Our next presentation comes from nCino. nCino is the leader in cloud-based lending systems. To my immediate left is Sean Desmond, CEO, and Greg Orenstein, CFO. This is going to be a fireside chat. If members of the audience have questions, you can email session2@rwbeard. I'll get those on the iPad. Maybe to begin, I'll ask for an intro to nCino and an overview of the investment case.
Sure. Thanks for the time. We appreciate it. It's great to be here. We have been at this for the better part of the past 13 years at nCino, our original mission to transform financial services through innovation, reputation, and speed. We have been known in the marketplace as the worldwide leader in cloud banking. At this point, we are pivoting the energy of the entire company that we would usher banks, credit unions, and independent mortgage bankers into the era of AI. We will be the worldwide leader in AI banking as we move forward. It is a super exciting time for the company. At the same time, we're solving some of the same problems that have been age-old for financial institutions for many years.
If you think about how organizations are siloed in their operating model as well as in terms of how they house data and make decisions, we democratize and provide digital collaboration across that landscape and deliver outcomes for our customers. Some of those problems, you know, the age-old of customer really wants two things. It's kind of how much money can I get and how quick can I get it on the borrowing side? How fast can I open an account? Can you onboard me onto your institution in a compliant sort of a way? Know your business, all the KYC adages there. How can you kind of monitor and service my portfolio in a way that would be proactive for me? We deliver these types of outcomes over time in a seamless sort of personalized way.
That digital and interactive collaborative nature is in our DNA. We bring the middle and back office toward the front office of the bank and ultimately toward the banker and their customer. That is what we have been doing for many years. If you think about the things that we do and where we do them on the platform, nCino is busy doing onboarding for our customers, doing account opening, doing loan origination, doing portfolio monitoring. We do that across commercial, consumer, and mortgage lines of business. We serve that up in a consistent fashion for the banker and their customer, whether they are in the branch or on a digital online experience. All of that is underpinned by what we believe is the world's richest data set in fintech- highly differentiated. We have 2,700 customers globally.
We're collecting not PII data, but on aggregate, we have a lens on the process-centric data. We understand how capital flows through the bank, and how people make decisions. With that data, we think we're set up perfectly to capitalize on the vertical AI opportunity in banking. That's exactly what we're busy kind of engineering the company and the resources and our time toward. That global customer base exists across market segments. We deliver the same solutions and the same code base and the same platform to community banks, credit unions, as well as the largest enterprise banks with trillions of assets under management at scale the world over. 15 out of the top 30 banks in the US, five of the top seven in the UK and Ireland, three of the top five in Asia-Pacific. Excited about the momentum we have in Tokyo.
That global customer base, again, I point that out because that gives us a purview and a lens on the data that is very unique. In a world where you all hear everybody opining about how folks can run any sort of business, including a bank, which is the most highly regulated business around, on LLMs alone, we believe being a vendor that's been on the journey with customers and has trusted us with their data for many years is differentiating because we have access to the same LLMs, but we have the actual data. We're going to capitalize on that. That's a bit about what we do. I don't want to drain the slides too much. Happy to take questions however this works.
Great. I'm going to stay on you for a moment. Customers are complex. Their workflows are complex. Before you were CEO, you led product. You led customer success. You're probably the best person inside nCino to really understand what customers need and are looking for. How do you kind of take that background and now as CEO parlay it into your near-term goals? What longer-term you hope to do? Kind of your line of sight as CEO.
Yeah. Yes, so previous to stepping into this role, I spent a large part of my career in the post-sale world, which is really all about delivering on the promises you made to your customers, fulfilling the commitments. I take that very seriously. I believe I'm pretty aligned with how our customers think. If you talk to banks, put the customer at the center of everything you do. That is how I think about our business. We have real big opportunities to propel our business forward with some initiatives we have at the company right now that are near and dear to my heart, which would be removing friction from the entire experience and making sure we have faster, repeatable, more streamlined implementations.
That's a big initiative for the company that I think is going to be a differentiator for us in the sales cycle. At the end of the day, we get feedback from our customers. It's almost always about, did you follow through on the promises that you made? That's how I think about the opportunity. I would say in addition to that, I've been through a few of these inflection points in my career, having grown up in the consulting side of the business in the mid to late 1990s, seeing mainframe to client server, seeing client server to cloud, seeing big data. Here we are at this inflection point to AI. I think about the experiences I've had over time running both customer success and product and how uniquely positioned we are. It's in the DNA of our company to drive change.
That's what we do. At the end of the day, the technology is fantastic. We're proud of our products. Our solutions work. If we can deliver measurable outcomes, those speak for themselves. You still have to drive change. You still have to help financial institutions the world over understand how to make that transition from the old to the new, whether it's manual legacy or we're replacing the existing system. We kind of lean into that as we drive change into this AI inflection point.
Great. I have a lot of AI questions. Before getting to that, I'll ask Greg, maybe just recent financials. Had a good update last week. Entering this year, maybe how were you thinking about the go forward budgeting, the outlook? As you look to execute this year, what are some of the things you're focused on to set you up for even stronger growth next year?
Absolutely.
Yeah, as we came into this year, look, I think our customer base for the most part is healthy. Clearly, a couple of years of difficulties with the liquidity crisis, the rapid rise in interest rates. I think they've gotten through that well. Again, I think we see activity in the pipelines continuing to increase, which gives us optimism. Also, again, with the products that we came out with just a couple of weeks ago at our annual user conference, we have more products to go sell. I think right now we sit, executing on a bookings plan this year that if you look at the midpoint of the guidance that we gave, and it's the first time that we've given ACV bookings guidance as a company, it's just $3 million more at the midpoint than what we did last year.
I think we feel like the markets continue to improve, and we have more products to go sell. From a top-line perspective, it's just very much focused on execution. Closing the deals we say we're going to close and closing them when we say we're going to close them. That's what the focus is. From an expense perspective, I think we've been managing the expenses at the company well over the last couple of years. I think we'll be able to continue to do that. We continue to find opportunities for efficiencies. Ultimately, I think try to set ourselves up for a year where we continue to build momentum throughout the year. Overall, I think right now it's just heads down execution. That's what we're focused on.
For those in the audience, when you think about nCino, is this a rule of 40 business, rule of 50? Where do you see that ultimately settling out?
Yeah, we said on our Q4 earnings call a couple of months ago that around the fourth quarter of next year, we would be a rule of 40. I think some folks were questioning how we would get there. Ultimately, we did not give a specific, it assumes X% or Y% of growth or bottom line. We just made a commitment that we would get there. We did take an action last week in terms of a restructuring in the company. Those things are never easy. Ultimately, we felt like it was the right thing to do. I think a big step forward towards meeting and ultimately exceeding that rule of 40 target. That is our next goal, is to get that around the end of next year.
Great. OK, AI, I think a lot of folks are in agreement of all the different industries looking to deploy AI. Financial services is going to be one of the hotbeds, potentially one of the biggest potential implications. And in a lot of ways, I have thought nCino is always early in terms of AI product and intentions. I think about the first kind of copilot launches. That was on the earlier end. You were very early in talking about agents. You can kind of plot along to use Salesforce as an example. A lot of people now recognize Salesforce with the agent for strategy. You can often trace nCino as being even earlier and ahead of those communications in this industry. How do you see the opportunity?
Why is it so different than what a lot of SaaS vendors or even vertical SaaS vendors have said about AI for their businesses over time? Because it does seem with consistency, nCino has been on the early end of thinking about it and introducing it.
Yeah, the opportunity is massive. I think it's going to be unique in banking. To your point, in terms of capitalizing on that, everybody sees the potential. At the same time, folks recognize that in a highly regulated environment that is traditionally known as risk averse, what will that journey look like? What will the adoption curve look like for banks in terms of the pace of innovation that they consume? We have said since day one at this company, before AI was even a narrative, we said if we can capture all the data in the context of the workflow and the process-centric nature of that data, and we can serve that up to our customers at the production line where they need insights to make decisions, that good things will happen. We said this in 2013.
We have steadily been accumulating that data all that time. You look at the moves that some of the big players in the space have been making around data recently from a tech standpoint and the horizontal landscape, we have just been doing that all along. We have that foundation. We kind of lean into the reality that we have been driving efficiency into banks. If we can increase loan application rates by 288% for certain financial institutions, that is going to get them more customers. It is going to get them more market share. If we can reduce keystroke and data redundancy by 75%, that is going to drive efficiency. We have been doing this without AI. Here we are. Our strategy for AI is threefold. We are continuing to develop out what we are calling our banking advisor skill sets.
That is basically training by persona. We look at each role in the bank, the loan officer, the credit analyst, the underwriter. We say, how do they do their job every day? How can we automate that? What have we already done to drive efficiency into their job? How can we do that further with Banking Advisor skills? We have already got 18 Banking Advisor skills that are live and in GA and that our customers are adopting. We had Wells Fargo on our main stage at our conference last week talking about Banking Advisors. That is number one. Number two is Agentic AI. We take all the existing workflows that we have in place across 2,800 customers that are in production today. We start wrapping our agents around those.
If an agent can actually fire off a loan origination task, and then an agent can then gather all the requisite documentation, and an agent can do all the checks, can we get to what we call the path to one, which is an end-to-end complex commercial loan origination experience, for instance, one of the things that we do with only one human in the loop. Today, that has sometimes 10 humans in the loop. Agentic AI is powerful. Banking Advisor plus agentic AI. The third pillar of our strategy is that data backbone. We have invested in a company called Sandbox Banking that we acquired six or so months ago.
That will serve as the foundation to connect all our solutions and integrate to all the third-party data in the financial ecosystem in a way that will actually exponentially derive value from the data that we already have.
How do you monetize each of those elements? Banking is already an industry where if you look at banker headcount, it does not really grow to begin with. Yet we clearly grow loan volume. Automation is good for this industry. You see that already. Going forward, how do you think about automation and maybe changing the pricing of your products?
We're not just doing this for the fun of it, AI? OK, yeah, for sure. This is something that we have active conversations on a regular basis in terms of pivoting. What you see is a shift in the landscape from the kind of old school per user per seat to the new school, which is it's all about outcomes. How can you connect the value that we deliver to the fees that our customers pay? Banking Advisor has a base price. Then as you deliver those outcomes, you actually draw down on what we call Intelligence Units. It's a way to kind of track and measure the usage of Banking Advisor. The more outcomes we deliver, the more fees that we over time collect.
Customers buy into that because they understand, for instance, if you could give me a quarter of a % on my commercial pricing and profitability, that can actually mean tens, in some cases, hundreds of millions of dollars, depending on the size of the institution. If you are going to deliver that through AI, and I can see it, and I can measure it, and you can read it back to me from an analytics standpoint, then I am willing to pay for that. From a monetization standpoint, Banking Advisor, as well as when you start delivering the agentic experience, you are delivering the same outcomes. With fewer people, you are taking cost out of their equation.
Do banks tie investment in these new areas or even investment in your core systems into a view on the interest rate cycle? If a bank has a view that we're about to enter a lower rate environment, are they proactively investing more in lending systems now to be ready for that future upcycle?
Yeah, at the center of what we do, we drive efficiency into the operating model for banks. In a down market, in an up market, in a low interest rate, in a high interest rate environment, depending on the line of business you're in and the types of products that you're selling to your customers, we drive toward those imperatives. You think about onboarding, account opening, loan origination, portfolio monitoring. You think about doing that across commercial, consumer, and mortgage, including small business. You think about doing that globally. In a high interest rate environment or a low interest rate environment, the permutation of products and services that we cover in there kind of works both ways, which is why this has been a sustainable business. We started in a time when money was free. Interest rates were historically low.
The company had tremendous success. We have operated through COVID, through triple P, through high interest rates, through headwinds. The company has proven its durability. Of course, I would prefer rates to go lower. We have all had a hard time predicting that for the past couple of years. We think that we continue to take mortgage share in the mortgage game in the IMB space. We continue to position that solution to large banks. We are getting traction in consumer. We are getting traction in commercial and going deeper in commercial, regardless of the rate environment.
One thing you discussed at the Investor Day recently is even in kind of the original commercial lending products, which is the gold standard. If banks are putting it into place, they're referring to it on their public calls. You're about 30% penetrated there. Now, I know there's always debates, well, is 30% a high number? Is that nearing saturation? I guess I would ask the inverse of that. Where do you still grow into the other 70%? And do you have to do a bit of education with the customers? One of the things I thought was very savvy of nCino early on is the original price point. For a lending system, it maybe was expensive.
In terms of the full capability you get as a sign-on user, you can rip out four to six other systems you're probably paying for, which makes nCino actually the most cost-effective as well. Do customers really understand that, however, or is that part of growing at an existing account?
Yeah, I think they get it. The larger the bank, the more systems you're taking out, the more integrations that you can replace with your platform. It is the platform play that's differentiating for us because everybody we compete with is a point solution. Across the lines of business, it's either a point solution. Most of the competitors we have are only down market, or only up market, or only in the U.S., or only in EMEA. This global platform is a key differentiator for us at nCino. To your point about market saturation, listen, I'm excited about the mix of revenue we had in Q1. We talked about this at Investor Day. We had about 50% of our revenue in commercial. The other 50% split right down the middle between consumer and mortgage.
That seems to be very right-sized with our investments that we have in R&D as well. The small business opportunity is picking up a lot of steam. The credit union opportunity is getting a lot of momentum with our acquisition of Allegro. The mortgage into banks beyond IMBs is exciting. The AI play. Then our upside internationally. In EMEA, we have kind of reinvigorated our leadership team. We are attacking the continent, not only the U.K. and Ireland. We have a tremendous opportunity in Japan. I say all that because, again, 30% is open interpretation. 30% in the community bank market in the US, but 0.2% in Japan. It has a lot of layers to it. The bottom line is we just have a tremendous opportunity to re-accelerate growth. We see the bookings coming this year.
Talk about consumer and mortgage now. On consumer, I think it was a few fiscal years ago where you got a $200 billion bank. For those of us that watch vertical software over time, people remember when Viva won their first top 20 pharma, when Guy Boyer won the first top 25 insurance carrier. Is it the same here where you really needed that one lighthouse account? Now you are starting to see the deal flow pick up. People are picking up the phone and talking. Is it kind of flowing like that?
It is the same. Those industry parallels are powerful. Even though the parallels we have historically at nCino, I mean, our lighthouse enterprise bank and our flagship commercial solution was SunTrust back in 2016. Now they are obviously part of Truist now. The reality is we started in the community bank market. We steadily moved up. We signed a $30 billion bank. Then we had a $70 billion bank. All of a sudden, we had SunTrust. The same thing has happened in consumer. Now it has taken us a little longer because that is a rip and replace. We learned some lessons. It took us a little longer in a different market, to your point, interest rates, COVID, all the things. Here we are with consumer where we have a nice mix.
We signed 20 community and regional bank customers in the consumer lending solution in Q4 alone. We signed a $50 billion asset bank about two and a half, three years ago. Boom, here we are with a $200 billion bank that was on stage with us at Investor Day. What I would expect is you're going to have a combination of employees at that institution, as well as system integration partners and other folks that then go out in the ecosystem. They tell the story. They move around. Everybody knows folks move from bank to bank. They're wearing a badge for one bank, and two years, in a year, they're wearing a badge for another bank. Oh, by the way, we were on nCino.
Yeah, the inbound interest from banks at scale on consumer is going to pick up and is picking up already based on that.
At the Investor Day, you talked about the ACV mix between the three legs of the stool, so commercial, consumer, mortgage. Actually, they're all growing kind of around the same at the moment, kind of 10%, give or take. When you think of consumer and mortgage, should those be multiples of what the commercial product is growing by?
Everything should be growing faster as far as I'm concerned. We can never get enough growth. We're insatiable on growth. Listen, I would say that as we have now readied the mortgage solution for banks and credit unions at scale and to sell that beyond the IMB ecosystem, we should expect really meaningful growth there, 100% from a consumer lending standpoint. I mentioned the 20 in Q4. I would expect that we continue to go hard. As we go up market and cross-sell, we have 15 out of the top 30 banks on commercial. We have one on consumer. Let's go get the other 14. That would indicate a nice growth rate. OK.
Just to add to that, I mean, from a guidance philosophy perspective, we said that we were going to get out of the predicting mortgage volume business this year. We said we were going to keep our mortgage expectations flat year over year. Consumer, we did talk about growing 50% two years ago, 33% last year. Sean talked about in Q1 the ACV, the booking split, a little less than half commercial, the other two splits. We do see those as nice growth levers. That is where, again, for Q1, we were able to beat the top end of our guidance by $1.8 million. $800,000 was for mortgage. We did not flow that through. We flew in because of the strength of the core business, $4 million through the rest of the year.
I think we're feeling pretty good about what we're seeing out there right now.
Just on the mortgage point, high single-digit growth last year. Obviously, still a very brutal environment for a lot of your customers. I think high single digits is definitely reflective of share gain, at least it would seem to be that way. I think you have a very unique strategy. I think most that have followed nCino probably appreciate what you were buying in Simple Nexus at the time. Maybe you can talk about how Simple Nexus has kind of been blown out, and now it is a big part of the overall front-end strategy and how we have been talking about how nCino is not just a product. It is a platform. I think Simple Nexus kind of was the gateway to a platform in the newer areas of the business, so kind of why you saw that as an opportunity.
Yeah, and you're spot on. Absolutely, we entered the mortgage space, particularly in the IMB market, with the acquisition of Simple Nexus. Now we sit here a couple of years down the road where we're selling that solution at scale to banks of all sizes. The underlying point there is we acquired a technology layer from a digital front-end and experience point of view that now serves as the single consistent experience that the banker or their customer has with nCino, whether they're having that in branch or digitally. That's kind of the foundation for everything on the front-end digital experience for nCino, was the IP acquired from the Simple Nexus acquisition. When I talked about fulfilling some of the promises and commitments we made to our customers on that platform experience, that's the strategic nature of that acquisition.
Yeah, we continue to gain market share in the IMB space despite the rates, despite the pace. Listen, we have competitors in that space that are buying contracts. We have competitors that are going to our customers and saying, we'll pay your nCino contract, and you won't charge us anything. We'll do that for the next several years. It does not seem like a sustainable business model to me. I'm not going to let that happen on our balance sheet. Every once in a while, if you have a churn event, I think that might actually take out a competitor along the way, too. We are good with that.
I think I was going to just add the fact that that business has grown in probably the most brutal market, certainly recent memory. But going back to the financial crisis in maybe 2008, 2009, every year, I think says a lot about the technology and the customer base and ultimately the opportunity as volumes do. We see them as stabilizing. Churn has come down in that business. And ultimately, as volumes come back. I think we believe we're well positioned there.
Maybe worth just touching on the pricing there because that's evolved in an interesting way. As an analyst, I love this because a lot of the upside is maybe not going to be in RPO anymore. It's something where you could get some revenue overages, maybe just explaining how that business will work going forward.
Sure. Historically, it was a seat-based model, which as we looked at pursuing it from an M&A perspective, it was one of the things that was attractive to us versus most all the other companies out there were volume-based. As the volumes kind of dropped over a cliff, the seat-based model was much more resilient. Ultimately, during the difficult time, if you go back with the rapid rise in interest rates, a lot of our customers came to us and said, hey, can you help? Obviously, it's difficult. We made a strategic decision to say that them going out of business would not be good for either one of us. We evolved our model to where instead of it being seat-based, you had a platform fee that for each month gave you a certain number of loans.
Once you exceed that loan number, ultimately, you'd pay more. What our sales folks and customer service folks are focused on doing is watching that volume. To the extent they're consistently exceeding the minimum numbers, just ultimately up that minimum. To your point, the only thing that would be an RPO or an ACV is what's contracted for. We do see opportunities for growth as the market does come back. Again, I think to me the best headline right now for mortgages, we do see it having stabilized. We said Q4 was our lowest churn quarter for mortgage last year. Q1 this year was lower than Q4. Clearly, the trends are in the right direction.
Great. Time for one more question from the audience. This one, we've been talking a lot of deals, some bigger than others, but kind of a good frequency of M&A. Do you think you're closer to an end in terms of acquiring maybe what you needed and now the focus is on integration? Should we expect a continuation of what we've been seeing?
Yeah, I think that we refer in the locker room to ourselves as in digestion mode right now on some of those. We feel great about our expansion of our SAM with the onboarding acquisitions of DocFox and FullCircle, our expansion of our SAM with our entry into the credit union space with the indirect lending capability, and then Sandbox Banking as far as being strategic to our AI play. We are going to fully integrate those. Are we always going to be opportunistic out there if something comes out? An active part of our re-acceleration of growth right now assumes that we can do it with what we have.
Great. We're at time. Please join me in thanking nCino.
Thanks.