OS - NASDAQ

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the OneStream's Third Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Now I would like to introduce your host for today's program, Anne Leschin, Vice President of Investor Relations and Strategic Finance. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to OneStream's third quarter 2025 earnings conference call. Joining me on the call today is our Co-Founder and CEO and President, Tom Shae; and our CFO, Bill Koefoed. The press release announcing our third quarter 2025 results issued earlier today is posted on our Investor Relations website at investor.onestream.com, along with an earnings highlights presentation. Now let me remind everyone that some of the statements on today's call are forward-looking, including statements related to guidance for the fourth quarter and 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 September 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 their most directly comparable GAAP measures. 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 the call over to Tom. Tom?

Thank you for joining us this afternoon. Third quarter was a story of focused execution. Facing headwinds and contract rationalization in our U.S. Federal business, the team exceeded expectations with strong billings growth in the quarter. More recently, at our sold-out Splash EMEA user conference, I was incredibly energized by the enthusiasm we received for our purpose-built finance AI. As we usher in the finance AI era, we remain one of the most innovative vendors in the CPM space, and we're not stopping there. We are constantly pushing forward and anticipating the growing demands of the office of the CFO. Let me start with some highlights of our third quarter performance. Year-over-year subscription revenue grew 27% and billings grew 20%. International revenue grew 37% year-over-year, particularly due to strong legacy replacement momentum in Europe. In the federal business, we renewed all of our Q3 agency customers with only one exception at a discontinued agency. We added one new federal customer and began multiple SaaS conversions, including one at our largest agency customer. CPM Express and our SensibleAI portfolio continue to show early momentum with customers. We are attracting new and existing customers by leveraging the proven customer ROI from SensibleAI Forecast. Additionally, OneStream was recognized as the exemplary leader in the 2025 Record to Report Buyers Guide by ISG Research, covering financial close, consolidation and overall record to report, achieving the highest scores in both customer and product experience. With AI at the forefront across all facets of business today, the drivers of our industry have never been more important for the office of the CFO. Number one, finance is in the initial phase of its transformation. Legacy financial systems often more than 20 years old, simply do not have the agility required for today's CFOs to effectively steer their businesses, never mind to maximize the value of AI. Finance organizations continue to look to modernize by unifying corporate data and moving core financial operations to the cloud. Number two, the role of the CFO is evolving and expanding. CFOs are being asked to do more than ever by becoming a strategic partner for the business. An integral part of that is helping them proactively look around corners, to anticipate challenges and opportunities and produce more timely and accurate forecasts. Number three, the use of AI is enabling finance teams to drive more business performance, not only measure it. In many cases, CFOs are the executive leaders taking responsibility for the AI evolution at their companies. They are being tasked with identifying key functions that can leverage these AI tools for productivity improvements and cost efficiencies. We believe platforms that provide purpose-built applied AI solutions will win the AI battle given the need for a single consistent data model and security framework. At OneStream, we have always challenged ourselves to raise the bar. Our approach to AI has been both forward thinking and deliberate. Since we began this journey a decade ago, we have gained a foundational understanding of what AI can bring to the office of the CFO by combining powerful quantitative, generative and agentic capabilities throughout our SensibleAI portfolio. We understood early on that AI for finance must run on clean data, provide context and solve specific use cases because 80% accurate is 0% useful for finance. Ultimately, we believe OneStream provides the key that unlocks the value of AI for finance through unified, secure, transparent and most importantly, contextualized information. Through our many AI announcements this year, customers are beginning to realize the growing power of our platform to drive better and faster decision-making and enhance their productivity. By modernizing the financial close process, customers are now able to, number one, unify their data on a common platform. And number two, interrogate that data using financially intelligent embedded AI; and number three, enhance and optimize the close process, enabling finance teams to focus on strategic high-value priorities such as integrated planning and forecasting. Just a few weeks ago at Splash EMEA, we again pushed the boundaries of applied AI for finance. We showed real package solutions designed specifically for finance, which we expect to deliver significant value for our customers. Let me recap some of our exciting product announcements. Since we introduced SensibleAI Studio in May, we have roughly doubled the number of algorithms currently available to 60. As you recall, Studio enables customers to quickly access a library of algorithms and routines and apply them to their own workflows. We showcased an example of this power and flexibility at Splash EMEA. Just 1 month after Studio's launch, our forward deployed engineers rapidly built our AI-powered benchmarking and outlier detection routine based on real-time customer specifications. Studio allows us to meet customers where they are in their AI journey, and we believe we are just scratching the surface of Studio's potential. We also took a big step with our SensibleAI agents, moving them out of private preview and into limited availability. So now our customers can begin to take advantage of them. Our agents are unique because they do not act alone. What's important is that they have financial context. They are embedded into solutions within OneStream, giving them direct access to all the customers' secured data stored on the platform. This allows finance teams to do tasks like ask questions in natural language, generate dynamic visualizations, query financial models and analyze contract data. Agents provide the ability to help automate repetitive work, reveal insights and help every analyst operate more like a strategic partner. We also unveiled AI-powered ESG. This enhanced solution is the culmination of our 3 strategic pillars. Core finance, operational analytics and finance AI. With AI-powered ESG, finance teams are able to link ESG reporting back to the core platform using real-time operational drivers, while automating quantitative forecasting by using SensibleAI Forecast. Further, we plan to embed our SensibleAI agents throughout the workflow to assist with data interrogation and reporting. Lastly, we continue to advance our best-in-class core finance capabilities by expanding our rapid deployment CPM Express with IFRS compliance and management. This includes a number of confirmation and validation rules adhering to IFRS Accounting Standards for our international customers. This is but one example of how we plan to expand our Express offer. Leveraging our plug-and-play architecture to bring a variety of rapid deployment productized use cases to our customers. Both at Splash EMEA and during the quarter, we had several noteworthy examples of how customers are seeing increased value from our strong and growing product line. Continuing the trend in recent quarters, OneStream is quickly becoming the CPM vendor of choice for companies transitioning from legacy systems nearing their end of life. One of the largest deals this quarter came from a Swiss multinational healthcare leader and a global leader in cancer treatments. A long-time customer of a competitive legacy CPM solution, the organization moved to OneStream to better unify financial consolidation, reporting and tax processes. They chose OneStream for our extensibility and flexibility. This significant legacy replacement marks our first big pharma win, highlighting how leading enterprises are modernizing with our unified platform. Additionally, with CPM Express, commercial customers are gaining access to the full power of OneStream with rapid deployment and best practice templates, workflows and frameworks all built in. Today, companies that are earlier in their financial journeys are starting to recognize just how valuable it can be to access our single unified platform with a preconfigured offering that can be implemented in as little as 8 to 12 weeks. One significant CPM Express win this quarter was with a leading residential real estate services company. Having recently centralized its finance and other core functions under a shared services model, the company needed greater visibility, agility and standardization across the business. Facing a legacy system infrastructure across their environment, we leveraged CPM Express to give the customer confidence in a faster, best practice-driven implementation with rapid time to value. Ultimately, they chose OneStream for our superior data integration, flexibility and finance own architecture. This empowered the finance team to streamline and modernize account reconciliations and transaction matching, all while reducing their dependency on IT. Lastly, we wanted to provide an update on a few major multinational customers that have gone live with SensibleAI Forecast and the remarkable ROI that they are realizing with the product. One of the great stories comes from the domestic healthcare division of a leading global logistics provider. They implemented SensibleAI Forecast across their U.S. operations to enhance financial forecasting as the company is developing an AI-powered approach, they reported that OneStream's SensibleAI Forecast is delivering measurable results. Gross revenue forecast accuracy has improved by 5 percentage points. Payroll forecast accuracy has improved by 8 percentage points. Forecast generation time has been reduced by 94%, freeing up more than 13,000 labor hours annually and eliminating the need for third-party specialized tools and staff augmentation. With these strong results, the organization is now expanding its use of SensibleAI Forecast to the healthcare division's international operations. Another long-time U.S. customer that builds systems and technology solutions deployed SensibleAI Forecast earlier this year. The customer was looking to transform its forecasting process for key financial metrics, including revenue, margin and SG&A using OneStream's single unified data model. SensibleAI Forecast has taken their forecasting and planning cycles from 20 days to less than 2 days, a 90% plus reduction. Additionally, the customer saw a noticeable improvement in forecast accuracy. One of the key features that led to the selection of SensibleAI Forecast was its ability to provide clear insights into how internal and external factors drive forecast outcomes. It is this level of transparency that is strengthening their trust in OneStream across its finance organization. In summary, the overarching drivers of the office of the CFO remains front and center today. OneStream has always looked to the future to anticipate and invest in what our customers will need and want to run their businesses more effectively. We have consistently been ahead in recognizing industry trends and emerging technologies as we have demonstrated with AI. Today, our customers are realizing the value that a unified and infinitely extensible platform delivers. Our SensibleAI provides insights and actions that are quantifiable and supercharged because of the high-quality and contextualized data controlled in OneStream. Our comprehensive platform has positioned us to lead the finance AI era and become the operating system for modern finance. Together with our exceptional team, we believe we have built a solid foundation to grow and scale the business. This gives me confidence in our ability to deliver unparalleled value for our customers, partners and shareholders over the long-term. I will now turn the call over to Bill to provide details on Q3 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 third quarter, which proved stronger than expected as the team executed well, particularly in EMEA, while managing through a tough federal government environment in the U.S. Subscription revenue increased 27% year-over-year to $141 million, while total revenue grew 19% year-over-year to $154 million. License revenue of $4 million declined 64% compared with last year due to contract rationalization and our success in driving SaaS conversions, including at our largest federal agency customer. Professional services and other revenue was $9 million, up 38% year-over-year due to demand for our consulting services. Our international business had another strong quarter with revenue growth of 37% year-over-year, representing 34% of total revenue. Billings increased 20% year-over-year to $178 million and 21% on a trailing 12-month basis, which we believe is the best indicator of our billings momentum. This included roughly $4 million of accelerated billings from Q4 due to early renewals and add-ons. Free cash flow for the third quarter was $5 million and exceeded our expectations. We ended the quarter with 1,739 customers, up 13% year-over-year. We saw exceptional new business growth in EMEA, while in the U.S., we had particularly strong add-on business, partially offsetting the federal new business weakness and illustrating the value of our multiproduct strategy. For the first 9 months of the year, subscription revenue has increased 29% year-over-year to $400 million. Total revenue grew 23% year-over-year to $438 million. AI bookings were up 60% year-over-year, and our free cash flow for the first 9 months of the year was $70 million, up 107% over last year. Our 12-month cRPO was up 29% year-over-year and total RPO was up 24% year-over-year to $1.2 billion. Non-GAAP gross margin for the third quarter was 69% compared to 71% last year, and our non-GAAP software gross margin for the third quarter was 75% compared with 78% last year, primarily due to lower license revenue in the third quarter. Non-GAAP operating income for the third quarter was $9.3 million or 6% of revenue and increased significantly by $3.8 million or 69% compared with the prior year. This increase was due to a combination of strong revenue growth and the scaling of our operating expenses. Non-GAAP net income of $15.2 million in the third quarter increased $3.9 million from the prior year and non-GAAP earnings per share was $0.08, flat with last year. Total equity-based compensation expense for the third quarter was $25 million. We ended the quarter with $654 million in cash and cash equivalents. Now let me turn to guidance. Given our Q3 outperformance, we are raising our 2025 growth and profitability outlook. Together with our strong pipeline, we entered Q4 with a growing and more differentiated product portfolio than ever. With that, we are offering the following outlook, including an update to a onetime measure that we gave last quarter. In Q4, we expect total revenue to be between $156 million to $158 million. We expect non-GAAP operating margin to be between 4% to 6%. We expect non-GAAP net income per share to be between $0.04 to $0.07. We expect stock-based compensation expense to be approximately $25 million. Taking into account the roughly $4 million of accelerated billings in Q3, we expect billings growth of roughly 20% for the fourth quarter. For full year 2025, we expect total revenue to be between $594 million to $596 million. We expect non-GAAP operating margin to be between 2% to 3%. We expect non-GAAP net income per share to be between $0.15 to $0.19. We expect stock-based compensation expense to be between $115 million to $120 million. While we plan to give formal 2026 guidance in February, the combination of our Q3 outperformance, strong pipeline and innovative product portfolio make us comfortable with current Wall Street consensus for full year 2026 revenue and non-GAAP operating income. In conclusion, Q3 was a strong quarter. Our results underscore the power of the OneStream platform to bring the office of finance into the AI era. Now let's turn it over to the operator for Q&A.

[Operator Instructions] And our first question comes from the line of John DiFucci with Guggenheim Securities.

Listen, on the federal dynamics this quarter, first, I want to say we really appreciate your transparency here, both last quarter and this quarter. In fact, we factored it into guidance. But your overall results really didn't skip a beat, and it's great to see subscription still growing at a really healthy clip here. It sounds like you only lost one federal contract because that agency was discontinued, but you also added a new federal customer. But I'd really like to better understand the remaining account, the renewals. And Bill, you mentioned the license rationalization. Anything you can add to help us better understand renewals in the September quarter and what this means for the future? It would be great. We're just trying to better understand the federal opportunity going forward within the context of the overall beat and raise this quarter.

Yes. Thanks for that, John. I'll take that and appreciate the commentary on the transparency. That's certainly something that we aspire to do and appreciate the comments. Look, the federal government, obviously, there were a lot of moving pieces as we went into the third quarter. We had SaaS conversions at a couple of our biggest agencies, and that obviously impacted license revenue, but obviously will flow through our subscription revenue in future quarters. And as you noted, we only lost one federal agency that actually doesn't exist anymore. It actually got merged into another agency. And obviously, we added a new one, as you noted. So we're really optimistic about our federal government opportunity as we turn the corner into 2026 now that I think we've gotten through this quarter, and we'll hopefully execute on that as we enter the year.

Our next question comes from the line of Chris Quintero with Morgan Stanley.

Tom and Bill, congrats on a solid quarter here. I want to ask about AI. We've seen some data points that suggest that finance and accounting is actually one of the top areas that organizations are looking to deploy their AI budget dollars over the next 12 months. So I'm curious, like is that aligning with kind of what you're hearing from your customer base? And what are some of those kind of initial most important use cases that you're seeing them deploy some of your technology into?

Thanks, Chris. Yes, I'll take that. As I mentioned in the remarks, we really feel great about our position in AI. We feel we're primed to lead the finance AI era. And what I mean by that is there is a lot of opportunity in finance, especially when you have a platform like OneStream that has this highly contextualized high-value information. So the use cases that you can think of -- you've heard us talk about SensibleAI Forecast, that's clearly predicting the quantitative outcomes for a business in those key line items that you heard, whether that's demand, whether that's multiple cost line items, that has a profound and direct impact on how you can manage your business. But that's just the beginning. With the comprehensive AI platform that we have, and you heard me talk about Studio as well, that opens up all kinds of additional use cases, outlier and sort of benchmarking analysis, giving companies the ability to do and measure their business in ways that they haven't been able to in the past and take immediate action. And then ultimately, agents, right? The autonomous financially intelligent coworkers that were -- we've built into the platform, that is very, very high interest in our customers because of the potential to actually interpret all this information, help take action and do repetitive work. So we feel finance is definitely embracing this opportunity. And again, our understanding of the deterministic nature of AI required for finance puts us in a great position to answer that need and interest for the customer base.

Next question comes from the line of Adam Hotchkiss with Goldman Sachs.

I think you made the comment, Bill, about being comfortable with Street estimates for '26. And I think what's notable about that is there's less of a deceleration baked into numbers for '26 relative to '25. And so you're exuding some confidence and some growth stabilization. So if you could just maybe rank order for us qualitatively what the big drivers are there that helpful.

Yes. Let me talk about just about the overall performance of our business, and I think that will answer your question. And we saw this this last quarter. EMEA really performed super well this quarter. As Tom mentioned, some pretty big lighthouse wins that we had there. Obviously, considerable strong growth, strong momentum, and we're really optimistic about the opportunity that we see in EMEA. Asia Pacific continues to be a small but growing area of our business, and we expect that momentum to continue. And in the U.S., certainly, Tom's talked about CPM Express and the opportunity that we see in the commercial business. That is just getting started, as Tom mentioned, and we see strong opportunity there, particularly as we get into more verticals. Actually, I didn't mention it in EMEA, but we just released IFRS Express, which is a really awesome opportunity for us there. And then on the enterprise side here in the U.S., obviously, Q4 is our biggest quarter. And we -- as I mentioned in my commentary, we feel great about the pipeline. The team is working to execute. We actually signed a really nice big deal today, which we're excited about against 2 very strong competitors, and that all gives us optimism about 2026.

Next question comes from the line of Koji Ikeda with Bank of America.

I wanted to double-click on the 2026 guide and really about pipeline assumptions and conversion assumptions in the fourth quarter guide and heading into 2026. How are you thinking about those assumptions? I guess, more specifically around conversions? Is it more conservative heading into 2026? Is it the same? I mean I just wanted to understand what is giving you the confidence to level set 2026, but also kind of expressed a lot of confidence there at the same time.

Yes. No, I'll take that. I mean, look, every quarter, every year as we start our forecast for the quarter and as we start our budgeting process for the next year, we look at 2 things, right? We look at our pipeline, which is arguably kind of the biggest driver of growth. And the second characteristic of that is obviously our conversion rate. And it obviously varies a little bit by quarter, but we certainly look at that as we enter the quarter and as we enter the year. In addition to the fact that we have our core business, as Tom mentioned, we're really enthusiastic about our new products. Tom's talked about our Agile Financial Analytics, which we see customers really excited about. We have our SensibleAI Forecast, which is showing some very strong growth. As I mentioned in my remarks, it's up 60% year-over-year, and we continue to see very strong pipeline as customers are seeing the results like Tom talked about in the script of better forecast accuracy, improved speed to forecast and just the benefits that we see there. Obviously, AI Studio is something Tom has talked about. And again, candidly, that new customer that I mentioned earlier has -- that's part of the solution that they've acquired. And then obviously, agents, which are just being released, we just announced limited availability when we're in Splash a few weeks ago. So look, as I mentioned in my closing remarks, we have our best product portfolio we've ever had going into any year. We have a very strong pipeline, and that gives us the confidence to obviously give our outlook for 2026. And again, I would just say like we'll give you more formal numbers when we get into February, but we just kind of wanted to give you a little bit of an update like I did.

Next question comes from the line of Alex

I appreciate that incremental color about the pipeline. I guess to that point, it sounds like, Bill, billings growth is going to accelerate if you take the fact that you pulled in or you had some early in Q3 and yet you're still kind of calling for really strong billings numbers in Q4. So maybe just comment on the demand environment as you kind of sit here in October? And also a metric that we haven't talked about at length previously, but like as you continue to see a lot of expansion opportunities from Sensible as well as moving into other parts of the finance workflow or outside of the core finance workflow, how should we think about NRR trends from here kind of moving forward as well?

So Alex, let me start with the last part of your question. I know you and I spent a lot of time talking about NRR. But we had this last quarter, as I mentioned, I think in my remarks was a really great add-on quarter. And it ended up being part of the upside that we saw in our numbers was -- were the add-ons. And candidly, it's just an illustration that our multiproduct strategy is working. A couple of years ago, we didn't have all these kind of new products that we've been introducing. And as Tom mentioned in his remarks, I think we're just getting started in our innovation around our products. Look, on the billing side, I would just tell you, again, we outperformed this quarter. We did have a bit, as I mentioned in my commentary, we saw some early renewals because -- back to your NRR point because our customers wanted to add on new products. And so we saw a bit of that in the third quarter. But obviously, in the guidance that I gave you for Q4 and as I think I mentioned that I don't expect to guide billings every quarter, but I thought it was important as we kind of went through Q3 to Q4 that we gave you that color. And obviously, we're enthusiastic about the quarter ahead.

Next question comes from the line of Terry Tillman with Truist Securities.

Bill, it's always nice to hear about a deal closing, an important deal closing like in real time.

Terry, it's pretty exciting when we have a deal close on the day of earnings. I have to tell you, Tom and I were high-fiving at each other.

Well, if one closes before the end of the call, we'd appreciate another update.

We'll keep our eyes out.

My one question relates to EMEA. It does sound like you're firing on all cylinders there, and there's a lot more where it came from. What I'm curious about is there something going on with this replacement cycle. We know there's a lot of technical debt in these 20-year-old systems. Is there something that seems like it's accelerating in that cycle of replacement? And part of this is also -- but your field sales coverage is probably expanding, so maybe it's becoming more productive or maybe it's partners. But just maybe you could kind of stack rank some of the drivers that's driving that momentum.

Thanks, Terry. I'll take that. And you pretty much hit on it. It's the fact that we're getting more scale in the region. So we are seeing that ability to have more coverage across the different countries. Secondarily, there is the opportunity of legacy applications that are coming up. And just to remind everybody, as I've mentioned in other calls, the foundation of getting access or being trusted to take those legacy replacements is that we've had prior success. And so when we think about that and we think about that opportunity, we're building on those foundational wins in that segment and some of those transformations that are happening. And then ultimately, when we look at the product portfolio and we look at the enthusiasm for our product, that is sort of the third component that I see driving it. But I definitely want to call out the execution of the team over there and the growth that we're seeing, and there's a lot of excitement.

Next question comes from the line of Steve Enders with Citi.

I guess I want to follow-up on the AI side of it. I think the bookings growth you called out there, I would say it was 60%. But I guess what are you seeing maybe in the pipeline? Like are you starting to see incremental builds there from the sales build-out that you've been talking about for the past year or so? And then just how do you kind of view the future pipeline opportunity as we kind of go into '26?

So we look at the current pipeline as a great validation of the momentum that we're building, first and foremost, is the way that I would talk about. So as we think about the product strategy that we have in AI, our AI portfolio consists of the first product SensibleAI Forecast, which is driving that adoption through the validation that I shared in my remarks. And so as we look going forward, what we're seeing is, again, early days, but excitement around AI Studio. It just opens up so many additional use cases. And the way that you want to think about AI Studio is AI everywhere in our platform. That's why we invented that product so that we can drive AI into meaningful workflows across our customers' set of use cases that they're enjoying on the platform. And then ultimately, we are very, very excited about what we're -- the feedback that we've been getting and the partnering, frankly, that we've had with our customers in the agentic space because, again, this is all -- this is a building process for us. It was quantitative, generative and agentic working together on a contextualized platform. And so as we look to 2026 and continuing the rollout of our limited availability of the agents, we're very excited about that opportunity and bringing that to our customers and again, building on that same momentum that we're seeing from SensibleAI Forecast.

Next question comes from the line of Scott Berg with Needham.

Really nice quarter here. Tom or Bill, I just wanted to see if you could maybe comment on what you're seeing early with the revenue opportunity for the agents. I know they're not fully released in general availability yet. But I think a key question we've all kind of had is, as you release those, I guess, what's the uplift there? And does it impact any of your seat-based model at all?

Sure. I'll take that. And as we look at agents, we're still in the early days in terms of the -- going from private preview to limited availability. So pricing, you can expect to be more of a usage-based pricing the way we price the other AI services products. And we think we have a strong applied approach, which is key here, and that is demonstrated value of our finance analyst agent. What we see this is a -- as I mentioned in one of my remarks, it's an autonomous coworker. It's the ability to help the customer get more value, do work efficiently and then let their team members do more high-value work is quite frankly, what we see. So, we see this as incremental revenue rather than sort of a replacement or displacement of seats. And I think that's largely what you're going to see in the financial space. There's certainly optimizations. But as we've highlighted in some of the studies that we've done, the 2035 finance, like you have -- finance teams are generally overworked, overstressed. It's not that there are always way too many people, right? They want to have those people working on the most important areas of the business, to be a true partner of the business. And we think that we're an unlock for that, giving them efficiency to do the things they have to do and help them be more of a business partner.

Next question comes from the line of Mark Murphy with JPMorgan.

Can you comment on traction in some of the emerging applications that sit outside of the core, maybe shed some light on where you see the strongest growth vectors? For instance, noticing you have account reconciliations now that are driven by SensibleAI. And then the supplier analysis, I'm wondering if there's any more interest there in the wake of the tariffs? And any brief mention on the big pharma win? Congrats on that. Just wondering if you see that as a linchpin to going a little deeper in a new vertical?

Thanks, Mark. Yes, there's always -- if I can just orient everybody on our platform and our platform message. And I think this is critical to helping you -- to help everybody kind of baseline this. We think of the platform as having 3 key components: core; operational; and AI, kind of think of it as a triangle. Core is the stuff everybody has to do. Every big business has to do this, the things you have to get right. We need to help our customers become as efficient as possible. And to your point, Mark, the thing they want to do, though, is they want to help -- they want to start turning that fast-changing operational data, those operational use cases into a signal that they can take action on. So we have always seen a lot of interest in that particular space. And the fact that with our AFA or what we call Agile Financial Analytics, our ability to do more real-time analytics, no ETL, directly on top of operational sources and have our agents be able to interact with that data as well is an area that we're continuing to push into. And those are, again, some of the key innovative areas that are underpinning our excitement in the business and the opportunity that we see ahead. And so -- and when you think about these operational use cases, whether that's -- you mentioned AI-powered account reconciliations. We have that under an umbrella that we call the modern financial close. That's an opportunity for us to, again, to double down and address certain personas and make sure that they understand that we're delivering the key capabilities and technologies if you're a controller, to help you not only do your financial planning, your financial reporting, but also deliver on those and become more efficient at your closing. So any and all of those opportunities are what lie in front of us. And you'll see us continue to develop more and more productized use cases in those areas, as you mentioned, supplier analytics, and these are all areas that are part of our ongoing verticalization strategy and intention to focus in these areas.

Next question comes from the line of Jake Roberge with William Blair.

I just wanted to follow-up on the new agentic offerings entering limited availability. Could you talk a little bit more about the feedback you've gotten from customers and if there are any specific agents that you're seeing drive outsized interest for the platform right now?

Sure. So let me first just talk about the agent set that we have in play, just to level set for everyone. So we have our finance analyst agent. You can think of that as a structured kind of data analyst that understands the OneStream data architecture, data repository, highly contextualized data and can help with analytics, can help with reporting, answer questions that can help with education because individuals that don't understand some of the data models that customers have built now have access to that information. So it's broadly applicable. And that's a very high interest agent within our customer base. The other couple of agents that are also getting a lot of interest are our search agent and our deep analysis agent. These complement and contextualize and synthesize with our finance analyst agent. So meaning if you have an interesting set of analytics that are coming out from finance analysts, but you require additional information to provide context such as contract-based analysis, our agents, we've developed an agentic workflow. So the thing that has come out of the interaction with customers is more than -- these aren't just chat-oriented interactions. We've built an entire workflow-based interaction which will allow us to truly assign tasks that can be done on a repetitive basis. And this is some of the feedback loop and the processing that our AI engineering team has been working with to rapidly innovate that and make sure that we're iterating and delivering in real-time what the customer is looking for out of these agents.

Next question comes from the line of Siti Panigrahi with Mizuho.

This is Phil on for Siti. Can you talk about what you're seeing in terms of competitive displacements like Hyperion and SAP? And how important are these legacy displacements in achieving the preliminary FY '26 growth targets?

So when we look at the historical legacy replacement, it's a consistent and a large opportunity that we're continuing to focus on. And so it's obviously an important part of our numbers. It's an important part of our selling [ motion ]. But the thing I do want to make sure that we all focus on is any business -- as I mentioned, the core pillars of our platform. Any business that develops any degree of complexity in their own financial operations has a very high need for OneStream's platform. And that's, again, why we tend to focus on CPM Express and the productized approach because we view all companies that have those needs as our customers. So we want to continue to focus heavily on the replacement of legacy systems and help those customers that have been in the CPM world for a number of years, but also make sure that we're extending and onboarding any company that has that growing need for a full CPM solution. So I just want to make sure that I share the way that I see this expansive opportunity consisting of both legacy and evolving companies.

Next question comes from the line of Brian Peterson with Raymond James.

This is John on for Brian. Maybe following up a bit on that earlier question on sales pipeline and as we think about customer sizes. You mentioned an acceleration in legacy CPM replacement, but then CPM Express also accelerating adoption in the commercial side of the equation there. So how have those been tracking in 2025? And as we look towards 2026, realizing that both might be the answer here, what are you most excited about? And what opportunity do you see creating the most potential upside in 2026?

Yes, I'll take this. It's Bill. I would go back a little bit to some of the commentary that I made earlier. We're really excited about EMEA's growth and continued trajectory. Again, I think Tom mentioned CPM Express. I mentioned IFRS Express specifically for EMEA on the commercial side, and we see that as being a really big opportunity. We see EMEA enterprise as well as a big opportunity, obviously, with the legacy replacement opportunity there. And again, there's a lot of change going on, on the ERP stack there, too, which is actually tailwind in our favor. I mentioned Asia Pacific. And in the U.S., they've been our biggest driver of AI sales so far. I think that will continue to extend to other geographies. And then as Tom mentioned, just the whole opportunity that we have to continue to grow the core, to continue to offer capabilities around Agile Financial Analytics and then as I mentioned earlier, our AI portfolio. So it's hard to choose your favorite child. We love them all, and we think they're all great opportunities for us to grow.

Next question comes from the line of Brett Huff with Stephens Inc.

On a nice quarter. I wanted to follow-up on the Agentic AI comments you made. But first, given the market is still anxious on how long it will take enterprise AI to get ROIs, congrats on those really good proof points in the forecasting business. I thought those are notable. But the follow-up question is talking more about how your agents will or won't or how they'll interact with agents from other software firms. Do you view a world where there'll be kind of Uber software or Uber agents that coordinate things across workflows? Do you aspire to have that particular position? Or is this a battle or more of a cooperation as you look beyond the 4 walls of just your data architecture?

Thanks. I'll take that. It's something that I think about a lot and my evolving thought on this is OneStream has the right to be, if not the best, one of the best agents in the financial realm, meaning, because of the highly contextualized data, we want to be the best, most reliable, understanding, again, that if you're a CFO and you're trying to use a generic non-financially aware type of agent that doesn't have high context, you're going to get inaccurate results, 80%, 50%, you name it, whatever, which will become 0% useful for the CFO. And so we really feel that we have the right to be that -- in that domain, the agent set of choice. Now to your point, with agent-to-agent protocol, multi-agent orchestration, we're not naive to think that other vendors that have platforms, that have other highly contextualized information also have a right to have agents that are highly attuned and aware of that highly contextualized information. We will -- those eventually -- my -- I'm being a futurist now. My view is that we will see those of us that have platforms and highly contextualized information, our agents will work in coordination with some sort of multi-agent protocol at a higher level. And that's where I do think there will be a battle maybe by hyperscaler or there will be a real battle in terms of who wants to own that masterful entry point into the agent ecosystem and then pick the right agent for the right question and do that synthesis. So as this plays out, we're really focused at the moment on making sure that we have the right protocols in place to play in agent-to-agent communication and multi-agent orchestration. But more importantly, at this moment is delivering the ultimate value that our customers want from our agent set within the context of the CFO.

Next question comes from the line of Derrick Wood with TD Cowen.

Bill, can you give us a sense how you've handicapped some of the risks around the government shutdown as you guided for Q4? And then looking beyond just with FedRAMP High authorization with DOGE behind us, just how are you feeling about building -- rebuilding momentum in the U.S. Fed? Do you think they'll have kind of a bigger appetite to come back and spend or modernize? Or how do you feel about the visibility there?

Yes. No, great question. I'm going to answer your second one first. Look, this Q3 was a challenge, obviously, as all software companies were kind of coming up to the end of the government's fiscal year-end. And again, I think we executed -- we were really happy to have SaaS conversions because obviously, that's the genesis of our business. And so that was something that we were certainly hoping for, and it's nice to have that behind us for sure. As we look forward, as you mentioned, we're the only kind of cloud CPM vendor that is FedRAMP High, and that gives us the opportunity to serve agencies within the government that require that level of security, and we feel exceptionally well positioned to be able to take advantage of that opportunity. And so we're definitely taking advantage of that as well as we're working to get AI FedRAMP High certified as well because the government has actually asked us and has strong demand for AI capabilities that, again, no one else has similar capabilities that we do in that arena. Look, as it relates to the government shutdown, I think we all hope the government shutdown ends quickly. We're obviously working with our customers to kind of navigate through it. And I think all of us on this call probably have our fingers crossed that it ends quickly.

Next question comes from the line of Andrew DeGasperi with BNP Paribas.

I just wanted to ask without getting a guide for next year, like in terms of the balance of license and services and subscription, would you say that the license revenue sort of decline, is it going to be reflective of what happened this year? Or are you expecting a more muted kind of deceleration there? And I have a follow-up.

Yes. Well, you're our last call -- so we'll let you do the follow-up. Although I think the operator might have cut you off. But anyway, look, this was a big year, particularly this last Q3 for a transformation from license to SaaS, arguably our biggest year. You should expect to see overall SaaS migration over the next couple of years, and at which point we likely won't have very much license revenue remaining. And as I said before, on the PS&O side, I think you'll see that be some slight growth, but we certainly -- it was a big growth quarter this year. But if you recall from last year, we had a tough Q3 last year. So -- but I think on a run rate basis, our PS&O business is probably in pretty good shape where it's at.

And our last question comes from the line of Mark Schappel with Loop Capital Markets.

I have a question around the sales team. Just a question around the sales team, which has been obviously executing very well here. Could you just comment on any changes or fine tuning to the sales and marketing strategy that maybe we could expect in the coming quarter or 2? And also where maybe you plan to just prioritize additional sales investments?

Sure. So as we've talked about, selling the -- I'll kind of go back to my overview of the opportunity that we have in front of us, right? We're selling the -- we have the legacy market that our sales team is geared towards, understands and knows and we've been selling for years and years. We also are introducing the steady pipeline of products. So what you can expect to see from us is a more concentrated effort on scaling across those different product lines, while we maintain a strong focus on our core business that we've been talking about. So the way that I view the investments in the sales and marketing team is in that scale-based approach to make sure that we're properly positioning all the AI innovation, the CPM Express. The good news is it's that straightforward to sell a more productized solution is contained, and we're excited because you get to really scope in and meet the customer in a use case-oriented fashion.

That concludes the question-and-answer session. I would like to turn the call back over to the management team for closing remarks.

Yes. I'd just like to say thanks, everybody, for joining us. We look forward to seeing you at upcoming events, and hope you have a great rest of your day.

Thank you.