OneStream - Earnings Call - Q3 2025

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the OneStream's third-quarter fiscal year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star followed by the number One on your telephone keypad. If you would like to withdraw your question again, press the Star One. Now, I would like to introduce your host for today's program. Annie Leschin, Vice President of Investor Relations and Strategic Finance. You may begin.

Annie Leschin (VP of Investor Relations and Strategic Finance)

Thank you, Operator. Good afternoon, everyone, and welcome to OneStream's third-quarter 2025 earnings conference call. Joining me on the call today is our Co-founder and CEO and President, Tom Shea, and our CFO, Bill Koefoed. The press release announcing our third-quarter 2025 results issued earlier today is posted on our Investor Relations website at investor.onestream.com, along with an earnings highlight presentation. Now, let me remind everyone that some of the statements on today's call are forward-looking, including statements related to guidance for the fourth quarter and year-ending December 31, 2025. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other factors. Some of these risks are described in greater detail in the documents we file with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, that we filed today.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During our call today, we will also reference certain non-GAAP financial measures. There are limitations to our non-GAAP measures, and they may not be comparable to similarly titled measures of other companies. The non-GAAP measures referenced on today's call should not be considered in isolation from or as a substitute for their most directly comparable GAAP measures. Management believes that our non-GAAP measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing Core operating performance. Reconciliations of our historical non-GAAP measures to the most directly comparable GAAP measures can be found in this afternoon's press release and the earnings highlights presentation posted on our Investor Relations website.

We are not able to provide reconciliations for forward-looking non-GAAP measures without unreasonable effort because certain adjustments cannot be predicted with reasonable certainty and could be significant, particularly related to equity-based compensation and employee stock transactions and the related tax effects. Now I'll turn the call over to Tom. Tom?

Tom Shea (Co-Founder, CEO and President)

Thank you for joining us this afternoon. Third quarter was a story of focused execution. Facing headwinds in contract rationalization in our U.S. federal business, the team exceeded expectations with strong billings growth in the quarter. More recently, at our sold-out Splash AMEA user conference, I was incredibly energized by the enthusiasm we received for our purpose-built Finance AI. As we usher in the Finance AI era, we remain one of the most innovative vendors in the CPM space. We are not stopping there. We are constantly pushing forward and anticipating the growing demands of the office of the CFO. Let me start with some highlights of our third-quarter performance. Year-over-year subscription revenue grew 27%, and billings grew 20%. International revenue grew 37% year-over-year, particularly due to strong legacy replacement momentum in Europe.

In the federal business, we renewed all of our Q3 agency customers with only one exception at a discontinued agency. We added one new federal customer and began multiple SaaS conversions, including one at our largest agency customer. CPM Express and our Sensible AI portfolio continue to show early momentum with customers. We are attracting new and existing customers by leveraging the proven customer ROI from Sensible AI forecasts. Additionally, OneStream was recognized as the exemplary leader in the 2025 Record to Report Buyers Guide by ISG Research. Covering financial close, consolidation, and overall record to report, achieving the highest sCores in both customer and product experience. With AI at the forefront across all facets of business today, the drivers of our industry have never been more important for the office of the CFO. Number one, finance is in the initial phase of its transformation.

Legacy financial systems, often more than 20 years old, simply do not have the agility required for today's CFOs to effectively steer their businesses, never mind to maximize the value of AI. Finance organizations continue to look to modernize by unifying corporate data and moving Core financial operations to the cloud. Number two, the role of the CFO is evolving and expanding. CFOs are being asked to do more than ever by becoming a strategic partner for the business. An integral part of that is helping them proactively look around corners to anticipate challenges and opportunities and produce more timely and accurate forecasts. Number three. The use of AI is enabling finance teams to drive more business performance, not only measure it. In many cases, CFOs are the executive leaders taking responsibility for the AI evolution at their companies.

They are being tasked with identifying key functions that can leverage these AI tools for productivity improvements and cost efficiencies. We believe platforms that provide purpose-built applied AI solutions will win the AI battle, given the need for a single consistent data model and security framework. At OneStream, we have always challenged ourselves to raise the bar. Our approach to AI has been both forward-thinking and deliberate. Since we began this journey a decade ago, we have gained a foundational understanding of what AI can bring to the office of the CFO by combining powerful quantitative, generative, and Agentic capabilities throughout our Sensible AI portfolio. We understood early on that AI for finance must run on clean data, provide context, and solve specific use cases because 80% accurate is 0% useful for finance.

Ultimately, we believe OneStream provides the key that unlocks the value of AI for finance through unified, secure, transparent, and most importantly, contextualized information. Through our many AI announcements this year, customers are beginning to realize the growing power of our platform to drive better and faster decision-making and enhance their productivity. By modernizing the financial close process, customers are now able to, number one, unify their data on a common platform. Number two, interrogate that data using financially intelligent embedded AI. Number three, enhance and optimize the close process, enabling finance teams to focus on strategic, high-value priorities such as integrated planning and forecasting. Just a few weeks ago at Splash AMEA, we again pushed the boundaries of applied AI for finance. We showed real packaged solutions designed specifically for finance, which we expect to deliver significant value for our customers.

Let me recap some of our exciting product announcements. Since we introduced Sensible AI Studio in May, we have roughly doubled the number of algorithms currently available to 60. As you recall, Studio enables customers to quickly access a library of algorithms and routines and apply them to their own workflows. We showcased an example of this power and flexibility at Splash AMEA. Just one month after Studio's launch, our forward-deployed engineers rapidly built our AI-powered benchmarking and outlier detection routine based on real-time customer specifications. Studio allows us to meet customers where they are in their AI journey, and we believe we are just scratching the surface of Studio's potential. We also took a big step with our Sensible AI Agents, moving them out of private preview and into limited availability. Now our customers can begin to take advantage of them.

Our Agents are unique because they do not act alone. What's important is that they have financial context. They are embedded into solutions within OneStream, giving them direct access to all of the customers' secured data stored on the platform. This allows finance teams to do tasks like ask questions in natural language, generate dynamic visualizations, query financial models, and analyze contract data. Agents provide the ability to help automate repetitive work, reveal insights, and help every analyst operate more like a strategic partner. We also unveiled AI-powered ESG. This enhanced solution is the culmination of our three strategic pillars: Core finance, operational analytics, and Finance AI. With AI-powered ESG, finance teams are able to link ESG reporting back to the Core platform using real-time operational drivers while automating quantitative forecasting by using Sensible AI forecasts.

Further, we plan to embed our Sensible AI Agents throughout the workflow to assist with data interrogation and reporting. Lastly, we continue to advance our best-in-class Core finance capabilities by expanding our rapid deployment CPM Express with IFRS compliance and management. This includes a number of confirmation and validation rules adhering to IFRS accounting standards for our international customers. This is but one example of how we plan to expand our Express offering. Leveraging our plug-and-play architecture to bring a variety of rapid deployment productized use cases to our customers. Both at Splash AMEA and during the quarter, we had several noteworthy examples of how customers are seeing increased value from our strong and growing product line. Continuing the trend in recent quarters, OneStream is quickly becoming the CPM vendor of choice for companies transitioning from legacy systems nearing their end of life.

One of the largest deals this quarter came from a Swiss multinational healthcare leader and a global leader in cancer treatments. A longtime customer of a competitive legacy CPM solution. The organization moved to OneStream to better unify financial consolidation, reporting, and tax processes. They chose OneStream for our extensibility and flexibility. This significant legacy replacement marks our first big pharma win, highlighting how leading enterprises are modernizing with our unified platform. Additionally, with CPM Express, commercial customers are gaining access to the full power of OneStream with rapid deployment and best practice templates, workflows, and frameworks all built in. Today, companies that are earlier in their financial journeys are starting to recognize just how valuable it can be to access our single unified platform with a pre-configured offering that can be implemented in as little as 8-12 weeks.

One significant CPM Express win this quarter was with a leading residential real estate services company. Having recently centralized its finance and other Core functions under a shared services model, the company needed greater visibility, agility, and standardization across the business. Facing a legacy system infrastructure across their environment, we leveraged CPM Express to give the customer confidence in a faster, best practice-driven implementation with rapid time to value. Ultimately, they chose OneStream for our superior data integration, flexibility, and finance-owned architecture. This empowered the finance team to streamline and modernize account reconciliations and transaction matchings, all while reducing their dependency on IT. Lastly, we wanted to provide an update on a few major multinational customers that have gone live with Sensible AI forecasts and the remarkable ROI that they are realizing with the product.

One of the great stories comes from the domestic healthcare division of a leading global logistics provider. They implemented Sensible AI forecasts across their U.S. operations to enhance financial forecasting. As the company is developing an AI-powered approach, they reported that OneStream's Sensible AI forecast is delivering measurable results. Gross revenue forecast accuracy has improved by 5% points. Payroll forecast accuracy has improved by 8 percentage points. Forecast generation time has been reduced by 94%. Bringing up more than 13,000 labor hours annually and eliminating the need for third-party specialized tools and staff augmentation. With these strong results, the organization is now expanding its use of Sensible AI forecasts to the healthcare division's international operations. Another longtime U.S. customer that builds systems and technology solutions deployed Sensible AI forecasts earlier this year. The customer is looking to transform its forecasting process for key financial metrics, including.

Revenue, margin, and SG&A, using OneStream's single unified data model. Sensible AI forecast has taken their forecasting and planning cycles from 20 days to less than 2 days, a 90%+ reduction. Additionally, the customer saw a noticeable improvement in forecast accuracy. One of the key features that led to the selection of Sensible AI forecast was its ability to provide clear insights into how internal and external factors drive forecast outcomes. It is this level of transparency that is strengthening their trust in OneStream across its finance organization. In summary, the overarching drivers of the office of the CFO remain front and center today. OneStream has always looked to the future to anticipate and invest in what our customers will need and want to run their businesses more effectively. We have consistently been ahead in recognizing industry trends and emerging technologies, as we have demonstrated with AI.

Today, our customers are realizing the value that a unified and infinitely extensible platform delivers. Our Sensible AI provides insights and actions that are quantifiable and supercharged because of the high-quality and contextualized data controlled in OneStream. Our comprehensive platform has positioned us to lead the Finance AI era and become the operating system for modern finance. Together with our exceptional team, we believe we have built a solid foundation to grow and scale the business. This gives me confidence in our ability to deliver unparalleled value for our customers, partners, and shareholders over the long term. I will now turn the call over to Bill to provide details on Q3 financials and our financial guidance.

Bill Koefoed (CFO)

Thanks, Tom. Good afternoon, everyone, and thank you for joining today's call.

We are pleased to discuss the results of our third quarter, which proved stronger than expected as the team executed well, particularly in AMEA, while managing through a tough federal government environment in the U.S. Subscription revenue increased 27% year-over-year to $141 million. While total revenue grew 19% year-over-year to $154 million. License revenue of $4 million declined 64% compared with last year due to contract rationalization and our success in driving SaaS conversions, including at our largest federal agency customer. Professional services and other revenue was $9 million, up 38% year-over-year due to demand for our consulting services. Our international business had another strong quarter with revenue growth of 37% year-over-year, representing 34% of total revenue. Billings increased 20% year-over-year to $178 million.

and 21% on a trailing 12-months basis, which we believe is the best indicator of our billings momentum. This included roughly $4 million of accelerated billings from Q4 due to early renewals and add-ons. Free cash flow for the third quarter was $5 million and exceeded our expectations. We ended the quarter with 1,739 customers, up 13% year-over-year. We saw exceptional new business growth in AMEA, while in the U.S., we had particularly strong add-on business, partially offsetting the federal new business weakness and illustrating the value of our multi-product strategy. For the first nine months of the year, subscription revenue has increased 29% year-over-year to $400 million. Total revenue grew 23% year-over-year to $438 million.

AI bookings were up 60% year-over-year, and our free cash flow for the first nine months of the year was $70 million, up 107% over last year. Our 12-month CRPO was up 29% year-over-year, and total RPO was up 24% year-over-year to $1.2 billion. Non-GAAP gross margin for the third quarter was 69% compared to 71% last year, and our non-GAAP software gross margin for the third quarter was 75% compared with 78% last year, primarily due to lower license revenue in the third quarter. Non-GAAP operating income for the third quarter was $9.3 million, or 6% of revenue, and increased significantly by $3.8 million, or 69% compared with the prior year. This increase was due to a combination of strong revenue growth and the scaling of our operating expenses.

Non-GAAP net income of $15.2 million in the third quarter increased $3.9 million from the prior year, and non-GAAP earnings per share was $0.08, flat with last year. Total equity-based compensation expense for the third quarter was $25 million. We ended the quarter with $654 million in cash and cash equivalents. Now let me turn to guidance. Given our Q3 outperformance, we are raising our 2025 growth and profitability outlook. Together with our strong pipeline, we entered Q4 with a growing and more differentiated product portfolio than ever. With that, we are offering the following outlook, including an update to a one-time measure that we gave last quarter. In Q4, we expect total revenue to be between $156 million-$158 million. We expect non-GAAP operating margin to be between 4%-6%. We expect non-GAAP net income per share to be between $0.04-$0.07.

We expect stock-based compensation expense to be approximately $25 million. Taking into account the roughly $4 million of accelerated billings in Q3, we expect billings growth of roughly 20% for the fourth quarter. For full year 2025, we expect total revenue to be between $594 million-$596 million. We expect non-GAAP operating margin to be between 2%-3%. We expect non-GAAP net income per share to be between $0.15-$0.19. We expect stock-based compensation expense to be between $115 million-$120 million. While we plan to give formal 2026 guidance in February, the combination of our Q3 outperformance, strong pipeline, and innovative product portfolio makes us comfortable with current WallStreet Consensus for full year 2026 revenue and non-GAAP operating income. In conclusion, Q3 was a strong quarter.

Our results undersCore the power of the OneStream platform to bring the Office of Finance into the AI era. Now let's turn it over to the operator for Q&A.

Operator (participant)

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star One on your telephone keypad to raise your hand and join the queue. If you would like to raise your question, simply press Star One again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question only. Thank you. Our first question comes from the line of John DeFucci with Guggenheim Securities. Your line is open.

John DiFucci (Senior Managing Director)

Thank you. Hey, Tom and Bill. Listen, on the federal dynamics this quarter, first I want to say we really appreciate your transparency here, both last quarter and this quarter. In fact, we factored it into guidance. Your overall results really did not skip a beat, and it is great to see subscriptions still growing at a really healthy clip here. It sounds like you only lost one federal contract because that agency was discontinued, but you also added a new federal customer. I would really like to better understand the remaining account, the renewals. Bill, you mentioned the license rationalization. Anything you can add to help us better understand renewals in the September quarter and what this means for the future would be great. We are just trying to better understand the federal opportunity going forward within the context of the overall beat and raise this quarter. Thank you.

Bill Koefoed (CFO)

Yeah, no, thanks for that, John. I'll take that. I appreciate the commentary on the transparency. That's certainly something that we aspire to do and appreciate the comments. Look, the federal government, obviously, there were a lot of moving pieces as we went into the third quarter. We had SaaS conversions at a couple of our biggest agencies, and that obviously impacted license revenue, but obviously, will flow through our subscription revenue in future quarters. As you noted, we only lost one federal agency that actually does not exist anymore. It actually got merged into another agency. Obviously, we added a new one, as you noted. We are really optimistic about our federal government opportunity as we turn the corner into 2026. Now that I think we have gotten through this quarter, we will hopefully execute on that as we enter the year.

John DiFucci (Senior Managing Director)

Okay. Thank you, Bill. Nice job, guys.

Bill Koefoed (CFO)

Thank you.

Tom Shea (Co-Founder, CEO and President)

Thanks, John.

Operator (participant)

Our next question comes from the line of Chris Quintero with Morgan Stanley. Your line is open.

Chris Quintero (VP of Equity Research)

Hey, Tom. Hey, Bill. Congrats on a solid quarter here. I wanted to ask about AI. We've seen some data points that suggest that finance and accounting is actually one of the top areas that organizations are looking to deploy their AI budget dollars over the next 12 months. I am curious, is that aligning with kind of what you're hearing from your customer base? What are some of those kind of initial, most important use cases that you're seeing them deploy some of your technology into?

Tom Shea (Co-Founder, CEO and President)

Thanks, Chris. Yeah, I'll take that. As I mentioned in the remarks. We really feel great about our position in AI. We feel we're primed to lead the Finance AI era.

What I mean by that is there is a lot of opportunity in finance, especially when you have a platform like OneStream that has this highly contextualized, high-value information. The use cases that you can think of, you've heard us talk about Sensible AI Forecast. That's clearly predicting the quantitative outcomes for a business in those key line items that you heard, whether that's demand, whether that's multiple cost line items. That has a profound and direct impact on how you can manage your business. That's just the beginning. With our comprehensive AI platform that we have, and you heard me talk about Studio as well, that opens up all kinds of additional use cases, outlier, and sort of benchmarking analysis, giving companies the ability to do and measure their business in ways that they haven't been able to in the past and take immediate action.

Then ultimately, Agents, right? The autonomous, financially intelligent coworkers that we've built into the platform, that is very, very high interest in our customers because of the potential to actually interpret all this information, help take action, and do repetitive work. We feel finance is definitely embracing this opportunity. Again, our understanding of the deterministic nature of AI required for finance puts us in a great position to answer that need and interest for the customer base.

Operator (participant)

Next question comes from the line of Adam Hotchkiss with Goldman Sachs. Your line is open.

Adam Hotchkiss (VP of Emerging Software Equity Research)

Great. Thanks so much for taking the questions. I think you made the comment, Bill, about being comfortable with street estimates for 2026. I think what's notable about that is there's less of a deceleration baked into numbers for 2026 relative to 2025, and you're exuding some confidence and some growth stabilization.

If you could just maybe rank order for us qualitatively what the big drivers are there that give you. Helpful. Thanks so much.

Bill Koefoed (CFO)

Yeah. Let me talk about just about the overall performance of our business, and I think that'll answer your questions. We saw this last quarter. AMEA really performed super well this quarter. As Tom mentioned, some pretty big lighthouse wins that we had there. Obviously, considerable strong growth, strong momentum, and we're really optimistic about the opportunity that we see in AMEA. Asia-Pacific continues to be a small but growing area of our business, and we expect that momentum to continue. In the U.S., certainly, Tom's talked about CPM Express and the opportunity that we see in the commercial business that is just getting started, as Tom mentioned, and we see strong opportunity there, particularly as we get into more verticals.

Actually, I did not mention it in AMEA, but we just released IFRS Express, which is a really awesome opportunity for us there. On the enterprise side here in the U.S., obviously, Q4 is our biggest quarter. As I mentioned in my commentary, we feel great about the pipeline. The team is working to execute. We actually signed a really nice big deal today, which we are excited about against two very strong competitors. That all gives us optimism about 2026.

Operator (participant)

Next question comes from the line of Koji Ikeda with Bank of America. Your line is open.

Koji Ikeda (Director of Enterprise Software Equity Research)

Yeah. Hey, guys. Thanks so much for taking the question. I wanted to double-click on the 2026 guide and really about pipeline assumptions and conversions assumptions. In the fourth quarter guide and heading into 2026, how are you thinking about those assumptions? I guess more specifically around conversions.

Is it more conservative heading into 2026? Is it the same? I mean, just wanted to understand what is giving you the confidence to level set 2026, but also kind of express a lot of confidence there at the same time.

Bill Koefoed (CFO)

Yeah. No, I'll take that. I mean, look, every quarter, every year, as we start our forecast for the quarter and as we start our budgeting process for the next year, we look at two things, right? We look at our pipeline, which is arguably kind of the biggest driver of growth. And the second characteristic of that is obviously our conversion rate. It obviously varies a little bit by quarter. We certainly look at that as we enter the quarter and as we enter the year.

In addition to the fact that we have our Core business, as Tom mentioned, we're really enthusiastic about our new products. Tom's talked about our agile financial analytics, which we see customers really excited about. We have our Sensible AI forecasts, which is showing some very strong growth. As I mentioned in my remarks, it's up 60% year-over-year, and we continue to see very strong pipeline as customers are seeing the results like Tom talked about in his script of better forecast accuracy, improved speed to forecast, and just the benefits that we see there. Obviously, Sensible AI Studio is something Tom's talked about. Again, candidly, that new customer that I mentioned earlier has, that's part of the solution that they've acquired. Obviously, Sensible AI Agents, which are just being released. We just announced limited availability when we were in Splash a few weeks ago.

Look, as I mentioned in my closing remarks. We have our best product portfolio we've ever had going into any year. We have a very strong pipeline, and that gives us the confidence to obviously give our outlook for 2026. Again, I would just say we'll give you more formal numbers when we get into February, but we just kind of wanted to give you a little bit of an update like I did.

Operator (participant)

Next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Alex Zukin (Managing Director and Senior Analyst)

Hey, guys. Thanks for taking the question, and appreciate that incremental color about the pipeline. I guess to that point, it sounds like, Bill.

Billings growth is going to accelerate if you take the fact that you pulled in or you had some earlys in Q3, and yet you're still kind of calling for really strong billings numbers in Q4. Maybe just comment on the demand environment as you kind of sit here in October. Also, a metric that we haven't talked about at length previously, but as you continue to see a lot of expansion opportunities from Sensible as well as moving into other parts of the finance workflow or outside of the Core finance workflow, how should we think about NRR trends from here kind of moving forward as well?

Bill Koefoed (CFO)

Alex, let me start with the last part of your question. I know you and I spent a lot of time talking about NRR, but this last quarter.

As I mentioned, I think in my remarks, was a really great add-on quarter. It ended up being part of the upside that we saw in our numbers. The add-ons were the upside. Candidly, it's just an illustration that our multi-product strategy is working. A couple of years ago, we didn't have all these kind of new products that we've been introducing. As Tom mentioned in his remarks, I think we're just getting started in our innovation around our products. Look, on the billing side, I would just tell you, again, we outperformed this quarter. We did have a bit, as I mentioned in my commentary. We saw some early renewals, to your NRR point, because our customers wanted to add on new products. We saw a bit of that in the third quarter.

Obviously, in the guidance that I gave you for Q4, and as I think I mentioned, I do not expect a guide of billings every quarter, but I thought it was important as we kind of went through Q3 to Q4 that we give you that color. Obviously, we are enthusiastic about the quarter ahead.

Operator (participant)

Next question comes from the line of Terry Tillman with Truist Securities. Your line is open.

Terry Tillman (Managing Director)

Yeah, thanks for taking my question. And Bill, it is always nice to hear about a deal closing, an important deal closing in real time.

Bill Koefoed (CFO)

Hey, Terry. It is pretty exciting when we have a deal close on the day of earnings. I have to tell you, Tom and I were high-fiving each other.

Terry Tillman (Managing Director)

If one closes before the end of the call, we would appreciate another update.

Bill Koefoed (CFO)

We will keep our eyes out.

Terry Tillman (Managing Director)

My one question relates to AMEA.

It does sound like you're firing on all cylinders there, and there's a lot more where it came from. What I'm curious about is there's something going on with this replacement cycle. We know there's a lot of technical debt in these 20-year-old systems. Is there something that seems like it's accelerating in that cycle of replacement? Part of this is also, but your field sales coverage is probably expanding, so maybe it's becoming more productive, or maybe it's partners. Just maybe you could kind of stack rank some of the drivers that's driving that momentum. Thank you.

Tom Shea (Co-Founder, CEO and President)

Yeah. Thanks, Terry. I'll take that. You pretty much hit on it. It's the fact that we're getting more scale in the region. We are seeing that ability to have more coverage across the different countries. Secondarily, there is the opportunity of legacy applications that are coming up.

Just to remind everybody, as I've mentioned in other calls, the foundation of getting access or being trusted to take those legacy replacements is that we've had prior success. When we think about that and we think about that opportunity, we're building on those foundational wins in that segment and some of those transformations that are happening. Ultimately, when we look at the product portfolio and we look at the enthusiasm for our product, that is sort of the third component that I see driving it. I definitely want to call out the execution of the team over there and the growth that we're seeing and just a lot of excitement.

Operator (participant)

Next question comes from the line of Steve Enders with Citi. Your line is open. Okay. Great. Thanks for taking the questions here.

Steve Enders (Equity Research Analyst)

I guess I want to follow up on the AI side of it. I think the bookings growth you called out there, I would say, was 60%. I guess what are you seeing maybe in the pipeline? Are you starting to see incremental builds there from the sales build-out that you've been talking about for the past year or so? Just how do you kind of view the future pipeline opportunity as we kind of go into 2026?

Tom Shea (Co-Founder, CEO and President)

We look at the current pipeline as a great validation of the momentum that we're building, first and foremost, is the way that I would talk about it. As we think about the product strategy that we have in AI, our AI portfolio consists of the first product, Sensible AI forecasts, which is driving that adoption through the validation that I shared in my remarks.

As we look going forward, what we're seeing is, again, early days, but excitement around AI Studio. It just opens up so many additional use cases. The way that you want to think about AI Studio is AI everywhere on our platform. That's why we invented that product, so that we can drive AI into meaningful workflows across our customers' set of use cases that they're enjoying on the platform. Ultimately, we are very, very excited about the feedback that we've been getting and the partnering, frankly, that we've had with our customers in the Agentic space. Because again, this is all a building process for us. It was quantitative, generative, and Agentic working together on a contextualized platform. As we look to 2026 and continuing the rollout of our.

Limited availability of the Agents, we're very excited about that opportunity and bringing that to our customers. Again, building on that same momentum that we're seeing from Sensible AI Forecast.

Operator (participant)

Next question comes from the line of Scott Berg with Needham. Your line is open.

Scott Berg (Senior Analyst)

I have one really nice quarter here. Tom or Bill, I just wanted to see if you could maybe comment on what you're seeing early with the revenue opportunity for the Agents. I know they're not fully released in general availability yet, but I think a key question we've all kind of had is, as you release those, I guess what's the uplift there? Does it impact any of your seat-based model at all? Thank you.

Tom Shea (Co-Founder, CEO and President)

Sure. I'll take that. As we look at Agents, we're still in the early days in terms of going from private preview to limited availability.

Pricing, you can expect to be more of a usage-based pricing the way we price the other AI Services products. We think we have a strong applied approach, which is key here. That is demonstrated value of our Finance Analyst Agent. What we see this is a, as I mentioned in one of my remarks, it's an autonomous coworker. It's the ability to help the customer get more value, do work efficiently, and then let their team members do more high-value work is quite frankly what we see. We see this as incremental revenue rather than sort of a replacement or displacement of seats. I think that's largely what you're going to see in the Financial space. There's certainly optimizations. As we've highlighted in some of the studies that we've done, the 2035 Finance Study, you have finance teams that are generally overworked, overstressed.

It's not that there are always way too many people. Right? They want to have those people working on the most important areas of the business to be a true partner of the business. We think that we're an unlock for that, giving them efficiency to do the things they have to do and help them be more of a business partner.

Operator (participant)

Next question comes from the line of Mark Murphy with JPMorgan. Your line is open.

Mark Murphy (Executive Director)

Can you comment on traction in some of the emerging applications that sit outside of the Core and maybe shed some light on where you see the strongest growth factors? For instance, noticing you have account reconciliations now that are driven by Sensible AI. The supplier analysis, I'm wondering if there's any more interest there in the wake of the tariffs.

Any brief mention on the big pharma win? Congrats on that. Just wondering if you see that as a linchpin to going a little deeper in a new vertical.

Tom Shea (Co-Founder, CEO and President)

Thanks, Mark. Yeah. If I can just orient everybody on our platform and our platform message. I think this is critical to helping you to help everybody kind of baseline this. We think of the platform as having three key components: Core, operational, and AI. Kind of think of it as a triangle. Core is the stuff everybody has to do. Every big business has to do this. It is things you have to get right. We need to help our customers become as efficient as possible. To your point, Mark, the thing they want to do, though, is they want to help.

They want to start turning that fast-changing operational data, those operational use cases, into a signal that they can take action on. We have always seen a lot of interest in that particular space. The fact that with our AFA, or what we call agile financial analytics, our ability to do more real-time analytics, no ETL, directly on top of operational sources, and have our Agents be able to interact with that data as well is an area that we're continuing to push into. Those are, again, some of the key innovative areas that are underpinning our excitement in the business and the opportunity that we see ahead. When you think about these operational use cases, whether that's—you mentioned AI-powered account reconciliations, we have that under an umbrella that we call the modern financial close.

That's an opportunity for us to, again, double down and address certain personas and make sure that they understand that we're delivering the key capabilities and technologies, if you're a controller, to help you not only do your financial planning, your financial reporting, but also deliver on those and become more efficient at your closing. Any and all of those opportunities are what lie in front of us. You'll see us continue to develop more and more productized use cases in those areas, as you mentioned, supplier analytics. These are all areas that are part of our ongoing verticalization strategy and intention to focus in these areas.

Operator (participant)

Next question comes from the line of Jake Roberge with William Blair. Your line is open.

Jake Roberge (Research Analyst)

Yeah. Thanks for taking the questions. Just wanted to follow up on the new Agentic offerings entering limited availability.

Could you talk a little bit more about the feedback you've gotten from customers and if there are any specific Agents that you're seeing drive outsized interest for the platform right now? Thanks.

Tom Shea (Co-Founder, CEO and President)

Sure. Let me first just talk about the Agent set that we have in play, just to level set for everyone. We have our finance analyst Agent. You can think of that as a structured kind of data analyst that understands the OneStream data architecture, data repository, highly contextualized data, and can help with analytics, can help with reporting, answer questions. It can help with education because individuals that don't understand some of the data models that customers have built now have access to that information. It's broadly applicable. That's a very high-interest Agent within our customer base.

Other couple of Agents that are also getting a lot of interest are our search Agent and our deep analysis Agent. These complement and contextualize and synthesize with our finance analyst Agent. So meaning if you have an interesting set of analytics that are coming out from finance analysts, but you require additional information to provide context, such as contract-based analysis, our Agents, we've developed an Agentic workflow. The thing that has come out of the interaction with customers is more than these aren't just chat-oriented interactions. We've built an entire workflow-based interaction, which will allow us to truly assign tasks that can be done on a repetitive basis. This is some of the feedback loop in the processing that our AI engineering team has been working with to rapidly innovate that and make sure that we're iterating and delivering.

In real time what the customer is looking for out of these Agents.

Operator (participant)

Next question comes from the line of Siti Panigrahi with Mizuho. Your line is open.

Phil Buccino (SVP and Managing Director)

Hi. This is Phil on for Siti. Thank you for taking our question. Can you talk about what you're seeing in terms of competitive displacements like Hyperion and SAP? And how important are these legacy displacements in achieving the preliminary FY 2026 growth targets?

Tom Shea (Co-Founder, CEO and President)

When we look at the historical legacy replacement, it's a consistent and a large opportunity that we're continuing to focus on. It's obviously an important part of our numbers. It's an important part of our selling motion. The thing I do want to make sure that we all focus on is any business, as I mentioned, the Core pillars of our platform, any business that develops any degree of.

Complexity in their own financial operations has a very high need for OneStream's platform. That's, again, why we tend to focus on CPM Express and the productized approach because we view all companies that have those needs as our customers. We want to continue to focus heavily on the replacement of legacy systems and help those customers that have been in the CPM world for a number of years, but also make sure that we're extending and onboarding any company that has that growing need for a full CPM solution. I just want to make sure that I share the way that I see this expansive opportunity consisting of both legacy and evolving companies.

Operator (participant)

Next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Thanks for taking the question. This is John on for Brian.

Maybe following up a bit on that earlier question on sales pipeline and as we think about customer sizes, you mentioned an acceleration in legacy CPM replacement, but then CPM Express also accelerating adoption in the commercial side of the equation there. How have those been tracking in 2025? As we look towards 2026, realizing that both might be the answer here, what are you most excited about? What opportunity do you see creating the most potential upside in 2026? Thanks.

Bill Koefoed (CFO)

Yeah. I'll take this, Phil. I would go back a little bit to some of the commentary that I made earlier. We're really excited about AMEA's growth and continued trajectory. Again, I think Tom mentioned CPM Express. I mentioned IFRS Express specifically for AMEA on the commercial side. We see that as being a really big opportunity.

We see AMEA enterprise as well as a big opportunity, obviously, with the legacy replacement opportunity there. Again, there is a lot of change going on on the ERP stack there too, which is actually a tailwind in our favor. I mentioned Asia-Pacific. In the U.S., they have been our biggest driver of AI sales so far. I think that will continue to extend to other geographies. As Tom mentioned, just the whole opportunity that we have to continue to grow the Core, to continue to offer capabilities around agile financial analytics, and then, as I mentioned earlier, our AI portfolio. It is hard to choose your favorite child. We love them all, and we think they are all great opportunities for us to grow.

Operator (participant)

Next question comes from the line of Brett Huff with Stephens Inc. Your line is open.

Brett Huff (Managing Director)

Thanks for the questions and congrats on a nice quarter. I wanted to follow up on the Agentic AI comments you made. First, given the market is still anxious on how long it'll take Enterprise AI to get ROIs, congrats on those really good proof points on the forecasting business. I thought those were notable. The follow-up question is talking more about how your Agents will or won't, or how they'll interact with Agents from other software firms. Do you view a world where there'll be kind of Uber software or Uber Agents that coordinate things across workflows? Do you aspire to have that particular position? Is this a battle or more of a cooperation as you look beyond the four walls of just your data architecture? Thanks.

Tom Shea (Co-Founder, CEO and President)

Sure. Thanks. I'll take that. It's something that I think about a lot. And my.

Evolving thought on this is OneStream has the right to be, if not the best, one of the best Agents in the financial realm. Meaning, because of the highly contextualized data, we want to be the best, the most reliable, understanding, again, that if you're a CFO and you're trying to use a generic, non-financially aware type of Agent that doesn't have high context, you're going to get inaccurate results, 80%, 50%, you name it, whatever you want, which will become 0% useful for the CFO. We really feel that we have the right to be that, in that domain. The Agent set of choice.

Now, to your point with Agent-to-agent protocol, multi-Agent orchestration, we're not naive to think that other vendors that have platforms that have other highly contextualized information also have a right to have Agents that are highly attuned and aware of that highly contextualized information. Those, eventually, my—I'm being a futurist now—my view is that we will see those of us that have platforms and highly contextualized information, our Agents will work in coordination with some sort of multi-Agent protocol at a higher level. That is where I do think there will be a battle, maybe by a hyperscaler, or there will be a real battle in terms of who wants to own that masterful entry point into the Agent ecosystem, and then pick the right Agent for the right question and do that synthesis.

As this plays out, we're really focused at the moment on making sure that we have the right protocols in place to play in Agent-to-Agent communication and multi-Agent orchestration. More importantly, at this moment, is delivering the ultimate value that our customers want from our Agent set within the context of the CFO.

Operator (participant)

Next question comes from the line of Derrick Wood with TD Cowen. Your line is open.

Derrick Wood (Managing Director)

Great. Thanks for taking my question. Bill, can you give us a sense of how you've handicapped some of the risks around the government shutdown as you guided for Q4? Looking beyond, just with FedRAMP High authorization, with DOD behind us, how are you feeling about rebuilding momentum in the U.S. Fed? Do you think they'll have kind of a bigger appetite to come back and spend or modernize?

How do you feel about the visibility there?

Bill Koefoed (CFO)

Yeah. No, great question. I'm going to answer your second one first. Look. Q3 was a challenge, obviously, as all software companies were. Kind of coming up to the end of the government's fiscal year-end. Again, I think we executed. We were really happy to have SaaS conversions because, obviously, that's the genesis of our business. That was something that we were certainly hoping for. It's nice to have that behind us for sure. As we look forward, as you mentioned, we're the only kind of cloud CPM vendor that is FedRAMP high. That gives us the opportunity to serve agencies within the government that require that level of security. We feel exceptionally well-positioned to be able to take advantage of that opportunity. We're definitely taking advantage of that, as well as.

We're working to get AI FedRAMP High certified as well because the government has actually asked us and has strong demand for AI capabilities that, again, no one else has similar capabilities that we do in that arena. Look, as it relates to the government shutdown, I think we all hope the government shutdown ends quickly. We're obviously working with our customers to kind of navigate through it. I think all of us on this call probably have our fingers crossed that it ends quickly.

Operator (participant)

Next question comes from the line of Andrew DeGasperi with BNP Paribas. Your line is open.

Andrew DeGasperi (Research Analyst)

Thanks for taking my question. I just wanted to ask without getting a guide for next year, in terms of the balance of license and services and subscription. Would you say that the license revenue.

Sort of decline is going to be reflective of what happened this year, or are you expecting a more muted kind of deceleration there? I have a follow-up.

Bill Koefoed (CFO)

Yeah. You're our last call, so we'll let you do the follow-up. I think anyway, the operator might have cut you off. Anyway. Look, this was a big year, particularly this last Q3, for transformation from license to SaaS, arguably our biggest year. You should expect to see overall SaaS migration over the next couple of years, at which point we likely will not have very much license revenue remaining. As I've said before, on the PS&O side, I think you'll see that be some slight growth, but certainly it was a big growth quarter this year. If you recall from last year, we had a tough Q3 last year.

I think on a run-rate basis, our PS&O business is probably in pretty good shape. We're at that.

Operator (participant)

Our last question comes from the line of Mark Chappell with Loop Capital Markets. Your line is open.

Mark Chappell (SVP and Senior Equity Research Analyst)

Hi. Yeah. Thanks for squeezing me in here. I have a question, Tom, around the sales team. Just a question around the sales team, which has been obviously executing very well here. Could you just comment on any changes or fine-tuning to the sales and marketing strategy that maybe we could expect in the coming quarter or two? And also where maybe you plan to just prioritize additional sales investments.

Tom Shea (Co-Founder, CEO and President)

Sure. As we've talked about. Selling the I'll kind of go back to my overview of the opportunity that we have in front of us, right? We're selling the. We have the legacy market that.

Our sales team is geared towards, understands, knows, and we've been selling for years and years. We also are introducing the steady pipeline of products. What you can expect to see from us is a more concentrated effort on scaling across those different product lines while we maintain a strong focus on our Core business that we've been talking about. The way that I view the investments in the sales and marketing team is in that scale-based approach to make sure that we're properly positioning all the AI innovation, the CPM Express. The good news is that's straightforward to sell. A more productized solution is contained, and we're excited because you get to really scope in and meet the customer in a use-case-oriented fashion.

Operator (participant)

That concludes the question-and-answer session. I would like to turn the call back over to the management team for closing remarks.

Bill Koefoed (CFO)

Yeah. I'd just like to say thanks, everybody, for joining us. We look forward to seeing you at upcoming events, and I hope you have a great rest of your day.

Tom Shea (Co-Founder, CEO and President)

Thank you.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.