Charles Nabhan

Charles Nabhan asked for details on the mortgage business's consistent outperformance, seeking drivers such as new logos, same-store sales, or specific strengths/weaknesses across bank, non-bank, and homebuilder segments. He also inquired about the expected AI adoption curve in the bank space, specifically whether it will be slow or ramp up more rapidly in calendar years 2026 and 2027.

Answer

Sean Desmond, nCino's Chief Executive Officer, highlighted expansion into mortgage with top 100 banks and continued momentum in the IMB space, with normalized revenue growth aligning with industry volumes. Greg Orenstein, nCino's Chief Financial Officer, noted that past efforts to gain market share during difficult times are now yielding benefits as volumes increase. Sean Desmond expects a spike in AI adoption over time, with early adopters already shifting from 'what is AI' to 'how can I deploy it quickly,' and nCino aggressively deploying resources to assist customers.

Charles Nabhan from Stephens asked for a detailed explanation of the mortgage business's outperformance in Q3, seeking drivers such as new logos, same-store sales, and performance across bank and non-bank components, including homebuilders. He also inquired about nCino's outlook on the AI adoption curve in the banking sector, specifically whether it anticipates a slow, gradual adoption or a more rapid ramp-up in calendar years 2026 and 2027.

Answer

CEO Sean Desmond noted expansion in top 100 banks into mortgage and continued momentum in the IMB space, with normalized revenue growth aligning with industry volumes. CFO Greg Orenstein added that past efforts to gain market share during difficult mortgage market times are now yielding benefits as volumes increase. Regarding AI adoption, Desmond observed a shift among progressive early adopters from 'what is AI' to 'how can I deploy it quickly,' expecting a spike in adoption over time as more banks follow suit, with nCino actively collaborating with customers on deployment and change management.

Charles Nabhan inquired about the expected growth rate of the Full Circle and SandBox acquisitions as they become organic and whether they will be accretive to overall growth. He also asked for the percentage of the mortgage book on a platform-based pricing model and the customer mix.

Answer

CEO Sean Desmond stated that both acquisitions are on track with revenue plans and are expected to be more accretive next year as integrations are completed. CFO Greg Orenstein clarified that about a third of the 21% of ACV on the new platform pricing is from mortgage. He added that the mortgage customer base is weighted towards IMBs and homebuilders by revenue.

Charles Nabhan from Stephens Inc. questioned the drivers behind the strong 31% year-over-year growth in international revenue and its sustainability. He also requested a high-level update on the integration and performance of recent acquisitions like Full Circle, DocFox, and Allegro.

Answer

CFO Greg Orenstein attributed a significant portion of the international growth to the Full Circle acquisition but also highlighted optimism for organic growth in Japan and Europe. CEO Sean Desmond provided a comprehensive update, noting DocFox is ready for a sales push, Full Circle is driving deals and enabling expansion, Allegro is key to unlocking the credit union market, and Sandbox Banking is core to the AI and data strategy.

Charles Nabhan asked to quantify the revenue impact of a large homebuilder deal that closed in Q3 and inquired if the prospect of bank M&A is currently driving demand.

Answer

Chief Financial Officer Greg Orenstein declined to quantify the impact of a single customer deal but noted its early close was a positive execution milestone. Chief Executive Officer Pierre Naude confirmed that preparing for M&A is a significant demand driver, as banks with a modern, standardized platform like nCino are better positioned to acquire and integrate other institutions efficiently.

Charles Nabhan asked for the domestic bookings mix between net new logos and cross-sales, and whether the broader product set could shorten sales cycles. He also inquired about nCino's international investment priorities by geography and product.

Answer

CEO Pierre Naude noted that while H1 was 80% cross-sell, H2 is expected to be weighted towards new logos. He projects a future mix of roughly 60% cross-sell to 40% new logos. Internationally, he identified Canada, UK/Ireland, Benelux, Nordics, Spain, ANZ, South Africa, and Japan as focus markets, with new products for onboarding and mortgage being developed in the U.K. and Australia.

Charles Nabhan sought confirmation on the estimated $15 million headwind from the epay segment's product discontinuation and asked if the resulting mid-single-digit growth should be considered normalized, inquiring about any promotional changes. For money transfer, he asked if customers are sending larger balances less frequently and what data or conversations provide confidence that the U.S. to Mexico corridor's transient conditions will improve in the coming quarters.

Answer

CFO Rick Weller confirmed the math for the epay headwind was roughly correct and attributed the mid-single-digit growth to broader economic pressure on discretionary spending, particularly in Asian economies affected by tariffs. He noted no significant changes in promotional activity and highlighted new opportunities in gaming. Regarding money transfer, Mr. Weller explained that confidence in transient conditions stems from macro perspectives, including developed countries' need for migrant labor to support their economies, citing examples like the U.S. farming industry and Japan. He emphasized that historical patterns show ebbs and flows in immigration policies, but the underlying economic need for labor persists.

Charles Nabhan of Stephens Inc. asked for more detail on the specific complexities of revolving credit that create a competitive moat for CoreCard. He also inquired about current travel trends within the EFT business and the impact of interchange rate increases.

Answer

Chairman, CEO & President Michael Brown explained that the complexity and moat stem from handling a 'superset of features' and fringe cases, such as multi-year interest recalculations for returns, which only three platforms can manage at scale. Regarding travel, Mr. Brown noted that U.S. travel to Europe is up 10% year-over-year. He reiterated that Q2 EFT performance was impacted by a tough comparison to an extraordinary prior year quarter and expects a return to strong growth in Q3.

Charles Nabhan asked for details on the subscription gross margin outlook of 66-67%, including the puts and takes, and inquired about PAR's perspective on AI as both a disruptive force and an internal and external opportunity.

Answer

CFO Bryan Menar explained the 66-67% margin baseline for the second half is driven by product mix, which is not expected to change significantly in the near term, though the long-term goal remains closer to 70%. CEO Savneet Singh described PAR's 'all in' approach to AI, highlighting current efficiency gains in software development and support. He emphasized that PAR's strategy is to build AI natively into its products (like the new CoachAI), leveraging proprietary data and workflow control as a key competitive advantage.

Charles Nabhan of Stephens Inc. asked about the payments business, specifically its impact on gross margin and its size relative to total revenue. He also inquired about the hardware business's exposure to potential tariffs.

Answer

CFO Bryan Menar stated that the payments business is still dilutive to gross margin but is improving and currently represents less than 10% of total revenue. Regarding tariffs, Menar explained that PAR has mitigated risk by diversifying its supply chain away from China post-COVID and has flexibility in its contracts. He noted they have not seen a negative impact and are working closely with customers on pricing.

Charles Nabhan asked for more detail on the international opportunity presented by the TASK acquisition and how it might play out. He also inquired about the drivers of the recent Hardware margin improvement and the future outlook for those margins.

Answer

CEO and President Savneet Singh said the initial international focus is on operationalizing and scaling the business in the APAC region, where TASK is strong. CFO Bryan Menar noted that while Hardware margins have improved to the mid-20s, only modest further increases are expected. He also highlighted significant margin improvement in related Professional Services.

Charles Nabhan asked about the expected trajectory of subscription gross margin and which products are accretive. He also inquired if the company is seeing ARPU uplift from the Stuzo acquisition.

Answer

CEO Savneet Singh explained that Punchh and Data Central are accretive to margins, while Brink is in-line and PAR Ordering and Payments are currently below. The margin is a balance between fast-growing, lower-margin products and efficiency gains in larger ones. Regarding Stuzo, he said it's too early for ARPU uplift, which is expected to come from converting Punchh C-store customers to Stuzo's higher-priced platform.

Charles Nabhan of Stephens Inc. inquired about the trends driving the strength in ACI's backlog, which surpassed $7 billion, asking if there was a shift in investment from governments or banks. He also asked for an update on the company's capital allocation philosophy regarding buybacks and M&A.

Answer

CEO Thomas Warsop attributed the backlog growth to improved sales and account management execution rather than a fundamental shift in customer investment. On capital allocation, Warsop reiterated the strategy: prioritize internal growth investments, seek M&A to accelerate the Kinetic platform or for geographic expansion, and return excess capital to shareholders. He noted the aggressive Q2 buybacks were due to the stock's attractive price.

Charles Nabhan of Stephens Inc. asked for the reason behind the lowered margin outlook, questioning if it was due to Latham's margin profile or other factors. He also inquired about new bookings, specifically regarding product uptake, ARPU trends in new cohorts, and the size of employers Asure is now targeting.

Answer

CFO John Pence attributed the margin guidance adjustment primarily to the near-term margin profile of Latham, noting that cost synergies will take about 18 months to realize. CEO Pat Goepel added that while the company is focused on increasing attach rates now, he expects ARPU to become a key performance indicator in 2026. He also noted a slight trend toward selling to larger employers than the historical average.

Charles Nabhan asked for details on Asure's recent investments, its product roadmap from both an organic and inorganic perspective, and what new products might be next.

Answer

CFO John Pence highlighted the strategy of filling product suite gaps, citing the recent broker of record and applicant tracking acquisitions. CEO Patrick Goepel added that their approach is "build, partner, or buy" and emphasized internal technology investments, like a new client life cycle management tool, which are designed to drive operational efficiency, scale, and enable event-driven marketing.

Charles Nabhan asked about the expected cadence of margin expansion through 2025, the current M&A environment regarding valuations, and the company's product wish list beyond reseller acquisitions.

Answer

CFO John Pence indicated that margin expansion will be back-end loaded in Q3 and Q4, not linear, as revenue grows against a relatively flat cost base. He also noted reseller M&A valuations have been consistent at ~2.5x revenue. CEO Pat Goepel added that the strategic focus is on achieving scale and that future product expansion would likely be in the benefits space, following a 'partner then buy' approach.

Charles Nabhan asked for more detail on the 2.6x average acquisition multiple, seeking to differentiate between payroll resellers and ancillary technology solutions like HireClick. He also inquired about the current competitive environment.

Answer

CFO John Pence and CEO Patrick Goepel confirmed that 2.6x repetitive revenue is a good proxy for the overall M&A mix, noting that the HireClick deal was at a slightly higher multiple while a brokerage acquisition was lower. President Eyal Goldstein described the competitive landscape as stable and consistent, with Asure primarily competing against ADP and Paychex in its respective markets.

Charles Nabhan of Stephens Inc. questioned the potential impact of JPMorgan's plan to charge for consumer data access on Alkami's business and asked for a breakdown of Mantle's contribution to the implementation backlog.

Answer

CEO Alex Shootman stated that while data aggregation is a critical capability, Alkami is in a 'wait and see' mode regarding potential industry-wide fees for data access and will adjust its strategy as the situation develops. CFO Bryan Hill explained that it is difficult to parse out a single product's contribution to the backlog due to bundled sales, but confirmed the overall backlog is growing.

Charles Nabhan from Stephens Inc. asked if early cross-selling success with MANTL has altered the company's sales strategy and requested a breakdown of the organic growth component of the Remaining Performance Obligation (RPO).

Answer

CEO Alex Shootman affirmed that the company is sticking to its original three-pronged sales thesis for MANTL, utilizing MANTL's sales team, Alkami's client sales team, and Alkami's new logo team. CFO Bryan Hill clarified that of the 31% year-over-year RPO growth, approximately 20% was organic, with the MANTL acquisition contributing the remaining 11 percentage points.

Charles Nabhan asked for commentary on the revenue growth algorithm, noting accelerating ARPU growth and decelerating user growth, and questioned if the 2026 gross margin target contained conservatism.

Answer

CFO Bryan Hill explained that the revenue model has multiple levers, with strong ARPU expansion from cross-sells currently compensating for a moderation in user growth. He noted new clients in the backlog have a significantly higher RPU. Regarding margins, Hill confirmed the 65% gross margin target for 2026 remains, clarifying that the 1% investment for offshoring will impact R&D, not gross margin, and acknowledged the company could potentially reach the target ahead of schedule.

Charles Nabhan asked a modeling question about the cadence of EBITDA margin expansion in the second half of the year and sought an explanation for the dip in gross profit per travel customer between year one and year two, as shown in the presentation.

Answer

CFO Cosmin Pitigoi explained that H2 margin expansion is more moderate due to the timing of reinvesting savings from the restructuring. Regarding the travel cohort chart, he clarified that the year 1 to year 2 dip was a one-off anomaly caused by the business launching during the COVID-19 pandemic, and he affirmed the underlying profitability of the vertical is strong.

Charles Nabhan inquired about the expected drivers of normalization in the Consumer segment, specifically the mix between macro improvement versus new bookings, and asked about the company's M&A "wish list."

Answer

CFO Tim Murphy explained that after accounting for client losses and macro impacts, new bookings and client ramps would be the primary drivers of higher growth. Regarding M&A, Murphy highlighted interest in new consumer bill pay verticals like insurance and utilities, as well as tuck-in AP opportunities. CEO John Morris added that targets that add software partners or drive distribution scale are also attractive.

Charles Nabhan of Stephens Inc. questioned the reason for the deceleration in Instant Funding growth to 21% and asked about the expected financial impact and ramp timeline for the large auto captive client set to go live in Q3.

Answer

CFO Tim Murphy explained the Instant Funding growth deceleration was due to lapping a very large personal lending client that ramped up in early 2023. Regarding the auto captive client, he stated that while they are excited for it to go live, no material contribution is modeled for the second half of 2024, with a more significant impact expected in 2025 and 2026.

Charles Nabhan questioned the details of a government contract, the breakdown of the revenue growth guidance between recurring and nonrecurring sources, and the potential impact of remaining efficiency initiatives on margins.

Answer

CEO James Kelly clarified the contract is an expansion of a long-standing relationship with revenue ramping in Q1. Executive Brian Webb-Walsh stated that recurring revenue is expected to grow 4-5%, with pressure from nonrecurring hardware and services. He also detailed $100 million in 2025 cost actions, which will ramp through the year and improve margins.

Charles Nabhan requested color on the implied Q4 growth outlook by segment and asked for details on the payments initiative, including target clients, value proposition, and competitive positioning on price.

Answer

CEO David Wilkinson guided for Q4 to have flattish retail software/services revenue and 1-2% growth in restaurant software/services, with total EBITDA at or above the midpoint of the range. On payments, CFO Brian Webb-Walsh described a dual strategy: a high-attach, all-in-one solution for SMBs and a value proposition for enterprise based on total cost of ownership and seamless integration, not just price.

Charles Nabhan of Stephens asked about the drivers of free cash flow, changes in CapEx expectations, and capital allocation priorities, including product investment and M&A. He also followed up on the decline in professional services revenue and its potential for a future rebound.

Answer

CFO Jonathan Price credited strong free cash flow conversion to improved profitability and working capital management, with no change to the company's CapEx-light model. He stated that organic investment is focused on fraud, Innovation Studio, and commercial solutions. While M&A is an option, the company remains prudent. Regarding professional services, Price said the guidance assumes no rebound in discretionary spending, and any future growth in this area would be selective.

Charles Nabhan of Stephens Inc. inquired about any differences observed between large and small M&A opportunities in the pipeline and the company's preference for deal size. He also asked about potential changes in state and local government spending trends.

Answer

President Rick Stanford stated their M&A 'sweet spot' remains deals with $2 million to $5 million in EBITDA and that the competitive environment has not changed. CRO Paul Christians addressed spending, noting they have not seen a pullback from government clients. He explained their model, which can monetize software via user-based transaction fees, provides resilience against budget constraints and that the company has minimal exposure to federal grant funding like ARPA.

Asked about the planned pace of sales coverage expansion and for an explanation of the strong free cash flow performance and its expected cadence.

Answer

Raul Villar confirmed plans for double-digit sales headcount growth, balanced with driving productivity through increased tenure. Adam Ante stated the strong free cash flow was not due to transient factors but from sustained margin expansion and stabilizing working capital, with the current quarter being the seasonal low.