nCino - Earnings Call - Q1 2026
May 28, 2025
Executive Summary
- Q1 FY2026 revenue was $144.1M (+13% YoY) with subscription revenue $125.6M (+14% YoY); non-GAAP operating income $24.8M and non-GAAP diluted EPS $0.16; the company cited better-than-expected U.S. mortgage and steady international strength as drivers.
- FY2026 guidance was raised across revenue ($578.5–$582.5M), subscription revenue ($507.0–$511.0M), non-GAAP operating income ($112–$116M), and non-GAAP EPS ($0.69–$0.72); ACV maintained ($564–$567M).
- Management disclosed a ~7% workforce restructuring, targeting ~$24M gross annualized expense savings (with $7.5–$9M one-time costs in Q2) and flowing ~$5M into FY2026 non-GAAP operating income guidance; emphasis on AI-driven efficiencies in R&D, PSO and support.
- Consensus comparison: Q1 FY26 revenue beat ($144.1M vs $140.1M*), Primary EPS was roughly in line ($0.16 vs $0.157*), while EBITDA was below consensus ($18.7M* actual vs $25.3M*); FYQ2 guidance brackets consensus and sets catalysts around AI launches, implementation speed, and mortgage stabilization. Values retrieved from S&P Global.*
What Went Well and What Went Wrong
What Went Well
- Subscription strength and international mix: subscription revenue up 14% YoY to $125.6M; non-U.S. subscription revenue up 31% YoY ($25.9M), with non-U.S. total revenue $31.6M (+22% YoY).
- AI momentum and platform breadth: “We’re accelerating our AI strategy … embedding intelligence across the entire nCino Platform” and released 16 new Banking Advisor capabilities; omnichannel upgrades delivered without incremental cost for upgrades, aiding adoption.
- Guidance raise and capital returns: FY2026 revenue, subscription revenue, non-GAAP OI and EPS guidance raised; repurchased ~1.8M shares at $22.17 for $40.6M in Q1, reinforcing capital allocation discipline.
What Went Wrong
- EBITDA below consensus and PS margin drag: professional services gross margin remains a focus; CFO noted pricing/cost pressure at community banks and efficiency initiatives underway, including AI and redesigned products to reduce implementation hours. Values retrieved from S&P Global.*
- GAAP operating loss persists (Q1: $(1.5)M) and higher interest expense ($4.45M in Q1) reflects revolver usage ($208.5M outstanding), tightening GAAP profitability.
- Restructuring costs to weigh on FCF in FY2026: one-time restructuring costs of $7.5–$9M (mostly Q2) excluded from non-GAAP OI but expected to impact full-year free cash flow.
Transcript
Operator (participant)
Thank you for standing by, and welcome to nCino's first quarter fiscal year 2026 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Harrison Masters, Director of Investor Relations. Please go ahead, sir.
Harisson Masters (Director of Investor Relations)
Good afternoon, and welcome to nCino's first quarter fiscal 2026 earnings call. With me on today's call are Sean Desmond, nCino's 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 8K 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 Sean.
Sean Desmond (CEO)
Good afternoon, everyone, and thank you for joining us to discuss nCino's first quarter fiscal 2026 results. Before I get into the details of the quarter, I want to take a moment to remind you of the core problem we're solving and why nCino exists. Across the globe, financial institutions continue to wrestle with inefficiencies caused by legacy infrastructure. Too many are constrained by fragmented technology stacks and siloed data, which slow down decision-making, limit the ability to leverage data and analytics to make more informed and real-time decisions, limit the ability to leverage AI to further automate tasks across the institution, and inhibit growth and the ability to reduce expenses. These operational roadblocks are precisely what nCino is designed to eliminate. We are reimagining these processes and delivering world-class experiences across the customer lifecycle.
nCino is the only cloud-based SaaS provider that enables financial institutions to seamlessly manage lending, onboarding, account opening, and portfolio management across all major lines of business, connected on a unified, scalable platform powered by AI. Because we are the system of record for so many of our customers' most critical operations, and because our solutions are deployed in over 20 countries across a broad and diverse customer base of banks, credit unions, and IMBs of all sizes, we believe we've built a competitive moat that is both wide and deep. Turning to Q1 results, this was a strong start to the year and an important first step in turning nCino from a great company into a great long-term business that executes with precision and capitalizes on the sizable opportunities ahead. We delivered total revenues ahead of guidance, driven by strength in our subscription revenues line.
We are pleased with the demand we see building in the market, which was confirmed by the reception to the AI capabilities and omnichannel experiences we showed last week at our annual Insight Customer Conference. I'm also pleased to report that our non-GAAP operating income also came in ahead of expectations. It's early in the year, but I'm extremely encouraged, not just by the financial results we're reporting today, but by the internal KPIs we track closely to run the business. Bookings of new annual contract value are progressing well. Of course, there is work to do, but we remain confident in the full-year ACV plan we outlined last quarter. As you know, ACV is the leading indicator of future subscription revenues growth, and we believe we're on track.
At Insight last week, we showcased the culmination of a large multi-year and multi-product body of development work that delivered significant enhancements to our onboarding capabilities, created enhanced omnichannel digital experiences for our customers' clients, reinforced the scalability of our mortgage solution, and embedded intelligence across our workflows. Having fulfilled these commitments to our customers, we see incremental growth initiatives available as extensions of the core opportunity we have been pursuing for over a decade. AI is central to our long-term differentiation, and our approach, which we believe leverages the largest process-centric dataset in fintech, is uniquely powerful. At our Insight Conference, we released 16 new Banking Advisor capabilities, building on the two that were already generally available. These new capabilities are designed to help customers save time, lower costs, and improve productivity.
Because Banking Advisor drives incremental usage of the nCino platform, we see these enhancements as key drivers of future subscription revenues growth. One of the initiatives I highlighted at Investor Day is the mortgage cross-sell opportunity. In the first quarter, a $25 billion regional bank doubled their annual commitment to nCino through the adoption of our mortgage and our consumer lending solutions, accompanying a five-year renewal. This institution will be able to provide a consistent experience for their clients across all consumer loan products, including mortgage. We expect this differentiated experience will be a true competitive advantage for them in the marketplace. Another growth initiative I discussed is the credit union market, where we see a $1 billion of SAM opportunity that has been unlocked through the readiness of our solutions for that market.
In Q1, an $800 million credit union who had an existing relationship with nCino through our Portfolio Analytics solution chose to also adopt our Consumer Lending, including Indirect Auto, Commercial Lending, and Account Opening solutions. The nCino platform was truly the differentiator here, as the credit union was looking to consolidate vendors and streamline operations on a unified platform across their institution. Finally, we saw good progress on the international front, with a significant add-on deal at a top Canadian bank and a new logo in Japan. International expansion is core to our strategy, which goes beyond the EMEA growth initiatives I spoke of at Investor Day. The global opportunity for nCino is large, and we evaluate it with a broad lens.
We are excited by the progress so far this year in Europe and in Japan and look forward to updating you on wins later this year as opportunities get over the finish line. Before turning it over to Greg, I want to offer a brief perspective on the macro environment. We are, of course, sensitive to what's happening out there. It's a fluid situation that continues to evolve. That said, our financial institution customers remain well-positioned. Many of them have healthy balance sheets and are projecting growth in both loan portfolios and earnings. We're also seeing encouraging signs of stability in the mortgage market, even while some interest rate volatility persists. Because we planned conservatively in this part of the business, that stability contributed to our outperformance in Q1. Finally, our U.S.
Customers are telling us that potential deregulation could free up capital, streamline decision-making, and open the door to further adoption of best-in-class technology platforms like ours. Taken together, these are solid, early positive signals that reinforce the confidence we have in our strategy, our product portfolio, our team, and our ability to execute. You may have seen that we filed an 8K yesterday disclosing a restructuring event that affected approximately 7% of our global workforce. We do not take these actions lightly, and it does not diminish our appreciation for the contributions of these employees. As a result of re-examining our processes and organizational structure, including the ways we build and deliver software, which I had the opportunity to see up close during my tenure as the company's Chief Product Officer, we identified opportunities to streamline our operations, including by leveraging AI tools.
This restructuring event is indicative of our belief that we can reduce bureaucracy and be more efficient, including by bringing new product functionality to market even faster, while also delivering durable, accelerating growth with the ultimate aim of maximizing shareholder value, which is our primary mandate. In closing, I'm very encouraged by the start to the year we've had and by the feedback we're receiving on both our existing and our new products. The conversations we're having with customers are more focused, more strategic, and more forward-leaning than they were just a few months ago. I'm more excited about what lies ahead, and I look forward to updating you on our progress again on our second quarter earnings call. With that, I'll turn it over to Greg to walk you through the financial details.
Greg Orenstein (CFO)
Thanks, Sean, and thank you all for joining us today. Please note that all numbers referenced in my remarks, other than revenues, 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 is an exhibit to the Form 8K furnished with the SEC just before this call. In Q1, total revenues were $144.1 million and rose 13% year-over-year. Subscription revenues were $125.6 million and rose 14% year-over-year on a reported basis and 9% organically. Subscription revenues growth was driven by successful execution against our operating plan. Subscription revenues growth was also seasonally aided by approximately $800,000 of U.S. mortgage revenues that exceeded expectations. Professional services revenues were $18.5 million, an increase of 5% year-over-year.
Professional services revenues exceeded expectations in the quarter due to requisite revenue recognition adjustments of subscription fees to professional services revenues. Non-U.S. total revenues were $31.6 million, up 22% year-over-year or 23% in constant currency. Non-U.S. subscription revenues were $25.9 million, up 31% year-over-year or 32% in constant currency. Non-GAAP operating income was $24.8 million or 17% of total revenues. Overperformance of subscription revenues contributed to the overperformance of non-GAAP operating income, offset in part by severance expenses of approximately $500,000 incurred in the first quarter. Non-GAAP net income attributable to nCino was $18.4 million or $0.16 per diluted share. Turning to an update on our share repurchase program, we repurchased approximately 1.8 million shares during the first quarter at an average price of $22.17 for total consideration of $40.6 million.
As we stated last quarter, our capital focus for the time being will be on realizing the benefits of the prior acquisitions we've made and on share repurchases. Now, turning to guidance. For the second quarter of fiscal 2026, we expect total revenues of $142 million-$144 million, with subscription revenues of $124.5 million-$126.5 million, an increase of 8% and 10% respectively, at the midpoint of the ranges. Note that the sequential change in total revenues is impacted by us not flowing through the Q1 overachievement in mortgage and professional services revenues. Non-GAAP operating income in the second quarter is expected to be $23.5 million-$24.5 million, and non-GAAP net income attributable to nCino per share to be $0.13-$0.14. Our annual user conference is expected to contribute an approximately $2.5 million sequential increase to sales and marketing expenses in the second quarter.
This guidance assumes interest expense incurred under our credit facility of approximately $4 million and is based upon a weighted average of approximately 119 million diluted shares outstanding before any share repurchases. For fiscal 2026, we are off to a strong start to the year and are reiterating our guidance to add $48 million-$51 million to ACV on a constant currency basis, including approximately $4.5 million from the acquisition of Sandbox Banking. This represents 19% organic net ACV bookings growth at the midpoint of the range, which should accelerate subscription revenues growth in fiscal 2027. For fiscal 2026, we are flowing through a majority of our Q1 subscription revenues outperformance to our full-year guidance, but in keeping with the guidance philosophy for mortgage we introduced last quarter, we are not flowing through the approximately $800,000 of seasonal overperformance in U.S. mortgage subscription revenues.
We now expect our subscription revenues to be $507 million-$511 million, up from $503 million-$507 million. Our updated guidance for subscription revenues represents approximately 8.5% growth at the midpoint of the range. Excluding currency fluctuations, our organic subscription revenues growth rate in fiscal 2026 is expected to be approximately 5% at the midpoint of the range, up from the 4% noted on our Q4 earnings call. Please note this guidance assumes the fourth quarter will represent the lowest year-over-year subscription revenues growth and continues to assume no year-over-year increase in U.S. mortgage subscription revenues. Note also that our inorganic contribution expectations from Full Circle and Sandbox Banking remain unchanged from last quarter.
Taking all this together, we now expect total revenues of $578.5 million-$582.5 million, up from our prior guidance range of $574.5 million-$578.5 million, representing approximately 7% growth at the midpoint of the range. Turning to the 8K regarding the restructuring event that Sean referenced, we expect to realize approximately $24 million of gross annualized expense savings from these and other cost-saving actions. In our initial non-GAAP operating income guidance for fiscal 2026, we assumed we would realize approximately $6 million in gross annualized expense savings during the year. Through the actions we are taking, we accelerated this $6 million in planned cost savings and increased it by an additional approximately $18 million. We are initially flowing through approximately $5 million of the incremental savings through to our updated fiscal 2026 non-GAAP operating income guidance, which will primarily benefit the second half of this fiscal year.
This approach to guidance is intended to preserve flexibility in operating the business, including the ability to make additional investments in AI technology to drive further efficiencies in the business if opportunities present themselves. The net cost savings will primarily benefit our R&D expense line as well as our cost of goods sold line. Specifically, we expect to achieve expense savings on our R&D line as several major development milestones are now behind us with respect to various product initiatives. As Sean noted, we have identified opportunities to streamline our development operations, including by further leveraging AI tools. On the cost of goods sold line, we expect to deliver projects more efficiently as a result of redesigning our products to be implemented quicker and through the use of AI tools.
It will take some time to see our PSO margins increase as we close out on legacy projects and ramp up the use of AI tools, but we are confident enough in our ability to achieve efficiency gains in our PSO and customer support organizations from the use of AI and initiatives like Project SevZero that we discussed at Investor Day to take this action at this time. We expect to incur approximately $7.5 million-$9 million in one-time restructuring costs, primarily in the second quarter, to realize these savings, of which we expect approximately $1 million will be non-cash. These restructuring costs will be excluded from our non-GAAP operating income results but will impact fiscal 2026 free cash flow. We now expect our fiscal 2026 non-GAAP operating income to be $112 million-$116 million, up from a prior range of $107 million-$111 million.
This represents an approximately 19% increase over fiscal 2025 at the midpoint. At Investor Day, I mentioned that we added about 14% more sales capacity for fiscal 2026. To be clear, this was embedded in our initial guidance for the year, and there has not been an update to that number as a result of the restructuring. Non-GAAP net income attributable to nCino per diluted share is now expected to be $0.69-$0.72 for fiscal 2026, up from our prior guidance of $0.66-$0.69, excluding the impact of currency fluctuations, and is based upon a weighted average of approximately 119 million diluted shares outstanding, which does not factor in any additional share repurchases beyond those we have made to date. This guidance also assumes interest expense incurred under our credit facility of approximately $15 million for the fiscal year.
With that, we will open up the line for questions.
Operator (participant)
Certainly. Ladies and gentlemen, we have a full queue today. We ask that you please limit yourselves to one question and one follow-up. Our first question comes from the line, Osaka Kalya from Barclays. Your question, please.
Saket Kalia (Managing Director)
Okay, great. Hey, guys. Thanks for taking my questions here, and good to see a strong start to the year.
Greg Orenstein (CFO)
Thanks, Sackett.
Saket Kalia (Managing Director)
Absolutely. Sean, maybe just to start with you, you touched on this a little bit in your prepared remarks, but I was wondering if you'd just talk about how you're thinking about underlying demand and sort of willingness to invest right now with your bank clients. I know you spend a lot of time with customers, and you touched on some positive conversations, but I'm curious just what data points do you look at, and what gives you confidence in sort of strong underlying demand?
Sean Desmond (CEO)
Yeah, thanks for the question, Sackett. I do have a lot of confidence in the demand that we're seeing. I think that was validated at our user conference last week at Insight in Charlotte with the full nCino ecosystem on display. We have very steady interest across the board on our solutions across onboarding, account opening, loan origination, as well as portfolio monitoring. We do measure the pipeline activity and look at that for the right coverage and the growth in that coverage and make sure we're aligning investments toward that as well.
By and large, despite the macro, which Greg referred to in his comments, we are seeing mostly a state of course from a narrative from our banks and hearing that budgets are set for the year and business imperatives to drive efficiency into the operating model of our financial institution customers is remaining strong in terms of demand.
Saket Kalia (Managing Director)
Got it. Got it. That's helpful. Maybe for my follow-up, Greg, for you, I was wondering if you'd just dig into professional services gross margins a little bit. You touched on this and sort of the plan to improve it, but it's been a drag on gross margin here for a couple of quarters now. What's driven that, and how do you think about the path to improvement?
Greg Orenstein (CFO)
Yeah, thanks, Sackett. I'll say price pressure or cost pressure on services really has been concentrated in the community bank space in the U.S., particularly over the last two or so years when obviously it was a more challenged market for our banking customers. We've done a few things. One is from a project and product perspective, as I commented on, we redesigned some of our products so that they could be implemented quicker, more efficiently, right, to ultimately improve margins. The second thing, and again, we highlighted it at Investor Day, reiterated in my prepared remarks, with what we're seeing with AI, we see a lot of opportunities to improve that gross margin as well. It is a focus area for us. I'd say it's an opportunity for us, and I think it's something that we are executing on.
It will take a little bit of time, right, as we, again, as I commented, work through the legacy projects that we have and truly ramp up some of these AI tools that we are seeing and experimenting with and doing POCs with. It is an opportunity we see that we can execute on, and it is something that we will see over the coming quarters results from.
Saket Kalia (Managing Director)
Very helpful. Thanks, guys.
Greg Orenstein (CFO)
Thanks, Sackett.
Operator (participant)
Thank you. Our next question comes from the line of Terry Tillman from Truist. Your question, please.
Bobby Dion (Research Analyst)
Great. Thanks for taking the questions. This is Bobby Dion for Terry. First one for Sean. Sean, now that you've had some time engaging with analysts and investors, what do you think is most misunderstood about the story? I had one follow-up. Thank you.
Sean Desmond (CEO)
You know, I think spending time with you all in the past three months, I see good alignment and understanding of the story. I walked away from Investor Day last week, especially after the formal presentation and taking questions with the confidence that the group understands our focus on execution discipline, our commitment to the metrics that we're tracking around ACV, Rule of 40, and free cash flow, and they understand what our growth initiatives are across leaning into the onboarding opportunity, the credit union space, mortgage beyond IMBs, and the EMEA opportunity, as well as the momentum in Japan, and finally, our strategy around AI, which we got to double down on. I don't have a lot of discomfort that there's a misunderstanding of the nCino strategy right now.
Bobby Dion (Research Analyst)
Much appreciated. With omnichannel experiences, can you talk about the sales strategy there? Would this be something existing customers can easily upgrade into? Are there pricing implications from an upgrade? How important is omnichannel to the overall platform go-to-market strategy? Thank you.
Sean Desmond (CEO)
Yeah, thanks for the question. You all heard the story that we had two primary goals stated at Insight. One was that we fulfill the commitments that we made to our customers. Omnichannel is a big part of that, that we would have a consistent experience for the banker and their customer, whether digital or in-branch, across our solutions. As we upgrade customers to that omnichannel experience, there's not incremental cost. It's simply part of the platform. Of course, if a customer is on Commercial and they come to nCino for a new solution, there's incremental ACV there. If they're upgrading an older version of nCino to the current, they simply get omnichannel with that, and there's not additional spend.
Bobby Dion (Research Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Koji Akita from Bank of America. Your question, please.
Koji Ikeda (Director or Enterprise Software Equity Research)
Yeah, hey, guys. Thanks for taking the questions here. I did want to ask a question on kind of the workforce reduction and the office space reductions. I guess first question, how to think about further utilization opportunities in the office space from here, and then how to think about any sort of reinvestments from the workforce changes. How is AI playing into the workflow efficiency? It definitely sounds like you're gaining some efficiency in the R&D department, but anywhere else where AI is playing a role in workforce efficiency. Thank you.
Sean Desmond (CEO)
Yeah. Can you restate the first part about the office question? I want to make sure I understand that.
Koji Ikeda (Director or Enterprise Software Equity Research)
Yeah. You guys got rid of some office space. Is that part of the utilization optimization complete, or is there any more office space to potentially downsize from here?
Sean Desmond (CEO)
Gotcha. Yeah, thank you. Listen, we have our campus headquarters here in Wilmington, North Carolina, and as you all know, seven offices beyond that globally. Listen, we have some overage in capacity that basically when we moved across facilities over time, we hung on to some older spaces. We moved into newer space just to safeguard whether or not we would need that at a future date. At this point, the new building serves our needs holistically. We had a large conference room down the road that held about 100 people, and we'd only use it a couple of times a year. It just was not a good use of our money. We have plenty of auditorium and town hall space right here in Wilmington.
Then beyond that, we're always going to look for opportunities to right-size our investments with how we're seeing return there, but I think we're right-sized in our major office and geolocations, and we don't have a lot of overage in capacity there. Specifically in terms of how we think about investments in the future, listen, in terms of the workforce reduction, there are probably a combination of contributing factors there. One is just with the discipline that we have and the commitment we have to making difficult decisions for the betterment of the business in the long term, there probably were some overdue decisions we need to make on our capacity alignment. There have been shifts in the market, shifts in the landscape, and roles in our organization that were no longer as relevant to the point-in-time needs that our customers have today, and we simply acted on those.
Those are never easy decisions. Those are never fun decisions, but they're right decisions for the long-term viability of nCino. We moved from there. Beyond that, there are certainly efficiencies to be gained as we move forward and modernize how we build software and reimagine that build and realign with partners in our technology stack. That all adds up to a reality that I think we're going to actually increase our velocity in terms of our software build cycles with less headcount. That doesn't necessarily mean do more with less. It means be optimized, be more efficient, be leaner and meaner, and go attack the market.
Koji Ikeda (Director or Enterprise Software Equity Research)
Thanks, Sean. Maybe a follow-up here for Greg. Billings, I know billings may not be the best indicator for you guys, but I did notice it decelerated a little bit in growth here. I do understand there's probably some inorganic contributions in there and billings dynamic with RevRec. Just wanted to, as we build our models, just wanted to understand if there's anything we need to know within billings this quarter or how to think about deferred revenue over the next several quarters as we build our models out. Thank you.
Greg Orenstein (CFO)
Thanks, Koji. Yeah, nothing to note. I mean, billings, which is one of the reasons we do not guide to it, can be lumpy, certainly with larger customers, and just depending on timing of deal signing and ultimately, again, the billings. Nothing to note different from prior quarters that I would call out at this point in time.
Koji Ikeda (Director or Enterprise Software Equity Research)
Got it. Thank you.
Greg Orenstein (CFO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Ryan Tomasello from KBW. Your question, please.
Ryan Tomasello (Managing Director)
Hi everyone. Thanks for taking the questions. I actually wanted to touch on something that you highlighted last quarter on the consumer lending side. I know you called out a really strong end to the year, I think 40 consumer lending deals signed in the fourth quarter. I guess how much of that momentum was driven by the Salesforce activation in the credit union space? Just generally, how should we think about the timing for that to start to kick in more meaningfully, the benefit of that activation? As a follow-up, as we think about momentum this year in the consumer lending category, I would assume that last year you were baking in some amount of ACV bookings, assuming momentum in that category of revenue.
Any color on how you're thinking about targets for this year on the consumer lending side, just given it seems like you're already kicking off the year with good momentum, you cited the $800 million deal here.
Sean Desmond (CEO)
Yeah. We are clearly excited about consumer lending. With respect to your first question on the 20 deals we signed in Q4, there was really no tangible impact on the activation of the credit union go-to-market team as we were assembling that team for the majority of the back half of last year. I believe they're just hitting their stride now. That all happened independent and before we fully activated that team. We think there's further upside there. As far as the second question, listen, we're excited. In the first quarter, we had a nice mix from a revenue standpoint. About half of our revenues in core commercial, the other half distributed across consumer and mortgage.
The momentum in the pipeline activity is encouraging in consumer across banks as well as credit unions and across market segments, down market and up market, as evidenced by the reference you made to First Citizens being on stage with us at Investor Day.
Greg Orenstein (CFO)
Yeah. Just to clarify, on commercial, it was a little less than half of our bookings for the quarter. I think you said revenues, and the rest was split between consumer and mortgage.
Sean Desmond (CEO)
Thank you, Greg.
Greg Orenstein (CFO)
You're welcome, Sean.
Ryan Tomasello (Managing Director)
Greg, regarding the expense savings, you're flowing through, I think, roughly, you think you said only $5 million of the total $18 million savings. I guess I understand the approach to wanting to preserve flexibility, but how should we think about additional upside to the full year guidance from those savings once you've had the chance to evaluate additional reinvestment opportunities? Thanks.
Greg Orenstein (CFO)
Sure, Ryan. Yeah, obviously, we'll update you as the year progresses. If you take the 18, and expenses will basically be a Q2 event, so you get about half out of that 18 you would think in the second half of the year. Again, we're going ahead and flowing five of that through as we sit here today. As the year progresses, we'll either flow more through and/or come to you and highlight some investments that we made, again, with the belief that it's going to meet our return expectations and ultimately help drive us to meeting that Rule of 40 target that we put out there for around the fourth quarter of next year.
Ryan Tomasello (Managing Director)
Great. Thanks for taking the questions.
Greg Orenstein (CFO)
You're right.
Operator (participant)
Thank you. Our next question comes from the line of Nick Altman from Scotiabank. Your question, please.
Nick Altmann (Director of US Software Equity Research)
Hey. Awesome. Thank you, guys. Last week at the Investor Day, you noted sales headcount was up 14% year over year, and the incremental quota carrying capacity was helping underpin some of the growth assumptions. Just given the reduction in force, can you just clarify whether that 14% growth rate in sales capacity was inclusive of the reduction in force? The follow-up is maybe can you guys just unpack some of the assumptions around sales productivity as it relates to that FY2026 ACV target? Thanks.
Greg Orenstein (CFO)
Yeah. On the first question, Nick, sales was not impacted by the actions that we announced last night. And so that 14% is still appropriate. If you could just repeat the second question.
Nick Altmann (Director of US Software Equity Research)
Yeah. Maybe just unpack some of the assumptions around sales productivity as it relates to the ACV target with the context of the 14% growth in quota carrying capacity.
Greg Orenstein (CFO)
Yeah. I mean, ultimately, you can assume that we oversign our targets and take into account when we do bring on new people that there's an appropriate, generally a six-ish month ramp that can vary depending on the background of the sales individual that joins the company. We take all that into account as we think about the plan. We spoke about specifically areas that we invested in, including the credit union market, which we just touched upon. EMEA, we've been very vocal in terms of the opportunity that we see there as well as investing in sales capacity as we go more aggressively towards the continent. Japan as well is an opportunity that we see. We feel good about the investments that we've made.
Again, we did not make them previously because, again, from a market perspective, we were very judicious in terms of rolling those out with the returns. With what we see in the market, we feel like it is the appropriate thing to do. Again, as we think about sales capacity and the actions that we took, we did not touch our sales capacity.
Nick Altmann (Director of US Software Equity Research)
Okay. Great. And then just my quick follow-up is, what are the growth signals you guys are looking for that would give you confidence to reinvest some of those cost savings back into the business rather than showing more margin expansion? Thanks.
Sean Desmond (CEO)
Yeah. Listen, building upon what Greg said, I mean, the maturity of the solutions that we have delivered and showcased last week at Insight do indicate that we, in fact, have more things to sell, right? That also contributes to capacity. The indicators we look for are some of the age-old tried and true, good old-fashioned pipeline and activity management, right? We're seeing a nice uptick there just in the overall activity in the field before Insight and lots of great warm leads coming out of the event as well that we think will continue to build on that momentum.
We feel like it's early days, but the interest and the inbound questions we're getting around leveraging our AI solutions, specifically Banking Advisor, and how soon can we partner with customers to co-build agentic experiences and showcase those and deliver those in a more componentized fashion without having to go for the whole platform all in one shot is really encouraging as well. Pipeline activity is always the leading indicator of health and hygiene in the sales process, and we're looking at that and focused on that with our execution.
Nick Altmann (Director of US Software Equity Research)
Great. Thank you. Thanks, Nick.
Operator (participant)
Thank you. Our next question comes from the line of Alex Giler from Raymond James. Your question, please.
Alex Sklar (Analyst)
All right. Thank you. Sean, maybe first, just I want to follow up on Sackett's question on your macro comments and the prepared remarks. Just relative to what you spoke to on the last call in early April, I know Q1 is not a big bookings quarter, but any change in buying behavior or sales cycles here at the end of May or coming out of Insight relative to a couple of months ago?
Sean Desmond (CEO)
No material changes in that behavior. We're seeing again a nice uptick in pipeline activity. In terms of buying cycles, behaviors, indicators that people are willing to go on that journey with us to explore how to gain efficiencies and drive those into their operating model through our solutions, those are pretty steady and consistent. I do think, and I'm very encouraged that by accelerating the velocity of our delivery of solutions as well as the deployment and implementation time frames, that that could actually speed up sales cycles because that historically has been a friction point. That's an area that we're being very intentional about investing to remove that friction from the sales process. I'm hopeful that that would result in second half of the year compression of sales cycles. That's the intent.
Alex Sklar (Analyst)
Okay. Great. Color. Greg, maybe a follow-up for you just on mortgage and the unchanged 2026 outlook. I appreciate not wanting to flow through some of that upside, but can you talk about was that upside driven by volume you saw in the quarter? Are you seeing retention improvements relative to last year, or is that kind of on the new gross bookings upside? Thanks.
Greg Orenstein (CFO)
Yeah. Alex, I think it was a combination of sales, of volumes, and also of, again, continued positive trends from a churn standpoint. I mentioned at Investor Day that Q4 was our lowest churn quarter for mortgage last year, and Q1 was lower than Q4. I think that whole combination came together for that overperformance. Again, consistent with the philosophy that we laid out, we'll take it one quarter at a time with that business in this market.
Alex Sklar (Analyst)
Okay. Great. Thank you both.
Greg Orenstein (CFO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Chris Kennedy from William Blair. Your question, please.
Cris Kennedy (Research Analyst of Financial Services and Technology)
All right. Good afternoon. Thanks for taking the question. Can you just talk broadly about the decelerating subscription revenue growth in fiscal 2026 and then kind of what the implications are for 2027?
Greg Orenstein (CFO)
Yeah. I think, Chris, it's Greg. Thanks for the question. I think it goes back to what we talked about on last quarter's call. In the second half of the year, we referenced that we're going to have difficult comps. I think there's nothing new to report from really what we talked about last quarter as we laid out the year and our expectations for the year. Again, we had a good first quarter. I think we are pleased with the execution from the team. It's nice to beat and raise and flow some of that through. Ultimately, again, I think from our perspective, as we set out the groundwork for this year on our Q4 call, it's just executing to it. Long story short, nothing new to report.
Ultimately, the second half of the year, it's the same comment I made last quarter around difficult second-half comps.
Cris Kennedy (Research Analyst of Financial Services and Technology)
Understood. Thank you for that. We really appreciate the ACV mix by category, US mortgage, commercial, and consumer. Is there any way to think about kind of how that mix should evolve as you think about the business in three years or so? Thanks.
Sean Desmond (CEO)
Yeah. I mean, listen, predicting what's going to happen on the macro events and how that's going to impact different solutions got everybody in a bind, specifically on the mortgage side in the past few years. We are going to follow closely what happens across the landscape. We believe that having a diversified and broad platform at scale sets us up and positions us very well no matter what's happening because when one line of business is up, another line of business might be down, and it comes out of the wash. Similar in terms of the imperatives and outcomes we deliver to our customers. Core commercial remains very healthy. I've been getting a lot of questions about that. The pipeline is healthy in commercial. The activity, the deals across market segments is in a good place.
We're reading out to you the mix of consumer and mortgage is a very healthy proportion of our mix as well. That all is before we contemplate an influx from the intelligence units, consumption of Banking Advisor, and agentic AI.
Cris Kennedy (Research Analyst of Financial Services and Technology)
Great. Thanks for taking the questions.
Greg Orenstein (CFO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Aaron Kimson from Citizens. Your question, please.
Aaron Kimson (VP)
Great. Thanks, guys. Sean, last week, you talked about the importance of the process-centric data nCino has on its customers. The thesis that AI is going to increasingly verticalize software has been out there for some time. As we begin to move into a world of AI agents, do you have a strong stance on the future competitive positioning of agents from vertical vendors like yourself versus horizontal vendors that also have large relationships with financial institutions? Why do nCino or other vertical vendors have the advantage there?
Sean Desmond (CEO)
Yeah. I appreciate you recognizing the importance of the process-centric point of view we have on data, which allows us to really understand how the money flows through the workflow today. As we start to wrap agents around those workflows and fully automate those experiences, they'll be informed by how that capital flows. There are lots of folks out there who have transactional data, but it's really that workflow-oriented, interactive data that gives you a process-centric point of view and then enables you to go ahead and deliver insights to your customers by role and by persona to the production line where they need to make decisions on behalf of their customers on the next product or service to offer. We think that's very differentiating, and that's why vertical AI is so compelling. We saw the same trends and patterns from horizontal cloud into vertical cloud.
I think we'll see the same thing exponentially here in banking in the next few years.
Aaron Kimson (VP)
That's really exciting. As a follow-up, has there been any feedback on the nCino Mortgage Solution demonstration at a top four bank last week? Does that customer currently use a homegrown solution or a competitive solution for mortgage? Thanks, guys.
Sean Desmond (CEO)
Yeah. That was a fantastic discussion. We were honored to participate in. We got great feedback, as we always do when we show our solutions that we're proud of. Of course, those size and scale banks typically have long cycles. All we know is we got positive feedback on what we showed.
Operator (participant)
Thank you. Our next question comes from the line of Michael Infante from Morgan Stanley. Your question, please.
Michael Indante (VP of Equity Research)
Hey, guys. Thanks for taking my question. Sean, obviously, a healthy amount of new product velocity, which I'm sure is at least partially playing into the pipeline improvements that you mentioned. It also seems like loan growth itself at the banks that we track has been trending better and is expected to grow faster than deposits broadly. I am just curious whether or not that loan growth acceleration dynamic is helping to catalyze some incremental demand.
Sean Desmond (CEO)
Yes, absolutely. It's been a core part of our value proposition from day one, both on not only loan origination, but then through monitoring and servicing. There's an uptick in interest of our Continuous Credit Monitoring solution that is now gaining a lot of traction in the market. We believe there's upside from an ACV standpoint in core commercial with loan growth and across the portfolio. Absolutely.
Michael Indante (VP of Equity Research)
Helpful. Greg, maybe just a quick housekeeping item. On the reiterated ACV outlook of $48 million-$51 million, I was not aware that the net new ACV additions had contemplated the $4.5 million from Sandbox Banking. Now it seems like it does. I just wanted to clarify whether or not that was embedded into last quarter's ACV outlook. Thanks.
Greg Orenstein (CFO)
Yeah, Michael, it was. Yeah, no change there. So the 19% is organic, but the Sandbox Banking is part of that.
Michael Indante (VP of Equity Research)
Got it. Thanks, guys.
Greg Orenstein (CFO)
Thank you, Michael.
Operator (participant)
Thank you. Our next question comes from the line of Charles Nubin from Stevens. Your question, please.
Charles Nabhan (Managing Director of Equity Research)
Hi, guys. Congrats on the result, and thank you for taking my question. I had a quick one on international performance. Year-over-year growth of 31%, very strong. I remember if I think back a couple of quarters ago, you had said that growth internationally would at some point converge with the overall revenue growth. My question is, what's led to that outperformance? Is the outperformance in international relative to overall growth, excluding mortgage, sustainable over the next year or so based on the pipeline?
Greg Orenstein (CFO)
Yeah, thanks for the question. I think the big contribution to that was the Full Circle acquisition. That certainly helped drive the international growth. Ultimately, again, I think as you've heard, whether it was at Investor Day or even in our prepared remarks today, the, I think, excitement or optimism around the opportunity that we have internationally. We've talked specifically around Japan and our excitement and optimism there, as well as, then again, the focus on the continent in Europe. We do think that there's opportunities for growth there that could very much outsize or be accretive to the rest of the company as we get into next year and beyond.
Charles Nabhan (Managing Director of Equity Research)
Got it. As a follow-up, I know it's still kind of early days on Sandbox Banking, but you've done a number of acquisitions over the past year. I was hoping you could just kind of give us a quick high-level update on what's working, what's not working with Full Circle and Doc Vox and Allegra.
Sean Desmond (CEO)
Yeah. Across the board, we've been active on the acquisition kind of agenda for the past 14 or so months with respect to the opportunity in onboarding and delivering on the integration of Doc Vox with the rest of our platform. We're ready to go press the gas and sell that out to our community and regional banks in the U.S. We expect the pipeline activity is already showing that we'll be busy in those sales cycles the back half of the year. From a Full Circle standpoint, we already had accretive Full Circle deals continue. That momentum shows up in some of the year-over-year growth numbers already. It positions us really well to capture the opportunity more broadly on the continent in EMEA and expand out our integrations that would be required to do that.
We've got an eye on what we need to do to go beyond the U.K. and Ireland with Full Circle. Allegra gives us the hooks into the indirect auto lending solution, which is an imperative for credit unions. That is just a non-starter if you go into the credit union market without that capability. I would argue that unlocks almost every opportunity we look at in the credit union space for consumer lending specifically. We also have a lot of momentum and opportunity for commercial and small business in the credit union markets. Then Sandbox Banking, arguably, stole the show at Insight last week as such a core part of our AI strategy. I think that was probably underappreciated prior to the event.
A lot of folks associated Sandbox Banking with real-time core integrations for our Consumer Lending solution where we were live and in production with many customers prior to that acquisition. It really will underpin our entire data strategy, play a key role in integrating that process-centric data that we already talked about. As you see the market aggressively positioning on data capture, Sandbox Banking has a very financial services-oriented point of view on ingesting that data and interpreting that data and readying that data and preparing us to capture on the AI opportunity. That is where we are with the collective integrations, and they are all giving us momentum in our pipeline activity.
Charles Nabhan (Managing Director of Equity Research)
Got it. Got it. Appreciate all the callers. Thanks again.
Greg Orenstein (CFO)
Thanks for the questions.
Operator (participant)
Thank you. Our next question comes from the line of Adam Hotchkiss from Goldman Sachs. Your question, please.
Adam Hotchkiss (VP of Emerging Software Equity Research)
Great. Thanks so much for taking the question. Sean, you mentioned that deployment has been a pretty heavy friction point for your customers. Can you just give a little more detail on what the biggest friction points are on the implementation side and how you think that's actually impacted pipeline conversion versus just it being sales cycle length? Maybe what gives you the confidence in that improving as soon as the second half of the year?
Sean Desmond (CEO)
Sure. To fully appreciate the reality there, we have to understand the shifts in the market and the landscape over time. We also have to understand that nCino grew up with a core value proposition of a solution that was highly configurable. That uniquely differentiated ourselves from legacy competitors that for years were rigid. They would say, you get what you get, right? There was no configurability or optionality in those solutions. At that time, there was also a very big appetite for long consultative projects that were heavy in their investment from a consulting dollar standpoint in order to configure those solutions and tailor them in a very unique way for institutions who wanted it differently. What happened in the landscape is twofold, right? One is the market shifted in terms of appetite to spend consulting dollars and have these long projects.
As a result, people realized they can't have their cake and eat it too. In other words, if I can't have this long tailored configurable implementation, then I do want to box it in, and I am willing to have less flexibility there. I also want a vendor who's going to give me a robust experience and deliver as much functionality as they possibly can with a solution that's scalable over time. That's how we've evolved our solution set as we've reined in the configurability. We've given customers less optionality, and we've delivered more functionality, which has all resulted in probably some of the longer than we would like time frames to deliver the convergence and the maturity of solutions that we saw at Insight last week.
Now we position customers to really lean into the offerings that we have without having these long drawn-out projects and large dollar consulting spends.
Adam Hotchkiss (VP of Emerging Software Equity Research)
Okay. That's really helpful color, Sean. It does. That was really, really helpful. Greg, just another housekeeping item. I think you mentioned a revenue recognition adjustment to services. Any color on what that is, what the magnitude might be, and whether that's going to be ongoing in future periods? Thanks.
Greg Orenstein (CFO)
Sure, Adam. Yeah. I mean, we evaluate standalone selling price of subscription and services, right, which can result in reallocating fees between revenue lines. Nothing out of the ordinary, but just in terms of the actual results this quarter versus where we were expecting it to come in, that was an impact. Nothing new, nothing of note other than, again, just making sure you guys appreciated why it was a little bit ahead of where we expected it to be.
Adam Hotchkiss (VP of Emerging Software Equity Research)
Okay. Understood. Thanks so much.
Greg Orenstein (CFO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Brent Braceland from Piper Sandler. Your question, please.
J.R. Herrera (Equity Research Associate)
Good afternoon. Thanks for taking the question. This is JR On. Just one for us today. The credit union space has been a topic you've touched on frequently. Could you maybe remind us about the differences in competitive dynamics in that end of the market compared to the enterprise or regional bank space?
Sean Desmond (CEO)
Yeah. The opportunity for nCino to realize that our solutions and the value proposition of our solutions resonate with the credit union market. In other words, we do not have to go and build separate products because we are delivering on the same outcomes. On the other hand, the credit unions have a unique culture from banks and differentiate in terms of how they serve their member and the local communities they play in and, quite honestly, manage their balance sheets, right? What we realized over time is that although we are solving the same business problem and delivering a very similar technology solution, the way our teams go out and build relationships in those markets really matters, right? They expect folks who understand the dynamic in a credit union. Therefore, we put leadership in place that has historically worked in credit unions over time.
We have a whole team that largely sources from spending careers in credit unions and building those relationships. Not to be discounted are the 800-plus credit union customers that we already claim with our portfolio analytics solution and footprint. We have the world's largest credit union using our commercial solution. There is already traction and momentum. Just with the renewed focus and a team that wakes up in the morning and thinks only about the credit union and their member versus the bank and the credit union, I think positions us to really build momentum there.
J.R. Herrera (Equity Research Associate)
Got it. Makes sense. Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Alex Markgraf from KBCM. Your question, please.
Alex Markgraff (VP of Equity Research)
Hi guys. Thanks for taking the question. Just a couple of follow-ups on the efforts around deployment. Sean, maybe just first, the 200 hours that you've referenced, can you just clarify what we should be sort of comparing that to today? Then, Greg, if you would maybe speak to the impact that that sort of improved delivery timing would have on timing of revenue recognition over the midterm, that'd be helpful. Thank you.
Sean Desmond (CEO)
Yes. The 200 hours is a bold, audacious goal, and we have set the bar high there. We are excited to run toward that with everything we have. What I would tell you is that in the community and regional bank landscape across our solution set, those projects are historically anywhere from two to six-ish months. Up in the enterprise, that can vary from 6-18 months, depending on the culture of those institutions, the change management discipline, and how far they are coming from their legacy experience. Yeah, we are talking about going from months to years to months to days.
Greg Orenstein (CFO)
Yep. On the second question, it does not impact subscription revenue recognition. Going back to my comments on Investor Day, again, our focus is going to be on professional services growth, profit growth, versus, again, driving more professional services revenues because we do think we will be able to do projects quicker and ultimately leverage AI and other efficiency initiatives that we have. That is going to help drive our margins over time.
Operator (participant)
Does that answer your questions?
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Sean Desmond, Chief Executive Officer, for any further remarks.
Sean Desmond (CEO)
Sure. Before we close, I'd like to thank the entire nCino ecosystem that was on full display last week in Charlotte at our user conference. I'd like to thank our employees for their tireless work they put in to ensure that this has now become the marquee event in fintech annually. I'd like to thank our customers for showing up in full force and validating that our prioritization is in line with their needs. I'd like to thank our partners, both our SI and tech partners, who play an invaluable role in our go-to-market strategy. Finally, I'd like to thank you all, our investors, who I think were very additive to the event. Having Investor Day coupled with Insight gives a lot of perspective and value.
Collectively, I think we all return to our offices wherever we are with a renewed focus on our execution strategy and ready to go. Thank you for your time this afternoon. We appreciate it.
Operator (participant)
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.