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nCino (NCNO -26%) is under pressure today. After a gap down following Q3 (Oct) results in early December, this banking software company is down sharply following its Q4 (Jan) earnings miss last night. This was the first time nCino missed on EPS in any quarter over the past five years. The guidance was troubling as well with a downside outlook for both Q1 and FY26. nCino did authorize a $100 mln share repurchase program, but it's not having much impact.

• On February 3, Sean Desmond was promoted to CEO. He explained that nCino built a strong foundation in cloud banking software, but now his focus is on leading nCino's evolution to be a leader in AI banking. Also, financial institutions continue to struggle with inefficiencies caused by legacy infrastructure. nCino's platform helps banks manage lending, onboarding, account opening and portfolio management on a scalable platform powered by AI.
• nCino provided some good color on the call. It explained that, as it expanded beyond its commercial banking roots into consumer lending, it brought to market a product capable of leapfrogging competitors. However, it has not happened as quickly as originally planned. It also saw customers pause their onboarding buying decisions this past year until nCino completed its highly anticipated acquisition from DocFox.
• With the benefit of hindsight, nCino says it was also too optimistic in expecting a drop in interest rates to drive an increase in mortgage activity. Another issue was that its sales execution in certain international markets, most notably Europe, was not as crisp as it needed to be. nCino has since made some personnel changes there. This combination of challenges created compounding headwinds that impacted new bookings momentum in FY25 and are chief contributors to weak FY26 revenue outlook.
• The new CEO also provided some good news. He said that nCino has already taken decisive action to address these challenges and he is confident they are squarely behind it. He noted that the company brought to market a best-in-breed consumer lending product last year. It's also bringing to market full omni-channel capabilities across its consumer platform at nSight. In addition, nCino plans to release its onboarding add-on in Q2, which he sees as unlocking numerous pent-up opportunities.
• As such, nCino expects improved gross bookings growth as the year progresses. This will result in subscription revenue growth reacceleration in FY27. Also, nCino notes that, while there is current volatility in the financial markets, the macro headwinds that challenged its customer base over the past couple of years have eased quite a bit. Its customers, by and large, have healthy balance sheets and are forecasting growth. Also, its US customers are telling nCino that deregulation could free up capital and enable them to adopt additional technology.

Overall, this was a rough quarter for nCino with a rare EPS miss and disappointing guidance. However, we commend the company for being candid on the call about its troubles and what it is doing to fix its issues. It sounds like FY26 is going to be a difficult year, but with some improvement in the second half. Also, nCino sounded more positive about FY27. Rates have been dropping recently and are down a good bit from January highs, which hopefully will spark mortgage activity.