nCino Q2 FY2025 Earnings Call Transcript

nCino, Inc. (NASDAQ:NCNO) released its second-quarter results after Tuesday’s closing bell.

Below are the transcripts from the Q2 earnings call.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.NCNO stock is up after hours Tuesday.  Watch the momentum here.

OPERATOR

Good day and thank you for standing by. Good day and thank you for standing by. Welcome to the Ncino Second Quarter Fiscal Year 2026 Financial Results Conference Call. At this time all participants are in a listen only mode. Please be advised that today’s conference is being recorded. After the speaker’s presentation there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today. Harrison Masters, Vice President Investor Relations.

Harrison Masters (Vice President Investor Relations)

Good afternoon and welcome to Ncino’s second quarter fiscal 2026 earnings call. With me on today’s call are Sean Desmond, Ncino’s Chief Executive Officer and. Greg Ornstein, 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 generally accepted accounting principles (GAAP) metrics can be found in today’s earnings release which is available on our website and as. An exhibit to the Form 8K furnished.

Sean Desmond (Chief Executive Officer)

With the SEC just before this call as well as the earnings presentation on our Investor relations with that, I will turn the call over to Sean. Good afternoon and thank you for joining us to discuss Ncino’s second quarter fiscal 2026 results. Before jumping into the details from the quarter, I’d like to remind you of the fundamental challenge we address in Ncino’s mission in the marketplace. Financial institutions around the globe face persistent challenges rooted in legacy and fragmented technology infrastructure that restricts their growth potential and bottom line performance and causes inefficient and frustrating user experiences for both their employees and customers. Ncino alleviates critical pain points inflicted by disparate data sources, legacy technology and manual processes with intelligent automation delivered on a unified scalable platform powered by AI. Ncino stands as the singular cloud native SaaS platform that allows financial institutions of all sizes on a global basis to seamlessly manage lending, onboarding, account opening and portfolio management across all major lines of business. Because we are the system of record for so many of our customers most critical operations. And because our solutions are deployed in over 20 countries across a broad and diverse customer base of banks, credit unions and IMBs of all sizes, we believe we have built a competitive moat that is both wide and and d Turning to our second quarter, we outperformed our guidance ranges for both our revenues and profitability metrics and the evolution of our product strategy continues to be validated in the marketplace. With our flagship commercial loan origination solution, we saw strong activity in the North American enterprise market including significant expansion agreements with two top 50 US banks and the top five Canadian bank. And in the mid market we saw an almost seven figure ACV commitment from a net new $10 billion asset bank for commercial lending. We also saw positive traction with our growth initiatives for fiscal 2026 which as a reminder are expanding our focus in EMEA activating the credit Union market Realizing the onboarding opportunity, cross selling mortgage and embedding AI data and analytics across our unified platform on Continental Europe where we see an over $4 billion market opportunity, we signed our first customer in Spain. As we have seen over the history of the company, we expect success with the initial customer in a new geography to validate the Ncino value proposition and fuel growth with other financial institutions in that Also in the quarter, Infosys, a strategic partner in the implementation of Ncino at ABN Amro bank, one of the largest banks in the Netherlands, issued a press release announcing a successful GO Live. This project strategically sought to transform ABN AMRO’s loan origination and collateral management process by consolidating multiple legacy systems into a single unified platform, enhancing ABN AMRO’s ability to serve its customers and streamline operations. We expect wins and more importantly GO lives like these to precipitate more new business in our newer European markets throughout the second half of this year and beyond. In the credit union market where we previously announced a dedicated focus this year we signed an expansion deal that included business lending and account opening, commercial lending, commercial pricing and profitability and incentive compensation which took a credit union with $12 billion in assets over the seven figure mark for their annual commitment to Encina. Overall, our credit Union team added six new logos and 35 cross sells in the second quarter. Moving to onboarding in the second quarter, an existing UK challenger bank customer increased their ACV within CIN over 80% by broadening their adoption to include onboarding, demonstrating the market demand for technology that helps financial institutions manage the end to end client relationship from acquisition to ongoing interactions and due diligence monitoring ensuring a compliant, smooth and personalized experience. Turning to Mortgage the market showed signs of momentum in the second quarter with expansion activity revenue from over 50 Ncino mortgage customers, about half of which were depository institutions. Evidencing the demand in our customer base to leverage our best in class unified platform across lines of business within their institution. Seeing this level of activity across both depositories and IMBs with our mortgage solution is a positive signal and as Greg will touch upon in his remarks, the year over year subscription revenues growth we saw in mortgage this quarter demonstrates that the platform pricing shift we made with mortgage over the past couple of years will prove beneficial as the industry recovers. Finally, on the AI front, I’m very excited to share our progress on what we believe will be as transformative for financial services as our pioneering move to cloud banking was over a decade ago. Banking Advisor represents the first pillar of our AI Strategy and over 80 customers have now purchased this technology. Banking Advisor represents an AI powered interface designed exclusively for financial institutions. Unlike generic AI solutions, Banking Advisor is deeply integrated into Ncino workflows and understands financial products, process workflows, regulatory nuances and day to day banking realities. Banking Advisor is evolving to become the primary interface through which our customers will experience increasingly sophisticated AI capabilities and fully agentic workflows which we plan to start rolling out to the market next quarter. As our product development organization continues to deepen and widen our AI mode and as more and more financial institutions look to Ncino to help them navigate their AI journey, we are laser focused on ensuring the successful adoption of Banking Advisor by the initial cohort of customers. Financial institutions don’t just need AI tools, they want a partner they trust who deeply understands banking, has a proven ability to drive industry wide change and possesses the data foundation necessary to build truly differentiated AI capabilities. Insino has been that partner through our customers introduction to the cloud and we strongly believe no company is better positioned than Ncino to lead the AI transformation of financial services. Specifically, Ncino provides mission critical systems for our customers. We understand the regulatory complexities and nuances our customers must navigate and comply with on a global basis. We are a trusted data partner with a deep appreciation for the confidential nature of our customers information and the infrastructure required to protect it and we understand the context in which AI tools are used because of our singular financial services vertical market focus across commercial, consumer and mortgage lines of business. These factors, along with our scale, global presence, reputation in the market and best of breed product portfolio make us uniquely positioned to be the worldwide leader in AI banking. AI is coming up in virtually every customer conversation and we are already seeing our AI first approach contributing as a differentiator that helps move deals over the finish line, including being a catalyst for customers to transition to our new pricing framework. With that, I’ll hand the call over to Greg to walk you through our financial results.

Greg Orenstein

Thanks Sean and thank you all for joining us today. Please note that all numbers referenced in my remarks 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 8K furnished with the SEC just before this call. In the second quarter, total revenues were $148.8 million, up 12% year over year. Subscription revenues were $130.8 million, up 15% year over year on a reported basis and 10% organically. As noted on slide 15 of our second quarter earnings presentation of the approximately $4.3 million over performance against the top end of our second quarter subscription revenues guidance, $900,000 was a result of solid execution against our plan. $1.7 million was due to over performance from our U.S. mortgage business where we saw subscription revenues of $20.9 million, up 22% year over year and $1.6 million was a result of favorable foreign exchange rates relative to plan. Professional services revenues were $18.1 million, a decrease of 2% year over year as I addressed at our Investor Day in May. While it will take some time to see results, professional services gross profit growth will be the focal point of our internal operating plans versus driving additional professional services revenues growth and we remain focused on realizing quicker deployment timelines through the use of AI and sandbox banking and by taking a more prescriptive approach to projects. Non US total revenues were $33.5 million, up 22% or 19% in constant currency. Non US subscription revenues were $27.4 million, up 30% or 27% in constant currency and 10% organically. Please note our discussion of constant currency excludes any currency impact on revenues from full circle. Non GAAP operating income was $30 million or 20% of total revenues over performance against our subscription revenues. Guidance contributed approximately $3.7 million of non GAAP operating income and the balance of our overperformance against guidance came from solid execution on efficiency initiatives. We ended the quarter with $123.2 million in cash, including restricted cash and $203.5 million outstanding on our line of credit. We repurchased approximately 750,000 shares of our common stock in the second quarter at an average price of $26.89 per share for total consideration of approximately $20 million. When added to the stock we acquired in the first quarter, we have repurchased approximately 2.6 million shares at an average price of $23.53 per share for total consideration of approximately 60.6 million dollars against the $100 million authorization. As we stated last quarter, our capital focus for the time being will be on realizing the benefits of the prior acquisitions we have made and on share. Our platform pricing transition continues to proceed according to our expectations, including price uplifts, and we have now converted approximately 21% of our ACV to platform pricing. Now, turning to guidance for the third quarter of fiscal 2026, we expect total revenues of $146 million to $148 million and subscription revenues of $127.5 million to $129.5 million, an increase of 6% and 7% respectively at the midpoints of the ranges, including approximately $5.5 million of inorganic subscription revenues from Full Circle and Sandbox Banking. Non GAAP operating income in the third quarter is expected to be $31.5 million to $33.5 million and non GAAP net income attributable to Encino per share is expected to be $0.20 to $0.21 based upon 117 million diluted shares outstanding. If you turn to Slide 16 of our second quarter earnings presentation, you will see for the full year we are flowing through the $900,000 second quarter execution base beat and increasing our full year subscription revenues guidance by $2.7 million. We are also increasing our outlook for US mortgage subscription revenues growth for the full year by the approximately $1.7 million over performance in the second quarter. While we are planning for mortgage subscription revenues to be down both year over year and taking seasonality into account sequentially in the third quarter, we now expect U.S. mortgage subscription revenues growth of approximately 5% for fiscal 26, up from our prior guidance of flat year over year. The accretive subscription revenues growth contributed by our mortgage business in the second quarter is the result of volume growth concentrated in some large IMB and homebuilder customers. Our mortgage team did a tremendous job acquiring these customers in the lows of the mortgage cycle and we are quite encouraged by these results. However, in keeping with our new guidance philosophy, we are not extrapolating this over performance to the rest of the year at this time. With respect to FX, our prior subscription revenues guidance for fiscal 26 assumed a relatively strong US dollar which weakened in the second quarter. Our revised full year subscription revenues outlook includes adding approximately $2.1 million of foreign currency benefit relative to our plan for the fiscal year, which includes approximately $1.6 million realized in the second quarter with the $500,000 balance of the benefit expected in the fourth quarter when the US dollar was strongest last year. Full circle and sandbox banking have been contributing subscription revenues in accordance with plan, so our outlook for fiscal 26 inorganic subscription revenues of $17.5 million remains unchanged. For fiscal 26, we now expect subscription revenues of $513.5 million to $517.5 million, up from our prior guidance of $507 million to $511 million, representing 10% growth at the midpoint of the range and 9% in constant currency. As a reminder, our second half fiscal 26 year over year subscription revenues comparisons are negatively impacted by an approx. Headwind in both the third and fourth quarters as a result of one time subscription revenues that occurred in the second half of fiscal 25. We also continue to expect the fourth quarter to represent the lowest year over year subscription revenues growth for the year. For fiscal 26, we now expect total revenues of $585 million to $589 million, up from our prior guidance of $578.5 million to $582.5 million, representing growth of approximately 9% at the midpoint of the range and 8% in constant currency. We now expect our fiscal 26 non GAAP operating income to be $117.5 million to $121.5 million, up from our prior range of $112 million to $116 million, representing an approximately 24% increase over fiscal 25. At the midpoint, non GAAP net income attributable to Encino per diluted share is now expected to be $0.77 to $0.80, based upon a weighted average of approximately 118 million diluted shares outstanding, which ...