nCino, Inc.

Good day and thank you for standing by. Welcome to the Encino 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 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations.

Good afternoon, and welcome to Encino's second quarter fiscal 2026 earnings call. With me on today's call are Sean Desmond, Encino's Chief Executive Officer, and Greg Ornstein, Encino'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. 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 at investor.ensino.com. With that, I will turn the call over to Sean.

Good afternoon, and thank you for joining us to discuss Encino'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 and Encino'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. Encino 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. Encino 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 mode that is both wide and deep 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 a 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 Encino value proposition and fuel growth with other financial institutions in that geography. Also in the quarter, Infosys, a strategic partner in the implementation of Encino 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 the 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 with Encino 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 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 from over 50 Encino 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 institutions. 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 Encino 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 Encino 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. Encino has been that partner through our customers' introduction to the cloud, and we strongly believe no company is better positioned than Encino to lead the AI transformation of financial services. Specifically, Encino 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. 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.

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 8-K 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 overperformance 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 overperformance 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-U.S. total revenues were $33.5 million, up 22% or 19% in constant currency. Non-U.S. 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. Overperformance 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 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 repurchases. 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 20 cents to 21 cents based upon 117 million diluted shares outstanding. If you turn to slide 16 of our second quarter earnings presentation, you'll see for the full year, we are flowing through the $900,000 second quarter execution base fee and increasing our full year subscription revenues guidance by $2.7 million. We are also increasing our outlet for U.S. mortgage subscription revenues growth for the full year by the approximately $1.7 million overperformance 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 home builder 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 overperformance 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 U.S. dollar, which weakened in the second quarter. Our revised four-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 approximately 3% 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 77 cents to 80 cents, based upon a weighted average of approximately 118 million diluted shares outstanding, which does not factor in any additional share repurchases beyond those we have made to date. This guidance assumes interest expense incurred under our credit facility of approximately $15 million for the fiscal year. Finally, our fiscal 26 outlook for ACV is $564 million to $567 million representing growth of 10% at the midpoint of the range, which reflects constant currency as, unlike revenues, ACV is measured in rates at the end of the period. Our guidance represents net additions to ACV of $48 million to $51 million in the year, including $4.5 million from the acquisition of Sandbox Banking. Our confidence in meeting or exceeding this outlook is underscored by the net bookings we achieved in the first half of the year and the opportunities we see in the pipeline for the remainder of the year. I'll remind you that ACV bookings have historically been seasonally stronger in the second half of the year, hence the rationale for an annual cadence of our disclosure of this metric. In closing, we are quite pleased with the progress we have made in the first half of the year and are very excited about the deal activity and sales opportunities we are seeing in the market. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of fiscal 27, as stated on our fourth quarter fiscal 25 earnings call. With that, I will open the line for questions.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Brent Braceland with Piper Sandler. You may proceed.

Thank you. Good afternoon. Greg, it's great to see the biggest revenue beat here since the lockdown days and the digital surge we first sought. Based on our estimates, it looks like organic growth re-accelerated for the first time in three years. Can you maybe frame the drivers behind the strength you're seeing and whether those are sustainable or were there some one-time things that helped you this quarter? Thanks.

Yeah, thanks, Brett. Yeah, I think first and foremost, again, just solid execution from the team and so appreciative of everyone's efforts. Everyone is very focused on executing the plan. I think taking a step back, And I think the macro in general is more supportive than what we've seen, getting back to your comments about kind of the pre-COVID days. You know, the headwinds that we've been navigating have generally subsided. And ultimately, as we talked about on the call, from a deal activity standpoint and from a sales opportunity standpoint, we haven't seen this level of activity in quite some time. And so we feel good about the business. And I think the team is very, very focused on just execution.

Helpful color there. And then, Sean, maybe for you on AI, it sounds like you're getting some nice early proof points that you have some differentiation. We're seeing in other areas, you know, applied AI in these domain-specific areas are also having success. Banking Advisor looks like you're now at 80 customers. I think you talked about maybe a little under 20 entering the year. What's resonating there and how important is Are these fully agentic workflows coming out next quarter in building on that momentum? Thanks.

Yeah, I appreciate the question. Indeed, AI is coming up in every customer conversation we have in the field, and it is contributing meaningfully to wins thus far the first half of the year, so we're excited to build on that momentum. And it also pulls through the platform story. Customers recognize that we have built up a decade of process centric data and a point of view on that data that informs decisions as well as recommendations we can make to help banks improve their efficiency. Um, and that's ultimately our overarching goal here at Encino. Um, so we're excited about that. The uptake on banking advisor, we do have to remember there is a change management journey there, right? As we roll out banking advisor skills, we're changing fundamentally the way people do their jobs. And they, as they embrace that, there's a learning curve. And so we're busy investing in the adoption of that, um, helping people navigate that. And that's fun work to be doing because we've always aspired to just change the way people do their jobs in this industry. And then finally, when it comes to agentic experiences, um, we believe we're going to deliver them, um, you know, even earlier than we anticipated this, uh, you know, on this call last quarter. Um, so, uh, We are seeing teams come to the table with agentic experiences, reimagining existing Encino workflow that are going to show up before the end of this year. And that's exciting. That's exactly the conversation our customers want to have. And they remind us that while they're excited, they're also going to be conservative in terms of how they adopt these. So we're finding the right balance between getting excited about agentic workflows, but driving that out in a very in a very realistic as well as mature sort of a way that we're not compromising risk and compliance within the institution.

Helpful color there, guys. Thank you.

Thanks, Matt.

Our next question comes from Terry Tillman with Truist. You may proceed.

Yeah. Hi, Sean, Greg, and Harrison. Maybe I should try this. Don't laugh at me. I'm a Spanish. Good to see the Spanish win, but yeah, I think there was a little laugh there, but I first wanted to focus on platform pricing and then I want to follow up with mortgage. So as you have these platform pricing conversations and it sounded like you had some success with two top 50 banks and then a top five Canadian bank, like what kind of uplift are you seeing? And then how important and how is that actually tracking in terms of your expectations you had on platform pricing? And how do you think about that next year, given probably there's even a larger base of renewals? And then I had a mortgage follow-up question. Thank you.

Yeah, thanks for the question, Terry. A few things, I think, to unpack there. First and foremost, just in terms of the pricing transition, as we noted in the prepared remarks, so far, I think it's going well in accordance with our expectations. And so we're really pleased with that. The team's invested a lot of time and energy and enablement to execute that. So far, we are seeing price uplifts consistent with our expectations. We've told folks that You know, we like to target around a 10% uplift just on an apples-to-apples basis, so no additional product, just switching from, you know, on renewal to the new model. You know, ultimately, the biggest cohort of migrations or renewals this year is going to be in the fourth quarter. So, you know, we want to work through that before we kind of come out with what we see through that, because, again, that's going to be the largest cohort for this year. But it's going well, going in accordance with our expectations, and we see people embracing it. particularly, as Sean noted, with the AI and the banking advisor skills that are part of that transition.

That's great. And just on the mortgage side, it's impressive to hear about 5% versus flat. I think, Sean, you were talking about, it almost sounds like there's some share gains. This isn't a reliance on mortgage industry changing or getting better, but IMBs and then home builders. Is there more you can pull from them just winning in a tough market, whether it's in 3Q or beyond, or... you know, how much do you have to start seeing the industry get better? Thank you.

Yeah. So we are excited about the momentum there. I think the convergence of churn settling down to our historic low norms there, in addition to the activity we see in the pipeline is resulting in a picture where we have more deal activity out there than we've had in quite some time. In fact, I had a number of the field mortgage employees in my office just yesterday talking about this activity and the excitement and the number of meetings I have just in the next month with some customers in that IMB space that you mentioned, as well as depository institutions were energized by that. So I don't think we need to rely on any announcements from the MBA. We don't need to rely on any correlations to interest rates. We simply need to execute. and have the best tech in the marketplace. We have a relatively crowded space there with a lot of competitors. That's healthy. That keeps us sharp, and I feel really good about our position competing in that space.

Thanks. Nice job. Thanks, Terry.

Our next question comes from Ryan Tomasello with KBW. You may proceed.

Hi, everyone. Thanks for taking the questions. I wanted to start on the credit union wins. You called out, I think, six new logos in that category, which seems strong. Just any context around what drove those, if any of those were competitive takeaways? And regarding the broader activation of that new go-to-market team, do you feel like that sales force is now kind of fully hitting its stride in this pace of sales, or there's still more ramp you know, as pipelines build with that new go-to-market activation. Thanks.

Yeah, I think the six deals are a validation of why we made the investment to activate this team. We have the technology. We have the solutions. We're solving the same business problems, but we're speaking the language of a segment of the market that we just had not been as focused on before. As we talk about execution, discipline, and focus, That's an area that we're laser focused, and that team is enthused and energized by that opportunity. So I expect that we'll continue that momentum there. We have opportunities in automated small business. We have opportunities in mortgage. We have opportunities in commercial and consumer lending, all just core bread and butter things that we do here at Encino. And then we have an opportunity to cross-sell the platform, right? We have a well-established credit union customer base based on doing business there for over a decade, and we're seeing opportunities to cross-sell there with that team. So it's a matter of focus, and it's exciting to see that one of our key growth initiatives is being validated at this point in the year.

Great. And then now that you have several quarters of banking advisor usage data, and I think you called out roughly 80 customers onboarded, Any color on sizing the type of uplift you're seeing from those usage credits to ACVs? I understand that Banking Advisor doesn't actually count towards ACV, but any way to size that in terms of the usage benefits would be helpful. Thanks.

Yeah, Ryan, for this year, I think we've mentioned this, but just to reinforce, it's not part of our fiscal 26 financial plan. You know, right now the focus of the team is getting that technology in as many of our customers' environments as we can. And as Sean said, it's then taking them on that journey kind of cohort by cohort, you know, enabling them to leverage the technology. And so that will take some time to work through. And so that's where our focus right now is very much on the adoption of the technology. And we'll see how that plays out as the year progresses in anticipation of having that be part of our plan for next year. But, again, we want to get a little bit more data and more data points from the evolution. But we are very pleased with what we're seeing so far and the receptivity to people, again, looking to us and Encino to take them on this AI journey.

Great. Thanks for taking the questions. Thanks, Ryan.

Our next question comes from Michael Infante with Morgan Stanley. You may proceed.

Hey, guys. Thanks for taking my question. Greg, you obviously called out, you know, your commentary just in terms of your ability to meet or exceed the full year ACV outlook. I just wanted to ask on the sort of two buckets you called out between, you know, performance in the quarter versus what you see in the pipe. Like, how would you sort of speak to, you know, your level of visibility and sort of how that has improved throughout the quarter? Thanks.

Yeah, thanks for the question, Michael. Yeah, again, I did note our confidence. Ultimately, we've got to go execute, right? We have to go get the business, but the business is out there. And as I think we said, we feel good about it. Have not seen this level of deal activity and opportunities, and as I said, in quite some time. So that's encouraging, team focused on execution. And yeah, in terms of looking at the ACV guide, again, I think we feel good with really both components. What we did in the first half on a net bookings basis, as well as the pipeline. So I think both those are contributing, again, to our confidence. And then, like I said, it's just about execution.

And then just a quick housekeeping follow-up on Ryan's question. So just on the banking advisor, despite all of the success that you're seeing on GoLives and some of the positive usage trends, the assumption from a revenue contribution basis for banking advisors specifically is that you're still not going to see any revenue from that product this year. Is that correct?

That's correct. You know, certainly from an overage perspective, that's right. And again, the focus is on adoption, you know, and helping, again, as Sean said, help our customers transform the way that they do business with technology.

Thanks, Greg. Thanks, Michael.

Our next question comes from Adam Hotchkiss with Goldman Sachs. You may proceed.

Great. Thanks so much for taking the question. You know, I wanted to ask on DocFox and Full Circle, obviously, a number of months since those have been generally available. You know, what was sort of the performance highlights there in the quarter and then how are you feeling about the pipeline of those two products and maybe just onboarding and account opening category more broadly into the back half of the year and into calendar 26? Thanks.

Yeah, with respect to the integration of Full Circle, we're on track to revenue plan, as noted in prepared remarks, and we're really happy with the technical work that is ongoing there that we could deliver a full CLM solution, customer lifecycle management in the MVM market. With respect to DocFox, consistent with the message we've been delivering this year, we have been doing the technical work that we'll set up sales cycles the back half of this year that we think will be accretive next year. So the lion's share of that work has been completed. The teams continue to get a fully end-to-end integrated onboarding straight through into origination and onboarding into account opening scenarios. And that's exactly what our customers are asking for.

Great. And Adam, just as a reminder, we released that at the end of May. And so to Sean's point, You know, we really set an insight, and so seeing this pipeline build, that's what we've been focused on, and we would expect to see results over the coming quarters.

Okay, thanks, Greg and John. Really helpful. And then, Greg, just on the comment you made around reiterating the fiscal 27 rule of 40 by the end of the year, with the revenue growth outperformance and then the sort of operating income outperformance that's commensurate with that so far this year, Any changes to the way you're thinking about the relative contribution from revenue growth versus operating margin or which one you're prioritizing or thinking about versus the other, maybe versus when you talked to us three months ago? Thank you.

Yeah, you bet. Look, our focus, as you know, has been on growth. And obviously, we've had some headwinds to navigate. And as I mentioned earlier, from a macro perspective, it is quite a bit more supportive. And those headwinds have largely subsided. And so we're always going to err on the side of growth. We think there's a tremendous opportunity out there for us. We think we have an unparalleled product portfolio. We think we are leading the market in terms of AI. And so, Adam, we're always going to err on the side of growth. But when we made that commitment around the fourth quarter of next year with rule of 40, we did not differentiate. That was the commitment. And obviously, we want to see as much of that come from growth as we possibly can.

Great. Thanks so much, Greg. Thanks, Adam.

Our next question comes from Aaron Kimson with Citizens. He may proceed.

Great. Thanks, guys. Sean, are you finding today or do you anticipate in the future that any of the newer vision around banking advisor or functionality like the updated Encino mortgage is compelling enough to drive early renewals and thus bring forward pricing tailwinds versus the tailwinds being spread out over a four-year renewal cycle?

Yes. The answer is yes. We have been seeing that play out in some early renewal scenarios the first half of this year. In some cases where we have customers that might not be up for renewal until next fiscal year and beyond, the interest in banking advisor is pulling forward conversations that we're having in the field and having them run toward embracing the new pricing model that we have our customers on. And You know, as you all know, you know, on the one hand, a new pricing model is directly aligned with the outcomes that we want to deliver to our customers. On the other hand, you know, it is a change and change is hard. So I am really excited to hear that customers, because of Banking Advisor as a proxy to drive renewal conversations, are pulling those forward.

That's great to hear. And then as a follow-up, I just wanted to ask, given the noise around Circles IPO in June and then the community bank lobby playing a big role in the ultimate wording of the Genius Act in July, how do you think about the potential risks of stablecoins on the community banks that make up about a third or so of your U.S. core revenue as the regulatory framework evolves in the future?

We're watching carefully what's going on in the market and we're listening intently to our customers. And, you know, in the past three weeks, we've had a number of banks of all sizes visit us here in Wilmington and we're close and in tune with the field. What I would tell you is that that is a question that our customers are asking us. And when we read that question back, they're saying it's not a big priority at the moment. So in terms of the problems we solve and what we do for our customers onboarding, account opening, loan origination, and portfolio monitoring. As we ask, should we prioritize stablecoin solutioning within that context, they're not pushing us hard right now. But we're listening carefully, and we'll be on the front foot when they're ready. Thank you.

Thanks, Aaron.

Our next question comes from Chris Kennedy with William Blair. You may proceed.

Good afternoon. Thanks for taking the question. Just wanted to follow up on the fiscal 2027 commentary. Any way to think about kind of what this business can grow at in 2027?

Yeah, Chris, I think right now we're just focused on executing 26. And so I don't want to get ahead of ourselves thinking about fiscal 27. But, again, as we sit here today, from a deal activity standpoint, you know, we feel good about where the business is. We feel good about the deal activity we see out there, the opportunities, the discussions we're having on a global basis. And I think, as I noted, it's just really all about going and getting the business closed. And, obviously, as the year progresses and as we get into next year, that will form our opinion about next year.

Got it. Understood. Thank you for that. And then just broadly – clear the pipeline of opportunities is really strong right now what are you seeing out there in the market that's driving that clearly you have more a better product side or more robust products but what are you seeing out there in the market that's driving that pipeline thanks for taking the question yes thank you um you know number one i think the macro is is supportive um you know reinforcing some of the great comments earlier that some of the headwinds that we faced are

you know, behind us. I also think that the reality that we have this very unique inflection point in the technology in AI that is available to drive outcomes is something that is driving customer conversations, you know, and pulling forward, as I mentioned, not only renewals, but just interest in how customers can get outcomes that we've always delivered, but now deliver even faster, right, and with better quality. So not only are the headwinds behind us and we have this inflection point, but back to controlling what we can control, there's an intense focus on the pipeline coverage and ratios that we have in all segments and in all businesses. So we look across commercial, consumer, and mortgage, and we look at our North American and EMEA and APAC business, and every conversation starts and ends with what we're doing to drive that pipeline and the activity in that pipeline. So, you know, execution always comes down to people and accountability, and I think the sense of urgency and accountability in those pipeline conversations is what's driving some of the activity as well.

Thank you. Thanks, Chris.

Our next question comes from Alex Sklar with Raymond James. You may proceed.

Great, thanks. Sean, maybe following up on your answer there, the last question, just in terms of international pipeline, you've got a new leadership team that's been in place now for almost a year. You had a couple of wins in the prepared remarks. Any color on what you're seeing from a contribution to bookings or pipeline growth relative to the 10% kind of organic subscription growth you talked about this quarter? Are you seeing the kind of signs of reacceleration come through?

We are absolutely seeing signs of reacceleration in the pipeline activity. In terms of, you know, disclosing the ratios on bookings, you know, we're going to stick to our core ACV metrics and read those out on an annual basis. But I'm really, really pleased with what Joaquin and his second line leadership team that he's put in place since joining in November is driving. We have been very candid about our focus on continental Europe beyond the UK and Ireland, and that's starting to play out in the pipeline and in the conversation, the activity. in the field, and we're tracking closely the size of deals as well. And I'm excited about the volume that we have both upmarket and downmarket in EMEA. And then I'm excited about the integration of Full Circle and our ability to really lean into the CLM opportunity. So pipeline activity is strong. Joaquin is doing a nice job. I'm headed over there next month and excited about our EMEA summit where we have all our customers in a single place and to make some of the rounds in the field.

Okay, great color there. And then maybe a follow-up for you, Greg. Just in terms of the mortgage volume upside you saw in the first half of the year, I know you kind of said, keeping with guidance philosophy philosophy, Not embedding that, but what is embedded in the second half in terms of mortgage? Is it kind of a thought that volumes were pulled forward or any other factor in terms of how you shook out on the mortgage outlook?

Yeah, Alex, I think as we look at the second quarter, again, not wanting to get ahead of ourselves, you know, ultimately, assuming maybe there's some seasonality as well in terms of the second quarter, And so we flowed through, obviously, the beat, but again, just lessons learned from last year. We're going to stick with our guidance philosophy and not extrapolate in terms of what interest rates may do, what mortgage rates may do, and what mortgage volumes may do. We're trying to be very transparent in terms of giving you that detail so you guys can have that information and see what we're seeing. And again, as the year progresses and we get more data points, we'll obviously be able to come back to you guys with updated thoughts around what we're seeing in that market. Ultimately, again, I think I'm very proud of the team, the work that was done during the very difficult days over the last couple of years to go out and gain market share, grab new logos. And it's encouraging with what we're seeing from certainly some of those customers, particularly some of the larger IMB and home builder customers that we've bought on over the last couple of years.

All right, great. Thank you both. Thank you.

Our next question comes from Koji Akita with Bank of America. You may proceed.

Hey, guys. Thanks so much for taking the questions. Maybe a question for Sean. What do you think will be the stronger driver of growth over the next several years? an improving demand environment from, you know, presumably lower interest rate and looser regulatory environment for your vertical AI strategy?

So, appreciate the question and, you know, would love to provide prescriptive forecasts and exactly where all the growth is coming from, but I would lead with the power of the platform. and the diversified revenue streams that we do have here at Encino across the things we do in the lines of business where we do them. And we have always been a company that is going to bet on ourself and the investments we're making that align with where we think your growth is going to be in the ecosystem. Right now, you do see a massive inflection point with AI. I don't necessarily think AI by itself drives revenue growth. I think outcomes that we deliver to our customers drive revenue growth and AI will be the best proxy to deliver those outcomes and we will capitalize on that and we'll lead the industry but we're going to control what we can control we can't control interest rates we can't control the regulatory environment we can't control what the feds are going to announce tomorrow so we're going to stay focused on betting on ourselves with those growth initiatives got it no thanks sean and maybe a follow-up question here for greg

You know, when I go back to the investor day from earlier this year and then your comments today about focusing on professional services growth margins, how should we be thinking about the pace of growth margin, professional services growth margin improvements from here? Will it be more gradual or are there things that you're working through that can really drive the step function improvement in growth margins? Thanks.

Coach, I think at this point we would expect it to be somewhat gradual. And first and foremost, we need to close off on some of the projects that we've been involved in, right, and ramp those down as those come to completion. And in parallel with things like we talked about at the Investor Day Project 70, for example, which is one of the initiatives we have, you know, those ramping up. And so we're going to work through those as the year progresses. But again, I think that positions us well as we get into, you know, some point in next year, you know, starting to see the benefits of those activities as we see there today. That's kind of how we're thinking about it. So, again, it's a ramp down and a ramp up in parallel, but it's very much a focus of the team. We see the opportunity there to improve gross margins meaningfully from where we are. And, again, it's just all about executing to get there.

Got it. Thank you. Thank you, Koji.

Our next question comes from Joe Roon with Baird. You may proceed.

Great. Thanks for taking my question. I wanted to go back to the pricing model. So 21% of ATVs switched over. I think the bulk of that is mortgage. When you hone in on the renewals with big commercial customers and the press release called out a few of these, Is that looking any different than the experience at large? And then maybe a second adjunct, when you think broadly across your customer base and starting this conversation, does the new pricing model provide an opportunity to widen the aperture of how customers think about using Encino? So is aligning yourself with the idea of growing assets

more accommodating conversation than forcing banks to think about seats for instance yes absolutely the reality is on the one hand the legacy seat model may have seemed very you know simplistic for customers to understand and it wasn't a map but it is hard especially for a large enterprise institution to understand exactly how many users three years from now are going to be on the platform when you're talking about you know, thousands of users in some cases. And the conversation that I'd much rather have and that I think our customers would much rather have is what outcomes are you going to deliver and what efficiency are you going to drive into the institution? If we can identify where the friction is, whether that's in closing time or underwriting time or loan cycle times, and we can read that back through operations analytics and meaningfully reduce that friction and spend within the institution's and they're much more willing to spend and scale with Insignia. So we like the way the early-day pricing conversations are heading, although, again, I will remind everybody that change is hard, and so when you introduce something new, there's some initial education that needs to happen. Once people understand the outcome correlation, it plays really well.

And, Joe, just to give a little bit more clarity, out of the 21%, about a third of that platform pricing would be mortgaged.

Okay. Uh, that's great. Thanks Greg. Uh, just on the updated forecast and what's assumed for the second half and, uh, appreciate all the mortgage commentaries. So maybe this question is outside of mortgage and just on the court subscription bookings, I seem to recall that entering the year you were not assuming much transacted during the first half. And so therefore limited revenue contribution in this fiscal year. Can you maybe comment just on how your first half bookings compared to plan, you know, maybe not a number, but were they better? And then how does the second half bookings plan look like it's shaping up? Because I think that'll bear some influence on these fiscal 2027 questions and maybe how to think about your exit philosophy into next year's number.

Yeah, look, I think, and I noted on Annette Booking's basis from a first-half standpoint, we were pleased with how the company executed and performed. And, again, that gives us confidence as we think about meeting or exceeding our ACV guide for the year. And so as we go into the second half of the year, like I said, you know, we feel good about the business. The business is out there. It's just about, you know, executing. And that's what the team is really focused on. It's great to see Annette. Great to see that focus. And, you know, as we in our football season, right, it's just, you know, we remind ourselves it's a four-quarter game, and we want to finish all four quarters strong. That's what we're focused on doing.

Great. Thank you very much. Thank you.

Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. Our next question goes from Charles Navin with Stevens. You may proceed.

Hey, guys. Congrats on the result, and thank you for taking my question. I wanted to focus on the inorganic piece of the business and just get a sense for how we should think about the growth rate of Full Circle and Sandbox as they transition into organic over the next year or so. Are those businesses growing? Is the growth rate of those businesses accretive?

neutral or or dilutive to uh to the overall growth rate yeah thanks for the question um both full circle and sandbox are on track to revenue plan as noted in in the prepared remarks and moreover i'm excited about the technical work that is progressing there so they're in line with our internal expectations and i would expect as we further integrate those solutions For instance, full circle to have an end-to-end CLM reality in the EMEA marketplace. And we bring some of the sandbox use cases to market beyond some of the initial support of banking advisor that they'll be more creative next year. But right now they're on track. I would also just anecdotally add, you know, from an integration gateway opportunity standpoint, point of view, the sandbox banking team that we have ingested has become part of the Encino broader team right now. It's probably one of the most in-demand teams at the company and have injected a great deal of not only integration, but as well as AI DNA here. So that's energized us on a lot of fronts.

Got it. And as a follow-up, and apologies in advance if you noted this already, How much of the mortgage book is on a volume or platform-based pricing model? I know recently it was about half, but just curious where we stand today. And any color on the mix of bank, credit union versus IMBs would be helpful as well.

Yeah, I think there are two questions in there. Chuck, so I think the first part of the question was, again, about a third of that 21% that's on platform pricing is mortgage. And, again, that's where we started this platform pricing transition. So, again, I think we feel real good about the ad bets that we've had there and the execution of that. I think the second question was the breakdown between IMBs and depositories. I think from a logo perspective, historically been more weighted to IMBs. I'm sorry, from a logo perspective, it's about balance. From a revenue perspective, it's been more weighted towards, I'll call the IMBs and home builders, the non-depositories. And again, a lot of that goes to some of those large customers that we referenced that, you know, some of them helped with the overperformance in the second quarter.

Got it. Appreciate all the call, guys. Thank you.

Thank you for the questions.

Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks.

Yes, thank you. We appreciate the time today. We appreciate the questions. I hope everybody enjoys the long weekend ahead of us as we look forward to speaking again next quarter and run toward the back half of the year. Take care. Thank you.

This concludes the conference. Thank you for your participation.

You may now disconnect.