the next 6 to 12 months, over the next 3 to 5 years, what are you most excited about as it pertains to the opportunity.

I think right now, our focus is on execution. And I think it actually is very energizing. I think the company is very aligned in terms of what our priorities are and very focused on executing against our targets and goals. And again, I think from a management team perspective, from Sean's perspective as our CEO, beating the table around execution and staying focused and not getting distracted. And so that actually is exciting to me and energizing. And again, you can see the company rowing in the same direction towards those goals. And so again, focus on execution, and you'll continue to hear that, I think, from this management team. As I think bigger picture, again, I think we are in an amazing time in technology. These things don't come around very often every 10, 15 years or so, you see these inflection points.

And I think, again, we are very specially, and I said this earlier, uniquely positioned to be the worldwide leader in AI banking. I think we've got the trust, the reputation the vantage point, the data, the technology to truly drive the market and the industry done as AI path. And I see it as an exciting way for us to go ride just as, again, we roll with that wave of cloud banking. So that's exciting to be part of, particularly with a wonderful bunch of people that we have in the company.

Great way to end. Greg, thanks so much for being here.

Appreciate it.

All right. Thank you. appreciate it.

Good day, and thank you for standing by. Welcome to the nCino's Second Quarter Fiscal Year 2026 Financial Results Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Harrison Masters Vice President, Investor Relations. .

Good afternoon, and welcome to nCino's Second Quarter Fiscal 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer.

During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements.

Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.

With that, I will turn the call over to Sean.

Good afternoon, and thank you for joining us to discuss nCino's second quarter fiscal 2026 results. Before jumping into the details from the quarter, I'd like to remind you of the fundamental challenge we address and nCino's mission in the marketplace. Financial institutions around the globe face persistent challenges rooted in legacy and fragmented technology infrastructure that restricts their growth potential and bottom line performance and causes inefficient and frustrating user experiences for both their employees and customers.

nCino alleviates critical pain points inflicted by disparate data sources, legacy technology and manual processes with intelligent automation delivered on a unified, scalable platform powered by AI. nCino stands as the singular cloud-native SaaS platform that allows financial institutions of all sizes on a global basis to seamlessly manage lending, onboarding, account opening and portfolio management across all major lines of business. Because we are the system of record for so many of our customers' most critical operations and because our solutions are deployed in over 20 countries across a broad and diverse customer base of banks, credit unions and IMBs of all sizes we believe we have built a competitive moat that is both wide and deep.

Turning to our second quarter. We outperformed our guidance ranges for both our revenues and profitability metrics and the evolution of our product strategy continues to be validated in the marketplace. With our flagship commercial loan origination solution, we saw strong activity in the North American enterprise market, including significant expansion agreements with 2 top 50 U.S. banks and the top 5 Canadian bank.

And in the mid-market, we saw an almost 7-figure ACV commitment from a net new $10 billion asset bank for commercial lending. We also saw positive traction with our growth initiatives for fiscal 2026, which, as a reminder, are expanding our focus in EMEA, activating the credit union market, realizing the onboarding opportunity, cross-selling mortgage and embedding AI data and analytics across our unified platform.

On Continental Europe, where we see an over $4 billion market opportunity, we signed our first customer in Spain. As we have seen over the history of the company, we expect success with the initial customer in a new geography to validate the nCino value proposition and fuel growth with other financial institutions in that geography. Also in the quarter, Infosys, a strategic partner in the implementation of nCino at ABN AMRO Bank, one of the largest banks in the Netherlands, issued a press release announcing a successful go-live.

This project strategically sought to transform ABN AMRO's loan origination and collateral management process by consolidating multiple legacy systems into a single unified platform, enhancing ABN AMRO's ability to serve its customers and streamline operations. We expect wins and more importantly, go lives like these to precipitate more new business in our newer European markets throughout the second half of this year and beyond.

In the credit union market, where we previously announced the dedicated focus this year, we signed an expansion deal that included business lending and account opening, commercial lending, commercial pricing and profitability and incentive compensation, which took a credit union with $12 billion in assets over the 7-figure mark for their annual commitment to nCino. Overall, our credit union team added 6 new logos and 35 cross-sells in the second quarter.

Moving to onboarding. In the second quarter, an existing U.K. Challenger Bank customer increased their ACV with nCino over 80% by broadening their adoption to include onboarding, demonstrating the market demand for technology that helps financial institutions manage the end-to-end client relationship from acquisition to ongoing interactions and due diligence monitoring, ensuring a compliant, smooth and personalized experience.

Turning to mortgage. The market showed signs of momentum in the second quarter with expansion activity from over 50 nCino mortgage customers, about half of which were depository institutions, evidencing the demand in our customer base to leverage our best-in-class unified platform across lines of business within their institution. Seeing this level of activity across both depositories and IMBs with our mortgage solution is a positive signal.

And as Greg will touch upon in his remarks, the year-over-year subscription revenues growth we saw in mortgage this quarter demonstrates that the platform pricing shift we made with mortgage over the past couple of years will prove beneficial as the industry recovers.

Finally, on the AI front, I'm very excited to share our progress on what we believe will be as transformative for financial services as our pioneering move to cloud banking was over a decade ago. Banking adviser represents the first pillar of our AI strategy, and over 80 customers have now purchased this technology. Banking Advisor represents an AI-powered interface designed exclusively for financial institutions. Unlike generic AI solutions, Banking Advisor is deeply integrated into nCino workflows and understands financial products, process workflows, regulatory nuances and day-to-day banking realities.

Banking Advisor is evolving to become the primary interface through which our customers will experience increasingly sophisticated AI capabilities and fully agentic workflows, which we plan to start rolling out to the market next quarter. As our product development organization continues to deepen and widen our AI moat and as more and more financial institutions look to nCino to help them navigate their AI journey, we are laser-focused on ensuring the successful adoption of Banking Advisor by the initial cohort of customers.

Financial institutions don't just need AI tools. They want a partner, they trust who deeply understands banking, has a proven ability to drive industry-wide change and possesses the data foundation necessary to build truly differentiated AI capabilities. nCino has been that partner through our customers' introduction to the cloud, and we strongly believe no company is better positioned than nCino to lead the AI transformation of financial services. Specifically, nCino provides mission-critical systems for our customers. We understand the regulatory complexities and nuances our customers must navigate and comply with on a global basis. We are a trusted data partner with a deep appreciation for the confidential nature of our customers' information and the infrastructure required to protect it. And we understand the context in which AI tools are used because of our singular financial services vertical market focus across commercial, consumer and mortgage lines of business. These factors, along with our scale, global presence, reputation in the market and best-of-breed product portfolio, make us uniquely positioned to be the worldwide leader in AI banking.

AI is coming up in virtually every customer conversation. And we are already seeing our AI-first approach contributing as a differentiator that helps move deals over the finish line, including being a catalyst for customers to transition to our new pricing framework. With that, I'll hand the call over to Greg to walk you through our financial results.

Thanks, Sean, and thank you all for joining us today. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call.

In the second quarter, total revenues were $148.8 million, up 12% year-over-year. Subscription revenues were $130.8 million, up 15% year-over-year on a reported basis and 10% organically. As noted on Slide 15 of our second quarter earnings presentation, of the approximately $4.3 million overperformance against the top end of our second quarter subscription revenues guidance, $900,000 was a result of solid execution against our plan, $1.7 million was due to overperformance from our U.S. mortgage business, where we saw subscription revenues of $20.9 million, up 22% year-over-year and $1.6 million was a result of favorable foreign exchange rates relative to plan.

Professional services revenues were $18.1 million, a decrease of 2% year-over-year. As I addressed at our Investor Day in May, while it will take some time to see results, Professional services gross profit growth will be the focal point of our internal operating plans versus driving additional professional services revenues growth. And we remain focused on realizing quicker deployment time lines through the use of AI and Sandbox Banking and by taking a more prescriptive approach to projects.

Non-U.S. total revenues were $33.5 million, up 22% or 19% in constant currency. Non-U.S. subscription revenues were $27.4 million, up 30% or 27% in constant currency and 10% organically. Please note, our discussion of constant currency excludes any currency impact on revenues from FullCircl. Non-GAAP operating income was $30 million or 20% of total revenues. Over performance against our subscription revenues guidance contributed approximately $3.7 million of non-GAAP operating income and the balance of our overperformance against guidance came from solid execution on efficiency initiatives.

We ended the quarter with $123.2 million in cash, including restricted cash and $203.5 million outstanding on our line of credit. We repurchased approximately 750,000 shares of our common stock in the second quarter at an average price of $26.89 per share for total consideration of approximately $20 million.

When added to the stock we acquired in the first quarter, we have repurchased approximately 2.6 million shares at an average price of $23.53 per share for a total consideration of approximately $60.6 million against the $100 million authorization. As we stated last quarter, our capital focus for the time being will be on realizing the benefits of the prior acquisitions we have made and on share repurchases. Our platform pricing transition continues to proceed according to our expectations, including price uplifts. And we have now converted approximately 21% of our ACV to platform pricing.

Now turning to guidance. For the third quarter of fiscal 2026, we expect total revenues of $146 million to $148 million and subscription revenues of $127.5 million to $129.5 million, an increase of 6% and 7%, respectively, at the midpoint of the ranges including approximately $5.5 million of inorganic subscription revenues from FullCircl and Sandbox Banking.

Non-GAAP operating income in the third quarter is expected to be $31.5 million to $33.5 million, and non-GAAP net income attributable to nCino per share is expected to be $0.20 to $0.21 based upon 117 million diluted shares outstanding.

If you turn to Slide 16 of our second quarter earnings presentation, you'll see for the full year, we are flowing through the $900,000 second quarter execution-based beat and increasing our full year subscription revenue guidance by $2.7 million. We are also increasing our outlook for U.S. mortgage subscription revenues growth for the full year by the approximately $1.7 million overperformance in the second quarter.

While we are planning for mortgage subscription revenues to be down both year-over-year and taking seasonality into account sequentially in the third quarter, we now expect U.S. mortgage subscription revenues growth of approximately 5% for fiscal '26, up from our prior guidance of flat year-over-year. The accretive subscription revenues growth contributed by our mortgage business in the second quarter is the result of volume growth concentrated in some large IMB and homebuilder customers.

Our mortgage team did a tremendous job acquiring these customers in the lows of the mortgage cycle, and we are quite encouraged by these results. However, in keeping with our new guidance philosophy, we are not extrapolating this overperformance to the rest of the year at this time. With respect to FX, our prior subscription revenues guidance for fiscal '26 assumed a relatively strong U.S. dollar which weakened in the second quarter.

Our revised full year subscription revenues outlook includes adding approximately $2.1 million of foreign currency benefit relative to our plan for the fiscal year, which includes approximately $1.6 million realized in the second quarter with the $500,000 balance of the benefit expected in the fourth quarter when the U.S. dollar was strongest last year.

FullCircl and Sandbox Banking have been contributing subscription revenues in accordance with plan. So our outlook for fiscal '26 inorganic subscription revenues of $17.5 million remains unchanged. For fiscal '26, we now expect subscription revenues of $513.5 million to $517.5 million, up from our prior guidance of $507 million to $511 million, representing 10% growth at the midpoint of the range and 9% in constant currency. As a reminder, our second half fiscal '26 year-over-year subscription revenue comparisons are negatively impacted by an approximately 3% headwind in both the third and fourth quarters as a result of onetime subscription revenues that occurred in the second half of fiscal '25.

We also continue to expect the fourth quarter to represent the lowest year-over-year subscription revenue growth for the year. For fiscal '26, we now expect total revenues of $585 million to $589 million, up from our prior guidance of $578.5 million to $582.5 million, representing growth of approximately 9% at the midpoint of the range and 8% in constant currency. We now expect our fiscal '26 non-GAAP operating income to be $117.5 million to $121.5 million up from our prior range of $112 million to $116 million, representing an approximately 24% increase over fiscal '25 at the midpoint.

Non-GAAP net income attributable to nCino per diluted share is now expected to be $0.77 to $0.80 based upon a weighted average of approximately 118 million diluted shares outstanding, which does not factor in any additional share repurchases beyond those we have made to date. This guidance assumes interest expense incurred under our credit facility of approximately $15 million for the fiscal year. Finally, our fiscal '26 outlook for ACV is $564 million to $567 million, representing growth of 10% at the midpoint of the range, which reflects constant currency as unlike revenues, ACV is measured in rates at the end of the period.

Our guidance represents net additions to ACV of $48 million to $51 million in the year, including $4.5 million from the acquisition of Sandbox Banking. Our confidence in meeting or exceeding this outlook is underscored by the net bookings we achieved in the first half of the year, and the opportunities we see in the pipeline for the remainder of the year.

I'll remind you that ACV bookings have historically been seasonally stronger in the second half of the year. Hence, the rationale for an annual cadence of our disclosure of this metric.

In closing, we are quite pleased with the progress we have made in the first half of the year and are very excited about the deal activity and sales opportunities we are seeing in the market. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of fiscal '27 as stated on our fourth quarter fiscal '25 earnings call.

With that, I will open the line for questions.

[Operator Instructions] Our first question comes from Brent Bracelin with Piper Sandler.

Greg, it's great to see the biggest revenue beat here since the lockdown days and the digital surge we first sought. Based on our estimates, it looks like organic growth reaccelerated for the first time in 3 years, can you maybe frame the drivers behind the strength you're seeing and whether those are sustainable? Or were there some onetime things that helped you this quarter?

Yes. Thanks, Brent. Yes, I think first and foremost, again, just solid execution from the team. And so appreciative of everyone's efforts. Everyone is very focused on executing the plan. I think taking a step back, and I think the macro in general, is more supportive than what we've seen getting back to your comments about kind of the pre-COVID days. The headwinds that we've been navigating have generally subsided. And ultimately, as we talked about on the call, from a deal activity standpoint and from a sales opportunity standpoint, we haven't seen this level of activity in quite some time. And so we feel good about the business. And I think the team is very, very focused on just execution.

Helpful color there. And then, Sean, maybe for you on AI. It sounds like you're getting some nice early proof points that you have some differentiation we're seeing in other areas applied AI in these domain-specific areas are also having success Banking adviser. Looks like you're now at 80 customers. I think you talked about maybe a little under 20 entering the year. What's resonating there? And how important are these fully agentic workflows coming out next quarter and building on that momentum.

Yes, I appreciate the question. Indeed, AI is coming up in every customer conversation we have in the field, and it is contributing meaningfully to wins thus far, the first half of the year. So we're excited to build on that momentum. And it also pulls through the platform story. Customers recognize that we have built up a decade of process-centric data and a point of view on that data that informs decisions as well as recommendations we can make to help banks improve their efficiency and that's ultimately our overarching goal here at nCino. So we're excited about that. The uptick on banking adviser, you have to remember, there is a change management journey there, right?

As we roll out banking adviser skills, we are changing fundamentally the way people do their jobs and as they embrace that, there's a learning curve. And so we're busy investing in the adoption of that, helping people navigate that, and that's fun work to be doing because we've always aspired to just change the way people do their jobs in this industry. And then finally, when it comes to agentic experiences, we believe we're going to deliver them even earlier than we anticipated in this call last quarter. So we are seeing teams come to the table with agenetic experiences, reimagining the existing nCino workflow that are going to show up before the end of this year.

And that's exciting. That's exactly the conversation our customers want to have. And they remind us that while they're excited, they're also going to be conservative in terms of how they adopt these. So we're finding the right balance between getting excited about agentic workflows, but driving that out in a very in a very realistic as well as mature sort of a way that we're not compromising risk and compliance within the institution.

Our next question comes from Terry Tillman with Truist

Maybe I should try this [indiscernible]. Don't laugh at me, I'm Spanish. Good to see the Spanish win, but I think there was a little laugh there. But I first wanted to focus on platform pricing, and then I want to follow up with mortgage. So as you have these platform pricing conversations and it sounded like you had some success with 2 top 50 banks and then a top 5 Canadian banks, like what kind of uplift are you seeing? And then how important and how is that actually tracking in terms of your expectations you had on platform pricing? And how do you think about that into next year, given probably there's even a larger base of renewals, and then I had a mortgage follow-up question.

Yes. Thanks for the question, Terry. A few things, I think, to unpack there. First and foremost, just in terms of the pricing transition. As we noted in the prepared remarks, so far, I think it's going well in accordance with our expectations. And so we're really pleased with that. The team has invested a lot of time and energy and enablement to execute that. So far, we are seeing price uplifts consistent with our expectations.

We've told folks that we'd like to target around a 10% uplift just on an apples-to-apples basis, so no additional product, just switching from on renewal to the new model. Ultimately, the biggest cohort of migrations or renewals this year is going to be in the fourth quarter. So we want to work through that before we kind of come out with what we see through that because, again, that's going to be the largest cohort for this year, but it's going well, going in accordance with our expectations. And we see people embracing it, particularly, as Sean noted, with the AI and the banking adviser skills that are part of that transition.

That's great. And just on the mortgage side, it's impressive to hear about 5% versus flat. I think, Sean, you were talking about -- it almost sounds like there's some share gains. This isn't a reliance on mortgage industry changing or getting better [indiscernible] IMBs and then homebuilders. Is there more you can pull from them just winning in a tough market whether it's in 3Q or beyond? Or how much do you have to start seeing the industry get better? .

Yes. So we are excited about the momentum there. I think the convergence of churn settling down to our historic low norms there, in addition to the activity we see in the pipeline is resulting in a picture where we have more deal activity out there than we've had in quite some time. In fact, I had a number of the field mortgage employees in my office just yesterday talking about this activity and the excitement and the number of meetings I have just in the next month with some customers in that IMB space that you mentioned as well as depository institutions, we're energized by that.

So I don't think we need to rely on any announcements from the [ NBA ]. We don't need to rely on any correlations to interest rates. We simply need to execute and have the best tech in the marketplace. We have a relatively crowded space there with a lot of competitors. That's healthy that keeps us sharp, and I feel really good about our position competing in that space.

Our next question comes from Ryan Tomasello with KBW.

I wanted to start on the credit union wins you called out, I think, 6 net new logos in that category, which seems strong. Just any context around what drove those, if any of those were competitive takeaways. And regarding the broader activation of that new go-to-market team, do you feel like that sales force is now kind of fully hitting its stride in this pace of sales? Or there's still more ramp as pipelines build with that new go-to-market activation?

Yes. I think the -- the 6 deals are a validation of why we made the investment to activate this team. We have the technology. We have the solutions. We're solving the same business problems but we're speaking the language of the segment of the market that we just had not been as focused on before. As we talk about execution discipline and focus, that's an area that we're laser-focused. And that team is enthused and energized by that opportunity.

So I expect that we'll continue to add momentum there. We have opportunities in automated small business. We have opportunities in mortgage. We have opportunities in commercial and consumer lending, all just core bread and butter things that we do here at nCino. And then we have an opportunity to cross-sell the platform, right?

We have a well-established credit union customer base based on doing business there for over a decade, and we're seeing opportunities to cross-sell there with that team. So it's a matter of focus, and it's exciting to see that one of our key growth initiatives is being validated at this point of the year.

Great. And then now that you have several quarters of banking adviser usage data, and I think you called out roughly 80 customers onboarded. Any color on sizing the type of uplift you're seeing from those usage credits to ACVs? I understand that banking adviser doesn't actually count towards ACV, but any way to size that in terms of the usage benefits would be helpful.

Ryan, for this year, it's -- I think we've mentioned this, but just to reinforce, it's not part of our fiscal '26 financial plan. Right now, the focus of the team is getting that technology in as many of our customers' environments as we can. And as Sean said, is then taking them on that journey kind of cohort by cohort, enabling them to leverage the technology. And so that will take some time to work through. And so that's where our focus right now is very much on the adoption of the technology. .

And we'll see how that plays out as the year progresses in anticipation of having that be part of our plan for next year. But again, we want to get a little bit more data and more data points from the evolution, but we are very pleased with what we're seeing so far and the receptivity to people, again, looking to us and nCino to take them on this AI journey. .

Our next question comes from Michael Infante with Morgan Stanley.

Greg, you actually called out your commentary just in terms of your ability to meet or exceed the full year ACV outlook. I just wanted to ask on the sort of 2 buckets you called out between performance in the quarter versus what you see in the pipe. Like how would you sort of speak to your level of visibility and sort of how that has improved throughout the quarter. .

Yes. Thanks for the question, Michael. Yes, again, I did note our confidence. Ultimately, we've got to go execute, right? We have to go get the business, but the business is out there. And as we said, we feel good about it, have not seen this level of deal activity and opportunities, and as I said, in quite some time. So that's encouraging team focused on execution. .

And yes, in terms of looking at the ACV guide, again, I think we feel good with really both components. What we did in the first half on a net bookings basis as well as the pipeline. So I think both of those are contributing again to our confidence. And then like I said, it's just about execution. .

Helpful. And then just a quick housekeeping follow-up on Ryan's question. So just on a banking adviser despite all of the success that you're seeing on go-lives and some of the positive usage trends. The assumption from a revenue contribution basis for banking advisory, specifically is that you're still not going to see any revenue from that product this year. Is that correct?

That's correct. Certainly, from an overage perspective, that's right. And again, the focus is on adoption and helping, again, as Sean said, help our customers transform the way that they do business with technology.

Our next question comes from Adam Hotchkiss with Goldman Sachs.

I wanted to ask on DocFox and FullCircl, obviously, a number of months since those have been generally available. What are -- what was sort of the performance highlights there in the quarter? And then how are you feeling about the pipeline of those 2 products and maybe just onboarding and account opening category more broadly. into the back half of the year and into calendar '26.

Yes. With respect to the integration of FullCircl, we're on track to revenue plan, as noted in prepared remarks, and we're really happy with the technical work that is ongoing there that we could deliver a full CLM solution, customer life cycle management in the EMEA market. With respect to DocFox, consistent with the message we've been delivering this year, we have been doing the technical work that will set up sales cycles the back half of this year that we think will be accretive next year. So the lion's share of that work has been completed. The teams continue to get a fully end-to-end integrated onboarding straight through into origination and onboarding into account opening scenarios, and that's exactly what our customers are asking for.

Just as a reminder, we released that at the end of May. And so to Sean's point, we really set an nSight and sustaining this pipeline build. That's what we've been focused on, and we would expect to see results over the coming Quarters.

really helpful. And then, Greg, just on the the comment you made around reiterating the fiscal '27 Rule of 40 by the end of the year, would the revenue growth outperformance and then the sort of operating income outperformance that's commensurate with that so far this year, -- any changes to the way you're thinking about the relative contribution from revenue growth versus operating margin? Or which one you're prioritizing or thinking about versus the other maybe versus when you talked to us 3 months ago? .

Yes, you bet. Look, our focus, as you know, has been on growth. And obviously, we've had some headwinds to navigate. And as I mentioned earlier, from a macro perspective, it is quite a bit more supportive and those headwinds have largely subsided. So we're always going to err on the side of growth. We think there's a tremendous opportunity out there for us. We think we have an unparalleled product portfolio. We think we are leading the market in terms of AI.

And so Adam, we're always going to err on the side of growth. But when we made that commitment around the fourth quarter of next year with the rule of 40, we did not differentiate we just -- that was the commitment. And obviously, you want to see as much of that come from growth as we possibly can.

Our next question comes from Aaron Kimson with Citizens

Sean, are you finding today or do you anticipate in the future that any of the newer vision around banking adviser or functionality like the updated mortgages compelling enough to drive early renewals and thus bring forward pricing tailwind versus the tailwinds being spread 4-over renewal cycle? .

Yes. The answer is yes. we have been seeing that play out in some early renewal scenarios in the first half of this year. in some cases where we have customers that might not be up for renewal until next fiscal year and beyond, the interest in banking adviser is pulling forward conversations that we're having in the field and having them run toward embracing the new pricing model that we have our customers on.

And as you all know, on the one hand, a new pricing model is directly aligned with the outcomes that we want to deliver to our customers. On the other hand, it is a change and change is hard. So I am really excited to hear the customers because of banking adviser as a proxy to drive renewal conversations or pulling those forward.

That's great to hear. And then as a follow-up, I just wanted to ask, given the noise around FullCircl's IPO in June and then the Community Bank lobby playing a big role in the ultimate wording of the Genius Act in July, how do you think about the potential risks of stable points on the community banks that make up about 1/3 or so of your U.S. core revenue as the regulatory framework evolves in the future.

We're watching carefully what's going on in the market, and we're listening intently to our customers. And in the past 3 weeks, we've had a number of banks of all sizes visit us here in Wilmington, and we're closing in tune with the field. What I would tell you is that, that is a question that our customers are asking us and when we read that question back, they've seen kind of a big priority at the moment. So in terms of the problems we solve and what we do for our customers onboarding account opening loan origination and portfolio monitoring as we ask should we prioritize stablecoin solutioning within that context, they're not pushing us hard right now. But we're listening carefully, and we'll be on the front foot when they're ready.

Our next question comes from Cris Kennedy with William Blair.

Just wanted to follow up on the fiscal 2027 commentary. Any way to think about kind of what this business can grow at in 2027?

Yes, Chris, I think right now, we're just focused on executing '26. And so I don't want to get ahead of ourselves thinking about fiscal '27. But again, as we sit here today, from a deal activity standpoint, we feel good about where the business is. We feel good about the deal activity we see out there, the opportunities, the discussions we're having on a global basis. And I think as I noted, it's just really all about going and getting the business closed. And obviously, as the year progresses and as we get into next year, that will form our opinion about next year.

Got it. Understood. And then just broadly, there's a pipeline of opportunities is really strong right now. What are you seeing out there in the market that's driving that? Clearly, you better product side or more robust products. But what are you seeing out there in the market that's driving that pipeline?

Yes. Thank you. Number one, I think the macro is supportive reinforcing some of Greg comments earlier that some of the headwinds that we faced are behind us. I also think that the reality that we have this very unique inflection point in the technology in AI that is available to drive outcomes is something that is driving customer conversations and pulling forward, as I mentioned, not only renewal, but just interest in how customers can get outcomes that we've always delivered but now deliver even faster, right, and with better quality.

So not only are the headwinds behind us and we have this inflection points, but back to controlling what we can control. There's an intense focus on the pipeline coverage and ratios that we have in all segments and in all businesses. So we look across commercial, consumer, mortgage, and we look at our North American and EMEA and APAC business and every conversation starts and ends with what we're doing to drive that pipeline and the activity in that pipeline. So execution always comes down to people and accountability. And I think the sense of urgency and accountability in those pipeline conversations is what's driving some of the activity as well.

Our next question comes from Alex Sklar with Raymond James.

Sean, maybe following up on your answer there to the last question. Just in terms of international pipeline, you've got a new leadership team that have been in place now for almost a year. You had a couple of wins in the prepared remarks. Any color on what you're seeing from a contribution to bookings or pipeline growth relative to the 10% kind of organic subscription growth you talked about this quarter? Are you seeing the kind of signs of reacceleration come through?

We are absolutely seeing signs of reacceleration in the pipeline activity. In terms of disclosing the ratios on bookings, we're going to stick to our core ACV metrics and read those out on an annual basis. But I'm really, really pleased with what [ Jatin ] and his second line leadership team that he's put in place since joining in November is driving.

We have been very candid about our focus on Continental Europe beyond the U.K. and Ireland, and that's starting to play out in the pipeline and in the conversation, the activity. in the field, and we're tracking closely the size of deals as well. And I'm excited about the volume that we have, both upmarket and downmarket in EMEA. And then I'm excited about the integration of FullCircl and our ability to really lean into the CLM opportunity. So pipeline activity is strong, Joaquin is doing a nice job. I'm headed over there next month and excited about our EMEA Summit, where we have all our customers in a single place and to make some of the rounds in the field.

Okay. Great color there. And then maybe a follow-up for you, Greg. Just in terms of the mortgage volume upside you saw in the first half of the year, I know you kind of said keeping with guidance philosophy, not embedding that. But what is embedded in the second half in terms of mortgage? Is it kind of a thought that volumes were pulled forward or any other factor in terms of how you shook out on the mortgage outlook.

Yes, Alex, I think as we look at the second quarter, again, not wanting to get ahead of ourselves, Ultimately, assuming maybe there's some seasonality as well in terms of the second quarter. And so we flowed through, obviously, the beat. But again, just lessons learned from last year. We're going to stick with our guidance philosophy and not extrapolate in terms of what interest rates may do, what mortgage rates may do and what mortgage volumes may do.

We're trying to be very transparent in terms of giving you that detail so you guys can have that information and see what we're seeing. And again, as the year progresses and we get more data points, we'll obviously be able to come back to you guys with updated thoughts around what we're seeing in that market. Ultimately, again, I think very proud of the team the work that was done during the very difficult days over the last couple of years to go out and gain market share, grab new logos, and it's encouraging with what we're seeing from certainly some of those customers, particularly some of the larger IMB and homebuilder customers that we bought on over the last couple of years.

Next question comes from Koji Ikeda with Bank of America.

Maybe a question for Sean. What do you think will be the stronger driver of growth over the next several years, an improving demand environment from presumably lower interest rate and looser regulatory environment or your vertical AI strategy.

So I appreciate the question. And would love to provide prescriptive forecast in exactly where all the growth is coming from. But I would lead with the power of the platform. and the diversified revenue streams that we do have here at nCino across the things we do in the lines of business where we do them. And we have always been a company that is going bet on ourselves, and the investments we're making that align with where we think the growth is going to be in the ecosystem.

Right now, you do see a massive inflection point with AI. I don't necessarily think AI by itself drives revenue growth. I think outcomes that we deliver to our customers drive revenue growth. And AI will be the best proxy to deliver those outcomes, and we will capitalize on that and will lead the industry, but we're going to control what we can control. We can't control interest rates. We can't control the regulatory environment. We can't control what the Feds are going to announce tomorrow. So we're going to stay focused on betting on ourselves with those growth initiatives.

And maybe a follow-up question here for Greg. When I go back to the Investor Day from earlier this year and then your comments today about focusing on professional services gross margins, how can we be thinking about the pace of gross margin professional services gross margin improvements from here? Will it be more gradual? Or are there things that you're working through that can really drive the step function improvement in gross margin?

Koji, I think at this point, we would expect it to be somewhat gradual. And first and foremost, we need to close off on some of the projects that we've been involved in, right, and ramp those down as those come to completion. And in parallel, with things like we talked about at the Investor Day, Project 70, for example, which is one of the initiatives we have, those ramping up. And so we're going to work through those as the year progresses. But again, I think that positions us well as we get into some point in next year starting to see the benefits of those activities as we sit here today.

That's kind of how we're thinking about it. So again, it's a ramp down and ramp up in parallel, but it's very much a focus of the team. We see the opportunity there to improve gross margins meaningfully from where we are. And again, it's just all about executing to get there.

Our next question comes from Joe Vruwink with Baird.

I wanted to go back to the pricing model. So 21% of ACV switched over. I think the bulk of that is mortgage. When you hone in on the renewals with big commercial customers and the press release called out a few of these, is that looking any different than the experience at large? And then maybe a second adjunct, when you think broadly across your customer base and starting this conversation does the new pricing model provide an opportunity to widen the aperture of how customers think about using nCino. So is aligning yourself with the idea of growing assets we're accommodating conversation than forcing banks to think about seats, for instance?

Yes, Joe, absolutely. The reality is, on the one hand, the legacy seat model may have seen very simplistic for customers to understand. And it wasn't a map, but it is hard, especially for large enterprise institution to understand exactly how many users 3 years from now are going to be on the platform when you're talking about thousands of users in some cases.

And the conversation that I'd much rather have that I think our customers would much rather have is what outcomes are you going to deliver and what efficiency you're going to drive into the institution. If we can identify where the friction is, whether that's in closing time or underwriting time or loan cycle times, and we can read that back through operations analytics and meaningfully reduce that friction and spend within the institution, then, they're much more willing to spend and scale with nCino. So we like the way the early day pricing conversations are headed. Although, again, I will remind everybody that changes hard until when you introduce something new, there's some initial education that needs to happen. Once people understand the outcome correlation, it plays really well.

And Joe, just to give a little bit more clarity out of the 21%, about 1/3 of that platform pricing would be mortgage.

Okay. That's great. Just on the updated forecast and what's assumed for the second half and I appreciate all the mortgage commentary. So maybe this question is outside of mortgage and just on the core subscription bookings. I seem to recall that entering the year, you were not assuming much transacted during the first half and so therefore, limited revenue contribution in this fiscal year. Can you maybe comment just on how your first half bookings compared to plan, maybe not a number, but were they better? And then how does the second half bookings plan look like it's shaping up because I think that will bear some influence on these fiscal 2027 questions and maybe how to think about your exit philosophy into next year's number.

Yes. Look, I think I noted on a net bookings basis from a first half standpoint, we were pleased with how the company executed and performed. And again, that gives us confidence as we think about meeting or exceeding our ACV guide for the year. And so as we go into the second half of the year, like I said, we feel good about the business. The business is out there. It's just about executing. And that's what the team the is focused on. It's great to see great to see that focus. And as we're in our football season, right, it's just -- we remind ourselves, it's a 4-quarter game, and we want to finish all 4 quarters strong. That's what we're focused on doing.

Our next question comes from Charles Nabhan with Stephens.

Congrats on the result. I wanted to focus on the inorganic piece of the business and just get a sense for how we should think about the growth rate of FullCircl and Sandbox as they transition into organic over the next year or so? Are those businesses growing -- is the growth rate of those businesses accretive neutral or dilutive to the overall growth rate?

Yes. Thanks for the question. Both FullCircl and Sandbox are on track to revenue plan, as noted in the prepared remarks. And moreover, I'm excited about the technical work that is progressing there. So they're in line with our internal expectations. And I would expect, as we further integrate those solutions, for instance, FullCircl to have an end-to-end CLM reality in the EMEA marketplace and we bring some of the Sandbox use cases to market beyond some of the initial support of banking adviser that they'll be more accretive next year. But right now, they're on track. I would also just anecdotally add from a integration gateway opportunity point of view, the Sandbox banking team that we have in [ Justin ] has become part of the nCino broader team right now is probably one of the most in-demand teams at the company and have injected a great deal of not only integration but as well as AI DNA here. So that's energized us on a lot of fronts.

Got it. And as a follow-up, and apologies in advance if you noted this already. How much of the mortgage book is on a volume or a platform-based pricing model. I know if you -- I know recently, it was about half, but just curious where we stand today? And any color around the mix of bank credit union versus IMBs would be helpful as well.

Yes, I think there are 2 questions in there. Chuck. So I think the first part of the question was, again, about 1/3 of that 21% that's on platform pricing is mortgage. And again, that's where we started. This pricing, platform pricing transition. So again, I think we feel real good about the ad bets that we've had there and the execution of that. I think the second question was the breakdown between IMBs and depositories. I think from a logo perspective, historically, we've been more weighted to IMBs -- I'm sorry, from a logo perspective, it's about balance; from a revenue perspective, it's been more weighted towards, I'll call it, the INDs and homebuilders, the nondepositories. And again, a lot of that goes to some of those large customers that we referenced that some of them helped with the overperformance in the second quarter. .

Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks.

Yes. Thank you. We appreciate the time today. We appreciate the questions. I hope everybody enjoys the long weekend ahead of us as we look forward to speaking again next quarter and run toward the back half of the year. Take care.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

All right. Cool. We're on the clock.

Let's go.

Sean, Greg, thank you both for joining us. Thanks, everyone, for joining as well. Before we get started, I have a quick disclosure to read. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative.

So thanks again, guys. I really appreciate you being here. Sean, maybe just for those that haven't spent as much time with you, give an overview of your background and sort of where you started your career, how you evolved and now where you're sitting in the nCino CEO seat today?

Sure. Yes, I appreciate the opportunity to be here. Thanks for having us. I've been in the software game for about 30 years now.

And I've been fortunate enough to see a few inflection points in my career, started out with a company called Platinum Technologies that eventually got acquired by Computer Associates in kind of the mainframe to client server move, right?

And then was with Informatica, who was recently in the news for their acquisition by Salesforce that's pending and saw really the move from client server to enterprise and big data there. And then here at nCino, the move to cloud, right? And from a cloud standpoint, we have played a proactive role in leading banks, credit unions, to that infrastructure. And now we're at this inflection point as we pivot toward the vertical AI opportunity in banking and super excited about that.

So yes, I've been in a few horizontals, a few verticals and mostly on the post-sale customer success side for a large part of the career. I've also run the product development and engineering organization at nCino and stepped into the CEO role in February.

Awesome. Helpful context. Maybe just given your background in the product organization, I thought we'd first start by taking through some of the major lines of businesses and how you're thinking about the go-forward trajectory.

So maybe just first starting in commercial, given that it's your bread and butter. Despite some of the normalization that we've seen in the business over the last couple of years, that organic commercial ACV that you guys have disclosed of late, still grew around that 10% level in fiscal year '25. I know you have ambitions to do better. But maybe just spend some time walking through how you think about reaccelerating that commercial business.

I know you've talked about your 30% penetration within that existing installed base, but it is, call it, 75% plus severe ACV. So it takes a lot to move that segment. But I know it's an area that there's a lot of irons in the fire to reaccelerate. So maybe just walk us through some of the puts and takes there.

Yes, sure. And it always starts with the problems that we're solving for our customers. And today, our customers are still challenged with some of the age-old problems in banking, how to onboard a customer swiftly in a compliance sort of a way and take that seamlessly into a commercial loan origination process that has traditionally been legacy manual.

And even as we have focused on taking customers to a digitally collaborative experience and driven a lot of value and efficiency into the process, still people are dragging and dropping and approving and advancing to the next stage of the workflow digitally, and there are many people in that process.

And as we sit here with the opportunity with AI to wrap Agentic experiences around existing workflow, we can automate end-to-end and almost provide what we call a path to one, where you could imagine for the first time in this business, which would have really just not even been conceivable 5 years ago, even 3 years ago, that you could have one human in the loop to approve an entire commercial loan origination workflow, through Agentic AI.

And so there are opportunities for us to go deeper with commercial. You mentioned the 30%. So in context, we operate down market community banks, regional banks, mid-market as well as enterprise with some of the largest banks in the world. And we also sell our commercial solution to credit unions, and we do that globally.

And so if you just look at the U.S. enterprise market for a second, you say we have 15 out of the top 30 banks in that market. And those customers are using all of them our commercial solution, and we have a handful of top banks using our consumer lending solution as well. But in that commercial space, they still don't have every single product in the commercial business on casino. So that's the 30%. And beyond those -- that 30% is the 70% as well as going deeper where we have new products around commercial around continuous credit monitoring. auto spreading and then, of course, the banking adviser AI solutions that we continue to penetrate and gain market share in commercial.

Okay. Maybe just on that banking adviser functionality. I know you've spent a lot of time on this. It's a super exciting component of the business internally where you're dedicating a lot of time.

Maybe just talk through what you're trying to do there and how you think about your broader vision for Agentic Banking broadly.

Yes. Yes. So back to the business problems we solve for our customers, what we're doing with banking advisers is we're looking at every single role and every single persona.

Again, let's look at the commercial workflow and say, where do they spend their time? Where does the loan officer, where does the underwriter, where does the credit analyst spend their time? And we actually know because we have usage analytics and are capturing operations analytics from a dashboarding standpoint of where they spend their time in our workflow.

And then we can train skills to complete tasks that are now even manual or digital from a human interaction standpoint. And so one of those examples would be auto spreading. One of those examples would be document validation for our mortgage solution. Locate and file is one that's gaining a lot of traction. And again, a lot of this is automating the clicks and the drags and the drops as well as the biggest opportunity we see around unstructured data.

If you think about the type of documentation and all the documentation is simply unstructured data that's associated with a loan workflow, in some cases, a single document is 75 to 100 pages. And there is a person in the bank who is sifting through those documents on a daily basis and sometimes taking 30, 45 minutes just capture 3 to 5 data points from that document and then feed them back into a decision point in the workflow. We can automate that and take that from 30 minutes to seconds and extrapolate that over the volume the banks are doing, that's a massive efficiency gain.

Helpful. Maybe just coming out of the user conference, it was obviously great to see all the products live a few weeks ago. But anything you would share just in terms of maybe demos booked or just level of interest in that banking adviser functionality specifically?

Yes. And listen, it absolutely stole the show. If you're familiar with our conference layout, we have what we call our community lounge, which has our booth with demo, the functionality by solution. And we started talking about commercial when I talk about nCino, the things that we do, onboarding, account opening, loan origination, portfolio monitoring and doing those across commercial, consumer and mortgage lines of business underpinned with this data set.

What we did in the community lounge is we showcased all of that, right? So if you want to focus just if you're a community bank, you want to see the consumer lending experience, you can go to that booth. Well, what we have is we launched 16 new banking adviser skills at Insight across those personas. And we provided an opportunity for folks in the community launch to see those come to life and see those demo.

And some of the ones I mentioned before were absolutely the most popular. And there's some basic use cases as well, just knowledge interaction in terms of mining information around using the platform.

Helpful. Maybe, Greg, I know there's obviously a lot of work being done just in terms of thinking through pricing and monetization across the business. But as it relates to banking adviser specifically, it sounds like this is a product that you want to be adopted and attached by a meaningful portion of the customer base, you're incentivized to get clients to love it and to really want to use it.

But maybe just any early data points that you can share in terms of how you're thinking about the potential ACV uplift associated with Banking adviser. I think historically, you guys have generally spoken about, call it, 20% to 25% ACV uplift for a lot of the solutions that you develop on top of the existing commercial set. Is that broadly the right ballpark we should be thinking about banking adviser?

I don't want to box it in at just that number at this point because it is early. I think to Sean's point, last year, we had -- where we came out with banking adviser, we had just 2 skills. We now have 16 more.

And so I think we're going to track that usage as the year progresses. And ultimately, I think as we think about next year and the impact, the positive impact we would expect to have, we'll be able to talk about it. I would note that it is not in our guidance for this year. That said, we are seeing nice uplift. We did have a top 4 bank on stage talking about the efficiency gains that they've already seen.

And as they're speaking to 1,600 other customers that were in the audience, we think it really resonated in terms of one of the largest banks in the world using it, comfortable with it from a security standpoint and ultimately kind of sending the message that if you're not working with nCino and leveraging some of the very innovative things that we're doing with AI, you're going to fall behind competitively.

And so we do think it's going to be helpful in terms of our desire and plans to reaccelerate growth. But again, I think we're going to want to get a little bit more data before we get out too far in front of the excitement that we have and the optimism that we have with what we're seeing.

Makes sense. Maybe pivoting to the consumer business.

I know this is an area of the business that you've taken some time and a lot of R&D dollars to sort of build from the ground up. There have obviously been an acceleration in the number of net new logos that you've landed this past fiscal year, including with a $200 billion asset bank.

So it seems like traction is beginning to sort of accelerate. But if we sort of take that aside, if I just look at that mix of ACV and the growth of ACV over the last couple of years, right, I think the consumer business is probably 15% to 20% of the size of commercial, and it's growing relatively at similar rates.

So how do you sort of think about when that sort of cadence of net new wins and the size of those wins can really start to accelerate and move the needle for the overall business?

Yes. Listen, the time continuum in software and innovation can never come fast enough. And to your point, we've been on the consumer lending journey for a minute. What I would say is change management and driving change, specifically around removing friction and business process reengineering and bank automation is in our DNA.

So for us, it wasn't a matter of if it was just when that we were going to really turn the corner on a fully matured consumer lending solution. And we really did that at the back half of last year. As evidenced, I mean, you talked about the $200 billion bank. We signed 20 new consumer lending deals in Q4 alone. If I look at the bookings from Q1, we're really happy with the mix there.

About 50% of our Q1 bookings in commercial and then the other 50% split right down the middle from consumer and mortgage. So that feels good. We'd like to keep up with that momentum and capitalize on the investments we've made. But there's no doubt we played the long game with consumer lending because we know the landscape and we had a lot of conviction that we can make a difference there. And there has not been a lot of optionality in that market. So traditionally, if you look specifically at the community and regional banking market in the U.S., consumer lending has had 1 or 2 vendors that they've been partnering with over time.

And so to work with somebody who's been cloud native from day 1 and now taking our customers through the AI journey, we think is compelling, and we think the timing is in our favor.

Okay. But you feel like the product itself is now in a place where that sort of cadence of net new logos can start to accelerate? How do you sort of think about that piece and just like the differentiation of the platform versus some of those other solutions?

Yes. We do think that we've rounded out the solution with the requisite integrations. That's probably took a little bit longer. We are seeing the ability to reimagine some of the more complex components of the consumer lending journey.

We've done really well with the real-time integration and in fact, had so much success with our partner, Sandbox Banking that we decided to acquire that technology and leverage that as a broader iPaaS solution for the entire platform. The doc prep and doc validation component of consumer lending is important, and we see efficiencies that we can gain through AI there that we think will be differentiating compared to the competitors that are now taking their customers from on-premise solutions to the cloud, while we're kind of cloud native taking them into the AI experience.

It's about speed. It's about efficiency. It's about automation and a rip and replace in consumer lending is a bit longer of a journey for a customer to make a buying decision, right? But we've got some good experience with that and some good momentum.

Okay. Great. Maybe just on the mortgage side of the business. Talk us through the strategic rationale in and of itself of pursuing the SimpleNexus asset, what the thesis was at the time and some of the work that you've done to sort of integrate that product with the consumer functionality as well and how that's been a driver of retail wins?

Yes. So from a mortgage standpoint, we are in the point-of-sale front-end application intake part of that game. And primarily, the acquisition of SimpleNexus pulled through a very rich customer base in the IMB space.

And we also have 50 or more banks and credit unions using our mortgage solution beyond IMBs, and that's gaining traction. And so the vision for us was twofold. One, it was to insert ourselves into the mortgage POS game and cross-sell and upsell that to banks over time while we continue to take market share from IMBs.

But there was also a technology component that was very attractive to us. We grew very rapidly in the early days. And as we expanded beyond commercial, we saw the need to have a single consistent digital front-end experience across the entire platform, such that if you're in commercial or consumer or mortgage, you would have a similar experience for the banker or their customer, whether that was in branch or digital.

And when we acquired SimpleNexus, part of the rationale was to leverage their front end and take it across the entire platform. And that's actually what we've been busy doing in the past few years, and that was part of the journey to get all the way there on the consumer lending maturity. And now we're taking that across our onboarding experience as we look at that opportunity is very exciting. And so there's really the opportunity not only to get into the mortgage space, but also to leverage a really slick front end.

Makes sense. I know the mortgage market has obviously been challenging, to say the least over the last several years. But you also, on a relative basis versus the market and a lot of other providers in the space have generally continued to grow when most have contracted.

But over time, right, as you sort of continue to convert people towards that new pricing model within mortgage, like how do you think about the attractiveness of that mortgage business if we're in a world where converting to that pricing model is going to continue to take a few years, and you still have a portion of revenue that is directly tied to loan officer headcount, which who knows the directionality of where that's headed?

I think we started our pricing transition, pricing model transition with mortgage. It was really driven by the market with our customers coming to us in a difficult time and saying, "Hey, can you help work with us?" and we made a strategic decision that them going out of business would not be good for either one of us.

And so we did do that, and we moved to a platform with a minimum per loan per month model and really try to set ourselves up as volumes come back, right, to be able to benefit with that. And so if you look at our overall base, we've talked about 15% is now on the new model.

A big bulk of that is for mortgage. And so I think we're well on our way from a mortgage perspective. And I think if you -- for mortgage, you're right. I mean I think one of the things that's been really impressive with that business, I think it's a testament to the team that we've had as well as the technology.

That business has grown every year since we've owned it. And one of the most difficult mortgage markets and certainly in recent memory. if not longer than that. And so I think we're positioned incredibly well. And ultimately, I think what we've seen is some stabilization in that market. I commented that Q4 was our lowest churn quarter for mortgage last year and that Q1 was actually lower than Q4.

And so I think looking forward to some growth, but I think it starts with stability. And I think it definitely feels like that market has stabilized quite a bit. And I think that positions us very well. If we can grow during a difficult time, I think we can certainly grow at attractive levels during better times.

Got it. Lastly, before we pivot to implementation questions and how you're thinking about the impact of AI there. Maybe just on the international piece of the business. Again, I think this particularly for those that are newer to the nCino story, I think it's somewhat underappreciated at how difficult it is to be a banking software provider operating in all these different countries and corridors.

So maybe just walk through like how you've been able to do that and sort of your relationships with the systems integrator base, and then we can hit some of the growth dynamics internationally as well.

Yes. In addition to North America, we operate in EMEA as well as Australia and New Zealand and up to Tokyo. And so in the EMEA market, we have been highly successful in the U.K. and Ireland, and we have aggressive plans for the continent.

And to your point, I mean, is it hard? Yes, it's hard, right? There's never a reason not to do something. And I think we probably focused where the low-hanging fruit was in the U.K. and Ireland in the early days, we got 5 out of the top 7 banks there and have a great brand.

And now what we've done is really said, we're going to go out and get some seasoned leadership who has delivered at scale on the continent. And so our current leader, Joaquín de Valenzuela, has delivered over $100 million annually, selling to the exact customer base we're targeting. He's based in Madrid, and we think there are big opportunities in both Spain and the Nordics. So we're going to continue with the momentum we have in the U.K. and Ireland, but we're going to lean into the opportunities on the continent, with commercial as well as onboarding and international mortgage in EMEA.

We have nice momentum in Australia and New Zealand, 3 of the top 5 banks there. And we have leveraged the reputation we have internationally and played the long game in Tokyo, where there's a high concentration of banks with high number of assets under management that we then needed to really develop different partnerships. You mentioned the SI ecosystem.

We've been very grateful for the partnerships that we have with the likes of Accenture and Deloitte and Pricewaterhouse, and they've largely helped us in North America as well as EMEA and ANZ, mostly upmarket in the enterprise banks where change management and business process reengineering is so intense. -- you go into Japan, and you realize, hey, we need different partners, whether that's NTT Data or Hitachi.

It's not always the same partners, but those are the ones that resonate in that market. So it takes a while to develop and cultivate those relationships and then get the relationships in the C-suites of the banks. But we feel like we're at a good point there. We get some good momentum with some small to midsized banks, and we think we're going to sign some big large ones at scale in the back half of this year.

Got it. Okay. Maybe just on some of the growth dynamics internationally. Obviously, that international subscription business still growing in the high teens organically. It's obviously at a premium to the overall company.

But if I look at it on a mix basis. The mix hasn't really stepped up incrementally, at least relative to the last several fiscal years. It's broadly consistent in that 20% plus territory. So obviously, you alluded to some of the sales leadership changes. Hopefully, that's a catalyst for incremental growth there.

But how do you sort of think about similar line of questioning to before, like when that international business on a mix basis becomes big enough to really like move the needle and have a step function change higher for the overall company?

Yes. I mean, listen, it is meaningful today, like the international component of our overall business, but we have been pretty public and candid that we were disappointed in the year-over-year growth that EMEA contributed last year.

We've made investments. And in terms of execution discipline right now, there's an intense narrative of the company around aligning our investments with where we see the growth, right? And so while we have invested to retool the frontline management team in EMEA, we expect that growth to show up the back half of this year and into next year.

Got it. Okay. Maybe progressing to some of the financials, I wanted to first touch on pricing, and then we can discuss fiscal year '27 acceleration.

But on the pricing transition front, again, maybe just level set for those here just in terms of what the intention is to sort of pivot away from the seat-based activation model and towards pricing and how you think that will evolve from a cadence perspective.

I think you've obviously said 15% of revenue on that new pricing model today, largely in mortgage. But that's going to drive a 1 point benefit even with a pretty small percentage of revenue on that new pricing model. So if we sort of progress over the next fiscal year as you continue to get renewals, like how are you thinking about the cadence of -- cadence and magnitude of that pricing uplift over time?

Yes. As you noted, we have about 15% of our ACV is on the new model. It's something we spend a lot of time looking at before going through a transition like that. We worked with a third-party consultant that had taken other companies down this path.

We did a lot of surveys and discussions with our customers. And so far, it's gone well. There haven't been any surprises, and I think we feel good about the execution. In terms of the 1%, so the 1% comment was for net new deals that we signed this year under the new model versus our old seat-based model, we would expect about a 1% additive model versus model.

Our average contract length is about 4 years. And so if you think about that, it should take about that time for us to convert everybody. Our biggest first cohort will be in the fourth quarter of this year since fourth quarter is generally our largest bookings quarter historically.

And as we think about moving on to the model, we do expect to take a step up just in terms of some of the innovation and value that we've provided. Historically, our model was seat-based and the price was fixed during the term, right? And so we haven't been able annually to get value on an ongoing basis. And so we would expect to have a step up.

And once you have that step up, from a bank perspective, we'll be tracking and calculating on an annual basis, the assets that the bank has on our platform. And every year, we go back and calculate that number and to the extent that you move from one tier to another in terms of the pricing tiers that we have, that would be your new price for the next year. And so we're really trying to align value and growth with our customers, right? And so as they grow, again, us getting a little percent of that, I think something that they're supportive of and open to, and they're used to it based on other models that they are subject to with other vendors.

Historically, asset growth has generally tracked GDP. So think about 2% to 3% opportunity each year. Not every bank is going to go from one tier to another, but we think that's the opportunity. And ultimately, again, we think that will allow us to get value intra-contract versus, again, historically when we would only get value upon a renewal. So we're excited about it. Again, it's gone well. We've enabled the team. I think we've done a lot of work with the market and our customer base. So it's just about execution.

Yes. Okay. On the banking adviser dynamic, right, as you sort of begin to introduce that product to customers, you sort of accelerate the cross-sell momentum. Do you think that as people get accustomed to the consumption-based model there that it could actually drive faster conversion to the new pricing model?

Yes. I mean the whole idea for us is by training skills to automate tasks over time that will deliver those outcomes faster. And the faster the banks realize the outcomes, the faster that we can drive them into our revenue model.

And that does go hand-in-hand with the investments we've made to speed up our deployments as well. You mentioned implementations earlier. And banking adviser skills, by the way, just from a road map standpoint and the build side as well as from a deploy standpoint, we're talking about weeks versus months, right?

And so accelerating that, and that's probably one of the most exciting pivots I've seen in the industry is people no longer talk about multiyear road maps, right? They're talking about it inside 6 months and anything beyond that is just too far to see in the world that we're in now.

And so banking adviser helps get us there, helps align the value that Greg talked about and the outcomes. And it's all about speed to market. Time is the most precious commodity we have. If you think about driving efficiency into the operating line of a bank and a lot of the cost we're taking out is labor cost, we think that banks will be able to repurpose labor toward higher-value client-facing relationship building activity versus middle and back-office rudimentary tasks.

Yes. Okay. Great. Maybe just on drivers of potential acceleration. You obviously have a pretty exciting initiative that you have some of your best engineers working on just in terms of accelerating some of that implementation time line, which is obviously critical for any software business, particularly given like the duration of time it actually takes for your business, call it, 6 to 12 months to get people live from the point of booking.

So how are you sort of thinking about the mechanics of how you can deliver on that, right? Like is that sort of some prebuilt configuration that a certain cohort of banks is likely to adopt? Or do you think it can be pervasive across the whole customer base?

Yes. This is something I'm super passionate about having spent a lot of time in my career in the professional services arena. And in order to fully appreciate where we're headed, you have to also understand where we've come from. We were the first platform that provided optionality and configurability.

Everybody we were competing with when we launched nCino was more of a black box locked down. If you wanted to make a change to a field, you had to kind of push it through and you might get it back months later, you might not get them back at all. And so our customers really were receptive to that optionality and configurability.

And as a result, really embraced kind of elongated consulting heavy projects because the outcome they were going to get was so much different, right? Well, interest rates went up, access to capital, and big consulting projects fell out of favor. And now we kind of have the best of both worlds, which is what we've done is we've taken these fully configured experiences across nearly 500 customers, if we're just looking at commercial alone.

And we've taken those configurations and fed them into a large language model and come out the other side with a prescribed starting point that would be a preconfigured package commercial offering with all of the great things that we're able to deliver across the customer base. And then from there, if the customer still wants to extend, they can, right? But if they want to get live in a couple of months versus 6 to 12, we can do that now.

And we ultimately have a North Star to deploy all of our solutions in under 200 hours of what we would call consulting hours from nCino, and that's very realistic with the AI and the techniques and the tools that we have available to us.

You think that's even in play for some of the largest, call it, like if we take the top 30 biggest banks that you don't have, right, the incremental 15, like is that 3-month time line feasible for that cohort?

That starting point for us to deliver that preconfigured solution is absolutely there, right? Might they take a little longer on the journey to get the change management because they're rolling this out around thousands of users versus hundreds, like that process might take some time.

But that preconfigured starting point scales, right? And that kind of added a loan as a loan as a loan, there might be a little bit more rigor in that enterprise process, but still, we can have that informed by the 15 customers that we have there and have a flavor of that.

I think one of the things that's also very exciting about it outside of the [ PSO ] part of it is just from a decision-making standpoint in the sales process, right? Shorter implementation time frame, quicker time to value, right? We think that will help decision-making because, again, financial institutions won't have to look at some, as you say, multi, multi-month implementation process and factor that in and factor in the cost that they historically had to endure, right?

So I think that's another advantage as we think about the opportunity we have in front of us.

And finally, I'd mention integrations as a discipline, right? The integrations being the long pole in the tent for these projects is well known. And historically, we've always given optionality with integration partnership, right?

And now we've kind of had a very trusted tried and true partner in SandBox Banking that we thought did it better than anybody. And they focus only on the systems and applications and platforms that we integrate within the financial services ecosystem.

So acquiring that technology, bringing it in-house also removes the friction from the deployments as well as the sales process and we come with a point of view versus, well, let's figure out who the bank is going to partner with integrations, just adds time to the decision.

Got it. Greg, I'm going to ask your favorite question about fiscal year '27 acceleration. But maybe just on all the irons that you have in the fire across the business, there's a lot, right? Pricing model transition, banking adviser attach, potential for mortgage acceleration, you're cleaning up some of the sales leadership internationally, right?

How do you sort of think about the level of subscription revenue you're putting up today and sort of your ambitions to get back to nCino growth rates of old?

Look, we think that there is massive opportunity in front of us for growth. And the results that we've demonstrated for us are not sufficient, right? So very focused on reacceleration of growth. I think to your point, we've got a lot of irons in the fire, and I think we think that's a huge positive.

So again, we've got commercial, consumer mortgage. Underneath them, we've got 5 specific initiatives right, that we're very focused on. One is AIs, as Sean talked about and the initiative there. We've got a credit union team that we've stood up, very focused on that market. It's a $1 billion SAM in the U.S.

Consumer lending is ready. Our small business offering is ready, mortgage is ready, commercial, et cetera. So we're very excited about that opportunity. We've talked about onboarding with DocFox and FullCircl. We think that is a product that every one of our customers needs, specifically our commercial lending customers should want.

Again, taking what's really manual processes and being able to digitize that, we think it's a massive opportunity, taking mortgage more upmarket into our and cross-selling it into our larger bank base. Again, IMB has been a huge focus. We've had great success there. We've had success cross-selling into community banks and credit unions. But taking that product up market is something that we're focused on as well as the EMEA opportunity, right?

And we would say international more broadly, including Japan.

And so we'd love for all of those to hit, right? But I don't think we need all of those to hit. And so if you look at the numbers, we gave out ACV guidance for the first time as a company for this year. At the midpoint on a current currency basis, we need to do about $3 million more, right, for us to believe we're going to reaccelerate growth into next year. And again, we've got more product than we've ever had. We've got 14% more sales capacity out in the field.

And we think our customer base is healthier than it's been in a couple of years. So we think we're well positioned. It really just comes down to execution, and that's what we are constantly focused on and just closing the deals that we say we're going to close and closing them when we say we're going to close them.

And we think that sets us up for reacceleration next year and beyond and a very unique opportunity, particularly as we transition into this AI world. We led and created this category called cloud banking, all right? When we started the company, everyone said banks will never put their data in the cloud. And now we think we've got an opportunity to create AI banking and be the worldwide leader in that, and that's what we're focused on doing.

Awesome. I think that's a great place to leave it. Thank you both for joining us. We appreciate it.

Thanks...

Thanks for having us.

Hi, everybody. My name is Koji Ikeda. I am one of the software analysts here at BofA. I am super thrilled to have nCino's CFO, Greg Orenstein, here for a fireside chat. Thank you so much for being here. We really, really appreciate it. And so yes, I guess from a high-level perspective, for those in the room that are unfamiliar with nCino or those on the webcast that is unfamiliar with nCino, just to maybe spend a minute or 2 on what does nCino do? What is the opportunity? Who is Greg?

Sure. Pleasure to be here. The easier thing, Greg. I've been at nCino for about 10 years in multiple roles. I took over the CFO role in January of 2023 and been selling software to banks for over 20 years. So background in financial services, software. In terms of nCino, really who are we? What do we do? Why do we exist? Right? If you think about it, we help make banks more efficient.

Banks are burdened by a whole bunch of legacy infrastructure, old on-premise licenses, maybe some have shifted some parts into the cloud, very difficult to manage, very inefficient. I think this is going to become even more of a problem in trying to leverage data in the world of AI.

And so nCino comes in with a unified platform that we focus on 4 things. We focus on onboarding customers; we focus on originating loans and that's any type of loan; focus on opening accounts, any type of an account; and then portfolio management. And we do those 4 things across commercial line of business, which includes small business in this context, consumer as well as mortgage. And so that's what we do. And at the end of the day, we're there to help banks, like I said, become more efficient, reduce expenses, drive revenues, but ultimately, make sure we help them transition into this new world of being able to interact with their customers and do it in a more profitable and effective manner.

Got it. You guys just reported earnings, last week?

Last week.

Yes, last week. So what were some of the key takeaways from the quarter, maybe your highlights. And then what has been kind of the key debates as you've been speaking with investors post quarter?

Yes. We did have a good first quarter, a good start to the year. We felt good about that. We overperformed top line, but total revenues as well as subscription revenues as well as our operating income. And as part of that, we also reiterated our gross bookings, our ACV guidance, I should say, for the year. And so from a top line perspective for subscription revenues, we outperformed the top end of our guidance by $1.8 million, about $800,000 of that we attributed to mortgage.

We came into the year saying that we were going to -- from a guidance philosophy perspective, we changed our guidance philosophy that we communicated 2 quarters ago. But for mortgage specifically, we were going to keep it flat and just manage expectations. So we didn't flow that through, but the $1 million overperformance in the core business outside of mortgage, we flowed through for the year and raised the subscription revenue guidance by $4 million.

On the bottom line, we raised the back half of guidance by $5 million for operating income. So $10 million on an annualized basis. And so a good start to the year. I think we're pleased and encouraged with the activity that we're seeing in the pipe. And so really, it's just about execution, heads down, closing deals that we say we're going to close and closing them when we say we're going to close them, and that's the focus of the team.

Okay. Okay. And then maybe on the investor front, what's maybe the 1 or 2 most common question that you've been getting and how you've been answering it?

Yes. I think clearly, folks continue about macro and potential impacts from tariffs or maybe some of our international business. And we feel so far comfortable reporting that we haven't seen that be a negative impact. I think there's optimism in our customer base, banks and credit unions around potential deregulation, particularly with this administration over the coming years.

I know there was some excitement about that in January. I know the focus has been on tariffs, but I think that opportunity, which our customers would view as a positive looms out there. And so I think all in all, from our market, the macro has improved quite a bit from what we saw 2 or 3 years ago when they were dealing with a rapid rise in interest rates at an unprecedented level as well as dealing with the liquidity crisis.

And so again, I think that's really where it's been focused, a lot of macro stuff. And then for us, more specifically, we have a new CEO in Sean Desmond, who started in February. So questions about Sean and how that transition is taking place. And so we've enjoyed discussing the impact that he's already had in the organization and some of the things that he's making sure we're focused on.

Okay. And you just hosted an Investor Day. And so maybe what were the key takes from the Investor Day? I know you've been pounding the table a little bit on Rule of 40 sometime around the fiscal fourth quarter of next -- of '27, and so how do we think about kind of the key takes of the Investor Day and kind of that progression to that Rule of 40 target?

Absolutely. We were excited to have our second Investor Day. This one we did at our annual user conference, which was important for us because in order, I think, to appreciate the optimism and excitement we have around the business and the growth opportunity in front of us, it's important to get exposure to our customers. And even more, I think beyond that is to see all the product strategy coming together. And so what we really unveiled at the conference where Investor Day was held was the culmination of a multiyear, multi-product R&D initiative.

And where we've brought this unified platform together, again, across commercial, small business, consumer and mortgage for the product lines that I said. And so I think that was the major highlight seeing that. And again, I think trying to correlate those products and the opportunity with the optimism that we have that we would expect over time to flow through our financial results.

It was also Sean's first exposure really to the investment community. And so I think that was also a highlight as people heard what he's focused on. We did talk about Rule of 40. We put that as a target out in Q4. We purposely didn't say it assumes x percent growth, right, versus we're going to get there around the fourth quarter of next year. I think people have seen over the last couple of years a lot of good progress with our operating income progression, operating margin progression.

And I think really the takeaway is that if we can focus on executing our sales with all the product that we've got now. And with the coverage that we have in the field, we added about 14% sales capacity to the field this year that we would expect a growth -- a reacceleration of growth for the top line, and that's what we're focused on executing on.

Remind me, your Rule of 40 composition is revenue growth plus non-GAAP operating margins, right?

Correct? Subscription specific.

Subscription revenue growth non-GAAP operating margins. Why not a free cash flow margin target for Rule of 40? I know a lot of software investors comp Rule of 40 to revenue growth plus free cash flow. So why not free cash flow? And what is the relationship between operating income and free cash flow?

Yes. So when Sean -- when he spoke on his first investor call, he said there's 3 areas that he and we as a team are focused on. The first one is ACV growth, right? The second one is hitting our Rule of 40 targets out there and the third one being free cash flow, and more specifically, free cash flow per share over time. And that hasn't changed Koji. I think right now, we are going through a pricing model transition. And at Investor Day and folks have heard us talk about, particularly with new logos that sometimes you'll see ramped pricing where -- I'll use an example on a 3-year deal, maybe they'll pay you $1 in year 1, $2 in year 2 and $3 in year 3.

That approach has always worked for us because we expect these customers to be with us for 10, 15-plus years. People always talk about being generational buying decisions with our software because of the sticky nature of it. And so we always like maximizing that exit rate. But under that model that we evolved to, under rev rec, you actually recognize $2 -- you straight line that, you recognize $2 a year, but you're still billing in year 1, $1, right? So there's a little less upfront on the other side of the contract in the second half. You're actually getting more than you're recognizing.

So we want a little bit more progress through this pricing transition. And then on the other side of that, I think it would be reasonable for us to kind of regroup in terms of free cash flow target.

Yes. Let's talk about the pricing model a little bit, the platform pricing model. Maybe for those that are unfamiliar with it, and I can always use a good refresher here is what is the new pricing model change? How far along are we in there, renewal process, et cetera? And what does it essentially look like after you're all done?

Sure. Historically, we were a seat-based pricing model, which I think, particularly where we started on the commercial lending side or the commercial side of the bank made sense, very much relationship driven, right? So the seat model made sense. But if you go back a couple of years, as we were building out our consumer lending offering, which we're very excited about.

We talked about 43 consumer lending deals last year, including over 20 in the fourth quarter. We realized that we have the opportunity to automate the entire consumer lending process, and therefore, you don't need seats, right? Now from a regulatory standpoint, I imagine there's always a human in the loop, but ultimately, appreciated that having a seat-based model would not make sense for that.

And then I think right around that same time period, the mortgage market faced some challenges. That was a seat-based model. Some of our mortgage customers came to us and said, "Hey, can you work with us and help us navigate these headwinds." And we took a step back and said, them going out of business wasn't good for either one of us. So yes, of course, we'll work with you guys as partners. And we started shifting to a platform model where for mortgage, you pass a minimum fee per month. And for that minimum fee, you get a certain amount of loans.

And as loan volumes come back and increase, we've got upside there. So we're excited about that. That was the first kind of step forward in the pricing model. And then subsequent to that, we've now, as of February 1 of this year, we have the rest of our business -- our bank business, I would say, on the new pricing model, and you pay us a flat platform fee. It's an annual theme, and it's based on the assets that you have on our platform.

And then every year, we'll go back and we'll assess the growth in the assets that you have on the platform. And to the extent you go from one tier to another tier, we'd be able intra-contract to raise your price to effect that increase. And I think it really has been well received by our customer because I think it aligns us much more from a value standpoint, right? As they're getting more value, as they're building assets on the platform, giving us a little piece of that, it feels good, and I think it feels good in terms of a true partnership that we have versus a vendor relationship.

So we're about 15% through the base in terms of that transition, a bulk of that is mortgage because that's where we started. Seasonality-wise, Q4 has historically been our biggest quarter. And so the big next cohort of customers to come through will be Q4 of this year and then we'll go from there. Our average contract length is about 4 years. So in theory, it should take about that time period to get the whole base transition. But we definitely see opportunities as folks, maybe they've got us for consumer, and they want to come buy commercial. Someone comes back and buys a new line of business, we'll use that as a pivot point to transition them to the new pricing.

Would it ever make sense for a customer to renew early on the pricing -- new pricing model and switch early?

Usually -- that happens frequently, and usually, though, it's because they're buying something new, and so that would really be a catalyst for that. As I said, if they come and they want to buy a new line of business, that will be on the new pricing. So we would use that as a transition point. So we think there's opportunities to accelerate that from 4 years. But in theory, that's how long it would be.

So not a real big sales push to push for early renewals right now?

No.

Okay. Okay. A little bit of a micro question on the mortgage origination pricing front. Strategy is that it's based on platform fee plus loan volume? Is it origination of the starting of the loan or the closing of the loan? Is it price -- or is it...

We're the front-end point of sale. And while we're an LOS, a loan origination system, for everything else we do on a global basis, in the U.S., we're just a point of sale on mortgage, and then we'll integrate with a back-end mortgage LOS. So it is that origination that we go through. And yes, as volumes pick up, we would expect to see opportunity there.

I think we have a very unique offering in mortgage. It really is around getting the ecosystem to get a loan done together on a mobile in an app and you can do it online as well, where you've got the loan officer, you've got the borrower, you've got the appraiser, everyone working together to get that loan done more quickly. And I think that's one of the things that differentiates us in the market is because the customers want to know, am I getting my mortgage and when am I going to get the money, right? And to the extent you're able to accelerate that, that is a competitive differentiator for us.

And so the mortgage business has obviously been challenged over the last couple of years, but our mortgage business has grown every year over the last 3 during this time period. And so I think we're very well positioned with the best technology out there for mortgage.

I recall you've given on an earnings call, a way to think about rates and volume -- or revenue upside. Could you remind us what that was? And has that changed at all?

It's not changed because volumes really haven't seen kind of a meaningful change in volumes. But we said, based on the data that we have, a 20% increase in volumes should generate about a 10% increase in the mortgage customers that are on the new platform. And we also caveated that by saying to get more specific, we really want to see per customer that volume flow, right? Because it could impact some customers differently. But that was just kind of a rule of thumb as a starting point to think about.

No, thank you for that. Vertical software, I always like to ask the TAM question. I'm going to ask it in 2 different ways, one from a target customer, now into the future and then maybe on a competition front, like what does that competition look like from the higher end and the lower end of the customer base or target customer base. And so on the customer side, who is the target customer today? How do you guys think about it? And what does that target customer look like, say, 3 years from now?

Sure. So I think that's one of the things that's unique about nCino in our platform is with the same platform, we span community banks and credit unions in the U.S. all the way up to Bank of America, which we are proud to say it's been a long-standing customer of ours, and that same platform globally as well, right? We had a little over 20% of our business is outside of the U.S. last quarter.

And I think that's very unique because when we talk about competition, Koji, it very much is concentrated down market in the community bank space in the United States. And so we really are unique in our ability to scale. And so what's also unique because we're the only ones truly with a platform across the bank. And so where we have competition isn't an apples-to-apples, we'll compete with point solution vendors really in each business line.

So you'll have a competitor down market for commercial. You'll have a different competitor down market for consumer. You'll have a different competitor for mortgage, et cetera. And then certainly, when you go overseas, it's a different group of competitors and frankly, a lot more would be more build or leveraging some framework technology. And I don't -- and then also IMBs, which has been a good market for us, notwithstanding the headwinds.

So that is the market. We've got just under $20 billion SAM. We've doubled it since we went public in the summer of 2020. So we think there's plenty of run room -- runway, I should say. And I don't think our customer base will evolve more. I think we service all of those customers. And what we've been very focused on doing is making sure we're servicing them with the right teams.

And to that end, for example, credit unions, which we've had some success in, historically, we had the same salespeople who service banks, service credit unions. But credit unions, it is a different market. And as our consumer lending product matured, we formed a separate credit union team to go take that more aggressively to market. And so that's how we've been trying to kind of break this massive opportunity we have down into kind of more digestible pieces to make sure we're maximizing the sales that we can get.

Why did the [ Reddit ] Union opportunity require a different team?

It's a different customer, right? We think about the market differently. It's very oriented as other financial institutions and banks are, but very member-driven, right? And so they speak a little bit different language, and we want to make sure they appreciate that we understand some of those nuances, and we're there to support them and make sure from an investment perspective, that they are getting the best product for what they need to do.

And a perfect example of that, and I think this is where the platform play really resonates is with credit unions on our Q1 call, Sean talked about an $800 million asset based credit union that had used us for a pretty small product that helped with some portfolio monitoring, a nice product that we've got. But from a cross-sell perspective, they expanded, again, with the platform vision and story. They bought commercial, they bought consumer and they bought account opening. And that's really where we see an opportunity that platform play with those institutions.

Okay. Okay. Let's move to AI.

Yes.

Vertical AI, we think at Bank of America is a very interesting opportunity, attractive opportunity, could be very disruptive. And one of the first places where we might see massive adoption of AI tools, specialized data, lots of data, very specialized. And so what is the nCino strategy with AI? And how are you thinking about it as a growth driver over the next few years? And what are your customers asking for right now from an AI perspective? I mean, I guess the question is, are they ready for it? Or are they just kind of still trying to figure out what to do?

Well, since we do serve banks and credit unions, generally a conservative group. And I think that actually plays incredibly well for nCino because those customers have trusted us with their data for over a decade. When we started the company, Koji, they said that banks would never put their data in the cloud. We created this segment called Cloud Banking. And I think we are uniquely positioned to create and be -- transition from being the worldwide leader in cloud banking to the worldwide leader in AI banking, and it's for a few reasons.

One is that trust, right? In some industries, again, maybe a start-up, maybe coming to sell you, you can run your business with leveraging LOMs and we can help you do that. That's not going to work in this highly regulated market, right? And so we are uniquely positioned to take them on the journey. We took them on the cloud journey. We can take them on the AI journey. And we have a unique data set, and we talked about this at our user conference. We launched a research institute where, again, because of the data that we've got access to with the consent of our customers to use, which is something that we've been focused on getting, we're able to see stuff going on and help our banks become more efficient, and ultimately, able from a training standpoint, talk about it.

So there's 3 kind of pillars to our AI strategy. The first, we call Banking Advisor, which is basically think about it as generative AI. And these are things that you can do to help make tasks easier. We had 2 in the market last year, knowledge and a credit memo one that would actually help create credit memos, which is something you need to do to facilitate a commercial loan, automating that. And at our Insight conference 2 weeks ago, we came out with 16 more.

And in terms of some of our early adopters, we had a different top 4 bank up on stage talking about the efficiency gains that they're already seeing with Banking Advisor, and that was before we came out with the 16 new capabilities. So we're really excited about that. We price that where you pay us a reasonable fee to get access to the technology and then it's on a consumption basis, right? So you'll get a minimal amount of consumption that you can use. And as you go over that consumption, we have opportunities for upside.

We'll see how that trends throughout the year. We don't have any of that in our plans for this year from a modeling or guidance perspective, but we think that can be a great growth lever for nCino for years to come. The second is Agentic, right, and wrapping agents around what we do. And again, there, I think we're uniquely positioned. But because we've built the workflow for banks now for about 13 years, we know exactly how they operate. And so we know where to focus the agents to help automate more tasks, to make the software that's already made them efficient, even exponentially more efficient. And so I think Agentic going to be exciting for us. We have some customers who -- large banks who've talked to us about codeveloping agents with us, and so that will be the second leg.

And the third one is an iPaaS opportunity, integration as -- integration platform as a service. We acquired a company called Sandbox Banking in February. And it really is a middleware layer, where you can leverage APIs, where we've got hooks not only into nCino, but also into a whole bunch of other data points. As we think about accessing data, it really is a gateway to access data. And at the end of the day, AI is all about the data, and we think we have a unique data set.

Are your customers ready for AI? How do you think about that?

Yes, great question. I think, generally, there -- some are more ready than others. And again, to us, this is very much how we remember the march to the cloud. You've got some early adopters and then you're going to have some laggards. And really, it's incumbent upon us to help educate the market as we've been doing to help some of our customers who are some of those early adopters like the top 4 bank that I mentioned up on stage, have them tell the story and have them talk about why they're comfortable going on this journey within nCino and why nCino is the right one to take them on this journey.

And so yes, to us, it's a very similar transformative opportunity. And so like I said, I think some are more ready than others, but it's inevitable. This is the path that we're going down. And again, I think we're kind of at the tip of the spear in terms of what we're doing, leading the march down this path.

Maybe switching gears a little bit, going back to ACV, the relationship with bookings there and the ACV waterfall. As I build models, I always get afraid of the waterfall term. And so walk me through why ACV bookings is the right metric here? And how does that play into revenue with that waterfall effect?

Yes. I think actually, as we've transitioned pricing from the seat base where the waterfall is very relevant, right, because people would buy seats or customers would buy seats and only so many would turn on initially. And over time, that waterfall, as you know, the others would turn on. With the new model, there actually isn't a waterfall, and you can -- there's opportunities to accelerate revenue quicker.

And so again, you would take the term, you take the fees that are being paid, you straight line it and you'd start recognizing revenue sooner than I think historically than we did.

So over the next couple of years, we might see a bit of a -- I don't know transition is the right word, but tailing off of legacy waterfall into a more predictable platform consumption revenue model?

I think that's well said. And we're well down that journey as a lot of those seats have been activated over time. So we're -- I think we're nicely down that path. But yes, I think us, we had the waterfall model, which I think was very unique to nCino, not seats, but seats with delayed activation versus, again, this platform model, I think, much more familiar to you guys and investors.

Okay. Maybe in the last few minutes here, I want to talk about M&A strategy. You guys have bought some stuff over the years, a fair amount of stuff over the past year. And I know that in the last quarter or the quarter before, calling out a little bit of a -- taking a little bit more time on the integration and the customers we're waiting for. And so how do we think about -- I guess, 2-part question. How do we think about the M&A strategy going forward from here? And how do we think about the integrations that still need to go with the acquisitions that you have recently done?

Yes. So a little over a year, we did 4 acquisitions. I can tell you, we did not set out the year saying, "Hey, let's do 4 acquisitions." Frequently, these things come your way when you're not looking for them. But I think we feel great about the 4 deals that we did. We did comment that right now, we're in digestion mode. And so absent something kind of coming from left field that we just feel is incredibly compelling. From a capital allocation perspective, we announced our first stock buyback as a company, $100 million. In terms of how we're allocating capital, we actually used a little over $40 million up in the first quarter versus M&A.

We're still always looking. I want to make sure we keep a pulse on the market, but we're very focused on, as you said, integrating those which I feel like we are substantially complete, including the onboarding one with DocFox, which we integrated that technology into the platform and really unveiled that integrated solution at our Insight user conference 2 weeks ago.

Sandbox, which is a company we've worked with for years, we've already integrated into them, very familiar with the team, the most recent one. And so I think as we sit back right now, we'll continue to tweak and continue to find opportunities to leverage and make sure we're getting the return that we expect from those. But I think we feel real good about those assets. And as we take a step back and look at our product portfolio, I think we look -- we feel good about the breadth and depth of our product portfolio right now.

So we have plenty of things to sell. We have this unified -- unique unified platform across business lines. And really, again, it's just about execution. And I think that's what you're going to hear from us in the coming quarters, is just about execution.

As you -- as execution continues, right -- good execution continues and maybe the ability to do M&A comes back for you guys or you're more open to it, would you ever go something big? Is that -- would that be ever in the cards for you guys? I mean, I think more or less the last 4 acquisitions have been more tuck-in. Would you go more or something more transformative, enter a new category or go something big to enter a new geographic region?

Yes. Tough to speculate on what that may look like. For us, everything we do, it's really focused around shareholder value and how do you maximize that. And so that's the driver -- that would be the driver if an opportunity presented itself. But again, as I said right now, I think we feel good about the assets. It's been a difficult couple of years for our market, particularly more on the larger bank side, where I think we have unique exposure versus some of the competitors that I mentioned earlier or referenced that are very much focused down marketing community banks.

And so, no, I think we feel -- we kept our head down. We fulfilled this product vision -- Pierre's product vision, we fulfilled. And now it's just about going in deploying that as broadly as we can on a global basis.

Sure. Last question for you, Greg.

Yes.

Thank you for being here. Maybe kind of going back to that Rule of 40 target. And there is some time between that and then and lots of things could happen. Interest rates could go to 0 all of a sudden. We don't know, right? We don't know. And would there ever be a trigger in the market that would signal maybe we should grow faster, maybe we should invest more, maybe we should abandon free cash flow generation, non-GAAP operating -- income margin expansion for growth? Would that ever happen? And what sort of trigger would that look like?

So look, we always want to err on the side of growth. And again, making sure we fulfilled from an investment perspective, this product vision was important because that sets us up for years to come in our minds to grow. And so we will always err on the side of the growth. And I would much rather come to you and say, "Hey, we've had this opportunity. It's going to cost us this. Here's what we think the return is. We think this is the right thing for the business, if that's what makes sense for the long term value of the company and long-term interest of our shareholders."

So speculating, but sure that could be. I think right now, we feel very good about our product portfolio and about our path to that Rule of 40.

Yes. Yes. That makes sense. Greg, we're out of time. Thank you so much for being here.

Pleasure.

We really appreciate it. Thank you.

Thanks everyone.

Our next presentation comes from nCino. nCino is the leader in cloud-based lending systems. To my immediate left is Sean Desmond, CEO; Greg Orenstein, CFO. This is going to be a fireside chat. If members of the audience have questions, you can e-mail session2@rwbaird. I'll get those on the iPad. But maybe to begin, I'll ask for an intro to nCino and an overview of the investment case.

Sure. Thanks for the time. We appreciate it. It's great to be here. We have been at this for the better part of the past 13 years at nCino, our original mission to transform financial services through innovation, reputation and speed. And we have been known in the marketplace as the worldwide leader in cloud banking. And at this point, we are pivoting the energy of the entire company that we would usher banks, credit unions and independent mortgage bankers into the era of AI, and we will be the worldwide leader in AI banking as we move forward.

And so it's a super exciting time for the company. At the same time, we're solving some of the same problems that have been age-old for financial institutions for many years, right? If you think about how organizations are siloed in their operating model as well as in terms of how they house data and make decisions, we democratize and provide digital collaboration across that landscape and deliver outcomes for our customers.

But some of those problems, the age-old customer really wants 2 things: it's kind of how much money can I get and how quick can I get it on the borrowing side? How fast can I open an account? Can you onboard me onto your institution in a compliance sort of a way, right? Know your business, all the KYC outages there? And then how can you kind of monitor and service my portfolio in a way that would be proactive for me?

And so we deliver these types of outcomes over time in a seamless sort of personalized way. That digital and interactive collaborative nature is in our DNA. And so we bring the middle and back office toward the front office of the bank and, ultimately, toward the banker and their customer, and that's what we've been doing for many years. If you think about the things that we do and where we do them on the platform? nCino is busy doing onboarding for our customers, doing account opening, doing loan origination, doing portfolio monitoring.

We do that across commercial, consumer, and mortgage lines of business. And we serve that up in a consistent fashion for the banker and their customer, whether they're in the branch or on a digital online experience. And all of that is underpinned by what we believe is the world's richest data set in fintech, highly differentiated. We have 2,700 customers globally. And we're collecting not PII data, but on aggregate, we have a lens on the process-centric data, and we understand how capital flows through the bank, right, and how people make decisions.

And so with that data, we think we're set up perfectly to capitalize on the vertical AI opportunity in banking, and that's exactly what we're busy kind of engineering the company and the resources and our time toward. That global customer base exists across market segments. So we deliver the same solutions in the same code base and the same platform to community banks, credit unions as well as the largest enterprise banks with trillions of assets under management at scale, the world over.

15 out of the top 30 banks in the U.S., 5 of the top 7 in U.K. and Ireland, 3 of the top 5 in Asia-Pac, excited about the momentum we have in Tokyo. So that global customer base, again, I point that out because that it gives us a purview and a lens on the data that is very unique.

And in a world where you all hear everybody opining about how folks can run any sort of business, including a bank, which is the most highly regulated business around on LLMs alone, we believe being a vendor that's been on the journey with customers, and has trusted us with their data for many years is differentiating because we have access to the same LLMs, but we have the actual data, and we're going to capitalize on that. So that's a bit about what we do. I don't want to drain the slides too much. Happy to take questions, however this works.

I'm going to stay on you for a moment. So customers are complex. Their workflows are complex. Before you were CEO, you led product, you led customer success. You're probably the best person inside nCino to really understand what customers need and are looking for. How do you kind of take that background and now, as CEO, parlay it into your near-term goals? What longer term you hope to do, kind of your line of sight as CEO?

Yes. And yes, so previous to stepping into this role, I spent a large part of my career in the post-sale world, which is really all about delivering on the promises you made to your customers, right, fulfilling the commitments. And so I take that very seriously, and I believe I'm pretty aligned with how our customers think. If you talk to banks, put the customer at the center of everything you do, right? And so that's how I think about our business.

And we have real big opportunities to propel our business forward with some initiatives we have at the company right now that are near and dear to my heart, which would be removing friction from the entire experience and making sure we have faster, repeatable, more streamlined implementations. That's a big initiative for the company that I think is going to be a differentiator for us in the sales cycle. But at the end of the day, we get feedback from our customers, and it's almost always about did you follow through on the promises that you made.

And so that's how I think about the opportunity. I would say, in addition to that, I've been through a few of these inflection points in my career, having grown up in the consulting side of the business in the mid to late '90s, seeing mainframe to client server, seeing client server to cloud, seeing big data. And here we are at this inflection point to AI. And I think about the experiences I've had over time running both customer success and product and how uniquely positioned we are, and it's in the DNA of our company to drive change. That's what we do.

At the end of the day, the technology is fantastic. We're proud of our products, our solutions work, right? If we can deliver measurable outcomes, those speak for themselves. But you still have to drive change, right? You still have to help financial institutions the world over understand how to make that transition from the old to the new, whether it's manual legacy or we're replacing the existing system. And so we kind of lean into that as we drive change into this AI inflection point.

Great. I have a lot of AI questions. But before getting to that, I'll ask Greg, maybe just recent financials, had a good update last week. Entering this year, maybe how are you thinking about the go-forward budgeting, the outlook? And then as you look to execute this year, what are some of the things you're focused on to set you up for even stronger growth next year?

Absolutely.

Yes. As we came into this year, look, I think our customer base, for the most part, is healthy. Clearly, a couple of years of difficulties with the liquidity crisis, the rapid rise in interest rates. But I think they've gotten through that well. And again, I think we see activity in the pipelines continuing to increase, which gives us optimism. And also, again, with the products that we came out with just a couple of weeks ago at our Annual User Conference, we have more products to go sell.

So I think right now, we sit executing on a bookings plan this year that if you look at the midpoint of the guidance that we gave, and it's the first time that we've given ACV bookings guidance as a company, it's just $3 million more at the midpoint than what we did last year. And again, I think we feel like the markets continue to improve, and we have more products to go sell. And so from a top line perspective, it's just very much focused on execution, closing the deals we say we're going to close, and closing them when we say we're going to close them. That's what the focus is.

From an expense perspective, I think we've been managing the expenses at the company well over the last couple of years, and I think we'll be able to continue to do that. We continue to find opportunities for efficiencies. And ultimately, again, I think we try to set ourselves up for a year where we continue to build momentum throughout the year. So overall, I think, right now, it's just heads down execution, and that's what we're focused on.

And for those in the audience, when you think about nCino, is this a Rule of 40 business, Rule of 50, where do you see that ultimately settling out?

We said on our Q4 earnings call a couple of months ago that around the fourth quarter of next year, we'll be a Rule of 40. I think some folks were questioning how we would get there. Ultimately, we did not give a specific it assumes X percent or Y percent of growth or bottom line. We just made a commitment that we would get there.

And we did take an action last week in terms of a restructuring in the company. Those things are never easy. But ultimately, we felt like it was the right thing to do. But again, I think a big step forward towards meeting and ultimately exceeding that Rule of 40 target. And so that's our next goal is to get that around the end of next year.

Great. Okay. AI. I think a lot of folks are in agreement of all the different industries looking to deploy AI. Financial services is going to be one of the hotbeds, potentially one of the biggest potential implications. And in a lot of ways, I have thought nCino is always early in terms of AI product and intentions. So I think about the first kind of copilot launches, that was on the earlier end.

You were very early in talking about agents, and you can kind of plot along to use Salesforce as an example. A lot of people now recognize Salesforce with the Agentforce strategy, but you can often trace nCino as being even earlier and ahead of those communications in this industry. So how do you see the opportunity? And why is it so different than what a lot of SaaS vendors or even vertical SaaS vendors have said about AI for their businesses over time because it does seem with consistency, nCino has been on the early end of thinking about it and introducing it.

Yes. And the opportunity is massive. And I think it's going to be unique in banking. And to your point, in terms of capitalizing on that, everybody sees the potential. At the same time, folks recognize that in a highly regulated environment that is traditionally known as risk averse, what will that journey look like? What will the adoption curve look like for banks in terms of the pace of innovation that they consume. And so we kind of -- we have said since day 1 at this company before AI was even a narrative, right?

We said, if we can capture all the data in the context of the workflow and the process-centric nature of that data, and we can serve that up to our customers at the production line, where they need insights to make decisions that good things will happen, right? We said this in 2013. And so we have steadily been accumulating that data all that time, right? And you look at the moves that some of the big players in the space have been making around data recently, right? From a tech standpoint and the horizontal landscape, we've just been doing that all along.

And so we have that foundation. And then we kind of lean into the reality that we've been driving efficiency into banks. If we can increase loan application rates by 288% for certain financial institutions, well, that's going to get them more customers. It's going to get them more market share, right? If we can reduce key stroke and data redundancy by 75%, then that's going to drive efficiency. Well, we've been doing this without AI. So now here we are, right?

And so our strategy for AI is three-fold. We are continuing to develop out what we are calling our banking adviser skill sets. And that is basically training by persona. We look at each role in the bank, the loan officer, the credit analyst, the underwriter, and we say, "How do they do their job every day and how can we automate that? What have we already done to drive efficiency into their job and how can we do that further with banking adviser skills?"

And we've already got 18 banking adviser skills that are live in GA and that our customers are adopting. We had Wells Fargo on our main stage at our conference last week talking about banking advisers. So that's number one.

Number two is Agentic AI, and we take all the existing workflows that we have in place across 2,800 customers that are in production today, and we start wrapping our agents around those. So if an agent can actually fire off a loan origination task and then an agent can then gather all the requisite documentation and an agent can do all the checks, can we get to what we call the path to one, which is an end-to-end complex commercial loan origination experience, for instance, one of the things that we do with only 1 human in the loop. Today, that has sometimes 10 humans in the loop, right? And so Agentic AI is powerful. So banking adviser plus Agentic AI.

And then the third pillar of our strategy is that data backbone. And we've invested in a company called Sandbox Banking that we acquired 6 or so months ago, and that will serve as the foundation to connect all our solutions and integrate to all the third-party data in the financial ecosystem in a way that will actually exponentially drive value from the data that we already have.

How do you monetize each of those elements? Banking is already an industry where if you look at banker headcount, it doesn't really grow to begin with, and yet we clearly grow loan volume. So automation is good for this industry. You see that already. But going forward, how do you think about automation and maybe changing the pricing of your products?

So we're not just doing this for the fun of it, the AI. Okay. Yes, for sure. This is something that we have active conversations on a regular basis in terms of pivoting and what you see is a shift in the landscape from the kind of old school per user per seat to the new school, which is, it's all about outcomes, right? And how can you connect the value that we deliver to the fees that our customers pay, right?

And so banking adviser has a base price. And then as you deliver those outcomes, you actually drawdown on what we call intelligence units. It's a way to kind of track and measure the usage of banking adviser and the more outcomes we deliver, the more fees that we, over time, collect and customers buy into that because they understand. For instance, if you could give me a 0.25% on my commercial pricing and profitability, that can actually mean tens, in some cases, hundreds of millions of dollars, depending on the size of the institution, right?

So if you're going to deliver that through AI, and I can see it and I can measure it, and you could read it back to me from an analytics standpoint, then I'm willing to pay for that. And so from a monetization standpoint, banking adviser as well as when you start delivering the Agentic experience, you're delivering the same outcomes with less people, you're taking cost out of their equation.

Do banks tie investment in these new areas or even investment in your core systems into a view on the interest rate cycle, if a bank has a view that we're about to enter a lower rate environment, are they proactively investing more in lending systems now to be ready for that future upcycle?

Yes. At the center of what we do, we drive efficiency into the operating model for banks, right? And so in a down market, in an upmarket, in a low interest rate, in a high interest rate environment, depending on the line of business you're in and the types of products that you're selling to your customers, we drive toward those imperatives, right? So if you think about onboarding account opening, loan origination, portfolio monitoring, you think about doing that across commercial, consumer and mortgage, including small business, and you think about doing that globally.

In a high interest rate environment or a low interest rate environment, the permutation of products and services that we cover in there kind of works both ways, right, which is why this has been a sustainable business. And we started in a time when money was free, right? And interest rates were historically low, and the company had tremendous success. We've operated through COVID, through PPP, through high interest rates, through headwinds and the company has proven its durability.

And of course, like I would prefer rates to go lower, but we've all had a hard time predicting that for the past couple of years, right? And we think that we continue to take mortgage share in the mortgage game in the IMB space, and we continue to position that solution to large banks. We're getting traction in consumer. We're getting traction in commercial and going deeper in commercial regardless of the rate environment.

One thing you discussed at the Investor Day recently is, even in kind of the original commercial lending products, which is the gold standard, if banks are putting it into place, they're referring to it on their public calls, you're about 30% penetrated there. Now I know there's always debates well is 30% a high number, is that nearing saturation? I guess, I would ask the inverse of that.

Where do you still grow into the other 70%? And do you have to do a bit of education with the customers? One of the things I thought was very savvy of nCino early on is the original price point. For a lending system, it maybe was expensive. But in terms of the full capability you get as a sign-on user, you can rip out 4 to 6 other systems you're probably paying for, which makes nCino actually the most cost-effective as well. Do customers really understand that, however, or is that part of growing at an existing account?

Yes. I think they get it. And the larger the bank, the more systems you're taking out, right, the more integrations that you can replace with your platform, and it is the platform play that's differentiating for us because everybody we compete with is a point solution, right? Across the lines of business, it's either a point solution. And most of the competitors we have are only down market or only upmarket or only in the U.S. or only in EMEA, right? And so this global platform is a key differentiator for us at nCino.

But to your point about market saturation, listen, I'm excited about the mix of revenue we had in Q1. I mean, we talked about this at Investor Day. And we had about 50% of our revenue in commercial and the other 50% split right down the middle between consumer and mortgage. That seems to be very rightsized with our investments that we have in R&D as well. The small business opportunity is picking up a lot of steam. The credit union opportunity is getting a lot of momentum with our acquisition of Allegro. The mortgage into banks beyond IMBs is exciting and the AI play, and then our upside internationally.

In EMEA, we've kind of reinvigorated our leadership team. We're attacking the continent, not only U.K. and Ireland, and we have a tremendous opportunity in Japan. So I say all that because again, 30% is open to interpretation, right? Well, 30% in the community bank market in the U.S., but 0.2% in Japan right? And so it's got a lot of layers to it. And the bottom line is, we just have a tremendous opportunity to reaccelerate growth, and we see the bookings coming this year.

On the -- talk about consumer and mortgage now. So on consumer, I think it was a few fiscal years ago where you got a $200 billion bank. And for those of us that watch vertical software over time, people remember when Veeva won their first top 20 pharma, when Guidewire won the first top 25 insurance carrier, is it the same here where you really needed that 1 Lighthouse account and now you're starting to see like the deal flow pick up, people are picking up the phone and talking, is it kind of flowing like that?

It is the same. And those industry parallels are powerful. And then even the parallels we have historically at nCino, right? I mean our Lighthouse Enterprise Bank and our flagship commercial solution was SunTrust, back in 2016. And now they're obviously part of Truist now, but the reality is we started in the community bank market, we steadily moved up. We signed a $30 billion bank, then we had a $70 billion bank, and all of a sudden, we had SunTrust.

Same thing is happening in consumer. Now it's taken us a little longer because that's a rip and replace, right? And we learned some lessons. So it took us a little longer in a different market, to your point, interest rates, COVID, and all the things. But here we are with consumer where we have a nice mix. I mean, we signed 20 community and regional bank customers in the consumer lending solution in Q4 alone. We signed a $50 billion asset bank, about 2.5, 3 years ago. And boom, here we are with the $200 billion bank that was on stage with us at Investor Day.

And what I would expect is you're going to have a combination of employees at that institution as well as system integration partners and other folks that then go out in the ecosystem, and they tell the story and they move around, right? Everybody knows folks move from bank to bank, right? So they're wearing a badge for one bank and 2 years now, they're wearing a badge for another bank. And "Oh, by the way, we were on nCino." And so yes, the inbound interest from banks at scale on consumer is going to pick up and is picking up already based on that.

At the Investor Day, you talked about the ACV mix between the 3 legs of the stool, so commercial, consumer, mortgage. And actually, they're all growing kind of around the same at the moment, kind of 10%, give or take. When you think of consumer and mortgage, should those be multiples of what the commercial product is growing by?

Everything should be growing faster as far as I'm concerned. We can never get enough growth. We're insatiable on growth. But listen, I would say that as we have now readied the mortgage solution for banks and credit unions at scale and to sell that beyond the IMB ecosystem, that we should expect really meaningful growth there, 100%. From a consumer lending standpoint, I mentioned the 20 in Q4, I would expect that we continue to go hard and as we go upmarket and cross-sell, we have 15 out of the top 30 banks on commercial. We have 1 on consumer, let's go get the other, 14 that would indicate a nice growth rate.

And just to add to that, I mean, from a guidance philosophy perspective, we said that we were going to get out of the predicting mortgage volume business this year, and so we said we were going to keep our mortgage expectations flat year-over-year.

Consumer, we did talk about growing 50% 2 years ago, 33% last year. Sean talked about in Q1, the ACV, the bookings split a little less than half commercial, the other 2 splits. So we do see those as nice growth levers.

And that's where, again, for Q1, we were able to -- we beat the top end of our guidance by $1.8 million. $800,000 was for mortgage. We didn't flow that through, but we flew in because of the strength of the core business $4 million through the rest of the year. So again, I think we're feeling pretty good about what we're seeing out there right now.

Just on the mortgage point. So high single-digit growth last year. And obviously, a very brutal environment for a lot of your customers. So I think high single digits is definitely reflective of share gain, at least it would seem to be that way. I think you have a very unique strategy. I think most that have followed nCino probably appreciate what you were buying in SimpleNexus at the time.

But maybe you can talk about how SimpleNexus has kind of been blown out and now it's a big part of the overall front-end strategy, and how we've been talking about how nCino is not just a product, it's a platform. I think SimpleNexus kind of was the gateway to a platform in the newer areas of the business. So kind of why you saw that as an opportunity?

Yes. And you're spot on. Absolutely, we entered the mortgage space, particularly in the IMB market with the acquisition of SimpleNexus and now we sit here a couple of years down the road where we're selling that solution at scale to banks of all sizes. But the underlying point there is, we acquired a technology layer from a digital front end and experience point of view that now serves as the single consistent experience that the banker or their customer has with nCino, whether they're having that in branch or digitally, right? And that's kind of the foundation for everything on the front end. Digital experience for nCino was the IP acquired from the SimpleNexus acquisition.

And so when I talked about fulfilling some of the promises and commitments we gave -- made to our customers on that platform experience that's a strategic nature of that acquisition. And yes, we continue to gain market share in the IMB space despite the rates, despite the pace. And listen, we have competitors in that space that are buying contracts, right? We have competitors that are going to our customers and saying, we'll pay your nCino contract, and you won't charge us anything, and we'll do that for the next several years. It doesn't seem like a sustainable business model to me. I'm not going to let that happen on our balance sheet. And every once in a while, if you have a churn event, I think that, that might actually take out a competitor along the way, too. So we're good with that.

I think I was going to just add the fact that, that business has grown in probably the most brutal market, certainly in recent memory, but going back to the financial crisis and maybe '08, '09. Every year, I think, says a lot about the technology and the customer base and, ultimately, the opportunity as volumes do. We've seen them as stabilizing, right? Churn has come down in that business and, ultimately, these volumes come back. So I think we believe we're well positioned there.

And maybe worth just touching on the pricing there because that's evolved in an interesting way. And as an analyst, I love this because a lot of the upside is maybe not going to be an RPO anymore, but it's something where you could get some revenue overages, maybe just explaining how that business will work going forward?

Sure. Historically, it was a seat-based model, which, as we looked at pursuing it from an M&A perspective, it was one of the things that was attractive to us versus most all the other companies out there were volume based, right? And so as the volumes kind of dropped over a cliff, the seat-based model was much more resilient, but ultimately, during the difficult time, if you go back with the rapid rise in interest rates, a lot of our customers came to us and said, "Hey, can you help?"

Obviously, it's difficult, and we made a strategic decision to say that them going out of business wouldn't be good for either one of us. And so we evolved our model to where instead of it being seat-based, you had a platform fee that for each month gave you a certain number of loans and once you exceed that loan number, ultimately, you pay more, right? And what our sales folks and customer service folks are focused on doing is watching that volume. And to the extent they're consistently exceeding the minimum numbers is to ultimately up that minimum, right?

To your point, the only thing that would be in RPO or in our ACV is what's contracted for. And so we do see opportunities for growth as the market does come back. But again, I think to me the best headline right now for mortgage is, we do see it having stabilized. We said Q4 was our lowest churn quarter for mortgage last year and Q1 this year was lower than Q4. So clearly, the trends are in the right direction.

Great. Time for one more question from the audience. This one, we've been talking a lot of deals, some bigger than others, but kind of a good frequency of M&A, do you think you're closer to an end in terms of acquiring maybe what you needed and now the focus is on integration? Or should we expect a continuation of what we've been seeing?

Yes. I think that we are -- we refer in the locker room to ourselves as in digestion mode right now on some of those. We feel great about our expansion of our SAM with the onboarding acquisitions of DocFox and FullCircl, our expansion of our SAM with our entry into the credit union space with the indirect lending capability.

And then Sandbox Banking as far as being strategic to our AI play. And so we're going to fully integrate those. Are we always going to be opportunistic out there if something comes out, but an active part of our reacceleration of growth right now assumes that we can do it with what we have.

Great. We're out of time, but please join me in thanking nCino.

Thank you for standing by, and welcome to nCino's First Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Harrison Masters, Director of Investor Relations. Please go ahead, sir.

Good afternoon, and welcome to nCino's First Quarter Fiscal 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer.

During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements.

Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call, as well as the earnings presentation on our Investor Relations website at investor.nCino.com. With that, I will turn the call over to Sean.

Good afternoon, everyone, and thank you for joining us to discuss nCino's first quarter fiscal 2026 results. Before I get into the details of the quarter, I want to take a moment to remind you of the core problem we're solving in why nCino exists.

Across the globe, financial institutions continue to wrestle with inefficiencies caused by legacy infrastructure. Too many are constrained by fragmented technology stacks and silo data, which slow down decision-making, limit the ability to leverage data and analytics to make more informed and real-time decisions limit the ability to leverage AI to further automate tasks across the institution and inhibit growth and the ability to reduce expenses. These operational roadblocks are precisely what nCino is designed to eliminate.

We are reimagining these processes and delivering world-class experiences across the customer life cycle. NCino is the only cloud-based SaaS provider that enables financial institutions to seamlessly manage lending, onboarding, account opening and portfolio management across all major lines of business connected on a unified, scalable platform powered by AI.

Because we are the system of record for so many of our customers' most critical operations, and because our solutions are deployed in over 20 countries across a broad and diverse customer base of banks, credit unions and IMBs of all sizes, we believe we've built a competitive moat that is both wide and deep.

Turning to Q1 results. This was a strong start to the year and an important first step in turning nCino from a great company into a great long-term business that executes with precision and capitalizes on the sizable opportunities ahead. We delivered total revenues ahead of guidance, driven by strength in our subscription revenues line. We are pleased with the demand we see building in the market, which was confirmed by the reception to the AI capabilities and omnichannel experiences we showed last week at our Annual nSight Customer Conference.

I'm also pleased to report that our non-GAAP operating income also came in ahead of expectations. It's early in the year, but I'm extremely encouraged not just by the financial results we're reporting today, but by the internal KPIs we track closely to run the business. Bookings of new annual contract value are progressing well. Of course, there is work to do, but we remain confident in the full year ACV plan we outlined last quarter. As you know, ACV is the leading indicator of future subscription revenues growth, and we believe we are on track.

At nSight last week, we showcased the culmination of a large multiyear and multiproduct body of development work that delivered significant enhancements to our onboarding capabilities created enhanced omnichannel digital experiences for our customers' clients, reinforced the scalability of our mortgage solutions and embedded intelligence across our workflows. Having fulfilled these commitments to our customers, we see incremental growth initiatives available as extensions of the core opportunity we have been pursuing for over a decade.

AI is central to our long-term differentiation and our approach, which we believe leverages the largest process-centric data set in fintech is uniquely powerful. At our nSight conference, we released 16 new banking adviser capabilities, building on the two that were already generally available. These new capabilities are designed to help customers save time, lower costs and improve productivity. And because banking adviser drives incremental usage of the nCino platform, we see these enhancements as key drivers of future subscription revenue growth.

One of the initiatives I highlighted at Investor Day is the mortgage cross-sell opportunity. In the first quarter, a $25 billion regional bank doubled their annual commitment to nCino through the adoption of our mortgage and our consumer lending solutions, accompanying a 5-year renewal. This institution will be able to provide a consistent experience for their clients across all consumer loan products, including mortgage. We expect this differentiated experience will be a true competitive advantage for them in the marketplace.

Another growth initiative I discussed is the credit union market, where we see a $1 billion of SAM opportunity that has been unlocked through the readiness of our solutions for that market. In Q1, an $800 million credit union who had an existing relationship with nCino through our portfolio analytics solution chose to also adopt our consumer lending, including indirect auto, commercial lending and account opening solutions. The nCino platform was truly the differentiator here as the credit union was looking to consolidate vendors and streamline operations on a unified platform across their institution.

And finally, we saw good progress on the international front with a significant add-on deal at a top Canadian bank and a new logo in Japan. International expansion is core to our strategy, which goes beyond the EMEA growth initiatives I spoke of at Investor Day. The global opportunity for nCino is large, and we evaluate it with a broad lens. We are excited by the progress so far this year in Europe and in Japan and look forward to updating you on wins later this year as opportunities get over the finish line.

Before turning it over to Greg, I want to offer a brief perspective on the macro environment. We are, of course, sensitive to what's happening out there. It's a fluid situation that continues to evolve. That said, our financial institution customers remain well positioned. Many of them have healthy balance sheets and are projecting growth in both loan portfolios and earnings. We're also seeing encouraging signs of stability in the mortgage market, even while some interest rate volatility persists. Because we planned conservatively in this part of the business, that stability contributed to our outperformance in Q1.

And finally, our U.S. customers are telling us that potential deregulation could free up capital streamline decision-making and open the door to further adoption of best-in-class technology platforms like ours. Taken together, these are solid early positive signals that reinforce the confidence we have in our strategy, our product portfolio, our team and our ability to execute.

You may have seen that we filed an 8-K yesterday disclosing a restructuring event that affected approximately 7% of our global workforce. We do not take these actions lightly and it does not diminish our appreciation for the contributions of these employees. As a result of reexamining our processes and organizational structure, including the ways we build and deliver software, which I had the opportunity to see up close during my tenure as the company's Chief Product Officer, we identified opportunities to streamline our operations, including by leveraging AI tools.

This restructuring event is indicative of our belief that we can reduce bureaucracy and be more efficient, including by bringing new product functionality to market even faster while also delivering durable accelerating growth with the ultimate aim of maximizing shareholder value, which is our primary mandate.

In closing, I'm very encouraged by the start to the year we've had and by the feedback we're receiving on both our existing and our new products. The conversations we're having with customers are more focused, more strategic and more forward-leaning than they were just a few months ago. I'm more excited about what lies ahead, and I look forward to updating you on our progress again on our second quarter earnings call.

With that, I'll turn it over to Greg to walk you through the financial details.