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Vertical Software Stocks Q1 Teardown: nCino (NASDAQ:NCNO) Vs The Rest


Anthony Lee /
2024/06/18 7:15 am EDT

As the Q1 earnings season wraps, let's dig into this quarter's best and worst performers in the vertical software industry, including nCino (NASDAQ:NCNO) and its peers.

Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.

The 16 vertical software stocks we track reported a slower Q1; on average, revenues beat analyst consensus estimates by 0.9%. while next quarter's revenue guidance was 2.3% below consensus. Valuation multiples for many growth stocks have not yet reverted to their early 2021 highs, but the market was optimistic at the end of 2023 due to cooling inflation. The start of 2024 has been a different story as mixed signals have led to market volatility, and while some of the vertical software stocks have fared somewhat better than others, they collectively declined, with share prices falling 0.2% on average since the previous earnings results.

nCino (NASDAQ:NCNO)

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

nCino reported revenues of $128.1 million, up 12.7% year on year, topping analysts' expectations by 1.1%. It was a weak quarter for the company, with a miss of analysts' billings estimates.

"Building on our fourth quarter momentum, we had a great start to the year, achieving our highest first-quarter gross sales in Company history,” said Pierre Naudé, Chairman and CEO at nCino.

nCino Total Revenue

The stock is up 1.9% since the results and currently trades at $30.72.

Read our full report on nCino here, it's free.

Best Q1: Toast (NYSE:TOST)

Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.

Toast reported revenues of $1.08 billion, up 31.3% year on year, outperforming analysts' expectations by 3.3%. It was a very strong quarter for the company, with a significant improvement in its gross margin and a solid beat of analysts' billings estimates.

Toast Total Revenue

Toast pulled off the fastest revenue growth among its peers. The stock is down 4.6% since the results and currently trades at $22.64.

Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.

Weakest Q1: ANSYS (NASDAQ:ANSS)

Used to help design the Mars Rover, Ansys (NASDAQ:ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.

ANSYS reported revenues of $466.6 million, down 8.4% year on year, falling short of analysts' expectations by 15.9%. It was a weak quarter for the company, with a decline in its gross margin and a miss of analysts' average contract value estimates.

ANSYS had the weakest performance against analyst estimates in the group. The stock is up 1.9% since the results and currently trades at $327.23.

Read our full analysis of ANSYS's results here.

Q2 Holdings (NYSE:QTWO)

Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.

Q2 Holdings reported revenues of $165.5 million, up 8.2% year on year, surpassing analysts' expectations by 1.3%. It was a very strong quarter for the company, with an impressive beat of analysts' billings and ARR (annual recurring revenue) estimates.

The stock is up 12% since the results and currently trades at $57.96.

Read our full, actionable report on Q2 Holdings here, it's free.

Olo (NYSE:OLO)

Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.

Olo reported revenues of $66.51 million, up 27.3% year on year, surpassing analysts' expectations by 3.5%. It was a very strong quarter for the company, with an impressive beat of analysts' GMV (gross merchandise value) estimates and a solid beat of analysts' billings estimates.

Olo scored the highest full-year guidance raise among its peers. The stock is down 10.2% since the results and currently trades at $4.22.

Read our full, actionable report on Olo here, it's free.

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