Banking software company nCino (NASDAQ:NCNO) reported better-than-expected results for its second quarter of fiscal 2024. Revenue rose 12.9% year over year to $132.4 million. Revenue guidance for the next quarter of $137 million, however, was less impressive, coming in 1.2% below analyst estimates. The company posted non-GAAP earnings of $0.14 per share, improving from a loss of $0.14 per share in the same quarter last year.
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nCino (NCNO) Q2 2024 Highlights:
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Revenue: $132.4 million versus analyst estimates of $131.1 million (up 1%)
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Adjusted operating result: $19.3 million versus analyst estimates of $17.93 million (up 7.6%)
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Earnings per share (non-GAAP): $0.14 versus analyst estimates of $0.13 (9.8% above)
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The company confirmed its sales forecast for the full year of 541.5 million US dollars on average
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Gross margin (GAAP): 59.3%, corresponding to the same quarter last year
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Free cash flow margin: 3.4%, compared to 42.2% in the previous quarter
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Market capitalization: 3.99 billion US dollars
WILMINGTON, NC, Aug. 27, 2024 (GLOBE NEWSWIRE) — nCino, Inc. (NASDAQ: NCNO), a pioneer in cloud banking for the global financial services industry, today announced financial results for its second quarter of fiscal 2025 ended July 31, 2024. “We are pleased to report that we once again exceeded quarterly guidance for total and subscription revenue and non-GAAP operating income,” said Pierre Naudé, Chairman and CEO of nCino.
Founded in North Carolina in 2011, nCino (NASDAQ:NCNO) develops cloud-based operating systems for banks and offers them as software-as-a-service.
Banking software
Consumers today are accustomed to seamless digital experiences, from online shopping to ordering food to hailing a taxi. Financial services providers are notoriously risk-averse when it comes to adopting modern software, as they often lack the resources or expertise to develop the digital solutions in-house. This is driving demand for software-as-a-service platforms that enable banks and other financial institutions to offer the digital services without having to operate or maintain them.
Sales growth
As you can see below, nCino’s 28.3% annualized revenue growth over the past three years has been impressive, with revenue this quarter reaching $132.4 million.
This quarter, nCino’s quarterly revenue again increased by 12.9% year-over-year. We can see that nCino’s revenue increased by $4.32 million in the second quarter, which is roughly the same growth rate as the first quarter of calendar year 2024. This steady quarter-over-quarter growth shows that the company can maintain its rapid growth trajectory.
Next quarter’s guidance suggests nCino expects revenue to rise 12.3% to $137 million, slowing from the 15.8% increase in the year-ago quarter. Analysts covering the company had expected revenue to rise 15% over the next 12 months before the results were announced.
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Cash is king
If you’ve been following StockStory for a while, you know we value free cash flow. Why, you ask? We believe that in the end, cash is king and you can’t pay your bills with accounting profits.
nCino has demonstrated impressive cash profitability, allowing it to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.2% last year, better than the broader software sector.
nCino’s free cash flow in the second quarter was $4.56 million, representing a 3.4% margin. The company’s cash profitability declined as it was 6 percentage points lower than the same quarter last year, prompting us to take a closer look. Short-term fluctuations are usually not a big deal as capital expenditure needs can be seasonal, but we will be watching to see if the trend carries over to future quarters.
Analysts forecast nCino’s cash conversion to improve next year. Their consensus estimates call for the free cash flow margin to increase to 16.7% from 14.2% over the past 12 months, giving the company more cash to invest.
Key takeaways from nCino’s Q2 results
It was encouraging to see nCino narrowly beat analysts’ revenue expectations this quarter. On the other hand, next quarter’s revenue forecast fell short of analysts’ expectations and gross margins declined. Overall, this quarter could have been better. The stock traded up 9.4% to $31.25 immediately after the results were announced.
nCino may have had a rough quarter, but does that actually present an opportunity to invest now? When making this decision, it’s important to consider the valuation, business qualities, as well as what happened last quarter. We cover that in our actionable full research report, which you can read for free here.
