nCino(NCNO) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenues for Q3 2025 were $138.8 million, a 14% YoY increase [23] - Subscription revenues were$ 119.9 million, also a 14% YoY increase, representing 86% of total revenues [23] - Mortgage subscription revenues were $20.7 million, a 16% YoY growth, accounting for 17% of subscription revenues [23] - Non-GAAP gross profit was$ 93.2 million, a 15% YoY increase, with a gross margin of 67.2% compared to 66.5% in Q3 2024 [26] - Non-GAAP operating income was $28 million, a 38% YoY increase, with an operating margin of 20% compared to 17% in Q3 2024 [26] - Non-GAAP net income attributable to nCino was$ 24.4 million, or $0.21 per diluted share, compared to$ 16.2 million, or $0.14 per diluted share in Q3 2024 [27] - Remaining Performance Obligation (RPO) was$ 1.095 billion as of October 31, 2024, up 19% YoY [28] Business Line Data and Key Metrics - US community and regional businesses, as well as US enterprise businesses, had strong sales quarters, both on track to exceed gross bookings targets for the year [7][8] - Mortgage business added 11 new logos in the US, with an average mortgage customer ACV 15% higher than a year ago [10] - Banking Advisor added 11 new customers globally in Q3, with plans to include it in every new deal and renewal [15][16] - EMEA team signed an expansion agreement with the largest bank in Norway and secured the first customer in Luxembourg for a joint commercial and mortgage lending solution [13] Market Data and Key Metrics - US enterprise market saw strength in expansion sales, including a deal with an $80 billion bank, increasing ACV by approximately 15% [9] - International markets showed momentum, with Tokushima Taisho Bank in Japan becoming the largest customer in the region [11][12] - EMEA market benefited from regulatory emphasis, such as the Digital Operational Resilience Act (DORA), driving vendor consolidation [14] Company Strategy and Industry Competition - The company is transitioning to a new pricing framework called the Intelligent Solution Framework, which aligns fees with the assets of financial institutions [30][31] - The acquisition of FullCircl enhances customer onboarding capabilities, particularly in the UK and Europe, with potential to expand the global SAM by$ 800 million [17][19] - The company is focusing on cross-selling opportunities, particularly with the integration of DocFox and FullCircl, to create a more comprehensive platform [72][75] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the US enterprise market and international growth, particularly in Japan and the Nordics [12][13] - The company expects FullCircl to contribute approximately $4 million to subscription and total revenues in Q4 [34] - Guidance for Q4 2025 includes total revenues of$ 139.5 million to $141.5 million, with subscription revenues of$ 122.5 million to $124.5 million [33] - Full-year 2025 guidance expects total revenues of$ 539 million to $541 million, with subscription revenues of$ 467 million to $469 million [33] Other Important Information - The company plans to provide an updated KPI framework starting with the Q4 earnings report to offer more transparency into the business [38] - The company is focused on integrating AI and Banking Advisor into its platform, with 11 new Banking Advisor deals signed in Q3 [15][129] Q&A Session Summary Question: Decomposition of Q4 guidance excluding FullCircl contribution [40] - Answer: The Q4 guidance reduction is primarily due to increased mortgage churn and cautious outlook on mortgage volumes despite the Fed rate reduction [42][43] Question: Annualizing FullCircl's$ 4 million contribution into next year [45] - Answer: The company will provide guidance for next year during the Q4 call [46] Question: Performance of other business lines outside of mortgage in Q4 [49] - Answer: The company signed significant deals internationally and a large enterprise deal in the US, indicating a strong pipeline [50][51] Question: Feedback on the Intelligent Solution Framework [54] - Answer: Customers have provided positive feedback on the new pricing model, which aligns with their success and simplifies the buying experience [55][56] Question: Updates on Banking Advisor customer feedback [64] - Answer: Early adoption of Banking Advisor is progressing well, with 11 new customers added in Q3, and the company is excited about the potential for future skill additions [65][66] Question: Timing for material cross-sell impact from new products [72] - Answer: Cross-sell is already proving successful, with more than 50% of bookings coming from non-commercial products, and the company expects further growth as new products are integrated [74][75] Question: Mortgage churn outlook beyond Q4 [80] - Answer: Mortgage churn has stabilized, with the market showing signs of improvement, though M&A activity remains a factor [82][83] Question: International market performance drivers [90] - Answer: The company sees momentum in Japan and the Nordics, with potential for growth in Spain and other regions, though Germany may require further investment [92][96] Question: RPO strength in Q3 [97] - Answer: The strong RPO growth was driven by a mix of net new business and renewals, reflecting good execution [98] Question: Net 50% bookings target for the year [103] - Answer: The company remains focused on achieving the net 50% bookings target, with Q4 historically being the largest bookings quarter [105] Question: FullCircl acquisition details and growth rate [106] - Answer: FullCircl's $4 million contribution in Q4 is all subscription revenue, with no professional services, and the company will provide more details on growth in future calls [112][115] Question: Mortgage volume increase impact on revenues [118] - Answer: A 20% increase in mortgage lending by customers on volume-based pricing could yield a 10% increase in revenues, though minimums vary by customer [119][123] Question: Drivers for customer spend increase in fiscal 2026 [124] - Answer: Lower interest rates, a resilient economy, and AI integration are expected to drive increased customer spend [125][128] Question: Fiscal 2025 revenue churn expectation [151] - Answer: Revenue churn is expected to remain around 5%, consistent with previous guidance [152] Question: Additional KPIs to be disclosed [153] - Answer: The company will provide an updated KPI framework starting with the Q4 earnings report [154] Question: Banking Advisor's impact on ACV and sales cycles [157] - Answer: Banking Advisor is expected to drive ACV uplift and has not caused elongated sales cycles, with positive feedback from customers [161][163] Question: Implied organic Q4 guidance growth rate [164] - Answer: Excluding M&A, the organic growth rate for Q4 is expected to be in the low double digits [165] Question: Deposit account opening product adoption [169] - Answer: The deposit account opening product is being adopted across the spectrum, including credit unions, community banks, and enterprise banks [170] Question: Impact of the home-builder deal on Q3 [178] - Answer: The home-builder deal contributed to Q3 performance, but the company did not quantify its specific impact [180] Question: M&A as a catalyst for demand [181] - Answer: M&A activity is expected to drive demand as acquiring banks look to streamline their middle and back-office operations [183][184]