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nCino (NASDAQ:NCNO) Beats Q3 Sales Targets, Next Quarter Growth Looks Optimistic


Adam Hejl /
2021/12/01 4:09 pm EST
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Maker of operating system for banks nCino (NASDAQ:NCNO) beat analyst expectations in Q3 FY2022 quarter, with revenue up 29.1% year on year to $70 million. Guidance for next quarter's revenue was $69 million at the midpoint, which is 1.03% above the analyst consensus. nCino made a GAAP loss of $13.6 million, down on its loss of $9.27 million, in the same quarter last year.

Is now the time to buy nCino? Access our full analysis of the earnings results here, it's free.

nCino (NCNO) Q3 FY2022 Highlights:

  • Revenue: $70 million vs analyst estimates of $66.6 million (5.12% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.06
  • Revenue guidance for Q4 2022 is $69 million at the midpoint, above analyst estimates of $68.2 million
  • Free cash flow was negative $21.4 million, down from positive free cash flow of $12.5 million in previous quarter
  • Gross Margin (GAAP): 61%, up from 58.4% same quarter last year

“The third quarter was another strong quarter for nCino as we added new logos across the U.S. and multiple international markets, including our first customer in Japan, and also signed expanded contracts with existing nCino customers,” said Pierre Naudé, nCino’s Chief Executive Officer.

Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software as a service.

In the age of digital banking, being the only bank with a physical branch in town is not enough of a competitive advantage anymore. Regional and community banks and credit unions are facing increasing pressure to keep up with the offerings of the big banks, but they don’t have the resources or competency to develop the digital solutions in-house. That drives demand for software as a service platforms that allows the small banks to offer the digital services without having to run or maintain them.

Sales Growth

As you can see below, nCino's revenue growth has been very strong over the last year, growing from quarterly revenue of $54.2 million, to $70 million.

nCino Total Revenue

This quarter, nCino's quarterly revenue was once again up a very solid 29.1% year on year. But the growth did slow down a little compared to last quarter, as nCino increased revenue by $3.51 million in Q3, compared to $4.16 million revenue add in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 20.3% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than nCino. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. nCino's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 61% in Q3.

nCino Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.61 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from nCino's Q3 Results

We liked to see that nCino beat analysts’ revenue expectations pretty strongly this quarter. And we were also glad to see good revenue growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $59.1 per share.

Should you invest in nCino right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.