nCino (NASDAQ:NCNO) Beats Q4 Sales Targets, Next Quarter Growth Looks Optimistic

Kayode Omotosho /
2023/03/28 4:05 pm EDT
Add to Watchlist

Maker of operating system for banks nCino (NASDAQ:NCNO) reported Q4 FY2023 results topping analyst expectations, with revenue up 45.7% year on year to $109.2 million. The company expects that next quarter's revenue would be around $112.5 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. nCino made a GAAP loss of $21.2 million, down on its loss of $6.6 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) Q4 FY2023 Highlights:

  • Revenue: $109.2 million vs analyst estimates of $104.5 million (4.5% beat)
  • EPS (non-GAAP): $0.04 vs analyst estimates of -$0.05 ($0.09 beat)
  • Revenue guidance for Q1 2024 is $112.5 million at the midpoint, above analyst estimates of $111.5 million
  • Management's revenue guidance for upcoming financial year 2024 is $479.5 million at the midpoint, in line with analyst expectations and predicting 17.4% growth (vs 49.2% in FY2023)
  • Free cash flow was negative $27.1 million, compared to negative free cash flow of $8.67 million in previous quarter
  • Gross Margin (GAAP): 58.9%, up from 58.3% same quarter last year

“We are pleased with our strong fourth quarter financial results, as we once again exceeded top and bottom-line guidance,” said Pierre Naudé, Chairman and Chief Executive Officer of nCino.

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

Consumers these days are accustomed to frictionless digital experiences from online shopping to ordering food or hailing a cab. Financial services firms are notoriously risk averse in adopting modern software, often lacking the resources or competency to develop the digital solutions in-house. That drives demand for software as a service platforms that allows banks and other finance institutions 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 impressive over the last two years, growing from quarterly revenue of $56.6 million in Q4 FY2021, to $109.2 million.

nCino Total Revenue

And unsurprisingly, this was another great quarter for nCino with revenue up 45.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $3.89 million in Q4, compared to $5.67 million in Q3 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates nCino is expecting revenue to grow 19.4% year on year to $112.5 million, slowing down from the 51.1% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $479.5 million at the midpoint, growing 17.4% compared to 49.1% increase in FY2023.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


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 58.9% in Q4.

nCino Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.59 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and we would like to see it start improving.

Key Takeaways from nCino's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on nCino’s balance sheet, but we note that with a market capitalization of $2.48 billion and more than $82 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth nCino delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations on total revenue, subscription revenue, and non-GAAP operating profit. On the other hand, free cash flow missed expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $22.36 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.