Executive Summary / Key Takeaways

• nCino is a cloud-based SaaS provider for financial institutions, offering a unified platform for lending, onboarding, account opening, and portfolio management, increasingly powered by AI.
• Recent performance shows solid Q1 FY26 results with subscription revenue growth of 14% reported (9% organic) and non-GAAP operating income ahead of expectations, driven by execution and strategic initiatives.
• The company is strategically focused on leveraging AI (Banking Advisor, Sandbox acquisition for data integration), expanding into high-growth areas like the credit union market, and integrating recent acquisitions (DocFox, FullCircl, Allegro) to broaden its platform capabilities and addressable market.
• Management is guiding for FY26 subscription revenue growth of approximately 8.5% (5% organic), with an expectation for reacceleration in FY27 driven by anticipated bookings growth in the second half of FY26 and the impact of strategic investments and efficiency gains, targeting a Rule of 40 milestone around Q4 FY27.
• Key risks include macroeconomic sensitivity (especially in the mortgage market), execution challenges in international expansion and product integration timelines, and intense competition from both broad platform providers and niche players, though the company believes its AI and platform strategy provide a durable competitive moat.

Setting the Scene: The Digital Imperative in Banking

In the complex and highly regulated world of financial services, legacy systems and fragmented processes continue to create significant operational drag. Financial institutions, from the largest global banks to community credit unions, grapple with inefficiencies that hinder strategic decision-making, impede effective risk management, and ultimately detract from the client experience. Addressing this challenge is the core mission of nCino, Inc. (NASDAQ: NCNO), a software-as-a-service (SaaS) provider that emerged from within a bank in late 2011 with the vision of transforming these critical operations through cloud-based technology.

Over the past decade, nCino has evolved from a focused solution for commercial lending into a comprehensive, unified platform designed to manage the entire customer lifecycle across various lines of business—including commercial, small business, consumer, and mortgage banking. This evolution has been fueled by a combination of internal product development and strategic acquisitions, positioning nCino as a key partner for financial institutions seeking to digitize and streamline their operations. The company's platform serves as a system of record for many of its customers' most vital functions, spanning over 20 countries and serving a diverse customer base by size and type.

Technological Foundation and the Dawn of AI Banking

At the heart of nCino's offering is its cloud-based platform, designed to connect employees, clients, and third parties on a single system. This platform approach inherently offers advantages over disparate point solutions by providing a consistent experience and centralized data. However, nCino's strategic focus is increasingly centered on embedding intelligence and automation throughout this platform, aiming to lead the charge in "AI banking."

The company's AI strategy is built upon leveraging its unique access to process-centric data derived from the workflows managed on its platform. This data provides a deep understanding of how financial transactions and processes flow, enabling the development of AI capabilities specifically tailored to banking needs. The Banking Advisor suite, which became generally available in Q2 FY25, is a prime example. Building on initial capabilities, nCino recently released 16 new Banking Advisor features designed to drive efficiency and productivity. Management highlights quantifiable benefits already being realized, such as reducing complex banking processes from days to seconds, saving approximately 40 minutes per loan in U.S. mortgage document validation, and avoiding 15-20 minutes of manual work per tax statement using Tax Statements 3.0. These AI-driven tools are intended not only to differentiate the platform but also to drive incremental usage and future subscription revenue growth.

A critical component of nCino's AI strategy is the acquisition of Sandbox Banking in February 2025. This acquisition is highly strategic, extending beyond core system integrations to underpin the company's entire data strategy. Sandbox's Integration Platform as a Service (iPaaS) solution is intended to build a unified API layer, serving as a data access gateway for financial institutions. This capability is crucial for ingesting, interpreting, and leveraging data effectively for AI applications, further deepening nCino's competitive moat by enhancing data connectivity and system interoperability. The acquisition also immediately yielded approximately $1 million in annual cost of goods sold savings from a former partnership agreement and is expected to reduce implementation timelines, contributing to improved professional services margins.

Business Model and Market Expansion

nCino primarily generates revenue through subscriptions to its SaaS platform, typically under multi-year contracts. Professional services for implementation and configuration also contribute, though the company increasingly partners with system integrators for larger deployments. A significant strategic shift is underway with the transition to the Intelligent Solution Framework pricing model, which began rolling out in fiscal 2025. This moves away from a seat-based model towards pricing correlated to financial institution assets, transaction volumes, or processing volumes. This change is expected to align nCino's revenue more directly with the value provided, simplify discussions, and drive more value creation over time, particularly as customers expand their use of the platform and adopt AI-driven features like Banking Advisor, which is planned to be included in every new deal and renewal starting in fiscal 2026.

The company's market approach is segmented by financial institution size in the U.S. and by geography internationally. While historically strong in U.S. commercial lending, nCino is actively expanding its footprint in other areas. The credit union market represents a significant $1 billion SAM opportunity, unlocked by the readiness of nCino's solutions. Leveraging its existing portfolio analytics footprint within approximately 40% of the U.S. credit union market, nCino has launched a dedicated go-to-market team and is offering its consumer lending (including indirect auto via the Allegro acquisition), commercial lending, and account opening solutions. This focus is already yielding results, as evidenced by an $800 million credit union adopting multiple nCino solutions in Q1 FY26 to consolidate vendors and streamline operations.

International expansion remains a core strategy, though it has presented execution challenges, particularly in Europe. Recent leadership changes, including the hiring of a new EMEA General Manager, are aimed at sharpening execution and capitalizing on opportunities in specific geographies like the Nordics, Benelux, Spain, Japan, Australia, and New Zealand. Q1 FY26 saw progress with a significant add-on deal at a top Canadian bank and a new logo in Japan.

Recent Performance and Operational Details

nCino delivered a strong start to fiscal year 2026. For the three months ended April 30, 2025 (Q1 FY26), total revenues were $144.1 million, a 13% increase year-over-year. Subscription revenues, the key driver, grew 14% year-over-year to $125.6 million (9% organically), benefiting from new customer additions and expansion within the existing base. Professional services revenue grew 5% to $18.5 million. International revenues showed particular strength, growing 22.5% year-over-year to $31.6 million (23% in constant currency), with international subscription revenues up 31% (32% in constant currency).

Profitability also saw improvement. The subscription gross margin remained stable at 71.2% in Q1 FY26, while the professional services gross margin improved to 16.3% from 9.7% in the prior year period, though management notes price pressure persists in certain segments like community banking. Non-GAAP operating income came in ahead of expectations at $24.8 million (17% of total revenues), compared to $24.4 million (19% of total revenues) in Q1 FY25. Operating expenses saw increases in sales and marketing ($33.0 million vs. $28.0 million) and research and development ($33.3 million vs. $30.0 million), partly due to headcount increases from acquisitions and strategic investments. General and administrative expenses decreased ($21.6 million vs. $22.5 million), primarily due to lower third-party professional fees. Non-operating income/expense saw a significant increase in other income/expense, net, largely due to foreign currency remeasurement gains on intercompany loans ($16.1 million gain in Q1 FY26 vs. $0.7 million gain in Q1 FY25).

Liquidity remains sound. As of April 30, 2025, nCino held $133.2 million in cash and cash equivalents. The company utilized its revolving credit facility, with $208.5 million outstanding and $41.5 million available, to fund the Sandbox Banking acquisition and share repurchases. Net cash provided by operating activities was $54.3 million in Q1 FY26, reflecting net income, non-cash charges, and favorable working capital changes (notably a decrease in accounts receivable and increase in deferred revenue). The company's stock repurchase program, authorized up to $100 million in March 2025, saw $40.6 million in repurchases during Q1 FY26.

Competitive Landscape and Positioning

nCino operates in a competitive market for financial software, facing a mix of direct and indirect rivals. Key publicly traded competitors include large technology companies with financial services offerings like Salesforce (CRM), core banking providers like Fiserv (FISV) and Jack Henry (JKHY), and other specialized fintech companies.

Compared to broad platform providers like Salesforce (CRM), nCino's competitive edge lies in its deep, banking-specific functionality and AI tailored to financial workflows. While Salesforce (CRM) offers a robust ecosystem and strong general CRM capabilities, nCino's platform is designed from the ground up for the intricacies of banking operations, offering potentially faster loan processing and more efficient compliance automation through its specialized AI. This niche focus allows nCino to build a "banking-specific AI moat," providing superior risk management insights compared to more generalized AI tools. However, Salesforce's (CRM) scale, extensive API ecosystem, and strong financial health (higher margins, robust cash flow) provide significant pricing power and market reach.

Against core banking and traditional software providers like Fiserv (FISV) and Jack Henry (JKHY), nCino differentiates itself with its cloud-native architecture and advanced AI capabilities. While FISV and JKHY have established relationships, large market shares (especially in the U.S. community banking segment for JKHY), and often offer cost-effective solutions, they can be slower to innovate in AI and may rely on legacy system integrations. nCino's agility in cloud environments and its AI scalability offer potentially faster data analytics and better performance in dynamic markets. However, FISV and JKHY generally exhibit stronger profitability margins and cash flow generation, reflecting greater operational scale and potentially lower R&D intensity relative to revenue.

Indirect competition comes from banks' internal development efforts and alternative solutions like open-source platforms or cloud infrastructure providers like Microsoft Azure. While these can offer cost advantages for basic functions, they often lack the specialized, integrated workflows and regulatory compliance features embedded in nCino's platform.

nCino's strategic response to this landscape involves leveraging its reputation as the "gold standard" in commercial banking to cross-sell into other lines of business (consumer, small business, mortgage, onboarding, analytics). The company's platform approach and the integration of acquisitions like DocFox, FullCircl, and Allegro are aimed at providing a more comprehensive solution that enables vendor consolidation, a key priority for financial institutions facing increasing regulatory scrutiny (like Europe's DORA) and seeking efficiency. The AI strategy, underpinned by Sandbox Banking, is central to deepening the moat by providing embedded intelligence and a unified data gateway that competitors may struggle to replicate with the same banking-specific depth.

Strategic Initiatives and Future Outlook

nCino's outlook for fiscal year 2026 is framed as a period of strategic execution and investment aimed at reaccelerating growth in fiscal year 2027. Management is guiding for total revenues of $578.5 million to $582.5 million and subscription revenues of $507 million to $511 million for FY26. This represents approximately 7% total revenue growth and 8.5% subscription revenue growth at the midpoint. Organic subscription revenue growth is expected to be approximately 5% at the midpoint, up from 4% noted previously.

This near-term growth rate reflects trailing factors from FY25 bookings momentum and difficult year-over-year comparisons in the second half of FY26 due to one-time revenues in the prior year. However, management is reiterating its guidance to add $48 million to $51 million to ACV on a constant currency basis in FY26 (including $4.5 million from Sandbox), representing 19% organic net ACV bookings growth at the midpoint. This anticipated bookings growth, particularly in the second half of the year driven by expected momentum in onboarding (post-DocFox integration), consumer lending, credit unions, and international markets, is expected to translate into subscription revenue reacceleration in FY27.

The FY26 guidance also incorporates strategic investments, including approximately $10 million in increased sales and marketing expense for additional quota-carrying reps targeting the U.S. credit union market, emerging EMEA/Japan geographies, and digital marketing. Despite these investments, the company expects non-GAAP operating income of $112 million to $116 million for FY26, representing a 19% increase over FY25 at the midpoint. This margin expansion is supported by expected efficiency gains, including approximately $24 million in gross annualized expense savings from the recent restructuring (impacting ~7% of the workforce), primarily benefiting R&D and cost of goods sold by leveraging AI tools and streamlining operations. Management is flowing through approximately $5 million of these incremental savings to the FY26 operating income guidance initially, preserving flexibility for potential reinvestment in AI technology. The company remains focused on achieving the Rule of 40 milestone around the fourth quarter of FY27.

Risks and Challenges

Despite the strategic focus and positive Q1 results, nCino faces several risks that could impact its trajectory. Macroeconomic conditions, particularly interest rate volatility, continue to affect the U.S. mortgage market, which management is conservatively assuming will see no year-over-year subscription revenue growth in FY26. While signs of stability are emerging, a prolonged period of elevated rates or a downturn in the housing market could pose headwinds.

Execution risk is present in integrating recent acquisitions (DocFox, FullCircl, Sandbox) and realizing the planned synergies and cross-sell opportunities. Delays in fully integrating these capabilities or achieving expected efficiencies could impact bookings momentum and margin expansion targets. International expansion, while a significant opportunity, requires sharp execution in diverse markets with different buying behaviors and regulatory environments. The historical challenges in certain geographies highlight this risk.

Competition remains intense across all segments. Larger, well-capitalized players like Salesforce (CRM) and Fiserv (FISV) can leverage their scale and existing relationships, while niche players may offer specialized solutions. nCino must continuously innovate, particularly in AI, and effectively articulate its platform's value proposition to win and retain customers.

Churn, while moderating, remains a factor, particularly in the IMB mortgage space due to M&A activity. Unexpected customer losses, especially among larger clients, could impact revenue growth and retention metrics. Finally, the success of the new platform pricing model and the adoption of AI-driven features like Banking Advisor are critical to realizing the expected long-term value creation and revenue acceleration.

Conclusion

nCino is strategically positioning itself at the intersection of cloud banking and artificial intelligence, aiming to be the leading provider of intelligent, best-in-class solutions for financial institutions globally. Following a period impacted by macroeconomic headwinds and internal execution adjustments, the company has delivered a solid start to fiscal year 2026, demonstrating progress in key areas like U.S. bookings momentum, international growth, and the initial adoption of its AI-driven Banking Advisor.

The investment thesis hinges on nCino's ability to execute on its strategic initiatives: successfully integrating recent acquisitions to expand its platform and addressable market, capitalizing on high-growth opportunities like the credit union market, and most critically, leveraging its unique data access and AI capabilities to deliver tangible efficiency gains for customers. The transition to platform pricing and the embedding of AI are expected to drive long-term value creation and revenue reacceleration. While near-term growth reflects trailing factors, the anticipated bookings momentum in the second half of FY26 and the focus on operational efficiency through restructuring are expected to pave the way for stronger performance in FY27 and progress towards the Rule of 40 target. Investors should monitor the pace of bookings growth, the successful integration and adoption of new capabilities (especially onboarding and AI), and the execution in key international markets as indicators of the company's trajectory.
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