nCino, Inc. (NCNO) September 2026 Conference Transcript

Welcome, everyone in the room. My name is Billy Fitzsimmons. For those of you I haven't had the chance to meet, I cover everything from the hyperscalers to large-cap horizontal software to vertical software. Really glad to have Greg Ornstein, CFO of Encino, here. Thanks for being here, Greg. It's a pleasure to be here. I think a good place to start, and this is how we're kind of starting all these conversations, is just give a quick overview for those in the room who might not be as familiar. What does Encino do, and what problem does it solve for customers?

And, again, thanks, everyone, for being here. We help financial institutions loan money quicker. We help them make those loans on a more informed, intelligent basis. We help them reduce risk. We help them operate more efficiently. And we help them provide their end users, their customers, a better user experience. And we do that across four parts of the bank. So lending, any type of lending from commercial to small business to consumer, including mortgage, account opening, onboarding of customers, and then ultimately portfolio monitoring. And we do that on a global basis. We've got a little over 20% of our revenue is actually outside of the United States. And that's what our focus is.

And you guys just reported a couple weeks ago now, any takes from the print that you kind of want to leave the audience with and make sure I understood those results?

Yeah, excited about the results. and, again, you know, very pleased with the activities of our team. So we had a good quarter, and ultimately I think the core business that we have is operating well. There's a lot of activity, a lot of sales activity out there. The pipelines look good. We did talk about mortgage, obviously, in this interest rate environment. The mortgage part of our business, which is about 15% of our subscription revenues, you know, is dealing with some headwinds. But, you know, I think overall, whether it's through better execution, and again, very proud of the team, and ultimately just technology and what's going on with AI, an exciting time for the company. And, you know, we're seeing that with the conversations we're having with our customers.

You guys gave updated guidance for the fiscal year. Can we dissect kind of the core drivers of growth in your business and what investors should be paying attention to?

Yeah, absolutely. And so obviously, as we're thinking about the rest of the year and beyond, it's continued strong execution, as I just noted, really pleased with what we've been seeing across the organization. But if you go back to last year, we laid out five very specific growth initiatives. And I think we're excited about the progress that we're seeing across each one of them. In no particular order, international. Again, we just announced early, actually in the Q3, we announced this on our call early in the third quarter, a nice sizable win. We expect it may be our largest deal of the year. So getting that done early in the third quarter was great. Our international business, we said, is accretive to growth. And so excited about that. A lot of white space out there. About half of our SAM is actually outside of the United States. And as I mentioned earlier, only a little over 20% of our revenue right now is outside of the United States. So opportunity there. Our mortgage business, which, again, there are market headwinds, but we continue to see opportunities. We highlighted a couple of wins on the call, selling or cross-selling mortgage into our depository customer base. So banks and credit unions standardizing on Encino, again, across their lending portfolio, including mortgage. We talked about our credit union business, which is something that we stood up last year, seeing good momentum, penetrating deeper and wider in the credit union space. Onboarding, which is another one of our growth initiatives. We had a nice win that we announced, if you look at our press release, for onboarding, which we think is a great cross-sell opportunity for us across our entire customer base, but specifically into our commercial customer base. And finally, obviously, AI being a huge topic. You know, a lot of momentum on the AI front. We announced over 230 customers are now paying us for our AI capabilities, which is really exciting to see. And above and beyond just those capabilities, I think, again, AI is driving a lot of discussions with the customers and prospects in the market. We've always said historically our biggest competitor, particularly upmarket in the larger bank space, was just do nothing, right? Delay the decision, kick the can down the road. And I think one of the takeaways with what's going on with AI is the market realizing you just can't continue to do that if you want to be competitive from a technology standpoint. And so really excited what we're doing there and really excited about the innovation that's coming out of our R&D organization around our AI technology.

Let's talk for a sec about the platform pricing transition because there were some important updates on your last earnings call, kind of where we're at. Let's talk through those. And then where are we kind of in this transition and what are customers saying or what are you hearing from them kind of on the other side of it?

So we embarked upon this pricing transition a couple years ago. And the real catalyst for it was, historically, we were a seat-based model, like many SaaS companies. But we were seeing the efficiency gains that we were driving with our customers. We realized that the more efficient we made them, the less seats they would need, which obviously isn't a great long-term business model. And so we made the decision to align a set of seats to assets and really align the value proposition. So as our customers grew their assets on the Encino platform, we would be able to participate in that growth. Our average contract length is about four years. So in theory, it should take us about four years to transition the model or transition the customer base to the new model. But six quarters in, we're at about 48 percent, which is really exciting to see. And it's frankly exceeding our expectations. And we're all pleased with the execution there as well. No one likes getting a price increase. We have said that you do get a one-time step up on the new platform. We targeted a 10 percent goal that we met and have continued to meet. No one likes a price increase. But I think our customers understand a couple of things. One is under our old model, the seat price was fixed during the term of the agreement. And so on average, I mentioned four-year contract length. As inflation ripped, you know, we weren't being compensated for that. And so some of that uplift is merely just catching up with inflation, and I think they understand that. The second thing is part of a carrot that facilitates the transition. They do get their initial bundle of intelligence units, which allows them to use our AI capabilities. And so I think that's been something that's been driving actually accelerated renewals. And we talked about that on the call. Already 12 of our top 20 largest customers by ACV have already transitioned to the new model, including four that we signed up last quarter.

Great. You talked about international, and I think it's worth a double click. Can we talk about some of the wins there you announced in 2Q and how you think about the opportunity and how that go-to-market motion? is similar or potentially differs from what you've already done domestically?

Yeah, it is different. And we talk about international, you know, which really for us is outside of the U.S., but there's a lot to break down there, right? You know, in the United States, if you have a customer in Tennessee that you have as a reference, it will work in Georgia. It's not necessarily the same having a customer in the U.K. or reference working in Germany, right? And so the playbook that we've seen and we've been able to execute on, whether it's been in Canada, whether it's been in Japan, for example, or the U.K., which were some of our earlier outside-the-United States locations, is you land that first customer, which can take some time, right? A lot of companies are, yeah, a lot of companies outside the U.S., see U.S. companies come in and try to make a presence but ultimately don't commit. And so it's really important for them to see that commitment from us. But you get that first customer. You get them live, happy, and referenceable. And while it's a very big market, it's actually a small industry. And that drives additional references and ultimately additional wins. And so we have been very focused on executing in specific geos, making sure we are executing that playbook. And, again, as I mentioned earlier, it's about half of our SAM, and we've got some really nice opportunity to continue to execute there. Generally, you've got larger banks outside of the U.S. so you don't necessarily have that community bank and credit union market like we have here. And so those deals can be somewhat lumpy, so you kind of need to navigate that. But ultimately, those are generally much more sizable transactions that really can move the needle when you do land them.

I have a bunch of questions on everyone's favorite topic, AI. You brought it up earlier. You have a few different newer AI tools, banking advisor, digital partner, intelligent credit consumption. I know you talked about on the one Q call that customers kind of started reaching their limits. And on the two Q call, you talked about how customers were kind of purchasing additional intelligence units. Can we talk about the AI opportunity as it relates to Encino and the different pillars of it?

Absolutely. And so you mentioned Banking Advisor, which think about as our generative AI capabilities. And then we have Digital Partners, which is really our agentic capabilities. And again, when you go on the new platform, you do get an initial bundle of intelligence units that allows you to use those capabilities. The way that we tried to set it up was to give folks about a year in our estimations to allow them to play with and ultimately get comfortable adopting AI. You know, we sell to banks and credit unions and IMBs and generally financial institutions are incredibly highly regulated and conservative. And so for us, it's been very much focused on them and their adoption and getting them comfortable with adopting the technology. Interestingly, as we talk about AI, I mean, from an Encino perspective, it really is just an extension of the business that we've always been in, which is using technology and new technology to make our customers more efficient and more profitable. Initially, it was the cloud. When we started the business, we were told that banks would never put their data in the cloud. And ultimately, we went on and created this category called cloud banking. Now there's just another new, incredibly exciting technology to further make our customers more efficient. And I think with the market presence that we have, the customer base that we have, the trust that we've built up with those customers, we really see them looking to us to help them navigate through all of the noise that's out there and do it in a very safe, compliant manner. And, again, as I mentioned, we have over 230 customers now who are paying for AI, and our focus has been and will continue to be for the foreseeable future getting that adoption up, right, and making sure, again, they appreciate the efficiency gains and the power of the technology and ultimately making sure they're comfortable using it, which includes getting them through their risk and security reviews and ultimately getting them using it throughout the organization.

I cover a number of vertical software names, and verticals are, like, it's a catch-all for lots of software companies that serve completely different end markets. And I think one of the big debates is, does the end customer kind of lean on the existing incumbent to provide AI, or do they go with, like, an AI-native vendor or search for it externally or try to do it themselves? We talked about how, you know, customers are leaning in to Encino, which makes sense given the base you serve. Can we just talk about has the competitive landscape changed at all and how you think about differentiation in an AI era?

You know, I think one of the things that's always, you know, Encina has always been viewed as an innovative company. And I think our customers in the market are looking at us now and seeing how we are innovating with AI and really being a market leader for banks and credit unions and IMBs, you know, with AI technology. And so from our perspective, you know, I think competitively we feel really good about our position. You know, we talk about the history that we have, the trust that we've built, the customer base that we have. I think that matters a lot and more than maybe in any other market in the market that we serve, right? And so I think that's important. And I think the other thing is, again, with some of the things that we're doing are unique. You talk about AI-native companies, and, you know, we're paranoid from a competitive perspective, so we do keep our eyes and ears open and try to make sure we aren't missing anything from a market standpoint. But unlike some of the AI-native competitors who really are kind of repackaging or putting a wrapper around and reselling third-party LLM tokens, right, our AI strategy is much broader than that. And we're very focused on using the right technology to solve the right problem at the right time as efficiently and cost-effectively as possible. And so one of the things that Sean, our CEO, talked about on the earnings call a couple weeks ago, for example, is one of our banking advisor capabilities called continuous credit monitoring, which does what it says. It sounds like, right, it helps our customers monitor their portfolio on whatever cadence they want, hourly, daily, monthly, et cetera, but it automates it, and it highlights proactively red flags and points it out to the relationship manager for them to go and follow up on and really identify risk before they've probably ever had an opportunity to do so. Not only identify the risk, but give them next steps to go in terms of how you can go maybe address it, right? And maybe it turns into a cross-sell opportunity because maybe someone's having a cash flow issue because of a customer problem, and all of a sudden you have an opportunity to go sell them something. That's leveraging primarily our internal machine learning deterministic models that we have based on the unique data that we have in our systems. And we talk about that data. That data has been accumulated over a decade and a half from hundreds and hundreds of customers on a global basis. And we've worked over the last five or six years getting our customers' consent to use that data on an anonymized basis to drive our product development and also to drive benchmarking to help them appreciate how they're performing against other anonymized banks. And so I think our value prop is pretty unique as it relates to the AI native folks. And also, again, I get back to the trust comment. You know, we've had a demonstrated success of serving customers, dealing with regulators, dealing with security issues and scaling. And I think that's a pretty big hurdle for some of those AI native companies to get over. On the, I think you mentioned internal build as well. You know, we're not seeing our customers at this point saying, hey, it's easier to code. Let's get back in the software development business. It's really hard to be a bank, and it's a competitive market. Let's focus on being the best bank or credit union or IMB that we can. Let's leave the software development to folks like Encino. But what they do want to have is optionality. And, you know, we've architected our product to provide them that if they want to go build their own agents on top of Encino and leverage some of our skills, you know, we can facilitate that. And so right now, again, we're not seeing them saying we're going to go do that. But as they think about their long-term strategy in partnering with someone, they want to make sure they have that flexibility. And, again, I think they see that with Encino.

We're kind of asking this to every company at the conference this year and acknowledging that it's evolving in real time. And you hinted at several things. How have processes internally at Encino changed with AI or potentially improved? How are you using AI to be more efficient inside your organization?

Yeah, it's been a big focus for the team. And it does start from the top, and Sean really driving that throughout the organization. But, you know, we've made investments in our people and in technology to give them the tools ultimately to be more efficient. And we've talked about specific things. For example, we've highlighted over the past year and a half an opportunity to improve our gross margins for our professional services business. And we launched several initiatives. One we've highlighted publicly called Projects of Zero, which basically accelerates the time it takes to implement and leveraging AI to facilitate some of the work, the burdensome work and the time-consuming work that would be required, for example, to map our system to another third-party system so that they could talk to each other. And so we've gone from negative margins in our professional services business over the last year or two to in Q1 it was up 10%, Q4, things like that we're doing throughout the organization, again, to really accelerate our efficiency and the organization. It's been great watching the team embrace the technology. We actually have reduced the size of our R&D team. A lot of it was rationalizing some of the acquisitions that we did. We're seeing more output with fewer people. Again, I think there's really an excitement and a buzz. If you're in software, it's a really exciting time to be part of an organization that is developing stuff that is going into the market really to help getting back to what we do, help banks and credit unions and IMDs make loans faster, more efficiently, on a more informed basis. Throughout the organization, we are focusing on that. Everyone's got tools that have been provided that we've invested in, and we are seeing the results of that. If you look at our bottom line and the trend for our bottom line, some of that is directly attributed to some of the AI efficiency gains that we've seen.

And then lastly on AI, with some of the newer products we've kind of talked about earlier and kind of the consumption trends you're seeing, just level set for us what you kind of talked about previously on the pipeline you're seeing, customer interest, how we think about scaling usage across your base?

Yeah, I mean, in terms of sales and sales activity, I mean, we exited last year. It was actually our best sales year in the history of the company. And Q4 was our best sales quarter in the history of the company. And so that momentum carried into this year. You know, we need to keep it up, right? You're only as good as the last quarter. But, again, I think from a market activity standpoint, you know, we feel really good about the pipelines. We feel really good about the conversations we're having and the strategic nature of those conversations. And, again, I think folks looking to us to be a strategic partner on this AI journey and not just a vendor. And I think that's important. And, you know, ultimately, we just, like I said, need to keep our heads down and keep executing. But we feel good from a market standpoint. And then I want to talk about a couple things, capital allocation and kind of margins. maybe as a good segue from AI how do we think about gross margins with some of these new AI products coming online and being sold getting back to my earlier comments about us having our own machine learning deterministic models and solving the right problem with the right technology we've consistently said that we see our AI business from a gross margin perspective being neutral to a creative to gross margins um and you know as we've looked through this year i mean we feel good about that because again we're not paying anybody from the continuous credit monitoring example right um for for that output and so like i said i think that's unique from a from an encino perspective um maybe versus some other companies who like i said maybe repackaging or reselling you know third-party lm tokens and then any anything we should think about just on capital allocation uses of free cash flow the balance sheet and kind of how you're thinking about the business moving forward? Yeah, we've been very aggressive over the last year and a half now, purchasing our stock. We've spent over $300 million since last April on three different stock repurchases, and we just authorized another $100 million. So we continue to see that as an attractive use of capital. While we always keep our eyes and ears open from an M&A standpoint, and frequently stuff comes up when you're not necessarily looking for it, I think we feel very good about our product portfolio right now. And so, again, we'll always keep our eyes and ears open, but in terms of use of our cash and our increasing free cash flow, you know, the continued allocating it towards buybacks is something we feel very good about right now.

And I want to make sure I ask about your kind of go-to-market team and necessary changes you've had to make over the last year, because there's a few different things here. You're expanding internationally, which is, we talked about this already, kind of a different motion, there's also like metrics domestically seem to be pointing in the right direction. And so I'm assuming there's some changes you've made there as well. Can we talk about how your sales team is kind of going out and how that's changed?

Yeah, look, we are always tweaking the organization. And we think that's a healthy thing to do. We think it's the right thing to do and always challenging what can we do better, right? And from a go-to-market perspective, you know, we have made some changes. Ultimately, we got a new chief revenue officer in earlier this year. And he's come in and I think has carried forward the success and the momentum that we were having prior to his arrival. And so I think we feel good from a go-to-market perspective. But again, there'll constantly be tweaks. Always we want to make sure we've got the market covered, first and foremost. And I think it's really important with this ever-changing environment that the market understands all of the innovation that we've been coming out with and keeping up with it. And I think that's kind of an additional, from a marketing perspective, I think an additional emphasis, you need to be more active out there and not just with kind of, you know, broad social media, but making sure we're getting the right information about the product innovation to the right.

We've talked about a few different drivers of growth. If we, if you and I sat here 12 months from now and we're kind of talking about success in the business, what do you think we'd be talking about? There's several things here, AI and customer demand, international. Anything else that I missed in that kind of grouping of core levers as you think about rev growth going forward?

No, I think those are good. And, again, just continued execution, right? You can have the best strategy in the world, but you've got to execute. Like I said, the team's been doing a great job at that. We just need to keep doing that. And I think it's reasonable to expect over the coming quarters that we add some more growth levers. And so, again, we keep focusing on making sure we're erring on the side of driving that continued reacceleration of growth and continuing to build on it. I feel like we've planted the right seeds for growth, and it's just a question of them kind of watering them and having them mature. But, again, from a product portfolio standpoint, from a team standpoint, from a market demand standpoint, I feel like we're really, really well positioned. And just like we saw with all the excitement about cloud, you know, back when the company was started almost a decade and a half ago, it feels like that again with AI. And, you know, we had great success then, and I think we expect to have great success with the customer base we have, the products we have, the data moat that we have in this world of AI.

Greg, thanks for joining us. We really appreciate it. Appreciate the conversation. Thank you very much.