Q2 2020 nCino Inc Earnings Call

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Ladies and gentlemen, please standby your conference call will begin momentarily once again. Please standby your conference call will begin momentarily. Thank you for your patience and police continue to hold.

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Ladies and gentlemen, thinking for standing by welcome to the Encino Inc. second quarter earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be question and answer session to ask a question during the session you'll need to press star one on.

Your telephone I'd now like to introduce your host for today's program, Greg Weinstein, Chief Corporate development and legal officer. Please go ahead Sir.

Thank you and good afternoon and welcome to Encino, It's just school 2021 second quarter earnings call for the quarter ended July 31st 2020.

With me on todays call, our peer not day and seen as President and Chief Executive Officer, and David Rudow, Our Chief Financial Officer.

During the course of this conference call. We may make forward looking statements regarding trends strategies any anticipated performance of our business.

These forward looking statements are based on management's current views and expectations and are subject to various risks and uncertainties, including those related to the impacts of cobot 19 in our business the financial services industry and global economic conditions.

Our actual results may differ differ materially.

Please refer to the risk factors included in our filings with the Securities and Exchange Commission, which are available on the company's website at Encino Dot com under the Investor Relations section and on the Fccs website at FCC Dot Gov.

Forward looking statements made during the call are being made as of today September 19, 2020 based on the facts available to us today, and Encino disclaims any obligation to update or revise any forward looking statements.

Guidance, we will provide today is in part based on our assumptions as to the macroeconomic environment in which we will be operating in the future, including the timing and pace of recovery from any negative effects caused by cobot 19.

Such matters that are beyond our control in our assumptions may not be correct.

On today's call. We will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K furnished with the FCC just before this call.

With that thank you for joining us and I will turn it over to Pierre.

Thank you, Greg Hello, and good afternoon. Thank.

Thank you for joining us today for our inaugural public company earnings call.

I'm excited to share details about encino, and our second quarter results, but let me start by saying that we hope you and your loved ones a safe and in good health.

Well Cobot 19 has created a new normal for all of us.

He does also show up into the momentum and urgency around the digital transformation of financial institutions.

It's encino pioneer over eight years ago.

When cobot struck and the world immediately moved to remote access and see no customers seem to see converted to a work from home structure.

Yet many financial institutions that did not have a cloud based bank operating system struggled trying to remotely operated that institution run their business keep their employees productive and effective and support their clients.

We believe the print that make us dramatically demonstrated for financial institution executives and moving to a cloud environment caused just be part of their future roadmap.

It's an immediate imperative the size and prominence of the global financial institutions that are engaging with us today confirms that digital transformation in banking is happening and is accelerating.

The strength of our pipeline is further evidence of this fact.

As soon as co, which truck and see note was there to help out of financial institution customers and their clients navigate this difficult time.

In the past two quarters, we help our customers to fund more than $50 billion in triple payloads under the cast sect.

In the second quarter, we also added banks managing to forgiveness portion of the loan.

As well as worked with banks in the UK to support the current providers business interruption loans scheme or cboes.

I'm extremely proud of how the Encino team successfully engage with both established and new customers around the globe during an unprecedented period.

Before I share additional highlights from the second quarter I want to spend a few minutes, providing a brief overview of encino for those new to our story.

And she now were founded my team of bankers and entrepreneurs in late 2011, who recognized that the commercial lending process was inefficient and time consuming.

Our ambitious goal was to create a cloud based solution.

That would enhance transparency.

Efficiency and speed across the financial institution.

From the very beginning a theme was bought by bank us for bankers.

We believe this core foundation differentiates us from competitors as we deeply understand a bank as challenges and pain points and be focused first and foremost on creating solutions to improve the bank employees work experience.

Once that was established.

We extended our product functionality to benefit the banks and use of the clients.

Today and see no offers an end to end digital bank operating system on a single platform designed to help reduce costs increased revenues improve employee efficiency and productivity and enhanced transparency across client onboarding loan origination and deposit that gap.

Opening oh, while helping to ensure a regulatory compliance.

Both on the Salesforce platform since day, one our bank operating system integrators, Digitizes and enhances the operations for financial institutions across lines of business, including commercial small business and retail.

Our single cloud based platform, we scalable for financial institutions customers of all sizes and complexities across the globe, including enterprise banks regional and community banks credit unions and challenger banks.

We couldn't be more proud of what encino easterday with over 1100 financial institution customers worldwide ranging in assets from $30 million to more than two trillion dollars, including institutions, such as bank of America Barclays sometime there too.

Connect one bank Navy federal credit Union and many more.

As good as we feel about the progress we have made today.

We have only begun to penetrate our market opportunity.

With more than 28000 financial institutions worldwide.

Banking is one of the largest and most complex industries dairies with many financial institutions to operating with outdated legacy systems and point solutions.

According to Gartner Global I T cell thrift spend within banking was over $63 billion in 2080.

Not surprisingly, 85% of banks have indicated that digital investment you say key priority on their roadmap.

We have sized our self isabel available market or Sam a $10 billion, which realistically reflect the opportunity to sell our current products in your current targeted markets.

Our bank operating system is generally sold by seats on the subscription basis.

Usually with three to five year initial contract terms.

Our land and expand approach allows us to deploy with a specific products solution such as client on boarding.

The rejuvenation or account opening within a specific business line.

We then look to expand adoption within that business and across other lines of business.

Allowing us to leverage data and functionality across the financial institution, increasing efficiencies and cost savings.

Beyond this expansion within our current installed base our growth strategy includes continued expansion of our installed base.

Including increasing our international footprint.

Increasing the depth and breadth of product set going our partner ecosystem and selective targeted acquisitions.

One of our most exciting opportunities is derived from two technology acquisitions, we completed last year.

Which forms the basis of and see no I Q or Nick.

Analytics platform.

Using artificial intelligence data analytics and machine learning, we believe Nick will provide unmatched inside an actionable data for our customers, enabling them to become more predictive.

Sliced and proactive.

It's so early days for Nick but we're very excited by the customer feedback we have received and the potential that lies ahead to help financial institutions around the world leveraged data to make more informed decisions in real time at the point of production.

So turning back to the quota we.

We are pleased with the results of our first quarter as a public company.

Subscription revenues increased 70% to a record $39.4 million, while total revenues grew 52% to $48.8 million also a record.

The triple P. loans and forgiveness business I mentioned earlier helped drive subscription revenues in the quota to 81% of total revenues.

In the second quarter 32 financial institutions purchased seats for forgiveness, that's when not to repeat customers to process. The loans, including the addition of 10, new customers to with over $25 billion in assets and then expansion.

Within the top 10 years bank.

Those seats activated immediately and generated revenues in the second quarter, which is different from our normal delayed activation process.

David will provide details around that element of our business model.

In total 87 financial institutions used encino to triple B and forgiveness in the first two quarters, including 45 banks was over $5 billion in assets.

Our professional services teams, we're busy in the quarter, including in Europe, where we assist to one of the large global bank customers in establishing a solution to process loans for the UK government backed siebels lending program.

Similar to Triple payloads. These revenues activated immediately.

After help from our professional services teams.

We have largely built out our customer success and professional services teams in EMEA and we're very encouraged by the growth opportunities we are seeing there.

In fact in the second quarter, we signed a large expansion for the EMEA based global Bank, we supported on Cboes.

Which has close to two trillion and assets put our onboarding solution.

Their second large expand since the initial land.

We also had a significant win with a new customer in Continental Europe. This $450 billion Global Bank chose Encino for collateral management within their commercial bank and we see meaningful opportunities to expand from this initial land.

Deal overtime.

Our traction with international banks demonstrates that our global branding is working.

And so you know is becoming synonymous with a digital transformation of banking.

For example on his recent second quarter quarter earnings call preferred Bank, a top 20, you as bank with more than $200 billion, an assets discussed that their client interactions are increasingly shifting to digital products and noted that digital strategy includes accelerating.

The implementation often see no in their commercial business.

But more trust a financial services company headquartered in Pennsylvania that has offered banking insurance and wealth management solutions for over 130 years and as over $5 billion in assets and $17 billion in assets under management also discussed and.

You know on his recent earnings call highlighting the growth in his digital account opening and then she knows roll into success Stadium.

Deposit account applications increased 300% from March through April and remained at elevated levels in may.

This increase in openings werent able by our Encino online account opening solution, which we deployed in the fourth quarter of 29 team.

Our customers highlighting us on their earnings calls as a strategic differentiator is a testament to the tangible impact and she never is having on their institutions and the banking industry.

On the product front the strength of our retail offering was recognized recently, we didn't see knows that retail loan origination system was named best in class by the I T. I take group, a highly respected resets and advisory firm.

Focused on the financial services industry.

Of the 15 firms assessed and seen it was recognized as the global leader in three categories.

Hi, and strength.

Client service and product features.

Expansion of our retail lending footprint is a key avenue to increased penetration of our installed base. So this best in class designation is important validation.

Especially since this is relatively new product for us.

Product innovation is key to our success and we will further expand the depth and breadth of our retail lending product in October when we release, new product updates, including functionality to further improve the regulatory and compliance capabilities of retail lending.

We're also making important updates to Nick the analytics platform I mentioned earlier.

The October release will be the first full integration.

Okay, Nick into the Encino Bank operating system.

Leveraging the friend suite technology, we acquired last year embedded in Nick we have developed automated loan underwriting.

We have seen reduce the many or components by 50% to 75%, thereby accelerating the time to approval. We have an ambitious product road map for Nick and our exciting about the multiple solutions. We are developing to provide customers with data driven insights across every institution.

We are confident that Nick will play a key ROE in continuing to differentiate and she knows bank operating system in the coming here.

Our customer success team at a very productive quarter, taking numerous customers into production.

Highlighted by two significant go lives.

Before I get into the specifics of these accounts, let me spend a minute talking about what it means to go into production all go life.

Since it is such an important milestone for a customer and it says a great deal about the Encino culture.

A customer is considered in production or life.

When a critical mass of employees or uses often an entire line of business or function within the institution has begun using encino.

As a company we celebrate when a customer goes life.

Much more than when the deal is closed because we recognized that our success is directly linked to the success of our customers having huge our software.

As a company we are laser focused on ensuring we have an extremely loyal satisfied and referenceable customer base, what advocates and champions for our platform.

Anyone who has followed encino over the years, what hurt me, telling our story during the IPO Roadshow understands how important culture is evidence you know.

We believe empowering our employees and trusting them to do the right thing fuels this customer loyalty and helped drive the hundred 47% subscription revenue retention rate for fiscal 2020.

Our growing team in Wilmington, North Carolina.

Along with our six other offices in major cities around the globe.

A changing the cloud banking world.

So back to the to go lives I wanted to highlight.

The first was where they how does and 45 billion dollar agriculture lender in the U.S.

A niche like AG lending requires specific functionality and workflows.

Implemented at the financial institution level, which the flexibility and configured ability of our software easily enable.

This is an important selling feature guarantees a frontline employees productivity is not at the mercy of an overworked IP Department.

We saw another significant go live with a 67 billion dollar global Bank.

Within ambitious deployment plan, we went live with commercial lending in three countries on three continents in less than a month.

We believe this global bank will continue adding more lines of business to their encino footprint.

I want to sank the encino team, our customers partners and stockholders for your support and loyalty.

And she knows ROE in the digital transformation of the financial services industry is of global significance.

And we are gaining traction in every market, where we operate today.

We don't have very exciting and important journey.

And our just getting started.

We look forward to sharing it with you.

Now, let me turn the call over to David to review, the second quarter financials in detail and discuss our outlook for the third quarter and full year.

Thank you Pierre and thank you all for joining us on our first earnings call.

It's been an exciting time and want to thank my team and everyone, who helped us get to this point.

We're very pleased to have started a public company life was such a strong quarter.

So let me begin by reviewing our results for the second quarter of fiscal 2021. Please note that all numbers referenced in my remarks on a non-GAAP basis, unless otherwise stated.

Our non-GAAP financial information excludes the impact of stock based compensation and the amortization of intangible assets a reconciliation to comparable GAAP metrics can be found in today's earning release, which is available on our website and ethane exhibit to our form 8-K furnished with the FCC.

Total revenues for the second quarter of fiscal 2021, or 48.8 million compared with 32 million in the second quarter of fiscal 2020, an increase of 52% year over year.

Subscription revenues for this quarter were 39.4 million, an increased to 70% year over year and represented 81% of total revenues in the second quarter. As a reminder, our subscription revenues include subscription and support revenues.

Subscription revenues growth benefited from the Triple B and forgiveness customers appear noted what's your activated immediately and resulted in revenues being recognized in the second quarter.

Let me spend a minute on this topic because it is a unique invaluable aspect of our business model.

Usually our contracts include a phase seat deployment timeline, which is generally six to nine months for community and regional banks and 12 to 24 months for enterprise customers.

This structure, which is based on specific seat activation dates and not tied to project success milestones allows us to maximize the lifetime value of a customer maintain pricing and provides heightened visibility to our revenues.

Because they are activated immediately triple b and forgiveness deals actually contributed $3 million to our second quarter subscription revenues.

We're not subject to our usual phased activation approach.

We will work to re purpose the seats to other business lines once the cares hack winds down over the next 12 to 24 months.

Visible equity and since we the two acquisitions completed last year that form the technology base for Nick contributed 2.6 million to second quarter subscription revenues.

As we have now on both companies for about a year in the future, we do not plan and separately disclosing revenues related to these acquisitions in our financial results.

Professional services were 9.4 million in the quarter, a 6% increase over the 8.9 million the second quarter last year.

We had assumed lower utilization rates due to cope with a strong services performance in EMEA drove the professional services revenues in the quarter.

Our international revenues continue to expand.

All non us revenues were 4.7 million, our 10% of total revenues in the second quarter up from 2.3 million or 7% total revenues in the second quarter fiscal 2020.

International revenues increased 103% year over year, reflecting continued success center international expansion.

Some benefit from the Siebels program in UK that Peter mentioned earlier.

Non-GAAP gross profit for the second quarter fiscal 2021 was 29.1 million compared with 17.6 million in the second quarter fiscal 2020, an increase of 65% year over year.

Gross margin was 60% compared to 55% in the second quarter of fiscal 2020.

Our gross margins continue to improve largely from product mix as well as a larger portion of our total revenues coming from subscriptions.

Total non-GAAP operating costs for the second quarter fiscal 2021 was 30.7 million or 63% revenues compared to 22.9 million or 72% of revenues in the second quarter fiscal 2020, while we did see some cost savings due to covert, especially around reduced travel in person event.

We continue to invest to grow our international footprint and expand the breadth and depth of our products as well as absorb public company costs as we move toward our IPO.

Sales and marketing for second quarter fiscal 2021 was 11.9 million or 24% of revenues compared to 10 million or 31% in the second quarter fiscal 2020.

18% increase year over year, though we continue to invest for global expansion sales and marketing expenses were lower than originally expected during the quarter due to the reduction in travel and expenses related inside our annual user conference, which removed to virtual event. We expect this lower level of spending to rebound slightly.

In the second half of the year as we continue to invest in expanding internationally and people returning to travel offset by savings for virtual conferences.

Research and development for the second quarter was 12.3 million are 25% of revenues compared to 8 million or 25% for the second quarter fiscal 2020.

A 54% increase year over year, we continue to invest in building out the Encino bank operating system, including Nick and our retail products as well as localizing products to support our international expansion.

General and administrative expenses was 6.6 million or 14% of revenues compared to 4.9 or 15% in the second quarter fiscal 2020.

We expect DNA to be higher in the second half of the year as we being given to incur public company Dino insurance costs. In addition to absorbing other public company costs.

Non-GAAP operating loss for the second quarter fiscal 2021 was 1.6 million compared with non-GAAP operating loss of 5.3 million in the second quarter fiscal 2020.

Our non-GAAP operating margin for the second quarter was negative 3%.

Compared with negative 17% in the second quarter fiscal 2020.

Non-GAAP net loss attributable to Encino for the second quarter fiscal 2021 was 581000 or one cents per share compared to non-GAAP net loss attributable to encino of 5.8 million or eight cents per share in the second quarter fiscal 2020.

Turning to cash.

We ended the quarter with cash and cash equivalents of 388.2 million. This includes 268 million in net proceeds from the IPO.

Net cash provided by operating activities totaled 23.5 million for the second quarter compared to 8.4 million in the first quarter of fiscal 2021, an increase of 179% quarter over quarter.

Net of $1.9 million in capital expenditures. This resulted in positive free cash flow of 21.6 million for the second quarter fiscal 2021.

That's very strong cash generation reflects both immediate activation of triple B and forgiveness seats and solid renewal activity.

Based upon historic seasonality, we do not expect that generate cash in the second half of the year. We will continue the balance cash flow, while investing to take advantage of a global opportunity in front of us.

Now turning to guidance.

For the third quarter, we expect total revenues of $49 million to $50 million non-GAAP operating loss of approximately $8 million to $9 million and non-GAAP net loss attributable to encino per share to be nine to 10 cents. This is based upon a weighted average of approximately 91.

4 million basic shares outstanding.

Our outlook for the full fiscal year is as follows total revenues of 193 to 194 million.

We expect non-GAAP operating loss for fiscal 2021 to be 20 to 23 million and non-GAAP net loss attributable to encino per share to be 25 to 26 cents.

Based upon a weighted average of approximately 87.3 million basic shares outstanding.

In summary.

We're very pleased with the momentum and the second quarter as we benefited from revenues related to government pack cope with lending programs both in the us in Europe.

These revenues will also drive full year growth, which is approximately 40% at the midpoint of the updated range.

We are beginning to see bank executives refocus more on business as usual and revisiting some of the long term projects in the pipeline. We expect the second half will begin experience more normal sales and activation cycles and an increased focus on digital transformation.

As always.

We appreciate the hard work in the Encino team around the globe and the loyalty by our customers and stockholders. We're early in the digital transformation of the banking industry.

We are excited to share the security with you.

Aaron and I are now happy to take your questions.

Ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes on line up branch sales from Bank of America. Your question. Please.

Oh, Great Hey, guys. Thanks, Thanks, so much and congratulations on a nice quarter.

Gate.

I wanted to ask about entering Q, it's an exciting opportunity and.

Wanted to get a little bit more color. Please on some of these initial use cases that you're going after in October I know the products not out yet but.

Anything you could share with us in terms of.

Use cases.

Expected uptake would look like initially in any any impact that might have on ASP.

Yes, Thanks, a lot for joining us so as you might remember.

Nick solution set or Encino Q is actually a suite of very specific solutions that we will be launching gets shorter you. Okay.

And I'm going to make it is very simple banks solutions that we offer for instance, the first one is a cecil solution on remote already one hundreds of credit unions using that today from the visible equity acquisition and see some has now been that whole platform has been moved over gray w. as might scalable made available for.

Banks and so come October that release comes out that single go across.

Our customer base. The second one is portfolio analytics, which you can imagine in times like this banks are looking to understand better their portfolios.

The payment history of their customers and what they can expect into future.

Third Montes automated spreading.

And automotive spending is all about scanning in your financial statements your tax forms et cetera, pre populate the spreads tremendous manpower and cost savings for banks, there and the final one is consumer credit the risk insights.

Those four solutions.

Come out here shortly and as you remember we are adding solutions like that continuously going forward, but that's the initial for will start taking it to market I don't think you're going to see an immediate impact on revenue. Because this is sales cycle and is also.

Implementation cycle et cetera, but the early indications are very promising on that solution set.

That's great. Thank you so much peer and then I wanted to ask about kind of the mix of business. This quarter in the global banks segment and the community regional segment. It looks like pretty balanced results. You cited some examples in both segments can you just remind us kind of where the industry is in those two segments is one further along in their digital transformation efforts.

Is there one that you would point to where maybe there they're less.

The adoption cycle is.

Perhaps behind it we could see an inflection point, just where where are we in terms of adoption in those two different segments.

It's interesting so.

And it really back sector, there's about 5000 institutions retarget about two thousands of them and we've got 300 customers. So from that alone you can imagine and be focused mainly on commercial loan origination. So all of retail and other account opening it centros opened for US is very new for us in down okay.

I would like to remind you that the commercial loan origination global Sam.

3.4 billion.

So as a company that we just scratching the surface yet.

Then if you go to the community or do the large banks. We mentioned these got 14 as a top 25, but again realize we're getting small pieces of the commercial bank as our lending opportunity and then we expand within it.

Again data if you look at 14 as adults 25 in the Americas, So North America, Canada and the U.S.

Although that sounds like a lot.

The the Sam is about 1.2 billion.

So there is a massive opportunity both in commercial origination as well as for the for the enterprise banks as well as the community banks I think.

We have just scratching the surface and then finally, let me explain to you retailer that'll, but it's important to understand and retail as three components.

Your account opening.

This onboarding aspects going through can you I see anti money laundering et cetera.

And then finally this international mortgage.

So all relatively very new products.

And we are seeing significant interest in those three.

And then of course it another generation coming from the retail space and then we've got some personal on top and then small business with some banks falls into the retail space and some banks into commercial.

So I believe.

It's very early for this process in this market as we go is very early for the cloud technologies to penetrate these banks, although we've been going for eight years. It shows just like yesterday.

That's great. Thanks, Peter and the one more if I may just please on the comments you made David on the Triple pre forgiveness program.

Actually repurchasing those seats would that mean, if these could become recurring in nature.

Yes, that's the plan I think the majority of those contracts were coterminous. So they lined up with the original contract length of the customers. We had a handful that were.

12, or 24 months and so the idea is to re purpose those seats upon expiration into other areas that bank. So we can continue to maintain those revenues.

That's great. Thanks, so much guys hey, thank you.

Thank you. Our next question comes the line Saket Kelly from Barclays Capital. Your question. Please.

Okay, Hey, guys. Thanks for taking my questions here on the congrats and becoming a public company.

Thanks, Greg hearing from you.

Yes, same here Hey, Peter maybe just to start with you.

Can you just talk about what you're hearing from from countries and he's been all the time with customers. What are you hearing from them outside of Triple P and forgiveness in terms of their willingness to invest particularly in that and that core commercial lending part of the market does it make sense.

Yes, I can tell you that.

We see an accelerated or urgency.

Around digital transformation. There's this to me a realization now that work from home is not a luxury anymore. It's just an imperative. If you look for the city like London, New commuting an hour and a half each way today why would you wait three hours in a train if you can do your job from home and as a business Ben you think I can get.

Productivity out of by people doing that now look in Wilmington to begin with 15 minutes that same logic doesn't apply but if you look New York City Chicago La any of these big cities I think these banks realized they were forced to go this direction and I think when this is done.

Everybody is going to move towards much more flexible workforce. That's good work from anywhere on any device at any time okay.

Because the work life balance of just changed and number one because of that because of Crow with actually drove the agency.

We are seeing.

Great strategic conversations with the most senior people in the largest complex institutions of how to actually get there at the faster pace, So I'm very optimistic.

Got it got that makes sense, David maybe for my follow up for you you touched on this a little bit in the prepared remarks, but just on pack and a little bit.

Can you just talking about the seat activation schedule a bit in terms of how that can change if at all.

And how we should be thinking about that activation schedule when when we model revenues going forward.

Yes, we do have delayed seed activation schedule and we.

We did not see any major change to those activation schedules in the quarter and our guidance assumes a similar level that we that we saw in the past for those sort of those activation.

Digital's.

Except for Triple B.

Total pre obviously accelerated activations and its distorting the revenue of second quarter.

Straight to create growth spurt because of that but overall on your normal business. The activation scheduled stayed steady as it was before to puppy and code.

Got it makes a lot of sense. Thanks, guys. Thanks, a lot second.

The Q. Our next question comes from the line of Josh back from Keybanc. Your question. Please.

Thank you for for taking the question.

Maybe this is for you Pierre but you've talked a bit about.

Digital transformation and I certainly think the conversation has changing you gave some great references from other.

Bank calls on how they're thinking about that so that seems to be something that would would build the pipeline.

Other hand, these are large enterprises and we have seen some.

Elements of disruption just sales cycles and implementation cycles. So I'm just wondering like when you balance those two factors together how are you thinking about building the pipeline in the and the outlook for new bookings as we go into the end of this year and the end of your fiscal year.

So thanks, a lot for joining the call yet.

So look yes, it's really interesting in that community bank space. It clearly was a disruption because it's a small to staff people are more focused and when that to pivot towards simple Pete that started pushing deals out and that was about a four five months I would say.

Redirection of activity and people, okay, and the moment that is coming to an end people are focusing back on long term strategic initiatives. Once you get to yield larger regional banks and your enterprise banks. They are big enough. They say that GE on track and this is driven a higher urgency as I mentioned.

For these initiatives because it's not only a matter of efficiency anymore.

This compliance issues around this can you walk from what effectively on the old systems.

Do you have the right entitlement engine someplace to make sure your people and actually the people signing into the systems et cetera. So all of that plays into this higher level of agency. These are big banks. It takes time, okay, but I can tell you that in this time, our pipeline has grown because of these banks understanding that.

Need to do this.

And they have to move forward and it's not merely.

I would say something that they would like to do is becoming a strategic imperative to run the bank in a different way.

Okay. That's that's really helpful and David I think you gave us some helpful really charts, describing the HCV net revenue retention in your S. One filing so anything you can share there certainly seems like you've had some nice.

Deals where you have had some some expansion. So just you know is that still a good framework for us to use as we as we build out the kind of long term growth prospects for your business. Okay. Great. Thank you, yes, we ended the fiscal 2147%, which appear mentioned earlier.

If you if you think about the triple P. deals in the forgiveness deals that we closed in the first half of the year. Many of those most of those words were existing customers. So although we're not disclosing revenue retention on quarterly basis, I would assume that you could assume that those 147%.

I would have increased because of that and we are planning on updating that at the end of this fiscal year as well so triple P. absolutely did.

Help that metric in the last two quarters.

Okay very helpful. Thank you Bill.

Thank you.

Thank you. Our next question comes from a line of Terry Tillman from CJS Securities. Your question. Please.

Yes, Hey, PR, Greg and David Congrats on the IPO for me as well.

Maybe the first question here for you.

It's just related to sometimes an IPO can catalyze the business and just create more notoriety and recognition.

I know, it's early still since the IPO, but like what have you seen from just getting this increased recognition maybe particularly in international markets. What is being a public company help you or has it have you seen any benefit so far with.

That that increased exposure and then a follow up.

Thanks, Terry it's quite interesting into one of the strategic reasons resort to do this was notoriety and to be taken series in more conservative international markets like if you're thinking about Germany, Italy, or Spain, where you don't want to be seen as a small startup out of the U.S.

And the notoriety around as driven significant activity and receptivity from the banks three our teams and if you speak to our London team now and they will tell you that they get calls and meetings now they could never get before so we see the notoriety we see the brand recognition.

Our relationship with Salesforce Dot Com is always helpful.

But these events.

The way we built this platform with the Referenceable customers you've gotten the U.S. tremendous helpful. In the IP was just at the next step to push us forward.

Got it actually you just mentioned salesforce, they actually talked about acceleration in some large enterprises in terms of their digital transformation.

You all were able to exhibit the power of your platform in last few quarters with Triple PNM forgiveness is it's doing anything to kind of spring accelerating kind of conversation than maybe even kind of the monetization timeframe for things like retail lending or deposit account openings et cetera, just like what are you seeing so far in terms of maybe that picking up the pace.

Some of the sales cycles. Thank you.

Thanks, it's interesting to actually know diseases. So typical p. forced banks to have a digital channel.

In a very short order to get up and running and you know for years, we had sales cycles trying to convince them. This is the right thing to do is going to help you et cetera, and now everybody is unbelievable.

So now it's about where do you deploy first what business lines, you get et cetera. So it's not a matter off should we do it anymore is now matter of when do we do this and witnessed the IP bunch et cetera, et cetera, and we can use the examples of how quickly we stood up the typical PD lone product and actually gotten in production in process billions of dollars.

As proof points that these projects shouldn't take 12 18 24 months, we can do it much faster at a much bigger impact and then do some of the integrations. After the fact and we are seeing those messaging is resonating with banks and the senior management.

Thanks.

Thank you. Our next question comes in the line of Brian Peterson from Raymond James Your question. Please.

Oh, hi, everyone and thanks for taking the questions so and congrats on the strong results. So.

Sure I wanted to hit on on the retail opportunity you got a nice third party endorsement this quarter there as we think about that the progress that product offering what are the guide posts that you're using internally and what would you expressed through investors for how to assess that ramp as we look at that that product building up.

Yes, thanks for dialing in so as I mentioned earlier. This three legs of this tool for the retail offering okay. We came out to shoot for mortgage international and signed six Canadian smoldering very small institutions, but six was taken up at a very short order.

Which was number one on a promising body shaping the acute issues in that marketplace for good software.

On the retail lending side.

Taking a careful approach because it easy so.

Intends around the electricity compliance and the documentation to do need.

But we are making great progress we are seeing good referenceable customers and I can tell you the complexity or building that solution is also the biggest moat.

Around that that people kind of entry into that market.

The one when I see the biggest momentum right now is deposit account opening.

I'm sure you look at that you look at my mortgage.

Reference points about the Canadian market and in Europe, I'm seeing that interest as well.

You look at the uptake on the lending side and the I'd tell you report and I feel very good.

That whole offering is coming up and I actually outpaced from a growth perspective, the commercial loan origination. If you look at percentage growth. Although we just want to start I really see the but would you started marrying the knick elements into the retail and you get to a touch this experience.

Customers can do everything on their phone there's no banker involved and you could have automated decisioning at the backend that's going to propel and accelerate this so he is one of the dilemma in the banking industry today.

If you look at the history of deposits.

And how banks are funding loans deposits are flowing to the four big banks in the U.S. today.

And the coming to regional banks are struggling to get a deposit at the same right. We have many proof points of the Encino solution is much more effective in a threed sensing gathering deposit account number one but number two they will have to beef up the retail lending efforts to get my deposits in the future. There was otherwise if I can be a one stop shop.

I'll take my deposit to a big banks willing to do my color by mortgage et cetera.

And we are beginning to bundle package that altogether and explain to banks have to get there and I'm seeing good receptivity.

That's great to hear in maybe one of the according to the follow up question on the pipeline I realize there's there's a lot of market presence of things that that's driving awareness of your solution, whether that's p. or the IPO I'm curious what you're seeing in the pipeline in terms of new customer opportunities in its early commonality in in what's driving those new opportunities into.

The pipeline. Thank you.

Thanks.

What I would say is we see still.

Very healthy commercial pipeline coming in whether it's expanding in existing.

Enterprise banks and your comedian regional space as I mentioned earlier, we've got 300 out of 2000 institutions by the way, we don't even have the whole commercial bank with a three out of the God. We've got pieces of this and maybe seven loan types et cetera. So there is tremendous cross sell as well as new logo opportunities into commercial side then.

On top of that.

In the committee regional space. The platform story is really powerful they would love to standardize older operations middle and back office and customer interaction on a single platform.

And so what we're seeing is they buying to the full platform, but then deploy one line of business at a time.

Because it just take time and effort to do that okay.

And then the other leg of this too is absolutely international I mentioned to you earlier through the IPO that I measure every one of the solution sets of or strategic growth initiatives compared to the every day. So the company. So I live in international and after three years.

Outpacing where the company was in the first three years I didn't look at the retail solution set and its outpacing what treated with commercial in the first three years and if those two things keep on holding true then it actually is an exponential growth story, which is what we are doing yet.

That's great color. Thank you.

Thank you Arent next question comes from the line Brent Bracelin from Piper Sandler Your question. Please.

Thank you and good afternoon, I guess, one for Pierre and one for David Pierre.

International crossed over 10% of revenue for the first time I know, it's early days, but I was hoping if you could frame just the international opportunity what's changed post covia them, you talked about a big UK Bank.

Basically pulling you infer a triple p. equivalent in UK, but more broadly speaking what are you seeing there relative to opportunity and and hasn't materially changed in the last six months as you just think about engagement activity and is it largely because of that.

Need around remote workers.

Yes.

So I was firstly say when we entered Europe, we realized that the cloud was not as well adopted that's in the U.S.. There's a lag effect. There. So we have to start the vandalizing from scratch again to get people comfortable with the cloud.

Second the main thing is you know I can fly from year to Kentucky and go sell a piece of software.

I cannot do the same from England to Germany, I need the German speaker, German infrastructure and somebody speak Spanish for Spain.

Et cetera, so the initial start up in that market, although the market has begun.

To get bigger investment in allows the infrastructure and we have to put in we had to make sure. The languages are supported by the software all the different integration steps. So you upfront investment happens to be.

More complex than larger however.

Beginning to see is with Covance and just the event. So realized the only can do we had a triple B program like the U.S. was the UK I didn't see any of this in France or.

Good morning.

Germany, Spain similar programs.

But there is I would say a heightened awareness number one number to recruit banks like sometime there was using us in the UK and the U.S. because obviously the next question is what about strain. So we are penetrating these banks in the foreign subsidiaries.

And then cynical that to get into their main home countries.

So I'm seeing over all this awareness the cloud adoption.

The awareness of Salesforce Encino, the brands and the trust affects it around that.

And then further to that I can tell your in Australia, we see fantastic traction as you May now we've got more quality bank there as an anchor solution. We did Goetabanken Zealand going so everywhere, we planted the flag we've got a presence he's got a great success story and that'll just drive it forward, but they.

I was more difficult up ramp in the beginning.

Helpful color, there and then I guess, David for you just to be clear on this subscription growth, leaving 70% just phenomenal growth this quarter I get that you got to benefit from it looks like what to go lives as well as that the triple P. forgiveness.

My question is it did you see any tailwinds this quarter from that UK Bank, that's rolling out the Triple play like program or is that a potential that could roll in in Q3.

Yeah.

Thank you I appreciate the the call yeah on the.

On the Triple P. the siebels in Europe, we did see benefit on the P.S. so side.

In the quarter and we will see we didn't see a full quarter benefit on the subscription side, so that will come in the following quarters.

Okay, Great and then quickly house, keeping our PEO did did you kind of have give us what the our Pos in the quarter, Yeah, and you'll see the all the details in the 10-Q, which repelling tomorrow morning.

ARPU increased by about 20 million a quarter in the quarter with the majority of that increase coming from the less than 24 month bucket, which kind of reflects the triple b and forgiveness deals that we closed in the quarter.

Okay Super helpful.

Thank you. Our next question comes on line Cerro hand phone from Macquarie. Your question. Please.

Great. Thank you so much for taking my questions Pierre and David It's great to hear Yervoy says and I'll definitely add my congrats on your debut corner on Pierre I know one initiative, you had been focusing on and Bob.

I know this will certainly the case pre IPO, it's been expanding both your technology partnership ecosystem and also your consulting partner ecosystem. So I'm wondering how will that has changed or what kind of development you're seeing there since the IPO and then I have a quick housekeeping follow up for date.

Yeah. So as you can see the balance of revenue subscription to professional services. The professional services portion is continuing to decline historically for the company because we are focused on expanding globally was outside partners.

In the U.S., we've got a stable off I would say that top brands.

System integration working with us.

Which is very beneficial and be proud on those partnerships. What we are seeing in Europe. They are cases, where banks when she used partners. We've never used before we after a very effective training and Onboarding program for these partnerships.

We get them up to speed, we substitute those.

Projects with a bit more encino resources to make sure they get the best product.

Knowledge and help for the project.

So I would see I do see an expansion typically driven by customers.

As we go to new geographies, we're always open minded.

Typically in your smaller bank markets.

We will have more smaller size doing it and then your global styled partnerships.

Well play more into enterprise type banks.

Haven't seen much change, it's more that factor over the growth, we're seeing it driving more partnerships as opposed to the IPO.

Okay, great. Thank you and then David I'm, just a quick follow up for you.

Well get deguerin versus what you expected for the year given the Upselling anyway is that kind of a fair classification.

Could you repeat that I think you broke up in right at the beginning of the question sure sure No problem I was wondering if Colgate Dread then a seat or seat expansion got bigger versus what you expected for the year given the assigning you had in India.

Yeah, I would say you called it did the triple B and even the siebels that came as a surprise in the quarter.

And that was part of the reason for for for the upside we do expect to see you know.

We saw $3 million.

In the quarter, we expect to see a little bit uptake and that for the balance of the year as well around the triple P. and forgiveness related subscription revenues.

I see okay. All right that's equally normally when we signed a contract you know they said fairly links you activation of seats and to see boats and Triple B just had a very quick activation you literally signed the contract in two weeks I know you're up and running you take your revenue. Okay. So that is a slight distortion that you're going to see into Q2 in Q.

In Q3, which is modeled into the models and the.

The guidance that that quick uptake is just.

Not normal for how we do business and that's the flex and you're saying.

Absolutely great that makes a lot of cans I appreciate it. Thank you sell much things like it.

Thank you and this does conclude the question and answer session I'd like to hand, the program back to PR for any further remarks.

Well. Thank you so much for dialing in today and tracking our progress.

We are excited about the future and we are focused on our customers and the learning or be promised. So thank you very much for joining us today.

Thank you, ladies and gentlemen for your participation in todays conference. This does conclude the program you may now disconnect good day.

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Ladies and gentlemen, thank you for standing by welcome to the Encino Inc. second quarter earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be question and answer session to ask a question during the session you'll need to press star one on your telephone.

I like to introduce your host for today's program, Greg <unk>, Chief Corporate development and legal officer. Please go ahead Sir.

Thank you and good afternoon, and welcome to Encino trace This school 2021 second quarter earnings call for the quarter ended July 31st 2020.

With me on todays call our peer not day are seen as president and Chief Executive Officer, and David Rudow, Our Chief Financial Officer.

During the course of this conference call. We may make forward looking statements regarding trends strategies any anticipated performance of our business.

These forward looking statements are based on management's current views and expectations.

Our subject to various risks and uncertainties, including those related to the impacts of cobot 19 on our business the financial services industry and global economic conditions.

Our actual results may differ materially.

Please refer to the risk factors included in our filings with the Securities and Exchange Commission, which are available on the company's website at Encino Dot com under the Investor Relations section and on the Fccs website at FCC Dot Gov.

Forward looking statements made during the call are being made as of today September night 2020 based on the facts available to us today, and if you know disclaims any obligation to update or revise any forward looking statements.

The guidance, we will provide today is in part based on our assumptions as to the macroeconomic environment in which we will be operating in the future, including the timing and pace of recovery from any negative effects caused by cobot 19.

Such matters that are beyond our control in our assumptions may not be correct.

On today's call. We will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K furnished with the FCC just before this call.

With that thank you for joining us and I will turn it over to Pierre.

Thank you, Greg Hello, and good afternoon. Thank.

Thank you for joining us today for our inaugural public company earnings call.

I'm excited to share details about its you know and our second quarter results, but let me start by saying that we hope you and your loved ones a safe and in good health.

Well Cobot 19 has created a new normal for all of us.

He does also sharpened the momentum and agency around the digital transformation of financial institutions, which encino pioneer over eight years ago.

When it Cobots truck and the won't immediately moved to remote access and see no customers seem to see converted to a work from home structure.

Yet many financial institutions that did not have a cloud based bank operating system struggled trying to remotely operated that institution run their business keep their employees productive and effective and support their clients.

We believe the pandemic as dramatically demonstrated for financial institution executives and moving to a cloud environment just be part of their future roadmap.

It's an immediate imperative the size and prominence of the global financial institutions that are engaging with us today confirms that digital transformation in banking is happening and is accelerating.

The strength of our pipeline is further evidence of this fact.

As soon as grow what struck and seeing that was there to help our financial institution customers and their clients navigate this difficult Kyle.

Last two quarters, we help our customers too far more than $50 billion interpret payloads under the cast Act.

In the second quarter, we also added banks managing to forgiveness portion of the low.

As well as work with banks in the UK to support the current providers of business interruption loans scheme or cboes.

I'm extremely proud of how the encino team successfully to engage with both established and new customers around the globe during an unprecedented period.

Before I share additional highlights from the second quarter I wanted to spend a few minutes, providing a brief overview of encino for those new to our story.

And seen our founded my team of bankers and entrepreneurs in late 2011, who recognized that the commercial lending process was inefficient and time consuming.

Our ambitious goal was to create a cloud based solution.

That would enhance transparency.

Efficiency and speed across the financial institution.

From the very beginning now seem was bought by bank us for bankers.

We believe this core foundation differentiates us from competitors as we deeply understand a bank as challenges and pain points, and we focused first and foremost.

Creating solutions to improve the bank employees work experience.

Once that was established.

We extended our product functionality to benefit the banks and use of clients.

Today Encino offers an end to end digital bank operating system on a single platform designed to help reduce costs increased revenues improve employee efficiency and productivity.

And enhanced transparency across client onboarding loan origination and deposit account opening.

All while helping to ensure a regulatory compliance.

Both on the Salesforce platform since day, one our bank operating system integrators, Digitizes and enhances the operations for financial institutions across lines of business, including commercial small business and retail.

Our single cloud based platform, we scalable for financial institutions customers of all sizes and complexity across the globe.

Including enterprise banks regional and community banks credit unions and challenger banks.

We couldn't be more proud of what Encino is today with over 1100 financial institution customers worldwide, arranging and assets from $30 million to more than two trillion dollars, including institutions, such as bank of America Barclays sometime Dan.

Truest connect one back maybe federal credit Union and many more.

As good as we feel about the progress we have made to date, we've only begun to penetrate our market opportunity.

With more than 28000.

Financial institutions worldwide banking is one of the largest and most complex industries very.

With many financial institutions to operating with outdated legacy systems and point solutions.

According to Gartner Global IP software spend within banking was over $63 million in 2018.

Not surprisingly, 85% of banks have indicated that digital investment you say gee proudly on their roadmap.

We have sized our serviceable available market or Sam at $10 billion, which realistically reflects the opportunity to sell our carbon products.

Current targeted markets.

Our bank operating system is generally sold by seats on the subscription basis.

Usually with three to five year initial contract terms.

Our land and expand approach allows us to deploy with a specific product solution such as client on boarding.

The generation or account opening within a specific business line.

We then look to expand adoption within that business and across other lines of business, allowing us to leverage data and functionality across the financial institution, increasing efficiencies and cost savings.

And this expansion within our current installed base our growth strategy includes continued expansion of our installed base.

Including increasing our international footprint.

Increasing the depth and breadth of product set going out partner ecosystem and selective targeted acquisitions.

One of our most exciting opportunities is derived from two technology acquisitions, we completed last year.

Which form the basis of Encino Q or Nick.

Lending platform.

Using artificial intelligence data analytics and machine learning, we believe Nick will provide unmatched inside an actionable data we are customers, enabling them to become more predictive.

So lies and proactive.

It's so early days for Nick but we're very excited by the customer feedback we have received and the potential that lies ahead to help financial institutions around the world leverage data to make more informed decisions in real time at the point of production.

So turning back to the quarter.

We are pleased with the results of our first quarter as a public company.

Subscription revenues increased 70% to a record $39.4 million, while total revenues grew 52% to $48.8 million also a record.

The Triple PD, Lones and forgiveness business I mentioned earlier helped drive subscription revenues in the quarter to 81% of total revenues.

In the second quarter 32 financial institutions purchased seats for forgiveness, that's when not appropriate customers to process the loans.

Including the addition of 10, new customers to with over $25 billion in assets and then expansion within the top 10 years Bank.

Those seats activated immediately and generated revenues in the second quarter, which is different from our normal delayed activation process.

David will provide details around that element of our business model.

In total 87 financial institutions used in CNO topi and forgiveness in the first two quarters, including 45 banks with over $5 billion in assets.

Our professional services teams, we're busy in the quarter, including in Europe, where we assistant one of the large global bank customers in establishing a solution to process loans for the UK government backed cboes lending program.

Similar to Triple payloads. These revenues activated immediately.

After help from our professional services teams.

We have largely built out our customer success and professional services teams and EMEA and we have very encouraged by the growth opportunities we are seeing there.

In fact in the second quarter, we signed a large expansion for the EMEA based global Bank, we supported on Cboes.

Which has close to two trillion in assets put our onboarding solution.

Second large expand since the initial lapped.

We also had a significant one with a new customer in Continental Europe. This $450 billion Global Bank chosen CNO for collateral management, which into commercial bank and we see meaningful opportunities to expand from this is so land.

Deal over time.

Our traction with international banks demonstrates that our global branding is working.

And so you know is becoming synonymous with a digital transformation of banking.

For example on his recent second quarter quarter earnings call Fifth third Bank, a top 20, you as bank with more than $200 billion and assets discussed that their client interactions are increasingly shifting to digital products and noted that digital strategy includes accelerating.

The implementation of Encino in their commercial business.

Run more trust a financial services company headquartered in Pennsylvania that has offered banking insurance and wealth management solutions for over 130 years and as over $5 billion in assets and $17 billion in assets under management also discussed and.

Well its recent earnings call highlighting the growth in these digital account opening and then seniors ROE in the success Stadium.

The positive account applications increased 300% from March through April and remained at elevated levels in may.

This increase in openings were unable to buy our Encino online account opening solution, which we deployed in the fourth quarter of 29 team.

Our customers highlighting us on their earnings calls as a strategic differentiator is a testament to the tangible impact and CNO is having on their institutions and the banking industry.

On the product front the strength of our retail offering was recognized recently what Encino is a retail loan origination system was named best in class by the ITC Itay group, a highly respected resets and advisory firm.

Focus on the financial services industry.

Of the 15 firms assessed and senior was recognized as the global leader in three categories clients strength.

Client service and product features.

Expansion of our retail lending footprint is a key revenue to increase penetration of our installed base. So this best in class designation is important validation.

Especially since this is relatively new product for us.

Product innovation is key to our success and we will further expand the depth and breadth of our retail lending product in October when we release, new product updates, including functionality to further improve the regulatory and compliance capabilities of retail lending.

We're also making important updates to Nick the analytics platform I mentioned earlier.

The October release will be the first full integration.

Okay, Nick into the Encino Bank operating system.

Leveraging the Prince Street Technology, we acquired last year embedded in Nick we have developed automated loan underwriting, which we have seen reduce the manual component by 50% to 75%, thereby accelerating the time to approval, we have an ambitious product road map for Nick and our exciting about.

Multiple solutions, we are developing to provide customers with data driven insights across every institution.

We are confident that Nick will play a key ROE in continuing to differentiate and Cnos bank operating system in the coming yes.

Our customer success team at a very productive quarter, taking numerous customers into production.

Highlighted by two significant go lives.

Before I get into the specifics of these accounts, let me spend a minute talking about what it means to go into production or go life.

Since it is such an important milestone for our customer and it says a great deal about the Encino culture.

Hey, customer is considered in production or life.

When a critical mass of employees or uses often an entire line of business or function within the institution as began using encino.

As a company we celebrate when a customer goes live.

Much more than when the deal is closed because we recognize that our success is directly linked to the success of our customers having huge our software.

As a company we are laser focused on ensuring we have an extremely loyal satisfied and referenceable customer base, what advocates and champions for our platform.

Anyone who has followed encino over the years, what hurt me, telling our story during the IPO Roadshow understands how important culture is encino.

We believe empowering our employees and trusting them to do the right thing fuels this customer loyalty and helped drive the 147% subscription revenue retention rate for fiscal 2020.

Our growing team in Wilmington, North Carolina.

Along with our six other offices in major cities around the globe.

A changing the cloud banking world.

So back to the to go lives I wanted to highlight.

The first was were there other than 45 billion dollar agricultural lender in the us.

Nish like AG lending requires specific functionality and workflows.

Implemented at the financial institution level, which the flexibility and configurability of our software easily enables.

This is an important selling feature.

Guarantees a frontline employees productivity is not at the mercy of an overworked IP Department.

We saw another significant go live with a 67 million dollar global Bank.

With an ambitious deployment plan, we went live with commercial lending in three countries on three continents in less than a month.

We believe this global bank will continue adding more lines of business to the encino footprint.

I want to thank the Encino team, our customers partners and stockholders for your support and loyalty.

And Cnos ROE in the digital transformation of the financial services industry is of global significance.

And we are gaining traction in every market, where we operate today.

On a very exciting and important journey.

And our just getting started.

We look forward to sharing it with you.

Now, let me turn the call over to David to review, the second quarter financials in detail and discuss our outlook for the third quarter and full year.

Thank you Pierre and thank you all for joining us on our first earnings call.

It's been an exciting time I want to thank my team and everyone, who helped us get to this point.

We're very pleased to have started a public company life was such a strong quarter.

So let me begin by reviewing our results for the second quarter fiscal 2021. Please note that all numbers referenced in my remarks on a non-GAAP basis, unless otherwise stated.

Our non-GAAP financial information excludes the impact of stock based compensation and the amortization of intangible assets a reconciliation to comparable GAAP metrics can be found in today's earning release, which is available on our website and as an exhibit to our form 8-K furnished with the SEC.

Total revenues for the second quarter fiscal 2021, or 48.8 million compared with 32 million in the second quarter fiscal 2020, an increase of 52% year over year.

Subscription revenues for this quarter were 39.4 million and increased to 70% year over year and represented 81% of total revenues in the second quarter. As a reminder, our subscription revenues include subscription and support revenues.

Subscription revenues growth benefited from the Triple B and forgiveness customers appear noted what's your activated immediately and resulted in revenue is being recognized in the second quarter.

Let me spend a minute on this topic because it is a unique and valuable aspect of our business model.

Usually our contracts include a face seat deployment timeline, which is generally six to nine months for community and regional banks and 12 to 24 months for enterprise customers.

This structure, which is based on specific seat activation dates and not tied to project success milestones allows us to maximize the lifetime value of a customer maintain pricing and provides heightened visibility to our revenues.

Because they are activated immediately chiptopia and forgiveness deals actually contributed $3 million to our second quarter subscription revenues.

We're not subject to our usual phased activation approach.

We will work to re purpose the seats to other business lines. Once the cares act winds down over the next 12 to 24 months.

Visible equity infant suite, the two acquisitions completed last year that form the technology base for Nick contributed 2.6 million to second quarter subscription revenues.

As we have now on both companies for about a year in the future, we do not plan and separately disclosing revenues related to these acquisitions in our financial results.

Professional services were 9.4 million in the quarter, a 6% increase over the 8.9 million the second quarter last year.

We had assumed lower utilization rates due to cope with a strong services performance and EMEA show the professional services revenues in the quarter.

Our international revenues continue to expand.

All non us revenues were 4.7 million, our 10% of total revenues in the second quarter up from 2.3 million or 7% of total revenues in the second quarter fiscal 2020.

International revenues increased 103% year over year, reflecting continued success on our international expansion.

With some benefit from the Siebels program in the UK that Pierre mentioned earlier.

Non-GAAP gross profit for the second quarter fiscal 2021 was 29.1 million compared with 17.6 million and the second quarter fiscal 2020, an increase of 65% year over year.

Gross margin was 60% compared to 55% in the second quarter fiscal 2020.

Our gross margins continue to improve largely from product mix as well as a larger portion of our total revenues coming from subscriptions.

Total non-GAAP operating costs for the second quarter fiscal 2021 was 30.7 million or 63% of revenues compared to 22.9 million or 72% of revenues in the second quarter fiscal 2020.

While we did see some cost savings due to covert, especially around reduced travel in person events, we continue to invest to grow our international footprint and expand the breadth and depth of our products as well as absorb public company costs as we move toward our IPO.

Sales and marketing for second quarter fiscal 2021 was 11.9 million or 24% of revenues compared to 10 million or 31% in the second quarter fiscal 2020.

18% increase year over year, though we continue to invest for global expansion sales and marketing expenses were lower than originally expected during the quarter due to the reduction and travel and expenses related inside our annual user conference, which we moved to a virtual event. We expect this lower level of spending to rebound slightly.

In the second half of the year as we continue to invest in expanding internationally and people returning to travel offset by savings for virtual conferences.

Research and development for the second quarter was 12.3 million are 25% of revenues compared to $8 million are 25% for the second quarter fiscal 2020.

A 54% increase year over year, we continue to invest in building out the Encino bank operating system, including Nick and our retail products as well as localizing products to support our international expansion.

General and administrative expenses was 6.6 million or 14% of revenues compared to 4.9 or 15% in the second quarter fiscal 2020.

We expect gionee to be higher in the second half of the year as we being given to incur public company Dino insurance costs. In addition to absorbing other public company costs.

Non-GAAP operating loss for the second quarter fiscal 2021 was 1.6 million compared with non-GAAP operating loss of $5.3 million and the second quarter fiscal 2020.

Our non-GAAP operating margin for the second quarter was negative 3%.

Compared with negative 17% in the second quarter fiscal 2020.

Non-GAAP net loss attributable to Encino for the second quarter fiscal 2021 was 581000 or one cents per share compared to non-GAAP net loss attributable to encino of 5.8 million or eight cents per share and the second quarter fiscal 2020.

Turning to cash.

We ended the quarter with cash and cash equivalents of 388.2 million. This includes 268 million in net proceeds from the IPO.

Net cash provided by operating activities totaled 23.5 million for the second quarter compared to 8.4 million in the first quarter fiscal 2021, an increase of 179% quarter over quarter.

Net of $1.9 million in capital expenditures. This resulted in positive free cash flow of 21.6 million for the second quarter fiscal 2021.

That's very strong cash generation reflects both immediate activation of triple B.

And forgiveness seats and solid renewal activity.

Based upon historic seasonality, we do not expect that generate cash in the second half of the year. We will continue the balance cash flow, while investing that take advantage of the global opportunity in front of us.

Now turning to guidance.

For the third quarter, we expect total revenues of $49 million to $50 million non-GAAP operating loss of approximately $8 million to $9 million and non-GAAP net loss attributable to encino per share to be nine to 10 cents. This is based upon a weighted average of approximately 91.

4 million basic shares outstanding.

Our outlook for the full fiscal year is as follows total revenues of 193 to 194 million.

We expect non-GAAP operating loss for fiscal 2021 to be 20 to 23 million and non-GAAP net loss attributable to encino per share to be 25 to 26 cents.

Based upon a weighted average of approximately 87.3 million basic shares outstanding.

In summary.

We're very pleased with the momentum and the second quarter as we benefited from revenues related to government impact covert lending programs, both in the us and Europe.

These revenues will also drive full year growth, which is approximately 40% at the midpoint of the updated range.

We are beginning to see bank executives refocus margin business as usual and revisiting some of the longer term projects in the pipeline. We expect the second half will begin experience more normal sales and activation cycles and an increased focus on digital transformation.

As always.

We appreciate the hard work in the Encino team around the globe and the loyalty by our customers and stockholders. We're early in the digital transformation of the banking industry.

We are excited to share this journey with you.

Aaron and I are now happy to take your questions.

Ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes on line of Brat sales from Bank of America. Your question. Please.

Oh, Great Hey, guys. Thanks, Thanks, so much and congratulations on a nice quarter.

Gate.

I wanted to ask about entering Q, it's an exciting opportunity and.

Wanted to get a little bit more color. Please on some of these initial use cases that you're going after in October I know the products not out yet but.

Anything you can share with us in terms of.

Use cases.

Expected uptake would look like initially in any any impact that might have on ASP.

Yes, thanks for joining us so as you might remember.

Nick solution set or Encino Q is actually a suite of very specific solutions that we will be launching gets shorter okay.

And I'm going to make it's very simple banks solutions that we offer for instance, the first one is a seasonal solution on rug already one hundreds of credit unions using that today from the visible equity acquisition and see some has now been that whole platform has been moved over gray w. as made scalable made available for.

Banks and so come October that release comes out that single go across.

Our customer base.

And one is portfolio analytics, which you can imagine in times like this banks are looking to understand better that portfolios.

The payment history of their customers and one big and expect into future.

Third Montes automated spreading.

And automotive spending is all about scanning getting your financial statements your tax forms et cetera, pre properly spreads tremendous manpower on cost savings for banks.

And the final one is consumer credit the risk.

Sites.

Those four solutions.

Come out shortly and as you remember we are adding solutions like that continuously going forward, but thats. The initial for will start taking it to market I don't think you're going to see an immediate impact on revenue. Because this is sales cycle and is also.

Implementation cycle et cetera, but early indications are very promising on that solution set.

Thats great. Thank you so much peer and then I wanted to ask about kind of the mix of business. This quarter in the global banks segment and the community regional segment. It looks like pretty balanced results. You cited some examples in both segments can you just remind us kind of where the industry is in those two segments is one further along in their digital transformation efforts.

Is there one that you would you would point to where maybe there they are less.

The adoption cycle is.

Perhaps behind it we could see an inflection point, just where where are we in terms of adoption in those two different segments.

It's interesting so.

Thank you really back sector, there's about 5000, Situtions retarget about two thousands of them and we've got 300 customers. So from that the load and you can imagine and be focused mainly on commercial loan origination. So all of retail and other account opening et cetera is open for US is writing new for us in that okay.

I would like to remind you that the commercial loan origination global Sam.

3.4 billion.

So as a company that we just scratching the surface yet.

Then if you go to the community or do the large banks. We mentioned, we've got 14 of the top 25, but again realize we're getting small pieces of the commercial bank as our lending opportunity and then we expand within it.

Again that if you look at 14 as adults 25 in the Americas, So North America, Canada and the use.

Although that sounds like a lot.

The the Sam is about 1.2 billion.

So there is a massive opportunity both in commercial originations as well as for the for the enterprise banks as well as the community banks I think.

We're just scratching the surface and then finally, let me explain to you retailer that'll, but it's important to understand that retail as three components.

Your account opening.

This onboarding aspects going to tell you I see anti money laundering et cetera.

And then finally this international mortgage.

Which are all relatively very new products.

And we are seeing significant interest in those three.

And then of course it another generation coming from the retail space and then we've got commercial on top and then small business with some banks falls into the retail space and some banks into commercial.

So I believe.

It's very early for this process and this market as FICO is very early for the cloud technologies to penetrate these banks, although we've been going crazy as it shows dislike yesterday.

That's great. Thanks, Pierre and the one more if I may just please on the comments you made David on the Triple pre forgiveness program.

Actually repurchasing those seats would that mean that this these could become recurring in nature.

Yes, Thats the plan I think the majority of those contracts were coterminous. So they lined up with the original contract length of the customers. We had a handful that were.

12, or 24 months and so the idea is to re purpose those seats upon expiration into other areas that bank. So we can continue to maintain those revenues.

That's great. Thanks, so much guys hey, thank you.

Thank you. Our next question comes the line Saket Kalia from Barclays Capital. Your question. Please.

Okay, Hey, guys. Thanks for taking my questions here, and congrats and becoming a public company.

Thanks, Greg how are you.

Yes, same here Hey, Peter maybe just to start with you.

Can you just talk about what you're hearing from from customers and he's been all the time with customers. What are you hearing from them outside of Triple P and forgiveness in terms of their willingness to invest particularly in that and that core commercial lending part of the market does it make sense.

Yes, I can tell you that.

We see an accelerated or urgency.

Around digital transformation that this to me a realization now that work from home is not a luxury anymore. It's just an imperative if you live in the city like London, New commuting an hour and a half for each way per day why would you wait 3000 to try and if you can do your job from home and as a business Ben you think I can get.

Productivity out of by people doing that now look in Wilmington to begin with 15 minutes that same logic doesn't apply but if you look New York City Chicago La any of these big cities I think these banks realized they were forced to go this direction I think when this is done.

Everybody is going to move towards much more flexible workforce that can work from anywhere on any device at any time okay.

Because the work life balance of just changed and number one because of that because of co with actually drove the agency.

We are seeing.

Great strategic conversations with the most senior people in the largest complex institutions of how to actually get there at a faster pace, so I'm very optimistic.

Got it got that makes sense, David maybe one for my follow up for you you touched on this a little bit in the prepared remarks, this manpack and a little bit.

Can you just talked about the seat activation schedule a bit in terms of how that can change if at all.

And how we should be thinking about that activation schedule, one when we model revenues going forward.

Yes, so we do have delayed seat activation schedule and.

We did not see any major change.

To those activation schedules in the quarter.

And our guidance assumes a similar level.

That we that we saw in the past for those photos. So there was activation schedules.

Except for Triple B.

Okay, obviously accelerated activations and it's a starting the revenue of second quarter.

Straights or create growth spurt because of that but overall on your normal business.

The activation schedule stayed steady as it was before to Popi uncoated.

Got it makes a lot of sense. Thanks, guys. Thanks, a lot second.

Thank you. Our next question comes from the line of Josh back from Keybanc. Your question. Please.

Okay. Thank you for for taking the question.

Maybe this is for you Pierre but you talked a bit about.

Digital transformation and I, certainly think the conversation has changed and you gave some great references from other.

Bank calls on how they're thinking about that so that seems to be something that would would build the pipeline.

Other hand, these are large enterprises and we have seen some.

Elements of disruption to sales cycles and implementation cycles. So I'm just wondering like when you balance those two factors together how are you thinking about building the pipeline in the and the outlook for new bookings as we go into the end of this year and the end of your fiscal year.

So thanks, a lot for joining the call yet.

So look it's really interesting in the community bank space. There clearly was a disruption because it's a small to staff people are more focused and when that to pivot towards.

That started pushing deals out and that was about a four five months I would say.

Redirection of activity and people, okay, and the moment that is coming to an end people are focusing back on long term strategic initiatives. Once you get to yield larger regional banks and your enterprise banks. They are big enough. They say that strategically on track and this is driven a higher urgency as I mentioned.

For these initiatives because it's not only a matter of efficiency anymore.

This compliance issues around this can you walk from I will effectively on the old systems.

Do you have the right entitlement engine someplace to make sure your people and actually the people signing into the systems et cetera. So all of that plays into this higher level of agency. These are big banks. It takes time, okay, but I can tell you that in this time our pipeline.

Has grown because of these banks understanding that needs to do this.

And they have to move forward and it's not merely.

I would say something that they would like to do is becoming a strategic imperative to run the bank in a different way.

Okay Thats, that's really helpful and David I think you gave us some not helpful really charts, describing the HCV net revenue retention in your S. One filing so anything you can share there certainly seems like you've had some nice.

Deals where you have had some some expansion. So just so is that still a good framework for us to use as we as we build out the kind of long term growth prospects for your business. Okay. Great. Thank you, yes, we ended the fiscal 2147%, which appear mentioned earlier.

If you if you think about the triple P. deals in the forgiveness deals that we closed in the first half of the year. Many of those most of those words were existing customers.

So, although we're not disclosing revenue retention on quarterly basis.

I would assume that maybe you could assume that those 147%.

Would have increased because of that and we are planning on updating that at the end of this fiscal year as well so chiptopia absolutely did.

Help that metric in the last two quarters.

Okay very helpful. Thank you Bill.

Thank you.

Thank you. Our next question comes from the line of Terry Tillman from CJS Securities. Your question. Please.

Yes, Hey, PR, Greg and David Congrats on the IPO for me as well.

Maybe the first questions here for you.

It's just related to sometimes an IPO king catalyze the business and just create more notoriety and recognition.

I know, it's early still since the IPO, but like what have you seen from just getting this increased recognition maybe particularly in international markets. What is being a public company help you or has it have you seen any benefit so far with.

That increased exposure and then a follow up.

Thanks, Terry it's quite interesting into one of the strategic reasons resort to do this was notoriety and to be taken series in more conservative International markets. I give you think about Germany, Italy, or Spain, where you don't want to be seen as a small startup out of the U.S.

And the notoriety around this has driven significant activity and receptivity from the banks three our teams and if you speak to our London team now and they will tell you that they get calls and meetings now they could never get before so we see the notoriety we see the brand recognition.

Our relationship with Salesforce Dot Com is always helpful.

But these events.

Hey, we built this platform with the Referenceable customers, you've got into US tremendous helpful and the IPO was just at the next step to push us forward.

Got it actually you just mentioned salesforce, they actually talked about acceleration in some large enterprises in terms of their digital transformation.

You all were able to exhibit the power of your platform in last few quarters with Triple PNM forgiveness is it's doing anything to kind of spur accelerating kind of conversations and maybe even kind of the monetization timeframe for things like retail lending or deposit account openings et cetera, just like what are you seeing so far in terms of maybe that picking up the peso.

Some of the sales cycles. Thank you.

Thanks, it's interesting to actually know diseases. So typical be forced banks to have a digital channel.

In a very short order to get up and running and you know for years, we had sales cycles trying to convince them. This is the right thing to do is going to help you et cetera, and now everybody is unbelievable.

So now it's about ready to deploy first what business line do you get et cetera. So it's not a matter of should be do it anymore is now matter of when do we do this and when is the IP budgets et cetera, and we can use the examples of how quickly we stood up the typical PD lone product and actually got of in production and process billions of dollars.

As proof points that these projects shouldn't take 12 18 24 months, we can do a mess faster at a much bigger impact and then do some of the integrations. After the fact and we are seeing those messaging is resonating with banks and the senior management.

Thanks.

Thank you. Our next question comes from the line of Brian Peterson from Raymond James Your question. Please.

Hi, everyone and thanks for taking the questions so and congrats on the strong results. So.

Sure I wanted to hit on the retail opportunity you got a nice third party endorsement this quarter as we think about that the progress that product offering what do we guide posts that you're using internally and what would you express to investors for how to assess that ramp as we look at that that product building up.

Yes, thanks for dialing in.

So as I mentioned earlier this three legs of this too for the retail offering okay.

Came out to shoot for mortgage international and signed six Canadian small very small institutions, but six was taken up at a very short order.

Which was number one on a promising body shaping the acute issues in that marketplace for good software.

On the retail lending side.

We're taking a careful approach because it is so.

Tens around those activity compliance and the documentation to do need.

But we are making great progress, we are seeing goods referenceable customers.

And I can tell you the complexity of building that solution is also the biggest moat around.

Around that that people kind of entry into that market.

The one when I see the biggest momentum right now is deposit account opening.

And so you look at that you look at my mortgage.

Once points about the Canadian market and in Europe, I am seeing good interest as well.

You look at the uptake on the lending side and the I'd say, the pork and I feel very good.

That whole offering is coming up actually outpaced from a gross perspective, the commercial loan origination as you look what percent is growth, although it's a smaller stop I really see the moment you started marrying the knick elements into the retail and you get to a touch this experience.

Customers can do everything on their phone there's no banker involved and you could have automated decisioning at the backend.

That's going to propel and accelerate this so yes, one of the dilemma is in the banking industry today.

If you look at the story of deposits.

And how banks are funding loans deposits are flowing to the four big banks in the us today.

And the remainder regional banks are struggling to get a deposit at the same right. We have many proof points of the Encino solution is much more effective treatments in gathering deposit accounts number one but number two they will have to beef up the retail lending efforts to get my deposits in the future theres otherwise if I can be a one stop shop.

I'll take my deposits through a big bankers willing to do my color by mortgage et cetera.

And we are beginning to bundle package that altogether and explain to banks have to get there and I am seeing good receptivity.

That's great to hear in maybe one other according to the follow up question on the pipeline I realize there's there's a lot of market presence of things that that's driving awareness of your solution whether that's for people that are the IPO I'm curious what youre seeing in the pipeline in terms of new customer opportunities in is only commonality in what's driving those new opportunities in it.

The pipeline. Thank you.

Thanks.

What I would say is we see still.

A very healthy commercial pipeline coming in whether it's expanding in existing.

Enterprise banks.

The median regional space as I mentioned earlier, we've got 300 out of 2000 institutions by the way we don't even have the whole commercial banker to 300 regard we've got pieces of this and maybe seven loan types et cetera. So there is tremendous cross sell as well as new logo opportunities into commercial side than on top of that.

In the committee regional space. The platform story is really powerful they would love to standardize all their operations middle and back office and customer into action on a single platform.

So what we're seeing as they buy into the full platform, but then deploy one line of business at a time.

Because it just take time and effort to do that okay.

And then the other leg of this too is absolutely international I mentioned to you earlier through the IPO that.

Hi measure every one of the solution sets of or strategic growth initiatives.

After the holidays for the company celebrated in Nashville, and after three years.

Outpacing where the company was in the first three years.

Then look at the retail solution set and its outpacing what treated with commercial in the first three years and if those two things keep on holding true that it actually is an exponential growth story, which is what we are doing here.

That's great color. Thank you.

Thank you. Our next question comes from the line of Brent Bracelin from Piper Sandler Your question. Please.

Thank you and good afternoon, I guess, one for Pierre and one for David Pierre.

International crossed over 10% of revenue for the first time I know, it's early days, but I was hoping if you could frame just the international opportunity what's changed post covanta being talked about a big UK bank.

Basically pulling you infer a triple p. equivalent in UK, but more broadly speaking what are you seeing there relative to opportunity and and hasn't materially changed in the last six months as you just think about it.

Engagement activity and is it largely because of that need around remote workers.

Yes.

So I would first is say when we entered Europe, we realized that the cloud was not as well adopted SWS theres a lag effect. There. So we had to start the vandalizing from scratch again to get people comfortable with the cloud.

The second main thing as you know I can fly from you have to Kentucky and go sell a piece of software.

Cannot do the same from England to Germany, I need a German speaker line in Germany infrastructure in some of these big Spanish for Spain.

Et cetera, so the initial start up in that market, although the market has begun.

To get bigger investment and allows the infrastructure and we have to put in we had to make sure. The languages are supported by the software all of the integrations. Since those are you upfront investment happens to be.

More complex than larger however.

What we are beginning to see is with Covance and just the events are realized.

Only can do we had a triple B program like the US was the UK I didn't see any of this in France or.

Quarterly.

Germany, Spain similar programs.

But there is I would say a heightened.

Awareness number one number two record banks like sometime there was using us in the UK and the us because obviously the next question is what about sprint. So we are penetrating these banks in the foreign subsidiaries.

And then cynical that to get into that May know countries.

So I am seeing over all this awareness the cloud adoption.

The awareness of Salesforce Encino, the brands and the trust affected around debt.

And then further to that I can tell you are in Australia, we see fantastic traction as you May know, we've got low quality bank there as an anchor solution we did.

We've got a bank in the Zealand going so everywhere, we planted the flag we've got a presence we've got a great success story and that'll just drive it forward, but there was more difficult upper end in the beginning.

Helpful color, there and then I guess, David for you just to be clear on this.

Subscription growth, leaving 70% just phenomenal growth this quarter I get that you got to benefit from it looks like what to go lives as well as the Triple P. forgiveness.

My question as it did you see any tailwinds this quarter from that UK Bank, that's rolling out the Triple play like program or is that a potential that could roll in in Q3.

Yes.

Thank you I appreciate the.

Yeah on the on the Triple Pete receivables in Europe, we did see benefit on the PS So side.

In the quarter and we will see we didn't see a full quarter benefit on the subscription side, so that will come in the following quarters.

Okay, Great and then just quickly house, keeping our PEO did did you kind of have give us slipped our Pos in the quarter.

And you will see the all the details in the 10-Q, which were filing tomorrow morning.

ARPU increased by about 20 million in quarter in the quarter with the majority of that increase coming from the less than 24 month bucket, which kind of reflects the triple b and forgiveness deals that we closed in the quarter.

Okay Super helpful.

Thank you aren't next question comes on line Cerro has fallen from Macquarie. Your question. Please.

Great. Thank you so much for taking my questions Pierre and David It's great to hear Yervoy says.

I'll definitely add my congrats on your debut corner on Pierre I know one initiative you have been focusing on and.

I know this will certainly the case pre IPO, we've been expanding both your technology partnership ecosystem and also your consulting partner ecosystem. So I'm wondering how will that has changed or what kind of development you're seeing there since the IPO and then I have a quick housekeeping follow up for date.

Yes, so as you can see the balance of revenue subscription to professional services. The professional services portion is continuing to decline historically for the company because we are focused on expanding globally with as I thought this.

In the US we've got a stable off I would say the top brands.

System integration working with us.

Which is very beneficial and we are proud on those partnerships. What we are seeing in Europe. They are cases, where banks wants to use bothers. We've never used before we after a very effective training and Onboarding program for these partnerships.

We get them up to speed, we substitute those.

Projects with a bit more encino resources to make sure they get the best product.

Knowledge and help for the brunt projects.

So I would see I do see an expansion typically driven by customers.

As we go to new geographies, we're always open minded.

Typically in your smaller bank markets.

We will have more smaller size doing it and then your global styled partnerships.

We'll play more into enterprise type banks.

Haven't seen much change it's more of a factor of the growth we are seeing driving more partnerships as opposed to the IPO.

Okay, great. Thank you and then David.

A quick follow up for you.

Well, let me get Okay got it versus what you expected for the year given the Upselling anyway is that kind of a fair classification.

Could you repeat that I think you broke up is right at the beginning of the question sure sure No problem I was wondering if colgate driven feet or seat expansion got bigger versus what you expected for the year given the signing you had in India.

Yeah, I would say covered did the triple b and even the samples.

That came as a surprise in the quarter.

And that was part of the reason for for for the upside.

We do expect to see.

We saw $3 million.

In the quarter, we expect to see a little bit uptake and that for the balance of the year as well around the triple Pn forgiveness related subscription revenues.

I see okay. All right that's equally normally when we signed a contract thats a fairly length you activation of seats and the Cboes entropy just had a very quick activations. Your literally signed the contract in two weeks I know you're up and running you take your revenue. Okay. So that is a slight distortion that you're going to see into Q2 in Q.

In Q3, which is modeled into the models and.

The guidance that that quick uptake is just.

Not normal for how we do business and that's still flex and you're seeing.

Absolutely great that makes a lot of cans I appreciate it. Thank you so much thanks, a lot like it.

Thank you and this does conclude the question and answer session I'd like to hand, the program back to PR for any further remarks.

Well thank you so much.

For dialing in today and tracking our progress.

We are excited about the future and we are focused on our customers and delivering what we promised so thank you very much for joining us today.

Thank you, ladies and gentlemen for your participation in todays conference. This does conclude the program you may now disconnect good day.