nCino(US:NCNO)2023-11-30 01:50Financial Data and Key Metrics Changes - Total revenues for Q3 fiscal 2024 were $121.9 million, an increase of 16% year-over-year [36] - Subscription revenues for Q3 were $104.8 million, up 19% year-over-year, representing 86% of total revenues [36] - Non-GAAP operating income for Q3 was $20.4 million compared to $2.5 million in Q3 fiscal 2023, with a non-GAAP operating margin of 17% [37] - Non-GAAP net income attributable to nCino for Q3 was $16.2 million or $0.14 per diluted share, compared to a loss of $1.4 million or negative $0.01 per share in Q3 fiscal 2023 [14] Business Line Data and Key Metrics Changes - The U.S. mortgage business experienced double-digit revenue growth despite lower origination volumes and increased churn [3] - Professional services revenues were $17.2 million in Q3, growing 1% year-over-year, impacted by pressure on bill rates [36] - Non-U.S. revenues were $23.4 million, accounting for 19% of total revenues, up 48% year-over-year, with strong growth in Australia and New Zealand [13] Market Data and Key Metrics Changes - Approximately 60% of gross ACV bookings in Q3 came from existing customers, with 50% of platform customers using more than one product [11] - The mortgage pipeline is now comprised of 60% financial institutions, indicating a shift in market focus [33] - The company signed its largest customer to date in Japan, Yamaguchi Financial Group, a $150 billion asset bank [10] Company Strategy and Development Direction - The company aims to leverage its extensive SI ecosystem to provide professional services and prioritize subscription revenues over professional services revenues [13] - nCino is focusing on cross-selling into underpenetrated banking and credit union markets while enhancing its mortgage technology [33] - The company is excited about opportunities in the Japanese market, viewing it as a significant growth area [63] Management's Comments on Operating Environment and Future Outlook - Management noted that the current macroeconomic environment remains unsettled, but the sales pipeline is healthy [2][59] - There is a belief that the U.S. mortgage business is well-positioned for growth despite interest rate pressures [17] - Management expects total revenues for the full fiscal year 2024 to be between $476.5 million and $478.5 million, with subscription revenues growth of 18% at the midpoint [19] Other Important Information - The company experienced elevated churn in the U.S. mortgage business, with approximately $5 million of annualized subscription revenues lost due to high mortgage rates [40] - Non-GAAP gross profit for Q3 was $81.1 million, an increase of 18% year-over-year, with a gross margin of 67% [66] - The company is adjusting its churn rate expectation for the full year to about 9% of prior year subscription revenues, up from 6% [70] Q&A Session Summary Question: How are customers outside of independent mortgage banks responding to the evolving rate environment? - Management noted that while there is some stabilization in the enterprise market, decision-making is slower due to uncertainty [21] Question: Can you comment on the leverage seen this quarter? - Management highlighted that operational discipline has led to improved leverage across all operational expense lines [22] Question: What is the outlook for the fourth quarter? - The company expects total revenues of $123.5 million to $125.5 million for Q4, with subscription revenues of $105.5 million to $107.5 million [71] Question: How critical are system integrators in the Japanese market? - Management indicated that system integrators play a significant role in the success of their strategy in Japan [118] Question: What is the impact of the current interest rate environment on deal signing? - Management observed that while there is a need for transformation, investment decisions are more measured due to the current economic climate [121]