Q1 2022 nCino Inc Earnings Call

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Ladies and gentlemen, and thank you for standing by and welcome to the and Dino first quarter fiscal 2022 earnings conference call. At this time all participants are in a listen only mode. After the peak and presentation there'll be a question and answer.

Session Task a question. During this session you will need press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like turn the conference over to your Speaker today, Greg Gordon's team Chief Corporate development and legal officer. Please go ahead.

Thank you and good afternoon, and welcome to Encino, its first quarter fiscal 2022 earnings call for the quarter ended April 32021.

With me on today's call are appear on our day and seen as President and Chief Executive Officer, and David <unk>, 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.

These forward looking statements are based on management's current views and expectations and tail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, including those related to the impacts of COVID-19 on our business the financial services industry and global economic.

Conditions and.

<unk> disclaims any obligation to update or revise any forward looking statements.

Further on today's call. We will also discuss certain non-GAAP metrics that we believe aid and the understanding of our financial results 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 the form 8-K furnished with the SEC just before this call.

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

Thanks, Greg Good afternoon, and thanks for joining us we're very pleased with the results of our first quarter, maintaining the strong momentum from year end and the first quarter of FY 'twenty..2 we closed more net new customer business and then upsell for the first time since the start of the pandemic, reflecting financial Institute.

<unk> increased demand for digital solutions across our product portfolio.

Subscription revenues increased 47%, while once again, we ended the quarter with a record pipeline for the company.

Our results reflect the accelerating digital transformation of financial services, a topic, you've heard us discuss before.

Most companies in the industry.

And I think back to the early days of Encino, a lot of our time with sprint educating banks and credit unions and about the benefits of moving to the cloud.

It is clear they now understand the significant value of the cloud office today, we no longer need to focus on the why for digital transformation. Instead, we spent time on the how the prior theaters weighted evident for every institution that they need to embrace a digital strategy prior to COVID-19 the rest of the world.

Lagged behind the U S and cloud adoption.

Over our first quarter results highlight that international markets are starting to catch up.

International is 1 of our 4 key growth pillars for the year and international momentum was particularly robust this quarter.

To spend some time today, focusing on debt element of our growth strategy.

As a reminder, the.

Other 3 growth areas for us are maintaining commercial product leadership.

Celebrating retail banking and broadening our encino Iq or Nick analytics offerings.

We are excited to announce that we added nearly $1 trillion asset bank as a commercial customer and Canada 1 of the big 5.

This deal was a terrific expansion of our Canadian footprint.

We're looking to replace debt outdated disparate systems with a and C knows digital platform in order to increase efficiency and automation, while providing enhanced client service.

Again, it's clear that the cloud is the future for banks of all sizes around the world.

We are also very excited this quarter to close our first deal in Germany.

Which we announced in May you may recall that last quarter, I said I challenged our team to land a reference customer and each of the new European markets, we entered there.

And clearly risen to the challenge and are off to a great start.

<unk> commercial bank or each crop will deploy the encino bank operating system as proud of each and it modernization.

Each crop is our Hamburg based commercial bank with operations across Germany, and metropolitan regions and in select European markets.

Copies are terrific entry into this highly regulated market and based upon on our past experience. We are optimistic we can leverage this deal to land more Jim and his customers.

Turning to the U S.

We were pleased to sign and approximately $8 billion regional bank, who will begin their relationship with encino with retail lending and deposit account opening it really does feel like most community and regional banks I'll now focus on the longer term strategies with the distraction of Covid and simple fee largely.

Behind them.

I've spoken previously about the farm credit system, a growing niche market for us here in the U S.

This quarter, we were pleased at 2 from credit system institutions at $22 billion and 25 billion in assets expanded their use of <unk>.

And is trading our continued momentum in this market sector, and our ability to upsell into our customer base.

As you all know by now.

We enjoy signing new deals and see what we really celebrate is to go life. We continue working to streamline integrations and accelerate delivery leveraging our best practices and gold standards to create a prescriptive deployment framework customers are very receptive to this approach.

Particularly in the community bank space, which allows for faster deployment schedule and a quicker time to value as demonstrated with a $3.5 billion community Bank, we took life and the first quarter with our deposit account opening solution.

Another success in the C&I segment was a new $3 billion community bank buying seats for the entire platform.

Commercial lending retail lending and deposit account opening.

Our goal is for all of our customers to utilize the complete platform. So seeing 1 embraced this approach from the beginning is very exciting.

The key to all of these wounds is not only our incredible team of people, but our industry, leading products and ongoing commitment to innovation.

We continue to invest and innovation during the first quarter by adding several new features and product enhancements across our platform as part of our spring release.

1 highlight was and new no touch loan process for retail banking.

Using this product a customer can apply for and unsecured loans.

The bank and review the file.

Proves alone and generate electronic documents for signature within minutes and without any human intervention.

The efficiency and cost effectiveness of this approach cannot be overstated.

Very excited about this latest release, which gets us closer to our high Tech low touch vision for retail banking.

As we also have discussed many times.

Product vision marries the Encino bank operating system with the insights of Nick.

Our emphasis on data machine learning and analytics and our platform roadmap aligns with banks need to differentiate based on insights and personalization.

The awareness derived from data analytics that can be used to improve decision, making increase efficiency and mitigate risk and thats just what we are bringing to our customers with our platform.

We took a big step forward with Nick this quarter with the early adopter the launch of our commercial pricing and profitability solution <unk>.

Commercial pricing enables customers to price commercial loans on platform with India, and senior commercial loans origination system to optimize loan pricing based on the unique policies and financial targets of each bank.

Repricing can be performed at each critical states of the loan origination process based upon negotiations and business development opportunities with clients.

Automated spreading also part of the net platform gained significant traction in the quarter. It is now deployed on 3 continents, Europe, Australia and North America.

Customers using the product are reporting net automated spread and can reduce the time it takes to spread and processes documents by 75% accelerating loan underwriting and empowered and credit analysts to develop a holistic understanding of credit risk instead of painstaking reentering data.

All of these innovative products came to life for our customers and partners and our recent annual user conference insight, which we held in May we had over 2000 people that adjusted for the 2 day virtual conference.

Presenting hundreds of financial institutions and partner companies from 24 countries.

As part of the conference we held our first ever and see no financial services impact awards to recognize our customers were doing great work and achieving exceptional results with the Encino platform.

These awards include at Santander, UK Barclays and co bank, congratulations to the winning customers and all who are nominated for these awards based upon their success with the <unk> Bank operating system, we are honored to be and business with you.

For those listening today, if you would like to watch the replay of the conference which includes many product demos you can find a link on the Investor Relations section of <unk> website under events and presentations.

Finally, I want to share a recent company and community update that I am incredibly proud off.

As you've heard me say before and Encino and our culture of passion.

And it's a huge differentiator for us and the market, we have and ambitious growth strategy and we can only be successful by continuing to attract the best talent.

And part of this focus we recently committed to a long term project working with the city of Wilmington to create the Encino sports complex.

And our funding will not only help ensure that youth and young <unk> access to sports like soccer lacrosse, and rugby a personal favorite of mine going up and South Africa, but it also makes Wilmington, North Carolina, and even more attractive place to live for both current and future and employees.

So now let me wrap up and turn the call over to David to share financial details on the first quarter and how our strong results.

Low us to increase our full year outlook, David over to you.

Thank you Pierre and thank you all for joining us to review our first fiscal quarter 2022 earnings. Please note that all of the numbers referenced in my remarks on a non-GAAP basis, unless otherwise stated are.

Our non-GAAP financial information excludes the impact on stock based compensation and the amortization of intangible assets and expenses related to the government antitrust and Vacates investigation and related civil action disclosed in our SEC filings.

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 our 8-K furnished with the SEC.

SPS shared we're really pleased with the start to the year.

So let's review the results total revenues for the first quarter fiscal 2022 were $62.4 million compared with $44.7 million and the first quarter of fiscal 2021 and increase of 39% year over year.

Subscription revenues for this quarter were $51 million and increase of 47% year over year, representing 82% of total revenues and the first quarter.

Keep in mind the growth rate is skewed by triple fee revenues and to remind everyone. We generated about $600000 and tripled revenues and Q1 of fiscal 'twenty 1 we.

We still expect about $18 million and triple <unk> related revenues in fiscal 'twenty 2.

In line with our previous comments made on our Q4 'twenty 1 earnings call.

Professional services revenues were $11.3 million and the quarter, a 15% increase over the $9.9 million and in the first quarter of last year.

Europe was particularly strong for professional services and the first quarter.

Revenue is outside the U S were $9 million or 14% of revenues and the first quarter up from $4.2 million or 9% of total revenues and the first quarter of fiscal 2021.

International revenues increased 113% year over year.

Non-GAAP gross profit for the first quarter of fiscal 2022 was $38.1 million compared with $26.5 million and the first quarter of fiscal 2021 and.

And increase of 43% year over year.

Non-GAAP gross margin was 61% compared to 59% and the first quarter of fiscal 2021.

Our gross margins continue to improve largely from subscription product mix.

Sales and marketing expenses for the first quarter of fiscal 2022, or $16.3 million or 26% of total revenues compared to $11.5 million or 26% and the first quarter of fiscal 2021.

We continue to invest and our international operations, adding salespeople and Europe, along with specialists to augment capabilities around the new product offerings and business lines.

Research and development expenses for the first quarter were $15.9 million or 25% of total revenues compared to $10.7 million or 24% and the first quarter of fiscal 2021.

We continue to increase our investment and building up the Encino bank operating system, including Nic and our retail products as well as localizing products to support our international expansion.

General and administrative expenses were $10.3 million or 16% of total revenues compared to $6.8 million or 15% and the first quarter of fiscal 2021.

We continue to invest and our G&A function to help support our rapid growth along with our increased public company related costs.

During the quarter, we incurred around $3.3 million and costs related to the antitrust matters.

Not included in the $10.3 million and non-GAAP expense.

As a reminder, we are excluding these costs from our non-GAAP operating income results and guidance.

And the first quarter. We also include approximately $2 million and unplanned payroll taxes related to the exercise of stock options.

Non-GAAP operating loss for the first quarter of fiscal 2022 was $4.3 million compared with non-GAAP operating loss of $2.4 million and the first quarter of fiscal 2021 on.

Non-GAAP operating margin for the first quarter was negative 7% compared with negative 5% and the first quarter of fiscal 2021.

Turning to cash we ended the quarter with cash and cash equivalents of $386.5 million net.

Net cash provided by operating activities was $7.6 million compared to $8.4 million and the first quarter of fiscal 2021 with.

With cash generation and both periods driven by increases in deferred revenue from renewal and new sales.

In addition capital expenditures were <unk> 5 million and the quarter, resulting in a positive free cash flow of $7 million for the first quarter of fiscal 2022.

Now turning to guidance for the second quarter, we expect total revenues of $63 million to $64 million.

Subscription revenues are expected to be between $51.5 million and $52.5 million.

Non-GAAP operating loss is expected to be approximately $5.5 million to $6.5 million.

And a net loss per share to be in the range of 5 to 6.

Based on a weighted average of approximately 96 million basic shares outstanding.

We are increasing our guidance for the full fiscal year 2022 as follows we now expect total revenues of $258 million to $260 million.

And subscription revenues are expected to be $212.5 million and $214.5 million.

We also expect non-GAAP operating loss for fiscal 2022 to be $22.5 million to $24.5 million and a net loss per share and the range of 21 to 'twenty 3 based on a weighted average of approximately 96 million basic shares and.

In summary.

We are very pleased with the start to the year, especially some of the large international wins and the quarter.

As a reminder, the seed activation cycle and any larger deals results and revenues that will primarily began recognition and fiscal 'twenty 3.

The team is working hard to maintain the strong momentum and to the second quarter and beyond.

We will now be happy to take your questions.

Thank you as a reminder to ask a question you will need to press star 1 on your telephone.

Following a question on Crystal balance sheet. Please limit yourself to 1 question and 1 follow up please standby, while we compile the Q&A roster.

Our first question comes from Brent <unk> with Piper Sandler You May proceed with your question.

Thanks for the call back here and look.

And I got really strong start for the quarter and gave it just David let's start with you here subscription revenue I think was up I think $6 million sequentially. This is the highest we've ever seen with growth accelerating slightly year over year.

What drove the subscription upside this quarter as Nick revenue starting to layer on here or did you see a handful of customers activate seats faster than expected and the quarter just trying to get a little more color on what drove momentum on the subscription side this quarter.

And that's great. Thanks, so and the quarter, we just had a very active seed activation.

Timeline and the quarter and it is lumpy from quarter on quarter yourself, and then in the fourth quarter and the first quarter. We just ended up with a very large number of seats activating.

And all of these seats feed activations to remind you our contracted and.

The original contract so very pleased with the activity that we saw on the seed activations and the quarter.

And was that tied to a handful of customers or was it relatively broad based at all kind of landed in the corner yes.

Yes, I think it was more broad based and the quarter, we do see good activity on Nick.

And the products within those are still small in nature, and we do see contribution from them, but it was mainly the seed activations from Martin and <unk>.

Bank operating system customers and activate it and the quarter.

Super Helpful. And then just peer for you.

Any big surprises coming out of the user conference last month, and as it pertains to either appetite to expand that existing customers and retail or our broader interest and new customer lands just trying to get any sort of additional color coming out of the user conference and if they were any surprises from your takeaways.

Based on customer conversations thanks.

Thanks, a lot for us.

What we're seeing is that clients are Canadian and looking at the broader picture now.

There is a broad interest into the full platform story versus purely 1 product solution and I would say the other 1 that's really getting a lot of attention is Nick people truly want to understand what the analytics can look like what the data Lake and accumulation is going to look like from us as well as what specific products, we will bow.

<unk> and actually released shortly to inject into the system to help them and how they run their bank. So what I would say as we get confirmation from our customers on the on strategic direction from a product and then Ed.

Makes you feel good about the investments we're making.

Thank you. Our next question comes from Brad Sills with Bank of America. You May proceed with your question.

Hi, Thank you for taking my questions and Sherri on for Brad.

And that's on a great quarter.

I wanted to ask if you can provide the RVO and CRP and members for on a quarter.

Yes, I can so for the first quarter total ARPA was $611.3 million.

Less than 24 months was $380.1 million and greater than 24 months was $231.2 million.

Got it thank you and then.

I guess my follow up is just how penetrated is the and thank you laughing with and your estimates right now and what kind of uplift are you seeing.

And on the deal sizes. Thank you so much.

Yes. Thank you.

So Nick has there been any new product and it's actually a number of products, it's going to come out of there.

On the foundation of that is actually the accumulation of data and as you can imagine we've got 9 years' worth of commercial origination data.

Assuming that a lot of.

Data on deposit account opening as well as retail.

And then we've got a long standing product.

On the seasonal side, so on the consumer side, we've got lots of data and these analytics and portfolio is really coming through now on top of that as we release new products like the commercial pricing and profitability product, we will start seeing and uptake but at this stage. It is very lightly penetrated.

And so all the upside is still sitting in that product.

Awesome. Thank you again, thank you.

Thank you. Our next question comes from Joe <unk> with Baird. You May proceed and your question.

Hi, everyone.

Maybe to begin and can you just give a bit of maybe and I'll.

On the competitive landscape regarding the encino auto spread and capabilities and my understanding is you tackle the technology and approach a little bit differently than what's typical on and the loan origination space and.

As Nick offerings, and gain more mind share and traction out there.

1 thing you would look to as maybe a point of competitive differentiation where and.

Maybe pushes you over the goal line versus our peers when it comes to I head to head matchup.

Yes, so when it comes to auto spreading and remember that it helps us companies that actually can read the financial statements and digitize the content or maybe a tax form.

And the benefit we have is providing the actual spreading software and as well is that we kind of on the populate.

And the spreading software we can then do and analysis on the actual financials off.

And the perspective Linda.

Or borrower.

And so therefore, what we believe is over time as we increase our analytics that we won't begin to automate debt decisioning process to a much higher degree and because its all and integrated system various people into decision chain, we'll be able to get to these results and the real time basis and make more informed.

And more complete decisions. So it's not only the autos trading which is consuming the data is.

Actually the analytics that will follow that as we develop the product further so I feel very strong that we've built a market leading technology and a solution here and we're getting that feedback from our customers by the way.

Okay.

Good detail and then just on the original comment that and Sina is back to more net new business.

And then pre Covid.

Or are some of these transactions just.

Deals that were moving your direction before the pandemic and so it's basically making up for lost time and pent up demand or is this activity that kind of hesitant and percolating over the last 12 months, realizing I guess.

And <unk> IPO, just marketing more brand awareness is driving some of this activity that you saw on the quarter.

I would say if you look at the pipeline size.

What it tells you is that we do not lose business during Covid and he just said there dormant and then picking up as I said before the third quarter of last year and fourth quarter.

Adding into sales, but then on top of that the renewed interest in digital transformation is added to the pipeline. So although we have very good sales quarters.

The pipeline is still growing which means we take from the pipeline and bring it and as contracts, but the interest and the market is clearly <unk>.

Picking up and we see that across especially our international markets as people are coming out of Covid and it's.

Very early days for them coming out as you know and Europe. Many countries are still under lockdown and barely coming out now. So we are optimistic as we see people turning the attention to these strategic initiatives.

That's great. Thank you very much.

Okay.

Thank you. Our next question comes from Terry Tillman with choose you May proceed and your question.

Yes. Good afternoon, it's great to see the commentary on new bookings, new business bookings, Hi, Pierre and David and Greg maybe the first question for you here is just related to.

The retail business and that's obviously, a big market opportunity you just talked about new innovation around unsecured retail loans our.

Capability is that something that could spur increased enterprise activity or is this just more kind of strengthening your presence with where you've had more success today on the retail side, just love to get an update on kind of the retail business particular on enterprise and then a follow up for David.

Yes look we plan to expand debt no touch low touch.

Experience for the consumer beyond just the unsecured loans down the line as we develop the product and we automate the processes and the integrations, we've got there et cetera.

And I also think realize enterprise banks bis different from community and regional banks.

Typically buy our products suite and <unk>.

Place to hold retail platform, where what we see and the enterprise will you more so maybe by loan type or by a group of loan types. Okay.

So we see good interest there, but it's very early to say asset product, which you and I will remind you. When we started the company for the first 3 years of commercial we only sold to community and regional because you want to mature the product. So we are not.

Pressing too hard and the upper markets for this because we are focused on getting this down and automate it to the point, where it'll be an imperative for the big banks to look at debt low touch no person involvement experienced the day after you do their customers and Thats.

We plan to take this thing.

That sounds good and I guess, David just a follow up on I was trying to take notes path, but I must have missed that could you give us an update again on reminding us what the triple T and government driven revenue would be for fiscal 'twenty, 2 and then how to think about across quarters. Thank you.

Yes, so as we talked about and the fourth quarter. The exit run rate was $4.5 million. We saw some just immaterial additions to triple P and the first quarter and we expect that to trend throughout the year to equal a total of $18 million for the year.

And I can just add debt on may 31st the typical peak program was shut down for new loans by the government.

But fortunately we fold day solution that is actually very effectively and therefore, giving states as well.

So.

We believe that debt solutions and stay in place at banks for the foreseeable future to work through the loan book that they've got off the <unk>.

Thank you.

Yeah.

Thank you. Our next question comes from Brian Peterson with Raymond James You May proceed with your question.

Hey, everyone and thanks for taking my question and congrats on the strong quarter.

First from me I'm actually surprised just hasn't come up yet, but the international strength, obviously growing triple digits year over year on it.

Sounds like <unk> and solid bookings in the quarter peer I'd be curious how would you define success for investors internationally, we're thinking about maybe the longer term opportunity.

Customers percentage of revenue because clearly that's a big growth driver, where you're seeing success and I'm curious, how you would frame that opportunity longer term.

Yes, so we've got a number of very focused areas as you know interest and Europe, UK, Ireland, Australia, and Japan, where we're investing and you've got people and the ground there now.

Simple measurement is that we would like to exceed the growth rates of the Americas and other words Europe should continuously on the international including Canada should continuously.

A largest share of the total revenue of the company.

And the Tam of international and is larger than the than the U S. So I would expect at some point and the future that the company may even be larger outside the U S. So exceeding the growth rate of the Americas on a continuous and constant basis is to me success number 1 number 2.

And expand our available product suite and.

And Thats what market slugging explained before mortgages can be player. There. If you look at the balance sheet and the bank and Europe mortgage.

Even a bigger player than on a component of that balance sheet than commercial lending. So we see a tremendous opportunity with that as we mature that product.

Did that answer your question.

And it does it does sound like you might have some some frequent flyer miles that you'll be earning over the next few years here.

And and maybe David a follow up for you.

You mentioned about seed activation schedule this quarter.

We're going to get the question and so so as we think about net new now, becoming a big or what you're adding.

Has that changed the seed activation schedule at all how do we think about that kind of bookings and revenue timeline. Thank you guys.

Yes, there is still no meaningful change from what we saw last year pre triple P on the seed.

<unk> schedule, so as we talked about during the IPO process.

And we talked about the seat activation thats similar to those.

That cadence that we saw historically, so no big change.

Great. Thank you.

Thank you and our next question comes from Sicad cleaner with Barclays. You May proceed with your question.

Awesome, Hey, guys. Thanks for taking my questions here.

Peter maybe just.

Maybe just to dig more specifically internationally. It was great to see that that commercial win in Germany can you just talk about the German market, a little bit how big do you think of and opportunity.

Could that country, B and and what is the competitive landscape look like there specifically.

Yes.

And the German market has been over the last time I check over 1500 banks okay.

Obviously, you've got some established Jim and software companies and its players and that market, but we believe our modern software sales force com platform and it would be bolt on.

And superior and we've got a good shot and breaking into that market as we've proven now our experiences and once you've got the first 1 that's only the toughest 1 the second 1 it comes a little bit easier and number 3 it comes a lot easier and I know you build momentum through that.

By the way, it's also a lot more community and regional like in that market. So it's a it's a nice fairly sized commercial focused bank.

And then of course plays well into our strengths okay.

So we see a great potential there we've got a nice strong contingent of people now on the ground in Germany.

That can speak the local language as well as the dialects in the different regions, where they're operating.

So we see a very strong opportunity there.

Got it that's really helpful. Maybe for my follow up for you David.

I was wondering if you could just maybe just speak a little bit about the <unk> metric just in general and some of the puts and takes on that metric for <unk> model. I think we were all impressed with that number last quarter. Good to see the sequential growth this quarter as well, but is there anything that we should sort of keep in mind as we get some more here.

And with that metric around how that can sort of ebb and flow and the future does that makes sense, yes. It does yes. So.

And so the <unk> is just total contract value.

Of the deals that we closed and the quarter. So if we close larger deals.

And a quarter Youll see that jump and my guess would be as we move through the years through the quarters. It will be inconsistent and our Q4 is normally strong as you saw when we posted the numbers that we did and the fourth quarter.

It's nice to see on the first quarter that we were able to flow through and closed a good amount of deals as well and that's what.

It took our RP off again, but I think just remind you that as we close large deals it will be and lumpy.

Because our average contract duration is still 3.8 years and the total.

But we do have contracts that range from $3.3 to 5 years within there as well and then also renewals will come throughout the year as well so when they renew if we can get multiyear renewals out of the customers, it'll bounce and be and be larger and outsized and any given quarter or 2 so we're still we got what 5.6.

<unk> quarters to look at.

And so it'll be interesting to see how these play out but I think just remember larger deals will boost those those values up and in any given quarter.

Very helpful. Thanks, guys.

Okay.

Thank you. Our next question comes on tends to gross King with Thomas Research. You May proceed with your question.

Hi, Pierre and David Thanks for thanks for taking the questions.

And I just wanted to ask you about Nick I believe you launched the commercial pricing module and April can you just talk about how that launch land and and what's the what's been the and the initial interest and that module and I guess, what's the ECB uplift if a customer adopts net offering.

Yes, so we've got teams engaged and our group of early adopter cash.

We are getting fantastic feedback on how banks are modeling pricing, how they view that balance with risk.

As you know out of Cisco on a b pricing plus profitability. So you could take care of the full component of the customer business with you, including all deposits and.

And cash that you might have on hand on treasury products.

And as you look at that and holistic picture I believe and fully integrated pricing and profitability module is going to be very well received and we are seeing debt.

And the ease and the early adopter stage right now for that product and we believe over the next 6 months until the next release comes out when it goes through.

It will be really start getting a lot more interest and that's the feedback we're getting from the market as well okay.

Yeah.

David do you remember the uplift on the on.

On the commodity we ever.

Have you ever disclosed app on the specifically I think when we did the last time, we said that.

<unk> 2 billion sample it makes which is 20%, but that's a combination of portfolio analytics and commercial pricing.

And 1 more product so it was actually the collection of the Nic products.

That will give you that 20% uplift if you adopt all of them.

Okay. That's helpful. And then maybe just as my as my follow up here I just wanted to follow up on the on the comment about new business going dormant and and ask you about how that flows through the subscription revenue growth and so I guess the question is do you expect.

And revenue growth accelerate at either at the end of this year or maybe early next year, because it seems like the slowdown and new ACB booked last fiscal year, so and fiscal year 'twenty..1 during COVID-19 is kind of impacting revenue growth this fiscal year.

So I guess I'm just I'm curious, how how should we think about that subscription revenue growth.

I guess over the next 4 to 6 quarters like is that going to accelerate.

Once that lower.

<unk> period kind of works its way through the results. Thanks a lot.

Yes. Thank you, yes. So we saw the full impact from Triple T and the second quarter of last year, so growth will trend down.

Over the next couple of quarters it should bottom in the third quarter and then start building from there, but we had triple P. Ramping we had that onetime million dollars.

Accelerate or catch up revenue from our consortium and the third quarter, which should set the low point on year over year growth for the year and then we would expect that to trend up after the third quarter.

Okay. That's helpful. Thank you.

Thank you.

Thank you. Our next question comes from Josh Beck with Keybanc. You May proceed with your question.

Thank you team for taking the question I.

I wanted to go back and peer to some of your commentary around this acceleration.

Digital transformation within the banking space and as you said others have certainly spoken to this but.

I guess I'm curious within the tier 1 and true enterprise.

Types of customers if.

If maybe youre seeing anything notably different about the pace at which they're starting to move this year versus say some of the other segments that are maybe more regional or community base. Just maybe curious if there's any notable differences about the pace at which some of those.

Segments are.

Re embracing if you will these digital transformation projects.

Yes, So let me analyze and market for you. This way if you look at the enterprise market. They buy by business unit. So we tend to sell to either the commercial bank.

Small business.

Solution, which could set by the way and commercial or retail or maybe you go to a retail solution, but the thin slices to be account opening it could be a certain loan types are they trying to automate and make better okay. So they buy over long periods. These strategic planning sessions.

And budgets come up once a year and it depends what software they've gotten the balance sheet. So it's a much more begins strategic view of debt when you start getting into the community and regional what we see is more of a platform and and.

<unk>.

Simplification decision process. So they would look more at the full platform as a solution.

They may still sometimes by 1 but you could see that they are looking at the full complement and actually look at a multiyear project that could do commercial first maybe on retail first and then go small business and commercial on account opening.

The community banks and the.

<unk> was a little bit slower because they got impacted more and more disruptive, but we start seeing that and the end of last year and the beginning of this year start picking up again and that is a fantastic market for us so I'm seeing that accelerating.

Obviously, there's a lot more of those banks.

And so what I'm seeing is overall, it's really interesting. The conversation has moved from should we do this is as important and should have account opening etc to almost more of a into a survival mode of I need this to be relevant in the future.

And banks are looking at debt and <unk>.

They have to have these modern platforms with API to actually participate with your third parties, who want to participate in the banking industry without being a bank with its loan origination or a credit card issuance or something and you're a big player entering that market piggybacking on some of these bank. So we can be very helpful.

And providing the platform how they can participate in this embedded banking future that we're seeing coming.

Very helpful and maybe a follow up for David is we're starting to be a little bit further removed from the initial wave of Triple T.

And I imagine you had made some assumptions around repurposing of those seats. So I'm just curious maybe where things are standing versus maybe some of your <unk>.

Original expectations with regards to the triple B and forgiveness seats.

Yes, I think what we've seen so far is pretty much in line with with what we thought now most of these are co termed with the original contract.

We've seen a handful of seats being redeployed elsewhere and the bank and.

And just a very low level of churn and it's all as we expected so no real change there and all of our expectations on the churn and and redeployments are and our numbers for the balance of the year as well, but pretty much so far as we expected.

Yes.

Good to hear thanks, Tim and Kevin.

Yeah.

Thank you. Our next question comes from <unk> Tandon with Needham and company you May proceed and good question.

Thank you and good evening and congrats on the quarter.

Could you go back to the international opportunity and I'm just curious is the regulatory.

Differences in various markets around the globe and I would imagine different compliance issues does that come into play when these banks and making decisions looking.

Looking to buy the encino platform or other 1 off products or is that even a hurdle or is that not be a factor when you're looking at these decisions being made.

No absolutely it plays.

Fortunately and Europe.

A single regulatory compliance regime across Europe, and then what you find is they might be nuances by country. Okay, but if you look at us going in with our flagship commercial product commercial is probably the least regulated.

The balance sheet is regulated and you have to understand your credit risk force.

Safety and soundness, but from a.

On the loan origination piece.

We could take our product from here into international countries without massively having to change it so that opens up and the whole market for US then you get to retail and that's where the extra compliance and adoption.

As well as our integration strategies, because there is different players on different back and cost.

Therefore, we've got a team in London that is analyzing the markets understanding the obstacles as well as a small contingent and building integrations, there and passing through spec for us here on how to change the product to make it applicable to all of those.

But again as you look at the growth rates that we have.

<unk> with you.

Extremely pleased with our penetration in that market and the growth rates, we're seeing that.

Right now it's been occurring.

And if I can just layer on 1 more question around both the international and the domestic market.

As you scale up is it important to have Si partnerships and leverage them or do you believe that's not going to be sort of a critical aspect to your growth story at least over the near to medium term.

The ASI partners for Us is critical and strategic.

We've always said that the professional services to us.

We will do it at the low end of the market and that means.

Bank assets of 5 billion and below.

Like debt as a teaching and the lending growth for our people as well as taking care of that contingent of customers.

And people and that knowledge and expertise along with our product expertise to assess the size and banks about 510 billion and all the way up to the very large loans, we believe to scale and go with this rate and also partnering with the best of breed Si partners in the market as we've done on a global.

On a global stage so.

Those partners on a go hand in net with US we've got today.

Over 2000 people certified on the Encino platform by these partners and it's highly sought after.

Skill sets.

And we see competition and the market for that skill set which bodes well for us.

That's helpful. Thank you so much congrats again.

Thanks.

Thank you and our last question comes from Brett <unk> with Macquarie. You May proceed with your question.

Thank you for taking my question and fitting the A&D and the call here I think that many of the questions that have been interested and have been asked but there's a couple of things that I'd, just like to actually ask and clarify around your comments on localization and as it reflects on your international go to market and it's something I think we've talked about in the past that.

When you're operating in the region you need to look at lots of course on languages and also local regulations et cetera. As I know you talked about earlier, so I'd like to ask generally speaking when you're entering a international market do you tend to go all in.

On your platform as 1 at once or do you tend to.

Perhaps like localized products bit by debt and then introduce them into a region and I'm curious how that's reflected in some of your wins and Jeremy rather you win and Germany.

Yes, So let me first highlight something the force Com platform comes with over 120 languages and more than 120 currencies. So we don't have to build those we do have to adjusted product for different integrations as well as maybe local regulations, which is more relevant.

Retail side of the house versus the commercial side Okay.

And so what we do is typically would go to a new country with a view of going at commercial and small business lending.

And as you know we have launched we can do unsecured consumer lending as well as.

We've launched a mortgage solution for Canada, and the UK right now so we actually look at these products and we launched the concept of the platform, but actually take to market those product lines to start with and then as we penetrate the country just like we did the U S. If I can remind you started the company and.

Early 2012 late 2011.

And then for the first 5 years basically focused on commercial but we have to architect the customer databases and the record so that we could build upon that as a platform and that's worked well for us and we approach the international markets exactly the same.

Thank you there and then just 1 last follow up question again about international markets, specifically, Japan and I realize.

It's early days, but last quarter, we talked about some of the investments that youre, making into Japan, including your joint venture there.

Do you have any updates generally about your go to market in Japan, and more broadly Asia, and we've seen that strength and Europe quarter.

Yes, we've had our.

As I mentioned before our Japan conference there we saw great interest.

Clearly there is a need for this kind of software Japan as you can see if you track. The Olympics is really still in a lockdown mode and.

So it's a difficult market to take action, but we are seeding the market. We are evangelize ing, we're making great connections our.

Our partner in Japan, and Japan cloud is doing a fantastic job, putting us in touch with all of the right people.

But as you know thats, a conservative banking market.

Force has a nice presence there.

And I am highly optimistic.

Great. Thank you.

Thank you.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over and CPE or not and for any further remarks.

Well thank you all for.

Your time and attention today, we truly appreciate your support I look forward to speaking with many of you at conferences and meetings in the coming weeks and I would like to take this opportunity to thank the employees of encino for their efforts and dedication through this period.

And now opened and Wilmington, and the excitement is building back coming back to the office and we are ready to change the world. So thank you for your time today.

Okay.

Sure.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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Sure.

Yes.

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Moving on.

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Ladies and gentlemen, and thank you for standing by and welcome to the Encino first quarter and fiscal 2022 earnings conference call. At this time, all participants are in a listen only mode.

And speaking presentation there'll be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like turn the conference over to your speaker today, Greg Gordon's team.

Corporate development and legal officer. Please go ahead.

Thank you and good afternoon, and and welcome to <unk> first quarter fiscal 2022 earnings call for the quarter ended April 32021.

With me on today's call are Peter and all 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 and the anticipated performance of our business.

These forward looking statements are based on management's current views and expectations until certain assumptions made as of today's date and.

And are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, including those related and the impacts of COVID-19 on our business the financial services industry and global economic conditions and <unk>.

<unk> disclaims any obligation to update or revise any forward looking statements.

Further on today's call. We will also discuss certain non-GAAP metrics that we believe aid and the understanding of our financial results 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 the form 8-K furnished with the SEC just before this call with that thank you for joining us and I'll turn.

And it over to Pierre.

Thanks, Greg Good afternoon, and thanks for joining us we're very pleased with the results of our first quarter, maintaining the strong momentum from year end and.

And the first quarter of FY 'twenty, 2 we closed more net new customer business and then upsell for the first time since the start of the pandemic, reflecting financial institutions increased demand for digital solutions across the product portfolio.

Subscription revenues increased 47%, while once again, we ended the quarter with a record pipeline for the company.

Our results reflect the accelerating digital transformation of financial services, a topic, you've heard us discuss before.

Most companies in the industry.

And I think back to the early days of Encino, a lot of our time was spent educating banks and credit unions and about the benefits of moving to the cloud it's.

It is clear they now understand the significant value of the cloud office today, we no longer need to focus on the why for digital transformation and instead, we spent time on the how the prior theaters made it evident for every institution that they need to embrace a digital strategy prior to COVID-19 the rest of the world.

Lagged behind the U S and cloud adoption.

However, our first quarter results highlight that international markets are starting to catch up.

International is 1 of our 4 key growth pillars for the year and international momentum was particularly robust this quarter I'd like to spend some time to day focusing on that element of our growth strategy.

As a reminder, the.

Other 3 growth areas for us are maintaining commercial product leadership, accelerating retail banking and broadening our encino Iq or Nick analytics offerings.

We are excited to announce that we added nearly 1 trillion asset bank as a commercial customer and Canada 1 of the big 5.

This deal was a terrific expansion of our Canadian footprint.

They were looking to replace their outdated disparate systems with a and C knows digital platform in order to increase efficiency and automation, while providing enhanced client service.

And again, it's clear that the cloud is the future for banks of all sizes around the world.

We are also very excited this quarter to close our first deal in Germany, which.

Which we announced in May you may recall that last quarter, I said I challenged our team to Orlando referenced Crestwood and each of the new European markets, we entered.

They have really risen to the challenge and are off to a great start Hamburg commercial bank or each crop will deploy the encino bank operating system as part of its organization.

<unk> is our Hamburg based commercial bank with operations across Germany, and metropolitan regions and in select European markets.

And your properties are terrific entry into this highly regulated market and based upon our past experience. We are optimistic we can leverage this deal to land more Germans customers.

Turning to the U S. We were.

Were pleased to sign and approximately $8 billion regional bank, who will begin their relationship with encino with retail lending and deposit account opening it really does feel like most community and regional banks I'll now focus on the longer term strategies with a distraction of Covid and <unk> largely.

Behind them.

I've spoken previously about the farm credit system, a growing niche market for us here in the U S. This quarter. We were pleased to have 2 from credit system institutions, and $22 billion and 25 billion and assets expanded their use of encino illustrating our continued momentum within this market sector.

And our ability to upsell into our customer base.

As you all know by now while we enjoy signing new deals you can see now what we're really celebrate is to go life. We continue working to streamline integrations and accelerate delivery leveraging our best practices and gold standards to create a prescriptive deployment framework.

Customers are very receptive to this approach, particularly in the community bank space, which allows for faster deployment schedule and a quicker time to value as demonstrated with a $3.5 billion community Bank, we took alive and the first quarter with our deposit account opening solution.

Another success and the C&I segment was a new $3 billion community bank buying seats for the entire platform.

Commercial lending <unk>.

Our lending and deposit account opening.

Our goal is for all of our customers to utilize the complete platform. So seeing 1 embraced this approach from the beginning is very exciting.

The key to all of these wins is not only our incredible team of people, but our industry, leading products and ongoing commitment to innovation.

Continue to invest and innovation during the first quarter by adding several new features and product enhancements across our platform as part of our spring release.

And the highlight was and new no touch loan process for retail banking.

Using this product a customer can apply for and unsecured loans the.

On the bank and review the file approves alone and generate electronic documents for signature within minutes and without any human intervention.

The efficiency and cost effectiveness of this approach cannot be overstated.

Very excited about this latest release, which gets us closer to our high Tech low touch vision for retail banking.

As we also have discussed many times our product vision marries the Encino Bank operating system, where the insides of Nick.

Our emphasis on data machine learning and analytics and our platform roadmap aligns with banks need to differentiate based on insights and personalization.

The awareness derived from data analytics can be used to improve decision, making increase of frequency and mitigate risk and thats just what we are bringing to our customers with our platform.

We took a big step forward with Nick this quarter with the early adopter launch of our commercial pricing and profitability solution <unk>.

Commercial pricing enables customers to price commercial loans on platform was India and senior commercial loans origination system to optimize loan pricing based on the unique policies and financial targets over each bank.

Repricing can be performed at each critical stage of the loan origination process based upon negotiations and business development opportunities with clients.

Automated spreading also part of the net platform gained significant traction in the quarter. It is now deployed on 3 continents, Europe, Australia and North America.

Customers using the product are reporting net automated spread and can reduce the time it takes to spread and processes documents by 75% accelerating loan underwriting and empowered and credit analysts to develop a holistic understanding of credit risk instead of painstaking re entering data.

All of these innovative products came to life for our customers and partners and our recent annual user conference insight, which we held in May we had over 2000 people registered for the 2 day virtual conference.

Presenting hundreds of financial institutions and partner companies from 24 countries.

And as part of the conference we held our first ever and see no financial services impact awards to recognize our customers were doing great work and achieving exceptional results with the Encino platform.

These awards include at Santander, UK Barclays and co bank, congratulations to the winning customers and to all who are nominated for these awards based upon their success with the Encino Bank operating system, we are honored to be and business with you.

For those listening today, if you would like to watch the replay of the conference which includes many product demos you can find a link on the Investor Relations section of <unk> website under events and presentations.

Finally, I want to share a recent company and community update that I am incredibly proud off.

As you've heard me say before and Encino and our culture is our passion.

And it's a huge differentiator for us and the market, we have and ambitious growth strategy and we can only be successful by continuing to attract the best talent.

And part of this focus we recently committed to a long term project working with the city of Wilmington to create and snow sports complex.

And our funding will not only help ensure that youth and young <unk> access to sports like soccer lacrosse, and rugby a personal favorite of mine going up and South Africa, but it also makes Wilmington, North Carolina, and even more attractive place to live for both current and future and senior employees.

So now let me wrap up and turn the call over to David to share financial details on the first quarter and how our strong results.

Low us to increase our full year outlook, David over to you.

Thank you Pierre and thank you all for joining us to review our first fiscal quarter 2022 earnings. Please note that all of the numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated are.

Our non-GAAP financial information excludes the impact on stock based compensation, the amortization of intangible assets and expenses related to the government antitrust and Vacates investigation and related civil action disclosed in our SEC filings.

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 our 8-K furnished with the SEC.

SPS shared we're really pleased with the start to the year. So lets review the results total revenues for the first quarter of fiscal 2022 were $62.4 million compared with $44.7 million and the first quarter of fiscal 2021 and increase of 39% year over year.

Subscription revenues for this quarter were $51 million and increase of 47% year over year, representing 82% of total revenues and the first quarter.

Keep in mind the growth rate is skewed by triple fee revenues and to remind everyone. We generated about $600000 and tripled revenues and Q1 of fiscal 'twenty 1 we.

We still expect about $18 million and triple <unk> related revenues in fiscal 'twenty 2.

In line with our previous comments made on our Q4 'twenty 1 earnings call.

Professional services revenues were $11.3 million and the quarter, a 15% increase over the $9.9 million and in the first quarter of last year.

Europe was particularly strong for professional services and the first quarter.

Revenues outside the U S were $9 million or 14% of revenues and the first quarter up from $4.2 million or 9% of total revenues and the first quarter of fiscal 2021.

International revenues increased 113% year over year.

Non-GAAP gross profit for the first quarter of fiscal 2022 was $38.1 million compared with $26.5 million and the first quarter of fiscal 2021 and increase of 43% year over year.

Non-GAAP gross margin was 61% compared to 59% and the first quarter of fiscal 2021.

Our gross margins continue to improve largely from subscription product mix.

Sales and marketing expenses for the first quarter of fiscal 2022 were $16.3 million or 26% of total revenues compared to $11.5 million or 26% and the first quarter of fiscal 2021.

We continue to invest and our international operations, adding salespeople and Europe, along with specialists to augment capabilities around the new product offerings and business lines.

Research and development expenses for the first quarter were $15.9 million or 25% of total revenues compared to $10.7 million or 24% and the first quarter of fiscal 2021.

We continue to increase our investment and building up and <unk> bank operating system, including Nic and our retail products as well as localizing products to support our international expansion.

General and administrative expenses were $10.3 million or 16% of total revenues compared to $6.8 million or 15% and the first quarter of fiscal 2021.

We continue to invest and our G&A function to help support our rapid growth along with our increased public company related costs.

During the quarter, we incurred around $3.3 million and costs related to the antitrust matters, which are not included in the $10.3 million and non-GAAP expense.

As a reminder, we are excluding these costs from our non-GAAP operating income results and guidance.

And the first quarter. We also include approximately $2 million and unplanned payroll taxes related to the exercise of stock options.

Non-GAAP operating loss for the first quarter of fiscal 2022 was $4.3 million compared with non-GAAP operating loss of $2.4 million and the first quarter of fiscal 2021.

Non-GAAP operating margin for the first quarter was negative 7% compared with negative 5% and the first quarter of fiscal 2021.

Turning to cash we ended the quarter with cash and cash equivalents of $386.5 million.

Net cash provided by operating activities was $7.6 million compared to $8.4 million and the first quarter of fiscal 2021 with cash generation and both periods driven by increases in deferred revenue from renewal and new sales.

In addition capital expenditures were <unk> 5 million and the quarter.

<unk> and a positive free cash flow of $7 million for the first quarter of fiscal 2022.

Now turning to guidance for the second quarter, we expect total revenues of $63 million to $64 million.

Subscription revenues are expected to be between $51.5 million and $52.5 million.

Non-GAAP operating loss is expected to be approximately $5.5 million to $6.5 million and.

And a net loss per share to be on the range of 5 to 6.

Based on a weighted average of approximately 96 million basic shares outstanding.

We are increasing our guidance for the full fiscal year 2022 as follows we now expect total revenues of $258 million to $260 million and.

And subscription revenues are expected to be $212.5 million and $214.5 million.

We also expect non-GAAP operating loss for fiscal 2022 to be $22.5 million to $24.5 million and a net loss per share and the range of 21 to 'twenty 3 based on a weighted average of approximately 96 million basic shares.

In summary.

We are very pleased with the start to the year, especially some of the large international wins and the quarter.

As a reminder, the seed activation cycle and any larger deals results and revenues that will primarily began recognition and fiscal 'twenty 3.

The team is working hard to maintain the strong momentum and to the second quarter and beyond.

We will now be happy to take your questions.

Thank you as a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question on price the balance sheet. Please limit yourself to 1 question and 1 follow up please standby, while we compile the Q&A roster.

Our first question comes from Brent <unk> with Piper Sandler You May proceed with your question.

Thanks for the call back here and.

It looks like a really strong and start the quarter and gave it just David let's start with you here as subscription revenue I think was up I think $6 million sequentially. This is the highest we've ever seen with growth accelerating slightly year over year, what what drove this subscription upside this quarter as Nick revenue starting to layer and here or did you see Uh huh.

Handful of customers activate seats fashion and they expected and the quarter just trying to get a little more color on what drove momentum on the <unk>.

Prescription side this quarter.

And that's great. Thanks.

And the quarter, we just had a very active seed activation.

Timeline and the quarter you know it is lumpy from quarter to quarter, you saw that and the fourth quarter and the first quarter. We just ended up with a very large number of seats activating.

And all of these seats and feed Activations to remind you our contracted and.

The original contract so very pleased with the activity that we saw on the seed activations and the quarter.

And was that tied to a handful of customers or was it relatively broad based at all kind of landed in the corner yes.

Yes, I think it was more broad based and the quarter, we do see good activity on Nick.

And the products within net you know those are still small in nature, and we do see contribution from them, but it was mainly and the seed activations from Martin and see no bank operating system customers and activate it and the quarter.

Super Helpful. And then just peer for you.

And any big surprises coming out of the user conference last month, and as it pertains to either appetite to expand that existing customers and retail or our broader interest and new customer lands just trying to get any sort of additional color coming out of the user conference and if they were any surprises from your takeaways.

Based on customer conversations thanks, yeah. Thanks, a lot for this quarter.

And what we're seeing is that clients are Canadian looking at the broader picture and now.

There's a broad interest into the full platform story versus purely 1 product solution and I would say the other 1 that's really getting a lot of attention is Nick people truly want to understand what the and at least on look like what do they the legs and accumulation is going to look like from us as well as what specific products, we will bow.

<unk> and actually release shortly.

To inject into the system to help them and and how they run day back so what I would say as we get confirmation from our customers on the on strategic direction from a product and then Ed.

Makes you feel good about the investments we're making.

Thank you. Our next question comes from Brad Sills with Bank of America. You May proceed with your question.

Hi, Thank you for taking my questions just carry on for Brad.

And that's on a great quarter and.

I wanted to ask if you can provide the RVO and CRP and remember I spent a quarter.

Yes, I can so for the first quarter total ARPA was $611.3 million.

Less than 24 months was $381 million and greater than 24 months was $231.2 million.

Got it thank you and then.

I guess my follow up and just how penetrated is the and thank you laughing with and your customer base right now and what kind of uplift are you seeing on deal sizes. Thank you so much.

Yes. Thank you.

And Nick is there any new product and it's actually a number of products and it's gonna coming out of there.

The foundation of that he's actually the accumulation of data and as you can imagine we've got 9 years' worth of commercial origination data.

And a lot of and.

And David on deposit account opening as well as retail.

And then he's got a longstanding product.

On the seasonal side, so on the consumer side, we've got lots of data and these analytics and portfolio is really coming through now on top of that as we release new products like the commercial pricing and profitability product, we will start seeing and uptake but at this stage. It is very lightly penetrated and.

And so all the upside that folks sitting in that product.

Awesome. Thank you again, thank you.

Thank you. Our next question comes from Joe ruling with Baird. You May proceed and your question.

Oh, great and hi, everyone.

And maybe to begin and can you just give a bit of maybe and I'll.

On the competitive landscape regarding the Encino auto spread and capabilities and my understanding is you you tackle the technology and approach a little bit differently than what's typical on and the loan origination space and.

And as Nick offerings gained more mind share and traction out there.

1 thing you would look to as maybe a point of competitive differentiation and where it yet.

Maybe pushes you over the goal line versus our peer when it comes to a head to head matchup.

Yes, so when it comes to orders spreading and remember there's lots of companies that actually can read and financial statement and digitize the content or maybe a tax form.

And the benefit we have is providing the actual spreading software and as well is that we cannot only populate.

The spreading software we can then do and analysis on the actual financials off.

And the perspective Linda.

Or borrower.

So therefore, what we believe is over time as we increase our analytics that we won't begin to automate debt decisioning process to a much higher degree and.

And because it's all and integrated system various people into decision chain well be able to get to these results and a real time basis and make more informed and more complete decisions. So it's not only the autos trading which is consuming the data is.

Actually the analytics that will follow that as we develop the product further so I feel very strong that we've built a market leading technology and a solution here and we're getting that feedback from our customers by the way.

Okay.

Good detail on and then just on the original comment that and Sina is back to more net new business.

And then pre Covid.

Or are some of these transactions just.

Deals that were moving your direction before the pandemic and so basically making up for lost time and pent up demand or is this activity that kind of has it been percolating over the last 12 months, realizing I guess, the Encino IPO just marketing more brand awareness.

And he is driving some of this activity that you saw on the quarter.

I would say if you look at the pipeline size.

And what it tells you is that we do not lose business during COVID-19 and they just sat there Goldman and then he saw picking up as I said before the third quarter of last year, the fourth quarter translating into sales.

And then on top of that debt.

Net interest and digital transformation is added to the pipeline. So although we have very good sales quarters.

And the pipeline is still growing which means we take from the pipeline and bring it in as contracts, but the interest in the market is clearly.

Picking up and we see that across especially on international markets as people are coming out of Covid and it's.

Very early days for them coming out as you know and Europe. Many countries are still on the locked out and it barely coming out now. So we are optimistic as we see people turning the attention to the strategic initiatives.

That's great. Thank you very much.

Okay.

Thank you. Our next question comes from Terry Tillman with choose you May proceed and your question.

Yes, good afternoon.

Wait to see the commentary on new bookings, new business bookings, Hi, Pierre and David and Greg maybe the first question for you here is just related to.

The retail business and that that's obviously, a big market opportunity you just talked about new innovation around unsecured retail loans.

Our capability is that something that could spur increased enterprise activity or is this just more kind of strengthening your presence with where you've had more success today on the retail side, just love to get on and an update on kind of the retail business, particularly around enterprise and then a follow up for David.

Yes look we plan to expand debt no touch low touch.

And experience for the consumer beyond just the unsecured loans down the line as we develop the product and we automate the processes. The integrations, we've got there et cetera.

And I also think realize enterprise banks bis different from community and regional banks.

Typically buy our product suite and they and replace it hold retail platform, where what we see and the enterprise World you more so maybe by loan type or by a group of loan types. Okay.

So we see good interest there, but it's very early to say I said product with U S. I will remind you when we started the company for the first 3 years of commercial we only sold to the community and regional because you want to mature the product. So we are not.

Pressing too hard and the upper markets for this because we are focused on getting those down and automate it to the point, where it'll be an imperative for the big banks to look at debt low touch no person involvement and experience that they have to get through their customers and that's.

And where we plan to take this thing.

That sounds good and I guess, David just a follow up on I was trying to take notes balance, but I must have missed that could you give us an update again on reminding us what the triple T and government driven revenue would be for fiscal 'twenty, 2 and then how to think about across quarters. Thank you.

Yeah, So as we talked about and the fourth quarter of the exit run rate was $4.5 million. We saw some just immaterial additions to triple pay on the first quarter and we expect that to trend throughout the year to equal a total of $18 million for the year.

And I can just add that on may 31st the typical peak program was shut down for new loans by the government.

But fortunately we have both day solution that is actually very effectively and the 4 giving states as well so we.

We believe that debt solutions and stay in place at banks for the foreseeable future to work through the loan book that they've got off to a bumpy.

Thank you.

Thank you. Our next question comes from Brian Peterson with Raymond James You May proceed with your question.

Oh, Hey, everyone and thanks for taking the question and congrats on the strong quarter.

First for me I'm actually surprised and it hasn't come up yet, but the international strength, obviously growing triple digits year over year on.

It sounds like and solid bookings and the quarter peer I'd be curious how would you define success for investors and internationally, we're thinking about maybe the longer term opportunity.

Customers percentage of revenue because he clearly that's a big growth driver, where you're seeing success and I'm curious, how you would frame that opportunity longer term.

Yes, so we've got a number of very focused areas as you know interest in Europe.

Ireland, Australia, and Japan, where we're investing and you've got people and the ground. There now the simple measurement is that we would like to exceed the growth rates of the Americas and other words, Europe should continuously or the international including Canada should continuously become a largest share of the total revenue of the comes.

<unk>.

And the Tam of international and is larger than the than the U S. So I would expect at some point and the future debt. The company may even be larger outside the U S. So exceeding the growth rate of the Americas on a continuous and constant basis is to me success number 1 number 2.

And our available product suite and.

And Thats what market like I explained before mortgage is going to be a big player. There. If you look at the balance sheet as a bank and Europe mortgage.

Even though a bigger player than on a component of that balance sheet than commercial lending. So we see a tremendous opportunity with that as we mature that product.

Did that answer your question.

And it does but it does sound like you might have some some frequent flyer miles that you'll be earnings over the next few years here.

And and maybe David a follow up for you.

You mentioned it will exceed activation schedule this quarter.

We're going to get the question. So as we think about net new now becoming a big are what you're adding.

Does that change the seed activation and schedule at all just how do we think about that kind of bookings and revenue timeline. Thank you guys.

Yes, there is still no meaningful change from what we saw last year pre triple P. On the seed activation schedule. So as we talked about during the IPO process and.

And we talked about the seat activations that similar to those.

That cadence that we saw historically, so no big change.

Alright, thank you.

Thank you and our next question comes on so I can't believe and with Barclays. You May proceed with your question.

Awesome, Hey, guys. Thanks for taking my questions here.

Peer maybe just.

Maybe just to dig more specifically internationally it was great to see that commercial win in and.

Germany can you just talk about the German market a little bit.

Do you think of and opportunity.

Could that country, B and and what does the competitive landscape look like there specifically.

Yes.

And the German market has been over the last time I check over 1500 banks okay.

Obviously, you've got some established Jim and software companies and its players and that market, but we believe our modern software sales force.

And so have com platform and it would be bolt on.

The superior and we've got a good shot and breaking into that market as we've proven now our experiences and once you've got the first 1 that's only the toughest 1 the second 1 it comes a little bit easier and number 3 it comes a lot easier and then you build momentum through that.

By the way, it's also a lot more community and regional like net market. So I'd say its a nice family sized commercial focused bank.

And then of course plays well into our strengths okay.

So we see a great potential there we've got a nice strong contingent of people now on the ground in Germany.

And that can speak the local language as well as the dialects in the different regions, where they're operating.

So we see a very strong opportunity there.

Got it that's really helpful. Maybe for my follow up for you David.

I was wondering if you could just maybe just speak a little bit about the our appeal metric just in general and some of the puts and takes of that metric for <unk> model. I think we were all impressed with that number last quarter. Good to see the sequential growth this quarter as well, but is there anything that we should sort of keep in mind and we get some more hidden.

And with that metric around how that can sort of ebb and flow and the future does that makes sense, yes. It does yeah. So.

And so the IPO was just total contract value.

Of the deals that we closed on the quarter. So if we close larger deals.

And a quarter Youll see that jump and my guess would be as we move through the years through the quarters. It will be inconsistent and now Q4 is normally strong as you saw when we posted the numbers that we did and the fourth quarter.

It's nice to see on the first quarter as we were able to flow through and close a good amount of deals as well and that's what.

It took our RP off again, but I think just reminder, that as we close large deals that will be and lumpy.

Because our average contract duration is still 3.8 years and the total.

But we do have contracts that range from $3.3 to 5 years within there as well and then also renewals will come throughout the year as well so when they renew if we can get multiyear renewals out of the customers, it'll bounce and be and be larger and outsized and any given quarter or 2 so we're still we got what 5.6.

<unk> quarters to look at.

And so and it'll be interesting to see how these play out but I think just remember larger deals will boost those those values up and in any given quarter.

Very helpful. Thanks, guys.

Thank you.

Thank you. Our next question comes on and so close to it on them as research you May proceed with your question.

Hi, Pierre and David Thanks for Thanks for taking the question.

And I just wanted to ask you about Nick I believe you launched the commercial pricing module and April can you just talk about how that launch when and and what's the what's been the and the initial interest and that module and I guess, what's the ACB uplift if a customer adopts net offering.

Yes, so we've got teams engaged and our group of early adopter cash.

We are getting fantastic feedback on how banks are modeling pricing, how they view that balanced with risk.

As you know out of Cisco and B pricing plus profitability. So you could take care of the food component of the customer business with you, including all deposits and.

And cash that you might have on hand or treasury products.

And as you look at that and holistic picture I believe and fully integrated pricing and profitability module is going to be very well received and we are seeing debt.

And the ease and the early adopter stage right now for that product and we believe over the next 6 months until the next release comes out when it goes to a G E.

Until we really start getting a lot more interest and and that's the feedback we're getting from the market as well okay.

Yeah.

David do you remember the uplift on the on.

On the contrary we ever.

Have you ever disclosed app on the specifically I think when we did the last time, we said that.

And there's about a 2 billion sample and makes it was just 20%, but that's a combination of portfolio analytics and.

Commercial pricing.

And 1 more product. So it was actually the collection of the niche products that will give you that 20% uplift if you adopt all of them.

Okay. That's helpful. And then maybe just as my as my follow up here I just wanted to follow up on the on the comment about new business going dormant and and ask you about how that flows through debt subscription revenue growth and so I guess the question is do you expect subscription revenue growth accelerate yes, either at the end of this year or maybe.

Early next year, because it seems like the slowdown and new ACB booked last fiscal year, so and fiscal year 'twenty..1 during COVID-19 is kind of impacting revenue growth this fiscal year.

So I guess I'm, just I'm curious, how and how should we think about that subscription revenue growth.

I guess over the next 4 to 6 quarters like is that going to accelerate once that lower ACB period kind of works its way through the results. Thanks a lot.

Thank you.

And so we saw the full impact from Triple T and the second quarter of last year, so growth will trend down.

Over the next couple of quarters it should bottom in the third quarter and then start building from there, but we had triple P. Ramping we had that onetime million dollar.

Accelerator or catch up revenue from our consortium and the third quarter, which should set the low point on year over year growth.

For the year and then we would expect that to trend up after the third quarter.

Okay. That's helpful. Thank you.

Thank you.

Thank you and our next question comes from Josh Beck with Keybanc. You May proceed with your question.

Thank you for taking the question.

I wanted to go back and peer to some of your commentary around this acceleration.

Digital transformation within the banking space and as you said, others certainly spoken to this but.

I guess curious within the tier 1 and true enterprise.

Types of customers.

Maybe youre seeing anything notably different about the pace at which they are starting to move this year versus say some of the other segments that are maybe more regional or community base. Just maybe curious if there's any notable differences about the pace at which some of those stakes.

<unk> R.

Embracing if you will these digital transformation projects.

Yes, So let me analyze and Margaret for you. This way if you look at the enterprise market. They buy by business unit. So we tend to sell to either the commercial bank.

Ball business.

Solution, which could shed by the way and commercial or retail or maybe you go to a retail solution, but it's and slice. It can be account opening and it could be a certain loan types are they tried to automate and make better okay. So they buy over long periods and the strategic planning sessions.

And budgets come up once a year and it depends what software they've gotten the balance sheet. So it's a much more bigger strategic view of debt when you start getting into the community and regional what do we see as more of a platform and on the I T.

And so.

Simplification decision process. So they would look more at the full platform as a solution.

They may still sometimes by 1 but you could see that they are looking at the full complement and actually look on a multiyear project that could do commercial first maybe on retail first and then go to small business and commercial auto account opening.

The community banks and the through.

Simple P was a little bit slower because they got impacted more and more disruptive.

But we start seeing debt at the end of last year and the beginning of this year start picking up again and that is a fantastic market for us so I'm seeing that accelerating.

Obviously, there's a lot more of those banks.

And so what I'm seeing is overall, it's really interesting. The conversation has moved from should we do this is as important and should have account opening etc to almost more of into a survival mode of I need this to be relevant in the future and.

And banks are looking at debt and they and they have to have these modern platforms with Apis to actually participate with your third parties, who wants it whether it's in the banking industry without being a bank whether it's low.

Loan origination or a credit card issuance or something and you're a big player entering that market piggybacking on some of these bank. So we can be very helpful and providing the platform how they can participate in this embedded banking future that we're seeing coming.

Very helpful and maybe a follow up for David is because we're starting to be a little bit further removed from the initial wave of Triple T.

Imagine you had made some assumptions around repurposing of those seats.

So I'm just curious maybe where things are standing versus maybe some of your.

The original expectations.

With regards to the Triple P and forgiveness seats.

Yes, I think what we've seen so far is pretty much in line with with what we thought now most of these are co termed with the original contract.

We've seen a handful of seats being redeployed elsewhere and the bank and.

And just a very low level of churn and it's all as we expected so no real change there and all of our expectations on the churn and and redeployments are and our numbers for the balance of the year as well, but pretty much so far as we expected.

Yes.

Good to hear thanks, Tim.

Thank you. Our next question comes from my <unk> Tandon with Needham and company, we have received and good questions.

Thank you and good evening congrats on the quarter peer could you go back and the international opportunity and I'm. Just curious is the regulatory differ.

Differences in various markets around the globe and I would imagine different compliance issues does that come into play when these banks and making decisions looking.

And looking to buy the encino platform or other 1 off products or is that even a hurdle or is that does that not be a factor when you're looking at these decisions being made.

No absolutely it plays.

Unfortunately in Europe, that's a.

A single retrofit compliance regime across Europe, and then would you find it and they might be nuances by country. Okay, but if you look at us going in with our flagship commercial product commercial is probably the least regulated.

The balance sheet is regulated and you have to understand your credit risk force.

Safety and soundness, but from a.

Below the origination piece.

We could take our product from here into international countries without massively having to change it so that opens up and home market for US then you get to retail and that's where the extra compliance and opportunities as well as our integration strategies, because there's different players on different backend cost.

And therefore, we've got a team in London that is analyzing the markets understanding the obstacles as well as a small contingent and building integrations, there and passing through specs for us here on how to change the product to make it applicable to all those.

But again as you look at the growth rates that we've shared with you. We are extremely pleased with our penetration in that market and the growth rates, we're seeing there.

Right now it's been.

And then if I can just layer on 1 more question around both the international and the domestic market.

And you scale up is it important to have Si partnerships and leverage them or do you believe that's not going to be sort of a critical aspect to your growth story at least over the near to medium term.

And the ASI partners is critical and strategic.

We've always said that the professional services to us.

And we'll do it at the low end of the market and that means as banks assets of 5 billion and below we like that as a teaching and learning ground for our people as well as taking care of that contingent of customers.

And people in that and knowledge and expertise along with our product expertise to assess the size and banks about 510 billion and all the way up to the very large ones. We believe to scale and go with this right and that's served partnering with the best of breed Si partners in the market as we've done on a global.

On a global stage so.

Those partners I'll go ahead and that with US we've got today.

Over 2000 people certified.

On the Encino platform by these partners and it's highly sought after.

Skill sets and.

See competition and the market for that skill set which bodes well for us.

That's helpful. Thank you so much congrats again thanks.

Thanks.

Thank you and our last question comes from Brad Hathaway with Macquarie. You May proceed and your question.

Thank you for taking the question and <unk> and the call here I think that many of the questions that have been interested and have been asked but there's a couple of things that I'd, just like to actually ask and clarify around your comments on localization as it reflects on your international go to market and it's something I think we've talked about in the past that.

When you're entering into a region you need to look at lots of course on languages and also local regulations et cetera. As I know you talked about earlier, so I'd like to ask generally speaking when you're entering a international market do you tend to go all in as the entire platform as 1 at once or do you tend to.

Perhaps like localized products bit by debt and then introduce them into a region and I'm curious how that's reflected in some of your wins and Jeremy rather your wind and Germany.

Yes, So let me first highlight something the force Com platform commerce with over 120 languages and more than 120 currencies. So we don't have to build those we do have to adjusted product for different integrations as well as might be local regulations, which is more relevant.

Retail side of the house versus the commercial side Okay.

And so what did we do is typically we go to a new country with a view of going at commercial and small business lending.

And as you know we have launched we can do unsecured consumer lending as well as.

We've launched a mortgage solution for Canada, and the UK right now so we actually look at these products and we launched the concept of the platform, but actually take to market those product lines to start with and then as we penetrate our country and just like we did the U S. If I can remind you started the company and.

Early 2012 late 2011.

And then for the first 5 years basically focused on commercial but we have to architect the customer databases and the records. So that we could build upon that as a platform and that's worked well for us and we approach the international market is exactly the same.

Thank you there and then just 1 last follow up question again about international markets, specifically, Japan and I realize.

It's early days, but last quarter, we talked about some of the investments that you're making into Japan, including your joint venture there.

Do you have any updates generally about your go to market in Japan, and more broadly Asia. After we've seen that strength and Europe quarter.

Yes, we've had the hour.

As I mentioned before our Japan conference there we saw great interest.

Clearly, there's a need for this kind of software and Japan as you could see if you track. The Olympics is really still in a lockdown mode and.

So it's a difficult market to take action, but we are seeding the market. We are evangelize, Inc. We're making great connections our.

Our partner in Japan, and Japan cloud is doing a fantastic job, putting us in touch with all the right people.

But as you know that's a conservative banking market.

So force has a nice presence there and I am highly optimistic.

Great. Thank you.

Thank you.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over and CPE or not in for any further remarks.

Well thank you all for.

And your time and attention today, we truly appreciate your support.

And I look forward to speaking with many of you at conferences and meetings in the coming weeks and I would like to take this opportunity to thank the employees of encino for their efforts and dedication through this period.

We are now open and Wilmington, and the excitement is building back coming back to the office and we are ready to change the world. So thank you for your time today.

Okay.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.