nCino's (NASDAQ:NCNO) Q2 Sales Top Estimates, Provides Encouraging Quarterly Guidance

Kayode Omotosho /
2022/09/01 4:10 pm EDT
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Maker of operating system for banks nCino (NASDAQ:NCNO) beat analyst expectations in Q2 FY2023 quarter, with revenue up 49.7% year on year to $99.6 million. Guidance for next quarter's revenue was $103.5 million at the midpoint, which is 1.62% above the analyst consensus. nCino made a GAAP loss of $27.2 million, down on its loss of $14.2 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) Q2 FY2023 Highlights:

  • Revenue: $99.6 million vs analyst estimates of $97.5 million (2.17% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.08
  • Revenue guidance for Q3 2023 is $103.5 million at the midpoint, above analyst estimates of $101.8 million
  • The company reconfirmed revenue guidance for the full year, at $402.5 million at the midpoint
  • Free cash flow of $4.86 million, up from negative free cash flow of $3.44 million in previous quarter
  • Gross Margin (GAAP): 58.6%, down from 60% same quarter last year

“We had a solid second quarter, and I am extremely proud of how well our team executed,” 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 year, growing from quarterly revenue of $66.5 million, to $99.6 million.

nCino Total Revenue

And unsurprisingly, this was another great quarter for nCino with revenue up 49.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $5.41 million in Q2, compared to $19.2 million in Q1 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 47.7% year on year to $103.5 million, improving on the 29.1% 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 34.3% 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 58.6% in Q2.

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. 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 Q2 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 $3.47 billion and more than $86.1 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 glad to see the improvement in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 0.83% on the results and currently trades at $29.61 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.

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