Ncino (NASDAQ:NCNO) held its fourth-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Ncino 4th Quarter and 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 of Investor Relations Good
Harrison Masters
afternoon and welcome to Ncino’s fourth quarter and fiscal year 2026 earnings call. With me on today’s call are Sean Desmond, Ncino’s Chief Executive Officer and Greg Orenstein, 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, entails 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. Encino 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 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 as well as the earnings presentation on our investor relations website@investor.in with that I will turn the call over to Sean.
Sean Desmond
Thank you Harrison and thank you all for joining us today. I want to start by saying how proud I am of the entire Ncino team for the results we achieved in fiscal 26 and especially in the fourth quarter. We exceeded our financial guidance across every key metric and delivered an exceptional ACV result up 17% year over year, which we believe was largely driven by customers embracing our AI strategy and product innovation. The team executed incredibly well and we’re seeing the momentum in the market as more prospects are engaging with and choosing Ncino and existing customers are expanding and deepening their commitments with us in large part because of how we are embedding AI throughout the Ncino platform. I’ll get into the details shortly, but with over 170 customers of all sizes, including global enterprise, regional and community banks and credit unions, Having already purchased AI intelligence units as of the end of fiscal 26 we believe Ncino is rapidly becoming the de facto AI platform for financial institutions across the globe. For those of you just getting familiar with our story, Ncino plays a mission critical role for our customers and the global financial services market. Financial institutions will continue to struggle with legacy fragmented systems that limit growth, hinder financial performance, restrict their ability to leverage data as a competitive advantage and create poor user experiences. Ncino solves these problems with AI powered intelligent automation on a unified scalable platform. We are the only platform for managing lending, onboarding, account opening and portfolio management across all major lines of business for financial institutions across the globe. This is why the Ncino platform serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in now over 25 countries. Throughout fiscal 26 I talked about the confidence I had in our team, our technology and strategy and our market leading position. I also said the foundation was in place and that our fiscal 26 performance would come down to execution, including against our AI strategy. This past year’s results only strengthened my conviction about what’s ahead for Ncino as we walk hand in hand with our customers into a new era of AI where data, context, guardrails, security, trust and a deep understanding of how financial institutions operate matter more than ever as banks further embrace automation and think about using AI as an accelerant. To do this, they’re choosing Ncino because Ncino is their process. We connect their data, operate as their system of record and enable them to comply with numerous rules and regulations. Ncino is an essential Tier 1 mission critical platform that amplifies their ability to more profitably generate revenues in a regulatory compliant manner. At the start of fiscal 26 I laid out a few strategic initiatives where I believed we had an opportunity to excel with focused execution. I am very proud of what the team delivered in these areas and the fourth quarter put an exclamation point on what was a tremendous year for the company. First, in the US Enterprise market we delivered our best sales quarter in over four years which included a mortgage expansion with the top 40 bank and cross selling commercial to our largest consumer lending customer. Second, in emea we leaned in with new leadership, a new go to market strategy and a clear execution plan. We delivered our largest deal of the year with a marquee net new customer win in Austria and I’m thrilled with the momentum the EMEA team is seeing. I’m also thrilled with momentum we continue to see in Japan as highlighted by the fourth quarter signing of one of the largest banks in the world for a commercial lending transformation. I want to congratulate the Japanese team for tripling their total ACV in fiscal 26 from fiscal 25. Third, it’s gratifying to see our existing customers continue to validate our AI strategy as they move to our new platform pricing framework to access our growing AI capabilities. We saw expanded commitments from some of our largest accounts and our ACV net retention rate improved to 112% or 109% organically and in constant currency, up from 106% in fiscal 25. Consistent with what we saw throughout fiscal 26. We closed a number of early renewals in the fourth quarter, including a fresh five year commitment from our largest customer by ACV. And those customer commitments go beyond dollars. Critically, they come with trust More and more customers are choosing to share data with us because they want the insights and benchmarking that only Ncino can deliver. Today, almost 500 financial institution customers representing over $11 trillion in assets have granted Ncino the right to process their data into a proprietary and anonymized data set, one that powers the development of our products, fuels best in class industry insights and sharpens the accuracy of our intelligent services. This proprietary data set that Ncino has carefully aggregated and curated for the better part of a decade gives Ncino a unique, unmatched global perspective on how to more profitably and efficiently operate a financial institution, how work moves seamlessly through the bank, where bottlenecks form, where exceptions happen, and what great looks like at scale. We have already put this data set to work through our product called Ncino Operations analytics, which helps customers pinpoint inefficiencies, track cycle times and win rates and benchmark performance against anonymized peers. That benchmarking provides valuable and actionable insights as customers get a true baseline, a clear path to ongoing operational and process improvements, and real time demonstrable ROI as they adopt our AI capabilities. It also informs how we build AI and deploy agents that are practical, relevant, reliable and trustworthy in real bank environments. And it goes a step further. Because of our API foundation and Integration gateway, we can seamlessly connect data across a bank’s technology stack as well as the key third parties. That broad 360 degree view of a financial institution’s customers has been Ncino’s calling card in the market since we started the company. Before I turn things over to Greg to talk through our financials in more detail, I want to spend a few minutes addressing the elephant in the room as we have all heard the narrative that AI will replace SaaS for some categories of software. That may very well be true. But the highly regulated business of banking is different. And Ncino’s position and value proposition in banking is different from what you’re seeing across the broader SaaS landscape. Bottom line is, we believe AI will be a tremendous tailwind for Ncino as it becomes central to how financial institutions operate and compete and how we’re scaling and operating the company. Here’s how we see the world evolving and how Ncino fits in. AI is moving quickly from help me write and help me search to help me complete meaningful productive tasks so I can focus on other work to grow my business more efficiently and profitably. And in a financial institution, the work is not generic. It’s onboarding, it’s underwriting, it’s credit reviews, it’s monitoring, assessing and managing risk, it’s opening accounts, it’s work where the data is sensitive. Strictly adhering to the rules is essential. Regulatory compliance is non negotiable and the cost of being wrong can be extremely high, not only financially, but reputationally. To make all this work, AI needs a foundation to run on. In banking, that foundation is the data and regulatory infrastructure Ncino provides. That’s why we feel extremely confident about our position. We are the system of record and user experience for many of the most important processes in a financial institution. And every capability has been built with regulatory compliance in mind. As AI becomes more capable, that makes our platform even more relevant. Because AI needs a place where it can safely understand context and then take action in an efficient, controlled, secure, trusted and regulatory compliant way. You’ll hear a lot of discussion in the market about AI commoditizing the application layer. We understand why people raise that point because it’s undeniable that AI driven software makes writing code easier and cheaper. But in the highly regulated, mission critical world of banking, deploying that code in a safe and compliant way is harder. Because of this, we believe AI agents actually increase the value of our underlying platform and system of record. An agent can’t operate in a vacuum. It needs trusted data, industry contacts and guardrails. And it needs to be traceable and auditable. And the platform that connects the user to the data and records the actions taken becomes the natural home for these AI driven experiences. Ncino is that platform. All this leads to how we’re approaching AI agents. Our role based agents, what we call digital partners, were designed to work alongside banking professionals inside the Ncino platform. Guided by what we’ve learned from almost a decade and a half of usage patterns across our lending customer base and what those patterns mean for speed, consistency and results. Now let me connect that strategy to what we’re seeing in the business today. First, adoption is real and usage is growing. While much of the SaaS industry continues to debate how best to respond to the agent economy, community, regional enterprise and global banks, credit unions and IMBs are already using Ncino’s AI capabilities in production today, not just as a pilot or beta, but as part of how they do lending and banking work. Customers are not just buying AI access, they’re using it, and we can see that directly in the increasing consumption of intelligence units on our platform. With Banking Advisor Usage up over 25 times in March compared to usage in October for years we have said that Encino is not only in the software business, we are in the change management business and moving every customer from contract signing to implementation to pilot to using Ncino’s AI in production as an integral part of the day job is the sole focus of our forward deployed engineering team. We also continue to see the halo effect we talked about before. Encino’s AI innovation and product strategy is showing up as a clear differentiator in competitive conversations. I have mentioned over the past couple of quarters that it’s helping drive earlier renewals and it’s becoming another reason new customers are engaging with and choosing Encino and current customers are expanding their relationship with Encino. Second, when we talk about AI, we try to keep it simple. We care about outcomes. The question isn’t how many features or how many agents exist. The question is how much time and money did the financial institution save? How much risk was serviced earlier and mitigated, and how much did consistency, efficiency and profitability improve, all while helping to ensure the financial institution operates and in accordance with various rules and regulations and provides an enjoyable and compelling user experience for its customers. That’s why when we look at Banking Advisor and our digital partners, we focus on practical wins. In the past, a single relationship review meant painstakingly pulling documentation from systems, manually identifying the relevant data points, followed by hours and hours of analysis with agenti credit reviews released as part of the analyst digital partner family last quarter, Encino summarizes in seconds what changed, highlights the drivers, cites the underlying data and helps draft the follow ups. And the work stays inside Encino. With the right permissions, the right documentation and the right audit trail, the bank gets faster answers, more consistent reviews and more capacity for higher value work like being in front of customers and growing relationships. This focus on outcomes is exactly why we transitioned our pricing model and I’m pleased to report that as of the end of fiscal 26 we have already moved approximately 38% of our ACV away from seed based pricing to platform pricing. Third, our data is not just a competitive moat, it is the foundation for a new category of proprietary intelligence capabilities benchmarking, predictive risk operations, analytics and other capabilities and products you will hear about as the year progresses that we believe will create entirely new value for our customers and new revenue streams for Encino. We strongly believe that proprietary domain specific real world data is the most valuable asset in an AI economy and no other company has the data Encino has and that data mode compounds with every customer we add and every line of business we expand into. Finally, I want to emphasize something that is especially important in banking trust in a regulated environment, close enough isn’t good enough. AI has to be deployed in a way that respects policies and data privacy aligns with the bank’s risk tolerance which varies from institution to institution and produces results both the institution and regulators can confidently rely on. One of our stockholders recently conveyed they were reminded how embedded Ncino is within a bank’s internal and external controls, risk management and governance processes When a top five US bank explained to them that they have over 500 exemption workflows configured in Encino that guide every deterministic step of the lending process and that they rely on that process to manage risk, regulatory compliance and audit trails. That’s why we’re building AI into the Ncino platform where our customers already have the industry context, the controls and the ability to measure outcomes over time. As the agentic operating system for financial institutions, Encino will be the backbone delivering AI with the same compliance guardrails, the same regulatory audit trails, the same institutional policy logic and the same lending decision framework they have grown to trust and rely on. And that’s also why we believe our approach will uniquely scale not by asking banks to bolt generic AI onto complex processes, but by delivering banking specific AI that reflects how banks actually operate on a platform that has demonstrated time after time the ability to scale to support some of the largest financial institutions in the world. So stepping back, we feel really good about where we are. While still early, we’re seeing strong excitement and increasing momentum in AI adoption and growth in usage as measured by intelligence unit consumption. Our sales pipeline looks great and we believe our AI agents make Encino even more valuable and sticky to our customers because we connect the user, the process and the data in a trusted, controlled, regulatory compliant environment. In summary, we believe the agent economy expands our addressable market, the outperformance against our financial guidance, the acceleration of ACV bookings, the RE acceleration of subscription revenue growth, and the improvement and strength of our retention KPIs are all reflections of the impact AI is already having on the business. And we’re just getting started. As I wrap up my prepared remarks, I want to welcome a new member to the Encino Leadership team. I cannot be prouder of how our sales and marketing teams performed in fiscal 26 and to build on that momentum, we are further investing in our Go to Market organization. Today we are excited to announce that Encino has hired Keith Cattell as our new Chief Revenue Officer. Keith is a seasoned operator who brings deep financial services, enterprise sales, large global company and scaling expertise to the company. We believe Keith’s experience and vision are a great addition to the company to help us further accelerate our subscription revenues growth and take Encino to the next level. With that, I’ll hand the call over to Greg to walk through our financial results.
Greg Orenstein
Thank you Sean and thanks everyone for joining us this afternoon to review our fourth quarter and fiscal year 2026 financial results. 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. Turning to our fourth quarter results, total revenues were $149.7 million, an increase of 6% year over year and $594.8 million for fiscal 26, an increase of 10% over fiscal 25. Subscription revenues were $133.4 million in the fourth quarter, an increase of 7% year over year and $523.1 million for the full year, an increase of 12% over fiscal 25. Organic subscription revenues were $132.2 million in the fourth quarter, up 6% year over year, and $505.9 million for fiscal 26, an increase Of 8% year over year. As a reminder, our fourth quarter organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from one time subscription revenues that occurred in our international business in the fourth quarter of fiscal 25 as the result of a contract buyout. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our subscription revenues over performance. International Total revenues were $32.9 million in the fourth quarter, down 1% year over year or down 6% in constant currency. International total revenues were $131.5 million in fiscal 26, up 13% year over year or 11% in constant currency. International subscription revenues were $28.4 million in the fourth quarter, up 1% year over year or down 4% in constant currency. In light of the difficult comparison from the one time contract buyout last year previously noted, international subscription revenues were $109.5 million in fiscal 26, up 19% year over year or 16% in constant currency and 5% organically. We had our largest international gross bookings year in company history and with ACV as a leading indicator of future subscription revenues growth, we look forward to our international subscription revenues growth rate once again being accretive. Professional services revenues were $16.3 million in the fourth quarter, a decrease of 1% year over year. Full year professional services revenues were $71.6 million flat year over year. As we have previously highlighted, we are emphasizing professional services gross profit growth over professional services revenues growth and expect to see this reflected within our financial Results by the second half of fiscal 27, due in large part to our ongoing initiatives leveraging AI to accelerate our implementations. Non GAAP operating income for the fourth quarter of fiscal 26 was $34.7 million, or 23% of total revenues, compared with $24.4 million or 17% of total revenues in the fourth quarter of fiscal 25. Please see slide 14 of our fourth quarter earnings presentation for additional details on the components of our non GAAP operating income over performance. Non GAAP operating income for the full year was $129.4 million, or 22% of total revenues, compared with $96.2 million, or 18% of total revenues in fiscal 25. Non GAAP net income attributable to Ncino for the fourth quarter of fiscal 26 was $42.8 million, or $0.37 per diluted share, compared to $22 million or $0.19 per diluted share in the fourth quarter of fiscal 25. Non GAAP net Income attributable to Ncino for fiscal 26 was $122.7 million, or $1.07 per diluted share compared to $84.5 million or $0.72 per diluted share in fiscal 25. As expected, churn year over year continued to trend down …
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