NCNO earnings call for the period ending June 30, 2024.
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nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
NCNO earnings call for the period ending June 30, 2024.
Image source: The Motley Fool.
nCino (NCNO -0.35%)
Q2 2025 Earnings Call
Aug 27, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by, and welcome to nCino’s second quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Harrison Masters, director of investor relations. Please go ahead.
Harrison Masters — Director, Investor Relations
Good afternoon, and welcome to nCino’s second quarter fiscal 2025 earnings call. With me on today’s call are Pierre Naude, nCino’s chairman and chief executive officer; and Greg Orenstein, nCino’s chief financial officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management’s current views and expectations entail certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry, and global economic conditions.
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 just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com.
With that, I will turn the call over to Pierre.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, Harrison. Welcome, and thank you for joining us today. We are very pleased with our second quarter financial results, once again, exceeding our guidance for both subscription and total revenues as well as for non-GAAP operating income. Before I turn the call over to Greg to provide you with additional financial details on the second quarter, I would like to argue through what we are seeing in the market.
In the United States, sentiment in the financial services industry has improved quite a bit from a year ago, with FI balance sheets generally healthy and net interest margin headwinds abating. Buying behavior in both the U.S. enterprise and community and regional markets accelerated in the first half of fiscal ’25 with gross bookings in the U.S., up 36% over the first half of last year, including mortgage and up 67% without mortgage. This momentum has been driven primarily by expansion opportunities within our existing customer base as more and more customers embrace our single platform.
As of the end of second quarter, our U.S. enterprise and community and regional businesses were both over 50% of their way to their total gross bookings goals for the year. In our U.S. mortgage business, we signed six new mortgage customers in the second quarter, four of which were financial institutions.
Lending volumes and market activity did remain relatively suppressed in what would otherwise historically be a seasonally strong selling quarter. We maintain our view that U.S. mortgage revenues will be dilutive to overall growth for nCino this fiscal year, but we expect interest rate cuts to be a catalyst for reaccelerated growth in this business starting in the fourth quarter and, as we look into next year, consistent with our previous comments. We are very pleased to have successfully navigated through a difficult mortgage market over the past couple of years and with approximately 40% of our U.S.
mortgage logos and 45% of our U.S. mortgage revenues now on our new pricing model. We believe we are very well situated to benefit from the expected increase in mortgage activity, including from one of the largest homebuilders in the United States which began the nationwide rollout of the nCino Mortgage Solution in July. Turning to our business outside of the U.S.
Our pipelines have grown nicely this time last year. But the international markets we operate in remain more challenged than in the U.S. As a reminder, our pipelines outside of the U.S. are comprised primarily of new logo opportunities, which do inherently take longer to close in any business climate and can be much more lumpy in light of the large bank nature of this business.
That said, we do expect our international operations to add a healthy number of new logos in the second half of the year. You’ll recall on our fourth-quarter earnings call, I said having roughly around 40% of our total gross bookings in the first half of the year is a more normal picture for the year. Gross bookings for the first six months were approximately 36% toward our annual goal, highlighted by overperformance in our legacy U.S. business while our U.S.
mortgage and international businesses were more challenged. As we look at our sales pipelines, we believe we are on track to meet our gross bookings goal for the year. We are particularly encouraged to see an increasing number of large enterprise opportunities in both our newer and established markets. On a net bookings basis, we ended the first half of the year up approximately 17% year over year, and we believe we are on track to our goal of net bookings being up 50% year over year.
In the second quarter, over half of our total company bookings came from outside of commercial lending, including over half of new customer deals and we added eight new consumer lending and five new deposit account opening customers, two of which added both solutions. Legacy systems and processes continue to bog down the middle and back office of financial institutions and our digital channels and automation are bringing speed and efficiency they never thought possible. For example, a $2 billion bank in New England shared they have taken a 41-minute deposit account opening process down to just four minutes for business clients and removed the need for a banker to get involved. Another community bank in Tennessee reduced approval times for consumer loans by 95%.
In the consumer banking world, the speed with which the financial institution can fulfill requests for products and services has everything to do with client satisfaction. With a quicker yes, nCino consumer lending and deposit account opening, customers are realizing a true competitive advantage. And with more product depth, we are delivering even more value to the lines of business already on our platform. For example, a $20 billion bank became one of our largest portfolio analytics customers, expanding their adoption from commercial lending and deposit account opening to also include portfolio analytics for CRE stress testing.
By bringing back office portfolio-level risk analysis onto the same platform used for originations, this bank is enhancing the availability and suitability of data for risk management. Again and again, customers demonstrate that adopting multiple solutions on a single platform for nCino yields a consistent and more enjoyable client experience and more efficient operations within the institution. Efficiency continues to be a core mandate for every financial institution, and we continue to make investments to reduce the cost of ownership by reducing implementation timelines, hardening, plug-and-play third-party integrations, and streamlining ongoing administration. One of the largest banks in New Zealand went live with nCino during the second quarter, a key milestone in the program that will allow this FI to retire over 40 legacy systems.
We aim for that level of efficiency across every business line in the financial institution. Turning to Banking Advisor. We are quite pleased with the progress we have made bringing our unique data capabilities and AI to financial services through this product family. Even though Banking Advisor only became generally available in the second quarter, we signed eight Banking Advisor deals in the quarter across the community, regional, and enterprise market segments in the U.S.
and Canada and have taken our first customer live with it. Our knowledge base and narratives drafting skills have strongly resonated with FIs across asset classes, representing a diverse cross-section of our customer base. Long term, our Banking Advisor road map is focused on opportunities to go even deeper with intelligence and automation, enabled by our unique access to financial institutions’ data which the team has done a great job obtaining consent to use. On the M&A front, we are pleased with the progress we have made integrating both DocFox and Allegro.
In particular, the market response to the commercial onboarding and account opening functionality we acquired with DocFox has far exceeded our expectations. We are actively exploring opportunities to accelerate this integration along with the rollout of this product outside of the U.S. especially as customers are looking to purchase this product as part of our single platform versus on a stand-alone basis. With that, I’ll hand it over to Greg to cover our financials.
Greg Orenstein — Chief Financial Officer
Thank you, Pierre, and thanks, everyone, for joining us this afternoon to review our second quarter fiscal 2025 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. As Pierre noted, we are very pleased with our second-quarter financial results.
Total revenues for the second quarter of fiscal ’25 were $132.4 million, an increase of 13% year over year. Subscription revenues for the second quarter were $113.9 million, an increase of 14% year over year, representing 86% of total revenues, both ahead of the top end of our guidance. Mortgage subscription revenues were approximately $17 million or 15% of subscription revenues in the quarter, representing year-over-year growth of 4%. Churn, including for mortgage, continued to moderate through the second quarter and remained in line with our $20.5 million churn forecast for the year.
As we have discussed, mortgage churn peaked in October last year, and total churn peaked in the fourth quarter, which negatively impacts our growth rates this year. Professional services revenues were $18.5 million in the quarter, growing 7% year over year. Our customers and prospects continue to exhibit a sensitivity to consulting rates which we are addressing by more strongly recommending gold standard out-of-the-box deployments in order to reduce implementation timelines and administration costs post go-live. Non-U.S.
revenues were $27.5 million or 21% of total revenues in the second quarter, up 25% year over year. International revenues are more dependent on new customer sales given the smaller installed customer base and the fact some of our newer solutions are not yet available outside of the United States. We expect further moderation of international revenues growth, more in line with overall company’s revenue growth until the new logo sales we plan to sign in the second half of this year impact revenues. Non-GAAP gross profit for the second quarter of fiscal ’25 was $86.7 million, an increase of 13% year over year.
Non-GAAP gross margin was 66% compared to 65% in the second quarter of fiscal ’24. Non-GAAP gross margin benefited from our amended agreement with Salesforce and from the larger mix of subscription revenues. Non-GAAP operating income for the second quarter of fiscal ’25 was $19.3 million compared with $11.2 million in the second quarter of fiscal ’24. Our non-GAAP operating margin for the second quarter was 15% compared with 10% in the second quarter of fiscal ’24.
Our annual Insight User Conference contributed approximately $2 million to a sequential increase in sales and marketing costs. Additionally, the acquisitions completed in the first quarter contributed approximately $7 million of annualized costs to research and development. Non-GAAP net income attributable to nCino for the second quarter of fiscal ’25 was $15.8 million or $0.14 per diluted share compared to $10 million or $0.09 per diluted share in the second quarter of fiscal ’24. Our remaining performance obligation, or RPO, was $1.04 billion as of July 31, 2024, up 12% over $929 million as of July 31, 2023, with $698 million in the less than 24 months category, up 10% from $636 million as of July 31, 2023.
We ended the second quarter with cash and cash equivalents of $126.8 million, including restricted cash. Net cash provided by operating activities was $5 million compared to $12 million in the second quarter of fiscal ’24. Capital expenditures were $444,000 in the quarter, resulting in free cash flow of $4.6 million for the second quarter of fiscal ’25. We repaid $15 million on our revolving credit facility in the second quarter and plan to pay down the remaining $40 million of borrowed principal during the rest of this fiscal year as we generate cash.
Note that unbilled accounts receivable has increased by $4.8 million since January 31 of this year. Unbilled accounts receivable are recorded when revenues earned on a contract exceed what has been billed to date for that contract. For nCino, this typically occurs when fees increase during the contract term, including under platform pricing arrangements, and revenue recognition aligns to the satisfaction of performance obligation rather than to billings. These platform pricing arrangements are becoming more commonplace for us as we execute on our strategy to evolve to a platform pricing model.
Accordingly, comparisons to previous quarters’ calculated billings may not accurately reflect trends in our business and deferred revenues are increasingly less predictive of the revenues that will be recognized in subsequent periods. Turning to guidance. For the third quarter, we expect total revenues of $136 million to $138 million, with subscription revenues of approximately $117 million to $119 million. For full fiscal year ’25, we continue to expect total revenues of $538.5 million to $544.5 million, with subscription revenues of $463 million to $469 million.
As noted, our churn expectations for fiscal ’25 currently remain in line with the $20.5 million we discussed on our two previous earnings calls. Our financial outlook includes 5% subscription revenues growth for U.S. mortgage this fiscal year with no year-over-year growth expected in the third quarter. Our guidance maintains our assumption that increased mortgage lending volumes do not start to positively impact revenues until the fourth quarter.
We continue to assume Banking Advisor’s contribution to subscription revenues this year will be de minimis as we are offering it at an attractive initial price point to garner adoption. Our efforts to transition the company’s revenue model to platform pricing continue in earnest. Our new and expansion sales of consumer lending, deposit account opening, and U.S. mortgage solutions are on platform pricing, and we continue to refine solution bundles pursuant to which we will roll out platform pricing across the remainder of our business later this year.
Beginning with this formal pricing change, we expect Banking Advisor to be part of every new deal and we expect usage will drive a more meaningful contribution to revenues next year and beyond. Non-GAAP operating income in the third quarter is expected to be approximately $21 million to $22 million and non-GAAP net income attributable to nCino per share to be $0.15 to $0.16. This is based upon a weighted average of approximately 118 million diluted shares outstanding. For the full year, in light of the outperformance in the second quarter, we are increasing our non-GAAP operating income outlook and now expect non-GAAP operating income for fiscal ’25 to be $87 million to $90 million.
For full fiscal year ’25, non-GAAP net income attributable to nCino per share is expected to be $0.66 to $0.69 based upon a weighted average of approximately 117 million basic shares outstanding. With that, we’ll open the line for questions.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Adam Hotchkiss from Goldman Sachs.
Your line is now open.
Adam Hotchkiss — Goldman Sachs — Analyst
Great. Thanks so much for taking the questions. I guess to start, Pierre, it’d be great to just understand at the high level where financial institutions broadly are on willingness to spend. I know you talked about the strength and referenceability of the legacy U.S.
business. But maybe just talk a little bit about how you’re building trust around some of these newer products like Banking Advisor, DocFox continuous credit monitoring and how we should see those flow through the model.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Thanks a lot, Adam. Yes, what we see. In the U.S., it’s more of a volume business still.
I don’t see as many very large transformation projects like we’ve seen in the past. But it’s good volume. People are continuously innovating and upgrading and tuning what they do in their systems. And you could see that in the results.
So, there’s clearly a return to normalcy in the market here. When you look at the international markets, that’s an enterprise market. So, what you’ll see is it’s more lumpy. It’s big deals.
But yes, it’s good news. We are looking at the pipelines, and I’m beginning to see these big transformation deals. Because if you look back at history, they are somewhat behind the U.S. in the cycle of cloud adoption, automation, drive in efficiency.
What I’m beginning to see is that in places like Japan, Australia, and in Europe, etc., I’m beginning to see on the pipeline some of these bigger transformation deals, again, which bodes very well for us. When it comes to new technologies, there’s always your hype cycle. People adopt it early, then they want to start seeing the benefits, they want to start hearing what’s going on. Is it accurate? How does it pass muster with regulators, etc.? But I will tell you, I’m very pleased with that number of deals on Banking Advisor so quickly.
We’ve got a concerted effort to build out the skill set on that because that’s going to drive revenue. So, you have to realize AI and Banking Advisor is going to be not only a differentiator for us, but it’s also going to be a revenue generator. So, we’re excited about that. So, overall, more positive tone.
It is just timing as these deals come up, especially in international. And of course, the mortgage market is impacted by rates. So, we’re all waiting for September, which we believe will start changing the yield curve as well as that marketplace.
Greg Orenstein — Chief Financial Officer
Yeah. And Adam, just to add one other thing, in terms of the lumpiness of the international markets, Pierre touched upon a couple of countries, but we see in Japan, EMEA, Australia, and New Zealand, those pipes up 30% year over year, and again, with some of those larger opportunities. And so, we’re encouraged by what we’re seeing out there, not just in the U.S. but on a global basis, although, of course, it never comes as quickly as we’d like.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Got it. Thanks. That’s helpful.
And then, Greg, could you just maybe bridge us between some of the positive commentary around U.S. demand and new products and then the sequential step down in RPO? And then maybe just also remind us how some of that commentary generally flows through the model with things like RPO and billings and what explains the step down there?
Greg Orenstein — Chief Financial Officer
Yeah. From an RPO standpoint, again, consistently, we highlight the lumpiness of that and again, not using that as a great metric. Perfect example this quarter, Adam, we highlighted in our press release that we renewed a relationship with our largest client in the U.K. We renewed it for a three-year deal, right? Had that been a five-year deal, that would have skewed RPO meaningfully, right? And so, again, we’re always cautious and urge you guys to be cautious as you look at that.
From a renewal standpoint, this quarter, nothing out of the ordinary, although I would call out from a duration standpoint, some of the mortgage renewals were a little lower than normal. And so, that also would have impacted RPO. But overall, again, getting back to kind of what we highlighted in our Q4 and Q1 call, we like to be halfway through the year at around 40% of our total gross bookings for the year. And we see ourselves within striking distance of that.
And so, I think as we sit here from the first half of the year, I think we’re feeling pretty good when we look at what we see ahead of us in the second half of the year.
Adam Hotchkiss — Goldman Sachs — Analyst
OK. Very helpful. Thanks, Pierre. Thanks, Greg.
Greg Orenstein — Chief Financial Officer
Thanks, Adam.
Operator
Thank you. And one moment for our next question. And our next question comes from Terry Tillman from Truist Securities. Your line is now open.
Terry Tillman — Analyst
Yeah. Thanks for taking my questions. Hi, Pierre, Greg, Harrison, and Joanne. Just the first question is because it was in the prepared remarks, and I think you all talked about it multiple times.
But in terms of — I’m just trying to understand how important platform deals and platform pricing structure is going to be in terms of hitting this 50% net bookings growth for this year. And kind of in that same vein, as we look into next year, I think the idea is like, look, the business is coming back and potentially sub revenue could accelerate leaving the year into next year. How important is platform monetization into the next year as well? And then I have a follow-up for Greg.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I would say, look, it’s going to happen late in the year, and we’re going to start with renewals and new business. We haven’t specified the specific date to be busy with field enablement, etc. But we are not dependent on that pricing structure change to make the numbers.
We’ve been running the company like this for 12 years. We know exactly how to do this. We’re going to make sure the field is prepared, and I would not say our numbers and how the years can perform is dependent on our change to platform pricing at all. I would tell you that platform deals, which means they buy everything for us, that moves the needle, and we love those, OK? But the pricing model is not going to necessarily this year, dependent on that.
And also remember, our average contract duration is about, what, 3.8 to four years. And therefore, it’s going to take us three to four years to get through this cycle as renewals come up to change people over to platform pricing.
Terry Tillman — Analyst
Yeah. That’s helpful, Pierre. Thanks for that. And I guess, Greg, just a follow-up.
In terms of cash flow in 2Q, anything you could call out there related to timing or collections? And for the full year, does anything change about how we should be thinking about free cash flow for the full year? Thank you.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Terry. You may have heard in my comments, focusing you guys on the unbilled AR, which was up just under $5 million since the beginning of the year. And just to reiterate what I said, unbilled AR is recorded when revenues earned on a contract exceed what’s been billed.
And that typically occurs when prices increase, free being so important for us because we expect these customers to be around 10, 15-plus years. And so, we always want to have that be the stepping-off point when we go into a renewal discussion. And so, we’re seeing some of that as we transition and maybe even a little bit more of that as we transition to platform pricing and kind of navigate this. And so, that’s driving some of that differentiator in billings ultimately.
And again, this ultimately is a reflection of 606 where you straight line what you bill over the term even agreement. And again, your billing may not match up with what you’re recognizing earlier in the contract. You’re ultimately going to build more than revenue later in the contract. So, over time, it’s a wash.
And it certainly doesn’t change our long-term view of cash, although there could be some impact in the short term. Is that responsive to your question, Terry?
Terry Tillman — Analyst
Yeah. Yeah. I mean, it is helpful. I mean, it sounds like there’s just some mechanics.
And like you said, you explained it. But in the second half of the year, I mean, even with that in mind, I mean, should we see some seasonal strength in like just maybe you can just remind us on seasonal strength in free cash flow, notwithstanding the dynamics you called out. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah, sure. You recall the first half of the year for us is more cash generation than the second half. So, from a seasonality perspective, historically, we have had lower cash generation in the second half, and that’s based a lot on just timing of deals historically and when we ultimately bill.
Terry Tillman — Analyst
Got it. Thank you.
Greg Orenstein — Chief Financial Officer
Thanks, Terry.
Operator
Thank you. And one moment for our next question. And our next question comes from Aaron Kimson from Citizens JMP. Your line is now open.
Aaron Kimson — JMP Securities — Analyst
Hey, thank you, guys, for the questions. First one, what would you say are the one or two largest execution risks associated with the pricing transition on the commercial side? And will the pricing transition be accompanied by a lot of operational changes to sales management structure, comp plans, new roles, or it’s just going to be pricing?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. You know, we’ve done extensive market studies around this, and to no surprise, the customers actually prefer this new pricing model we’re going to roll out for the simple reason. They are used to buying either on asset size or consumption models. And I want to make 100% sure all of you understand that we are not moving to a pure consumption model.
We are moving to a guaranteed foundation of pricing that will be based either on volume or on the asset side of the institution. And then when they exceed that, they will pay a unit cost that’s higher than what’s in the bundle guaranteed pricing to actually motivate them to push their minimums up, OK? So, there’ll be more play on volume variation, but it will be a smaller play in the financials of the company. While our studies show that people will much prefer that versus nickel and diming, two seats, 10 seats, 15 seats, if I used the seats or not, OK? Second to that, from a strategic perspective, we are helping banks to be more efficient and more effective. But I think that will accelerate with the adoption of AI analytics and machine learning.
And as you do this, you’re purely a seat-based business, then essentially when you make them successful, they’re going to pay you less, and that’s not a good business model. So, I don’t see a lot of risk from a client backlash perspective or a renewal perspective. The biggest thing for us is going to be disciplined execution internally. I am personally involved with our sales leaders, our marketing leaders of how we roll this out.
And I can tell you I’m highly confident this is going to be a very positive thing for the company.
Aaron Kimson — JMP Securities — Analyst
Thank you. That’s really helpful. And then just when we talk about, I think it was on the 4Q call, subscription revenue growth on track to exceed 15% in FY ’26. Is that in part driven by an acceleration in nCino Mortgage that you kind of talked about it kicking in, in fiscal 4Q of ’25 continuing into next year? Or do you have visibility to that still happening just with the core commercial business and consumer ex-mortgage?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. We have not giving further or addressed FY ’26 yet in any way, shape, or form. We are going to stick to your comments from earlier around that. And then we’re going to focus on executing this year because what we book from now on to the end of the year is largely going to contribute to next year’s growth.
So, it’s always really important for the team to focus on closing business as early as we can this year and actually set us up for next year for great success.
Greg Orenstein — Chief Financial Officer
Yeah. And Aaron, just to add to that, again, if you look at what we’ve been doing from a breadth and depth of product perspective, you mentioned mortgage. We talk about DocFox. We talk about Banking Advisor.
We talk about where we are on the consumer lending side, talk about Allegro, we talk about the international opportunity, again, lumpiness but we see a lot of opportunity there. I think that’s one of the things that we’re excited about as we put the last couple of years between liquidity crisis, interest rates, and COVID behind us, all the investments that we’ve made and the levers that we have for meeting our long-term targets from a growth standpoint. And so, to Pierre’s point, right now, I think it’s really just about keeping our heads down and executing, and I think we believe that all of the ingredients are there for us to continue to track toward those targets.
Aaron Kimson — JMP Securities — Analyst
Thank you, guys, so much.
Greg Orenstein — Chief Financial Officer
Thanks, Aaron.
Operator
Thank you. And one moment for our next question. And our next question comes from Saket Kalia from Barclays. Your line is now open.
Saket Kalia — Analyst
OK. Great. Hey, guys, thanks for taking my questions here. Hey, Pierre.
Hey, Greg. Hey, guys. Pierre, maybe just to start with you. Clearly, a strong, solid U.S.
and a very strong pipeline internationally. Maybe just to make sure the question is asked. Can you just talk about how sort of the competitive landscape internationally looks versus the U.S.? Are those roughly similar in terms of competitive landscape? Or is there anything different that you’re seeing as you get deeper and deeper into those markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. No. So, there’s a number of differences. The first one is motivation to buy.
If you look at the U.S., it’s very shareholder and profitability and efficiently focused. If you look at Europe and most international, it’s more compliance regulation-focused. And these are not massive zero to 100. But if you go 45-55, that’s how these balances come in.
So, when you enter there, you have to understand the motivation is more toward compliance, regulation, government regulations, etc. So, that’s one big difference. The second one we see is that — and this came out of a lot of these pricing studies and market research we did, is that in the U.S., we sell more platform deals which is your community, and regional space will take everything we got. And they believe in the simplified IT infrastructure.
When you go to the enterprise, you could get the whole commercial bank or at least half of it in one shot. When you go to Europe, those are a bit more fewer and far between. And people prefer to buy point solutions that they can slot into the IT infrastructure, so it’s a bit smaller, a bit more focused because the P&L are also slightly different to you, OK? So those are some of the nuances we see in the market. We actually make sure that we price, and we package and have the flexibility to address these markets as they want to buy as opposed to us.
On the flip side, it’s the same phenomenon here. It’s just behind the U.S. If you look at — once you get into a market and that market really begin to understand what we do, then the dominoes fall. New Zealand is a great example of that.
The U.K. is another good example of that, OK? And I’m seeing early signs in other markets like Australia and Japan, of that coming along as well. South Africa is a much smaller market, but we’ve now got a great presence with the DocFox acquisition, which is all now nCino customers as well as our direct-to-bank market there.
Saket Kalia — Analyst
Got it. Got it. That’s super helpful, Pierre. Greg, maybe for my follow-up for you.
I know we’ve talked a lot about platform pricing, but I want to just maybe focus the question a little bit. I thought it was a really useful stat that you gave just on I think it’s 40% or 45% of the mortgage business, depending on revenue or logos, 40% or 45% of that business that’s being priced on sort of a platform basis. Again, just focusing on the mortgage component, do you sort of see that getting to 100% at some point? And does that take three to four years to sort of go through that process, like Pierre mentioned earlier? Or could that happen at a slightly different time frame?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Saket. For mortgage, those contracts are a little bit shorter in duration on average. And so, that could happen quicker than the four years, more I’d say, probably in the two- to three-year range. And in terms of those discussions and receptivity, I think just like with the legacy nCino business, I think, very well received.
If you think about it, the seat-based pricing that we did for nCino Legacy’s business as well as for that mortgage business, right? And when we acquired SimpleNexus, they had a seat-based business as well. But those were really the anomaly. And so, we really have come around as we’ve evolved platform pricing throughout the company. and it’s more in line with what our buyers or our customers are buying and how they buy.
And so, I think it’s been very well received throughout the company, and we’ll continue to execute on that strategy as we drive toward 100% adoption over time.
Pierre Naude — Chairman and Chief Executive Officer
Saket, just a few other things about mortgage. I think it’s important to realize SimpleNexus was mostly an IMB provider. That’s where they focus, and that’s why they built a good brand. When it came over to nCino, we widened that whole scope and said, “Look, we’ve got a good brand in banking.
We’ll go there.” We’ve got homebuilders, which is another sector, and then IMBs. The one sector that is still struggling today is the IMB sector. Although the great news is a few weeks ago, we all read that the IMBs are now on average profitable. And then we all expect the rate cut in September somewhere.
So, that size of that market is, I think, through the trough, and they are going to start doing better. The industry as a whole, OK? Number one. The homebuilders, we’ve done fantastic with that. They see the implementations we’ve done.
They see the actual success we provide some of their competitors as well as the innovation and the investment we make into the product. And then you come over to banking. Banking mortgage which was much lower proudly with SimpleNexus. We’ve now focused on deploying the teams is actually year over year, 46% up over last year.
So, what we’re doing with that business is — and banking is a lot less risky for the mortgage business because once they bought it stays there, OK? It’s not like IMBs doing M&A all the time or try to shut down the business. So, I believe that business for us is a lot more balanced now. It’s more growth-oriented. And as soon as this rate cut comes and the volumes go up, I’m actually highly optimistic that mortgage was outperforming at a different level for us.
Greg Orenstein — Chief Financial Officer
Yeah. And just to add, Saket, that 46% data point that Pierre gave you was in ACV bookings year over year for the FI space.
Saket Kalia — Analyst
Got it. Super helpful, guys. Thank you.
Greg Orenstein — Chief Financial Officer
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Charles Nabhan from Stephens. Your line is now open.
Charles Nabhan — Stephens Inc. — Analyst
Good afternoon, and thank you for taking my question. I guess what I’m getting at here is, as you broaden the product set, could we expect to see a shorter book on the bill cycle as you cross-sell before into the existing base? And just trying to think about what that could mean for the 24-month portion of the RPO as well as your revenue visibility over the next couple of years.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. It’s very interesting. The first half of the year with 80-20 cross-sell, 80% cross-sell, 20% new logos. Back half of the year looks almost like the opposite.
I cannot project exactly what it’s going to look like, but if I look at the pipelines in the balance of business, a lot more new logo deals versus cross-sell. We used to run at 50-50, we now got so many cross-selling products. I think that 50-50 is going to move more at like a 60-40, if you asked me just to guess here because we’re going to have commercial onboarding. You’re going to have all your NIC products, you’re going to have Banking Advisor, your AI product, your analytic products, OK? We’ve got consumer that’s very new.
We’ve got small business coming in. you’ve got deposit account opening. This last quarter, again, the noncommercial products was over 50% of bookings. So, clearly, the company has balanced the business to a much different extent than what it used to be.
So, I would just tell you, the back end of the half is going to be the investor of the first half. But yes, over time, that 60-40 versus 50-50 is what I foresee on cross-sell, 60%; new logos, 40%.
Charles Nabhan — Stephens Inc. — Analyst
Got it. And as a follow-up, could you talk about where you’re investing internationally perhaps from a geographic standpoint as well as introducing greater product parity into some of your less mature markets?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. So, our current international focus is as follows. We’ve got a great operation in Canada, then the U.K. Ireland is the hub for us, and then we focus on the Nordics, the Benelux, and Spain.
We have decided to deemphasize Germany and France. There may be a day we go back in there. But for right now, let’s focus on Spain. It’s got great massive international banks, that sets us into Latin America as well as we’ve got a number of great logos outside of Spain of those Spanish banks.
And then you go down to New Zealand, Australia. Obviously, we’ve got South Africa with the DocFox acquisition as well as we have had some customers there beforehand. So, in New Zealand and then Japan. And that’s where we’re going to focus right now.
That is a massive TAM and SAM, these countries are tea-drinking countries, English-speaking, similar laws, similar banking structures, etc., and we have found success there, as well as we follow where Salesforce has had success. And there’s data residency. I feel very good about that. I think what we have to do now is focus on these.
We’re building new product out of the U.K. as well as Australia for both onboarding as well as mortgage. We’ve had some wins there. Those products are coming along nicely.
So, what I would say is we’ve got a very focused strategy in markets where we feel it’s familiar and we can be successful.
Charles Nabhan — Stephens Inc. — Analyst
Got it. I appreciate the color. Thank you.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Alex Sklar from Raymond James. Your line is now open.
Alex Sklar — Raymond James — Analyst
Great. Thank you. Pierre, just in terms of the confidence you expressed around achieving that 50% net bookings growth this year, I think the lapping of the mortgage headwinds part is clear. Just could you elaborate a little bit more on your pipeline comments? Where are you sitting here most optimistic today in terms of reiterating that 50% outlook? And then a related question, but third quarter historically is not a big enterprise buying quarter.
I know you talked about some Tier 1 activity, enterprise activity back in the pipeline, both in the U.S. and in Europe. Is that still a fair way to think about that segment, though, that it’s going to be more back half of the fourth quarter of the year weighted? Thanks.
Pierre Naude — Chairman and Chief Executive Officer
Yeah. I believe we’re going to have a good third quarter, but then fourth quarter is going to be big for us. that is traditionally how the quarters flow out, especially the enterprise. Many of these banks is at year-end that ends in October or September, so their budget years kicking.
We’ve got great visibility into that. We understand their board dates. We know exactly when they make decisions. Many of the stuff is preapproved.
They just have to get for a final board approval. So, we do see a massive fourth quarter as well, but third quarter is not going to be negative. It’s just a normal seasonality as you’re going to see there. Now, I want to make some comments on the community bank space.
It’s like a machine. It just rolls forward, OK? And that’s why I love that business so much. I think the mortgage will start seeing a slight improvement as the rates come down and the IMBs becomes more profitable. Enterprise in the U.S.
is on a good footing. We mentioned over 50% of bookings already exceeded this year so far. Then you go international, a little bit more lumpy, but I’m seeing all the right movement and all the right behavior. So, we are feeling confident that those numbers we put on the table is not only makable, it’s within reach.
There’s always a case — a middle case, a low case, and a great case. And we feel that we’ve struck the right balance to actually make those numbers.
Alex Sklar — Raymond James — Analyst
OK. Thanks for that color, Pierre. Greg, just maybe one for you. I appreciate all the color on — in your prepared remarks on comparability issues with deferred revenue, and I know you’ve always talked down RPO as a key metric.
In the past, you’ve kind of given some color on ACV or ARR growth, just to kind of combat that RPO. Is there anything you can tell us in terms of like how ACV or ARR bookings kind of fared in second quarter? Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks, Alex. Yeah, nothing beyond what we noted in our prepared remarks. We did try to give you quite a bit of color in terms of some of the metrics that we had laid out and enabling you guys to track us in our progress toward those numbers.
That was really our thought as we came into this call.
Alex Sklar — Raymond James — Analyst
OK. Great. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Alex.
Operator
Thank you. And one moment for our next question. And our next question comes from Michael Infante from Morgan Stanley. Your line is now open.
Michael Infante — Morgan Stanley — Analyst
Great. Thanks for taking our question. Pierre, deposit attraction and retention has commanded a pretty outsized mind share for bank executives over the last 12 to 18 months. I’d be curious to get your perspective on a potential inflection in loan growth in calendar year ’25 and whether or not that could be a catalyst for the U.S.
market to get a bit more constructive on some of the larger-scale transformations.
Pierre Naude — Chairman and Chief Executive Officer
That is a very good point because they buy where their attention span is and what they actually believe they have to solve. I do think there will be an inflection point in loan activity. However, what we’re seeing now is the markets have matured, the companies understand what they’re doing. They understand what nCino does, is clearly the market leader.
We’re moving now toward portfolio management, which if you look at the workload of that book of business of the bank, origination is important. It’s a great cost driver, and you can get efficiency there. But now the big next thing is going to be that portfolio management and automation of calculating your risk and exposure. And how can you project that? And how can you impact the balance sheet? And so, we’re seeing great traction and interest in how we’re going to do portfolio management and help the people actually to use the systems we put in place more effective.
That’s not only important from an efficiency perspective but also a differentiation for us. So, I see that as a driver as well as the loan demand that you’re talking about.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s clear. Maybe, Greg, a quick one for you just on the mortgage business. I think I was looking at some of the MBA expectations for volume growth in ’25.
And looks like a pretty healthy snap back to, call it, 20% growth next year versus close to 40% declines in ’24. Obviously, SimpleNexus took a ton of share this year. I’m just curious just in terms of a general framework for how to think about that, is there any reason to think that the mortgage business wouldn’t grow sort of in line with broader market growth or even at a premium to the overall market just given the level of share that you’ve taken this year?
Greg Orenstein — Chief Financial Officer
Thanks for the question, Michael. Again, as we’ve talked about with these contracts, where we have the guaranteed platform price, and then that comes — or what comes with that is a certain number of loans that they’re entitled to. What we still need more data on as volumes ultimately do start to increase is where those minimums were set versus the go-forward business of each of our customers, right? And so, we still need some more data points to understand when they’re going to trip over the minimums. And ultimately, that’s going to be upside revenue.
We think we’ve positioned ourselves incredibly well to participate in that increased volume. But a little bit too soon, I think, to determine whether it’s going to align with that 20% or be some other number. But that was really one of the reasons we have such a focus on changing those contracts and that really being the first evolution of platform was to be able to benefit from and participate in that increased volume, which, as you said, folks are expecting next year to be a positive year and obviously, a big change from what we’ve seen over the last two years. And the other thing, again, we talked about growth this year, but I think that mortgage business has performed incredibly well over the last two years during obviously incredibly difficult time period.
And I think those logos that we’ve been able to take and the market share that we’ve been able to gain, again, puts us in a perfect spot to be able to benefit from that. without being able to specifically answer your question because I think we just need more data points and trends in order to do that.
Michael Infante — Morgan Stanley — Analyst
Understood. That’s good color. Thank you both.
Greg Orenstein — Chief Financial Officer
Thanks, Michael.
Pierre Naude — Chairman and Chief Executive Officer
Thanks.
Operator
Thank you. And one moment for our next question. And our next question comes from Nick Altmann from Scotiabank. Your line is now open.
John Gomez — Scotiabank — Analyst
Hey, guys. It’s John Gomez on for Nick Altmann. Can you talk about the pipeline in terms of how has changed when thinking about retail versus commercial? And any changes to the pipeline makeup heading into the second half and where reps are leaning into?
Greg Orenstein — Chief Financial Officer
From a pipeline perspective, John, what we’re seeing now is more like high 50s to 60-ish noncommercial. And so, again, that trend continues as some of those noncommercial products mature and ultimately, we get more referenceability from them. And so, we’re excited about that mix. I mentioned earlier about Japan, EMEA and Australia, New Zealand, again those pipes just being up 30% year over year on an aggregate basis.
But as we think about commercial and noncommercial it’s kind of 40 60-ish as we look at the pipe right now, noncommercial being the higher number. And it’s — we see it maturing and we see it growing. And ultimately, we’re just looking at our colleagues and team to focus on executing and getting these deals over the line.
John Gomez — Scotiabank — Analyst
Got it. That’s helpful. And as a follow-up, with your comment on the pipeline mix leaning more heavily to net new versus the first half, are you seeing more multiproduct discussions upfront for those net new customers? Are you seeing more multi-department or more geographical reach within those deals? Any color there would be helpful.
Greg Orenstein — Chief Financial Officer
Yeah. I think it depends on the geo. Getting back to Pierre’s comments earlier, who you’re selling to from a geographic perspective? In the U.S., I’d say yes. less so internationally.
And then again, within the U.S., as you talk about community versus maybe enterprise bank, as we mentioned, that platform, multiproduct sale, we see continued traction there. And again, I think that’s a reflection of the maturation of some of those newer products like consumer lending. We talked about the eight new loan — consumer lending deals that we got this quarter, the five DAO deals that we got this quarter. And so, we’re excited about that in that trend.
Operator
Thank you. And one moment for our next question. And our next question comes from Joe Vruwink from Baird. Your line is now open.
Joe Vruwink — Robert W. Baird and Company — Analyst
Hi. Great. Thanks for taking my questions. I think Pierre made the comment earlier that when he looked at the pipeline, you see larger enterprises across both new and established markets.
I guess, is an imminent rate cut enough to catalyze decisions for some of those big enterprises in the pipeline? Does it happen within the next two quarters? Or are you kind of going into this, expecting maybe a potential lag, and this all ultimately just aids the outlook into the next fiscal year?
Pierre Naude — Chairman and Chief Executive Officer
No. I don’t see that these people are sitting there waiting for a rate cut to make a strategic decision. These deals that we’re working on is nine, 12, 16 months old, you have to prepare the full board, you prepare the management team, and they look at actually the much bigger picture strategically where the bank is going to be two, three, five years from now. I would say the driver is more how do you utilize intelligence of the future if you don’t have an operating platform that allows you to standardize your method, your procedures, and how you people interact with data and their customers, OK? It’s back to the old IT infrastructure issue.
I mentioned in my prepared remarks that one bank is going live. We removed 40 systems. I mean, those are the issues they deal with. Will the rate cuts help a little bit to nudge somebody forward? Maybe.
But in our conversations, it’s a lot more strategic around where they see the bank three and five years from now.
Greg Orenstein — Chief Financial Officer
Joe, when you look at the business, really the only, let’s say, rate sensitivity that we really have is on the IMB side of the business, our homebuilders maybe as well. But when you look at the rest of the business, historically, it’s not been very rate-sensitive. Obviously, when you have what we went through over the last two years with this unprecedented rise in rates and the liquidity crisis, well, that’s unusual, and that did impact our customer base. But as we distance ourselves from that and get back to maybe more of a normal operating environment, again, really where the interest rate cut will be impactful is on that IMB part of our business on the mortgage side.
Joe Vruwink — Robert W. Baird and Company — Analyst
OK. That’s helpful. And then I wanted to go back to the mortgage conversation, specifically thinking about those MBA forecasts, those are proven out, purchase origination is going to be quite good in 2025 and 2026, not back to the heyday of 2021. But also, you have a more robust offering now the pricing structure is going to be different, and you certainly have a customer set that’s consolidated.
When you stack up all of that, and we obviously know kind of how SimpleNexus was growing on a pro forma basis. When you compare the next two years versus prior history, can you relate those to at all in terms of what you would expect your growth rates in mortgage to settle out at in kind of upturn, not historically robust but a better environment in ’25 and ’26?
Pierre Naude — Chairman and Chief Executive Officer
I think you’re going to see a difference in our performance depending — is it a bank, is it an IMB, is it the homebuilder, OK? So, we have to slice and dice the market, firstly, to understand how the contracts are structured as well as how the bank patterns and the type of contracts that these people like. Will a rate cut and increased volume help us? Absolutely. And I’ve always been very conservative. I didn’t believe these things were going to come.
Now, I believe it’s going to come in September. And then we have to see what that does to inflation. I’ll be very frank with you. I’m still a little bit concerned that if you cut rates too soon, too fast, that weights and pricing will get us, and then boom, they stop the rate cutting, OK? So, we’re not right now looking at next year.
Number one, I want to see more evidence. And number two, I want to slowly see how the U.S. economy reacts to a rate cut and what actually the activity is beyond that and what the unemployment rate is as a result.
Joe Vruwink — Robert W. Baird and Company — Analyst
Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Robert Trout from Macquarie Capital. Your line is now open.
Robert Trout — Macquarie Group — Analyst
Thank you. Good afternoon, Pierre, Greg, Harrison. Thank you all for taking my questions. I guess if I could just start with how you think about striking the balance in showing your customers the ROI initially.
You mentioned striking the balance between adoption and demonstrable repetitive ROI. Because I think you’ve mentioned in your prepared remarks that Banking Advisor this year was started at a pretty attractive introductory price to drive adoption, which, of course, makes sense. How do you kind of — is there a framework that you kind of use as you introduce these new products, particularly as you get deeper into portfolio management to not give something away not for free, but in a way where people see what it’s worth but not at a price that scares them initially?
Pierre Naude — Chairman and Chief Executive Officer
Yeah. Robert, thanks. That’s a very insightful question. So, here’s what we do.
We literally go into these banks and based on usage analytics, we have got currently in our systems, OK? So, remember before when I go in with a new system, they’ve got new metrics, no understanding. And we literally had to get verbal measurements and people would tell us, look, it takes us about this and its guestimates and his falloff. With nCino in place, if it’s an existing customer, we can literally measure you’re spending four minutes on this task, 10 minutes on that task, etc. And then we show them Banking Advisor and say this 10-minute task is going to come down to two minutes.
Just an example, OK? So, people immediately see the value of what we’re doing there. And then just like with all new products, you go in with a low platform pricing, and you do a usage count in there. And the more they use it, the more they’re going to pay you and then the more they use it and they pay you that unit cost is a bit more expensive than the guaranteed one, and then they move the monies up, OK, which gives us guaranteed recurring revenue. So, we’re going to follow that same model.
In the early stage, we’re willing, just like we did with mortgage, in a tough time to go even with a lower guaranteed number and a higher upside for us as they start adopting and using it. If you see that product in action, it really is the closest thing to magic I’ve seen. And so, I think what we’re driving now is adoption and market penetration. And then as the product matures, it will settle down more to enhancing the skills and broadening the skills to get a much wider adoption in the bank and actually drive what I would say is material revenues for us.
Robert Trout — Macquarie Group — Analyst
It’s very helpful. Thank you. Thank you, Pierre. And then if I could just ask a very quick follow-up.
I know the mortgage industry, the IMB space has already gone through their commission realignment, if you will, a decade or so ago, more than that. But with the NAR sort of storm of cash and confusion and the potential for dislocation in that market short term. Are you at all worried that particularly simply within the IMB space, there might be some ripples that spill over into the mortgage market, mortgage originations?
Pierre Naude — Chairman and Chief Executive Officer
Well, the great news is that we’ve got a product that we sell to our clients, we help them with compensation and how to structure it. So, in this new environment, we actually can help them to do that better, number one. Number two, regardless of how mortgage brokers and real estate agents is going to get paid, people are still going to buy houses. And the moment the volume goes up, the transaction is going to come through us.
It’s by far the best product in the market. We’re making the investments. So, I feel very optimistic that automation and what we do in that market is going to be actually the winner as opposed to manual processes. And that market is a relationship market, but the more we can take the friction out of that model, the better for the market and for us.
Robert Trout — Macquarie Group — Analyst
Excellent point. Thank you.
Operator
Thank you. And one moment for our next question. And our next question comes from Ryan Tomasello from KBW. Your line is now open.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Thank you. On the international front, Pierre, I was hoping you could expand upon the product road map there. You mentioned in your prepared remarks the opportunity for bringing DocFox, in particular to international customers at some point. So, curious how you would rank order what different features of the platform still represent an opportunity to expand internationally as you kind of look across what you have in the U.S.
product set?
Pierre Naude — Chairman and Chief Executive Officer
I would say the biggest next opportunity is commercial onboarding. That is the universal problem. And our market testing has shown that everybody is clamoring for a product like that in the commercial small business space, OK? To really take that from a 6-month process down to a weeks and months process, OK? It literally is that difficult for them to open accounts. The second big product that we’re working on there is a mortgage product.
It will span from Canada into the U.K. Ireland down to Australia, New Zealand. So, those are the two, I would say, big workflow automation-type products. But then you have to realize all your NIC products as well as Banking Advisor, our global products coming out of the chute.
So, every customer will get the benefit of our intelligence and data initiatives as we go forward, and they don’t need that specific customization for local environments. And then there’s still a ton of commercial business left for us internationally. So, we can go in on three fronts from major footprints and then you start automating that with your banking advisors, NIC products. So, I feel pretty good about the footprint we’ve got there.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. And then a follow-up for Greg, maybe a two-part question here on U.S. mortgage. Greg, last quarter, you talked about M&A-driven mortgage churn as a particular area that you’re being more mindful of in terms of the guide.
I guess as you look at the mix across the U.S. customer base, mortgage customer base, are there any dynamics that make M&A something that’s more likely to go against you over the intermediate term? And then as a follow-up on the churn piece, if you can quantify where that came in, in the first half of the year and what your expectations are for the back half? Just trying to understand the weighting there in terms of whether or not churn could be a potential source of upside as we look at the second half of the year. Thanks.
Greg Orenstein — Chief Financial Officer
Yeah. Thanks for the questions, Ryan. On the M&A front, I don’t think there’s anything unique that would pose it as a specific risk. We’ve tried hard to align ourselves with the winners in the IMB space.
And to that point, we’ve tried hard and worked hard to align ourselves with some of the bigger players out there. And so, M&A, it certainly can go against you. It’s hard to predict, right, when you’re forecasting. But to the extent that there is on the mortgage side, we certainly would hope to be a beneficiary.
Even when we’ve not been in the past, some of our best salespeople are, frankly, the loan officers that use our product at a specific IMB and they go somewhere else, and they insist on SimpleNexus and now nCino Mortgage being part of their work life. And so, that actually can be a benefit as well even when a deal does go against us. But nothing unique to call out there. It’s just really more a reflection that we’re seeing some stabilization in that space.
IMBs are starting to make money again, which is great for the industry. And so, as you think about churn, it’s less about IMBs going out of business, which is what we experienced the majority of over the past two years, and more around potential M&A. To your second question around churn, we forecasted out of the $20.5 million churn for this year, $8 million in the mortgage space. Through the first half of the year, we’re about $4.75 million.
And so, we think we’re right on track. And again, expect the second half of the year to be more stable. And so, I think we feel good about where we are today.
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Great. Appreciate the color.
Greg Orenstein — Chief Financial Officer
Thanks, Ryan.
Operator
Thank you. And one moment for our next question. And our next question comes from Cris Kennedy from William and Blair. Your line is now open.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question. When you think about the new products that you have and your commentary about the pipeline, is there a way to think about how the ACV mix will evolve for nCino as you think about the next three years or so?
Pierre Naude — Chairman and Chief Executive Officer
I think you will see the current pattern holding where it will be more than 50% noncommercial. I see that pattern continuing because they’re so much bigger markets for us left in that thing. The second thing is, I think you’re going to see the 60-40 I talked about earlier about new business versus cross-sell, the cross-sell being 60 and 40. That’s the second way to look at it.
And then thirdly, if you look at the U.S. We are looking at the market here continuously. I mentioned earlier in previous calls, we are going to focus on credit unions more. And as you put dedication to those kind of markets, I think the U.S.
will outpace international in bookings for the next three years, just because of the sheer volume of institutions here and the breadth of the product set that we’ve got here. So, that’s how I look at the development of not only pipes but ACV bookings and the transition into revenue of that.
Cris Kennedy — William Blair and Company — Analyst
Great. Thanks for taking the question.
Pierre Naude — Chairman and Chief Executive Officer
You’re welcome.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back over to Pierre Naude, chief executive officer, for closing remarks.
Pierre Naude — Chairman and Chief Executive Officer
Thank you, operator, and thank you all to be on the call today and with your insightful questions, etc. Here’s my summary of what I’m seeing in the market. Great execution by the team. Team is well-positioned.
Strategically, we are as well positioned as ever in this company. We came out of two years of COVID, then liquidity crisis, and now we’re going to start seeing rate cuts. So, I truly believe that there’s better macroeconomic environments coming. At the same time, we kept our heads down.
We kept on investing in products, etc. And all of that is going to culminate in a great positioning for this company. So, I’m not only optimistic. I’m actually feeling pretty good at what I’m seeing in the pipeline, the early signs there.
So, I appreciate your analysis and your insights into our business. And hopefully, you can see the enthusiasm we have as we go forward. Thank you very much. Talk to you all later.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Harrison Masters — Director, Investor Relations
Pierre Naude — Chairman and Chief Executive Officer
Greg Orenstein — Chief Financial Officer
Adam Hotchkiss — Goldman Sachs — Analyst
Terry Tillman — Analyst
Aaron Kimson — JMP Securities — Analyst
Saket Kalia — Analyst
Charles Nabhan — Stephens Inc. — Analyst
Alex Sklar — Raymond James — Analyst
Michael Infante — Morgan Stanley — Analyst
John Gomez — Scotiabank — Analyst
Joe Vruwink — Robert W. Baird and Company — Analyst
Robert Trout — Macquarie Group — Analyst
Ryan Tomasello — Keefe, Bruyette and Woods — Analyst
Cris Kennedy — William Blair and Company — Analyst
