Q4 2020 nCino Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Encino fourth quarter of fiscal 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need the press star one on your telephone.
Be advised the today's conference.
It is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to Greg Ornstein, Chief Corporate development and legal officer. Please go ahead.
Thank you and good afternoon, and welcome to <unk> fiscal 2021 earnings call for the fourth quarter and year ended.
And Youre right 31st 2021.
With me on today's call are P or no day, <unk>, 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 and the anticipated performance of our business.
The <unk> looking statements are based on management's current views and expectations and are subject to various risks and uncertainties, including those related to the impact of COVID-19 on our business the financial services industry and global economic conditions.
Our actual results may differ materially please.
Please refer to the risk factors included in our filings.
The sports Securities and Exchange Commission, which are available on the company's website at <unk> Dot com under the Investor Relations section and on the SEC's website at SEC Gov.
Forward looking statements made during the call are being made as of today March 31, 2021 based on the facts available to us today and Encino 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 COVID-19, such matters that are beyond our control and our assumptions may not be correct.
On today's call. We will also discuss certain non-GAAP measures that we believe aid in the understanding of our financial results a.
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 SEC just before this call.
With that thank you for joining us and.
And I'll turn it over to Pierre.
Thanks, Greg and good afternoon, and thank you everyone for joining us to review, our fourth quarter and FY 2021 results.
I couldnt be more pleased with the end of the year. Despite the uncertainty in the market, we closed a record amount of business in the fourth quarter.
Through expansion deals with some of the largest banks in the U S by adding new logos for the out of commercial lending solution and cross selling of our retail and mixed solutions into our existing customer base.
One is in the fourth quarter also included the key deals outside the U S. For example, we closed a large.
<unk> expense and deal with our first enterprise customer in Continental Europe.
<unk> $500 billion bank in the Netherlands that we initially signed in the second quarter and also added a new logo in Continental Europe with one of the largest banks in the Baltics.
Even with the sales success in the fourth quarter.
We ended the year with one of the largest pipelines in the Companys history.
Equally important is the quality of the pipeline.
We are seeing interest in the Encino bank of operating system from financial institutions around the world.
In fact over 50% of the pipeline is comprised of non U.
U S financial institutions.
We also achieved a record number of go lives for our retail banking solutions.
Up 100% over the fourth quarter of last year.
Customers, who went live on retail included a $30 billion of U S bank the use of <unk>.
The $50 billion bank.
In the $12 billion Canadian credit Union.
First the retail banking customer in Canada.
We were also excited by the continued positive reception to the new products and our Nic analytics platform, including automated spreading and portfolio of analytics.
Automated.
Spreading in particular has been enthusiastic the received by our early adopter of commercial lending customers.
We saw strong interest and closed deals both in the U S and abroad.
I've already noted our early international success, many times in the fourth quarter, 14% of our revenues.
<unk> came from outside the U S. We.
We expect the international growth to continue this year and we are investing to support it more on that shortly.
Achievement this quarter and here included our strong financial performance subscription.
<unk> revenues in the fourth quarter grew 43% and.
Increased 57% for the year.
This helped drive our subscription revenue retention rate at year end to 155% up from 147% last year.
The results include approximately $13 5 million of <unk> and <unk>.
Subscription revenues day.
David will discuss how that revenue impact our 2022 outlook.
Finally, I am pleased to report that for the full year, we were free cash flow positive even as we continued investing in the business to capture the global market opportunity.
Yeah.
I could not be more proud of the incredible work and dedication of the entire Encino team who achieved these results. Despite the challenges throughout the year from Covid.
Funded almost overnight when the cares act and it's Triple PD Lone program in the U S and <unk> and <unk> in the UK crystallized the need for a.
Digital platform and small business lending.
Our solution enabled banks and credit unions to efficiently respond to their clients, helping to process of hundreds of thousands of loan applications.
The financial institutions around the globe have now seen the power of technology and digital lending.
There.
Is no going back to antiquated paper based processes or continuing to rely on legacy solutions.
Covid is only accelerating the move to the cloud for financial institutions around the world.
Our results in FY 2021 was driven by success in four key areas.
Commercially.
Actual lending.
Retail banking net.
Nick and international expansion.
I thought it would be valuable to discuss the progress on each of these areas as they are all core to our outlook for the years ahead.
So, let's start with commercial lending our flagship product.
Commercial is where we first built and deployed our solution to financial institutions globally. It represents approximately $3 3 billion of our $10 1 billion serviceable addressable market or Sam yes.
Yet while commercial lending was approximately 90% of our subscription revenues in Q.
Q4, we are still early in penetrating the opportunity.
Currently we are only addressing slightly more than 4% of the global market.
Our commercial lending growth was both of this year when we provided our triple P and Seabolt solutions to 98 customers representing bank of <unk>.
<unk> of all sizes.
Umpqua Bank one of the largest banks in the Pacific Northwest with 29 billion on assets noted in seniors ROE and a simple piece of business on their recent Q4 earnings call.
And I quote in Q1, we will be leveraging the <unk> platform.
To execute the new round of therapy that was just introduced and in fact, we started taking applications. Just this week, it's early but the our technology platform is already allowing us to meet <unk> demands with less human involvement compared to last year and quote.
Our.
Our solution can be so integral to banks efficiently managing the <unk> process that in the fourth quarter, we added a $15 $5 billion bank as a new customer and help them with a total offering even before they went live with our commercial product.
Professional services also.
Also helped drive the 47% growth in Q4 total revenues.
Professional services exceeded expectations as we again executed on successful remote deliveries with better than expected utilization and rate realization.
We have continued to make strategic investments within.
Professional services organization.
The expand our footprint globally.
Further, enabling our Si partners and enhance our managed services and change management practices to ensure successful adoption of our solutions across financial institutions of all sizes around.
In Europe, we are often asked our M&A effects of our client retention.
The short answer is that it can often be of very positive development. A great example is tourist the result of the merger between Suntrust and BB&T.
The $495 billion of asset bank now of the six largest.
Largest in the U S is characterized the encino has an.
Potent element of their combined operating system Kelly.
Kelly King Chairman and CEO of noted on their recent earnings call.
For example, in our commercial lending area, we've taken the very new and very best in class Suntrust Encino low net.
The <unk> program and the BB&T backend system in terms of commercial loans.
Another case is the merger of first horizon, and Iberiabank Iberia of $20 billion asset longtime encino customers merged with first horizon last year, creating of 18 billion.
As the bank.
First of all of Ryzen has since committed to utilizing Encino has bank operating system across the combined entity.
On its most recent earnings call first horizon CEO commented.
We're broadening and expanding our use of the Encino platform that's <unk>.
Going to <unk>.
Streamlined a lot of our commercial lending business into it.
First of all of Ryzen now one of the top for the U S Bank will be utilizing in Chinas commercial and small business lending and Treasury management sales and on boarding solutions across more than 2000 of the bank's associates.
Another important driver of our commercial growth is the strong success, we've had in the U S farm credit space.
In the fourth quarter, we added three from credit customers.
These new customers, we are working with about 60% of the institutions in this market.
Upon successful commercial implementations.
And these institutions.
We believe these customers will be great candidates to expand their use of encino and adopt our retail and Nick offerings.
Next let's discuss retail banking.
Building out our retail business was the key focus of this past year.
<unk> is globally. It represents six $8 billion of of our Sam.
I'm very pleased with the progress across the product line, including retail lending account opening and the international mortgage.
The fourth quarter go lives included some of the our largest and most complex installations to date the.
The billion dollar U.
<unk> Bank I mentioned earlier included 38 integrations of the bank of operating system.
Two disparate data sources as part of a large change management initiative.
This customer is a terrific example of the complexity.
And greater regulation in the retail market.
It has taken multiple years of R&D to create a retail solution that can meet these requirements.
As we continue investing to mature on increased the depth and breadth of our retail functionality, including further product updates in April we believe we are establishing a high barrier to entry.
For new competitors.
Our differentiated solutions is driving success in cross selling retail banking to customers of all sizes.
In the fourth quarter, a $17 billion asset bank already on <unk> commercial lending small business lending and customer engagement solutions expanding.
Expanded to include retail lending.
Now turning to Nick.
As discussed last quarter, we have now integrated Nick into the bank operating system. So we can drive intelligence across the platform we.
We are very pleased with the progress we are seeing selling portfolio analytics and automated spreading two.
Of the initial products on the net platform.
Automated spreading customers have reported a 50% to 75% reduction in the manual requirements of loan underwriting, which accelerates the time to loan approval, we already have five customers using automated spreading with three of them.
Outside the U S.
These customers who are already using our legacy spreading product. So they were up and running on the new automated trading solution in only a few short weeks.
The opportunity to cross sell to our existing commercial customers.
With time to revenues in weeks not months.
It's particularly exciting.
In the fourth quarter, six existing encino customers purchased portfolio analytics, including.
An $8 billion asset regional bank.
Within <unk> portfolio analytics solution, our customers receive performance and compliance driven <unk>.
<unk> that enable managers to better assess the risk from a single source of truth.
Let me spend a minute on the impact of the new platform on our Sam as Nic is not included in the $10 1 billion.
<unk> estimate and <unk> has a track record of increasing its Sam.
We started with commercial.
And for community banks in the U S ex.
Spanning the enterprise banks in the U S. Then expanded to include the global commercial opportunity and then added the global retail market to arrive at $10 1 billion.
We are now again growing the Sam by approximately $2 billion.
Based.
Upon the anticipated revenue lift from the first three products on the new platform.
<unk> spreading portfolio analytics, and commercial pricing, which we plan to add in April we.
We see this $2 billion is just the initial sizing of the Nic opportunity.
As pricing mature.
Sure.
Customers realize the value and benefit of the solutions. We expect this 2 billion to growth. In addition, as we introduce new products on the platform in the coming quarters on here's we expect to further expand the Nic Sam and the addressable market opportunity for <unk>.
No.
So now on to international.
All three of these business segments commercial retail and Nick are contributing to the growth of our international business.
As I've said before we believe Covid has had the greatest negative impact on our international growth as we couldnt get feet on the.
So our in country salespeople and build out our infrastructure as quickly as we would've liked however, we made solid progress in the fourth quarter hiring senior salespeople in both Germany and France. We were also pleased last quarter to expand our relationship with our first enterprise deal in Continental Europe.
The 500.
Billion dollar bank in the Netherlands, I mentioned earlier.
This customer initially selected <unk> in the second quarter for the compliance driven use case and has already increased at a depth of adoption of <unk> to include end to end commercial lending.
The success was supplemented in the quarter.
One of the largest banks in the Baltics selecting encino to utilize the commercial lending process.
On the go live of the Canadian Courage Union noted earlier further illustrates our international success as this customer went live on both retail and commercial lending.
With our land and expand model.
We are happy to gain a foothold with the new customer through either retail or commercial.
It's even more efficient when we can sell the old platform from the beginning.
Our presence in the Japanese market also took a big step forward in the fourth quarter, we named the general manager to run our Tokyo Office.
Total by Otsuka of Nomura and added to expense from our Wilmington of headquarters to embed the <unk> culture and product knowledge as we grow our footprint in Japan.
Shortly after the fiscal year, and we hosted our first ever Encino, somewhat Japan, which was a virtual half day event, featuring and senior executives.
The partners, such as sales force and financial industry leaders from across Japan.
Than 1100 people registered for this inaugural event and while we appreciate that it will take time to break into the Japanese market.
We are already seeing a positive impact in our pipeline.
Early interest.
In fiscal 2022, we also announced progress in building our presence in EMEA.
We named Jennifer Geary of seasoned European Finance executive as general manager EMEA tasked with driving our expansion across the continent.
<unk> step included the launch of our German subsidiary.
To focus on demand from financial institutions have recognized the need for a digital strategy in this $1 $1 billion market.
These are just some of the steps we've taken to investing in our international footprint and further leverage the increased visibility and brand awareness, we have enjoyed since our IPO.
Particularly overseas.
I have challenged the team this year to land reference of bulk customers in each of the new European markets. We have entered.
Let's talk for a minute about how we maintain the year end momentum leveraging one of the largest pipelines in our history.
The area will be to increase specialization in our sales efforts.
We enhanced the breadth and depth of products across the platform, we have begun hiring salespeople, who can add deep domain expertise.
Both of my bankers for bankers as been the motto since end of <unk> earliest days.
One of that includes bankers selling to bankers the <unk>.
<unk> Bank operating system brings business process optimization to the institution, while improving efficiency, the cost structure and compliance and who better to address those pain points and someone who looked at complexity before joining encino.
And we are confident that by expanding our sales teams with this additional level of expertise, we can accelerate both of the land and expand.
The cooperation required to successfully integrate another layer of sales ties directly to our culture.
I'm, particularly proud that we have maintained D&C no culture even.
Being in the office together.
This was especially evident during our recent companywide kickoff.
Which is typically out of every February in Wilmington, and where this year, our 1100 employees around the globe came together for a week of virtual learning.
Networking engagement and interaction.
I'm, telling you you could feel the positive energy.
And the enthusiasm through zoom.
Now, let me turn the call over to David to dive deeper into our financial results and discuss our outlook for fiscal 2022.
Thank you Pierre and thank.
You all for joining us to review, our fourth quarter and fiscal year 2021 earnings to Echo Pierre's comments I am very pleased to have ended the year with such a solid quarter.
Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated on non-GAAP financial information excludes the impact of stock based compensation.
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 8-K furnished with the SEC.
Total revenues for the fourth quarter of fiscal 2021 of $56 6 million.
Compared with $38 5 million in the fourth quarter of fiscal 2020, an increase of 47% year over year.
Full fiscal year revenues were $204 3 million compared to $138 2 million in fiscal 2020 of 48% year over year.
Subscription revenues for this.
Quarter were $45 million, an increase of 43% year over year, representing 79% of total revenues in the fourth quarter.
Full fiscal year of subscription revenues were $162 4 million, an increase of 57% year over year, representing 80% of total revenues.
In the quarter Triple P contributed $4 5 million to subscription revenues for the full year Triple piece subscription revenues were approximately $13 5 million the.
Team is hard at work, helping customers redeploy the triple of seats to other areas of their institution, which can help mitigate the.
The risk of Triple Pete churn.
And we are pleased with the success to date.
Even with the attrition factored into our guidance, we expect this $13 $5 million to grow in fiscal 'twenty two.
As we benefit from a full year of triple fee revenues.
However, as the seats of redeployed they will move into commercial or.
Or another buck of making them difficult to track as such we do not plan on further calling out the triple <unk> revenues in fiscal 'twenty two.
Subscription revenue retention rate for fiscal 'twenty, one was 155% increasing from 147% for fiscal 2020.
The <unk> implies approximately $160 million of our recurring revenues were derived from customers, who initially contracted for our solutions prior to fiscal 2021.
We are very pleased with our success in expanding business with our installed base, which in many cases included triple pay revenues.
While we continue.
We expect the retention rate to moderate over time, maintaining and growing the footprint within our customer base is key to our success and is reflected in the high retention metrics and customer satisfaction, we have historically enjoyed.
Professional services revenues were $11 6 million in the quarter, a 65% increase.
Two ex or $7 1 million in the fourth quarter of last year.
Professional services revenues benefited from better than expected utilization and rates in the quarter and an easier compare versus the prior year quarter, which was negatively impacted by the implementation of ASC 606.
Full fiscal year 2020 on professional.
<unk> services revenues were $41 9 million compared to $34 9 million in fiscal 2020, an increase of 20% year over year as.
As we have discussed we expect professional services to become a diminishing portion of total revenues as we continue to leverage our Si partners, particularly as we expand internationally.
Revenues outside the U S were $7 8 million or 14% of total revenues from the fourth quarter.
Up from $3 3 million or 9% of total revenues in the fourth quarter of fiscal 2020.
For the full year, 11% of revenues came from outside the U S. An increase from 8% last year.
We ended fiscal.
Fiscal 2021 with over 1260 customers up from over 1180 at the end of fiscal 2020.
Of these customers 224 contributed greater than $100000 to fiscal 2021 subscription revenues an increase from 161 in fiscal 2020.
Of these 224 customers 36 contributed more than $1 million to fiscal 2021 subscription revenues compared to 21 at the end of the prior year.
Non-GAAP gross profit for the fourth quarter of fiscal 2021 was $33 8 million compared to $20 9 million in the fourth quarter of fiscal.
'twenty, an increase of 62% year over year.
Non-GAAP gross margin was 60% compared to 54% in the fourth quarter of fiscal 2020.
Our gross margins continue to improve largely from subscription product mix with new logos weighted more towards enterprise and internet.
The national customers as well as subscription becoming a larger contributor to total revenues.
Total non-GAAP operating costs for the fourth quarter of fiscal 2021 were $41 3 million or <unk>, 73% of total revenues compared to $29 million or <unk>, 75% of total revenues in the fourth quarter of fiscal.
2020.
While we did see some cost savings due to COVID-19.
Especially around reduced travel and in person events, we continued investing to grow our international footprint and expand the breadth and depth of our products as well as absorb additional costs related to being a public company.
Sales and marketing expenses.
For the fourth quarter of fiscal 2021 were $15 9 million or 28% of total revenues compared to $12 6 million or 33% in the fourth quarter of fiscal 2020.
Research and development expenses for the fourth quarter were $15 9 million or 28% of total revenues.
Compared to $9 8 million or 25% for the fourth quarter of fiscal 2020.
As noted we continue to invest in building out the Encino Bank operating system <unk>.
Including Nic and our retail products as well as localizing products to support our international expansion.
General and administrative expenses.
From $9 5 million.
Or 17% of total revenues compared to $6 5 million or 17% in the fourth quarter of fiscal 2020.
We continued investing in our G&A function to help support our rapid growth along with our increased public company related costs.
Non-GAAP operating.
<unk> reported the fourth quarter of fiscal 2021 was $7 5 million compared with non-GAAP operating loss of $8 1 million in the fourth quarter of fiscal 2020.
Our non-GAAP operating margin for the fourth quarter improved to negative 13% compared with negative 21% in the fourth quarter of fiscal 2020.
Non-GAAP net loss attributable to Encino for the fourth quarter of fiscal 2021 was $5 7 million or <unk> <unk> per share compared to non-GAAP net loss attributable to encino of $7 7 million or <unk> 10 per share in the fourth quarter of fiscal 2020.
For fiscal.
Last 121, the non-GAAP operating loss was $14 2 million compared with the non-GAAP operating loss.
Up $27 million.
In fiscal year 2020 are.
Our non-GAAP operating margin for fiscal year 2021 improved of negative 7%.
Compared to negative 15% and filled.
Fiscal 2020.
Non-GAAP net loss attributable to Encino for fiscal year, 2021 was $12 1 million of <unk> 14 per share compared to non-GAAP net loss attributable to <unk> of $20 1 million or <unk> 26 per share in fiscal 2020.
Turning to cash.
We ended.
Year to one of the cash and cash equivalents of 371 4 million net.
Net cash used in operating activities was $11 9 million compared to $11 2 million in the fourth quarter of fiscal 2020.
Capital expenditures were $6 million in the quarter, resulting in negative free cash flow of $12 5 million for the fourth quarter.
Ended the court fiscal 'twenty one.
As a reminder, Q4 is our strongest billing quarter, which usually results in improving cash collections in the first and second quarters.
For the full year, we reported positive free cash flow of $4 9 million.
While we are of very pleased to achieved positive cash flow, we do plan to.
You're investing for growth in fiscal 2020 to especially.
Especially to build out our international footprint and fund R&D in the light of the opportunity we see from the Encino Bank operating system.
Our investment goal is responsible balance growth.
We've now demonstrated our ability to successfully generate cash but it is not a.
The continuing priority and we do expect to burn cash in fiscal 2022.
Our remaining performance obligation of our RPI increased to $600 9 million as of January 31, 2021.
Up 39% over $431 5 million as of January 31, 2020 with.
Short term 60.
$5 million in less than 24 months category of 42% from $253 million as of January 31, 2020.
Now turning to guidance, we are providing revenue guidance for both the subscription and professional services lines, reflecting the increasing impact of subscription revenues.
Three of <unk> results as I noted earlier.
For the first quarter, we expect total revenues of $59 million to $60 million.
With subscription revenues of $48 5 million to $49 5 million.
And professional services of $9 5 million to $10 5 million.
Non-GAAP operating loss is expected.
On oxo belief $4 million to $5 million.
Non-GAAP net loss attributable to <unk> per share to be four to five.
This is based on a weighted average of approximately 94 million basic shares outstanding.
For the full fiscal year 2022, we expect total revenues of two.
<unk> 3 million to $255 million.
With subscription revenues of $209 million to $211 million and professional services revenues of $42 million to $44 million.
We expect non-GAAP operating loss for fiscal 2020 to be 23 million to $25 million and non-GAAP.
Net loss attributable to <unk> per share to be 24 to 26.
Based on a weighted average of approximately 95 million basic shares outstanding.
Non-GAAP operating loss and net loss attributable to <unk> per share guidance excludes the impact of costs related to the matters disclosed in our form 8-K.
<unk> filed with the SEC on February 24, 2021 and.
In addition, excluding stock based compensation and the amortization of intangible assets as in prior periods.
In summary, the strong fourth quarter performance, including our success in building such a high quality pipeline sets us up for a very exciting fiscal 'twenty.
The two which at the high end of our full year guidance includes 30% subscription revenue growth.
Our results would not be possible without the hard work of the Encino team around the world I truly appreciate all of your efforts as well as your continued passion and enthusiasm for the opportunities ahead now.
Now I'll turn the call back.
For his closing remarks, and then we'll take your questions.
Thank you David.
The fourth quarter wasn't awesome and two of milestone year for Encino.
The record amount of business closed in Q4, and the strong pipeline already have us off to a fast start.
On what we expect to be another.
The <unk>, we ended fiscal 2021 with 24 of the top 50 U S banks as customers.
With lots of existing runway inside each of those banks to expand within and across business lines.
The international opportunities, even more significant as we have earlier in the journey.
Globally, we believe we have only captured approximately 1% to 2% of the opportunity.
I couldnt be more excited about the year ahead.
We have the right product the.
The Encino Bank operating system is the unique end to end platform with the roadmap in place to continuously increase its functionality.
Including expanding the Nic products hit providing actionable insights and data to the bank operating system use us.
We have a solid reputation with our customers.
This is truly one of our most valuable assets and something we work hard every day to us.
And perhaps most importantly.
And she knew as an outstanding team around the globe ready to take this past year's progress and tenant into this year of success.
As always we value of the confidence and support of our stockholders and we look forward to sharing our progress with you as the year continues.
We are now happy to take your questions.
Thank you as a reminder to ask the question you will need the press star one on your telephone Jay question touched upon key please standby will be compared of the Q&A roster.
The first question comes from Terry Tillman with two of Securities.
And is now open.
Yes, Thanks for taking my questions, Hey, Pierre David and Greg I Hope, you're doing well and congrats on the bookings and also the cash flow.
Maybe the first question on Paris for you in terms of its nice to hear about the retail traction.
What I'm curious about is could we get like an update on how many customers have some sort of.
Your line part of the retail banking platform and how youre feeling about what kind of signals you are getting from each of the global banks for the enterprise banks.
As we look into FY 'twenty two in terms of their willingness to move to this and then I had a follow up for David.
Yes.
Great to talk to you on thanks for being on today.
What we are seeing is that across.
Put the market interest in our retail operating and they'd be remind you remember retail is a mortgage on the the national front. It is account opening in the U S.
Canada and its retail lending across the spectrum, okay, and so what we're seeing is it's a nice healthy pipeline.
On the go lives.
We announced was actually a great testimonial to the fact of the software can scale you saw the size of the banks. Okay. Initially we told you we're going to have lots of smaller banks doing this and for US to go live with that size banks shows that we not only can scale from a volume perspective, but also the breadth of offering.
So we're seeing a nice pipeline we're.
We're seeing great interest in our international mortgage product.
Across the spectrum from Canada, and the U K, so I feel good about debt.
And from a customer at the number.
Of course.
Of the element because we've got a lot of number of deposit account opening accounts and retail lending in place already as I mentioned last time.
We signed in very quick order of six Canadian mortgage customers and now we have to make that product settle and make sure. We can go successful life, because thats, where the proof of the pudding is but I see an increasingly interest in retail as well as the fact that retail is growing faster than.
On commercial which is important to us all of our growth initiatives has to grow faster than commercial and we're seeing that.
That's great and I guess, David just my second and last question and there are always usually multi part of that's just the way on a role but I'm curious on the international side I mean, thats the journey with your customers. So theres the landing and then you expand over time, but one of the landing like.
So far with the international business from what you've seen and is there any kind of different implications on the activation scheduled for seats on the international deals versus the U S or North America deal. Thank you and congrats.
Thank you good to see you talk to your Teri on the international front, it's similar to what we see in the U S. Obviously.
Internationally, we need to land in each country and build reference accounts.
And Thats what were doing right now so very similar we land wherever we can to help of customers. If you look at the deal we did on the continent, we landed a very small deal portion of the deal.
In the third quarter second quarter I believe it was and then we followed up and did a follow on.
On the closing of a deal on the fourth quarter, so very quickly to upsell them. So that's the that's the idea of where just land prove ourselves. We're good at what we do we can make customer successful and then we follow on and then sell them more and it turns of activation schedule. It's very similar to what you see in the U S. So no real change there from when we talked about in the past.
Thank you. Our next question comes from Ben baseline with Piper Sandler Your line is now open.
Thank you and I apologize just a question was asked I got kicked off earlier, but I wanted to start with you on the retail side.
Surprised to see just the early success.
Cross sell success.
On retail this quarter, if you look at the the.
The 300 bank of the west customers that you have today.
Help us understand how many of those customers do you think could use both the retail and the commercial low last year over the next five to eight years is.
Is this the opportunity where if you have good continued good success here you can get half of those customers are all of those customers up for grabs help us kind of frame the.
The five year plus opportunity around retail given some of them on that momentum you saw on Q4 here. Thanks, yes. Thanks, that's a great question.
You know as I look at that market. Firstly. These go lives, we just mentioned with you.
One of those big banks actually we landed with retail so they had the commercial beforehand. So thats whats the night.
For us okay.
A while back and that's why they could go of lifestyle apart from that if you look at from a planning.
<unk>.
I exclude the top 10 top 20 banks.
The day and pursuing the poor retail I believe from should become more.
In the U S for retail lending in the account opening.
Should become more.
Mature with that product, but there is such a big market. If you take the top 20 out.
And most of our customers that 300, plus you mentioned is below the top 20, okay from a customer count perspective, so im fine there what.
What I'm seeing with international mortgage, which part of the retail profile.
Actually we are seeing interest with our largest customers. So there is no reason that all of that.
The national customers cannot have an interest in the mortgage product and <unk>.
Actually use us for that I see the same with unsecured lending.
In Europe, and Canada, where there's a willingness to look at the solution like casino to actually look at that.
It's a very different mix of consumer business.
Is this in Europe, we're seeing.
So I'm optimistic that we can win some business there. So as you look down at the Big picture to come back to your question I think a large number of our logos will actually embraced the platform. We're seeing that all the time you will see my net potential range of 155% debt. The only way you get debt is by cross selling okay.
Okay.
So I'm optimistic and the movement in the interest received on retail is that true.
As a group of people tell me well retail is kind of settled the buildout. While here. We are we are taking some fairly large banks life. So I think the cloud time has come for retailers as well.
Great Super encouraging.
Then just as a quick follow up David on our P O.
Wanted to make sure I get that number right I know last quarter I think it was $453 million did you say it was $500 million or $600 million. This quarter I just want to make sure I get that right. Yes. This quarter. The total was 609 million.
And then the less than 24 months bucket was $365 million.
Got it and so that's just.
Just a monster kind of new new bookings quarter of $148 million sequential increase.
Walk me through what drove such a monster.
Oster kind of quarter here on the on the backlog build side.
Are these some customers that might not necessarily go live this year, but next year. When you have some new renewals that debt looks just like a monster quarter, there and just trying to understand what drove <unk> up so much sequentially here in just one quarter. Thanks.
Yeah no. Thank you.
The fourth quarter was very strong.
We saw deals balance deals across the enterprise.
The regional come in and it was just the record quarter from a business closing perspective.
There is really I don't think the average contract length of changed.
<unk>.
And the seed activation schedule is just as we talked about as we were going public.
With the.
With the team so no change of that those revenues will flow over the next up to 24 months as they activate we're very pleased with the activity that we saw in the fourth quarter.
I do think there was pent up demand because.
Was the first six months of the year of banks were preoccupied with Triple P. So that pent up demand came through in the fourth quarter, but on top of that as.
As we mentioned we ended the year with one of the largest pipeline of these three of the company. So not only could return of that business and to contract or the prospects we.
We still.
Sitting on a big pipeline of bodes well for this year.
Great well certainly sounds like that was an amazing quarter here.
Good to see the momentum and the success you're having.
Okay.
Thank you. Our next question comes from Josh Beck with Keybanc. Your line is now open.
Yeah.
Thanks for taking the question I just wanted to follow up on on some of those cars.
Comments.
Here that you have made so when you think about maybe some of this pent up demand coming through.
Obviously, the world and the environment has changed a lot in the last year. So do you.
You feel like with your bank conversations now that may be there.
<unk> worked through the <unk>.
Triple P and the forgiveness and there may be starting to look at modernizing commercial of retail more seriously just just curious how those conversations have.
Maybe.
Tenured throughout the last year and.
And how you describe the current state of the environment.
Yes, I was wondering if youre seeing the first six months the market clearly was distracted by total fee and this is the activity and the people working from home. It was just the <unk>.
The minded we all have the good used to in the.
The second half, we started seeing the acceleration vector of strategic initiatives.
I've spoken to a number of Ceos over the past few weeks is very interesting in banking.
There is the new administration. So you clearly can sense that they get ready for more regulation and then see newest tremendously helpful. There number one they look at competitive pressures in the market. They fully understand that you get the googles.
Some of the AWS.
Amazon's I mean.
Looking at financial services, as an opportunity and so they have to wonder do we partner.
The Recompete and how do we address that and the way. If you step back then if youre on a banker you look at your infrastructure on your API infrastructure and how do you how do you engage with these players.
If you on a partner with them and Thats, what I can see no country. We can optimize we can drive of Fintech experience, but then we provide the API into those third parties to actually do what's called embedded banking, okay, and that's the theme that youre going to hear more over the next year as banks look strategically at the it infrastructure. So we truly believe we can help.
All of them to prepare for the future to not only survive but to thrive by.
By looking at the modern infrastructures for the bank.
Really helpful. And then maybe a follow up for you David I think you had mentioned net revenue retention actually improved to $1 50.
So if we were to back out maybe the P. P P contribution from existing customers.
That may be.
Better.
Year over year change to think about the moderation that we should see in the and this metric over time, just curious on how we should maybe tried.
Right.
Triangulate some of those data points.
So if you take out tripled its impact for fiscal 'twenty, one our net revenue retention number came in at 143% for the year and that's versus the 147, we ended fiscal 'twenty yet.
Okay really helpful. Thank you.
Thank you.
Thank you. Our next question comes from the <unk> Tandon with Needham <unk> Company. Your line is now open.
Thank you good evening on congrats on Purion, David on the strong set of numbers.
I wanted to first start with the the FY partnership I think David you mentioned that that's helping us scale international.
The could you just talk about.
Who are you working with how does that work in terms of partnering with these on the larger bank side I imagine, that's where you're really leveraging partnerships.
And maybe we can start with that and then I have a few follow ups yeah that sounds good. Thank you, yes on on the ESI side.
A lot more activity we.
At the time of IPO, we cited a number of <unk> hundred <unk> Si partners trained on Encino and that grew to 2000 at year end. So we're really seeing good traction with them.
As you see our professional services growth is lower because of that we're engaging more partners to deploy work and especially internationally, we don't want to build a massive.
Of services team as we've said in the past. This is exactly what we said we're going to do and we're just following through with that so we're very pleased with the activity, we're seeing especially on the new countries that we're entering into.
And we're getting them up to speed and running and then.
Over time, we expect them to be able to help us win additional deals in the future.
Got it and then if.
If you look at the names Deloitte Pwc Accenture rates the same names as global companies, it's companies, who knows as well it was helping us to get into these markets.
Great. Thanks, and then I just wanted to follow up maybe Peter in terms of international could you talk about what the specific markets that you're targeting and.
And then should we think about more organic or M&A and then types of that is how much of the local expertise required to really win internationally. Thank you, yes, yeah. So so we've fortunately I of experience of previous international businesses. So we established a product team in London to help us with the integrations and localization we have product managers.
Managers as well as strategic thinkers.
And so we literally.
Look at every market segment, because you've got the Europe, the European or EMEA of wide regulatory framework and then each countries still have their own little dynamics and changes that you have to make.
And that's why we take in with commercial.
The first because there's less regulated it's a broad platform.
Can do tremendous business there.
But we are looking at your typical of Western Europe Nordics.
The Germany, France, Spain, Italy, U K Ireland.
I haven't filed being the strongest for US right now that's really landed the first we.
We know of people in Germany, France.
Spain.
Et cetera in the Nordics.
So that's beginning to Yelp as you know from zero to one is always the toughest once you get that reference account the rest of will come like dominos.
And then we've got a nice team in Australia, we've got the joint venture in Japan.
Our sales force has got a strong foothold and we feel that their brand recognition will help us and we see that as we mentioned.
We have the conference Adam is virtual 1100 people attending which is tremendous so I feel optimistic although that market is a tough one to crack.
That's very helpful. Thank you so much.
Thank you. Our next question comes from the second caveat with Barclays. Your line is now open.
Okay, Great Hey, guys. Thanks for taking my questions here.
Hey, Pierre maybe maybe just to start review.
A lot of great traction in the international and it feels like it's just the beginning.
So maybe just.
To think about this top down.
Can you just maybe talk about the competitive backdrop in some of your larger international markets and how that sort of compares and contrasts to the U S.
Yes, it's interesting we see different players international I would say is more.
The interest that we see entrenched in these banks where the.
Have done kind of a pickup of framework on both.
To compete with us.
We see a little bit.
If I ask the quiet of company a long time back.
The that we see there in the commercial on origination where they try and the underwriting.
More of us okay.
But but not that activates the same pattern this year with the legacy players.
On in each country and Theres, some homegrown system suites of patchwork and then once you get into the bank of your realized but the 10 15 systems of the same job that we do with one platform okay and.
And then it's a question of getting.
Space over the hump with the cloud and it's a new company, where the IPO was tremendous helping us with the brand recognition and so on.
We've cracked the UK and Ireland, where volume trends were well known every bank you walk into we'll know about us.
You get into Germany.
It's a bit.
Getting the comment we are obviously, we've got people on the ground now and sort of you tackle every country like that then there's 500 plus banks in Germany. Then you go to Spain on this four five gigawatts. So you just have to get to know them.
People in.
Feet on the ground that is helpful.
Got it got it.
Yes.
For my follow up for you.
Understanding we're not going to be talking about triple P of sort of the cohort in fiscal 'twenty. Two I think you said, it's about $13 5 million in revenue here in fiscal 'twenty. One can you just kind of give us a sense for what kind of assumption is embedded in 'twenty.
To me, it's going be of full year impact but.
Any assumptions around churn or maybe even cross sell that we should sort of be thinking about.
As we kind of think about the blending in with the rest of the total GAAP know that sow.
That's great nice to talk to the second so we ended the fourth quarter with $4 5 million of Triple fee revenues.
On the run rate.
David out into the new fiscal in fiscal 'twenty, two now as we exit out of the year, we'll start seeing some of those seats being redeployed elsewhere.
Elsewhere within the bank.
That $4. Five also includes any level of churn that we assumed for the year.
So it's.
It's not it doesn't and it's not a cliff.
Looking at the Triple pay revenues continue into next year and gives us the opportunity to spend those seats elsewhere and place it in the bank to use them in some of the other segments.
You've already seen customers of re contracting some of those seats of redeployed them.
It's a great opportunity for them to actually drive efficiency in the broader small business lending market.
Or use it for commercial.
So we'd actually pleasantly surprised by how that is growing.
Makes sense thanks, guys.
Thank you.
Thank you. Our next question comes from Brad Sills with Bank of America. Your line is now open.
Great Hey, guys. Thanks for taking my question and congrats on a nice the nice bookings quarter of the backlog of with real nice.
Wanted to ask one of the comments you made PR was that stood out as 50% of the pipeline is international now.
The UK and Ireland is where you've been strong in the past you mentioned, Germany, France R. R.
Areas, Japan, where you're investing.
Should we should we take that to mean that those countries are contributing more to the pipeline at this point.
Are they coming in you know how how challenging is it to build the feet on the Street you mentioned that you know you're there.
Behind on hiring there, but that pipelines suggest that perhaps.
Our.
You're efficient there with the feet on the street that you have so just any comments if you could follow up on on the hiring effort how difficult. It is to kind of address these new countries.
And that makeup of 50% how much of that is in these new countries.
So so we've been very fortunate we've now got.
Haps the ground okay. In these countries and it makes a difference because when the German living in sort of got calling on Germans or number.
It's different than me, calling from London. Okay. So it was really the beginning to see the impact of that and that's in the pipeline and the dwell on qualified deals I've been personally on calls with.
Some.
On the German customers.
So that the plus the IPO it was been tremendously helpful.
<unk>.
I've challenged the team to look at the reference account in each of these markets as we go forward into this year.
And my team typically of those funds pretty well through these kind of challenges with just the competitive bunch.
Some of the what I'm seeing is.
The pipeline growing won't qualify deals and we're overcoming the clouds the resistance and people on getting to believe.
Our goal is to see if we can get the reference accounts on each of these markets.
That's great and with the strong our appeal backlog.
So could you help us unpack.
The the land versus expand you know how much of that growth is coming from land versus expand.
Were you surprised to the upside on either it sounds like both of our strong but.
Just any color on that and any any color you can make on just the initial lands are you finding.
<unk> tumors committing larger initial deal sizes.
Given the efforts you guys have made in broadening the footprint within IQ and in retail.
Comment on on that would be great. Thank you so much.
Yes, what I would say is fourth quarter characterized the return to the normal business bathroom, which means the contract and activation scheduled.
The cost is coming back to normal total P. As we all know was the distortion in the first half of.
If why 'twenty one.
And so what we're seeing the hours, it's normal contracts as I mentioned earlier, the big banks could focus on strategic initiatives and that's why we signed a larger number of those.
So if you take those two.
Scheduled and now the smaller banks are coming back I'm seeing it after the the year end.
But as you take those factors those contracts were larger.
The thinking strategic and net added through the <unk> anything to add there.
No. That's as you said end of things are returning.
Two favorable.
Our plan is to our goal is to get into a customer and help them in any way. We can because we know we can upsell them once we get it so those trends continue.
We did see a good level of activity from new customers in the fourth quarter as well.
That's great. Thanks, David Thanks, Pierre Thanks.
Thank you our next.
Back to non comes from Fred <unk> with Macquarie. Your line is now open.
Hey, Thank you I think I'd like to touch on something that you've discussed in part of already but I'd like to ask them on how to think about your post the pandemic pipeline. So the.
Between the recent ETP demand of rather beyond that.
Roughly bucket the reasons the banks all of.
The platform between the improving business resiliency bettering customer experience gaining efficiencies of software or generally any other categories you'd highlight is driving most of that.
I would say the biggest thing is probably the digital transformation.
There is now a heightened urgency for banks to understand the.
The current mode of operation will not make them competitive in the future debt.
They truly have realized that strategically you cannot go on like today and so many of these banks look at the different business segments and they look at the competition out there. They look at the renewal efforts of software the infrastructure.
And they say what is coming down.
And it varies.
And then you look at these massive fintech players.
All of the Amazons of the world and et cetera, coming to the market, okay, and they realize that the customer expectation because of Covid of just change the way, they're going to interact is different and so what we've convinced them.
On the point is look if you want to participate in the future banking environment connecting to third parties driving efficiency be much more customer friendly et cetera, and therefore more fintech experience for your customer.
All of that combined is driving an urgency in the banking community to understand.
And if you want to survive you're going to operate different on that.
That's what I'm seeing in every conversation I talked to and we even we talk about to Ceos of banks about this whole concept of embedded banking, which by the way he thought that strength. If you buy a car to the you really go to the bank to get the luxury by the kind of you go to the current leadership.
And.
And because your low end right there that's embedded banking that happens in mortgages.
Our ecosystem of mortgage brokers out there okay.
These companies, we bother with it will that will do that in the construction environment now.
Like both so theres a number of these players thats out there thats connected to us in the us creating an ecosystem.
System, where the banking services gets pushed out their interest.
Third parties and the bankers understand that's how consumers consume financial services and the after get the infrastructure in place to do that.
Thank you and then if I can get one follow up question here as well.
You've already called out of very strong new business quarter.
And it also looks like you had a very strong collections quarter as well between positive free cash flow and also deferred revenue growing about 51% year over year. It looks like we'd like to ask what is driving the and how do you see this growth reflected in the underlying dynamics of the business.
Yeah. So.
As we've talked about in the past are strongest.
Clean quarters.
The Q4 and Q1, so our cash flows will trail in the third and fourth quarters.
And really we had a very strong cash flow year because of Triple P. We had cost savings in travel.
In conferences.
Very pleased with the cash flows of for the year.
We will continue to spend next year.
As mentioned in the in the prepared remarks, we plan on burning some cash in the coming year around those investments.
I appreciate the thank you.
Thank you.
Thank you. Our next question comes from Brian Peterson with Raymond.
Bill Your line is now open.
Hi, gentlemen, thanks for taking the question and congrats on the on the really strong <unk> number in the fourth quarter results of the year. So so two questions from me.
So the first peer.
I know you don't manage to the Sam per Se on I know, we can segment it by geo or products, but I am curious the $2 billion incremental.
Sam that's a pretty big number so as we're thinking about the cadence of new products that youre, adding to the platform.
How should we think about that is that organic is that through M&A.
What do you think the Sam could be five to 10 years from now yes.
Yes, so low to me the Holy Grail of this whole thing was to bolt on.
<unk> on the infrastructure of something that is client centric and fits together.
And.
I've got many competitors, who is actually of Frankenstein of board of bunch of companies and put them on a bucket of until you can buy all of this from me. Okay. So we were very focused forever on even now.
Taking that approach that's why.
We're building all these different product lines from retail account opening and commercial et cetera on small business.
And as I mentioned before.
We always look at the market, we look at the great companies that we feel we can plug in specifically in the <unk> arena.
And some we vote. So if you look at portfolio analytics, that's the company we acquire.
Argued that the great domain expertise at the place where the global market.
And then we built the automated spreading from them.
Then the second one of them because the whole analytics platform, which is rebuild of the company in Salt Lake City, We bought one and now we're taking the platform and we're building it out and we've got portfolio analytics going on there.
And then we decided based on those two pieces of infrastructure.
We can actually build our own commercial pricing platform.
Okay.
Take those three.
Looked at what the upsell capability in <unk> and what the market will price it and that's how we got if you look at the total global market and you apply that upsell.
Upsell, we realize now we feel pretty good about a $2 billion and so then as we mature those products and we decide to either acquire a product of putting them or to build it organically.
And that will actually add to the Sam.
So if you ask me.
There's a tremendous opportunity.
<unk> to expand the Sam, but what I've learned in my life on software business.
I don't want to be too soon and too wide I would rather be a market leader in all of my segments I addressed because business just becomes easier youre weighted that way if you become the safe choice you become the place that people just buy from because it works.
Well known I've got people moving it on between banks and they say and she is a great company to work with so.
So I'm not sure the Hell bent on continuing to grow that Sam in the short term because I want to capture more of the Sam.
And then as we get to a point, where we believe there is an opportunity we can expand it again.
Right understood Okay great.
So David I, just wanted to clarify the there were some mentioned on the call of adding some more specialized sales reps of I'm curious how should we think about the impact of that is that is that more on upsell of we'd see that more purchasing more on the platform or we'd see that in in bigger lands on I don't know the size of that investment, but just curious how we should be thinking about the.
Thanks, guys.
So we're adding specialized people to help us on retail on Nick in the Americas.
And really.
Because of the retail is such a big product and it is different than commercial.
We need specialists to go out and help talk to our customers how they took on retail.
In fact, the on the same thing with Nick and specialized analytics.
Reading in commercial pricing. So we have to be able to go on and talk to customers and be the expert to help them make the decision on on whether the bias or not.
Hey.
It's a good size of investment in it.
It just adds to the sales team and helps the sales team, but most of that specialization.
<unk> is in the U S.
<unk> talked many times about this.
The point solutions or specialized companies. So you have to realize that's the only thing they do and the focus on on one thing.
My my head of sales of the frontline My account manager of now is to go in and talk about the whole platform with the suite of products and you can expect.
Expect the person to be of specialist on commercial small business retail lending account opening hum the trip et cetera. All of these regulations. So what you do is you have a layer of sales approach. There's an account manager at the front of the only account relationship and actually understand the full extent of the account and then we've got the layer behind them, which is sort of support people.
People when they are on the specific opportunity we bring the experts to the table and explain why we believe not only we have the best product, but we have the best platform because it's client centric and you can go across the enterprise with that solution.
Great color thanks, guys.
Thank you we have time for one of my question and that question comes from Joe The link with Baird. Your line is now open.
Oh, great. Thanks for answering the demand hi, everyone.
Yes, maybe pressing my luck with the question, but I was hoping that maybe you get some rough guidepost on a mid term framework.
About the subscription growth. So you know when I think about guidance for 'twenty, two being near 30% at the high end. Obviously, we you saw big step up in the mid term or P. O and you have greater visibility on activation schedule. So it doesn't seem like a big.
Big deceleration is imminent, particularly given the low levels of penetration with them. Some of your existing accounts, but just any thoughts you might have on perhaps the the two or three year kind of outlook for subscription growth.
So we're not giving guidance for you on FY 'twenty two however.
I have challenged my team debt when it comes to subscription revenue and I want to emphasize subscription revenue that we as a team should target to grow at 30% or exceed the.
We can't do it the market is there we've got the way of with the always got the products. So as an internal challenge to my team we shouldn't maintained.
The depth in the longer term.
And Thats, where we stand as the management team when we agreed upon net.
That's great I'll leave it there thank you.
Thank you.
Thank you I would now like to turn the call back over to Pierre Nowadays the closing remarks.
Well. Thank you so much for all of you joining us today, we really appreciate this as you can hear we're excited about the business.
We see a tremendous pipeline that we see an opportunity as the market sort of opening up and we can sort of traveling I think youre seeing that on the other expense line, we plan to travel there's nothing better than to go see of customer.
Some of it in person and actually convince them of your value proposition, especially on the international front.
So we are excited and we of previous appreciate your attention today.
This concludes today's conference call. Thank you for participating you may now disconnect.
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