nCino (NASDAQ:NCNO) Delivers Strong Q1 Numbers, Guides For Strong Sales Next Quarter

Radek Strnad /
2021/06/02 4:09 pm EDT
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Maker of operating system for banks nCino (NASDAQ:NCNO) beat analyst expectations in Q1 FY2022 quarter, with revenue up 39.4% year on year to $62.3 million. nCino made a GAAP loss of $15.6 million, down on its loss of $4.83 million, in the same quarter last year.

Is now the time to buy nCino? Get early access to our full analysis of the earnings results here

nCino (NASDAQ:NCNO) Q1 FY2022 Highlights:

  • Revenue: $62.3 million vs analyst estimates of $59.3 million (5.04% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.05
  • Revenue guidance for Q2 2022 is $63.5 million at the midpoint, above analyst estimates of $61.3 million
  • The company lifted revenue guidance for the full year, from $254 million to $259 million at the midpoint, a 1.96% increase
  • Free cash flow of $7.03 million, up from negative free cash flow of -$12.51 million in previous quarter
  • Gross Margin (GAAP): 57.8%, in line with previous quarter
  • Updated valuation: nCino is up slightly at $62 and accounting for the revenue added in Q1 it now trades at 26.2x price-to-sales (LTM), compared to 28x just before the results.

“We are very pleased with the strong start to the year, reflecting a solid sales quarter and ending with yet another record pipeline for the Company,” said Pierre Naudé, CEO of nCino.

Cloud Banking

Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software as a service. Banks are complex to run, heavily regulated and often lag far behind the curve in adopting cloud technologies, instead relying on decades old on-premise software. nCino offers cloud-based software that promises to replace the functionalities of the banks legacy systems, making it easier and cheaper to operate the bank. The company built its software on top of the Salesforce platform and as a result has a very close partnership with Salesforce (CRM).

nCino works as a central system for banks and credit unions allowing them to onboard new customers by offering them loans or checking and savings accounts, all online and in compliance with regulatory requirements. The platform becomes the single central location where all the data about customers and decisions are stored, which improves effectiveness of banking operations and allows banks to offer more personalised services to their clients.

As you can see below, nCino's revenue growth has been impressive over the last twelve months, growing from $44.7 million to $62.3 million.

nCino Total Revenue

And unsurprisingly, this was another great quarter for nCino with revenue up an absolutely stunning 39.4% year on year. On top of that, revenue increased $5.76 million quarter on quarter, a very strong improvement on the $2.35 million increase in Q4 2021, and a sign of acceleration of growth.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 80% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Nothing In Banking Happens Quickly

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. But nothing in banking happens quickly and getting a financial institution to adopt new software initially means a lot of expensive work supporting the implementation.

nCino Gross Margin (GAAP)

nCino's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 57.8% in Q1. That means that for every $1 in revenue the company had $0.57 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 Q1 Results

With market capitalisation of $5.87 billion nCino is among smaller companies, but its more than $386.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We enjoyed the positive outlook nCino provided for the next quarter’s revenue. And we were also excited to see the really strong revenue growth. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. Therefore, we think nCino will become more attractive to investors, compared to before these results.

PS. If you found this analysis useful, you will love our earnings alerts! We publish so fast, you often have the opportunity to buy or sell before the market has fully absorbed the information. Never miss out on the right time to invest again. Signup here for free early access.

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