A：The main focus of Encino's first quarter fiscal year 2027 Financial Results Conference call was to discuss the company's financial performance and strategic direction. During the call, CEO Sean besmanoff presented on the company's highlights, which included subscription revenue growth of 12% and a non GAAP operating margin of 28%, as well as the introduction of new AI capabilities and the expansion of AI use across various financial institution workflows.

A：Encino's core objectives are to help financial institutions digitize, automate, and streamline their business processes to increase efficiencies and improve banking experiences. It serves as a system of record for operational processes and decision-making to drive revenue growth and mitigate risk. Encino supports a range of financial institutions, including large banks, credit unions, and independent mortgage banks, by enabling them to onboard clients, make loans, monitor portfolios, and open accounts through an AI-powered, unified platform.

A：Some unique features of Encino's platform include its depth and breadth of customer relationships, a comprehensive data set, and a history of technological innovation built on domain expertise within the banking industry. The platform incorporates AI to drive transformation in financial services and offers a range of capabilities from executive strategy to loan processing to client engagement. The platform's AI agents are designed to embed cognitive intelligence into every workflow, and the new pricing model aligns Encino's business model with clients' outcomes.

A：Encino plans to optimize its AI technology adoption by making the initial platform pricing model flexible enough to accommodate experimentation and deployment of AI capabilities without unexpected costs. The company's strategy is to maximize and accelerate the adoption of AI features by thoughtfully sizing initial AI capability bundles. This approach aims to help customers quickly realize the value of AI and facilitate their transition to more advanced capabilities, which in turn is expected to drive increased consumption of intelligence units and further adoption.

A：The adoption of Encino's AI capabilities has led to significant time savings for customers, such as one bank reclaiming half of its team's time for revenue-generating activities by leveraging Encino's AI. These capabilities have streamlined processes, such as automatic relationship record creation instead of manual updates. Encino's forward deploy engineering engagements have not only accelerated value for ambitious customers but have also informed product roadmaps and led to plans for follow-on engagements to enhance AI capabilities.

A：Encino's investment in AI and professional services has resulted in significant time savings for professional services engagements, with a 40% reduction in professional services hours per engagement. This has translated into improved gross margins and has the potential to shorten implementations and reduce program costs for customers. The company is also enabling system integrator partners with AI tools to optimize deployments. Development cycles have been compressed from over a year to under 90 days, teams have increased productivity by 34%, and AI assistance in code writing has increased from 21% to 57% in the first quarter of fiscal 27. These gains enhance product development velocity and potential to sustain the 'Rule of 40' and beyond.

A：The company's confidence in its AI capabilities stems from nearly a decade of operational banking data, across various financial institutions, embedded directly into workflows. This domain-specific intelligence, combined with regulatory trust and workflow integration, is not easily replicated by general-purpose AI providers or assembled from scratch.

A：The year-over-year increase in total revenues for the first quarter was $159.4 million, an increase of 11%.

A：Subscription revenues for the first quarter increased by 12%, or 11% in constant currency. Factors contributing to this increase include a record gross bookings performance in the preceding quarter, earlier deal closing timing, a foreign currency tailwind of approximately $1.3 million, and execution-based overperformance.

A：Free cash flow for the first quarter was $80.8 million. As of the first quarter, there are $65 million remaining for future repurchases under the December 2025 stock repurchase program.

A：The company expects total revenues in the second quarter to be between $157.75 million and $159.75 million, with subscription revenues between $140.25 million and $142.25 million, representing an increase of 7% and 8% year over year, respectively, excluding US mortgage.

A：The free cash flow guidance for fiscal 27 has been updated to a range of $135 million to $140 million, an increase from the prior range of $132 million to $137 million.

A：The AI strategy has evolved with a focus on agents and integration gateways converging at the Avis forcioli launch. Customer feedback has been positive, with strong partnerships leading to the proliferation of agents within the customer base. Additionally, some customers have reached the limit of their bundles, proving the delivery of outcomes and the consumption of intelligence units tied to the value proposition.

A：While solving the same problems globally with AI solutions, there are nuances that require local considerations, such as cultural and regulatory differences. These complexities are being addressed through a global Professional Delivery Engagement (PDE) team with local presence in EMEA and Asia PAC, and the company has a consistent framework, strategy, and vision for the agentic operating system.

A：There is strong demand for commercial banking products, particularly commercial loan origination, from the largest customers and new logos internationally. Some banks now have dedicated AI leadership working alongside commercial banking leadership to ensure governance and compliance with AI integration.

A：AI adoption within banking is leading to strong revenue growth as indicated by increased usage in banking divisor and customers exceeding their usage limits. While the focus for this year is on near-term adoption to drive long-term top-line subscription revenue growth from AI and intelligence units, the encouraging feedback suggests a solid foundation for future revenue.

A：Customers are consuming their entire bundles, which indicates a significant milestone and suggests that intelligence unit consumption is the future of the company. The model change from fixed seat-based pricing to an asset-based model is contributing to growth and the addition of IU opportunities further enhances the growth potential.

A：The model change from fixed seat-based pricing to an asset-based model has set up a foundation for growth that was not present in previous contracts. This change, combined with the addition of IU opportunities, is expected to drive continued reacceleration of growth for the company.

A：Early adopters have saved many employee hours per year through the use of banking solutions, directly attributing those hours to higher-value activities. The company's forward deployment engineering team not only deploys the solution but also ensures the process is repeatable and scalable. The partner and system integrator ecosystem plays a significant role in scaling the company's offerings, allowing for the deployment of intelligent agents in various banking processes.

A：The company plans to scale the business by training the partner and system integrator ecosystem to deploy intelligent agents in various banking processes, such as onboarding, account opening, loan origination, portfolio monitoring, and risk management. This ecosystem helps build and scale the company, and there is a focus on utilizing and profiting from these agents within credit unions and other financial institutions.

A：The key priorities and focus areas of the new chief revenue officer include revenue generation, pipeline momentum, and expanding the partner ecosystem to include hyperscalers. He brings new ideas, operational experience, and focuses on efficient and effective pre-sales technical support, partner ecosystem expansion, and leveraging demonstrations to solve customer problems.

A：The company is closely monitoring IU token consumption and has established revenue and cost dashboards for managing these costs. They are calibrating their approach to ensure they are not overextending themselves financially and are leaning into the opportunity to use the most efficient technology while aiming to achieve a sustainable cost structure aligned with growing revenue.

A：While the adoption of technology has different imperatives now compared to the past, such as a greater reliance on AI and contextual data, there is still a common trepidation around adopting new technology, particularly around security, scalability, compliance, and regulation. Financial institutions seek a trusted partner to navigate these transformations, and there is still a need for a sense of urgency among banks to embrace change and avoid being left behind.

A：There has been no significant slowdown in early renewals, and the company continues to see strong appetites for renewal and the targeted pricing increases as part of those renewals. Q4 is typically the largest booking quarter, and the company is optimistic about the year's progress based on Q1 performance, with no notable changes in renewal patterns or pricing.

A：The expected revenue cadence for the full year suggests Q2 to be up around 15%, implying a down low single-digit range for the back half of the year, which includes Q3. Q3 is expected to be the trough given that it typically aligns with historical revenue growth. The revenue pattern follows a seasonal trend, with Q4 having more of a seasonal boost.

A：The performance varies from client to client, with some clients operating above their contractual minimums. This variability allows the company to potentially capitalize on volume overages within the book. The actual impact depends on the specific customer and their performance in the market.

A：The strong year-over-year performance in the international segment is driven by strength in the Japanese market, growth in Southeast Asia, and new leadership that has retooled teams and re-energized the field. The company is expanding data partnerships to address full client lifecycle management, which is a key focus for larger financial institutions in continental Europe.

A：The growth for NCI Integration Gateway is strong as it is essential for customers to connect with data in order to take full advantage of AI offerings. The acquisition of Sandbox Banking serves as the framework for the AIC operating system, which is part of the company's platform and will not be discussed separately in the future.

A：Compute costs vary depending on the AI capabilities used, with some, like auto spreading, achieving good adoption and cost control. The company is monitoring costs carefully and working to rationalize spending across AI skills to avoid separate management per intelligence unit. They are focusing on outcomes and value provided by AI and banking advisor skills while keeping an eye on costs.

A：Financial institutions are concerned about adhering to internal policies and the chaos that could arise from employees experimenting with different AI providers. To address this, they implement governing structures to guide AI usage within jobs, often documented in policies and provided in documentation packs. The speaker expresses pride in the low costs at Encino compared to industry reports and highlights the company's ability to support customers through the transition, drawing parallels with the cloud transition.

A：The competitive landscape in the AI space is considered healthy and Encino is seen as the leader due to its breadth and scale. There are new players and old-time competitors, but no single competitor matches Encino's capabilities. The company continues to see a competitive dynamic with old and new entrants, but the focus remains on providing a platform experience with insights and real-time capabilities.

A：Customers who consume their IU limits before year-end are having active conversations with sales and product teams about potential pricing and contracts. The company is learning from these interactions and in some cases, customers are re-upping their units or adding to their bundles, especially if they can align outcomes. The company is applying discretion in these situations, partnering with customers to deliver outcomes, and is optimistic about the possibility of customers willing to pay a premium to re-open their bundles.

A：The company expects the international subscription growth to be accretive to overall growth for the year. Q1 results reflect a good end-of-year performance with the largest quarter of gross bookings ever, giving the company momentum. The outlook is to keep this momentum up, and the company feels good about the sales pipeline and level of activity. Keith Cetel's new role as Cro and the activities outside the US indicate exciting opportunities, and the company is optimistic about the trajectory of the international business.

A：The company feels good about the win rates across the business at the beginning of the year, despite it being early. The level of sales activity has been positive, with the ACD guide indicating prudent guidance. The company is executing well and is optimistic about market trends.

A：The plan is to allow third-party agents to participate in the platform as part of the vision for the Aos with CNO. While the company will focus on providing prepackaged and easily deployable agents for core business solutions, it recognizes the need for customers and the SI ecosystem to build agents around these solutions, including those outside the core lending operations.

A：The speaker's biggest surprise was that, despite the hype around new technologies and the difficult business environment, the company successfully fulfilled existing commitments to customers at the largest event of the year without any major slippage in commitments.

A：The event's global attendance and the significant number of prospects (around 10% of the 300 attendees) indicates a strong commitment to the company's journey, especially as they focus on AI banking. This suggests that prospects are willing to invest time and resources to be part of the journey, highlighting the company's AI banking focus.

A：The number one correlation with customers who utilize a high amount of intelligence units is the leadership posture within their organizations. Leaders who are open to adopting new technology and creating the conditions for its adoption tend to have more aggressive utilization of intelligence units. These leaders are proactive in deploying agents and contemplating the potential advancements with Aos.