nCino, Inc.

Good day and thank you for standing by. Welcome to the Encino first quarter fiscal year 2027 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 first quarter fiscal 2027 earnings call. With me on today's call are Sean Besman, 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.

Thank you, Harrison, and welcome, everyone. Before we turn to highlights from our strong first quarter, I want to take a moment to remind you of Encino's mission in the market. Encino was founded to help financial institutions across the globe digitize, automate, and streamline their business processes, boosting efficiencies and creating better banking experiences. Encino serves as the system of record for the operational processes and resulting decisions that drive revenue growth and mitigate risk for our customers. We serve some of the largest financial institutions in the world, as well as regional and community banks, credit unions, and independent mortgage banks, helping them more efficiently and effectively onboard clients, make loans, monitor portfolios, and open accounts through a single, unified platform powered by AI. Our depth and breadth of customer relationships, unique data set, and history of technology innovation built on almost a decade and a half of deep domain expertise inside the highly regulated world of banking uniquely positions Encino to lead the AI-based transformation of the financial services industry. Turning to the first quarter, we delivered a great start to the year, outperforming guidance across all key metrics, including accelerating subscription revenues growth to 12% and improving our non-GAAP operating margin to 28%, achieving the rule of 40. The entire organization continued to execute with focus and discipline across the strategic initiatives instituted in fiscal 26, and I couldn't be more proud of their hard work and efforts. Customer conversations continue to reinforce that every financial institution is thinking about how they can leverage AI to be more efficient. And they are recognizing that to make AI work for their organization, they need a trusted partner like Encino. We help our customers harness AI specifically for banking by providing the context and data needed to deliver reliable outcomes while also providing the governance infrastructure required to satisfy legal, risk, and regulatory requirements. Every AI interaction on our platform is auditable, traceable, and governed by the same standards our customers apply to their human workforce because in banking, intelligence without accountability isn't intelligence. It's a liability. Banking Advisor is the first expression of our agentic operating system. The intelligent layer that orchestrates AI across the full range of banking operations that we unveiled two weeks ago at Insight, our annual customer conference. Our digital partners, purpose-built AI agents for distinct banking roles from executive strategy to loan processing to client engagement, represent the next wave of capabilities built on this infrastructure. This isn't a single chatbot. It's a platform designed to embed Sino intelligence into every workflow a financial institution runs. Customers that want to leverage Encino's AI capabilities must first adopt our new platform pricing model that correlates our business model to our clients' outcomes. As the end of Q1, over 40% of our ACV has already transitioned to this pricing model, which we believe demonstrates the heightened urgency in the market to embrace Encino's AI technology. We generally monetize our platform with platform fees and also through the sale of AI token bundles, which we call intelligence units. Customers use these intelligence units to execute various AI tasks on our platform. Some tasks are as simple as chat usage, where users can ask a question like, is this borrowing in compliance with their covenants? While others are more complex and compute intensive, like agents that continuously monitor the credit performance of an entire loan portfolio. As of the end of Q1, over 200 of our customers have their initial bundle of intelligence units. We've been very intentional about how we package these initial bundles of intelligence units as our near-term strategic goal is to maximize and accelerate the adoption of our AI features. To this end, we thoughtfully size initial bundles to provide enough room for customers to comfortably experiment with deploy and ultimately build reliance on a core group of AI capabilities. Without worrying, they will exceed their initial allotment and get saddled with unexpected invoice for overages. Our customers span a wide continuum of readiness and enthusiasm to adopt these AI features, and depending on how widely they initially deploy the technology across their institution and how many AI capabilities they start off using, An average customer might have their initial bundles last them about a year. Our strong point of view is that by taking this deliberate approach, rather than prioritizing near-term revenue opportunities, customers will be able to more quickly and easily realize the value of our AI technology. We expect as customers get more accustomed to this value and become more reliant on the benefits it provides them, they'll adopt even more of our AI capabilities and purchase more bundles of intelligence units. Additionally, as more compute-intensive agentic capabilities like continuous portfolio monitoring, agentic deal creation, and agentic multi-step loan origination workflows are adopted, we expect the number of intelligence units consumed per task and workflow to increase meaningfully, creating natural expansion in consumption beyond simple user growth. We are already starting to see signs of this in the field. Consumption of intelligence units has continued to inflect higher month over month with banking advisor usage up over 38 times so far in the month of May from October, with a few business days still left for additional usage this month. This gives us tremendous confidence in our ability to optimize subscription revenues growth from intelligence unit consumption over the medium and long term. While some of our customers are just getting started experimenting with Encino's AI technology, others are more advanced in their journey, including those that want to run in front of the pack by welcoming our team of four deploy engineers on site to help them embrace our banking advisor and agentic capabilities. Several of these customers were on stage with us at Insight where we welcomed over 1,600 attendees. representing an Insight User Conference record of over 300 customers and prospects to Charlotte, North Carolina, for what has evolved from a software user conference to a symposium for intelligent banking. Frank Sorrentino, CEO of ConnectOne, shared the stage with me to discuss his bank's experience to date with Banking Advisor and notably referenced his plan for to reclaim half of his team's time for revenue generating activities by leveraging Encino's AI capabilities. Connect One, a $14 billion institution in the Northeast and an Encino customer since 2017 that already boasts one of the best efficiency ratios in banking, contracted for their first bundle of intelligence units and began their banking advisor rollout in the fourth quarter of fiscal 26. The bank engaged with our team of forward deploy engineers in March for a quick win engagement to assess current benchmarks with our operations analytics functionality and pinpoint friction points they could quickly address with Banking Advisor. This initial forward deploy engineering engagement put foundational Banking Advisor capabilities in the hands of all the banks and CINO users, and they couldn't be more excited about the time they're getting back. As a simple example of this, rather than manually creating relationship records, the banker tells Banking Advisor to do it for them. As compared to the tedious one-by-one process of creating and updating collateral records, Banking Advisor does it on demand in mass. Encino's forward deploy engagements serve a dual purpose. They accelerate value for our most ambitious customers while simultaneously informing our product roadmap with real-world application of our agentic and other AI solutions that we can then scale across our entire customer base. We are already planning a follow-on FDE engagement at Connect One to raise the bar even further with our digital partners and see no serious of persona-based AI agents. Our forward deploy engineering team is fully utilized with engagement spanning the spectrum of our customer base including a $5 billion community bank, an $80 billion regional bank, and a top four enterprise bank in the U.S., as well as customers in EMEA and APAC. I would like to highlight another development on the AI strategy front I'm especially proud of given my heritage in customer success. We are seeing the returns on investments we've made in our professional services organizations over the past year developing AI tooling and methodologies that are already compressing professional services hours per engagement by over 40%. As Greg will elaborate on shortly, it was great to see this show up in our professional services gross margins this quarter, but beyond the positive gross margin impact, I believe the bigger return will be materially shorter implementations and lower program costs for our customers that will ultimately drive better pipeline conversions for Encino. We are enabling customers and system integrator partners with the same tools to help them continually optimize their deployments and prepare their environments for our latest innovations. On the product development and engineering front, we're seeing development cycles that used to extend beyond a year now compress under 90 days, with teams operating approximately 34% more efficiently over the past year with AI, which allows us to invest more aggressively in agentic and other AI capabilities while continuing to fulfill foundationally functional commitments to our customers. In the first quarter of fiscal 26, about 21% of our code was written with AI assistance. That percentage increased to approximately 57% as of the first quarter of fiscal 27. But writing more code is not the goal. The goal is to be faster in the entire product lifecycle from idea to production. We estimate writing code represents roughly 30% of the work it actually takes required to ship a product. The rest is product definition, quality assurance, security reviews, compliance validation, and the coordination required to deliver Tier 1 mission-critical software to financial institutions of all sizes. We believe there is no better blend of technical talent and financial services domain expertise anywhere in the industry than right here at Encino. And these tools and efficiency gains are exciting enablers of product development velocity and potential leverage on our path to sustaining the rule of 40 and beyond. In summary, I'm extremely proud of the way the team is executing our strategy. Excited by the tenor of conversations coming out of Insight and eager to build on the momentum from Q1 to continue helping financial institutions around the world turn AI ambition into measurable outcomes. As one of our stockholders noted in an April white paper on the rise of AI, companies with mission-critical workflows, deeply embedded customer relationships, regulatory complexity that serves as a moat rather than a burden, and the free cash flow generation required to absorb and accelerate through the transition will not be victims of AI. They will be AI's next beneficiaries. We believe that statement accurately reflects Encino's strategic positioning and reinforces our confidence that Encino is uniquely positioned to be an AI beneficiary and to lead the financial services industry into the world of AI-powered banking. The reason we are confident is straightforward. Our AI capabilities are shaped by almost 15 years of operational banking data across global, regional, and community banks, credit unions, and independent mortgage banks. embedded in the actual workflows where loans get made, risk gets managed, and compliance gets enforced. This combination of domain-specific intelligence, regulatory trust, and workflow integration is not something that can easily be replicated by a general-purpose AI provider or easily assembled from scratch. And with that, I will turn the call over to Greg.