Banking & Finance

NCino Reports Quarterly Earnings

By Jenny Callison, posted Aug 30, 2023
Cloud-based banking software company nCino reported higher earnings this week for the second quarter of its 2024 fiscal year, a year that ends Jan. 31, 2024. The company’s total revenues and subscription revenues continue to improve as nCino works its way toward profitability using Generally Accepted Accounting Practices (GAAP) measures.

Using an alternate system, non-GAAP, nCino is already profitable. Non-GAAP accounting does not include nonrecurring or noncash expenditures in its calculations.

Total revenues for the quarter ended July 31 were $117.2 million, an 18% increase over those of Q2 of FY23 and up from $113.7 million the previous quarter, according to the quarterly report Tuesday.

Subscription revenues – that is, income generated when customers re-up for use of products – were $99.9 million, a year-over-year increase of $15.5 million and a quarter-over-quarter increase of $2.6 million.

Using GAAP, nCino’s operating losses were more modest during its second quarter: $14.8 million compared with a $25 million loss over the same period last year, but higher than the $10.9 in losses for the preceding quarter.

Using non-GAAP accounting, operating income in the second quarter was $11.2 million, compared to a $2.8 million loss in Q2 of FY23 and a profit of $10.9 million in Q1 FY24.

nCino’s net loss per share for Q2 of FY24 was a negative $.14, compared with a negative $.25 a year ago.

The company reported ending the quarter with $103.4 million in cash, cash equivalents and restricted cash. During Q2, nCino repaid $15 million under its revolving credit facility and has “no outstanding balance thereunder,” a news release stated.

Despite lingering uncertainties in the financial industry globally, officials reported signing nCino’s first customer in the Middle East, a large bank in the United Arab Emirates. It also signed Rabobank, a “top-10” Australian bank, signed a “significant” expansion deal with a large U.S. mortgage lender and renewed and expanded an agreement with an enterprise bank in the Netherlands.

“Our team executed extremely well in the second quarter ... which includes SimpleNexus revenues,” Chairman and CEO Pierre Naudé said during Tuesday late afternoon’s earnings call. “Excluding SimpleNexus, we grew subscription revenues by 29% organically. During the second quarter, we saw continued global demand for our platform, including strong growth across our newer product solutions as illustrated by the Rabobank announcement we issued shortly before this call.”

nCino’s investment early in 2022 in mortgage software company SimpleNexus continues to contribute to its bottom line, Naudé added.

“We believe the strength in the quarter further highlights the unique quality of this business, including its mobile-first, cloud-based homeownership platform and superior subscription-based business model, which is fueling continued growth and market share gains in a difficult mortgage market,” he said.

nCino’s overall sales, which had slowed because of the financial industry’s economic wariness, have shown improved strength in several markets, Naudé said in the call.

“Higher interest rates are generally a positive for financial institutions and the demand we see in our sales pipeline for our products has never been stronger, reflecting the ongoing need for financial institutions to digitally transform in order to stay relevant and competitive,” he said. “Specifically, we are seeing strength in the U.S., Canada and Asia Pacific markets. However, we are seeing some weakness in Europe, highlighted by longer deal cycles.”

Looking ahead, nCino projects total revenues of between $120 million and $121 million for its third quarter this year. Of those, it expects between $102.5 million and $103.5 million will be subscription revenues. For the fiscal year, it’s eyeing total revenues of between $475.0 million and $478.5 million, with subscription revenues making up between $406 million and $409 million of that total.

The company expects its FY24 operating income will be between $13.0 million and $15.0 million in non-GAAP calculations.

“We are improving our non-GAAP operating loss guidance by $12 million for the full year from our guidance last quarter,” Naudé said. “The key focus for us has been a more measured approach to hiring. We believe we have plenty of opportunity within our existing employee base to support future growth while driving incremental operating leverage. That said, we will continue to responsibly invest in growth, which remains our top priority, and we will make additional strategic hires where needed to drive growth and revenue expansion.”

In the call, nCino Chief Financial Officer Greg Orenstein noted that the company was prepared to resolve an outstanding lawsuit.

"In July, through mediation, the company and the plaintiff in a putative class action complaint filed on March 12, 2021 in the United States District Court for the Eastern District of North Carolina reached a settlement agreement in principle of approximately $2.2 million that remains subject to court approval," Orenstein said.

The suit was initiated by a former employee of Live Oak who claimed that Live Oak Bancshares' technology unit, financial technology firm Apiture and nCino - all headquartered in Wilmington - had a "no-poaching" agreement in place. The suit became a class-action initiative with about 2,000 individuals involved, according to a report from Reuters.

The deal was the third and final one reached in the case, and it will require approval from Chief U.S. District Judge Richard Myers II, who is presiding over the litigation, Reuters' report stated.

Myers last year approved the plaintiffs' settlements with Live Oak and Apiture. Live Oak paid about $3.9 million and Apiture paid about $777,200.

nCino has accrued for the proposed settlement agreement, Orenstein said Tuesday. The settlement money is included in accrued expenses and other liabilities as of July 31, 2023 on the company's unaudited condensed consolidated balance sheets.

nCino shares, traded on the Nasdaq exchange, were selling at $31.93 per share as of 3:20 p.m. Wednesday, up $2.45 from Tuesday’s close.
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