OS - NASDAQ

Thank you for standing by, and welcome to OneStream's Second Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Anne Leschin, Vice President of Investor Relations and Strategic Finance. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to OneStream's Second Quarter 2025 Earnings Conference Call. Joining me on the call today is our Co-Founder, CEO and President, Tom Shea; and our CFO, Bill Koefoed. The press release announcing our second quarter 2025 results issued earlier today is posted on our Investor Relations website at investor.oneestream.com, along with an earnings highlights presentation. Before we get started, I'd like to let everyone know that we plan to participate in 2 conferences in the upcoming weeks. The first is Citi's Global TMT Conference in New York on September 4, and the second is Goldman Sachs Communacopia and Technology Conference in San Francisco on September 10. A live stream and replay of our presentations at the conferences will be made available on our Investor Relations website. Now let me remind everyone that some of the statements on today's call are forward-looking, including those related to guidance for the third quarter ending September 30, 2025, and the year ending December 31, 2025. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors. Some of these risks are described in greater detail in the documents we file with the SEC from time to time, including our quarterly report on Form 10-Q for the quarter ended June 30, 2025, that we filed today. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During our call today, we will also reference certain non-GAAP financial measures. There are limitations to our non-GAAP measures, and they may not be comparable to similarly titled measures of other companies. The non-GAAP measures referenced on today's call should not be considered in isolation from or as a substitute for the most directly comparable GAAP measures. Our management believes that our non-GAAP measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. Reconciliations of our historical non-GAAP measures to the most directly comparable GAAP measures can be found in this afternoon's press release and the earnings highlights presentation posted on our Investor Relations website. We are not able to provide reconciliations for forward-looking non-GAAP measures without unreasonable effort because certain adjustments cannot be predicted with reasonable certainty and could be significant, particularly related to equity-based compensation and employee stock transactions and the related tax effects. Now I'll turn it over to Tom. Tom?

Thank you for joining us this afternoon. The second quarter of 2025 built on the momentum of Q1 with strong subscription revenue growth and record attendance at our Splash user conference. We continue to focus and execute on our long-term vision to digitally empower the office of the CFO. We saw growth in our European business and our North American commercial business even as we navigate near-term uncertainty in certain markets, particularly the U.S. federal public sector. Our second half pipeline remains healthy as our message continues to resonate in the market. Our focus on product and AI innovations has positioned OneStream to capitalize on our momentum and build long-term value for shareholders, customers and employees. With that, let me recap our strong results for Q2. We had another quarter of solid execution as OneStream continues to replace legacy solutions worldwide. We achieved total revenue growth of 26% year-over-year, driven by strong subscription revenue growth of 30% year-over-year and a free cash flow margin of 20%. SaaS conversions continued as our customers adopt version 9 of our platform, which delivers advances in performance, scalability and capabilities. Our core finance platform continues to drive the majority of our revenue growth and the early momentum of our recently launched CPM Express offering is enabling customers to access the power of our platform with the ease and speed of its implementation. This is helping us capture more of the large legacy replacement opportunity that we believe is just in its early innings. The investments customers are making in our core capabilities will ultimately unlock the significant value that our finance AI brings. We introduced some of our most advanced AI innovations at our Splash conference in Nashville, including our enhanced SensibleAI Forecast, SensibleAI Studio and SensibleAI Agents. More and more, customers are beginning to realize the unique and transformational value that OneStream's finance AI delivers. This is reflected by our more than 60% year-over-year growth in AI bookings for the first half of 2025 and the ROI our customers are experiencing. Adding to our leading market rankings from Gartner and IDC, OneStream's market leadership was again recognized this quarter through our exceptional results in BARC's annual planning survey, where OneStream achieved 27 top rankings and 56 leading positions from the analyst firm. These proof points give us the confidence that our strategy is resonating with companies across the globe. These engines of our business continue to feed off 3 main drivers at the heart of our industry. Number 1, finance is in the initial phase of its digital transformation. Having utilized outdated legacy financial systems for decades, CFOs are recognizing the crucial need for a platform to provide a single view into financial and operational data across the enterprise to effectively steer the business. Number 2, the role of the CFO is evolving and expanding. CFOs are transitioning from focusing on reporting to providing more strategic insight and operational planning to help drive business execution. And number 3, the use of advanced tooling is enabling finance teams to drive business performance, not only measure it. We are seeing a shift in customers looking for applied solutions that are purpose-built for finance. Proven AI solutions have the potential to give finance teams greater predictability and visibility into their business with more speed and agility. Taken together, these industry trends remain at the heart of our market opportunity, guiding our product road map, shaping our innovation and expanding the value of our platform. And the second quarter was no different. Now let me recap our product innovations announced at Splash, including some of our most powerful advancements yet. We welcomed prospects and customers to the finance AI era and gave them a front row seat to the future of finance and OneStream's role in shaping it. Fundamental to our platform is our plug-and-play architecture known as Genesis. As a refresher, Genesis consists of a no-code click- to-configure engine and library of reusable functionality like dashboards, widgets, formulas and workflows that can easily be snapped together to dramatically simplify and personalize a customer's OneStream experience. Genesis is now generally available, and there was so much interest from customers and partners that we had to create additional sessions so they could get their hands on the product and learn more. Splash reinforced how transformational AI can be when connected to a company's financial and operational data. We highlighted a number of global brands having significant success with SensibleAI Forecast, pushing their forecast accuracy as high as 95% to date. SensibleAI Forecast is just the first step in our AI journey. We also unveiled several new applied finance AI solutions tailored to the office of the CFO. Number 1, SensibleAI Studio moved to general availability in June and is a collection of algorithms or routines built to solve key finance and business process issues such as anomaly detection and trending analysis. These routines can be accessed in 3 ways. First, OneStream embeds them directly into existing solutions, like we did with anomaly detection within OneStream account reconciliations. Second, customers and partners can access these routines as Genesis blocks, snapping them into their existing workflows. That means customers do not have to be programmers to build reports and applications on our platform. Third, developers can access the SensibleAI routine through REST APIs. SensibleAI Studio does all of this without the cost, complexity or risk of stand-alone deployments. Already, we are seeing customers purchase SensibleAI Studio given its quick time to value. A great early example of this in Q2 was an existing commercial customer who chose to adopt SensibleAI Studio just a month after its release. With nearly 1,000 dental centers, they wanted the ability to look across their portfolio to benchmark each one based on performance, key attributes and other metrics. By harnessing our advanced machine learning algorithms delivered through SensibleAI Studio, they can now automatically flag outliers, whether unusually high expenses or unexpectedly low collection rates. This capability, which was not possible before, is enabling them to move from time-consuming manual reporting and analysis to leveraging automated insights that enable strategic action. This reflects our vision of a single platform with a plug-and-play architecture seamlessly connecting the core finance functions with advanced AI. Number 2, we also introduced SensibleAI Agents, which are currently under private preview with several customers. These include 4 agents: finance analyst, operations analyst, search analyst and deep analysis. Embedded in OneStream, these agents can be operated within workflows, data models and security framework that our customers already know and trust. When asked the question, these agents can directly access validated financial and operational data within the platform to automate complex tasks, deliver deeper insights and help organizations move faster with confidence. Perhaps the best way to describe our differentiated approach to finance AI is that we bring quantitative, generative and agentic AI capabilities together into solutions that target the specific needs of CFOs, something no other company does. Before I highlight a few customer wins in Q2, there is one other pillar of our platform strategy that we are just beginning to accelerate into market. We call this agile financial analytics or AFA, which harmonizes transactional and fast-moving operational drivers with financial intelligence. This enables finance teams to, number 1, monitor performance and drivers on a daily, weekly and near real-time basis; number 2, model scenarios quickly; and number 3, respond to changing dynamics with precision. We are beginning to embed AFA into our advanced planning solutions to empower finance to drive integrated planning that links back to financial objectives of the business. Once again, our customer wins this quarter reinforced the need for a modern unified platform to enable agility in financial reporting and planning that scales to meet the needs of the world's largest companies. A Q2 example of this was a leading motion and control technology company that still relied on legacy and homegrown systems after multiple acquisitions over 20 years. As they embarked on their financial modernization journey, they were surprised to learn that more than half of their peers were already OneStream customers. They will be using our core consolidation capabilities to unify consolidation, management reporting, account reconciliations and FP&A. While more customers embark on their journey with OneStream's core platform, some are beginning by also utilizing our advanced finance AI capabilities to realize efficiency gains and accelerate operational insights. Similar to Endeavor Energy, who is on stage at Splash, we saw another global industrial manufacturer add SensibleAI Forecast to its initial purchase of our core platform, replacing its legacy CPM solution. Under the direction of the CFO and CEO, AI-driven forecasting has become central to their strategy, providing the accuracy and agility needed to manage new tariff pressures and shifting global trade dynamics. We also had a significant core win with a major U.S. government institution. This highlights the opportunity that exists for us in public sector, even as the current purchasing environment at the federal level remains dynamic. This organization was looking to modernize and streamline its legacy homegrown budgeting tool that could not meet its needs to scale and consolidate key processes. OneStream will allow their teams to move away from Excel, automating key reporting processes to drive efficiency and stronger team satisfaction. This is a landmark win for OneStream, which together with our recent FedRAMP High certification opens the door for future public sector expansion. This quarter, our North American commercial business performed well, driven in part by the growth of our CPM Express product. By reaching customers early in their financial journeys and getting them up and running in as little as 8 to 12 weeks, we are resetting historical expectations that CPM implementations are a heavy lift. CPM Express has given them a solid foundation from which to expand and gain access to OneStream's advanced solutions and AI technologies more quickly. One such customer was a fire protection and suppression provider that needed to transition from its former parent company's legacy CPM system. They chose our CPM Express platform to modernize their finance processes in a condensed time line. Within just 2 days, the company extracted metadata from the legacy environment and loaded it into CPM Express. The solution enabled them to complete the implementation within 8 weeks and subsequently to expand their use cases within months of the initial deployment. These examples reinforce one simple truth. The OneStream platform is not only a catalyst for efficiency, precision and proactive decision-making across the enterprise, but together with our embedded finance AI portfolio, it can be a game changer by delivering even more powerful insights at scale. In closing, it has been a year since we took the company public. Today, I'm even more excited about our future and the clear value OneStream brings to finance teams. We have made incredible progress and our customers are beginning to see the value of our growing applied finance AI portfolio. And we are just getting started. We have a clear vision, strong momentum and a team that is more energized than ever to take finance further. Thank you. Now I will turn the call over to Bill to provide details on Q2 financials and our financial guidance.

Thanks, Tom. Good afternoon, everyone, and thank you for joining today's call. We are pleased to discuss the results of our second quarter of 2025. Total revenue grew 26% year-over-year to $148 million. Subscription revenue increased 30% year-over-year to $134 million. License revenue declined $900,000 compared with last year, primarily due to our success in driving SaaS conversions. Professional services and other revenue was up $500,000 compared to last year. Free cash flow for the second quarter was $29 million, up 281% compared with last year. For the first 6 months of the year, total revenue grew 25% year-over-year to $284 million. Subscription revenue increased 30% year- over-year to $259 million. And our free cash flow for the first half of the year was $65 million, up 100% compared with last year. Our international business had another particularly strong performance in Q2 with revenue growth of 34% year-over-year, now contributing 33% to our total revenue. We continue to see more than 60% of our bookings come from new customers as we capitalize on the digital transformation of finance and the AI evolution at some of the world's most important companies. We ended the quarter with nearly 1,700 customers, up 14% year-over-year. Billings increased 20% year-over-year to $151 million and 23% on a trailing 12-month basis. I would like to remind everyone that we view the trailing 12 months as the best indicator of billings momentum as it normalizes lumpiness in any single quarter. Our 12-month cRPO was up 29% year-over-year. Total RPO grew 21% year-over-year to $1.2 billion. Our Q2 non-GAAP gross margin was 70% compared with 69% last year due primarily to higher software revenue as a percent of total revenue. Our non-GAAP software gross margin was 76%, flat with last year. Our non-GAAP operating income of $1.6 million in the quarter increased $10.3 million compared with the prior year due to a combination of strong revenue growth and the scaling of our operating expenses. Non-GAAP net income was $9 million in the quarter compared with a loss of $5 million in the prior year, and non-GAAP earnings per share was $0.05. Total equity-based compensation expense for the second quarter was $31 million. We ended the quarter with $652 million in cash and cash equivalents. In summary, we were pleased with our strong performance in the second quarter and first half of 2025. Now let me turn to guidance. Consistent with last quarter, we have the largest pipeline we have ever had at this point of the year and feel very good about our product portfolio and innovation momentum. Our leading indicators remain positive. As such, we are increasing our full year 2025 revenue guidance to be between $586 million to $590 million. Now let's turn to Q3. As Tom mentioned, we are positive about the long-term outlook for the U.S. federal and the public sector business. Near term, the uncertainty in the spending and restructuring environment in the public sector is likely to impact our Q3 revenue growth as this is the largest quarter for the U.S. federal government business. In addition, we continue to see opportunities to convert on-premise government contracts to SaaS, which we have contemplated in our guidance. Based on these factors, we are offering the following outlook, including some onetime measures to give additional color to our guidance. In Q3, we expect total revenue to be between $147 million to $149 million. We expect subscription revenue to grow at least 25% year-over-year. We expect billings to be between $160 million to $162 million. We expect billings growth to revert to 20% plus year-over-year in Q4. In Q3, we expect free cash flow to be breakeven to slightly negative, in line with our historical seasonality trends. We expect non- GAAP operating margin to be between 0% to 2%. We expect non-GAAP net income per share to be between $0.01 to $0.03. We expect stock-based compensation expense to be approximately $30 million. For full year 2025, we expect total revenue to be between $586 million to $590 million. We expect non-GAAP operating margin to be between 1% to 3%. We expect non-GAAP net income per share to be between $0.07 to $0.15. We expect stock-based compensation expense to be between $120 million to $125 million. All in all, we had a strong Q2 and first half performance. Despite the specific dynamics in the U.S. federal public sector market in the third quarter, our business outlook remains strong. Our unique platform, innovative product road map, our pipeline and most importantly, our unwavering commitment to customer success, all make us confident in our ability to realize the long-term opportunity we see ahead. Now let's turn it over to the operator for Q&A.

And our first question for today comes from the line of John DiFucci from Guggenheim Securities. John Stephen DiFucci I have a question -- my first question is for Tom, but I also have a follow-up for Bill, if that's okay. So Tom, we appreciate that OneStream has done very well, selling financial consolidation close to the office of the CFO. And then you've leveraged those relationships into successful sort of Phase 2 expansions for FP&A. And this is evident from all your prepared remarks. But we also recognize that OneStream can be and is used for the very large opportunity in operational planning, which goes beyond the office of the CFO. So can you talk a little bit about the sort of go-to-market steps that you've put in place that you're taking to drive expansion outside the office of the CFO? And then maybe even any recent success stories in that regard would be great.

Sure. Thanks, John. And yes, I'd love to talk about that. But first, let me kind of ground you in the strategy of our platform, which is -- we kind of call it the 3 core pillars of our platform. And the first is the core, as you've mentioned. That's the core financial capability that every business has to do. It's the monthly, quarterly, yearly reporting. It's the planning and management of the business. And as you mentioned, as companies gain efficiency in doing that by our unified platform, they immediately become interested in doing more operational type of planning, which we've been doing for years and years with our customers. What you see and why I mentioned AFA in my remarks is that we're really focusing on bringing that fast-changing operational data. When you think about operational planning versus financial planning, we're talking about more agile type of data changing more quickly that needs to be enriched to find that financial signal in it. Our capabilities that we have in the platform are enabling us to look for those generalizations. Now to answer your question specifically, we're looking at targeted use cases that we can bring to the market that demonstrate that capability by looking at what our customers are asking us to do across the customer base. One example of a product that we'll be showcasing shortly that really takes advantage of a lot of these capabilities is our ESG product, which is heavily based on the AFA technologies and our core technologies because it's dealing with more fast-changing operational data. That's what you can expect from us is uncovering those generic use cases that we will then bring to the customers in a similar type of approach as we're doing with marketplace products or exchange products that we have or even in the format of an Express type of product. So that's a huge opportunity for us going forward. At the same time, that's all wrapped in our plug-and-play architecture, which is another way of saying productization. It's our focus on driving scale to the market. And all of this, in conclusion, is powered and enabled by our AI platform, which is fully integrated. So that -- in general, what you're seeing from us is this focus on productization that's going to enable us to drive this new value to our customer base. John Stephen DiFucci And that -- it sounds like -- and that just makes it easier for the customer to know how to -- they don't have -- they start with a framework that you give them for specific use cases, and that makes a lot of sense. Bill, so you guys, like you pointed out, you reported strong 2Q. And we all know that 3Q for the federal government is the fiscal year-end for the federal government. And you've been open, I think, more so than a lot of other companies about what that can entail and what it -- and I'm just trying to get my arms around like what it is. Because we know it's the end of the fiscal year, and we also know that the federal government contracts are cancelable or they can change them every year. They have to be as federal government contracts. And we assume that there's more renewals in the fiscal fourth quarter. I guess I'm just wondering, your visibility there, are you giving us this guidance for 3Q based on, hey, listen, we know these contracts are going to be cut back a little bit or we're not going to grow much maybe we thought we could have before? Or is it because you know what, we're not quite sure. So let's be a little -- let's just be cognizant that everything I just said. I'm sorry for the long-winded question, but you know where I'm going, I think.

Yes. Thanks, John. Look, we're giving you the best outlook or guidance based on the visibility that we have as of today. So we're balancing near-term prudence with the fact that we do have the best pipeline for the second half of the year that we've ever had. And so we're really optimistic about the second half of the year. Again, it's our best pipeline ever. But in the short run -- and let me actually just frame the 3 things that we look at with respect to the federal government. Number 1, we know that the federal government wants to modernize their IT infrastructure, and we feel like we play a really good role in that. Number 2, what we're hearing is that they really want to migrate to SaaS when they're running on-premise software. They prefer the software vendors are running the software rather than folks in the government. And number 3, they're prioritizing and rationalizing for the new reality. And we don't -- exact to your point, we don't exactly know what that looks like. They have a number of existing projects that they're prioritizing. Obviously, there's been some restructuring in the government related to people. And so as we're looking out, we're -- obviously, I think we talked about this and Tom talked about it. We're super excited about the long-term opportunity in the federal government. We're the only cloud-based CPM vendor that's FedRAMP High. And so we're really excited about our long-term opportunity, but we're balancing near-term prudence with long-term optimism as it relates to the federal government. So thanks for the opportunity to clarify our view.

And our next question comes from the line of Chris Quintero from Morgan Stanley. Christopher Quintero Really appreciate the call out here on the federal uncertainty, but I wanted to ask around what you're seeing more broadly across the macro environment. We've seen some of your peers call out some deal delays and a slowdown in ERP immigration. So just curious kind of what you're seeing more broadly out there in the macro environment today.

Yes. Thanks, Chris. I'm going to take that. Look, our -- as you heard at the beginning, we had a really strong Q2 performance. We had strong conversion rates. We executed our plan pretty well, if not very well. And so we saw really strong execution. Obviously, as you look out, there is certainly -- we're not naive to the fact that there's some uncertainty. But as I mentioned earlier, we have a really strong pipeline. Tom and I have gone through it with our go-to-market team. And as I mentioned in my feedback to John, we feel very confident in our ability to execute that pipeline in the second half. And we've navigated uncertainty before and we're going to continue to do it as we look out. So yes, thanks for that.

And our next question comes from the line of Adam Hotchkiss from Goldman Sachs.

Tom, why don't you talk a little bit about CPM Express? I know that was recently made generally available. I know that time to value is something that customers are really focused on in this environment. Maybe just talk about how you're working with your reps to pitch that product and how that's resonated over the last number of months relative to your expectations. And then maybe just how you think about contribution of CPM Express to your financials.

Sure. Thanks. Great question. What I'd like to do is maybe up level it a little bit because I'm really thinking of CPM Express underpins our productization strategy. And so CPM Express is the first of many things that we're using to get leverage on our plug-and-play architecture. And you hit it exactly correct, and that is about delivering value more quickly to our customer base. And what I mean by that is we've always felt that we have the power and sophistication to handle the largest companies in the world, and now we're focused on making it even easier. So as you said, with CPM Express, we -- this is based on our Genesis plug-and-play architecture. It represents a fully integrated full CPM experience that if a customer is optimizing to get on to OneStream's platform in the fastest way possible, CPM Express is that gateway without any compromises. They can ride that product all the way to the top of the -- if they aspire to be Fortune 1, they can -- that software can -- it's the same software that we would sell to the largest companies in the world. Now in terms of the sales enablement and that process, we have gone through, as I mentioned, at the back half of last year. We validated the product market fit and our ability to deliver that solution within the time frames that we were describing to customers. We've now seen more interest and more sales cycles taking place in Q1. And I'd say we're just getting to that point of even more deeper enablement, which we've launched and reinforced at our -- what we call our [ SKO half time ]. And we're really optimistic. We like the direction that it's going and the feedback that we've seen.

And our next question comes from the line of Koji Ikeda from Bank of America. Koji Ikeda Maybe 2 from me. First one, just kind of digging in a little bit deeper on the third quarter guidance. I fully appreciate all the commentary from the federal side. But I wanted to ask about 2 additional levers if those are in consideration in the guide, too. And so number 1 would be a higher propensity for SaaS, just kind of given the ratable nature versus upfront rev rec on your license products. I know there's a higher propensity for SaaS. Did that play a factor into the guide? And maybe a follow-up with the previous question, CPM Express coming in cheaper, right, a cheaper option. Is that playing an additional lever into kind of the guidance consideration?

Koji, I'm going to -- this is Bill. I'm going to take those. So -- and thanks for asking about the clarification. And I mentioned this in my prepared remarks, but we have absolutely contemplated that our government -- our federal government contracts could migrate to SaaS. It's just prudent. Again, we don't want to have any surprises after the end of the quarter. And so we have contemplated that. We don't know whether they're going to go in that direction or not, but we have contemplated that. Number 2, as it relates to CPM Express, as Tom mentioned, CPM Express is the same product. And it's -- the difference is really speed of implementation. Again, our customers tend to love the best practices that we bring to bear. They can adopt those best practices. These -- the CPM Express tends to be -- it tends to be a good opportunity for all kinds of different companies, but particularly those who haven't had the power of a OneStream platform with the ease of implementation that CPM Express can bring with preconfigured chart accounts, preconfigured reporting. We've had a really good start. Again, we just launched that product back in January, but we've got good momentum so far. And as you could tell from Tom's remarks, we're really excited about it.

And our next question comes from the line of Alex

Thanks. I'll take that. So first, let me just kind of do a little refresher on the AI platform so that everybody is on the same level from a product perspective. We have our SensibleAI Forecast that's been in market now for about 18 months, and we have a pricing strategy there that we said it's primarily usage-oriented around how we're training models for customers. So that's the hybrid pricing structure. That started our hybrid pricing structure and informed a lot of our pricing and packaging strategy. As we have mentioned, we also have our SensibleAI Studio and our SensibleAI Agent. So SensibleAI Studio is generally available, and it's more of a platform tiered-based pricing. So again, you're going to see a mixture across the AI platform of both usage and platform-oriented pricing. We are now in the third phase, we are running our private preview program with agents and that pricing strategy is underway. We have -- and we're validating it at this point in time. Probably we will be more in the usage or sort of similar to what you would see with the SensibleAI Forecast type of prepaid gap card approach, if you will. So you're going to see a hybrid approach across there. And as we're learning, our goal ultimately is to have a low friction process for our customers so that they can use the powerful AI that we're delivering across the platform as easily as possible as well as have the predictability that they want in their pricing and understanding, right? And so that's really how we view this. And I think we're in the -- we're very close in the zone of where we want to be in terms of pricing those capabilities.

And our next question comes from the line of Brent Bracelin from Piper Sandler. Brent Alan Bracelin Sticking with the AI thread here. Tom, we watched live demos of OpenAI's new GPT-5 model today after 2.5 years of training and tuning. This resurfaced investor fears around AI models disrupting the traditional app layer. Can you remind us what the OneStream competitive moat is within CPM specifically around the calculation engine and maybe why CPM might be more insulated from AI model disruption than less specialized applications?

Sure. Thanks, Will. Let me answer that in a couple of different ways. First, I'll talk directly about the OneStream platform. And yes, there are very specific capabilities within the financial intelligence and the stack that we have that make it a very sophisticated system where you're not going to see AI just step up and you can say, hey, please go write OneStream. I'm very confident of that. If that was the case, I would be shipping another 50 products tomorrow for you. So because our AI team is very, very forward in using AI within our development process, and it's proliferated across our core platform team as well. But we measure and calculate how we're using AI to generate code. And in fact, our teams consider AI to be a member of their Sprint teams, but it's not a great member right now. We would -- it's providing us with a lot of advantage and acceleration, but it certainly couldn't write any -- it couldn't go and handle a feature that we were looking to do. So I appreciate the interest or I appreciate the excitement that Mr. Altman put forth, but I think we're a bit far away from replacing the application layer. Now with that said, I have very high expectations for AI contributing to our efficiency as a development team. And that is where the -- really the truth lies in terms of creating software and every software company needs to be thinking that way. It's an accelerant. Some point far out in the future, will it become sophisticated enough to help create full systems? Yes. But when you think about what it takes to deliver a book of record type of system with audit and transparency, CFOs are going to be reluctant to just all of a sudden rely on an agent or rely on an AI code base that they don't understand. If you remember for our history, which we've talked about, throughout OneStream's history, there was a lot of reluctance from CFOs to move to the cloud in general. This is another one of those steps that are going to take a while to get used to and for a CFO to be able to turn over agency to a machine in terms of delivering this. But we feel that we are in the position. It's why we keep talking about finance AI. We understand the trust and transparency that CFOs require.

And our next question comes from the line of Steve Enders from Citi. Steven Lester Enders Okay. Great. Maybe just following up on the last point around taking time for us as the CFO to get trust with AI models and in- systems. Just how do you kind of apply that, I guess, go-to-market approach with your AI portfolio and what you're doing with Sensible ML in the agent side to, I guess, try to progress that further to try to, I guess, quicken the pace of adoption there? And I guess, what do you feel like is controllable under your purview to make that happen?

Great question. There's 2 things. So first and foremost, the key word here is when we say applied, we're productizing the solution as much as possible, which then means that we can provide predictable defined outcomes. So narrowing in on use cases and demonstrating extreme value on those use cases that a customer can measure is really, really a critical element to bringing a technology as advanced as artificial intelligence to the market. Number 2, when we think about agents, it really is about the trust and transparency. So what we've learned along this journey and why we talk about us being on this journey for almost a decade is that when we first introduced some of our early neural network integrations, even though we could prove superiority in terms of predictability and accuracy, there was a reluctance for our constituents, CFOs and finance teams to accept that because they couldn't understand it. So the common thread here about success, and you're going to see more and more of this over the next year. I'm not going to -- I don't want to get philosophical, but let's -- since we have all this sort of futurism going, deterministic problems with AI are difficult to solve. Our customer base expects deterministic results, meaning it's knowable, it's understandable. As an example, if the CFO asks a question, they expect to get the answer. If you can get the answer, you need to understand or you either need to have it proven to you that it's correct so that you can immediately use it or you would have to go research it. If you have to go research it, AI is useless to you. And so we understand that and everything that we've built within our entire AI fabric across the AI platform is delivering on that trust and transparency requirement. And that's why you see us moving in a very methodical way to bring these products to market because we understand that in absence of that, it will not be accepted by our customers.

And our next question comes from the line of Scott Berg from Needham & Company. Scott Randolph Berg Tom, I wanted to start with, I guess, your North American kind of enterprise business. You really called out the outperformance on CPM Express in the quarter. You didn't really touch much on the domestic kind of upmarket segment. How did that perform relative to your all expectations?

Scott, I'm going to take that one. As Tom called out in his script, we had a number of pretty significant North American wins that we called out. Obviously, Europe also had a really great -- a particularly great quarter. But I'd say 2 things. One is -- the one thing that we're excited about that I called out in my script is -- or in my prepared remarks is we continue to have more than 60% of our new business come from new customers. That's really important to us because that continues the more that we -- the more new customers we get, the more kind of land that we can get, the more opportunities we have to sell more down the road. We also had a really good quarter with respect to add-ons, particularly to your point in North American enterprise. And so if you net it all out, we're selling more per customer than we've ever sold. As a matter of fact, it's up 10% per customer relative to what it was a year ago. So our multiproduct strategy is working is kind of the short of it, and we're excited about that.

And our next question comes from the line of Mark Murphy from JPMorgan. Sonak Kolar This is Sonak Kolar on for Mark Murphy. Tom, I wanted to double-click on the SensibleAI Agents. Across our survey work, we're continuing to pick up these indications that CIOs are leaning into the SaaS providers to actually deliver these prebuilt agents rather than building custom ones in-house. So I'm just curious, are you seeing that trend manifest in your customer conversations as well? And how can we think about that long-term opportunity for OneStream's agentic AI road map relative to some of these other AI innovations you brought to market over the years?

Great. Thank you. I really appreciate this question because it's an opportunity, and this is something I tried to allude to over the last 6 months. But -- and I have to tie it back into the core of OneStream. When you think about the core data that we're collecting, this rich, highly validated, audited and even managed data from a status perspective, all throughout the OneStream platform. Remember, we're reporting external data the Wall Street plans, operational data, all being highly curated. Think about -- if we think about agents and you think about how that's going to be valuable, OneStream is in a very unique position because an agent -- and we all -- we're all, I think, impressed by what we're seeing with LLMs and with agentic and the ability for these reading engines to do really amazing things. But if they don't have access to your highly curated data in a safe, secure way, there's very little value. So we feel that over time, as we continue -- and this is even why I talked about the fact that I'm so pleased with the data that we're holding for our customers is that we're going to be an amplification mechanism for agentic AI for our customers. because when you ask a question -- as I gave that example, when our finance analyst agent asked a question of the OneStream data, not only can it find that number, but it can provide the proof of why that number is correct, so it can be used, so it can be reliable, so it can be trusted. And so overall, when we think about agents in general, there's going to be a very large ecosystem of agents and some of them are going to be very useful, some of them are not. But we feel that we have a right to provide some of the most sophisticated and useful agents for our customers. And that's why we're so excited about our fully integrated and harmonized strategy of core operational data and AI because that's where the unlock is going to come from and the real value is going to be delivered to enterprises over the long term.

And our next question comes from the line of Terrell Tillman from Truist Securities. Terrell Frederick Tillman Tom, Bill and Anne, it might be a 2-parter, so beware. Genesis does seem strategically important. Do you see that as actually an actionable revenue opportunity specifically? And then, Bill, for you, you said -- and I appreciate the 4Q call out on billings. Is that kind of a quarterly billings? Or is that a TTM analysis? Just any more on that.

I'll start off, Terry. Thanks for the question. And yes, I talked about Genesis. Foundationally, Genesis will have pathways to revenue. So when you -- the way that you should think about Genesis is a foundational, there's really 3 constituents. The current customers can build new OneStream workflows and experiences and get value visualization across the board because of our ever-increasing library of what we call content blocks. So those content blocks can also be pathways to our AI Studio and AI services. So there's one way that you can drive revenue through Genesis as well. Now next, we also see Genesis powering new solutions. So as we talk about the development of CPM Express and we're looking at additional Express type flavors, for example a higher ed application or other industry verticals, all powered by Genesis. So indirectly, you're going to see Genesis powering new routes to market through the productization capabilities that it offers. And then ultimately, all development within our marketplace or within our exchange framework will be driven off of the Genesis foundation, enabling plug-and-play capability from not only any application created within the OneStream engineering team, but also any ISVs that are participating in our platform development capability. So there's multiple pathways by which you could see Genesis leading to revenue generation.

Yes. And Terry, I'll just -- I'll take up the second part of your question. I did -- again, in my prepared remarks, I gave a lot of guidance that we gave this time that we don't intend on giving every quarter, just again, given the onetime anomaly that we have this Q3. And so the billings guidance that I gave you, I gave you kind of Q3 and then I gave you Q4, which was the second part of my commentary, which was we expect billings growth to revert to 20% plus year-over-year in Q4. So I hope that helps. And I hope this guidance helps you guys. That's the intent.

And our next question comes from the line of Rob Oliver from Baird. Robert Cooney Oliver My question is on the federal business, recognizing you guys gave a lot of color, Tom, both you and Bill, on the dynamics around Q3, which I get. I was wondering if you could just provide some additional color just around how pipeline is and what you're hearing from your fed sales team. Clearly impressive you guys were able to close a large federal deal this quarter. And you guys are in a unique position according to our work versus your competitors to capitalize on this opportunity. Has pipeline continued to build through this period? Are you seeing a pickup in indications of interest potentially? In other words, has the freeze kind of thought a bit? And how should we think about that relative to, I guess, both year-end and as we start to kind of plan '26?

Yes. Thanks, Rob. I'll take that. Look, I'd start by saying, overall -- and I know you asked a question specific about Fed, but I made commentary in my prepared remarks. I think I mentioned it again in a couple of the questions. But overall, our pipeline at this point of the year is the best that it's ever been at this point in the history of the company. So I just wanted to start there. As it relates to federal, there's a decent amount of uncertainty as I mentioned, those 3 drivers of our federal business. And so the federal government is trying to prioritize their -- our customers are trying to prioritize their projects. We do have -- we have -- certainly, we have a good pipeline. That may or may not be a pipeline for this year or maybe a pipeline for next year, but we certainly have strong relationships with many of the different agencies. To your point, we were really excited with the large government institution that closed in Q2. But we're going to keep moving forward. As I mentioned, we're really optimistic about the fact that we're FedRAMP High. We've got a lot of satisfied customers. We haven't -- I'll be transparent, we haven't lost any government agencies, but we're just being prudent in our outlook as we look toward this quarter.

I could add just one thing to that. I would just say we're also prioritizing state and local and higher ed as a broader public sector initiative. So -- and we're optimistic about our ability as we continue to move into those markets as well in a more generalized public sector position.

And our next question comes from the line of Brian Peterson from Raymond James.

This is John on for Brian. Bill, really healthy results and great to hear about the pipeline there that you've been building. But given the ramping international business and the outperformance you've seen there, we're getting a question on the FX impact on revenue and billings. And also, if you could share what's contemplated in guidance from an FX perspective?

Yes. I appreciate the question. When we talked about FX last -- after Q4, just as a reminder, we went -- there was a pretty dramatic strengthening of the dollar in Q4 of last year. And that -- we obviously have a pretty big billings quarter in Q4. And so that obviously impacted -- we disclosed ARR, obviously, at that time. So it certainly impacted ARR. And then it rolled through 2025 revenue as we recognize the revenue from the billings that we did at that time. Obviously, the dollar has weakened, particularly in kind of late Q1 and Q2 and been a little bit bumpy here in Q3, but still remains at similar rates. If it stays at this rate, again, which we don't know, but if it does stay at this rate and we bill at this rate in Q4, then we'll have a nice tailwind in 2026. We obviously haven't given guidance yet on 2026, but that will be the biggest impact of the weakening of the dollar, which obviously is constructive to our revenue recognition, but that will happen in '26.

And our final question for today comes from the line of Jake Roberge from William Blair. Jacob Roberge Just on the new agentic offerings, could you talk about the feedback you've gotten for those solutions coming out of Splash? And then for customers that are in private preview, would you call out any specific agents that are seeing outsized interest for an interesting ROI?

Sure. So as we work through our objected private preview, we're really working on rapid product market fit validation as we're going through that process. The feedback that we've gotten is very strong to this point, and it's really in a couple of -- you can think of our agents in 2 buckets. Our finance analysts and our operations analysts are both in the more structured data where they understand how to talk to the data that we've been collecting within the platform. And then we have our search and deep analysis agents, which are based -- allowing us to -- allow customers to build and capture relevant supporting information that's unstructured in what's called a RAG system as well that's been proprietary to OneStream. Those 2 pieces together, they work together to harmonize and provide the most value. Because as you find something quantitative, we're able to help customers very rapidly produce reports, produce insights and different visualizations using the finance and operational analysts, but then also supplement those results in terms of narratives, in terms of plans, in terms of contract interpretation. So we're exploring all the different types of use cases. And we're using this -- we happen to be one of our own customers here as well, and we're seeing value across all of those spectrums directly. So as we move into the next phase and we increase the number of participants in the program, we will -- I'll be happy to share even more. But right now, the feedback has been very positive across those -- across the entire spectrum that you would think of agentic AI for finance.

Yes, Tom, I'd just reinforce my team uses it every day. So we look forward to sharing it, obviously, with more of the world as we take it into general availability. Okay. For everybody, I'd just like to say thank you. Awesome questions, and we look forward to seeing you at our upcoming events that Anne noted at the beginning of the call, and have a great day.