Navan, Inc. (NAVN) Q3 2026 Earnings Call Transcript

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Overview

The earnings call highlights strong growth in payment volume and enterprise adoption, driven by AI and strategic wins. Positive sentiment from analysts is evident, with Navan's IPO boosting market awareness and enterprise deals. Despite some seasonal margin concerns, the company's AI-driven efficiency and strategic focus on payments and M&A opportunities are well-received. The Q&A reveals strong enterprise-wide implementations and a robust guidance philosophy. Overall, the positive aspects outweigh any concerns, suggesting a positive stock price movement.

Key Financial Performance

Revenue Revenue grew 29% year-over-year to $195 million. This growth was driven by strong performance across the board, including a 29% increase in usage revenue and a 26% increase in subscription revenue.

Gross Booking Volume Gross booking volume reached $2.62 billion in the quarter, growing 40% year-over-year. This growth reflects increased travel activity and higher customer engagement.

Non-GAAP Gross Margin Non-GAAP gross margin expanded by approximately 200 basis points year-over-year to 74%, driven by automation of customer support through the AI agent Ava and efficiencies gained through scale.

Non-GAAP Operating Margin Non-GAAP operating margin reached 13%, up nearly 9 percentage points year-over-year. This improvement was due to gross margin gains and increased efficiency across sales and marketing, R&D, and G&A.

Free Cash Flow Free cash flow was negative $11 million in the quarter, an improvement of 30% compared to Q3 fiscal year '25. This improvement reflects better operational efficiency.

Payment Volume Payment volume processed through Navan cards was $1.13 billion, up 12% year-over-year. This growth is attributed to increased customer adoption and usage of Navan cards.

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Operating Highlights

Navan Cognition AI: Navan Cognition is a homegrown AI agentic framework designed specifically for travel. It enables unsupervised agents to handle complex travel tasks, improving service quality and margins. Ava, the AI support agent powered by Cognition, handles over half of user interactions with human-level satisfaction.

Navan Edge: An AI-powered travel booking experience currently in development, designed to enhance the travel experience for frequent travelers.

Enterprise Market Expansion: Signed significant deals with global enterprises, including a CAC40 company, Frasers Group, Axel Springer, Visa, ENGIE, and a Fortune 500 healthcare company. These deals highlight Navan's growing leadership in the enterprise market.

International Revenue Growth: Revenue from international customers represented 37% of total revenue in Q3, showcasing strong global market penetration.

AI-Driven Operational Efficiency: Non-GAAP gross margin expanded to 74% in Q3, driven by AI automation through Ava and operational scale efficiencies.

Customer Satisfaction: Customer satisfaction reached 97%, with an NPS of 45, significantly above the industry average of 5.

IPO and Financial Positioning: Navan completed its IPO, strengthening its balance sheet with $809 million in cash and $207 million in debt. This positions the company for global expansion and improved cost of capital.

AI Leadership: Navan is leveraging its AI capabilities to lead the transformation in the travel and expense category, focusing on innovation and efficiency.

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Risk or Challenges

CFO Transition: The departure of CFO Amy Butte and the interim appointment of Anne Giviskos could create potential leadership and strategic continuity challenges during the transition period.

Seasonality of Business: Navan's business is highly seasonal, with Q4 expected to be slower than Q3. This seasonality could impact revenue and margin predictability.

Dependence on AI and Technology: Navan's reliance on AI-driven solutions like Cognition and Ava for operational efficiency and customer satisfaction poses risks if these technologies fail or underperform.

Economic Sensitivity: The business travel sector is sensitive to economic conditions, and any downturn could adversely affect Navan's revenue and growth.

Regulatory and Compliance Risks: Operating as a public company introduces additional regulatory and compliance requirements, which could increase operational complexity and costs.

Supply Chain and Travel Disruptions: Although no material impact was noted from recent travel disruptions, future disruptions like government shutdowns or airline issues could affect operations.

Competitive Pressures: Navan faces competition from legacy solutions and other AI-driven platforms. Industry consolidation could also force companies to reevaluate their solutions, potentially impacting Navan's market share.

Credit Risk in Payments: Navan's plans to extend credit to more customers as part of its payments revenue growth strategy could expose the company to credit risk, especially in uncertain economic conditions.

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Guidance & Outlook

Revenue Guidance for Q4 FY2026: Navan expects revenue to be in the range of $161 million to $163 million, representing year-over-year growth of 23% at the midpoint.

Revenue Guidance for Full FY2026: Navan expects total revenue to be in the range of $685 million to $687 million, up 28% year-over-year at the midpoint.

Non-GAAP Operating Margin for Q4 FY2026: Expected to be between negative 9% at the midpoint.

Non-GAAP Operating Margin for Full FY2026: Expected to be 3% at the midpoint.

Seasonal Business Trends: Business travel is expected to be seasonally slower in fiscal Q4 compared to Q3, with corresponding lower margins.

Free Cash Flow for FY2027: Navan expects to be free cash flow positive for the full year of fiscal 2027.

Growth Drivers: Navan anticipates continued strong capital-efficient growth across its entire business, supported by its fortified balance sheet and global expansion plans.

AI and Innovation Focus: Navan plans to accelerate innovation, particularly in AI, meetings and events, and VIP services, while maintaining a balance between growth and profitability.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is driving the acceleration in the enterprise side of the business?

A:The acceleration is driven by three factors: 1) More customers are satisfied with the service, leading to them becoming ambassadors and bringing in more customers. 2) Market consolidation is causing companies to reevaluate their solutions, and Navan's AI-driven modern solution is winning over the old model. 3) Navan's use of AI is making travel more effective and saving customers an average of 15%. Recent enterprise wins include a major CAC40 customer, Axel Springer, Visa, and a major healthcare provider.

Q:What drove the strength in gross bookings volume (GBV) this quarter?

A:The strength in GBV is attributed to three factors: 1) Net Revenue Retention (NRR) of over 110% in fiscal year '25, showing growth in existing customers. 2) Benefits from customers signed 6-12 months ago. 3) Momentum from new customers. Additionally, factors like trip fees, supplier yield, and the ability to attach incremental products like payments and expense contributed to the growth.

Q:Are the large enterprise deals complete enterprise-wide implementations or partial?

A:The large enterprise deals are complete enterprise-wide implementations globally. For example, companies like ENGIE and Visa have adopted Navan for their entire workforce.

Q:How sustainable is the margin leverage seen in this quarter?

A:The margin leverage is supported by the use of AI (Ava) to deflect 54% of customer support interactions and general efficiency in the business. However, Q3 is seasonally the highest gross margin quarter. The company is committed to showing scale, profitability, and efficiency while continuing to invest in growth.

Q:What is the investment plan for Navan Edge and its expected revenue contribution?

A:Navan Edge is based on Navan Cognition, the company's AI platform, and aims to hyper-service frequent travelers. Investments began in the second half of fiscal year '26 and will continue in '27, with top-line contribution expected in fiscal year '28.

Q:What is the guidance philosophy for new large deals?

A:The guidance incorporates active customers, ramping customers, and new customers based on expected launch and ramp timelines. Machine learning is used to forecast future performance based on past scenarios.

Q:Has the IPO impacted the enterprise side of the business?

A:Yes, the IPO has increased market awareness, reduced long-term viability questions, and generated more leads. It has also enabled the company to be more aggressive in the payments space, creating a complete solution.

Q:What is the company's view on the SAP Concur partnership with Amex GBT?

A:The company views the SAP Concur partnership as antiquated and irrelevant compared to Navan's integrated AI-driven platform. They are not concerned about it.

Q:What drove Visa to switch to Navan's platform?

A:Visa switched to Navan's platform due to its modern, efficient, and AI-driven solution that saves time and money. The platform's ability to launch quickly and achieve fast adoption also played a role.

Q:What is the company's approach to M&A opportunities?

A:The company is open to M&A opportunities that bring additional capabilities to the platform, such as in meetings and events or VIP travel. However, in the AI space, they believe their in-house development is superior to external options.

Q:What is the impact of direct connections with suppliers on bookings growth?

A:Direct connections with suppliers (NDC) improve pricing, trust, and efficiency, leading to higher conversion rates and better merchandising. The AI platform further personalizes the experience, making booking faster and easier.

Q:What is the company's strategy for payments?

A:The company focuses on attaching payments to enterprise and mid-market segments to streamline expense submission and improve employee experience. The additional capital from the IPO will accelerate this strategy.

Q:What is Navan Edge's business model and target market?

A:Navan Edge targets the unmanaged travel market, unlocking more of the total addressable market (TAM). Its business model is similar to the current one, generating revenue from booking fees and supplier fees.

Q:What is the company's response to the slowdown before Thanksgiving?

A:The company experienced a brief slowdown before Thanksgiving due to FAA restrictions but saw activity rebound as anticipated in December.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the question about the CFO transition, providing only general statements about the timing being right and the transition being supported by the board.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NAVN Transcript

Navan, Inc. (NAVN) Q3 2026 Earnings Call Transcript

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NAVN Slides

Navan Q3 FY26 slides: 29% revenue growth as AI drives margin expansion

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