nCino (NCNO) Q2 2027 earnings call transcript

And now I'd like to introduce your host for today's program, Harrison Masters, Vice President in Festa Relations. Please go ahead, sir.

Good afternoon, and welcome to nCino's second quarter fiscal 2027 earnings call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer, and Greg Ornstein, 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 risk 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 8K 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 to Ncino's second quarter fiscal 2027 earnings call. I'm very proud of the team's consistent focus and execution this past quarter. We continue to deliver on our commitments, once again outperforming all financial guidance metrics, and find ourselves very well positioned for the second half of this fiscal year and beyond.

Over the last several months, my time on the road with customers, prospects, and partners has continued to validate our strategy. Each interaction, whether in Charlotte, Oklahoma City, New York, Tokyo, Amsterdam, or Jackson, Mississippi, has reinforced how uniquely positioned nCino is to be the trusted global leader in AI-powered banking. With the rapid evolution in technology and market dynamics, financial institutions of all sizes the world over are looking for a trusted partner rather than more vendors. And nCino is increasingly recognized as that partner. We are the partner the market can count on to innovate and bring the right technology to solve banking-specific operational risk management and regulatory compliance challenges. Our solutions for lending, onboarding, account opening, and portfolio monitoring run on a unified AI-powered platform, allowing customers to consolidate and streamline operations with one vendor and gain efficiencies other technology companies simply can't match.

During the second quarter, we signed multi-year renewals with four of our 20 largest U. S. enterprise customers by ACV, representing over $900 billion in assets. All four renewed ahead of schedule with an average ACV increase of more than 10% because they wanted access to nCino's rapidly expanding suite of AI tools and functionality. These customers are some of the largest financial institutions in the country and have the financial and technical resources to build internally if they chose to. But they're proactively doubling down on nCino because we've spent nearly 15 years building the trusted global system of record for critical banking processes. We've done the heavy lifting of building the data foundation, workflows, governance, security infrastructure, and regulatory compliance capabilities of the nCino platform, and embedded AI and intelligence throughout.

That work is difficult, risky, costly, distracting, and time-consuming, and exactly why so many internal build initiatives at some of the world's largest financial institutions have historically failed. This is also why so many of our customers are telling us they have no desire to attempt to rebuild an incredibly complex, tier one, mission-critical enterprise application themselves, simply because AI has made coding easier. nCino has the product functionality, data, workflow, context, customer relationships, and regulatory knowledge, and credibility to turn AI into accountable actions and to drive significantly better outcomes for customers. We believe those advantages have become even more evident to the market since our last earnings call as more customers use our banking advisor capabilities in production and realize meaningful outcomes for their organizations.

nCino enables financial institutions to drive the specific banking outcomes they want, backed by 15 years of data, governance, regulatory tracking, compliance, and the domain-specific context they require. As of the end of the second quarter, 12 of our top 20 U. S. Enterprise customers by ACV have already transitioned to our new pricing model under multi-year contract extensions. And approximately 48% of our total ACV is now on-platform pricing, up from just 40% last quarter.

New customer wins, like Hachi Juni Nagano Bank in Japan, who selected nCino for consumer lending, and a growth-focused development finance institution in Germany that selected nCino for commercial lending, are the latest proof points that our unified platform and AI capabilities are resonating on a global basis.

Ncino's deep banking domain expertise and market-leading product innovation and AI capabilities were clear differentiators against local market editors, horizontal workflow vendors, and potential internal build options in these recent international sales cycles. These attributes have also been clear differentiators for other customers around the world that are reinforcing their commitment to the nCino platform in the form of expanded and renewed commitments for the next phase of technology and operational transformation.

The breadth and depth of our unique platform gives us the confidence to land with any solution and expand across our full suite as our customers' needs grow.

This is especially true in the community and regional bank and credit union markets, where centralized decision-making frequently allows us to sell multiple solutions or the entire platform to a single buyer. The second quarter was no exception in demonstrating this point. A regional bank with over $15 billion in assets expanded its adoption of nCino from commercial lending and treasury management to now include consumer lending.

A Seattle-based credit union and portfolio analytics customers since 2014 expanded their commitment to the nCino platform in a major way by adding commercial and small business lending plus commercial account opening. The Community Bank of the Northeast expanded their nCino adoption from commercial and consumer lending and account opening to also include mortgage, and a credit union with almost $5 billion in assets became a seven-figure ACV customer through an expansion of their existing mortgage deployment to support their strategic growth objectives. Despite these mortgage wins with depository financial institutions, the higher-for-longer mortgage rate environment is pressuring the independent mortgage bank market and driving incremental M&A.

While the rate environment remains a headwind to the U. S. mortgage industry, we continue to focus on expanding our market share by adding logos with a market-leading, AI-powered experience. To that end, we were pleased to welcome back an IMB customer that left in August 2024 for a less expensive solution. Reliability issues and a cumbersome borrower experience with that solution, along with pushback from their own sales team about losing potential borrowers, brought them back to nCino. Customers and prospects recognize that nCino has been investing in AI, rapidly evolving and advancing our business model, and leading the industry by aggressively incorporating intelligent and AI capabilities into our solutions with measurable results. As an example, one of our U. S. Enterprise customers estimates they can save 160,000 hours annually by utilizing our locate and file functionality, which is just one of our banking advisor capabilities.

When extrapolated by about $35 per hour to approximate median loan officer compensation, according to the Bureau of Labor Statistics, that yields annual savings of over $5.5 million.

Again, that level of savings is from using just one banking advisor capability. Proof points like this are motivating customers to transition our platform pricing model to gain access to nCino's agentic solutions and other AI initiatives. At the end of the second quarter, over 230 customers have already purchased AI intelligence units.

We are no longer trying to convince prospective customers that we can lead the transition to agentic AI-powered banking. We're doing it. And the energy and momentum we are seeing in customer and prospect conversations around the globe reflects that conviction.

I mentioned during our first quarter earnings call that some customers were beginning to reach the limits of their initial intelligence unit bundles. We have recently begun monetizing the sale of additional intelligence units as clients come back for more, Which is really exciting to see and a strong signal of engagement with our banking advisor capabilities.

Our focus for the foreseeable future will remain on driving long-term sustainable AI adoption over near-term subscription revenues growth. So we do not expect this early additional monetization to materially impact our financial results in fiscal 27. However, the adoption trends and consumption trajectory we're seeing give us increasing confidence that intelligence unit consumption through the adoption of our AI capabilities will be a material driver of subscription revenues growth for years to come. You may recall us referencing continuous credit monitoring, or CCM for short, which is one of our banking advisor capabilities currently driving a meaningful amount of intelligence unit consumption.

CCM is a great example of how nCino leverages LLMs where they excel and add value. In this case, powering a natural language chat experience paired with our own proprietary predictive models, algorithms, and data. Rather than having credit teams manually review a commercial portfolio on a quarterly, semi-annual, or annual basis, Ncino's continuous credit monitoring can assess more than 40 credit and operational indicators on a daily basis and can identify the loans that warrant attention, create the necessary documentation to review, and help guide the next appropriate actions.

This functionality gives relationship managers and credit teams the ability to focus their time on issues requiring careful judgment, while giving senior leaders a current portfolio-level view of risk and the ability to drill into underlying exposures and detail. What's important to understand here is that this is not simply an LLM layered onto a bank or credit union's data. Banking requires reliable, traceable, auditable, and governed outcomes. While we use LLMs to summarize and understand intent across multiple data sources, the core of our continuous credit monitoring functionality is guided by nCino's internally developed, purpose-built, deterministic models and algorithms. We use these to consistently apply the same defined rules because a financial institution must be able to reproduce, explain, and defend how every single credit decision was made and how every process was executed.

We believe the continuous credit monitoring functionality will be a meaningful medium-term driver of intelligence unit consumption. That's because this isn't just a simple chat interaction. It is performing ongoing, highly complex, multi-step processes across critical banking activities.

This is software that is actually doing the work of a bank or credit union employee, not just helping that employee do the work. The combination of our unique operational data, deep banking expertise, and tested governance and security infrastructure is what enables nCino to deliver this kind of outcome to our customers in a way that simply cannot be replicated by adding non-deterministic LLM on top of core banking data. I have yet to hear a C-level executive at a financial institution express a desire to automate their business processes on public cloud data.

Conversely, they are as excited about offerings like CCM as we are, and I look forward to updating you on its progress over the coming course. Based on the conversations we are having with customers and prospects, we believe financial institutions of all sizes around the world are gaining a better and more clear understanding and appreciation of the uniqueness, value, and differentiation NCino's AI technology provides, which we believe has been a significant driver of the sales momentum we have seen over the past year and continue to see in our sales pipeline today. The pace of product innovation nCino is realizing today would not have been possible a few years ago.

Through our own initiatives and our internal team's use of AI, we are seeing tighter alignment across product development, engineering, and professional services, allowing us to learn from FDE engagements and customer deployments and incorporate those lessons back into the platform more quickly. It's also great to see that we are attracting extremely strong technical and banking talent that wants to join nCino to help define, build, and deploy the next generation of financial services technology.

Attracting and retaining talent is a strategic and stated top priority for the company. We remain laser-focused on execution and continue to make strong progress against the strategy and growth levers we've highlighted over the past year and a half. We continue to focus on what we can control and are energized by the accelerated subscription revenues growth we are seeing in the business outside of U. S. mortgage.

In summary, our business is strong and continues to gain momentum. We continue to see customers up and down the asset size spectrum, renew early, and expand their use of our AI technology. And our sales pipelines are healthy and diversified across segments, solutions, and geographies.

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

Thank you, Sean, and thanks everyone for joining us this afternoon to review our second quarter fiscal 2027 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 earnings release which is available on our website and is an exhibit to the Form 8K furnished with the SEC just before this call We are again pleased with our financial results.

Total revenues for the second quarter of fiscal 27 were $161 million, an increase of 8% year-over-year. Subscription revenues for the second quarter were $143.5 million, up 10% year-over-year, and also 10% in constant currency.

U. S. mortgage subscription revenues were $20.6 million in the second quarter, down 1% year-over-year, contributing $100,000 of overperformance in the quarter against our guidance, as noted on slide 14 of our earnings presentation. Excluding U. S. mortgage, subscription revenues in the second quarter increased 12% year-over-year and also 12% in constant currency, reflecting strong sales execution, which helped deliver approximately $1.3 million of upside to our subscription revenues guidance for the quarter.

Professional services revenues were $17.5 million in the quarter, down 3% year-over-year. Professional services gross profit margin was 3% in the second quarter, up 600 basis points, over negative 3% in the second quarter of fiscal 26. We continue to prioritize improving the profitability of our professional services practice over growth in professional services revenues. Non-U. S. total revenues in the second quarter were $36.4 million, up 9% year-over-year, and also 9% in constant currency. Non-U. S. subscription revenues were $30.9 million, up 13% year-over-year, and also 13% in constant currency. Non-U. S. subscription revenues were negatively impacted by a slight FX headwind of approximately $200,000 in the second quarter. Non-GAAP operating income in the second quarter was $40.8 million, or 25% of total revenues, an increase of 36% year-over-year.

As noted on slide 14 of our earnings presentation, of the $3.3 million in non-GAAP operating income overperformance in the second quarter, approximately $900,000 was from incremental gross profit derived from subscription revenues overperformance, and the remaining $2.4 million was driven by disciplined expense management across the organization, with teams executing effectively against plan. As expected, our annual customer conference hosted in May drove the sequential increase in second quarter sales and marketing expenses. Free cash flow was $34 million in the second quarter, up 170% year over year.

Turning to an update on our share repurchase programs, in the second quarter, we repurchased approximately 4.2 million shares of the company's outstanding common stock and open market purchases at an average price of $15.41 per share for total consideration of approximately $65 million. Additionally, in the second quarter, we finalized the accelerated share repurchase program we announced on March 31, 2026. Under that program, we repurchased approximately 6 million shares of our outstanding common stock at an average price of $16.57 per share for total consideration of $100 million. Since April 2025, the company has repurchased approximately 15.8 million shares of our outstanding common stock at an average price of $18.99 per share for total consideration of $300 million.

Having effectively exhausted all prior repurchase authorizations, our board of directors has authorized another $100 million share repurchase program. We continue to view opportunistic repurchases of our common stock as a compelling use of capital as available free cash flow permits, in light of the momentum we see in the business and the sizable global opportunity we have in front of us.

Turning to guidance, for the third quarter of fiscal 27, we expect total revenues of $161.25 million to $163.25 million, with subscription revenues of $143.25 million to $145.25 million, an increase of 7% and 8% respectively at the midpoint of the ranges. Excluding U. S. mortgage, our third quarter guidance assumes subscription revenues growth of 11% at the midpoint of the range. Non-GAAP operating income in the third quarter of fiscal 27 is expected to be approximately $42 million to $44 million, an increase of approximately 8% year-over-year at the midpoint of the range. For fiscal year 27, we now expect total revenues of $644 million to $647 million, with subscription revenues of $573.5 million to $576.5 million, an increase of 9% and 10%, respectively, at the midpoint of the ranges.

Excluding U. S. mortgage, our updated full-year guidance assumes subscription revenues growth of 12% at the midpoint of the range.

As noted on slide 15 of our earnings presentation, we are extrapolating the second-quarter execution-based overperformance in subscription revenues of approximately $1.3 million to both the third and fourth quarters. This is offset in part by an adjustment to our U. S. mortgage outlook, which we believe is prudent to do at this time to account for additional IMB churn resulting from mortgage rates remaining higher for longer. We are now forecasting U. S. mortgage subscription revenues of approximately $20 million in the third quarter and approximately $18.5 million in the fourth quarter, the sequential quarterly variance reflecting normal fourth-quarter market seasonality. This update represents a reduction in our prior U. S. mortgage subscription revenues forecast of approximately $700,000 in the third quarter and approximately $1.2 million in the fourth quarter.

Please note that our overall company churn expectations for fiscal 27 remain unchanged, but our churn forecast now includes a slightly higher mix of IMB churn, offset by less churn across the rest of the business. With earlier timing assumed that negatively impacts subscription revenues in the second half of the year.

We continue to expect international subscription revenues to remain accretive to overall subscription revenues growth in each of the third and fourth quarters of fiscal 27, notwithstanding that we now assume FX headwinds of approximately $200,000 in each of the third and fourth quarters. Excluding U. S. mortgage, our full-year guidance implies fourth-quarter subscription revenues growth of 12% at the midpoint of the range, representing year-over-year growth acceleration of 400 basis points, which we largely attribute to sales momentum emerging from the excitement around our AI strategy and product innovation and continued strong sales execution. We are very proud of the progress we have made re-accelerating subscription revenues growth outside of U. S. mortgage and are excited for the potential to further accelerate total subscription revenues growth in a better mortgage market, as we believe the re-accelerated growth we are achieving this year and the rest of the business is durable.

We now expect non-GAAP operating income for fiscal 27 to be $171 million to $174 million, up from our prior range of $166 million to $171 million. Our updated guidance represents an increase in non-GAAP operating income of approximately 33% year-over-year at the midpoint of the range and non-GAAP operating income margin expansion of approximately 500 basis points. We expect to continue delivering non-GAAP operating margin expansion in the ordinary course beyond this fiscal year as the business continues to scale, while balancing the opportunity to optimize subscription revenues growth, which remains our focus and priority. We are quite pleased with the progress we have made in the first half of the year and feel really good about the business right now as a result of the AI and product innovation being delivered by our R&D organization, the execution of our sales teams, and the demand environment and the sales activity we see reflected in our global sales pipelines.

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. For full-year fiscal 27, we are again raising our free cash flow guidance to now be $137 million to $142 million, up from our prior range of $135 million to $140 million, representing year-over-year growth of 69% at the midpoint of the range.

With that, we will open the line for questions.

I appreciate it. The question and where you're coming from, we actually highlighted two wins there, one in the community bank, one in the credit union in the script, and more broadly in the market. You know, while we do see, you know, the hire for longer rate environment has been a headwind as called out, we think this is a really good business for us. And we think the IMB market is very important, but at the same time, as we talk about these wins in the community bank and credit union landscape, we think continued wins in the core banking sector where there's less volatility and more stability are ready for the taking, both down and potentially up market.

So we're excited there. It remains adjacent to every conversation as we talk about the power of the platform in the environment that we operate in. The motions that we run across commercial, consumer, and mortgage give us a diversified portfolio and is absolutely accretive to not only our pipeline growth, but the first half of year momentum we have, and we're really excited about the second half.

It does, Zach. I appreciate the question and your time today. Look, excluding U. S. mortgage, you know, our third quarter guidance assumes subscription revenues growth of 11% at the Q3 midpoint and 12% at the midpoint, it implies for Q4, right, which is an overall growth acceleration year over year, 400 basis points. And so we did want to make clear in terms of mortgage, which, as you know, is the higher for longer market that we're going through. Make sure you guys appreciate that and not have that overshadow the rest of the business, which is performing quite well. So, in terms of drivers for growth, you know, look, we feel really good about our product portfolio overall.

Our flagship commercial product continues to have strong demand across the globe. And ultimately, I'd remind you of the five growth initiatives that we laid out last year, which are AI, international, credit unions, cross-selling mortgage to banks and credit unions, as Sean just touched upon, as well as onboarding. And so to me, the exciting thing to highlight is that while we feel really good about the progress we're making with each one of those initiatives, it's still early. And the accelerated growth we are driving really is not with those fully contributing as we expect they will be able to, you know, next year and beyond. And so we feel like we've planted the seeds for growth. We feel like we've got multiple growth levers to add on to the growth that we're already seeing from a reacceleration standpoint.

And, you know, we're really excited where we are. We'll continue to control what we can control. And as we talked about in our prepared remarks, and as Sean noted, you know, we'll continue to aggressively try to take logos down in the mortgage business, which is what we were successfully able to do. So if you go back a couple of years ago, in the, I'll call it, more darker days of mortgage, we were able to add a lot of logos and ultimately outpace the churn that we experienced in that, which was, from my perspective, a much more difficult market than it is today, even though we do have headwinds today.

Thanks, Zach.

Yeah, Alex, the first thing that comes to mind is we have more and more customers by the day going into production with Banking Advisor and our digital partner and energy capabilities. In fact, year to date, we've more than doubled the customers going into production, which is exciting. And of the core customers that we've named that are on our new pricing model and have adopted our AI capabilities, one-third of those are in production today. So all of that trends really well, as you know, in traditional sort of, you know, environments where you test in sandbox and then move to production once you gain confidence, and then you see measurable outcomes that you can drive to the bottom line of your business and directly to your balance sheet.

Those start to get the attention of the executives in C-suites that sign the checks in the first place. And that's what we're looking for, right, is to directly correlate those outcomes in production to what we're delivering. And so while in some cases it still takes longer than we would like to get to production because we have to go through governance and security reviews and, you know, all the things that need to be contemplated in the AI world, you know, we're seeing really good momentum there. So we call out in the script, you know, some of our continuous credit monitoring capabilities. We call out in the script locate and file. If you think about locate and file, for me, really being the floor, not the ceiling, right?

We talked about 160,000 hours annually for one particular niche use case in a single workflow. And remember, Alex, we're delivering workflows across all the motions that we run, onboarding, account opening, loan origination, and portfolio monitoring across commercial consumer and mortgage. So if you extrapolate that locate and file potential and capability across all the workflows that we have in production environments over time, you know, hopefully you can tell I'm pretty fired up about that.

Yeah, and just to add to that, Sean, as we talk about a third of those customers being in production, I think one of the things that's really exciting is we've got a nice queue all lined up, right, As we take customers from signing to implementation to get through testing and then ultimately into production. And so we see that queue lined up, and I think that's something that's exciting and bodes well. And to that point the client savings that Sean referenced you know right now they still in sandbox We working with them to get through security which we will But that a great example of just the process that you need to go through with our customer base which is highly regulated right conservative market before they actually go into production and start seeing you know it live the outcomes that we able to produce And so to Sean's point, we are pretty excited about what we see happening right now.

Yeah, thanks, Alex. And just to clarify, I said $160,000. It was referring to 160,000 hours that our enterprise customer estimates they'll be able to save with the locate and file capability. But no, as you heard in my prepared remarks, we feel really good about where we are in the progress in the first half of the year. Pipelines look good. Market demand looks good. And so as we go into the second half of the year, we're pretty energized here.

And just to that point, we can note that just last week we signed what we expect to be our largest deal of the year with an international customer. It's a Q3 deal, so we'll talk about it more on the next call. But certainly this early in the second half of the year, getting that out of the way bodes well.

Obviously, we've got five months left, so we've got work to do. But again, we're feeling pretty good right now.

Thanks, Alex.

Yeah, so in terms of long term, you know, we have stated aggressively this year we would hit the rule of 40 commitment, and we're excited. We feel like we're hitting that early with expense discipline and with growth reacceleration year over year, quarter over quarter. So as we think long-term, we expect to remain at that pace, and we expect growth to continue to accelerate and make up a larger portion of our overall delivery mechanism. But as far as this year, when we're talking about Q2, we're excited about the trajectory to the Rule of 40.

And once we tackle that and read that back, we'll set our sights on what growth looks like between now and the path to beyond 40. Yeah, Ryan, I think, you know, if you go back to our earnings day, our analyst day last year, you know, we focused on the rule of, but really more on that 35% non-GAAP operating margin, which, again, hopefully everyone has seen the progress that we've continued to make towards that. We do continue to err on the side of growth. I noted when I was on stage during that analyst day that we believe that framework is intact. We've not said anything since that around the top line. But again, I think we're doing the right things in order to continue to accelerate growth at the company and get back to what we think is a more reasonable level of growth for a company of this quality with the market opportunity we have in front of us.

We're very, very focused on the growth. When we sit here mid-year and we beat our aggregate annual operating plan halfway through the year, when we are in a position that we signed our largest deal of the year early in the third quarter, you know, it is about growth. And we talk about our growth initiatives and how they're maturing and how we think about them contributing over time. We'll continue to focus on that growth. But we've exercised very good discipline on the expense side as well.

You know, again, as we get more and more momentum outside of the United States, those are generally going to be leaning towards more new logos just because of the white space we have outside of the U. S. But again, we've got a great customer base globally, but particularly here in the U. S. , and we have a lot of product to sell them. And, again, I think one of the things we feel really good about is the output from our R&D organization, the acceleration of product.

And, again, I think that, you know, we don't distinguish cross-selling to a current customer or landing in that new logo. For us, it's all ACV. And, again, with the breadth and depth of product portfolio we have, we feel like they're both opportunities for us.

Thanks, Ryan.

Thank you. Yeah, I know you can hear the excitement with the pace of innovation that we're putting out into the market. You know, I have never seen more product delivered in a six-month period than I did the first half of this year. I reviewed that with our product team last week, and we presented that to our board. And that pace I expect to continue. And as we've talked about both in my comments as well as Greg's here, yes, we're in a highly regulated industry. There's compliance, there's regulation, there are security reviews. And to a certain degree, that's just part of the business that we're in, right? And I do expect that there will be more pent-up demands to adopt those features, and we will outpace what we're delivering into the market.

And I expect a product development pace to run ahead of how our customers can actually consume that. And we're seeing that at every segment of the market, right? Not just enterprise, but in the community and regional spaces as well. And, you know, that's okay, right? That's just part of doing business. I think you're starting to see some of the narrative overall in the landscape shift, you know, around what AI is going to be. You're hearing about the gap between adoption and outcomes, and we have always been focused on the outcomes. We've never taken our eye off the ball on what truly matters, and that's driving efficiency into the bottom line for our customers through increased loan cycle times, greater production, you know, by role, and that for us remains just a core principle at NCino.

Listen, we talk about the platform wins, right, and we talk about a balanced portfolio across commercial, consumer, and mortgage. Our flagship and, you know, core business is very strong, right? We're very excited that the commercial business in the domestic U. S. market from community up to enterprise is very strong at the same time. We've called out in the script consumer deals at regional banks. We've called out international deals, you know, the largest this year outside of the U. S. So, you know, to me, that's the power not only of the platform but being a global company is a diverse portfolio, and we invest accordingly to keep up that pace. We probably have more breadth overall in our commercial pace, and we're making sure we balance the functionality across all lines of business that we serve.

Thanks, Aaron.

Yeah, we understand where you're coming from with the question, and, you know, everybody's got their model out there. I'm not in the business of trying to provide the exact inputs, not knowing those models. But in our business model, we have been very clear that we're confident in our posture this year. We're excited about the growth that we've got, both in the first and second quarter, and we're excited about the momentum in the business. We don't expect to, you know, reframe anything for the back half of the year based on intelligence units alone. But over time, as those cues that Greg referred to move from development into production, as customers get through security reviews, as customers take on more of our agendic capabilities and digital partner experiences, that will show up over time.

But for fiscal 27, you know, we're excited about the business, and we're not changing any of the sort of inputs that you're looking for necessarily.

Yeah, Chris, as we've been highlighting, for us, it's all about adoption this year. We believe that will lead to, you know, material help or drivers from a top-line acceleration perspective, top-line growth perspective. We've got a lot of models here. You know, one gets me more excited than the next. We do have discussions in terms of KPIs and things, but I think the most prudent thing to do is not get ahead of ourselves and continue to focus on adoption. And as we get more and more data points from our customers, more and more outcomes where our customers are realizing the value, like that 160,000-hour example Sean said, I think we'll be able to come to you with more clarity and definitiveness in terms of the model.

But we understand the question, and again, we'll continue to work towards providing that clarity.

Yeah, as I said in my prepared remarks, our churn forecast hasn't changed for the year from an aggregate basis, which is about $25 million of churn for the year. Again, it tilted a little bit more towards mortgage, specifically driven by IMBs and less towards the rest of the business, but overall, it stayed consistent with where our forecast has been from the beginning of the year.

Thank you. I'm going to turn the call over $5 million on nCino, so hearing about double-digit increases in ACV with those renewal examples is impressive. I was wondering, can you maybe compare how ACV increases are comparing, again, at renewal more broadly across your customer base? You shared maybe some enterprise examples, but the experience at small regional or maybe even U. S. international, I'm wondering if there's certain segments of your customer base that are leaning in more to what nCino can offer.

Great. Thanks for that.

Yeah, you know, I'll point back to our focus on outcomes, as has always been clear. And we're serving up agentic solutions and delivering, you know, an AI.

But as far as numbers, you know, metrics with calculations, what we look at is a business case, right? With every customer, always have, before AI and after AI, is what does that business case look like? If we can extrapolate those 160,000 hours we're talking about across multiple workflows, and that's going to save a customer, we're excited about that, right? We don't think that fundamentally changes the pricing dynamics. We went through a pretty extensive exercise on the pricing transformation that we rolled out at the beginning of last year. And what we want to do, again, is just deliver efficiency to the bottom line of our customers as much as we possibly can.

The first part of your question, I mean, terms are generally steady. You know we don see a material swing or change in the terms of our contracts and enterprise due to the current time that we in with the pricing transformation as well as the eugenic solutions that we delivering So that holding firm Can you restate the second part of the question with additional modules I just want to make sure I understand Yeah, it was kind of the attribution to, like, there's 10% ACV uplift, and obviously a part of that is the flip to platform-based pricing, access to AI modules.

Absolutely, Andrew. The 10% is really, think about it apples for apples in terms of them buying no new product but getting the first bundle or the initial bundle of intelligence units. For each one of our renewals, I mean, our focal point is going to the customer, working with them to see, you know, where else we can expand in the financial institution, right, which is, again, one of the unique things about nCino and our platform story and all the product that we have to sell them, as I referenced earlier. And so there is much upside as we go into being able to sell them more, but again, just on an apples-to-apples basis with the only difference being the initial bundle of intelligence units.

We laid out that 10% target last year. After Q4, we confirmed that we exceeded it, and again, we're continuing to see that as we go through this year.

And then if you think about professional services, Greg, I get the comment about sort of seeking profitability versus revenue. It makes sense, and, you know, P. S. margins continue to be profitable, which is great. I guess just trying to think about the trajectory from here on the PS side, it seems like some of this efficiency continues, but then I think on the revenue side, as you get more efficient, is there an offset in terms of lower hours required? Obviously, the North Star is efficiency and profitability, but just trying to understand how that works through the model. Thanks. Yeah, I think the PS organization continues to do a good job of making our implementations more efficient.

And so we'll continue to focus on, again, driving margin. And again, we'll do that at the expense of revenue and get the overall total cost of ownership for our customers down. And so that's a win for all of us. As we do free up capacity, we are turning those folks in to support our FDE engagements as we continue to have high demand for that part of our organization. And so, again, that's something we're excited about and, again, that we expect will fuel more accelerated adoption of intelligence units as we deploy our FDEs on a global basis.

And remember, I talked about the pace and all that's been delivered the first half of this year. So the more output and productivity that we see coming from the R&D organization, the more things we have to deploy. And the same thing I would tell you is as we gain efficiencies in our release management and how we actually push out new technologies, we continue to rotate managed services capacity toward the forward deploy engineering group so we can keep pace. And avoid the bottlenecks that were referred to earlier in the call.

That makes sense.

Thanks for the comments.

Hey, listen, you know, we're out there with an aggressive posture every day, you know, trying to expand the functionality we have in the customer base that we have. So anything is possible. We have a team that's motivated, that's hungry, and has really strong trust, credibility, and relationships in our customer base. And, you know, if we have alignment with the outcomes our customers are looking and our posture, then why not? You know, we're anchoring to our core, you know, actual conservative estimates for this year, always looking to accelerate.

Yeah, and Terry, we've been pretty consistent over the last few quarters about these accelerated renewals, you know, and from a demand perspective, we haven't seen that wane. And so some of it is just timing and just working through some of these procurement processes. But in terms of the excitement with what we're doing, the capabilities that our RD organization are producing, and ultimately, as Sean continues to note, as we focus on the organization, the outcomes we're producing for our customers, We expect that to continue to drive some accelerated renewals over the coming quarters.

Sure. Thanks for the question. The platform value proposition is proving to resonate internationally as well as it is domestically. We're excited about the momentum, the outcomes that we're delivering for our customers as we talk about the excitement from EMEA to AsiaPAC is real. So, you know, I don't think it's dependent on any single individual. Again, the power of the platform and a global team and a machine here where we can ebb and flow. I mean, you're constantly going to have changes in your personnel, and a sustainable and long-term viable business model, you know, should be able to withstand this. So I don't spend a lot of time right now worrying about do we have the team on the field.

I'm excited about the outcomes we're delivering and really proud of the team.

I think we'll continue at the pace that we've been on, and, you know, we don't necessarily call out being dependent on a percentage of the customer base being on the new model to meet our fiscal commitments. We continue to execute and do what we said we were going to do with respect to our core financial targets. Certainly, it will be north of 48, and I think that growth will correlate as it has, you know, over the past the last several quarters.

Yeah, Nick, I think the good news is it continues to go well. Ahead of schedule for us, sales teams doing a great job of working with our customers through these renewals. And, again, I think the momentum that we're seeing, we do expect to continue without putting a specific target on it.

Thank you so much.

So let me just talk about what's driving the improvement on the non-mortgage churn and just which segment does that show up in. Thank you.

Thanks, Ken. Yeah, I think just as we kind of separate the businesses as we've done for this call, I'm going to make sure you guys can appreciate.

You know, ultimately, there's not one specific place. Again, it's slightly higher on the IMD side, I said, and slightly lower on the rest of the business just based on our forecast at the beginning of the year. You know, as we go into each year, we've got some identified churn based on whatever circumstances, and then we also have some unidentified churn that we do for forecasting purposes.

And as stuff comes up, you know, our teams do a great job of figuring out what's going on, and is there some way that we can mitigate a potential churn risk? So I'd say nothing worthy from a churn perspective, again, other than obviously on the IMB side with the higher for longer rates. And again, we see that driving a little bit higher turn. But I think overall, as I noted, no update in terms of where we started the year from an aggregate basis.

This is, you know, a particular example of a single skill within a workflow and a line of business, right? And if we extrapolate that across the platform, across the solution portfolio, across lines of business, and across the globe, as customers take cohorts into production, you can imagine that, you know, while we're not putting a number on it, it's nothing but upside, in our opinion.

Yeah, and Ken, I think the other thing to note is what's really exciting is, you know, kind of the funnel of additional capabilities that the team has out. A lot of them are in sandbox and being tested. But again, on upcoming calls, I think you should look forward to hearing us talk about more similar type capabilities that we think can drive significant value to our customers. And we're excited about that. But exciting stuff.

Thank you, Sean.

Thank you, Greg.

Thanks, Michael. And yeah, I don't think we would correct your assessment in terms of growth, which again, hopefully you guys are hearing our excitement about it, and we're real proud of the team and the focus and the execution. The back half of the year, again, we tried to be incredibly transparent with breaking out mortgage so you guys could see the impact of that to the back half of the year, and also highlighting, again, the growth that's implied in Q4, exiting without mortgage. Obviously, we'll take some mortgage, less headwinds for mortgage as they come along. But again, I think as you look at the rest of the business, we're feeling good about the trajectory, and our focus is just on continuing to execute and make sure, again, as you've heard me say before, Michael, make sure we close the deals.

We say we're going to close and close them when we say we're going to close them.

Thank you.

I heard most of that. It was kind of in and out in the middle, but I think you're talking about what does the trajectory look like for the intelligence unit consumption? And, you know, we will remain very steadfast in that a big update here for this call is the movement into production with customers who have been using our AI solutions in sandbox and development prior. And as those cohorts move in and we have one-third of the customers and twice as many customers in production now as we did at the beginning of the year, then we can actually read back the outcomes, right? And we read back the outcomes. That puts folks in a position where they say, okay, if I move, you know, from one to more banking advisor skills, digital partners, what's that going to look like for my outcomes?

And we'll actually be able to read back to them that gap that is the major narrative in the macro environment right now is the difference between adoption and actually value we're deriving from the outcomes. And as we get into production, that's the place where it shows up.

Yeah, this is a big milestone for the company. As you can imagine, a large part of our growth story over the years has been our partnerships and the system integrator ecosystem going to market with nCino across all segments and across banks as well as credit unions and IMB. And so when we think about giving access to our solution to these partners to go ahead and develop on top of the platform, that becomes a force multiplier for nCino. We have 1,600 employees today. We've talked about rotating the capacity toward our forward deploy engineering groups. If we can really put a multiplier in the SI ecosystem through access from our MCP layer, that really just gives us a proliferation of growth that's hard to put a ceiling on.

I'd like to hand the program back to Sean for any further remarks. Yeah, thank you all for your time this evening. Really hope you can hear our excitement in the business. Proud of our teams, energized by the momentum, and we look forward to continuing to update you all throughout the year. Have a good night.