nCino, Inc. ($NCNO)

Good day, and thank you for standing by. Welcome to the nCino First Quarter Fiscal Year 2027 Financial Results Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations.

Good afternoon, and welcome to nCino's First Quarter Fiscal 2027 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer; and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com. With that, I will turn the call over to Sean.

Thank you, Harrison, and welcome, everyone. Before we turn to highlights from our strong first quarter, I want to take a moment to remind you of nCino's mission in the market. nCino was founded to help financial institutions across the globe digitize, automate and streamline their business processes, boosting efficiencies and creating better banking experiences. NCino serves as the system of record for the operational processes and resulting decisions that drive revenue growth and mitigate risk for our customers. We serve some of the largest financial institutions in the world as well as regional and community banks, credit unions and independent mortgage banks, helping them more efficiently and effectively onboard clients, make loans, monitor portfolios and open accounts through a single unified platform powered by AI. Our depth and breadth of customer relationships, unique data set and history of technology innovation built on almost a 1.5 decades of deep domain expertise inside the highly regulated world of banking uniquely positions nCino to lead the AI-based transformation of the financial services industry. Turning to the first quarter. We delivered a great start to the year, outperforming guidance across all key metrics, including accelerating subscription revenues growth to 12% and improving our non-GAAP operating margin to 28%, achieving the Rule of 40. The entire organization continued to execute with focus and discipline across the strategic initiatives instituted in fiscal '26, and I couldn't be more proud of their hard work and efforts. Customer conversations continue to reinforce that every financial institution is thinking about how they can leverage AI to be more efficient, and they are recognizing that to make AI work for their organization, they need a trusted partner like nCino. We help our customers harness AI specifically for banking by providing the context and data needed to deliver reliable outcomes while also providing the governance infrastructure required to satisfy legal, risk and regulatory requirements. Every AI interaction on our platform is auditable, traceable and governed by the same standards our customers apply to their human workforce because in banking, intelligence without accountability isn't intelligence. It's a liability. Banking adviser is the first expression of our Agentic operating system, the intelligent layer that orchestrates AI across the full range of banking operations that we unveiled 2 weeks ago at Insight, our annual customer conference. Our digital partners, purpose-built AI agents for distinct banking roles from executive strategy to loan processing to client engagement represent the next wave of capabilities built on this infrastructure. This isn't a single chatbot. It's a platform designed to embed nCino intelligence into every workflow a financial institution runs. Customers that want to leverage nCino's AI capabilities must first adopt our new platform pricing model that correlates our business model to our clients' outcomes. At the end of Q1, over 40% of our ACV has already transitioned to this pricing model, which we believe demonstrates the heightened urgency in the market to embrace nCino's AI technology. We generally monetize our platform with platform fees and also through the sale of AI token bundles, which we call intelligence units. Customers use these intelligence units to execute various AI tasks on our platform. Some tasks are as simple as chat usage where users can ask a question like, is this borrower in compliance with their covenants while others are more complex and compute-intensive like agents that continuously monitor the credit performance of an entire loan portfolio. As of the end of Q1, over 200 of our customers have their initial bundle of intelligence units. We've been very intentional about how we package these initial bundles of intelligence units as our near-term strategic goal is to maximize and accelerate the adoption of our AI features. To this end, we thoughtfully size initial bundles to provide enough room for customers to comfortably experiment with, deploy and ultimately build reliance on a core group of AI capabilities without worrying they will exceed their initial allotment and get saddled with unexpected invoice for overages. Our customers span a wide continuum of readiness and enthusiasm to adopt these AI features. And depending on how widely they initially deploy the technology across their institution and how many AI capabilities they start off using, an average customer might have their initial bundles last them about a year. Our strong point of view is that by taking this deliberate approach rather than prioritizing near-term revenue opportunities, customers will be able to more quickly and easily realize the value of our AI technology. We expect as customers get more accustomed to this value and become more reliant on the benefits it provides them, they'll adopt even more of our AI capabilities and purchase more bundles of intelligence units. Additionally, as more compute-intensive Agentic capabilities like continuous portfolio monitoring, Agentic deal creation and Agentic Multistep loan origination workflows are adopted, we expect the number of intelligence units consumed per task and workflow to increase meaningfully, creating natural expansion in consumption beyond simple user growth. We are already starting to see signs of this in the field. Consumption of intelligence units has continued to inflect higher month-over-month with banking adviser usage up over 38x so far in the month of May from October, with a few business days still left for additional usage this month. This gives us tremendous confidence in our ability to optimize subscription revenues growth from intelligence unit consumption over the medium and long term. While some of our customers are just getting started experimenting with nCino's AI technology, others are more advanced in their journey, including those that want to run in front of the pack by welcoming our team of forward deploy engineers on site to help them embrace our banking adviser and Agentic capabilities. Several of these customers were on stage with us at Insight, where we welcomed over 1,600 attendees, representing an Insight user conference record of over 300 customers and prospects to Charlotte, North Carolina for what has evolved from a software user conference to a symposium for intelligent banking. Frank Sorrentino, CEO of ConnectOne, shared the stage with me to discuss his bank's experience to date with Banking adviser and notably referenced his plan to reclaim half of his team's time for revenue-generating activities by leveraging nCino's AI capabilities. ConnectOne, a $14 billion institution in the Northeast and an nCino customer since 2017 that already boasts one of the best efficiency ratios in banking, contracted for their first bundle of intelligence units and began their banking adviser rollout in the fourth quarter of fiscal '26. The bank engaged with our team of forward deploy engineers in March for a quick win engagement to assess current benchmarks with our operations analytics functionality and pinpoint friction points they could quickly address with banking adviser. This initial forward deploy engineering engagement put foundational banking adviser capabilities in the hands of all the bank's nCino users, and they couldn't be more excited about the time they're getting back. As a simple example of this, rather than manually creating relationship records, the banker tells banking adviser to do it for them. As compared to the TDS one-by-one process of creating and updating collateral records, banking adviser does it on demand in mass. NCino's forward deploy engagements serve a dual purpose. They accelerate value for our most ambitious customers while simultaneously informing our product road map with real-world application of our Agentic and other AI solutions that we can then scale across our entire customer base. We are already planning a follow-on FTE engagement at ConnectOne to raise the bar even further with our digital partners, nCino series of persona-based AI agents. Our forward deploy engineering team is fully utilized with engagements spanning the spectrum of our customer base, including a $5 billion community bank, an $80 billion regional bank and a top 4 enterprise bank in the U.S. as well as customers in EMEA and APAC. I would like to highlight another development on the AI strategy front. I'm especially proud of given my heritage and customer success. We are seeing the returns on investments we've made in our professional services organization over the past year, developing AI tooling and methodologies that are already compressing professional services hours per engagement by over 40%. As Greg will elaborate on shortly, it was great to see this show up in our professional services gross margins this quarter, but beyond the positive gross margin impact, I believe the bigger return will be materially shorter implementations and lower program costs for our customers that will ultimately drive better pipeline conversions for nCino. We are enabling customers and system integrator partners with the same tools to help them continually optimize their deployments and prepare their environments for our latest innovations. On the product development and engineering front, we're seeing development cycles that used to extend beyond a year now compress under 90 days with teams operating approximately 34% more efficiently over the past year with AI, which allows us to invest more aggressively in Agentic and other AI capabilities while continuing to fulfill foundationally functional commitments to our customers. In the first quarter of fiscal '26, about 21% of our code was written with AI assistance. That percentage increased to approximately 57% as of the first quarter of fiscal '27. But writing more code is not the goal. The goal is to be faster in the entire product life cycle from idea to production. We estimate writing code represents roughly 30% of the work it actually takes required to ship a product. The rest is product definition, quality assurance, security reviews, compliance validation and the coordination required to deliver Tier 1 mission-critical software to financial institutions of all sizes. We believe there is no better blend of technical talent and financial services domain expertise anywhere in the industry than right here at nCino. And these tools and efficiency gains are exciting enablers of product development velocity and potential leverage on our path to sustaining the Rule of 40 and beyond. In summary, I'm extremely proud of the way the team is executing our strategy, excited by the tenor of conversations coming out of Insight and eager to build on the momentum from Q1 to continue helping financial institutions around the world turn AI ambition into measurable outcomes. As one of our stockholders noted in an April white paper on the rise of AI, companies with mission-critical workflows, deeply embedded customer relationships, regulatory complexity that serves as a moat rather than a burden and the free cash flow generation required to absorb and accelerate through the transition will not be victims of AI. They will be AI's next beneficiaries. We believe that statement accurately reflects nCino's strategic positioning and reinforces our confidence that nCino is uniquely positioned to be an AI beneficiary and to lead the financial services industry into the world of AI-powered banking. The reason we are confident is straightforward. Our AI capabilities are shaped by almost 15 years of operational banking data across global, regional and community banks, credit unions and independent mortgage banks, embedded in the actual workflows where loans get made, risk gets managed and compliance gets enforced. This combination of domain-specific intelligence, regulatory trust and workflow integration is not something that can easily be replicated by a general purpose AI provider or easily assembled from scratch. And with that, I will turn the call over to Greg.

Thanks, Sean, and thank you all for joining us today. Please note that all numbers referenced in my remarks other than revenues are on a non-GAAP basis unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. In Q1, total revenues were $159.4 million, an increase of 11% year-over-year. Subscription revenues were $140.9 million, an increase of 12% year-over-year or 11% in constant currency. Note that the first quarter represented a significant sequential dollar increase in subscription revenues at approximately $7.5 million. This was enabled by a record gross bookings performance in Q4 of fiscal '26 with earlier deal closing timing in the fourth quarter and straight-line revenue recognition under our new pricing model, yielding more subscription revenues relative to the prior quarter than we have generally seen historically. As noted on Slide 14 of our earnings presentation, subscription revenues overperformance included a foreign currency tailwind of approximately $1.3 million, favorability of approximately $500,000 from U.S. mortgage and approximately $200,000 of execution-based overperformance. U.S. mortgage subscription revenues were $19.7 million in the first quarter, up 4% year-over-year. Professional services revenues were $18.5 million, flat year-over-year. As I have previously highlighted, we believe our progress with professional services is best measured by looking at the growth in professional services gross profit dollars rather than professional services revenues as we continue to apply and refine new implementation methodologies, leveraging AI to reduce project time lines. Non-U.S. total revenues were $36.4 million, up 15% year-over-year or 11% in constant currency. Non-U.S. subscription revenues were $31.3 million, up 21% year-over-year or 16% in constant currency. Non-GAAP operating income was $44.5 million or 28% of total revenues, an increase of 79% year-over-year. Non-GAAP professional services gross margin improved meaningfully in the first quarter to 10%, up 1,100 basis points year-over-year, contributing approximately $1 million to the non-GAAP operating income overperformance in the quarter. Approximately $1.7 million of the overperformance of non-GAAP operating income was from the delayed timing of expenses, including for various marketing activities that we thought would occur in Q1, but now expect to incur later in the year. And the balance of the overperformance was from the gross profit resulting from subscription revenues overperformance as noted on Slide 14 of our earnings presentation. Free cash flow was $80.8 million in the first quarter, up 54% year-over-year. As a reminder, the first quarter is typically our largest free cash flow quarter of the year following seasonally high bookings in the fourth quarter of the prior year. Turning to an update on our share repurchase programs. In the first quarter, we repurchased approximately 6.1 million shares of our outstanding common stock under the December 2025 stock repurchase program and the March 2026 accelerated share repurchase program at an average price of $15.20 per share, totaling $93.1 million. This includes 5.5 million shares received upfront as part of the $100 million ASR program announced in March, and we expect to receive the remaining shares in the second quarter. $65 million remains available for future repurchases under the December 2025 stock repurchase program. Turning to guidance. For the second quarter of fiscal '27, we expect total revenues of $157.75 million to $159.75 million, with subscription revenues of $140.25 million to $142.25 million, an increase of 7% and 8% year-over-year, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our second quarter subscription revenues guidance assumes constant currency subscription revenues growth of 9% to 11%, you will recall the second quarter of fiscal '26 included U.S. mortgage subscription revenues growth of 22%. Our second quarter guidance assumes elevated mortgage rates suppressed the seasonal benefit we realized last year, making for a difficult year-over-year compare for our U.S. mortgage business, and we are forecasting negative 2% year-over-year subscription revenues growth for U.S. mortgage in the second quarter, as noted at the bottom of Slide 10 in our earnings presentation. Non-GAAP operating income in the second quarter is expected to be $35.5 million to $37.5 million. Our annual user conference and other marketing activities are expected to contribute approximately $3 million sequential increase to sales and marketing expenses in the second quarter with timing of expenses in our annual merit process contributing the rest of the increase in operating expenses assumed by our non-GAAP operating income guidance. We are very excited about the size and quality of our sales pipeline and the sales momentum and activity we see across our business. For fiscal '27, we continue to expect net additions to ACV of $60 million to $65 million on a constant currency basis, representing cumulative ACV of $662.5 million to $667.5 million, up 10% over fiscal '26 ending ACV at the midpoint of the range. As a reminder, the first quarter is historically our smallest gross bookings quarter of the year and the fourth quarter is our largest. For fiscal '27, we now expect total revenues of $642 million to $646 million, up from our prior guidance range of $639 million to $643 million, representing approximately 8% growth at the midpoint of the range. For fiscal '27, we are extrapolating the approximately $200,000 execution-based subscription revenues overperformance through our full year guidance. In keeping with our guidance philosophy for mortgage that we established last year, we are not extrapolating the first quarter overperformance in U.S. mortgage subscription revenues. For fiscal '27, we now expect subscription revenues of $571.5 million to $575.5 million, up from our prior guidance of $569 million to $573 million, representing 10% growth or 9% in constant currency at the midpoint of our range. Our updated guidance continues to assume annual U.S. mortgage subscription revenues growth of approximately 1% and assumes subscription revenues growth, excluding U.S. mortgage of 11% to 12% year-over-year. Our updated guidance does not assume any additional currency tailwind beyond the first quarter. We are raising our non-GAAP operating income guidance and now expect fiscal '27 non-GAAP operating income to be $166 million to $171 million, up from a prior range of $165 million to $170 million. This represents an approximately 30% increase over fiscal '26 at the midpoint. You will note we did not pass all of the Q1 non-GAAP operating income overperformance through in light of the shift in timing of expenses as well as the desire to maintain some operating flexibility at this early point in the fiscal year, similar to the approach we took last year. We continue to remain focused on driving the Rule of 40 mix in future quarters more towards subscription revenues growth than non-GAAP operating margin. We are also raising our free cash flow guidance for fiscal ' 27 to be $135 million to $140 million, up from the prior range of $132 million to $137 million. We expect the second quarter to contribute a majority of the remaining annual free cash flow represented by our guidance. With that, I will open the line for questions.

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

I wanted to start, Sean, with your comments around the AI efficiencies you're seeing in the Professional Services segment, particularly the engagement costs being down by engagement per hour cost being down by over 40%. Just talk a little bit about what exactly is driving that? To what extent do you -- what is it within your business that you're seeing drive that so quickly? I think that's a pretty precipitous move given the time since you've started to implement some of these AI changes. So maybe just go into a little bit more detail around some of those drivers.

Sure. Thanks for the question. Firstly, I would say the most important AI efficiencies that our forward deployment engineering teams are delivering are the outcomes for our customers, and that's what I'm most excited about. And that's what I believe we're most focused on. At the same time, we have been on a journey that I have been communicating to you all for some time to increase the velocity with which we deploy our solutions. And so it might seem like that's been overnight, but we started on this journey beginning of last year. And as our forward deployed engineering teams are lockstep in alignment with our product development and engineering teams, we are really looking at the entire life cycle from how we build our software to how we deploy our software and get it into our customers' hands quickly so they can receive outcomes. And that's why banking adviser is being deployed in a matter of weeks versus months, and we're seeing the efficiencies that we're seeing, and it's also translating to the bottom line.

Okay. Great. Really helpful. And then, Greg, just on the mortgage revenue point, I know we saw a pretty large pickup in industry refi volumes over the last 6 to 9 months. I'm just curious how that -- how investors should think about that within the context of mortgage revenues. It looks like the mortgage revenues are a little bit more seasonal and in line with purchase mortgage trends maybe rather than refi mortgage trends. Just as we think about the business moving more towards some of the volume-exposed pricing model that I know is newer for you guys, how should investors think about tracking that with some of the KPIs that we see out there?

Thanks for the question, Adam. As we look back at the quarter, I think in the first half of the quarter, we did see nice volumes coming through as rates went up, as the quarter proceeded, we saw some of the impact from that. And so basically, we're just kind of looking at run rates from April and extrapolating those through, again, being consistent with the, call it, prudent guidance philosophy we took to mortgage last year and just continuing to take that approach. And so again, we see the industry data and it's calling for higher numbers, which would be great. But again, we want to be prudent as we go through the year and hopefully continue to surprise on the upside for mortgage.

Our next question comes from Ryan Tomasello with KBW.

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

Sure. Thanks, Ryan. And listen, if you think about the evolution of our AI strategy, you heard me talk last year about the 3 pillars being banking adviser, agents and our integration gateway. And that all converging at this year's Insight event a couple of weeks ago and the unveiling of the AOS for nCino. So the momentum is real and the customer feedback is really strong in terms of how we're partnering with customers to imagine agents exponentially proliferating within the customer base. Specific to the initial bundles that we provision to our customers, what I think is really exciting to share on this call and is new news is that we have had our first customers reach the limit in their bundles. And so they have proven that we're delivering outcomes and they're consuming the intelligence units that we are tying to the value proposition we provide with our 5 core digital partners, right? And so long as we continue doing that, while this whole industry is finding its footing, there's nothing in the model that we've put in here, but I am fully confident that by the time we get to the end of this year, we will monetize by re-upping the customers that are reaching their limits. So that's exciting news for nCino.

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

Yes. Listen, I would say on the zoom out sort of exec summary, we're solving the same problems the world over with our solutions. When you think about the value we deliver across onboarding, loan origination, portfolio monitoring, the conversations are pretty similar across geographies. Yes, there are some nuances, both culturally and from a regulatory perspective that we need to contemplate. And some of that shows up in the governance conversations we have with our customers around compliance. And we need to kind of build that locally, and that's exactly why we have a global PDE team with local presence in EMEA and Asia Pac. But the framework we have in place, the strategy we have in place, the vision for the Agentic operating system, the technology infrastructure partners that we have thoughtfully chosen to go to market with scale globally, and we're largely solving the same problems with the same technology.

Our next question comes from Saket Kalia with Barclays.

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

Yes. As you know, Saket, that's a core part of our heritage, our flagship solution in commercial loan origination remains a very fundamental part of our business, and we still see strong demand and expansion across some of the largest customers that we have, and we still see new logo opportunities in this space. And we still see opportunities from a geographic standpoint internationally in commercial loan origination with a lot of room for upside, and that's showing up in our readout in our revenue growth. What I'm also seeing that I think is exciting is that some of these banks now have commercial lending leaders that are working in concert with folks that have been appointed within their institutions to play specific AI leadership roles, right? So some of our largest enterprise banks -- we'll have somebody who's responsible for the adoption of AI across the bank that's working directly with the head of the Commercial Bank to provide the right governance framework in place. And those folks are reaching out directly to nCino to ensure that we can comply with those standards, and those conversations are going very well.

Got it. Got it. That's great to hear. Greg, maybe for you, just to pick up a little bit on that topic. I think we said that there was something like 38x increase in usage in Banking Advisor, I think, May versus October. And you correct me there if I'm wrong. But maybe the question is, how do you think about Banking Advisor maybe contributing to the business here this year or over the next couple of years? Understanding it's early, I think we're seeing customers go beyond their usage limits, but how do you sort of think about the revenue or ACV opportunity here with Banking Adviser specifically?

Thanks for the question, Saket. I think, again, it's exciting times and again, Sean being able to highlight that and that trend continuing month-over-month of usage growing up into the right. So it's great to see that. But going back to Sean's comments, I mean, we continue to focus on near-term adoption. And again, we expect if we do the adoption thing right, that will lead to long-term top line subscription revenue growth from leveraging our AI and our intelligence units. And so there's nothing in the model for this year for that, that would be upside. But again, our focus this year is making sure that we execute on the adoption front and it contributes next year and beyond. And I think the trends we're seeing are incredibly encouraging. I think the feedback we got at our Insight user conference 2 weeks ago was also very encouraging and exciting. And again, I think we feel like we're really uniquely positioned to drive this new world of AI-powered banking in the financial services industry on a global basis for banks, credit unions, IMBs of all sizes. And so it's an exciting time. And ultimately, again, I think from a model perspective and a forecasting perspective, we are taking a prudent approach this year, but setting ourselves up for next year and beyond.

Yes. And Saket, if I could just jump in here as well. On the one hand, yes, I'm excited to share that our first customers are consuming their entire bundles because that's a question you all have been asking, and I'm happy to be able to share that news. But more importantly, make no mistake, intelligence unit consumption is the future of this company, right? And while we have steadily reaccelerated growth on our asset-based model plus intelligence units, not even having that baked in and the upside with customers getting the outcomes you've heard from our forward deploy engineering teams just gives us nothing but cause for optimism here on that front.

And just to touch upon that a little further, if you think about the model change that we've gone through, put the IU opportunity aside, right, changing from the fixed seat-based pricing to asset, right, that's separate apart from AI and the IU opportunity. Again, I think that set us up for growth that we didn't have intra-contract previously. So I think that model change from a foundational standpoint is exciting and again, points us in the right direction. And then incrementally on top of that, we have now added this IU opportunity. as well. And so to Sean's point about where we're going, I think the overall model that we've evolved to, I think, sets us up well for continuing reacceleration of growth with the opportunities that we have in front of us that we just need to keep executing on to capitalize.

Our next question comes from Alex Sklar with Raymond James.

Sean, maybe I'm going to follow up on some of the Banking Adviser questions here, but you showed some of the dashboarding at Insight around operations analytics. Where do you stand today in some of those early adopters realizing measurable ROIs? And then as it relates to those FE engagements you spoke to, how are you going to go about replicating kind of the before and after improvement that your customers are seeing without -- with the customers being able to get it out of the box?

Sure. Thanks, Alex. Listen, the outcomes that I've talked about being first and foremost in our mind, when we can stand side-by-side with a customer who's articulating that in the world of the traditional 20/80 rule in terms of available hours in a year, he's saving 1,000 hours per employee that he can direct them toward higher-value activity directly attributed to the Banking Adviser solutions. That's something we're proud of. When our credit analyst agent is delivering 60% or more efficiency on credit reviews, that's something we're proud of. How do we replicate that? We've got some of our best and brightest at the company at the tip of the spear on this forward deploy engineering team that are not only out there deploying Banking Adviser, but then packaging up how we unwrap it for the next customer and making that repeatable and scalable. In some cases, that we wouldn't necessarily need to be on site to do that, right? We could do this all remotely, all digitally. In other cases, I will share candidly that sometimes I chuckle and think that the term forward deploy engineers is just a fancy word for what we've called consultants for years, right? It's folks who sit side by side with bankers and help them solve business problems with our technology and deploy it in a way that makes sense. And so all this is working really well. I think the big force multiplier for us is and always has been the partner and system integrator ecosystem. You know that's been a big story for us from day 1. And the largest system integrators in the world have helped us build and scale this company. In the early day, the paradigm was configuring an open, flexible, configurable solution for our customers. And that paradigm has simply shifted to deploying agents everywhere, agents in our swim lanes where we play in onboarding, account opening, loan origination and portfolio monitoring and then agents that are going to exist in the banking landscape side-by-side with ours and connect to those. And we think that's a tremendous opportunity for the SI ecosystem to be highly utilized and profitable and doing that with nCino. So we're busy training on that model today.

Okay. I appreciate that. Great answer there. Maybe just a follow-up, Sean. Just on credit unions, you had your largest new logo win this quarter. It felt like a big uptick in credit unions attending Insight this month. What are you seeing from that part of the market in terms of moving from adoption of portfolio analytics to kind of broader platform adoption? And maybe just a quick follow-up for Greg. How should we think about the mix of kind of those smaller singles and doubles in the pipeline this year versus larger enterprise deals as it relates to the ACV outlook?

Yes. In the credit union market, our solutions, in our opinion, have always resonated very well in terms of the problems that we solve for that segment of the market. I do think that a year in now from activating that go-to-market credit union team, one that culturally speaks the same language to that community, and we've got many members of that team that come from the credit union space, and I met with several of those customers with those teams in Charlotte a few weeks ago is starting to pay off, right? I think that people realize that, again, those same problems we're solving the world over for financial services institutions resonate with our credit union customers, and that's showing up in the logos that we're signing as well as the expansion. Portfolio analytics has always been a very powerful sort of point solution in its original heritage, but us integrating that fully into the platform is enabling us to actually imagine a pipeline of products and services we can deliver to the credit union market that you'll hear more from us about in the future.

And Alex, just to your comment, we really like that credit union business, just like we really like our C&R business, and we like all of our businesses. But those are nice singles and doubles, if you will, just in terms of overall deal size compared to our average. And so again, advancing runners around the base, that's a good business for us. We think we've got a great offering for credit unions. And ultimately, again, standing up that team, right, so we could focus very much exclusively on them with that team, I think, is paying dividends for us.

Our next question comes from Chris Kennedy with William Blair.

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

Sure. First and foremost, revenue. And Keith and I spent some time earlier today and the pipeline momentum that we have continues under his leadership. He brings a unique lens from having operated in this ecosystem in other areas and is injecting some new ideas and thinking to the team as well. But as we continue on the momentum that we've been reading out with our pipeline year-over-year. Keith comes in, and I think he also starts to bring ideation around how we think about that partner ecosystem. I talked about expanding from not only SIs and traditional tech partners, but to the hyperscalers in the industry where he has deep roots and connections and has a great nose for the balance of functionally positioning our problem solving for customers, but also letting our demos shine. And from a technical presales standpoint, doing that in the most efficient and elegant way that we possibly can. So those are some areas that he's looking, but he's making the rounds globally. He's already been over to see our European team. And we're excited that we seemingly haven't missed a beat with Keith stepping in as a true veteran into this role. It seems like he's been here a long time already, and it's only been a few months.

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

Yes, it's a big part of the equation, no doubt. And we're paying close attention as we see some of the largest names in the industry sharing that they've consumed all of their tokens year-to-date, and we're not even halfway through the year. We are not in that position, but we are watching carefully. And so as we think about the usage that we have for everything from leveraging Claude code to leveraging tokens internally for every job and every function at nCino, we have revenue dashboards for IU consumption, and we have cost dashboards that we need to correlate. I would say right now, I'm comfortable that we're calibrating that appropriately, and we're not too far out over our skis, but we certainly are leaning into the opportunity and encouraging our folks to leverage the most efficient technology to solve problems, and we'll calibrate the spend over time. Achieving the Rule of 40 in an era where we are already leveraging AI to do our jobs is something I'm super proud of. It did not take us sideways on achieving that goal.

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

Our next question comes from Aaron Kimson with Citizens.

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

Love to. That's a topic that we discuss often around here because to a certain degree, the more things change, the more they stay the same, right? There is a different technology imperative at this point in time, but there is the same psychological trepidation around adopting that new technology. And it all revolves around security. It revolves around scalability, compliance, regulation and comes back to the industry that we serve, right? And in this industry vertical, having a deep understanding and contextual data that helps inform how we serve up these experiences to our customers, I think, really reinforces the confidence they have in a partner like nCino. I still stand before you and share that I don't talk to any CEOs in our customer base that are eager to automate their business on public cloud data. alone. They're looking for a trusted partner who's navigated transformations like this in the past, whether they be technology shifts or cultural transformations. At the end of the day, we are changing the way people do their jobs. That's what we've always done. Now we're simply injecting the dual workforce methodology into our customer base. And so that's a different change, but it requires the same sort of sense of urgency that we would push and be provocative in terms of how our banks understand that there will be first-mover advantages. And the folks that embrace the change will separate from the pack and the folks who want to be last are probably certainly susceptible to acquisition. So that hasn't changed at all.

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

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

Our next question comes from Charles Nabhan with Stephens.

A couple of quick ones on mortgage for me. As we think about the cadence of revenue for the full year, I think you said second quarter would be up around 2%, which would imply something in the down 3% range for the back half, which I could appreciate has a degree of conservatism. Is it fair to think about the third quarter as the trough given, I think, 13% revenue growth last year? And then secondly, within that business, are you seeing more of your clients operating above their contractual minimums, which would you -- which I guess, would position you potentially to capitalize on volume overages within that part of the book?

Thanks for the question, Chuck. Yes, from a comp perspective, Q2 and Q3, which I think would be fairly flattish between the 2 is something that we've assumed as part of the guidance that we've provided. As you look at Q4, remember, Q4 is generally seasonally a slower quarter for mortgage, if you think about the holidays and just the buying cycles for homes. So we came into the year forecasting about a 1% increase in mortgage for the year, and we reiterated that this year, noting that from a linearity perspective, it would kind of play out with Q2 and Q3 being more trough versus last year and again, Q4 having more of the seasonal flavor to it. In terms of folks exceeding their committed or minimum commitments, again, it really varies from customer to customer. And you see some that are. Again, we highlighted a nice expansion that we did with a customer as part of the press release, right, getting more under contract, which, again, we think is great and provides more visibility for us. And so it really is customer by customer. Some folks may be a little bit more heavy on refi than purchase. And so as refi ticked up earlier in the quarter and then maybe calmed down a little bit as rates popped up, you can see some impact there. But that really hasn't changed as we've talked about that you really need to go customer by customer and see where they are and frankly, how aggressively they are operating in the market.

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

Yes. We are seeing strength on Continental Europe, seeing strength in our Japanese market and the opportunity in Southeast Asia is one we're leaning into. And I would say in terms of what is driving that in addition to having new leaders in place for some time that have now retooled their teams and reenergized the field, we also have some imperatives around expanding our data partnerships to lean into the opportunity around onboarding and full client life cycle management, which is a big part of the conversation in Continental Europe. And so we're starting to see some of the larger financial institutions in that region come our way, the active conversations there. I was over there just about a month ago, a little more, and I'm spending a lot more time on the continent than I am just in the U.K. and Ireland these days, and that's where we have a lot of the pipeline movement.

Our next question comes from Michael Infante with Morgan Stanley.

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

Yes. The growth is strong. I mean, listen, the customers cannot fully take advantage of the offering -- the AI offerings we have without having connectivity to the data, right? So when we think about the foundational infrastructure traversing our data layer to all the way to the MCP layer, LLMs in place, sometimes some not, as Greg talked about earlier, all of this connectivity matters. It's exactly why we made the strategic acquisition of Sandbox Banking, and that is now serving as the framework for the Agentic operating system that we're evolving into. So integration is part of our platform. And I don't think in the future, we'll talk about it separately.

Makes sense. And then just to circle back on Kris's question regarding some of the compute costs. I just wanted to understand how pervasive the adoption behavior of some of those compute-intensive Agentic capabilities are versus some of the more standardized chat capabilities? And if there's really any context that you can provide based on the sort of costs that you're seeing today as to how you're thinking about both the near- and medium-term gross margin profile of the Banking Advisor product?

Yes. To your point, they're not all created equal in terms of how we consume the cost on our side. So we are watching carefully. In general, the cost that we've been able to manage, and we're certainly outrunning the cost with the consumption of the intelligence units. But in some of the more heavy -- when you think about auto spreading, which is one of our more mature capabilities, we're having really good success on the adoption and the results we're delivering to our customers and keeping the cost well under control. So as we roll out more skills, we'll calibrate that, and we're really putting in a place to kind of rationalize spend across the board. So we don't have to manage that separately within each individual skill down to each intelligence unit that may be in a common framework that we can manage the cost.

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

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

Our next question comes from Ella Smith with JPMorgan.

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

Yes. They want to make sure that we are in adherence to the policies that they have established internally. You have to remember, some of these banks have tens of thousands of employees, right? And if you were to think of each individual employee in each individual role experimenting with a different AI provider, right, and then bringing those ideas up to the top of the house, that's absolute chaos, right? So they need to put in some sort of governing structure that gives guidance on how people should think about using AI within their jobs. And then they're looking to not necessarily reinvent the wheel. They're looking for folks. When I give the example of the credit analyst agent, the banks don't necessarily want all their credit analysts experimenting and how they could build their own agent, when nCino already serves that up very straightforward and elegantly. And so those policies are typically documented. They'll be served up in documentation packs that oftentimes these banks provide external links to that we can then sit down with our engineering teams. And it typically comes down to, in summary, building a few APIs.

Yes. Ella, I don't think we can emphasize enough the importance of the trust and governance factor. besides the regulatory framework our customers live under, again, they can't afford a hallucination, right? They can't take that risk, right? That risk could have millions and millions and millions of dollars of exposure on top of potential regulatory risk. And so again, I think we -- just as we did with the cloud, getting back to an earlier question and how we transition our customers from on-prem to the cloud and got them comfortable doing that, we're holding their hands along this path for AI as well. And again, I think we are uniquely positioned to do that, and it does come down to, I think, the history that we have of supporting them, of scaling with them and supporting them and appreciating the regulatory environment and the governance framework that they have to operate in, in order to comply with the obligations that are placed on them.

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

What I would tell you is that the platform continues to win in the market. And there -- in the AI era, we don't have a single competitor that has the breadth and scale that nCino does with respect to the things that we do and where we do them, the solutions we serve up across lines of business and across the globe. So we continue to see a healthy competitive dynamic out there and competition is good, whether those are some of the old time, long-time competitors or new entrants, they are all point solutions that largely focus on one of the things that we do, but not serve up a platform experience connected by 15 years of data across customers, giving incent to participate in a pool that serves up insights in real time at the point of production. So the landscape, I would say, while maybe a little more crowded is certainly similar in terms of point solution versus platform.

Our next question comes from Ken Suchoski with Autonomous Research.

You guys talked about some customers going beyond their usage limits on IU. And I think the thinking earlier this year was once they hit those limits, salespeople are going to have conversations with those customers. So what happens to those customers that have consumed their units before year-end? Are you granting them the same number of units that they received originally? Or are you starting to have conversations with them about potential pricing and contracts? Presumably, those are more super users that are getting more value out of that offering?

Yes. The conversations are very active, not only with our sales teams in the field, but I'm personally involved in these conversations. My product leaders are involved in these conversations. And we're certainly learning. And I would share with you candidly that the first customers we talked about that have consumed their bundles, we have customers that have addendums in front of them today to re-up their units. And so that's exciting. And we also have the reality that in some cases, we feel like we underestimated the intelligence units they needed because they started using more skills than anticipated on day 1. So there really is a case-by-case reality. I mean you think about some of the customers that have been on the journey with nCino for quite some time, we are absolutely applying some discretion to those conversations. And most importantly to me is if we can direct line read the outcomes, then we certainly have customers that are willing to pay a premium for re-upping those bundles. And it's imperative on us to partner with our customers and deliver the outcomes. And when we do, there's nothing but upside.

No, that makes a lot of sense. That's really clear. You could be flexible on timing there. Maybe just on international, and I think Chuck might have asked about this, but maybe just following up there, like the FX-neutral revenue growth. I think that's all organic. I know fiscal 4Q had a bit of a tougher comp, and maybe that was like low double-digit sort of normalized growth. But it does seem like the international business on an organic FX-neutral subscription revenue growth basis is accelerating, and it does feel like the comps get a little bit easier throughout the year. So is the thinking that we should expect that international subscription line to continue to accelerate for the balance of the year and be above this sort of mid-teens type of range?

Yes. Thanks, Ken. Yes, I think, look, the output that you're seeing in Q1 reflects the good end of the year that the international team had, very solid end of the year, which gave us our largest quarter of gross bookings ever and what was our largest year of gross bookings ever. And so ultimately, it's just around keeping the momentum up. But I did say on the last call that we did expect our international subscription growth to be accretive to our overall growth this year. And again, I think we feel real good about the sales pipeline and the level of activity that we see. As Sean mentioned, he was over in Europe not too long ago and also noted that Keith Patel, our new CRO, has already been there. And so it's exciting opportunities outside of the U.S. as well, and we're seeing the activity here.

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

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

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

Perfect. Understood, Greg. And if I could follow up just a 2-parter on the Agentic's strategy. Just the first one, if I interpret the comments about AOS correctly from the user conference, it sounds like there's obviously ambitions beyond lending. I heard treasury deposit. Maybe talk about your ability to execute sort of beyond core lending ops. And then just as a secondary question, obviously, you're rolling out your own agents, which makes a lot of sense. Does it make sense at some point to allow third-party agents or bank run agents also participate in the platform as well and have nCino be the governance platform for nCino agents and then third-party agents as well?

The answer is yes. It absolutely does, and that is the absolute vision for the AOS with nCino. While we do want to serve up prepackaged and easily deployable agents for the core business that we focus on and the solutions that we have the most investment in, we fully recognize that our customer base as well as the SI ecosystem is going to want to build agents around those and build agents even things that are outside those lanes like even call center and contact center and service side of the business. Think of those agents meeting to not only communicate with the agents that we're serving up, but also tap into that same data layer that we talk about as being a differentiator. And so while we build the agents, the customers are consuming intelligence units, and we're monetizing that, while the customer or the partner builds the agents, we're actually monetizing that through the data layer.

Our next question comes from Hannah Rudoff with Piper Sandler.

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

Yes. I will tell you my biggest surprise coming out of the event, and I'll remind you that I'm a CEO comes from a customer success heritage, and I wake up in the morning, making sure we deliver outcomes and have strong NPS and customer satisfaction scores. And I spent a lot of time talking to my customer base as well as our employees that while we're excited about the future and the AOS and the Agentic possibilities and the entire market is involved in the hype cycle, we simply need to fulfill the existing commitments we made to our customers. And what I would tell you is that there was very few and far between at our biggest event of the year where we have thousands of folks and 300 unique customers that people pulled me aside to say that we weren't fulfilling those commitments. This is a tough business. right? We're solving difficult problems for customers. And I'm really proud that the teams are actually fulfilling on all those expectations while innovating at the pace we are. And that was a surprise. That's the first thing that comes to mind when you ask that question.

And in terms of prospects, which is relatively new over the last couple of years, inviting prospects versus customers as that's evolved. I'd say probably around 10% of those 300 were prospects, which would be a record for us. And what was great to see for folks who walked around is it was a global conference. And so there were folks from all over the world there. And the fact that they take the time and incur the expense to come, I think, says a lot about them and their commitment to nCino and going on this journey with us, particularly as we focus on AI banking. So to me, I always judge those conferences by our sales folks and how they're feeling, and I left there very, very encouraged and excited by the conversations I had with our sales team post Insight.

Our next question comes from Terry Tillman with Truist.

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

Yes. I would tell you that the #1 correlation between our customers that are most aggressively adopting intelligence units is the posture of the leaders in those institutes. They need to set the tone and create the space and the conditions to adopt new technology, right? And then those are the folks that we run toward with our forward deploy engineering teams. And those are the folks that are eager to have those conversations on site and innovate together and understand while we're deploying agents, they are already thinking about the art of the possible with the AOS. So a lot of this is about change management and leadership posture.

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

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

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