nCino's (NASDAQ:NCNO) Posts Q1 Sales In Line With Estimates But Full Year Guidance Underwhelms

Jabin Bastian /
2023/05/31 4:15 pm EDT

Maker of operating system for banks nCino (NASDAQ:NCNO) reported results in line with analyst expectations in Q1 FY2024 quarter, with revenue up 20.7% year on year to $113.7 million. However, guidance for the next quarter was less impressive, coming in at $114.8 million at the midpoint, being 2.33% below analyst estimates. nCino made a GAAP loss of $11.6 million, improving on its loss of $30 million, in the same quarter last year.

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nCino (NCNO) Q1 FY2024 Highlights:

  • Revenue: $113.7 million vs analyst estimates of $112.6 million (0.96% beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.05 (32.6% beat)
  • Revenue guidance for Q2 2024 is $114.8 million at the midpoint, below analyst estimates of $117.5 million
  • The company reconfirmed revenue guidance for the full year, at $476.3 million at the midpoint
  • Free cash flow of $29.5 million, up from negative free cash flow of $27.1 million in previous quarter
  • Gross Margin (GAAP): 59.4%, up from 57.2% same quarter last year

“We are pleased to begin the year reporting a strong quarter with record operating income and free cash flow,” 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 very strong over the last two years, growing from quarterly revenue of $62.4 million in Q1 FY2022, to $113.7 million.

nCino Total Revenue

This quarter, nCino's quarterly revenue was once again up a very solid 20.7% year on year. On top of that, revenue increased $4.49 million quarter on quarter, a solid improvement on the $3.89 million increase in Q4 2023. Happily, that's a slight acceleration of growth.

Guidance for the next quarter indicates nCino is expecting revenue to grow 15.2% year on year to $114.8 million, slowing down from the 49.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 16.5% over the next twelve months.

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 59.4% in Q1.

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. Despite it trending up over the last year this would still be considered low gross margin for a SaaS company and we have no doubt shareholders would like to see the improvements continue.

Key Takeaways from nCino's Q1 Results

With a market capitalization of $3.09 billion nCino is among smaller companies, but its more than $98.1 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

Revenue and EPS beat this quarter, and free cash flow was strong. On the other hand, it was unfortunate to see that total revenue, subscription revenue, adjusted operating profit, and EPS guidance for the next quarter missed analysts' expectations. Additionally, revenue guidance for the full year missed expectations although adjusted operating profit and EPS guidance for the full year were ahead. Overall, it seems to us that this was a complicated quarter for nCino. The company is down 3.46% on the results and currently trades at $26.5 per share.

nCino may have had a tough quarter, but does that actually create an opportunity to 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.

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.