- Total Revenue: $132.4 million, an increase of 13% year over year.
- Subscription Revenue: $113.9 million, an increase of 14% year over year, representing 86% of total revenues.
- Mortgage Subscription Revenue: Approximately $17 million, representing year-over-year growth of 4%.
- Professional Services Revenue: $18.5 million, growing 7% year over year.
- Non-US Revenue: $27.5 million, or 21% of total revenues, up 25% year over year.
- Non-GAAP Gross Profit: $86.7 million, an increase of 13% year over year.
- Non-GAAP Gross Margin: 66%, compared to 65% in the second quarter of fiscal '24.
- Non-GAAP Operating Income: $19.3 million, compared with $11.2 million in the second quarter of fiscal '24.
- Non-GAAP Operating Margin: 15%, compared with 10% in the second quarter of fiscal '24.
- Non-GAAP Net Income: $15.8 million, or $0.14 per diluted share, compared to $10 million or $0.09 per diluted share in the second quarter of fiscal '24.
- Remaining Performance Obligation (RPO): $1.04 billion as of July 31, 2024, up 12% year over year.
- Cash and Cash Equivalents: $126.8 million, including restricted cash.
- Net Cash Provided by Operating Activities: $5 million, compared to $12 million in the second quarter of fiscal '24.
- Capital Expenditures: $444,000, resulting in free cash flow of $4.6 million.
- Guidance for Q3 Total Revenue: $136 million to $138 million.
- Guidance for Q3 Subscription Revenue: $117 million to $119 million.
- Guidance for Full Fiscal Year '25 Total Revenue: $538.5 million to $544.5 million.
- Guidance for Full Fiscal Year '25 Subscription Revenue: $463 million to $469 million.
- Guidance for Q3 Non-GAAP Operating Income: $21 million to $22 million.
- Guidance for Q3 Non-GAAP Net Income per Share: $0.15 to $0.16.
- Guidance for Full Fiscal Year '25 Non-GAAP Operating Income: $87 million to $90 million.
- Guidance for Full Fiscal Year '25 Non-GAAP Net Income per Share: $0.66 to $0.69.
Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ncino Inc (NCNO, Financial) exceeded guidance for both subscription and total revenues, as well as for non-GAAP operating income.
- Gross bookings in the US were up 36% over the first half of last year, driven by expansion opportunities within the existing customer base.
- The company signed six new mortgage customers in the second quarter, including four financial institutions.
- Non-GAAP operating income for the second quarter was $19.3 million, up from $11.2 million in the same quarter last year.
- International revenues grew 25% year over year, indicating strong performance outside the US.
Negative Points
- Lending volumes and market activity remained relatively suppressed, impacting what would historically be a strong selling quarter.
- US mortgage revenues are expected to be dilutive to overall growth for the fiscal year.
- International markets remain more challenging than the US, with longer sales cycles and lumpier new logo opportunities.
- Professional services revenues grew only 7% year over year, indicating slower growth in this segment.
- Net cash provided by operating activities decreased to $5 million from $12 million in the same quarter last year.
Q & A Highlights
Q: Pierre, it'd be great to understand at the high level where financial institutions broadly are on willingness to spend. How are you building trust around newer products like Banking Advisor and DocFox?
A: In the US, there's a return to normalcy with continuous innovation and upgrades. Internationally, we see larger transformation deals in places like Japan, Australia, and Europe. Banking Advisor has been well-received, and AI will be a revenue generator. Overall, there's a positive tone, and we expect the mortgage market to improve with rate cuts.
Q: Greg, could you bridge us between the positive commentary around US demand and new products and the sequential step down in RPO?
A: RPO can be lumpy and not always a great metric. For example, renewing a three-year deal instead of a five-year one can skew RPO. Mortgage renewals were shorter in duration, impacting RPO. Overall, we are on track to meet our gross bookings goal for the year.
Q: How important are platform deals and platform pricing structures in hitting the 50% net bookings growth for this year and next year?
A: Platform pricing will start late in the year, but we are not dependent on it to make our numbers. Platform deals move the needle, but the pricing model change is not critical this year. It will take three to four years to transition all customers to platform pricing.
Q: What are the largest execution risks associated with the pricing transition on the commercial side? Will it involve operational changes to sales management?
A: Customers prefer the new pricing model based on asset size or consumption. The biggest risk is disciplined internal execution. We are confident this will be positive for the company.
Q: Can you talk about the mix of business you're driving domestically from new bookings versus cross-sell?
A: The first half of the year was 80% cross-sell and 20% new logos. The back half looks almost the opposite. Over time, we expect a 60-40 mix favoring cross-sell.
Q: Could you elaborate on the product roadmap for international markets?
A: The focus is on commercial onboarding and mortgage products for markets like Canada, the UK, Ireland, Australia, and New Zealand. Banking Advisor and NIC products are global from the start. There's still a lot of commercial business left internationally.
Q: How do you think about striking the balance in showing customers the ROI initially for new products like Banking Advisor?
A: We use usage analytics to show customers the value of reducing task times. We start with lower platform pricing and increase as usage grows. The goal is market penetration and adoption, leading to material revenues.
Q: On the international front, what are the key areas of investment and product parity?
A: Focus areas include Canada, the UK, Nordics, Benelux, Spain, New Zealand, Australia, and Japan. We are de-emphasizing Germany and France for now. We are building new products for onboarding and mortgage out of the UK and Australia.
Q: How do you see the mortgage business performing in an upturn, given the broader market growth expectations?
A: Performance will vary by sector (banks, IMBs, homebuilders). We expect a rate cut to help, but we are cautious about inflation. We need more data to predict exact growth rates.
Q: Can you quantify churn in the first half of the year and expectations for the second half?
A: We forecasted $8 million in mortgage churn for the year, with $4.5 million in the first half. We expect the second half to be more stable and are on track with our churn forecast.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
