Earnings Call Transcript
nCino, Inc. (NCNO)
Earnings Call Transcript - NCNO Q1 2026
Harrison Masters, Director, IR
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 8-K 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 life cycle. 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 nSight 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 revenue growth, and we believe we are on track. At nSight last week, we showcased the culmination of a large multiyear and multiproduct 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 solutions 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 data set in fintech and is uniquely powerful. At our nSight conference, we released 16 new banking adviser 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. And because banking adviser drives incremental usage of the nCino platform, we see these enhancements as key drivers of future subscription revenue 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 SAM opportunity that has been unlocked through the readiness of our solutions for that market. In Q1, an $800 million credit union that 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. And 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. And 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 8-K 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 reexamining 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 I mention, except for revenues, are on a non-GAAP basis unless stated otherwise. You can find a reconciliation to comparable GAAP metrics in today's earnings release available on our website and as an exhibit to the Form 8-K filed with the SEC just before this call. In Q1, total revenues were $144.1 million, which is a 13% increase year-over-year. Subscription revenues accounted for $125.6 million, marking a 14% rise year-over-year on a reported basis and a 9% increase organically. The growth in subscription revenues was driven by the successful execution of our operating plan and was also seasonally supported by around $800,000 in U.S. mortgage revenues that exceeded our expectations. Professional services revenues reached $18.5 million, reflecting a 5% year-over-year increase, which was better than anticipated due to necessary revenue recognition adjustments of subscription fees to professional services revenues. Outside the U.S., total revenues amounted to $31.6 million, up 22% year-over-year or 23% in constant currency, with non-U.S. subscription revenues at $25.9 million, a 31% increase year-over-year or 32% in constant currency. Non-GAAP operating income stood at $24.8 million, making up 17% of total revenues. The outperformance of subscription revenues contributed to the higher non-GAAP operating income, which was partially offset by approximately $0.5 million in severance expenses incurred during the first quarter. Non-GAAP net income attributable to nCino reached $18.4 million, or $0.16 per diluted share. Moving on to our share repurchase program, we bought back about 1.8 million shares during the first quarter at an average price of $22.17, totaling $40.6 million. As mentioned last quarter, we are currently focused on realizing the benefits of our previous acquisitions and on share buybacks. Now, regarding our guidance for the second quarter of fiscal '26, we anticipate total revenues between $142 million to $144 million, with subscription revenues expected to be between $124.5 million to $126.5 million, reflecting an 8% to 10% increase at the midpoint. Keep in mind that the sequential change in total revenues is influenced by not carrying forward the Q1 overachievement in mortgage and professional services revenues. We project non-GAAP operating income for the second quarter to be between $23.5 million to $24.5 million, and non-GAAP net income attributable to nCino per share is estimated to be between $0.13 to $0.14. Our annual user conference is expected to add about $2.5 million to sales and marketing expenses in the upcoming quarter. This guidance includes an estimated interest expense of approximately $4 million under our credit facility and is based on a weighted average of about 119 million diluted shares outstanding, not accounting for any share repurchases beyond those conducted so far. For fiscal '26, we are off to a robust start and are reaffirming our guidance to achieve an additional $48 million to $51 million in ACV, on a constant currency basis, including roughly $4.5 million from the acquisition of Sandbox Banking. This signifies about 19% organic net ACV bookings growth at the midpoint, which we expect will boost subscription revenue growth in fiscal '27. For fiscal '26, we are integrating most of our Q1 subscription revenues outperformance into our full-year outlook, but, consistent with our guidance philosophy regarding mortgage introduced last quarter, we are not incorporating the seasonal overperformance of around $800,000 in U.S. mortgage subscription revenues. We now project our subscription revenues to be between $507 million and $511 million, an increase from the previous forecast of $503 million to $507 million. Our revised subscription revenue guidance indicates approximately 8.5% growth at the midpoint. Excluding currency fluctuations, we anticipate our organic subscription revenue growth rate for fiscal '26 to be around 5% at the midpoint, up from the 4% mentioned in our Q4 earnings call. Please note that this guidance assumes Q4 will represent the lowest year-over-year subscription revenue growth and continues to assume that there will be no year-over-year increase in U.S. mortgage subscription revenues. Additionally, our expectations for inorganic contributions from FullCircl and Sandbox Banking remain unchanged since last quarter. In summary, we now expect total revenues to be between $578.5 million and $582.5 million, an increase from our prior guidance of $574.5 million to $578.5 million, indicating approximately 7% growth at the midpoint. Regarding the restructuring event mentioned by Sean, we expect to realize about $24 million in gross annualized expense savings from these measures and other cost-saving initiatives. Initially, we estimated $6 million in gross annualized expense savings for fiscal '26, but through our current actions, we have accelerated this figure and added about $18 million more. We are initially factoring about $5 million of these additional savings into our updated fiscal '26 non-GAAP operating income guidance, which will mostly benefit the latter half of the fiscal year. This guidance approach allows for flexibility in managing the business while maintaining the option to invest in AI technology for greater efficiency if opportunities arise. The net cost savings will mainly benefit our R&D expenses and our cost of goods sold. Specifically, we anticipate expense savings on our R&D line as we have completed several major development milestones concerning various product initiatives and have identified opportunities to enhance our development operations, including greater use of AI tools. For our cost of goods sold, we expect to execute projects more efficiently due to redesigning products for quicker implementation and utilizing AI tools. While it may take some time to see an increase in our PSO margins as we finish legacy projects and ramp up AI tool usage, we are confident in our ability to achieve efficiency improvements in our PSO and customer support teams, particularly with initiatives like Project DevZero discussed at Investor Day, which justifies our current actions. We expect to incur one-time restructuring costs ranging from $7.5 million to $9 million, mostly in the second quarter, to realize these savings, with approximately $1 million expected to be non-cash. These restructuring costs will be excluded from our non-GAAP operating income but will affect our free cash flow for fiscal '26. We now anticipate our fiscal '26 non-GAAP operating income to be between $112 million and $116 million, an increase from the prior range of $107 million to $111 million, representing around a 19% rise over fiscal '25 at the midpoint. At Investor Day, I indicated that we increased our sales capacity by about 14% for fiscal '26; this was included in our original guidance for the year, and there has been no update to that number following the restructuring. Non-GAAP net income attributable to nCino per diluted share is now projected to be between $0.69 and $0.72 for fiscal '26, up from our previous guidance of $0.66 to $0.69, excluding the impact of currency fluctuations and based on a weighted average of approximately 119 million diluted shares outstanding, which does not factor in any additional share repurchases beyond what has been completed so far. This guidance also assumes an estimated interest expense of about $15 million for the fiscal year under our credit facility. We will now open the line for questions.
Operator, Operator
Our first question comes from Saket Kalia from Barclays. Please go ahead with your question.
Saket Kalia, Analyst
Okay. Great. Thanks for taking my questions here and good to see a strong start to the year. Sean, maybe just to start with you. You touched on this a little bit in your prepared remarks, but I was wondering if you could 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
Yes. Thanks for the question, Saket, and 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 nSight in Charlotte with the full nCino ecosystem on full display. And we have very steady interest across the board on our solutions across onboarding, cross account opening, loan origination as well as portfolio monitoring. And 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. And 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, Analyst
Got it. Got it. That's helpful. Maybe for my follow-up, Greg, for you. I was wondering if you could just dig into professional services gross margins a little bit. You touched on this in 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
Yes, thank you, Saket. I would say that price and cost pressures on services have primarily affected the community bank sector in the U.S., especially over the past couple of years when our banking customers faced a more difficult market. We have taken several actions in response. Firstly, we have redesigned some of our products to be implemented more quickly and efficiently, ultimately aiming to enhance margins. Secondly, as we mentioned at Investor Day and reiterated in my remarks, we are seeing significant opportunities to boost gross margins through AI. This is a key area of focus for us and presents a chance for improvement. While we believe that we are making progress, it will take some time as we work through our existing projects and ramp up the AI tools that we are testing and developing. However, we are optimistic about executing on this opportunity, and we expect to see results over the next few quarters.
Saket Kalia, Analyst
Very helpful. Thanks, guys.
Operator, Operator
And our next question comes from the line of Terry Tillman from Truist. Your question please.
Robert Dee, Analyst
Great. Thanks for taking questions. This is Bobby Dee on 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? And then I have one follow-up. Thank you.
Sean Desmond, CEO
I have been 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 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. So I don't have a lot of discomfort that there's a misunderstanding of the nCino strategy right now.
Robert Dee, Analyst
Much appreciate it. And then 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? And how important is omnichannel to the overall platform go-to-market strategy? Thank you.
Sean Desmond, CEO
Yes. Thanks for the question. And you all heard the story that we had two primary goals stated at nSight. One was that we fulfilled the commitments that we made to our customers and omnichannel is a big part of that, that we would have a consistent experience for the banker and their customer, whether digital or in person across our solutions. And as we upgrade customers to that omnichannel experience, there's no 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. But if they're upgrading an older version of nCino to the current, they simply get omnichannel with that and there's no additional spend.
Operator, Operator
Next question comes from the line of Koji Ikeda from Bank of America. Your question please.
Koji Ikeda, Analyst
Yes. Thanks for taking the questions here. I did want to ask a question on kind of the workforce reduction and the office space reductions. And 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
Yes. And can you restate the first part about the office question? I want to make sure I understand that.
Koji Ikeda, Analyst
Yes. 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
Thank you for the question. Our campus headquarters is located in Wilmington, North Carolina, along with seven additional offices globally. We've had some excess capacity as we've transitioned between facilities, retaining some older spaces in case we needed them in the future. Currently, our new building meets all our needs effectively. We had a large conference room that accommodated around 100 people, which we only utilized a few times each year, making it an inefficient use of resources. We have ample space for town hall meetings right here in Wilmington. We're continuously exploring opportunities to optimize our investments based on the returns we're seeing. I believe we're properly adjusting our major office locations, and we don't have much excess capacity left. Regarding future investments, there are multiple factors behind the recent workforce reduction. Our commitment to making tough decisions for the long-term benefit of the business played a role, and we needed to address capacity alignment with overdue decisions. Market shifts and changes in roles within our organization made some positions less relevant to current customer needs, and we acted on that, even though such decisions are difficult. Moving forward, we can achieve greater efficiencies as we modernize our software development approach and realign with our technology partners. This change will likely increase our software build cycle speed with a smaller headcount, not simply doing more with less but rather optimizing, increasing efficiency, and becoming more agile to seize market opportunities.
Koji Ikeda, Analyst
I have a follow-up question for Greg. Although billings might not be the best indicator for your company, I noticed a slight slowdown in its growth. I understand there may be some inorganic factors at play and that billings dynamics relate to revenue recognition. As we develop our models, could you clarify if there's anything we should consider regarding billings this quarter or how to approach deferred revenue in the upcoming quarters? Thank you.
Greg Orenstein, CFO
Yes, Thanks, Koji. Nothing to note. I mean, billings, which is one of the reasons we don't guide to it, can be lumpy, certainly with larger customers and just depending on timing of deal signing and ultimately, again, the billings. And so nothing to note different from prior quarters that I would call out at this point in time.
Operator, Operator
And our next question comes from the line of Ryan Tomasello from KBW. Your question please.
Ryan Tomasello, Analyst
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 sales force activation in the credit union space? And just generally, how should we be thinking about the timing for that to start to kick in more meaningfully the benefit of that activation? And 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. But 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
Yes. So 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, and I believe they're just hitting their stride now. So that all has been independent and before we fully activated that team. So we think there's further upside there. And then 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 for 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 upmarket as evidenced by the reference you made to First Citizens being on stage with us at Investor Day.
Greg Orenstein, CFO
Yes. And just to clarify, on commercial 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.
Ryan Tomasello, Analyst
Greg, regarding the expense savings, it seems you're accounting for about $5 million of the total $18 million in savings. I understand the desire to maintain flexibility, but how should we view the potential for increasing the full-year guidance based on those savings after you assess further reinvestment opportunities?
Greg Orenstein, CFO
Sure, Ryan. Yes. Obviously, we'll update you as the year progresses. If you take the $18 million and expenses will basically be a Q2 event. So you get about half out of that $18 million, you would think in the second half of the year. Again, we're going ahead and flowing $5 million of that through as we sit here today. And 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.
Operator, Operator
And our next question comes from the line of Nick Altmann from Scotiabank. Your question please.
Nick Altmann, Analyst
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? And then just a follow-up is maybe can you guys just unpack some of the assumptions around sales productivity as it relates to that FY '26 ACV target? Thanks.
Greg Orenstein, CFO
Yes. On the first question, Nick, sales was not impacted by the actions that we announced last night. And so that 14% is still appropriate. And then if you could just repeat the second question.
Nick Altmann, Analyst
Yes, 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
I mean, ultimately, you can assume that we over sign our targets and take into account. When we do bring on new people that there's an appropriate generally a 6-ish month ramp that can vary depending on the background of the sales individual that joins the company. But we take all that into account as we think about the plan and 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. And then Japan as well is an opportunity that we see. And so we feel good about the investments that we've made. Again, we didn't make them previously because, again, from a market perspective, we were very judicious in terms of rolling those out with the returns. But with what we see in the market, we feel like it's the appropriate thing to do. And again, as we think about sales capacity and the actions that we took, we did not touch our sales capacity.
Nick Altmann, Analyst
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
Yes. Listen, building upon what Greg said, I mean, the maturity of the solutions that we have delivered and showcased last week at nSight do indicate that we, in fact, have more things to sell, right? And so 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? And we're seeing a nice uptick there just in the overall activity in the field before nSight and lots of great warm leads coming out of the event as well that we think will continue to build on that momentum. And we feel like it's early days, but the interest in the inbound questions we're getting around leveraging our AI solutions, specifically banking adviser 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. So 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, Analyst
Great. Thank you.
Operator, Operator
And our next question comes from the line of Alex Sklar from Raymond James. Your question please.
Alex Sklar, Analyst
Hi, thank you. Sean, maybe first, just want to follow up on Saket's question on your macro comments in 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. But 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, and that's an area that we're being very intentional about investing to remove that friction from the sales process. So I'm hopeful that, that would result in the 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 '26 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?
Greg Orenstein, CFO
Yes, 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. So I think that whole combination came together for that overperformance. But 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.
Operator, Operator
And our next question comes from the line of Chris Kennedy from William Blair. Your question please.
Chris Kennedy, Analyst
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
Yes, Chris, it's Greg. Thank you for the question. This goes back to what we discussed in last quarter's call. In the second half of the year, we mentioned that we would face tough comparisons. However, there's nothing new to update from what we shared last quarter regarding our plans and expectations for the year. We had a solid first quarter, and we're satisfied with the team's performance. It's encouraging to exceed expectations and see the positive impact. Ultimately, as we outlined in our Q4 call, it's all about executing our plan. In summary, nothing new to report, but as I mentioned last quarter, the second half of the year will have challenging comparisons.
Chris Kennedy, Analyst
Understood. Thank you for that. And then we really appreciate the ACV mix by category, U.S. 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
Yes. 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're going to follow closely what happens across the landscape, and 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 and similar in terms of the imperatives and outcomes we deliver to our customers. So 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, and we're reading out to you the mix of consumer and mortgage is a very healthy proportion of our mix as well. And that all is before we contemplate an influx from the intelligence unit consumption of banking adviser and agentic AI.
Chris Kennedy, Analyst
Great. Thanks for taking the questions.
Operator, Operator
And our next question comes from the line of Aaron Kimson from Citizens. Your question please.
Aaron Kimson, Analyst
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. But 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? And why do nCino or other vertical vendors have the advantage there?
Sean Desmond, CEO
Yes. 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. And 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. So 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. And I think we'll see the same thing exponentially here in banking in the next few years.
Aaron Kimson, Analyst
That's really exciting. And then as a follow-up, has there been any feedback on the nCino mortgage demonstration at the top 4 banks last week? And does that customer currently use a homegrown solution or a competitive solution for mortgage?
Sean Desmond, CEO
Yes. So that was a fantastic discussion. We were honored to participate in. We've got great feedback as we always do where we show our solutions that we're proud of. Of course, those size and scale banks typically have long cycles. And all we know is we got positive feedback on what we showed.
Operator, Operator
And our next question comes from the line of Michael Infante from Morgan Stanley. Your question please.
Michael Infante, Analyst
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. But 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. So I'm 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 and there's an uptick in interest of our continuous credit monitoring solution that is now gaining a lot of traction in the market. So we believe there's upside from an ACV standpoint in core commercial with loan growth and across the portfolio, absolutely.
Michael Infante, Analyst
Helpful. And Greg, maybe just a quick housekeeping item. On the reiterated ACV outlook of 48% to 51%. I wasn't aware that the net new ACV additions had contemplated the 4.5% from Sandbox Banking. Now it seems like it does. So I just wanted to clarify whether or not that was embedded into last quarter's ACV outlook.
Greg Orenstein, CFO
Yes, Michael, it was. Yes, no change there. So the 19% is organic, but the Sandbox is part of that.
Operator, Operator
And our next question comes from the line of Charles Nabhan from Stephens. Your question please.
Charles Nabhan, Analyst
Hi, guys. Congrats on the result. 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 extend that growth internationally would at some point, converge with the overall revenue growth. So my question is what's led to that outperformance? And 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
Yes. Thanks for the question. I think the big contribution to that was the FullCircl acquisition. So that certainly helped drive the international growth. But ultimately, again, I think you've heard whether it was at Investor Day or even in our prepared remarks today the, I think, excitement and optimism around the opportunity that we have. Internationally, we've talked specifically around Japan and our excitement and optimism there as well as in the focus on the continent in Europe. And so 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, Analyst
Got it. And then the follow-up, I know it's still kind of early days on Sandbox, but you've done a number of acquisitions over the past year. And I was hoping you could just kind of give us a quick high-level update on what's working what's not working with FullCircl and DocFox and Allegro?
Sean Desmond, CEO
So 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 DocFox 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. and that we expect the pipeline activity is already showing that we'll be busy in those sales cycles or the back half of the year. From a FullCircl standpoint, we already had accretive FullCircl deals continue, and that momentum shows up in some of the year-over-year growth numbers already. But 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. So we've got an eye on what we need to do to go beyond the U.K. and Ireland with FullCircl. Allegro gives us that hooks into the indirect auto lending solution, which is an imperative for credit unions, and that is just a nonstarter if you go into the credit union market without that capability. So I would argue that, 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. And then Sandbox Banking, arguably stole the show at nSight last week, is such a core part of our AI strategy. I think that was probably underappreciated prior to the events. A lot of associated Sandbox Banking with real-time core integrations for our consumer lending solution where we are live and in production with many customers prior to that acquisition. But it really will underpin our entire data strategy, play a key role in integrating that process-centric data that we already talked about. And 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 reading that data and preparing us to capture on the AI opportunity. So that's where we are with the collective integrations, and they're all giving us momentum in our pipeline activity.
Charles Nabhan, Analyst
Got it. Appreciate all the color. Thanks guys.
Operator, Operator
And our next question comes from the line of Adam Hotchkiss from Goldman Sachs. Your question please.
Adam Hotchkiss, Analyst
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? And then maybe what gives you the confidence in that improving as soon as the second half of the year?
Sean Desmond, CEO
Sure. And to fully appreciate the reality there, we have to understand the shifts in the market and the landscape over time, and also understand that nCino grew up with a core value proposition of a solution that was highly configurable. And that uniquely differentiated ourselves from legacy competitors that for years were rigid and say, you get what you get, right? And there was no configurability or optionality in those solutions. And 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 want it differently. So 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. And as a result, people realize 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. And 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. And so 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 nSight last week. But 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, Analyst
Okay. That's really helpful color, Sean. It does. It does. That was really helpful. And then, Greg, just another housekeeping item. I think you mentioned revenue recognition adjustment to services. Any color on what that is, what the magnitude might be and then whether that's going to be ongoing in future periods? Thanks.
Greg Orenstein, CFO
Sure, Adam. Yes. I mean, we evaluate stand-alone selling price of subscription and services, right, which can result in reallocating fees between revenue lines. So 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. So nothing new, nothing of note other than, again, just making sure you guys appreciate it why it was a little bit ahead of where we expected it to be.
Adam Hotchkiss, Analyst
Okay, understood. Thanks so much.
Operator, Operator
And our next question comes from the line of Brent Bracelin from Piper Sandler. Your question please.
Unidentified Analyst, Analyst
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. Can 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
Yes. 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 don't have to go and build separate products because we're 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? And so what we realized over time is that although we're 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? And they expect folks to understand the dynamic in the credit union. Therefore, we put leadership in place that has historically worked in credit unions over time and we have a whole team that largely sources from spending careers in credit unions and building those relationships. And not to be discounted are the 800-plus credit union customers that we already claim with our portfolio analytics solution and footprint, and we have the world's largest credit union using our commercial solutions. So there's already traction and momentum. And 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.
Unidentified Analyst, Analyst
Got it. Makes sense. Thank you.
Operator, Operator
And our next question comes from the line of Alex Markgraff from KBCM. Your question please.
Alex Markgraff, Analyst
Hi, guys. Thanks for taking the question. Just a couple of follow-ups on the efforts around deployment. Sean, maybe just for the 200 hours that you've referenced, can you just clarify what we should be sort of comparing that to today? And then, Greg, if you could maybe speak to the impact that, that sort of improved delivery timing would have on timing of revenue recognition over the midterm, that would be helpful.
Sean Desmond, CEO
Yes. And the 200 hours is a bold, audacious goal, and we have set the bar higher. And we're 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 2 to 6 months and up in the enterprise that can vary from 6 to 18 months, depending on the culture of those institutions to change management discipline and how far they're coming from their legacy experience. So yes, we're talking about going from months to years to months to days.
Greg Orenstein, CFO
Yes. And on the second question, it doesn't impact subscription revenue recognition. Going back to my comments on Investor Day, again, our focus is going to be on professional services gross 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, and that's going to help drive our margins over time.
Operator, Operator
Does that answer your question? 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. And 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 and having Investor Day coupled with nSight gives a lot of perspective and value. So collectively, I think we all return to our offices wherever we are with a renewed focus on our execution strategy and ready to go. So thank you for your time this afternoon. We appreciate it.
Operator, Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.