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Let's go.
Sean, Greg, thank you both for joining us. Thanks, everyone, for joining as well. Before we get started, I have a quick disclosure to read. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. Thanks again, guys. Really appreciate you being here. Sean, maybe just for those that have not spent as much time with you, give an overview of your background and sort of where you started your career, how you evolved, and now where you are sitting in the nCino CEO seat today.
Sure. Yeah, appreciate the opportunity to be here. Thanks for having us. Been in the software game for about 30 years now. And I've been fortunate enough to see a few inflection points in my career. Started out with a company called Platinum Technologies that eventually got acquired by Computer Associates in kind of the mainframe to client server move, right? And then was with Informatica, who was recently in the news for their acquisition by Salesforce that's pending. And saw really the move from client server to enterprise and then big data there. And then here at nCino, the move to cloud, right? And from a cloud standpoint, we have played a proactive role in leading banks, credit unions, IMBs to that infrastructure. And now we're at this inflection point as we pivot toward the vertical AI opportunity in banking. And super excited about that.
Yeah, I've been in a few horizontals, a few verticals, and mostly on the post-sale customer success side. For a large part of the career, I've also run the product development and engineering organization at nCino and stepped into the CEO role in February.
Awesome. Helpful context. Maybe just given your background in the product organization, I thought we'd first start by taking through some of the major lines of businesses and how you're thinking about the go-forward trajectory. Maybe just first starting in commercial, given that it's your bread and butter, despite some of the normalization that we've seen in the business over the last couple of years, that organic commercial ACV that you guys have disclosed of late still grew around that 10% level in fiscal year 25. I know you have ambitions to do better. Maybe just spend some time walking through how you think about reaccelerating that commercial business. I know you've talked about your 30% penetration within that existing installed base, but it is, call it 75% plus of your ACV, so it takes a lot to move that segment.
But I know it's an area that there's a lot of irons in the fire to reaccelerate. Maybe just walk us through some of the puts and takes there.
Yeah, sure. It always starts with the problems that we're solving for our customers. Today, our customers are still challenged with some of the age-old problems in banking, how to onboard a customer swiftly in a compliant sort of a way and take that seamlessly into a commercial loan origination process that has traditionally been legacy manual. Even as we have focused on taking customers to a digitally collaborative experience and driven a lot of value and efficiency into the process, still people are dragging and dropping and approving and advancing to the next stage of the workflow digitally. There are many people in that process.
As we sit here with the opportunity with AI to wrap agentic experiences around existing workflow, we can automate end-to-end and almost provide what we call a path to one where you could imagine for the first time in this business, which would have really just not even been conceivable five years ago, even three years ago, that you could have one human in the loop to approve an entire commercial loan origination workflow through agentic AI. There are opportunities for us to go deeper with commercial. You mentioned the 30%. In context, we operate down market community banks, regional banks, mid-market, as well as enterprise with some of the largest banks in the world. We also sell our commercial solution to credit unions. We do that globally.
If you just look at the U.S. enterprise market for a second, you say we have 15 out of the top 30 banks in that market. Those customers are using all of them our commercial solution. We have a handful of top banks using our consumer lending solution as well. In that commercial space, they still do not have every single product in the commercial business on nCino. That is the 30%. Beyond that 30% is the 70%, as well as going deeper. We have new products around commercial, around continuous credit monitoring, auto spreading, and then, of course, the Banking Advisor AI solutions that we continue to penetrate and gain market share in commercial.
Okay. Maybe just on that Banking Advisor functionality, I know you've spent a lot of time on this. It's a super exciting component of the business internally where you're dedicating a lot of time. Maybe just talk through what you're trying to do there and how you think about your broader vision for agentic banking broadly.
Yeah. Yeah, so back to the business problems we solve for our customers. What we're doing with Banking Advisor is we're looking at every single role and every single persona. Again, let's look at the commercial workflow and say, where do they spend their time? Where does the loan officer, where does the underwriter, where does the credit analyst spend their time? We actually know because we have usage analytics and are capturing operations analytics from a dashboarding standpoint of where they spend their time in our workflow. We can train skills to complete tasks that are now even manual or digital from a human interaction standpoint. One of those examples would be auto spreading. One of those examples would be document validation for our mortgage solution. Locate and file is one that's getting a lot of traction.
A lot of this is automating the clicks and the drags and the drops, as well as the biggest opportunity we see around unstructured data. If you think about the type of documentation and all the documentation is simply unstructured data that's associated with a loan workflow. In some cases, a single document is 75-100 pages. There is a person in the bank who is sifting through those documents on a daily basis and sometimes taking 30-45 minutes just to capture three to five data points from that document and then feed them back into a decision point in the workflow. We can automate that and take that from 30 minutes to seconds and extrapolate that over the volume the banks are doing. That's a massive efficiency gain.
Helpful. Maybe just coming out of the user conference, it was obviously great to see all the products live a few weeks ago. Anything you would share just in terms of maybe demos booked or just level of interest in that Banking Advisor functionality specifically?
Yeah. I mean, listen, it absolutely stole the show. If you're familiar with our conference layout, we have what we call our community lounge, which has our booths, which demo the functionality by solution. We started talking about commercial. When I talk about nCino, the things that we do, onboarding, account opening, loan origination, portfolio monitoring, and doing those across commercial, consumer, and mortgage lines of business underpinned with this data set, what we did in the community lounge is we showcased all of that, right? If you want to focus just if you're a community bank, you want to see the consumer lending experience, you can go to that booth. What we have is we launched 16 new Banking Advisor skills and insight across those personas.
We provided an opportunity for folks in the community lounge to see those come to life and see those demoed. Some of the ones I mentioned before were absolutely the most popular. There are some basic use cases as well, just knowledge interaction in terms of mining information around using the platform.
Helpful. Maybe, Greg, I know there's obviously a lot of work being done just in terms of thinking through pricing and monetization across the business. As it relates to Banking Advisor specifically, it sounds like this is a product that you want to be adopted and attached by a meaningful portion of the customer base. You're incentivized to get clients to love it and to really want to use it. Maybe just any early data points that you can share in terms of how you're thinking about the potential ACV uplift associated with Banking Advisor. I think historically, you guys have generally spoken about, call it 20-25% ACV uplift for a lot of the solutions that you develop on top of the existing commercial set. Is that broadly the right ballpark we should be thinking about Banking Advisor?
I don't want to box it in at just that number at this point because it is early. I think to Sean's point, last year we had, where we came out with Banking Advisor, we had just two skills. We now have 16 more. I think we're going to track that usage as the year progresses. Ultimately, I think as we think about next year and the impact, the positive impact we would expect it to have, we'll be able to talk about it. I would note that it is not in our guidance for this year. That said, we are seeing nice uplift. We did have a top four bank on stage talking about the efficiency gains that they've already seen.
As they're speaking to 1,600 other customers that were in the audience, we think it really resonated in terms of, again, one of the largest banks in the world using it, comfortable with it from a security standpoint. Ultimately, kind of sending the message that if you're not working with nCino and leveraging some of the very innovative things that we're doing with AI, you're going to fall behind competitively. We do think it's going to be helpful in terms of our desire and plans to reaccelerate growth. Again, I think we're going to want to get a little bit more data before we get out too far in front of the excitement that we have and the optimism that we have with what we're seeing.
Makes sense. Maybe pivoting to the consumer business. I know this is an area of the business that you've taken some time and a lot of R&D dollars to sort of build from the ground up. There have obviously been an acceleration in the number of net new logos that you've landed this past fiscal year, including with a $200 billion asset bank. It seems like traction is beginning to sort of accelerate. If we sort of take that aside, if I just look at that mix of ACV and the growth of ACV over the last couple of years, right, I think the consumer business is probably 15-20% of the size of commercial. It's growing relatively at similar rates.
How do you sort of think about when that sort of cadence of net new wins and the size of those wins can really start to accelerate and move the needle for the overall business?
Yeah. Listen, the time continuum in software and innovation can never come fast enough. To your point, we've been on the consumer lending journey for a minute. What I would say is change management and driving change specifically around removing friction and business process reengineering and bank automation is in our DNA. For us, it wasn't a matter of if, it was just when that we were going to really turn the corner on a fully matured consumer lending solution. We really did that the back half of last year. As evidence, I mean, you talked about the $200 billion bank. We signed 20 new consumer lending deals in Q4 alone. If I look at the bookings from Q1, we're really happy with the mix there.
About 50% of our Q1 bookings in commercial and then the other 50% split right down the middle from consumer and mortgage. That feels good. We'd like to keep up with that momentum and capitalize on the investments we've made. There is no doubt we played the long game with consumer lending because we know the landscape and we had a lot of conviction that we can make a difference there. There has not been a lot of optionality in that market. Traditionally, if you look specifically at the community and regional banking market in the U.S., consumer lending has had one or two vendors that they've been partnering with over time. To work with somebody who's been cloud native from day one and now taking our customers through the AI journey, we think is compelling. We think the timing's in our favor.
Okay. Do you feel like the product itself is now in a place where that sort of cadence of net new logos can start to accelerate? How do you sort of think about that piece and just the differentiation of the platform versus some of those other solutions?
Yeah. We do think that we've rounded out the solution with the requisite integrations. That's probably what took a little bit longer. We are seeing the ability to reimagine some of the more complex components of the consumer lending journey. We've done really well with the real-time integration and, in fact, had so much success with our partner Sandbox Banking that we decided to acquire that technology and leverage that as a broader iPath solution for the entire platform. The doc prep and doc validation component of consumer lending is important. We see efficiencies that we can gain through AI there that we think will be differentiating compared to the competitors that are now taking their customers from on-premise solutions to the cloud while we're kind of cloud native taking them into the AI experience. It's about speed. It's about efficiency. It's about automation.
A rip and replace in consumer lending is a bit longer of a journey for a customer to make a buying decision, right? But we've got some good experience with that and some good momentum.
Okay. Great. Maybe just on the mortgage side of the business, talk us through the strategic rationale in and of itself of pursuing the Simple Nexus asset, what the thesis was at the time, and some of the work that you've done to sort of integrate that product with the consumer functionality as well and how that's been a driver of retail wins.
Yeah. From a mortgage standpoint, we are in the point of sale, front-end application intake part of that game. Primarily, the acquisition of Simple Nexus pulled through a very rich customer base in the IMB space. We also have 50 or more banks and credit unions using our mortgage solution beyond IMBs. That is gaining traction. The vision for us was twofold. One, it was to insert ourselves into the mortgage POS game and cross-sell and upsell that to banks over time while we continue to take market share from IMBs. There was also a technology component that was very attractive to us. We grew very rapidly in the early days.
As we expanded beyond commercial, we saw the need to have a single consistent digital front-end experience across the entire platform, such that if you're in commercial or consumer or mortgage, you would have a similar experience for the banker or their customer, whether that was in branch or digital. When we acquired Simple Nexus, part of the rationale was to leverage their front-end and take it across the entire platform. That's actually what we've been busy doing the past few years. That was part of the journey to get all the way there on the consumer lending maturity. Now we're taking that across our onboarding experience as we look at that opportunity as very exciting. There's really the opportunity not only to get into the mortgage space, but also to leverage a really slick front-end.
Makes sense. I know the mortgage market has obviously been challenging, to say the least, over the last several years. You also, on a relative basis versus the market and a lot of other providers in the space, have generally continued to grow when most have contracted. Over time, right, as you sort of continue to convert people towards that new pricing model within mortgage, how do you think about the attractiveness of that mortgage business if we're in a world where converting to that pricing model is going to continue to take a few years and you still have a portion of revenue that is directly tied to loan officer headcount, which who knows the directionality of where that's headed?
I think we started our pricing transition, pricing model transition with mortgage. It was really driven by the market with our customers coming to us in a difficult time and saying, "Hey, can you help work with us?" We made the strategic decision that them going out of business would not be good for either one of us. We did do that. We moved to a platform with a minimum per loan per month model and really tried to set ourselves up as volumes come back to be able to benefit with that. If you look at our overall base, we talked about about 15% is now on the new model. A big bulk of that is from mortgage. I think we are well on our way from a mortgage perspective. I think for mortgage, you are right.
I mean, I think one of the things that's been really impressive with that business, I think it's a testament to the team that we've had as well as the technology. That business has grown every year since we've owned it in one of the most difficult mortgage markets and certainly in recent memory, if not longer than that. I think we're positioned incredibly well. Ultimately, I think what we've seen is so+me stabilization in that market. I commented that Q4 was our lowest churn quarter for mortgage last year and that Q1 was actually lower than Q4. I think looking forward to some growth, but I think it starts with stability. I think it definitely feels like that market has stabilized quite a bit. I think that positions us very well.
If we can grow during a difficult time, I think we can certainly grow at attractive levels during better times.
Got it. Lastly, before we pivot to implementation questions and how you're thinking about the impact of AI there, maybe just on the international piece of the business. Again, I think this, particularly for those that are newer to the nCino story, I think it's somewhat underappreciated at how difficult it is to be a banking software provider operating in all of these different countries and corridors. Maybe just walk through how you've been able to do that and sort of your relationships with the systems integrator base. Then we can hit some of the growth dynamics internationally as well.
Yeah. In addition to North America, we operate in EMEA as well as Australia, New Zealand, and up to Tokyo. In the EMEA market, we have been highly successful in the U.K. and Ireland. We have aggressive plans for the continent. To your point, yeah, I mean, is it hard? Yeah, it's hard, right? That's never a reason not to do something. I think we probably focused where the low-hanging fruit was in the U.K. and Ireland in the early days. We got five of the top seven banks there and have a great brand. Now what we've done is really said, we're going to go out and get some seasoned leadership who has delivered at scale on the continent. Our current leader, Joaquin De Valenzuela, has delivered over $100 million annually selling to the exact customer base we're targeting.
He's based in Madrid. We think there are big opportunities in both Spain and the Nordics. We are going to continue with the momentum we have in the U.K. and Ireland, but we are going to lean into the opportunities on the continent with commercial as well as onboarding and international mortgage in EMEA. We have nice momentum in Australia, New Zealand, three of the top five banks there. We have leveraged the reputation we have internationally and played the long game in Tokyo, where there is a high concentration of banks with a high number of assets under management that we then needed to really develop different partnerships. You mentioned the SI ecosystem. We have been very grateful for the partnerships that we have with the likes of Accenture and Deloitte and Pricewaterhouse.
They've largely helped us in North America as well as EMEA and ANZ, mostly upmarket in the enterprise banks where change management and business process reengineering is so intense. You go into Japan and you realize, hey, we need different partners, whether that's NTT Data or Hitachi. It's not always the same partners, but those are the ones that resonate in that market. It takes a while to develop and cultivate those relationships and then get the relationships in the C-suites of the banks. We feel like we're at a good point there. We get some good momentum with some small to mid-sized banks. We think we're going to sign some big large ones at scale the back half of this year.
Got it. Okay. Maybe just on some of the growth dynamics internationally. Obviously, that international subscription business is still growing in the high teens organically. It's obviously at a premium to the overall company. If I look at it on a mixed basis, the mix hasn't really stepped up incrementally, at least relative to the last several fiscal years. It's broadly consistent in that 20%+ territory. Obviously, you alluded to some of the sales leadership changes. Hopefully, that's a catalyst for incremental growth there. How do you sort of think about a similar line of questioning to before, like when that international business on a mixed basis becomes big enough to really move the needle and have a step function change higher for the overall company?
Yeah. I mean, listen, it is meaningful today, the international component of our overall business. We have been pretty public and candid that we were disappointed in the year-over-year growth that EMEA contributed last year. We have made investments. In terms of execution discipline, right now, there is an intense narrative at the company around aligning our investments with where we see the growth, right? While we have invested to retool the front-line management team at EMEA, we expect that growth to show up the back half of this year and into next year.
Got it. Okay. Maybe progressing to some of the financials, I wanted to first touch on pricing, and then we can discuss fiscal year 27 acceleration. On the pricing transition front, again, maybe just level set for those here, just in terms of what the intention is to sort of pivot away from the seat-based activation model and towards pricing and how you think that will evolve from a cadence perspective. I think you've obviously said 15% of revenue on that new pricing model today, largely in mortgage. That is going to drive a one percentage point benefit even with a pretty small percentage of revenue on that new pricing model. If we sort of progress over the next fiscal years, you continue to get renewals, how are you thinking about the cadence and magnitude of that pricing uplift over time?
Yeah. As you noted, we have about 15% of our ACVs on the new model. It's something we spent a lot of time looking at before going through a transition like that. We worked with a third-party consultant that had taken other companies down this path. We did a lot of surveys and discussions with our customers. So far, it's gone well. There haven't been any surprises. I think we feel good about the execution. In terms of the 1%, the 1% comment was for net new deals that we sign this year under the new model versus our old seat-based model, we would expect about a 1% additive model versus model. Our average contract length is about four years. If you think about that, it should take about that time for us to convert everybody.
Our biggest first cohort will be in the fourth quarter of this year since fourth quarter is generally our largest bookings quarter historically. As we think about moving on to the model, we do expect to take a step up just in terms of some of the innovation and value that we've provided. Historically, our model was seat-based, and the price was fixed during the term, right? We haven't been able annually to get value on an ongoing basis. We would expect to have a step up. Once you have that step up, from a bank perspective, we'll be tracking and calculating on an annual basis the assets that the bank has on our platform. Every year, we'd go back and calculate that number.
To the extent that you move from one tier to another in terms of the pricing tiers that we have, that would be your new price for the next year. We are really trying to align value and growth with our customers, right? As they grow, again, us getting a little % of that, I think something that they are supportive of and open to. They are used to it based on other models that they are subject to with other vendors. Historically, asset growth has generally tracked GDP. Think about 2%-3% opportunity each year. Not every bank is going to go from one tier to another, but we think that is the opportunity. Ultimately, again, we think that will allow us to get value intra-contract versus, again, historically when we would only get value upon a renewal. We are excited about it.
Again, it's gone well. We've enabled the team. I think we've done a lot of work with the market and our customer base. It's just about execution.
Yeah. Okay. On the Banking Advisor dynamic, right, as you sort of begin to introduce that product to customers, you sort of accelerate the cross-sale momentum. Do you think that as people get accustomed to the consumption-based model there, that it could actually drive faster conversion to the new pricing model?
Yeah. I mean, the whole idea for us is by training skills to automate tasks over time that will deliver those outcomes faster. The faster the banks realize the outcomes, the faster that we can drive them into our revenue model, right? That does go hand in hand with the investments we've made to speed up our deployments as well. You mentioned implementations earlier. And Banking Advisor skills, by the way, just from a roadmap standpoint and the build side, as well as from a deploy standpoint, we're talking about weeks versus months, right? Accelerating that. That's probably one of the most exciting pivots I've seen in the industry is people no longer talk about multi-year roadmaps, right? They're talking about inside six months. Anything beyond that is just too far to see in the world that we're in now.
Banking Advisor helps get us there, helps align the value that Greg talked about and the outcomes. It is all about speed to market. Time is the most precious commodity we have. If you think about driving efficiency into the operating line of a bank and a lot of the cost we are taking out is labor cost, we think that banks will be able to repurpose labor toward higher value client-facing relationship-building activity versus middle and back-office rudimentary tasks.
Yeah. Okay. Great. Maybe just on drivers of potential acceleration, you obviously have a pretty exciting initiative that you have some of your best engineers working on just in terms of accelerating some of that implementation timeline, which is obviously critical for any software business, particularly given the duration of time it actually takes for your business, call it 6-12 months to get people live from the point of booking. How are you sort of thinking about the mechanics of how you can deliver on that, right? Is that sort of some pre-built configuration that a certain cohort of banks is likely to adopt, or do you think it can be pervasive across the whole customer base?
Yeah. This is something I'm super passionate about, having spent a lot of time in my career in the professional services arena. In order to fully appreciate where we're headed, you have to also understand where we've come from. We were the first platform that provided optionality and configurability. Everybody we were competing with when we launched nCino was more of a black box lockdown. If you wanted to make a change to a field, you had to kind of push it through, and you might get it back months later. You might not get it back at all. Our customers really were receptive to that optionality and configurability and as a result, really embraced kind of elongated consulting-heavy projects because the outcome they were going to get was so much different, right?
Interest rates went up, access to capital, and big consulting projects fell out of favor. Now we kind of have the best of both worlds, which is what we have done is we have taken these fully configured experiences across nearly 500 customers if we are just looking at commercial alone. We have taken those configurations and fed them into a large language model and come out the other side with a prescribed starting point that would be a pre-configured package commercial offering with all of the great things that we are able to deliver across the customer base. From there, if the customer still wants to extend, they can, right? If they want to get live in a couple of months versus 6-12, we can do that now.
We ultimately have a North Star to deploy all of our solutions in under 200 hours of what we would call consulting hours from nCino. That is very realistic with the AI and the techniques and the tools that we have available to us.
Do you think that's even in play for some of the largest, call it like if we take the top 30 biggest banks that you don't have, right, the incremental 15, is that three-month timeline feasible for that cohort?
That starting point for us to deliver that pre-configured solution is absolutely there, right? Might they take a little longer on the journey to get the change management because they're rolling this out around thousands of users versus hundreds? That process might take some time. That pre-configured starting point scales, right? The kind of added alone is alone is alone. There might be a little bit more rigor in that enterprise process, but still, we can have that informed by the 15 customers that we have there and have a flavor of that.
I think one of the things that's also very exciting about it outside of the PSOCON part of it is just from a decision-making standpoint in the sales process, right? Shorter implementation timeframe, quicker time to value, right?
We think that will help decision-making because, again, financial institutions won't have to look at some, as you say, multi, multi-month implementation process and factor that in and factor in the cost that they historically had to endure, right? I think that's another advantage as we think about the opportunity we have in front of us.
Finally, I'd mention integrations as a discipline, right? The integrations being the long pole in the tent for these projects is well known. Historically, we've always given optionality with integration partnership, right? Now we've kind of had a very trusted, tried, and true partner in Sandbox Banking that we thought did it better than anybody. They focus only on the systems and applications and platforms that we integrate within the financial services ecosystem.
Acquiring that technology, bringing it in-house also removes the friction from the deployments as well as the sales process, and we come with a point of view versus, well, let's figure out who the bank is going to partner with with integrations. It just adds time to the decision.
Got it. Greg, I'm going to ask you your favorite question about fiscal year 27 acceleration. Maybe just on all the irons that you have in the fire across the business, there's a lot, right? Pricing model transition, Banking Advisor attach, potential for mortgage acceleration, you're cleaning up some of the sales leadership internationally, right? How do you sort of think about the level of subscription revenue you're putting up today and sort of your ambitions to get back to nCino growth rates of old?
Yeah. Look, we think that there is a massive opportunity in front of us for growth. And the results that we've demonstrated for us are not sufficient, right? So very focused on re-acceleration of growth. I think to your point, we've got a lot of irons in the fire, and I think we think that's a huge positive. Again, we've got commercial, consumer, mortgage. Underneath them, we've got five specific initiatives, right, that we're very focused on. One is AI, as Sean talked about in the initiative there. We've got a credit union team that we've stood up, very focused on that market. It's a $1 billion SAM in the US. Consumer lending's ready. Our small business offering's ready. Mortgage is ready. Commercial, et cetera. We're very excited about that opportunity. We've talked about onboarding with DocFox and FullCircle.
We think that is a product that every one of our customers needs, specifically our commercial lending customers should want. Again, taking what is really manual processes and being able to digitize that, we think is a massive opportunity. Taking mortgage more up market and cross-selling it into our larger bank base. Again, IMB has been a huge focus. We have had great success there. We have had success cross-selling into community banks and credit unions. Taking that product up market is something that we are focused on, as well as the ME opportunity, right? We would say international more broadly, including Japan. We would love for all of those to hit, right? I do not think we need all of those to hit. If you look at the numbers, we gave out ACV guidance for the first time as a company for this year.
At the midpoint on a current currency basis, we need to do about $3 million more, right, for us to believe we're going to re-accelerate growth in the next year. And again, we've got more product than we've ever had. We've got 14% more sales capacity out in the field. We think our customer base is healthier than it's been in a couple of years. We think we're well positioned. It really just comes down to execution. That's what we are constantly focused on. Just closing the deals that we say we're going to close and closing them when we say we're going to close them. We think that sets us up for re-acceleration next year and beyond. A very unique opportunity, particularly as we transition into this AI world. We led and created this category called cloud banking, right?
When we started the company, everyone said banks will never put their data in the cloud. Now we think we've got an opportunity to create AI banking and be the worldwide leader in that. That's what we're focused on doing.
Awesome. I think this is a great place to leave it. Thank you both for joining us. We appreciate it.
Thanks .
Thanks for having us.