Bank software company nCino (NASDAQ:NCNO) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 12.5% year on year to $144.1 million. Its non-GAAP profit of $0.16 per share was in line with analysts’ consensus estimates.
Revenue: $144.1 million (12.5% year-on-year growth)
Adjusted EPS: $0.16 vs analyst estimates of $0.16 (in line)
Adjusted Operating Income: $24.83 million vs analyst estimates of $24.08 million (17.2% margin, 3.1% beat)
Revenue Guidance for Q2 CY2025 is $143 million at the midpoint, roughly in line with what analysts were expecting
Management raised its full-year Adjusted EPS guidance to $0.71 at the midpoint, a 4.4% increase
Operating Margin: -1%, up from -2.9% in the same quarter last year
Billings: $156.6 million at quarter end, up 13.8% year on year
Market Capitalization: $3.09 billion
StockStory’s Take
nCino’s first quarter results reflected ongoing demand for its cloud-based banking platform despite a competitive and evolving technology landscape. Management attributed performance to uptake in subscription services, especially among regional banks, as well as progress in international markets and the credit union segment. CEO Sean Desmond highlighted the importance of recently launched AI capabilities and enhanced omnichannel experiences, which were showcased at the company’s annual nSight Customer Conference. The leadership team also discussed the impact of streamlined operations and product development cycles, supported by workforce reductions and more focused investment in core product areas.
Looking ahead, nCino’s forward guidance is anchored by its expectation that new AI-driven features and expanded platform functionality will help drive both new customer wins and greater usage among existing clients. Management believes that investments in automation, data strategy, and international expansion will be key to sustaining growth. CFO Greg Orenstein noted that recent cost-saving measures—primarily from restructuring and increased use of AI tools—are intended to preserve flexibility for future investments and margin improvement. As Desmond stated, the company aims to accelerate software delivery cycles and broaden its reach in markets like Europe and Japan, while closely monitoring the pace of adoption for its AI-based offerings.
Key Insights from Management’s Remarks
Management pointed to subscription revenue momentum, enhanced product features, and targeted efficiency initiatives as the primary drivers of first quarter performance.
AI feature rollout: nCino introduced 16 new AI banking adviser capabilities at its nSight Customer Conference, designed to improve productivity and reduce costs for financial institution clients. Management regards these features as central to the company’s long-term differentiation and future subscription revenue growth.
Omnichannel platform enhancements: Upgrades to the onboarding and digital experience components of the platform were completed, offering a more unified experience for bank and credit union customers. These enhancements are available to existing clients as part of their platform upgrade with no incremental cost, which management believes could facilitate broader adoption.
Restructuring and cost efficiencies: The company undertook a restructuring that reduced its global workforce by approximately 7%, targeting operational streamlining and greater efficiency in product development. Management expects to realize $24 million in gross annualized expense savings, with a portion already reflected in first quarter results.
Credit union and international traction: nCino closed new deals with both an $800 million credit union and a top Japanese bank, while also securing expanded commitments from a $25 billion regional bank. Management views the credit union market and international expansion as significant growth opportunities.
Professional services margin focus: Ongoing efforts to redesign products for faster implementation and increased use of AI tools are expected to gradually improve professional services margins. Management acknowledged that margin improvement will take time as legacy projects wind down and new processes are scaled up.
Drivers of Future Performance
nCino’s outlook relies on increasing adoption of AI-powered solutions, operational efficiencies, and expanding sales capacity, but faces headwinds from challenging comparisons and variable customer demand.
AI-driven product adoption: Management expects that recent and upcoming investments in AI capabilities, such as banking adviser and workflow automation, will drive incremental usage across the existing customer base and attract new clients. These features are positioned as a differentiator in a market where financial institutions seek efficiency and real-time data insights.
Operational cost savings and reinvestment: The restructuring is projected to deliver $24 million in annualized expense savings, enabling the company to both improve margins and potentially reinvest in areas like product development and sales. Leadership emphasized the intention to preserve flexibility, evaluating whether to flow additional cost savings into margin expansion or growth initiatives based on evolving market signals.
Geographic and segment expansion: Continued investment in credit union-focused offerings and international markets, particularly Europe and Japan, is expected to support future revenue growth. However, management acknowledged that adoption rates and deal cycles in these regions may be variable, and that U.S. mortgage market stability remains a key factor in achieving guidance.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will watch (1) the pace at which financial institutions adopt nCino’s new AI-enabled features and banking adviser tools, (2) progress on professional services margin improvement as legacy projects wind down and new efficiency measures take hold, and (3) the company’s ability to secure additional wins in international markets and among U.S. credit unions. The impact of ongoing product integration from recent acquisitions will also be a key indicator of the company’s execution.
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