nCino, Inc. (NASDAQ:NCNO) Q4 2024 Earnings Call Transcript

nCino, Inc. (NASDAQ:NCNO) Q4 2024 Earnings Call Transcript March 26, 2024

nCino, Inc. beats earnings expectations. Reported EPS is $0.21, expectations were $0.12. NCNO isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, ladies and gentlemen, and welcome to the nCino Fourth Quarter and Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers’ prepared remarks, there’ll be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would like to turn the call over to Harrison Masters, Director of Invest Relations. Please go ahead.

Harrison Masters: Good afternoon, and welcome to nCino’s fourth quarter fiscal 2024 earnings call. With me on today’s call are Pierre Naude, nCino’s Chairman and Chief Executive Officer; Greg Orenstein, Chief Financial Officer; and Josh Glover, President and Chief Revenue Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations, entail certain assumptions made as of today’s date, and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.

nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today’s call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable 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 before this call, as well as the earnings presentation on our Investor Relations website at investor.ncino.com. With that, I will now turn the call over to Pierre.

Pierre Naude: Thank you for joining us this afternoon to discuss our strong finish to a challenging year. We are very pleased to close fiscal ‘24 with the strongest gross sales quarter we’ve had in the past 10 quarters, increasing 23% over the fourth quarter of fiscal ‘23. We saw strength across all US customer segments and from outside US as well, driving 16% subscription revenues growth for the quarter. We believe our Q4 results reflect a return to more normal buying patterns and behavior, including from our US enterprise customers, which we saw disproportionately impacted by the liquidity crisis last year. The improving tone from customers is also a positive indicator. Our confidence in the rebound, along with our expectations for lower churn this year drives our plan for net sales in fiscal ‘25 to be roughly 50% higher than fiscal ‘24.

Despite the macro headwinds, full year subscription revenues in fiscal ‘24 increased 19% year-over-year. I couldn’t be more proud of the solid execution of the global nCino team. Through the difficult environment, we remain focused on our customers and on product innovation, demonstrating our loyalty and commitment to them through the inevitable business cycles. Customer relationships are at the center of the nCino culture. The opportunity to expand these partnerships with new products and technology is one of the many reasons we are so excited about the road ahead. A more normal buying cycle and the improving tone from customers follows almost four years of industry upheaval between COVID and unprecedented rise in interest rates and the liquidity crisis.

During this time, nCino generated a 41% subscription revenues CAGR and transformed from posting a $14 million non-GAAP operating loss in fiscal ‘21 to generating non-GAAP operating income of $62 million in fiscal ‘24. The success reflects the value of our unique platform and strategy, which has created a durable business that can grow and be profitable in any economic environment. An obvious question is why we saw such a strong rebound in Q4 sales and the improved customer behavior. In short, interest rates stabilized, which provided customers the opportunity to focus more on moving forward the strategic investments in light of increased confidence in the business environment and greater visibility into economic trends. Throughout fiscal 24, we discussed the strong demand we were seeing in the market, with the Federal Reserve indicating it has largely finished raising rates.

We saw customers ready to close on pending deals. Even after the sales success in Q4, we entered fiscal ‘25 with a strong pipeline which has helped us carry momentum into this year. Before we discuss the factors behind our optimism for the current year and beyond, I wanted to briefly review some of the highlights from the fourth quarter and from fiscal ‘24. First, let’s discuss mortgage. Despite the mortgage turmoil leading to unprecedented churn, full-year US mortgage subscription revenues grew by 14%, with Q4 being our best mortgage gross sales quarter of the year. Our success in the fourth quarter was driven largely by selling into banks and credit unions. Of the 21 new mortgage customers signed in the fourth quarter, 13 were FIs. For 12 of these customers, mortgage was the landing point for nCino within the institution.

We again saw solid growth internationally in the fourth quarter, which will now represent 20% of total revenues. EMEA remains our largest market outside of the United States, where in the fourth quarter, we added our first enterprise bank in the Nordics, a new logo in South Africa, and a new UK platform customer for our commercial lending, mortgage, and NIC solutions. We also continued our momentum in Japan, announcing another Japanese customer a few weeks ago that signed with us in the fourth quarter for mortgage. We continued innovating to expand the capabilities of the platform, unlocking more wallet share opportunities with our installed base which contributed to more multi-product wins in the fourth quarter. Josh will cover some of these wins in more detail in his comments.

Let’s turn to NIC and AI, looking both at our progress in fiscal ‘24 and the accelerating opportunity we see in fiscal ‘25 and beyond. For nCino, AI starts with our NIC products, which we’ve been developing for almost five years. We have seen strong traction across all three products currently in the NIC portfolio. In the fourth quarter, we added our largest auto-spreading deal outside of the United States, which follows signing our largest portfolio analytics deal last quarter. NIC demonstrated our initial success in utilizing an unmatched data assets to provide intelligence and actionable insights at the point of production across our single platform. Now we are taking the next step with banking advisor, which already has early adopters.

Banking advisor leverages Generative AI to further automate banking specific tasks. The opportunity for AI in banking can’t be overstated. A recent Accenture study concluded that banks are likely to benefit more from Generative AI than any other industry. To truly benefit, financial institutions need nCino’s single platform to surface data at the point of production to drive the actionable insights and intelligence that differentiate a bank and improve the customer experience. Obviously, it is early in the AI lifecycle, but with our unique perspective on industry demand drivers, we believe the opportunity for AI in banks is not hype, it’s real. Banking advisor and our other NIC offerings are examples of our continued emphasis on expanding the breadth and depth of our product offerings.

Since the beginning, nCino’s single platform has addressed a variety of pain points, including the need to grow revenues, attract the best talent, meet regulatory demands, improve the customer experience, and increase efficiency. While the relative importance of the individual capabilities varies over time, customer feedback points to efficiency is currently the most important driver. Becoming more efficient is critical in any economic environment. It’s a business input an organization can control. Of course, the importance of AI ties directly to this demand. At the same time, the continued pressure on net interest margins can only be mitigated by improved efficiency. Our single platform allows nCino to be part of the solution as FIs look to consolidate vendors and streamline operations.

As the only platform that can work with small community banks, credit unions, and independent mortgage banks, all the way to the largest institutions across the globe, the value of our solution becomes more and more clear all the time. The nCino platform provides commercial, small business, consumer lending, including mortgage, account opening, and onboarding from one trusted partner on a single platform that is embedded with AI, actionable insights, data and intelligence. nCino helps FIs act like fintechs, leveraging the lower cost of capital with the ease of use and personalized experience consumers have come to expect from fintechs. Our new omnichannel experience for consumer lending is also an answer of early adopters. A lesson from the liquidity crisis last year that has sunk in all too well is the need to extend relationship banking through digital channels to create a more enjoyable user experience for the consumer and to reduce costs for financial institutions.

While online banking has been around for decades and consumers’ interactions with their financial institutions frequently occur through an app today, middle and back office processes for consumers have remained far from automated. The consumer-facing technology leveraged from our nCino Mortgage Suite creates a consistent experience for consumers across mortgage and spectrum of consumer lending products offered in today’s market. nCino omnichannel connects seamlessly to our platform through proprietary APIs, fully digitizing the process, beginning with the application. The release of this functionality is already driving significant pipeline development for both our consumer lending and mortgage solutions. Subsequent to year-end, we took an additional step to accelerate expanding our platform capabilities with a tuck-in acquisition.

Last week, we announced the acquisition of DocFox, which provides technology for commercial account opening and onboarding, including robust KYC and AML functionality. Utilizing DocFox eliminates paperwork, reducing the time required for onboarding complex commercial accounts from months to days. The acquired technology provides complementary functionality and again allows us to capture greater wallet share within our installed base. I can’t overemphasize the asset that is in our customer base as we continue to expand the breadth and depth of our product capabilities and value proposition. Our initial focus will be on bringing DocFox to our community bank customers, refining our go-to market and implementation motions in this market, as we usually do with new products.

After demonstrating success within the community market, we’ll begin targeting our entire commercial and small business customer base. Greg will review our financial outlook, but I want to note that we are trying to be prudent in our guidance despite our optimism about the improving trends. Even with a strong finish to the year, the difficult first quarter of fiscal ‘24, which stemmed from the liquidity crisis paired with the unprecedented churn that we believe peaked in the second half of last year, does create difficult compares for much of the year. Understanding our success, increasing profitability, subscription revenues growth remains our primary objective. We are confident the strength of year-end sales and the improving macro trends we see puts us on track to exceed 15% subscription revenue growth in FY ‘26.

In addition, we remain on track to achieve the Rule of 50 as highlighted during our Investor Day in September. Before I turn the call over to Josh to review the operational highlights of the quarter, I want to speak briefly about two organizational changes. First, our Chief Product Officer, Matt Hansen, has informed me that following a number of professional successes, including founding SimpleNexus in 2011, integrating it with nCino, following the acquisition in January 2022, and delivering exemplary results over the last two years leading our product development engineering organization, he has made the decision to leave nCino to spend more quality time with his family. We are grateful for Matt’s contributions and the leadership of various change initiatives, including the launch of the omnichannel experience, monthly product releases, evolving how work is done across PD&E and the significant productivity improvements during his tenure will have an ongoing impact on our success.

Matt will remain with nCino in a consulting capacity until August to help ensure a smooth transition. Sean Desmond, currently our Chief Customer Success Officer, has been named Chief Product Officer effective May 1. Sean’s extensive background in technical management and product development, his customer-centric approach and his proven ability to build meaningful relationships and lead complex organizations will help ensure the continued evolution of our solutions and our PD&E team. Sean has been a member of nCino’s executive leadership team for over 10 years. And his understanding of our business, products, customers, and market needs have prepared him extremely well for this position. Sean has been a key partner and highly collaborative with Matt and PD&E leadership on the change initiatives I just referenced.

His customer success organization is well developed and positioned to continue delivering best-in-class service levels to our customers. The other organizational change, as referenced in our earnings release, is that Josh Glover, our President and Chief Revenue Officer, is leaving nCino to pursue an opportunity as President and CRO of a later stage private company outside of the financial services industry. As most of you know, Josh was one of the earliest nCino employees and has been at my side the past 12 years, helping to create the global, profitable growth company we are today. While I’m sorry to see him leave, we all wish him the greatest success as he pursues a new challenge and expands his professional experience beyond nCino. Josh will continue with nCino in a consulting capacity until June 30th to help ensure a smooth transition.

Paul Clarkson, who has been leading global sales with Josh’s organization and has deep knowledge of our business, customers and the markets we serve, has been named Executive Vice President, Global Revenue. We’re excited for Paul to take on this increased responsibility as promoting from within has long been part of nCino’s success. At this time, we do not plan to fill the President role as we believe those responsibilities can be shared amongst the executive leadership team members. With that, I will turn the call over to Josh to review some of the operational highlights from the quarter.

Josh Glover: Thank you, Pierre. As I’m sure you can appreciate, I’ve given the decision to leave nCino a great deal of thought. It’s never easy to leave a place where you’ve invested so much of yourself and where you so highly value the people, the friends that you work with. With a mature global go-to-market and sales organization well in place and with interest rates stabilizing and the liquidity crisis behind us, it feels like now is the right time for me to pursue a new challenge. I will always be nCino’s biggest supporter, and I look forward to watching the company’s continued success. I particularly look forward to watching some of my closest colleagues and friends as they step up to take on additional responsibilities and receive well-earned professional opportunities.

I’ve enjoyed getting to know all of you over the years and I hope to get to work with you again down the road. With that said, let’s turn to the strong Q4 results. We are very pleased with the way our sales team finished the year. Our existing customer base continues to be nCino’s most strategic asset. About 60% of the business signed in the fourth quarter came from upsells and cross-sells to our existing base. We saw multi-year extensions across the entire business with expanded commitments from 29 institutions in US banking segments in EMEA, APAC, and Canada. In the fourth quarter, we signed a seven-figure expansion agreement for small business at a top 50 US bank and another for deposit account opening in the top 100 US bank. Reinforcing our successful delivery of the single platform, half of the new business signed in the quarter came from solutions other than commercial lending.

NIC adoption also increased. 39% of our platform base has now adopted at least one NIC solution. This is up from 30% at the end of last year. As part of their initial commitment to nCino, an over $4 billion bank in Texas selected us for commercial, small business, and consumer lending, as well as commercial pricing and profitability, automated spreading, and portfolio analytics. Also, an over $8 billion dollar bank in Ohio selected nCino for commercial and small business lending, as well as auto spreading and portfolio analytics. Customers are telling us more now than ever that financial institutions need to realize efficiencies by consolidating operations and data on to a single trusted platform. With the new offerings we’re bringing to the market and the acquisition of DocFox, we expect to see even deeper adoption of the single platform within our accounts.

This platform is being embraced by more than just US customers. During the fourth quarter, we completed one of our largest automated spreading agreements. This was with a top 10 Canadian financial institution, Desjardins. Desjardins began their digital lending journey with nCino with small business banking that expanded to their commercial banking line of business and has now selected us for auto spreading. Also in the quarter, a top UK non-bank lender selected nCino as the digital lending platform across all of their core products, presidential and [indiscernible] mortgages, commercial loans, bridging finance, and development funding. Other notable wins outside of the US included a Japanese regional bank win with the Saikyo Bank for mortgage, our first enterprise bank in the Nordics, and a top 10 South African bank.

Notably, in Canada, we added another two top 20 Canadian credit unions, and we added another top 10 Canadian banks. We now have six of the top 10 Canadian financial institutions on the nCino platform. Our continued investment in the platform has become a major differentiator for us in the market. The product announcements over the last several quarters, including the launch of banking advisor, automated insights for portfolio analytics, our omni-channel experience for consumer lending, and the acquisition of DocFox revolve around three key innovation themes you have heard us discuss many times, automation, intelligence, and experience. As Pierre mentioned, a recent publication from Accenture concluded that banking is likely to be more profoundly impacted by Generative AI than any other industry based on the potential for automation and augmentation.

As of this call we have three early adopters representing the US enterprise, US community banking segments plus an international bank using several banking advisor skills. One of those skills is credit memo narratives, which leverages Generative AI to automate the creation of a credit memo, a required and complex deliverable in every commercial loan that is used when making a lending decision. We have additional skills already in development that will be in the market later this year, bringing even more actionable intelligence to the point of production, where it can influence positive business outcomes for the financial institution. These use cases include layering Generative AI into commercial pricing and profitability and into our priority manager feature.

Given the shape of anticipated demand and adoption for Generative AI, our intent is to monetize with a platform fee paired with consumption-based fees and also to drive intelligence across our various solutions. We look forward to demonstrating many of these new features and enhancements at nSight in May. We hope to see many of you there as well to see these innovations and to see nCino’s vibrant ecosystem in person. Product enhancements aimed at experience have been driving market momentum for our mortgage suite. An over $30 billion regional bank, who previously adopted nCino across consumer and commercial lending, went live on our mortgage suite in the fourth quarter. We’re glad to hear the differentiated experience of one borrower. The customer was able to apply for their mortgage at less than 10 minutes on their phone while walking their dog.

This bank is well on their way to realize and exceed their business case for the solution by transitioning significant application volumes of digital channels and realizing a commensurate reduction and abandonment rates, bringing them well ahead of industry average. The fourth quarter is our best sales quarter for US mortgage in fiscal ‘24, adding 21 new logos for mortgage point of sale. These 21 new customers included one of the largest IMBs in the nation, a takeaway from competitor and one of the largest deals in our mortgage team’s history. The 13 new financial institution customers added also validate the benefit of our efforts to continue integrating and aligning our go-to-market teams to leverage nCino’s brand and presence across the finest financial institutions in the United States.

The reshuffle of mortgage loan officers throughout the latest cycle has been one of our best sources of demand generation. Past users of nCino’s mortgage solutions evangelize the product to the new employer and become vocal internal advocates as we pursue those accounts. And mortgage lenders look to implement our market leading solutions to proactively compete for talent. While churn for market consolidation remained elevated in the quarter, we are confident that the share gains throughout this cycle paired with continued product development efforts will yield accelerating growth as the mortgage market normalizes. I am proud of how the company came together to support sales efforts in the fourth quarter. The strength of our team and competitive positioning makes me optimistic for a strong fiscal ‘25 and beyond.

Greg, can you please take us to the financials?

Greg Orenstein: Thank you, Josh, and thank you for your friendship and partnership over the past 8.5 years. While I will miss working with you, I know it’s time for you to take on a new challenge and I wish you the very best. With that, thanks everyone for joining us this afternoon to review our fourth quarter fiscal 2024 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 8-K furnished with the SEC just before this call. We are pleased with our fourth quarter fiscal ‘24 financial results. Total revenues for the fourth quarter were $123.7 million, an increase of 13% year-over-year.

Full-year total revenues were $476.5 million, an increase of 17% over fiscal ‘23. Subscription revenues for the fourth quarter of fiscal ‘24 were $107.5 million, an increase of 16% year-over-year. Subscription revenues were 87% of total revenues. Full year subscription revenues were $409.5 million, an increase of 19% over fiscal ‘23 and 86% of total revenues for the year. Professional services revenues were $16.2 million in the fourth quarter, a slight decrease year-over-year. Full year professional services revenues were $67.1 million, an increase of 6%. As I noted on our third quarter earnings call and at Investor Day, we intend to prioritize subscription revenues growth over professional services revenues growth on our path towards the Rule of 50.

In the fourth quarter we continued to invest in our SI partner ecosystem and in implementation repetitions for newer products which impacted the number of billable hours. We also faced a difficult year-over-year comparison in professional services from our portfolio analytics business, where the fourth quarter of fiscal ‘23 contributed an additional $1.2 million of professional services revenue related to meeting the CECL implementation deadline. Non-US revenues were $24.8 million or 20% of total revenues in the fourth quarter, up 48% year-over-year. Revenues from outside the US were $89.3 million or 19% of total revenues for the full year, up 45% year-over-year. As you are aware, international is one of our key growth pillars and we are very pleased to see this continued growth outside the United States.

We believe our global footprint, which just grew with the new office in South Africa from the DocFox acquisition, is truly unique amongst vertical financial services SaaS companies. Non-GAAP gross profit for the fourth quarter of fiscal ‘24 was $81.7 million, an increase of 15% year-over-year. Non-GAAP gross margin was 66% compared to 65% in the fourth quarter of fiscal ‘23. Non-GAAP gross profit for the full year was $313.1 million, an increase of 18% year-over-year. Non-GAAP gross margin for the full year was 66% compared to 65% in fiscal ‘23. Our gross margins improved due to subscription revenues being a larger contributor to total revenues. Non-GAAP operating income for the fourth quarter of fiscal ‘24 was $19.3 million, with non-GAAP operating income of $1.8 million in the fourth quarter of fiscal ‘23.

Our non-GAAP operating margin in the fourth quarter was 16% compared with 2% in the fourth quarter of fiscal ‘23. Non-GAAP operating income for the full year was $61.8 million compared with a non-GAAP operating loss of $2.1 million for fiscal ‘23. Our non-GAAP operating margin for fiscal ‘24 was 13% compared with negative 1% in fiscal ‘23. We realized efficiencies across the organization in fiscal ‘24 while remaining committed to continuous product innovation, delivering the highest levels of customer satisfaction, and building out our global market presence. Non-GAAP net income attributable to nCino for the fourth quarter of fiscal ‘24 was $23.8 million, or $0.21 per diluted share, compared to $4.4 million, or $0.04 per diluted share in the fourth quarter of fiscal ‘23.

Non-GAAP net income attributable to nCino for fiscal ‘24 was $58 million or $0.50 per diluted share, compared to negative $8 million or negative $0.07 per basic and diluted share in fiscal ‘23. The company received an income tax benefit in the fourth quarter from releasing a valuation allowance against a UK deferred tax asset, which contributed $3.7 million to both GAAP and non-GAAP net income attributable to nCino in the quarter. Our remaining performance obligation increased to over $1 billion as of January 31, 2024, up 9% from $944.1 million as of January 31, 2023, with $675.4 million in the less than 24 months category, up 6% from $634.8 million as of January 31, 2023. RPO was positively impacted by the strength of gross sales, coupled with a very strong renewal quarter.

We ended the quarter with cash and cash equivalents of $117.4 million, including restricted cash. Net cash provided by operating activities in the fourth quarter was $8.1 million, compared to negative $22 million in the fourth quarter of fiscal ‘23. Capital expenditures were $400,000 in the quarter, resulting in free cash flow of $7.7 million in the fourth quarter, marking the first year in company history with positive free cash generation in every quarter of a fiscal year. Moving on to DocFox, we closed this acquisition on March 20th with the $75 million purchase price paid in cash at closing. We leveraged our expanding revolving credit facility to help fund this transaction and intend to pay down the borrowed principal throughout the year as we continue to generate cash.

Financial results of DocFox will be consolidated from the date of acquisition for reporting in accordance with GAAP. As of December 31, 2023, DocFox had approximately $6 million of annualized subscription revenues. We ended fiscal ‘24 with over 1,800 customers, down from 1,858 at the end of fiscal ‘23, due to the churn we have discussed all year within the independent mortgage bank market. 501 of these customers contributed greater than $100,000 to fiscal ‘24 subscription revenues, an increase of 8% from the end of fiscal ‘23. Of these 501 customers, 86 contributed more than $1 million to fiscal ‘24 subscription revenues, an increase of 18% from the end of fiscal ‘23. We ended fiscal ‘24 with 460 platform customers, up from 428 at the end of fiscal ‘23.

Our subscription revenue retention rate for fiscal ‘24 was 117%, down from 148% in fiscal ‘23 or 125% if you exclude the inorganic contribution from the SimpleNexus acquisition. Churn for fiscal ‘24 was approximately $31 million, in line with the revised expectations provided on our Q3 earnings call. Before we turn to our fiscal ‘25 financial guidance, let me provide some commentary around our outlook for the year in addition to Pierre’s earlier comment about the negative impact of first quarter fiscal ‘24 sales as a result of the liquidity crisis. First and most noteworthy, we entered fiscal ‘25 with a subscription revenues headwind of approximately $31 million as a result of the heightened churn that occurred in fiscal ‘24, a significant amount of which we consider to be outside the [Technical Difficulty] Apologies.

It seemed like we were having some technical difficulties. So let me take a few lines back and we’ll start over. Appreciate your patience. First and most noteworthy, we entered fiscal ‘25 with a subscription revenues headwind of approximately $31 million as a result of the heightened churn that occurred in fiscal ‘24, a significant amount of which we consider to be outside the normal course of our business. Specifically, $13 million was related to the turmoil in the US mortgage market, $2.5 million was attributable to a customer directly impacted by the liquidity crisis, and $4 million represented the remainder of PPP licenses. The financial impact of this churn, even when netted against the contribution from the DocFox acquisition, results in a 3% headwind to fiscal ‘25 subscription revenues growth.

Turning to mortgage, our US mortgage subscription revenues grew 10% in the fourth quarter of fiscal ‘24 and 14% for the full year. We are very proud of this achievement in what was a very difficult mortgage market. For fiscal ‘25, we are modeling $8 million in mortgage churn, which, while still elevated from historic levels, is $5 million less than last year, but otherwise modeling minimal improvement in the US mortgage market until the fourth quarter of fiscal ‘25. We expect our US mortgage business will be dilutive to the company’s overall subscription revenues growth rate for full year fiscal ‘25 in light of the fiscal ‘24 churn. We expect our total company churn in fiscal ‘25 to decrease to approximately $20.5 million or 5% of fiscal ‘24 subscription revenues and that churn will continue to moderate towards historic norms beyond this year as the mortgage market continues to normalize.

On the cost side, we were pleased to announce an extension to our long-standing agreement with Salesforce in December that took effect at the start of fiscal ‘25. In addition to deepening the commitment between our two product organizations, we expect the more favorable unit economics provided by the agreement to contribute an approximately 1% improvement in our non-GAAP gross margin in fiscal ‘25 and then contribute further incremental improvements in our non-GAAP gross margin in future years. This agreement provides us with even more confidence in our ability to deliver on the 78% to 80% subscription gross margin long-term target announced at Investor Day. You will note our guidance for fiscal ‘25 assumes continued progress on non-GAAP operating income with a $22 million to $24 million or 36% to 39% improvement year-over-year.

We plan to continue prudently investing, particularly in R&D and sales and marketing, to drive subscription revenues growth in light of the significant opportunity we see ahead including with our NIC AI data and analytics products. We remain confident in the long-term operating model targets we shared at our Investor Day in September. As I have previously stated, progress towards those targets will not be linear. And as a reminder, the 15% implied subscription revenues growth target in our long-term model is not a CAGR, but rather expected growth for that year. Finally, our plan assumes approximately $8.5 million of capital expenditures, most of which is for improvements to and expansion of our office in the UK. For the first quarter of fiscal 2025, we expect total revenues of $126 million to $127 million, with subscription revenues of $108.75 million to $109.75 million.

This guidance assumes year-over-year subscription revenues growth of 12% to 13%. As Pierre noted, churn in fiscal ‘24 peaked in the second half of the year. Specifically, mortgage churn peaked in October and total churn peaked in the fourth quarter, making the first three quarters more difficult comparisons. Non-GAAP operating income in the first quarter is expected to be approximately $18 million to $19 million, and non-GAAP net income attributable to nCino per share to be $0.13 to $0.14. This is based upon a weighted average of approximately 117 million diluted shares outstanding. For fiscal ‘25, we expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million. This full-year guidance assumes year-over-year subscription revenues growth of 13% to 15%.

As you will note, the 13% high end of our first quarter subscription revenues guidance is the low end of our full year subscription revenues guidance. We expect our highest year-over-year and sequential growth to occur in the fourth quarter. We expect non-GAAP operating income for fiscal ‘25 to be $84 million to $86 million. Non-GAAP net income attributable to nCino per share is expected to be $0.60 to $0.64 based upon a weighted average of approximately 118 million diluted shares outstanding. And with that, operator, we’ll open the line for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Terry Tillman with Truist Securities. Your line is open.

Terry Tillman: Yeah, good afternoon, everybody. First, I did want to say, Josh, I guess congratulations and good luck with the new opportunity we’ll miss you. And I’m sure you’re going to miss our great questions. I guess my first question, and then I have a follow-up is on the enterprise side. Pierre, I think you were talking about enterprise demand normalizing. I guess is it starting to shift or pivot in terms of some of the products they’re looking at? In particular, I’m wondering, are you seeing green shoots for these larger transformational commercial loan origination deals, which typically were much larger, or is it really a lot of the other products in the diversification playing out? And then I have a follow-up.

Pierre Naude: Yeah, I would say — thanks a lot Terry. I would say that the larger banks is returning to more of a strategic posture, which means they are beginning to look at larger transformations. It’s very early on in the buying cycle, but most of the actual activity is on the non-loan origination or non-commercial loan origination systems. So it sinks under than commercial loan origination. And as we always reminded you, we see our customer base as a massive asset to this company. And you can see now how we’re beginning to cross sell into them with existing products as these products start scaling and become more attractive to larger banks as well, as well as the community and regional space. You can also see how the DocFox acquisitions meet tremendously accretive to those accounts.

That is a critical issue for them, how to deposit account opening and onboarding with a robust KYC and AML functionality. So I think we are proving out the case that our customer base is not a drag, but actually a positive for us.

Terry Tillman: Got it, thanks for that, Pierre. And I guess my follow-up question is related to the $6 million, Greg. I think you disclosed that that was the annualized subscription revenue. Is that what you’re assuming for FY ‘25? And if it’s like SimpleNexus, you have some pretty significant revenue synergies. Are you baking anything in there? Thank you.

Greg Orenstein: Yeah, thanks, Terry. Obviously, we don’t break down that detail from a fiscal ‘25 or specific product guidance perspective. But as was noted in the call, we’re going to focus on integration and make sure from a product perspective we’ve got that single platform motion going to market starting in the community base. And so we would expect the momentum to build as the year progresses is how we’re looking at that contribution from DocFox.

Terry Tillman: Okay, thank you.

Greg Orenstein: Thanks, Terry.

Operator: Thank you. [Operator Instructions] Our next question comes from Adam Hotchkiss with Goldman Sachs. Your line is open.

Adam Hotchkiss: Great, thanks for taking the questions. I guess to start, I just wanted to touch a little bit more on the expansion of your partnership with Salesforce. I appreciate the detail on the model, Greg, but could you just talk a little bit more about what, if at all, is changing on the technology side from an integration perspective. Thanks.

Pierre Naude: Yeah, I’ll take that. Thanks, Greg. So the first thing is, we in Salesforce get together with our customers and we always look at opportunities to improve how the platform, which is force.com, and then the CRM functionality, the call center functionality from Salesforce integrate into nCino to make it a seamless experience for the banker. And so on the one hand, Salesforce is expanding some platform elements so that we can integrate easier to it and better. And on top of that, it’ll provide a much better client experience. And I always use this example. Think of your iPhone as a platform with a number of apps on there. And if they start sharing data, that makes it just so much more seamless. And although we’ve had that in the past, we are now taking that to a new dimension where more vertical capabilities of Salesforce becomes available to nCino.

So it gives us deeper integration, it gives us more cross-sell opportunities as well as co-sell opportunities. And I’m very optimistic with the product direction of Salesforce and how we piggyback on that, as well as the coordination in the field for us to enlarge our deals.

Adam Hotchkiss: Okay, great, that’s really helpful. And then I just wanted to talk a little bit more about banking advisors, some of the early adopters. How quickly do you think you can realistically ramp adoption of some of these features into the base? And then just any initial thoughts on how you think about the potential ACV uplift for existing customers would be helpful.

Pierre Naude: It’s very early stage for banking advisor. We’ve got early adopters going with it. But in the end, banking advisor is going to be a tremendous productivity tool and it’ll be based on obviously the size of the deployment which correlates with the size of the bank. It’ll be based on the number of skills. It’ll be heavily ROI based because we have to begin to understand how is it complementing specific roles and how it may even replace humans at certain places in the production line. Okay? So, the feedback we’re getting right now is very positive, but it’s early days. And, Josh, do you want to comment on that?