Executive Summary / Key Takeaways

• nCino delivered a strong start to fiscal 2026, exceeding revenue and non-GAAP operating income guidance, driven by strength in subscription revenue and better-than-expected U.S. mortgage performance.
• The company is strategically focused on becoming the leader in AI banking, leveraging its unique process-centric data and platform position to embed intelligence and automate workflows, aiming to drive significant customer efficiency and unlock new revenue streams.
• Management is prioritizing execution discipline and operational efficiency, implementing a restructuring plan for annualized cost savings while making targeted investments in high-growth areas like international markets and the U.S. credit union segment.
• Despite expected lower year-over-year subscription revenue growth in the second half of fiscal 2026 due to prior-year one-time items and conservative assumptions, the company is reiterating its ACV bookings target, signaling confidence in reaccelerated subscription revenue growth in fiscal 2027 and progress towards the Rule of 40 target around Q4 fiscal 2027.
• Key factors to watch include the successful integration and market adoption of recent acquisitions (DocFox, FullCircl, Sandbox Banking, Allegro), the impact of the new platform pricing model, execution in international markets, and the trajectory of the U.S. mortgage market.

Setting the Scene: The Platform Powering Financial Institutions

In the complex and highly regulated world of financial services, institutions grapple with legacy systems, fragmented data, and inefficient processes that hinder growth, impede risk management, and detract from client satisfaction. nCino, Inc., a software-as-a-service (SaaS) company born out of a bank in late 2011, set out to solve these fundamental challenges. Its mission is to reimagine banking operations by providing a unified, scalable cloud-based platform that streamlines employee and client interactions, consolidates vendors, and integrates intelligence to enhance strategic decision-making and operational agility.

Starting with a focus on Commercial and Small Business lending for community and regional banks in the U.S., nCino expanded its reach to enterprise banks and then internationally. Over the past decade, the company has strategically built and acquired technology to evolve into a comprehensive platform provider, offering solutions across Onboarding, Account Opening, Lending (Commercial, Consumer, Small Business, Mortgage), Portfolio Management, and Portfolio Analytics. Acquisitions like SimpleNexus, DocFox, FullCircl, Allegro, and Sandbox Banking have been instrumental in augmenting platform capabilities, expanding the addressable market, and creating cross-sell opportunities.

This evolution positions nCino as a critical technology partner for financial institutions globally, serving a diverse customer base that includes community banks, credit unions, enterprise banks, independent mortgage banks, building societies, and mutuals. The company's ability to serve institutions of all sizes across multiple lines of business on a single platform is a key differentiator in a market often characterized by disparate point solutions.

Technological Differentiation and the Dawn of AI Banking

At the heart of nCino's value proposition is its cloud-native platform, designed to replace multiple legacy systems and provide a connected operational environment. This platform serves as the system of record for critical banking processes, giving nCino a unique vantage point: access to a large, process-centric dataset that is foundational for leveraging artificial intelligence.

nCino is actively pursuing leadership in "AI banking," focusing on embedding generative and agentic AI throughout its platform. The Banking Advisor suite, a key component of this strategy, leverages AI and the company's proprietary data to automate tasks, provide actionable insights, and drive efficiency. Management highlights tangible benefits already being realized:

• Document Validation (U.S. Mortgage): AI verifies correct documentation, saving loan officers approximately 40 minutes per loan.
• Continuous Credit Monitoring: Eliminates hours of manual work in gathering data for client borrowing position assessment.
• Tax Statements Processing (Tax Statements 3.0): Uses an in-house trained large language model to process tax statements, avoiding 15-20 minutes of manual work per statement.

These capabilities are designed to reduce complex banking processes from days to seconds, directly contributing to lower costs and improved productivity for customers. The company's R&D efforts are focused on expanding these Banking Advisor skills (identifying 48 potential skills) and mobilizing AI agents to wrap around existing workflows. The recent acquisition of Sandbox Banking is strategic to this effort, aiming to build a unified API layer and integration hub that will underpin the AI strategy and enhance data connectivity and system interoperability.

For investors, the "so what" of this technological focus is clear: nCino's deep integration into banking workflows and unique access to process-centric data provide a significant competitive moat against generalist tech providers. The ability to embed certified, auditable, and traceable AI capabilities directly into the platform offers a compelling value proposition that can drive adoption, increase pricing power (especially under the new Intelligent Solution Framework), and contribute to higher average contract values and improved margins over time. While specific quantitative targets for AI revenue contribution are still emerging, the strategic intent is for Banking Advisor to be included in all new deals and renewals, with usage driving meaningful revenue contribution in the future.

Financial Performance and Operational Momentum

nCino's financial performance reflects its growth trajectory and ongoing investments. For the first quarter of fiscal year 2026, the company reported total revenues of $144.1 million, a 13% increase year-over-year, exceeding guidance. Subscription revenues, the core of the business, grew 14% year-over-year to $125.6 million, representing 87.1% of total revenues. Non-GAAP operating income came in ahead of expectations at $24.8 million, resulting in a 17% operating margin.

While subscription revenue growth was strong, the cost of subscription revenues also increased, driven by higher data costs and amortization of acquired intangible assets. Professional services revenue saw modest growth, but the cost of delivering these services remains high relative to revenue, particularly in the community bank space. The company is addressing this by recommending out-of-the-box deployments and leveraging AI tools to improve efficiency and professional services gross margins over time.

Operating expenses saw increases in sales and marketing and research and development, primarily due to increased headcount from acquisitions and investments in growth initiatives. General and administrative expenses decreased, mainly due to lower third-party professional fees, partially offset by increased personnel costs.

Liquidity remains sound, with $133.2 million in cash and cash equivalents as of April 30, 2025. The company has utilized its revolving credit facility, with $208.5 million outstanding as of the same date, to fund strategic activities like the Sandbox Banking acquisition and share repurchases. Net cash provided by operating activities in Q1 FY26 was $54.3 million, reflecting strong working capital dynamics, particularly a decrease in accounts receivable and an increase in deferred revenue.

The company's remaining performance obligation (RPO) stood at $1.2 billion as of April 30, 2025, indicating future contracted revenue. While RPO can be lumpy, the company is increasingly focusing on Annual Contract Value (ACV) as a key metric for sales achievement. ACV grew 13% reported and 9% organically (constant currency) in fiscal 2025, and the ACV net retention rate improved to 106% in fiscal 2025, signaling growing demand from existing customers and moderating churn. Subscription revenue net retention, a lagging indicator, moderated to 110% in fiscal 2025, impacted by prior-year churn.

Strategic Execution and Market Penetration

Under new CEO Sean Desmond, nCino is emphasizing execution discipline and capitalizing on growth opportunities. The company is making targeted investments, including increasing sales capacity by 14% for fiscal 2026, focusing on the U.S. credit union market, emerging geographies in EMEA and Japan, and digital marketing. The credit union market, in particular, represents a significant $1 billion SAM opportunity where nCino is leveraging its existing portfolio analytics footprint and tailoring solutions like indirect auto lending via the Allegro acquisition.

The company is also addressing historical friction points in implementation timelines by investing in product redesign and leveraging AI tools, aiming to reduce deployment times significantly. This is expected to not only improve professional services margins but also potentially speed up sales cycles.

Recent acquisitions are being integrated to unlock synergies and expand capabilities. DocFox and FullCircl enhance the onboarding suite, while Sandbox Banking is crucial for the AI strategy by providing a unified API layer. While the focus in fiscal 2026 is on realizing benefits from these completed transactions rather than pursuing new M&A, these acquisitions are expected to be positive contributors to future financial performance.

The transition to the Intelligent Solution Framework, shifting to asset or volume-based pricing, is underway. This model aims to better align revenue with the value delivered to financial institutions and is expected to provide a benefit to subscription revenue growth as more customers transition.

Outlook and Path to Reacceleration

nCino is providing guidance that reflects its strategic positioning and near-term dynamics. For the second quarter of fiscal 2026, the company expects total revenues of $142 million to $144 million and subscription revenues of $124.5 million to $126.5 million. Full-year fiscal 2026 guidance projects total revenues of $578.5 million to $582.5 million and subscription revenues of $507 million to $511 million, representing approximately 8.5% growth at the midpoint (5% organic constant currency).

Management is reiterating its fiscal 2026 target to add $48 million to $51 million to ACV (19% organic net ACV bookings growth at the midpoint), which is expected to accelerate subscription revenue growth in fiscal 2027. The fiscal 2026 subscription revenue growth trajectory is expected to be lower in the second half compared to the first half (approximately 6 points lower year-over-year) due to prior-year one-time revenues and conservative assumptions, particularly in the U.S. mortgage business where guidance assumes no year-over-year increase in subscription revenues.

Non-GAAP operating income is projected to be $112 million to $116 million for fiscal 2026, representing a 19% increase over fiscal 2025 at the midpoint. This reflects expected operating margin expansion of approximately 100 basis points for the full year, with greater expansion in the second half as investments are leveraged and efficiency gains from restructuring and AI are realized. The company is targeting achieving the Rule of 40 milestone around the fourth quarter of fiscal 2027, driven by a combination of growth and margin expansion.

Risks and Challenges

Despite the positive outlook and strategic initiatives, nCino faces several risks. Macroeconomic conditions, including fluctuating interest rates and potential shifts in the U.S. real estate market, could continue to impact the U.S. mortgage business. Execution risk exists in integrating recent acquisitions, successfully rolling out new products like the fully integrated onboarding solution and expanded Banking Advisor capabilities, and achieving targeted efficiency gains from the restructuring and AI adoption.

Competitive pressures from larger, more diversified players like Salesforce (CRM), Jack Henry (JKHY), and Fiserv (FI), as well as niche fintechs and internal bank development, could impact pricing power and market share. International expansion, while a significant opportunity, requires tailored approaches and can have longer, lumpier sales cycles. Churn, particularly in the IMB mortgage space due to M&A, remains a factor to monitor. Finally, financial risks include managing debt levels from acquisitions and ensuring sufficient liquidity to fund operations and investments.

Conclusion

nCino has demonstrated a solid start to fiscal 2026, signaling progress in its strategic shift towards becoming a leader in AI banking and driving operational efficiency for financial institutions globally. The company's core platform, augmented by recent strategic acquisitions and a growing suite of AI-powered solutions, provides a compelling value proposition in a market ripe for digital transformation. While macroeconomic headwinds and internal execution challenges impacted performance in fiscal 2025, management has taken decisive action, including a leadership transition, targeted investments, and a restructuring plan, to position the company for reaccelerated growth.

The outlook for fiscal 2026 reflects a more conservative guidance philosophy and near-term impacts from prior-year dynamics, but the underlying ACV bookings target and expected reacceleration in fiscal 2027 underscore management's confidence in the long-term trajectory. Key to realizing this potential will be the successful execution of product integrations, market penetration in targeted segments like credit unions and international geographies, and the ability to translate technological leadership, particularly in AI, into tangible financial benefits and sustained margin expansion on the path to achieving the Rule of 40. Investors should monitor bookings trends, the adoption of new solutions and pricing models, and the impact of efficiency initiatives as indicators of the company's progress in executing its strategic vision.