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nCino (NASDAQ:NCNO) Delivers Impressive Q4, Growth To Accelerate Next Year


Adam Hejl /
2022/03/31 4:15 pm EDT
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Maker of operating system for banks nCino (NASDAQ:NCNO) beat analyst expectations in Q4 FY2022 quarter, with revenue up 32.4% year on year to $74.9 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $91.5 million at the midpoint, 20.5% above what analysts were expecting. nCino made a GAAP loss of $6.59 million, improving on its loss of $12.4 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 FY2022 Highlights:

  • Revenue: $74.9 million vs analyst estimates of $69.3 million (8.14% beat)
  • EPS (non-GAAP): -$0.09 vs analyst estimates of -$0.09
  • Revenue guidance for Q1 2023 is $91.5 million at the midpoint, above analyst estimates of $75.8 million
  • Management's revenue guidance for upcoming financial year 2023 is $399 million at the midpoint, beating analyst estimates by 20.2% and predicting 45.6% growth (vs 34.3% in FY2022)
  • Free cash flow was negative $22.8 million, compared to negative free cash flow of $21.4 million in previous quarter
  • Gross Margin (GAAP): 58.2%, up from 57.2% same quarter last year

“With new logos, significant expansion deals, continued traction internationally and the completion of the SimpleNexus acquisition, the fourth quarter was a strong finish to a tremendous year for nCino,” said Pierre Naudé, CEO 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 very strong over the last year, growing from quarterly revenue of $56.5 million, to $74.9 million.

nCino Total Revenue

And unsurprisingly, this was another great quarter for nCino with revenue up 32.4% year on year. On top of that, revenue increased $4.91 million quarter on quarter, a very strong improvement on the $3.51 million increase in Q3 2022, and a sign of acceleration of growth.

Guidance for the next quarter indicates nCino is expecting revenue to grow 46.7% year on year to $91.5 million, improving on the 39.4% 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 $399 million at the midpoint, growing 45.6% compared to 34.3% increase in FY2022.

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 150% since the IPO last 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 58.2% in Q4.

nCino Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.58 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 it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

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 $4.71 billion and more than $92 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the very optimistic revenue guidance nCino provided for the next quarter. And we were also glad that the revenue guidance for the next year looks positive. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 3.19% on the results and currently trades at $42.29 per share.

nCino may have had a good quarter, so should you invest 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.

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