NCNO - NASDAQ

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, that 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 in 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 analysis 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 reinforced 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 spent 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 Advisor skills and 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 Advisor 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 Advisor is shifting from a set of stand-alone features to a pervasive experience. In that context, the number of discrete Banking Advisor capabilities is becoming a less useful measure than the 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 a ready-built Agentic 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 intercontract, 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 uplifts 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 over-performance against the high end of our third quarter subscription revenues guidance, approximately $1.4 million reflects 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, overperformance 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 in 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 now expect year-over-year 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 revenues 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 close to 130%. 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 [ Sev

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 we could just add some color to that. Is that coming from big customers around commercial lending? Is it international? You had 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 standpoint, 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 [ Sev

Got it. Got it. That's super helpful. And maybe on banking deposits, that'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 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 on 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, it 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 for before within the commercial loan space and what they're doing now with the expansion? And how much white space do you 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, sticking 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 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 [Technical Difficulty] actually nCino Research Institute recently did an internal study of 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 1 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 or were the conversion rates higher than you budgeted? And then just related to this execution factor, why doesn't it all flow through fully the 3Q magnitude becoming the 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 [ covet ] 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 AI solutions and the agents we're bringing to bear as well. And 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 that 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, our early renewals going to become kind of an increasingly important factor here if you are delivering kind of the ROI that's possible?

Yes. 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 Advisor and looking to our thought leadership on Agentic 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 Advisor 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 Advisor and our Agentic solutions do that work while they sleep, right? And they wake up in the morning and they get prompted on where exactly they should spend time with their customer 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 and 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.

Got it. 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 from 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 who we've had conversations with just in this past several weeks and collaborating with them on the adoption of Banking Advisor 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 contribute 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 [ covet ] the onboarding experience from the DocFox acquisition. We have integrated the technology, and we called that out as 1 of our 5 core growth initiatives at the beginning of the year. What I'm really pleased about is at this time in 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 growth, 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 years progress, seeing that feedback.

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

Great. 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.

Sure. Yes. Listen, I think the common playbook is we have a very quick deployment cycle on banking adviser. 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 locate and file skill 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 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 tight knit 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's -- 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 in a time when we've gotten leaner on our cost. And so we can see a clear trajectory toward 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 expansion into consumer with a 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 the target, right? The 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 Subzero a few times already. As you're rolling out agents and expanding banking advisers' 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 at nCino prior to stepping into the CEO role, I would say we've always been focused on holding our customers closely 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 mythbusters 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 they're 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 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 as a follow-up to follow up on Alex's question on the 2 top 50 bank expansions of 30% and 60%. Would you chalk 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?

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

And as we 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 4Q 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?

Yes. 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 an nCino customer.

No, absolutely. And then I guess 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 see 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 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 beyond 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 timing 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 nor did we 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've 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 in an enterprise bank that understands the value and the maturity of the intersection of AI and operations analytics and is not fully taking advantage of those capabilities today. We see that as a massive opportunity that's resonating. We're getting a lot of head nodding 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 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.

Connor Passarella on for Terry. Just on banking adviser 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 and early warning indicators. These are the things that cause customers to not even think about intelligence unit consumption because getting outcomes for their customers. So we're focused on those. Our forward deploy engineers will be sitting side-by-side with customers, starting with a baseline with operations 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 in our focus on execution here at nCino. I'm proud of the entire executive management team as well as all our employees globally and contributing to our momentum of reacceleration of growth, and we look forward to talking to you next time.