Q3 2022 nCino Inc Earnings Call

December 1, 2021

Okay.

Thank you for standing by and welcome to incident Inc's third quarter fiscal 2022 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press the star one on your telephone as a reminder, today's program may be recorded.

I would now like to introduce your host for today's program Harrison Masters from it.

Investor Relations. Please go ahead.

Good afternoon, and welcome to <unk> third quarter fiscal 2022 earnings call for the quarter ended October 31, 2021 with me on today's call are P. Arnaud de <unk> <unk>, Chief Executive Officer, David <unk>, Chief Financial Officer Joshua.

<unk>, President and Chief revenue Officer, and Greg Ornstein, Chief corporate development and strategy Officer.

During the course of this conference call. We may make forward looking statements regarding trends strategies and anticipated performance of our business, including without limitation. The proposed transaction between Encino and simple Nexus. These forward looking statements are based on management's current views and expectations and sales entailed certain assumptions made as of today's date and are subject to various risks and <unk>.

Certainties 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 in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K furnished with the SEC just before this call with that thank you for joining us and I will now turn it over to Peter.

Thanks, Alison and good afternoon, and thank you for all for joining US today. The third quarter was another strong quarter with impressive financial results highlighted by 32% growth in subscription revenues compared to the third quarter of last year, which as you may recall was also a very strong quarter as it included catch up.

Revenues related to the Triple P consortium that utilize our software to process Triple P loans.

Also achieved strong sales wins, this quarter, including adding new logos across multiple markets and signing several significant expansion deals with existing customers.

Before Josh walks you through some of the sales and operational accomplishments of the third quarter.

I want to take a few minutes to share my perspective on where we are today as a company, but I believe we are headed in the future and touch upon the simple Nexus transaction, we announced on November 16th.

When we first started and senior a decade ago, we focused on streamlining and commercial lending a cumbersome complex process with paper files in the spreadsheets and disconnected point solutions. Once we transform this process and were successful, bringing it to small community banks and credit unions.

We moved upmarket to larger institutions, and then internationally yes.

Yesterday, you might have seen our announcement that our commercial banking solution was again named best in class by I take group, an independent research and advisory firm focused on financial services.

<unk> is the only technology vendor to achieve this recognition three consecutive times.

This is yet another strong endorsement for our flagship commercial product.

However, we.

We did not just the risk on the success, we've had with our commercial lending solution.

Staying true to our mission of transforming the financial services industry through innovation reputation and speed, we developed multiple new products to solve our customers' challenges.

Our product portfolio now spans Treasury management deposit account opening onboarding.

<unk> business lending and retail lending all on a single customer focused cloud platform.

We believe our platform is a competitive differentiator for us in the market and we have aligned our entire organization around ensuring each and every one of our products is best of breed.

And that is a key reason why I'm. So excited about the simple Nexus acquisition.

We believe their mobile first cloud native digital home on their platform.

The best in the market today, and it's extremely complementary to our existing business and product suite.

While we weren't necessarily looking for our first acquisition as a public company to be of the size and scale.

They were many unique and attractive aspects about simple Nexus for example, simple Nexus has an impressive customer base across the U S with strong retention and references in fact during our due diligence process as we spoke with some of their customers one of their large regional bank <unk>.

Describe simple nexus.

A game changer for the bank and raved about the product functionality ease of use and speed of loan closing.

Additionally, simple and excess has a fantastic experience team with demonstrated the ability to grow quickly and scale.

<unk> has a similar fee based recurring revenue model to Encino initially expands our Sam by over $4 billion.

And has the technology and domain expertise to enable us to accelerate.

The development of additional platform journeys and mobile point of sale offerings to provide seamless consumer experiences across multiple lines of business and use cases over time.

Simple Lexus is more than just front in software to facilitate mortgage applications.

It is a leading mobile first cloud native homeownership platform that provides us with yet another market to drive digital transformation and long term revenue growth for Encino.

There are not many companies out there with all of the characteristics I, just mentioned and as we evaluate it simple Nexus we knew they would a terrific complement to our core business and that this acquisition was the right thing to do for our customers our company and our stockholders.

We look forward to updating you further about this acquisition and the opportunities we collectively see once this transaction closes and we officially welcomed simple nexus into the Encino family.

Before I turn the call over to Josh I want to note again, how pleased I am with the results of the third quarter.

Truong salesman's, new logos added across the globe and continued execution from our entire organization.

As a company we.

We remain laser focused on growing our business, taking care of our customers and building and delivering the highest quality and most innovative banking software in the industry.

And with that I will now turn it over to Josh.

Thanks, Pierre it's great to be on with you all today and I'm excited about the progress we've made in the third quarter before I get into the details I want to say it was really great last quarter to be back in front of customers and his senior team members and other offices during the third quarter I was lucky to spend time with our team in London, the visit prospects on the continent and to attend numerous casino hosted customer meetings.

And events across the U S with fantastic participate in face to face meetings and in person events again.

Turning to the specifics of the quarter, one new logo I am very excited about is care Bacci Bank as you know is first customer in Japan.

She is a Tokyo based regional bank with assets of more than $53 billion in U S dollars that will use the <unk> platform for its business financing division as.

As you've heard us say before the first logo and a new countries by far the hardest one I'm incredibly proud of the <unk> team and their commitment to land the first customer in Japan, particularly with the backdrop of Covid, Japan is a strategic market for us the country is home to a large industry and has over 600 banks with a sizeable upmarket with approximately 40.

6% of them, having over $5 billion USD and asset.

The Japanese regional bank market looks very similar to the U S retail market, we had many commercial banking customers today.

Market, where encino has executed well for years and we see a great opportunity in Japan to help these banks overcome challenges and drive growth through digital transformation.

We added other logos in the third quarter across multiple geographies, including signing a new enterprise Bank in New Zealand and a new bank in the UK. We also added new numerous logos in the U S across asset classes and solutions, such as Armstrong Bank and nearly $3 billion bank based in Oklahoma, we signed onto the Encino Platts.

<unk> vision as they purchase purchased our commercial small business retail lending and deposit account opening solution.

Armstrong Bank clearly sees the value of the bank operating system, bringing together multiple lines of business on a single end to end cloud based platform.

In addition to some notable new customer wins and extremely proud of the team for several great land and expand sub market. This quarter. One of these included a new expansion with the top 50 U S bank about $50 billion in assets.

Initial use cases actually PPP.

This bank was first introduced to US last year Green Covid on the strength of our successful partnership for sharing TPP. This enterprise institution is now greatly expanded their use of <unk> beyond PPP to include India in commercial and small business lending.

You've heard Peter say, many times that while we were happy when we signed new contract track, what we'd really celebrate her to go lives. This is a moment that our financial institution start to originate loans onboard customers or open accounts platform.

I am pleased to share that we had a record number of go lives in the third quarter with over 25 core platform and over 40 portfolio analytics customers beginning to enjoy business value from their investment.

One notable go lives. This quarter included a $2 6 billion asset Bank, who went live on <unk> commercial banking solution in about six months.

Other highlights include a large credit union going live in our deposit account opening solution a regional bank in the northwest who went live on <unk> Treasury management solution and a full service community bank in the southeast.

Several hundred users live on <unk> small business solution.

In the third quarter. We also took our first UK customer lives on our international mortgage solution.

This customer has fully originated and funded they're first mortgages using Athena and is already seeing value in the form of faster closing times.

The single biggest go lives this quarter was with <unk> Bank, which is the result of the 2019 merger of equals between BB&T and Suntrust.

Youll recall Suntrust was one of our longstanding partners.

Today is the six largest banks in the U S Bill Rogers.

<unk> highlighted this is Gino go lives during tourists third quarter earnings call on October the.

The 2500, BB&T teammates who joined their heritage Suntrust teammates on Encino are now better positioned to serve their clients and the bank has better visibility into their lending activities equally.

Equally important as bill highlighted the Encino upgrades also laid the foundation for future future digital innovation with.

We are deeply appreciative of the hard work of our <unk> teammates as well as our strategic system integration partners, who made this program a success during a remote work COVID-19 conditions.

I want to thank all of our CIO teams for their hard work and continued execution of the third quarter and with that I'll turn it over to David to tell you more about the numbers David Thanks.

Thank you Josh and thanks, everyone for joining us this afternoon to review our third quarter financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated.

Our non-GAAP financial information excludes the impact of stock based compensation the amortization of intangible assets expenses related to the acquisition of simple Nexus and expenses related to the government antitrust 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 form 8-K furnished with the SEC.

We are very pleased with our third quarter results and how well it positions us for a strong finish to the fiscal year total.

Total revenues for the third quarter of fiscal 'twenty, two were $70 million, an increase of 29% year over year.

Subscription revenues were $57 1 million, an increase of 32% year over year, representing 82% of total revenues.

During the quarter, we saw a balanced sales contribution from new and existing customers, including the very nice upsell from a triple play customer that Josh mentioned earlier.

Professional services revenues were $13 million in the quarter growing 18% year over year, reflecting another solid billing and utilization quarter.

Non U S revenues were $11 7 million or 17% of total revenues in the quarter up 77% year over year, our international business has matured to the point, where subscription revenues are the driver of growth with professional service services normalizing as a percent of total revenues.

As a reminder, we utilize our partners to deploy our software in the majority of our international projects, which May result in moderation of international professional services revenue growth in the future.

Non-GAAP gross profit for the third quarter of fiscal 'twenty, two was $44 6 million compared with $33 million in the third quarter of fiscal 'twenty, one an increase of 35% year over year.

Non-GAAP gross margin was 64% compared to 61% in the third quarter of fiscal 'twenty one.

Our gross margin continues to improve largely from subscription product mix.

Sales and marketing expenses for the third quarter of fiscal 'twenty, two we're at $18 5 million or 26% of total revenues.

Compared to $12 6 million or 23% in the third quarter of fiscal 'twenty one.

Increase in costs reflect investments in our global expansion, including additional salespeople on the continent in Europe.

And increased marketing expenses to further build out our international brand.

We also saw a higher level of demand for in person events, which resulted in incremental spending on conference and travel related costs.

Research and development expenses for the third quarter of fiscal 'twenty, two we're $18 6 million or 27% of total revenues compared to $14 million or 26% for the third quarter of fiscal 'twenty one.

We continue investing across our platform.

With a particular focus on maturing our retail products.

<unk> on our commercial pricing and profitability solution.

Adding functionality to our auto spreading solution and ongoing investments in our market leading commercial product.

General and administrative expenses for the third quarter of fiscal 'twenty, two or $10 6 million or 15% of total revenues compared to $9 1 million or 17% in the third quarter of fiscal 'twenty one.

In the third quarter, we incurred approximately $2 million and the costs related to the antitrust matters and $900000 and the costs related to the simple Nexus acquisition, which are not included in our $10 $6 million G&A expense.

Given these are non operating expenses, we are excluding these costs from our non-GAAP operating income results and guidance.

Non-GAAP operating loss for the third quarter of fiscal 'twenty, two was $3 2 million.

Compared with our non-GAAP operating loss of $2 7 million in the third quarter of fiscal 'twenty one.

Our non-GAAP operating margin for the third quarter was negative four 5%.

Compared with negative 5% in the third quarter of fiscal 'twenty one.

Non-GAAP net loss attributable to Encino for the third quarter of fiscal 'twenty, two was $4 1 million or <unk> <unk> per share compared to non-GAAP net loss attributable to encino of $3 million or <unk> <unk> per share in the third quarter of fiscal 'twenty one.

Turning to cash.

We ended the quarter with cash and cash equivalents of $381 million.

Net cash provided by operating activities totaled negative $19 1 million for the third quarter compared to negative $10 8 million in the third quarter of fiscal 'twenty one indicative.

Indicative of a seasonally slower billings and collections quarter.

Capital expenditures were approximately $2 4 million in the quarter, resulting in free cash flow of negative $21 4 million <unk>.

Consistent with our normal billings and collection seasonality.

We expect negative cash from operations through the balance of the year.

Total <unk> increased to $718 million up 58, 5%.

Over $452 9 million in the third quarter of fiscal 'twenty one.

The portion of RPM greater than 24 months was up 93% over the third quarter of fiscal 'twenty $1 million to $297 million.

And <unk> less than 24 months increased 41% to $421 million.

The increase in <unk> on the quarter was driven primarily by new customer adds.

Along with our strong performance in the quarter. We are excited by the announced simple Nexus transaction.

We expect which we expect to close by the end of our fiscal year ending January 31.

As previously mentioned, we expect simple nexus will be immediately accretive to growth.

Turning to guidance.

For the fourth quarter, we expect total revenues of $68 5 million to $69 5 million.

And subscription revenues of 57 million to $58 million.

This guidance assumes a seasonality impact on professional services.

Non-GAAP operating loss is expected to be approximately $8 million to $9 million.

Non-GAAP net loss attributable to <unk> per share is expected to be nine to 10.

Based on a weighted average of approximately $97 1 million basic outstanding shares.

As a reminder, our guidance does not include any impact from the operating results of simple Nexus.

We are increasing our guidance for the full fiscal year 'twenty two as follows.

We expect total revenues of $267 million to $268 million and subscription revenues of $219 million to $220 million.

We also expect non-GAAP operating loss for fiscal 'twenty, two to be $18 million to $19 million and non-GAAP net loss attributable to <unk> per share to be 'twenty to 'twenty one.

Based on a weighted average of approximately $95 9 million shares outstanding.

Our operating loss expectations assume an incremental increase in business travel and normal seasonality of expenses in particular elevated variable compensation for our sales professionals.

We are very pleased with the results for the third quarter with solid financial performance and the continued momentum and execution across the company.

It is a busy time of year and I want to thank our encino team members for all their hard work and dedication.

And with that we will now open the line for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.

First question comes from the line of socket, Kenya from Barclays Capital. Your question. Please.

Hey, guys. Thanks for taking my questions here and congrats on on the asset.

Thanks, Hey, guys.

Josh maybe maybe I'll start with you.

It was great to hear some of those international deals that that you cited I was just wondering can you just talk a little bit about the <unk>.

Pipeline for international generally.

And how that competitive landscape, maybe compares to the U S does that makes sense.

Absolutely and if you'll recall about a year ago, we really started putting people in market in western Europe. Our initial presence in a lot of our first accounts in EMEA and the UK.

Hey in Ireland and.

And we've continued to expand into western Europe. So those markets are nuanced.

Required local attention and is the overall pipe continues to grow we see corresponding growth in those markets with that local focus cultural and language capability.

The international pipes at about half of overall pipe and we're pleased with the progress.

That's great that's great great to hear.

David maybe for you.

I appreciate that.

The separation of guidance right organic and simple next is sort of separate until until it closes.

You're saying, we're not going to talk about simple next too much but.

I was wondering.

If you could talk a little bit about sort of their contract structure and maybe just as you start to go through some of the purchase accounting here can you give us a sense for maybe how significant the deferred revenue impact there could be yes.

Yes. Thanks.

Once the deal closes, which we expect by the end of our first quarter.

We will update accordingly, after that in the fourth quarter and the fourth quarter, sorry, and.

From simple Nexus the majority of their contracts are billed monthly and so we would not expect to see a large impact on deferred revenues from purchase accounting.

That's very helpful got it thanks, a lot guys I appreciate it congrats again thanks.

We have a good luck. Thank you.

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

Yes, Thanks for taking my questions hop here, Dave Josh and Greg I think I got that right.

There are a bunch of things here I'm able to unveil another foreign language sure. So I guess I would say <unk>.

Great to see.

Yes.

Japan, Thanks Neal.

Yes, so I got that all the way now I have two questions.

First question is.

I heard a fair number of new bank deals mentioned in prepared remarks, the deal in Japan, that's great New win there New Zealand UK, some community banks and regional banks in the U S. So I'm just kind of curious does it feel like there is a pickup in demand in decision cycles and close rates for new logos I know those take longer because they are not existing relay.

<unk> chips, but how does it feel in terms of the propensity to close deals right now and then thoughts into <unk> is that typically a seasonally stronger quarter for these new deals and then I had a follow up.

Absolutely and the seasonality of the business the third quarter is.

Not what the fourth quarter is we're really pleased with how the third quarter was.

We closed that quarter I would say I don't know that were back to pre COVID-19 levels, but this is the most active.

That we've seen and that was with more business as usual activity.

Not the PPP net COVID-19 driven thing so we're quite excited and pleased with how the team executed and we see customers taking the force reckoning from the last few years and translating that into action.

Got it thanks, Josh in my follow up question for Dave.

Last year between the <unk> <unk>, there was actually I think a seasonal decline in total <unk>, and then 24 months or less Rps and maybe Josh just answered part of this but it seemed like you bucked that trend and I don't know if that was the right seasonality last year and this is kind of abnormal but is there something to be said also for just the book of business and the strength in the quarter.

Vis vis the sequential increase in current.

24 months or less Rps.

Yes, I think we had a really good quarter overall remember last year was still triple P related so there were.

Lower duration contracts in that in that quarter last year and so this year was it was a more normal quarter was well balanced, but we saw some larger longer duration contracts, but overall it was a very solid quarter from a sales perspective.

Okay, great well ended with a compound wall. So thank you.

Alright. Thank.

Thank you Barry.

Thank you. Our next question comes from Josh Beck from Keybanc. Your question. Please.

Thanks for taking the question and excited to hear about the in person meetings not sure I was going to say that but glad glad to see that.

It might be a little too early to ask this but.

After you announced the simple Nexus acquisition curious maybe any early feedback you've received from partners customers alike.

Better held for a later call also happy to to wait.

Hey, Josh Thanks for calling in and your question no I cant give you some anecdotes because you do get calls from customers et cetera, and I am pleased to tell you that we've got a very positive response.

Both from our clients.

Well as we speak to assemble Nexus team.

Planning.

The closing of this deal we get a similar very positive feedback as you know these two companies both are very client centric. They both are very focused on the success of their customers and I think that's playing out now as people begin to understand the power of the two solutions together as well as the front of the cultures.

So very pleased with the initial reaction.

Very good to hear and maybe not sure where this question.

The management team, but I'm just curious as you are discussing with your bank customers their priorities for next year.

Certainly think we're we're through the triple P and forgiveness waves digital.

Really seem to ramp up as an initiative. This year, you, obviously have onboarding and many other solutions. So I'm just curious as you think about the prioritization for next year and in terms of your bank executive conversation how is that shaping up.

Yes.

What we're seeing overall is that banks aren't coming back specifically in the U S. The community regional.

Back to focusing on transforming themselves to be relevant for the future.

As you know our platform story plays well into that.

So what we're seeing is banks are refocused on the strategies for long term survival and relevant.

And it plays very well into that we are back on message with our platform play.

Sure.

All of us going to the cycle was to <unk> and other things. So now it's all about the platform. It's all about digital transformation for the long term.

And we're very excited about it.

Excellent well, thank you Pierre and thanks team.

Thank you. Thank you.

Our next question comes from the line of Bob Napoli from William Blair. Your question. Please.

And good afternoon.

It's great to see the progress on international and now that it's becoming a really material part of the business. I was wondering maybe if you can give a little color on the mix of subscription versus professional services.

In the international and then the gross margins I guess with the margins relative to the U S business. Yes. Thanks, Yes, we're not going to discuss margins on this call, but I can say in terms of revenues that <unk>.

Subscription revenues are growing at triple digits, and so the services business is slowing a little bit we're hitting a level, where we're going to re farm outs or re engage our partners to deploy software for us in all the countries that we're selling into.

We expect services revenues will decline on a year over year basis in the future, but that subscription revenue is still strong.

Thank you.

Accenture in one of your announcements and just in that pipe I guess, you also announced a couple of challenger banks.

Internationally, yes.

Focus for you and then.

Given that the first one is the hardest to get you've added France, Germany, Japan with 50% of your pipeline and Theyre going to actually can you give any color on.

Kind of the geographic strength are you seeing others lineup.

The market you just entered and then any color on the.

The challenger bank wins or effort.

Yes challenger banks.

Part of the normal go to market strategy I mean, some of them come some try to build their own software entrusted unrealized later on they should.

Six of them.

When you look overall.

Three years ago, we started with these investments in the international markets specifically in country in Europe.

All of those are beginning to pay off now we see good activity.

I equate this way back to in 2014 and 15, when we started the enterprise business in the U S. We made similar investments we went public at the time and over time it pays off so I see similar frac patents.

And I'm optimistic that over time that will come around.

Thank you I appreciate it.

Thank you.

Thank you. Our next question comes from the line of my own Tandon from Needham Your question. Please.

Hey, Good evening guys. This is actually Kyle Peterson on for <unk>, Thanks for taking the questions.

I wanted to touch on competition, specifically in the account opening side are you guys seeing any changes in the competitive environment I know a few other banking software players have been kind of making some announcements in the space. So just wanted to see if you've noticed any change in the landscape.

We continue to see competition from point solutions as we always have and it's our goal to build solutions across everything that we offer to our customers that are best in class and bring them back to a single platform vision. We think if you pick a point solution and did you pick another one you're going to wake up in several years and from an employee and customer experience.

<unk>.

I think regulatory burden that the bank efficiency perspective, you really wont have progressed.

So our goal is to build something that stands alone on its own.

Ties into that robust platform, we think thats duration the industry needs to add yes, I mean, it's not only the platform play. It's also that many of those solutions are more of a front end or a point of sale solution.

We can do front end as well as the branch transformation.

Older bankers.

<unk> experience. So you can started online you can go into a branch and completed there.

We see significant differentiation is more difficult to build upfront, but over time I think that's the better way to could be bank to be more like a fintech.

That's helpful. And then I guess, just one follow up on the professional services the margin the gross margins, especially kind of a second consecutive quarter.

With him.

Significantly higher than at least what we had been seeing previously is there anything kind of one time.

That's been pushing utilization higher something that or anything we should be thinking about moving forward is we're kind of thinking about the services gross margins yes.

Yes, we saw we've been seeing a lot of strength out of Europe, and we had a couple of customers go live in the quarter, which triggered revenues.

I'd anticipate that those margins will come down in Q4.

And impact our total gross margins overall, but yes, we've seen some really good activity high utilization rates good billings.

On a PSL.

But yes, we expect to see a seasonality impact in the fourth quarter.

Got it that's helpful. Thanks, guys nice quarter. Thanks, Thanks, a lot.

Thank you. Our next question comes from the line of Ken <unk> from Autonomous Research. Your question. Please.

Yeah, Hi, everyone. Good afternoon, and thanks for taking the question.

I wanted to ask you about simple nexis.

One thing we've noticed is that mortgage activity really picked up in.

Call. It 2019 2020.

So can you talk about how much simple nexis benefited from that increased activity and does that lead to any tougher comps to grow over in calendar year 'twenty, two and 'twenty three.

Thanks for your call or your question Great question. So.

The thing I would remind you obviously at some point <unk> seed based revenue model and as you recall when we announced the deal we actually discussed this we.

We actually looked at the trending revenue over time.

Specifically with lower volumes in 2018, the entrances into 19 et cetera, and you don't see the peaks and valleys with them as you would see with the people who plays in the mortgage volume game, where they actually charged by the transaction and that's what made it so attractive for US is that that also proceed and when there's a downturn in mortgage volume would be.

See as these typical independent mortgage banks cut back on the middle back office, but they keep the salespeople in place per Se a commission based okay, which means they have to keep the seeds for the licenses for the software.

So we loved that financial model, they've followed and historically, we have not seen the peaks and valleys as we've seen with other companies with a different financial model. So we are actually very optimistic that this was a great fit for us.

Okay. That's really helpful and then I think.

You guys mentioned that simple next it is immediately accretive to revenue growth I mean are we.

We're talking about revenue growth, 40% or is it closer to 50, 560% just trying to get a sense for how much faster, it's growing compared to core <unk>.

No.

And then any comments on the sustainability of that growth.

Yes, Thanks, Ken.

Like we said earlier, we will update after we close the transaction.

So we're not going to get into any of the details on their growth rates, we did disclose their trailing 12 month.

Our revenue growth and we also talked about their forward annualized growth based on our September number, but thats all were going to disclose right now yes. It was the trailing 12 months was $41 million in 50 654 different going forward was to September times 12 annualized number.

Great. Okay. Thank you guys I'll leave it there.

Thank you.

Thank you. Thanks for reminder, if you have a question at this time. Please press Star then one our next question comes from the line of Alex Sklar from Raymond James Your question. Please.

Thanks, Jonathan I wanted to ask about your result of kind of the time on the road you've been selling successfully virtually for the past 20 months and I know, it's early but curious to hear if there's any noticeable changes in terms of building pipeline, our close rates and how thats influencing your plans for more travel next year.

Yes, we are proud of how we've executed and remote work conditions.

On the other side of this is the reality that we are a business process transformation company and Theres business leaders on the other side that are making.

Not really technical decisions that theyre picking a partner so we believe and the people that we have representing encino in the field and when we can get them.

In front of customers and develop those relationships they can understand the culture and the value proposition even better.

And we would hope that that will continue to help those conversations accelerate.

Got it okay, and one follow up David.

The implied fourth quarter subscription guide coming out of the really strong. This quarter result, I think when you exclude the onetime revenue from last year. It implies about 35% growth for this current quarter versus the kind of 28% at the midpoint I'm just curious if there's anything to call out there in terms of one timers or seasonality or if this is kind of just standard conservatism any other color there.

Thanks.

Just like we saw last Q4 on a sequential basis, we're seeing just a lower level of activations as we talked about in the past our activations are lumpy.

Order to quarter. It just depends on how the contract was negotiated with customers and so we're seeing is kind of what we expect to see a seasonal impact on lower activations in the fourth quarter.

Okay, great. Thanks.

Thank you.

Our next question comes from the line of Brent <unk> from Piper Sandler Your question. Please.

Hi, This is Clarke Jeffries on for Brent.

First question you mentioned the expansion of our top 50 U S Bank Bank grew from an initial triple T use case.

I guess just stepping back could you give us a sense of how successful that effort has been.

Transferring or expanding that contract value in 'twenty, two and others still triple P. Only use case banks that are in the pipe for potential expansion.

Not much else to speak about today, we are proud of that validation of how we executed for them.

As we continue on with the year and into next year. The goal is obviously to continue taking those relationships.

And come back to the wheelhouse in India and vision that we have.

Its a great validation of how we succeeded.

Forging that relationship and we'll continue taking that story out.

Yes, and I want to emphasize if you recall, we have specific therapy contracts in Android with a bunch of it.

Coterminous.

And so you Wouldnt go upfront and get that so you wait for that contract to come through the renewal date, and then actually negotiated there was just so there is some <unk> thats still out there that we have to negotiate but that's part of the co terminus contracts.

And we've got such a good relationship with these customers I'm optimistic.

It will go well, but yes, there is some type of overhang there.

Yes, we're still we.

We still expect $18 million this year for triple periods. So theres no change to what we have discussed previously as a total company total this year.

Alright, great and I think my follow up question was actually maybe on that co terminus.

Topics.

Looking at deferred revenue, obviously is seasonal seasonally weaker quarter in Q3, typically but were there changes in renewal terms that might have moved around Q3 kind of deferred revenue interesting like.

Maybe an outlier in terms of the quarterly change.

Yes, no there's nothing in there triple peer related.

I think Q3 is our seasonally weakest quarter.

And that's just historically been a lower bookings quarter for us in lower billings quarter.

And we would expect that to continue in the future.

Great and then one last clarifying question.

Could you remind us if you're booking in our <unk> in U S dollars or in local currency, when we actually shouldn't even be aware of FX impact maybe on <unk> going forward.

Yes, it's all based on U S dollars, our appeals based on U S dollars.

It's a minimal impact on foreign currency exchange rates at this point.

Okay. Thank you thank.

Thank you.

Thank you. Our next question comes from the line of Charles <unk> from Stephens. Your question. Please.

Good afternoon, and thank you for taking my question could you comment on the pace of investment internationally.

<unk> been talking about getting feet on the ground in some of your foreign markets for a couple of quarters now and it looks like Youre getting some traction there but are we at a point or are we nearing a point where the infrastructure for <unk>.

The growth initiatives are in place and we could see some sort of moderation in spending abroad.

Yes, so we've made very large investments this year.

Relatively speaking large investments so we place people on the ground in Germany, Spain, France.

Italy.

And I would say the large investments are done for the time being as we see upside to bookings and customer activity, we will add incrementally, but I would say at this point internationally, we have the large investments in place and we will see additional adds incremental smaller ads in the future as we are successful.

Great. Thank you and secondly could you comment on the impact of consolidation in the banking industry on your business clearly a client base is skewed towards growth focused institutions. So it could could it potentially be a positive to your business win and acquired institution potentially at the ops.

Adopts casino.

Yes, and if you think to the prepared comments here.

If you look at the example of <unk> Bank, which is the type of BB&T and Suntrust.

And their Ceos comments that they're essentially positioning for the future with Encino, we would think that the kind of banks that are making that kind of investment or wouldn't go best of breed.

Earlier this year, we spoke about first horizon as well similar where you have a lot of the regional banks.

That are pursuing an M&A route to try to compete with tech.

And we believe we are well positioned to support them as they as they get ready to tie up and I'll try to go bigger.

Great I appreciate the color nice quarter. Thank you. Thank you very much.

Thank you.

This concludes the question and answer session of today's program I'd like to hand, the program back to Peter.

CEO for any further remarks.

Thank you for your time today and your continued support we look forward to speaking with many of you in the coming weeks and hope everyone has a safe healthy and happy holiday season.

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

Sure.

[music].

Yeah.

[music].

Thank you for standing by and welcome to Sito Inc's third quarter fiscal 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded.

I would now like to introduce your host for today's program Harrison Masters from.

Investor Relations. Please go ahead.

Good afternoon, and welcome to <unk> third quarter fiscal 2022 earnings call for the quarter ended October 31, 2021 with me on today's call RP Arnaud de <unk>, Chief Executive Officer, David <unk>, Chief Financial Officer, Josh clever.

<unk> and Chief revenue Officer, and Greg Ornstein, Chief corporate development and strategy Officer.

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.

Revenues related to the Triple a consortium that utilized our software through process to rupee loans.

We also achieved strong sales wins, this quarter, including adding new logos across multiple markets and signing several significant expansion deals with existing customers.

Before Josh walks you through some of the sales and operational accomplishments of the third quarter.

When we first out of the senior a decade ago, we focused on streamlining commercial lending a cumbersome complex process with paper files and the spreadsheets and disconnected point solutions. Once we transform this process and were successful bringing into small community banks and credit unions.

We moved upmarket to larger institutions and then internationally.

Yesterday, you might have seen our announcement that our commercial banking solution was again named best in class by I'd say group, an independent research and advisory firm focused on financial services.

And <unk> is the only technology vendor to achieve the segregation of three consecutive times.

This is yet another strong endorsement for our flagship commercial product.

However, we.

We did not just the rest on the success, we've had with our commercial lending solution stack.

Staying true to our mission of transforming the financial services industry through innovation reputation and speed, we developed multiple new products to solve our customers' challenges.

Our product portfolio now spans Treasury management deposit account opening onboarding small business lending and retail lending all on a single customer focused cloud platform. We believe our platform is a competitive differentiator for us in the market and we have aligned our entire.

We're organization around ensuring each and every one of our products is best of breed.

And that is a key reason why I'm. So excited about the simple <unk> acquisition.

We believe their mobile first cloud native digital home Anessa platform is the best in the market today and is extremely complementary to our existing business and product suite.

While we weren't necessarily looking for our first acquisition as a public company to be of the size and scale.

There are many unique and attractive aspects about simple Nexus for example, simple and excess has an impressive customer base across the U S with strong retention and references.

In fact during our due diligence process as we spoke with some of their customers one of their large regional bank customers describe simple access as a game changer for the bank and raved about the product functionality ease of use and speed of loan closing.

Additionally, simple access has a fantastic experience team, which has demonstrated the ability to grow quickly and scale simple Nexus has a similar fee based recurring revenue model to Encino initially expands our Sam by over $4 billion.

It has the technology and domain expertise to enable us to accelerate.

The development of additional platform journeys and mobile point of sale offerings to provide seamless consumer experiences across multiple lines of business and use cases over time.

Simple axis is more than just front and software to facilitate mortgage applications.

It is a leading mobile first cloud native homeownership platform that provides us with yet another market to drive digital transformation and long term revenue growth for Encino.

There are not many companies out there with all of the characteristics I just mentioned and is reevaluated simple Nexus we knew they were a terrific complement to our core business and that this acquisition was the right thing to do for our customers our company and our stockholders.

We look forward to updating you further about this acquisition and the opportunities we collectively see once this transaction closes and we officially welcomed simple nexus into the Encino family.

Before I turn the call over to Josh I want to note again, how pleased I am with the results of the third quarter the.

The strong sales once new logos added across the globe and continued execution from our entire organization as a company. We remain laser focused on growing our business, taking care of our customers and building and delivering the highest quality and most innovative banking software in the IND.

History.

And with that I will now turn it over to Josh.

Thanks, Pierre and it's great to be on with you all today and I'm excited about the progress we made in the third quarter before I get into the details I want to say it was really great last quarter to be back in front of customers and his senior team members and other offices during the third quarter I would like you to spend time with our team in London, the visit prospects on the continent and to attend numerous encino hosted customer meetings.

And events across the U S is fantastic to participate in face to face meetings and in person events again.

Turning to the specifics of the quarter, one new logo I am very excited about is <unk> bank and <unk> first customer in Japan, Hirabayashi as a Tokyo based regional bank with assets of more than $53 billion in U S dollars that will use the <unk> platform for its business financing division.

6% of them, having over $5 billion USD and assets.

The Japanese regional bank market looks very similar to the U S. EMEA regional market, we had many commercial banking customers today, that's a market where as you know is executed well for years and we see a great opportunity in Japan to help these banks overcome challenges and drive growth through digital transformation.

One vision as they perch purchased our commercial small business retail lending and deposit account opening solution.

Armstrong Bank clearly sees the value of the bank operating system, bringing together multiple lines of business on a single end to end cloud based platform.

Initial encino use cases actually PPP.

You heard Peter say, many times that while we are happy when we signed new contracts track, what we'd really celebrate or the go lives. This is a moment that our financial institution and start to originate loans onboard customers or open accounts I mean, <unk> seen a platform.

One notable go lives. This quarter included a $2 6 billion asset Bank, who went live on <unk> commercial banking solution in about six months.

Several hundred users live on <unk> small business solution.

In the third quarter. We also took our first UK customer lives on our international mortgage solution.

Customers fully originated and funded they're first mortgages using in CNS and is already seeing value in the form of faster closing times.

The single biggest go lives this quarter was with <unk> Bank, which is the result of the 2019 merger of equals between BB&T and Suntrust.

Youll recall Suntrust was one of our longstanding partners.

Curious today as the sixth largest banks in the U S Bill Rogers.

<unk> highlighted this is Gino go lives during <unk> third quarter earnings call on October the.

Equally important as bill highlighted the Encino upgrades also lay the foundation for future future digital innovation with.

We are deeply appreciative of the hard work of our Encino interest teammates as well as our strategic system integration partners, who made this program a success during a remote work COVID-19 conditions.

I want to thank all of our CIO teams for their hard work and continued execution of the third quarter and with that I'll turn it over to David to tell you more about the numbers David Thanks.

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 form 8-K furnished with the SEC.

We are very pleased with our third quarter results and how well it positions us for a strong finish to the fiscal year total.

Total revenues for the third quarter of fiscal 'twenty, two were $70 million, an increase of 29% year over year.

Subscription revenues were $57 1 million, an increase of 32% year over year, representing 82% of total revenues.

During the quarter, we saw a balanced sales contribution from new and existing customers, including the very nice upsell from a triple b customer that Josh mentioned earlier.

Professional services revenues were $13 million in the quarter growing 18% year over year, reflecting another solid billing and utilization quarter.

Non-GAAP gross profit for the third quarter of fiscal 'twenty, two was $44 6 million compared with $33 million in the third quarter of fiscal 'twenty, one an increase of 35% year over year.

Non-GAAP gross margin was 64% compared to 61% in the third quarter of fiscal 'twenty one.

Our gross margin continues to improve largely from subscription product mix.

Sales and marketing expenses for the third quarter of fiscal 'twenty, two we're at $18 5 million or 26% of total revenues.

Compared to $12 6 million or 23% in the third quarter of fiscal 'twenty one.

Increase in costs reflect investments in our global expansion, including additional salespeople on the continent Europe.

And increased marketing expenses to further build out our international brand.

We also saw a higher level of demand for in person events, which resulted in incremental spending on conference and travel related costs.

Research and development expenses for the third quarter of fiscal 'twenty, two we're $18 6 million or 27% of total revenues compared to $14 million or 26% for the third quarter of fiscal 'twenty one.

We continue investing across our platform.

With a particular focus on maturing our retail products Bill.

Building on our commercial pricing and profitability solution.

Adding functionality to our auto spreading solution and ongoing investments in our market leading commercial product.

General and administrative expenses for the third quarter of fiscal 'twenty, two or $10 6 million or 15% of total revenues compared to $9 1 million or 17% in the third quarter of fiscal 'twenty one.

In the third quarter, we incurred approximately $2 million and the costs related to the antitrust matters.

And $900000 in the costs related to the simple Nexus acquisition.

Not included in our $10 $6 million G&A expense given.

Given these are non operating expenses, we are excluding these costs from our non-GAAP operating income results and guidance.

Non-GAAP operating loss for the third quarter of fiscal 'twenty, two was $3 2 million compared.

Compared with our non-GAAP operating loss of $2 7 million in the third quarter of fiscal 'twenty one.

Our non-GAAP operating margin for the third quarter was negative four 5%.

Compared with negative 5% in the third quarter of fiscal 'twenty one.

Non-GAAP net loss attributable to <unk> for the third quarter of fiscal 'twenty, two was $4 1 million or <unk> <unk> per share compared to non-GAAP net loss attributable to <unk> of $3 million or <unk> <unk> per share in the third quarter of fiscal 'twenty, one turning to cash.

We ended the quarter with cash and cash equivalents of $381 million.

Net cash provided by operating activities totaled negative $19 1 million for the third quarter.

Compared to negative $10 8 million in the third quarter of fiscal 'twenty, one and.

Indicative of a seasonally slower billings and collections quarter.

Capital expenditures were approximately $2 4 million in the quarter, resulting in free cash flow of negative $21 4 million <unk>.

Consistent with our normal billings and collection seasonality.

We expect negative cash from operations through the balance of the year.

Total <unk> increased to $718 million up 58, 5%.

Over $452 9 million in the third quarter of fiscal 'twenty one.

The portion of RPM greater than 24 months was up 93% over the third quarter of fiscal 'twenty $1 million to $297 million.

<unk> <unk> less than 24 months increased 41% to $421 million.

The increase in ARPA on the quarter was driven primarily by new customer adds.

Along with our strong performance in the quarter. We are excited by the announced simple Nexus transaction.

We expect which we expect to close by the end of our fiscal year ending January 31 <unk>.

As previously mentioned, we expect simple nexus will be immediately accretive to growth.

Turning to guidance.

For the fourth quarter, we expect total revenues of $68 5 million to $69 5 million.

And subscription revenues of $57 million to $58 million.

This guidance assumes a seasonality impact on professional services.

Non-GAAP operating loss is expected to be approximately $8 million to $9 million.

Non-GAAP net loss attributable to <unk> per share is expected to be 9% to 10.

Based on a weighted average of approximately $97 1 million basic outstanding shares.

As a reminder, our guidance does not include any impact from the operating results of simple nexis.

We are increasing our guidance for the full fiscal year 'twenty two as follows.

We expect total revenues of $267 million to $268 million and subscription revenues of $219 million to $220 million.

We also expect non-GAAP operating loss for fiscal 'twenty, two to be $18 million to $19 million and non-GAAP net loss attributable to encino per share to be 'twenty to 'twenty one.

Based on a weighted average of approximately $95 9 million shares outstanding.

Our operating loss expectations assume an incremental increase in business travel and normal seasonality of expenses in particular elevated variable compensation for our sales professionals.

We are very pleased with the results of the third quarter with solid financial performance and the continued momentum and execution across the company.

It is a busy time of year and I want to thank our encino team members for all their hard work and dedication.

And with that we will now open the line for questions.

Hey, guys. Thanks for taking my questions here and congrats on the excellent.

Thanks.

Hey, guys.

Josh maybe maybe I'll start with you.

It was great to hear some of those international deals that that you cited I was just wondering can you just talk a little bit about the pipeline for international generally.

And how that competitive landscape, maybe compares to the U S. At all does that makes sense.

Absolutely and if you'll recall about a year ago, we really started putting people in market in western Europe. Our initial presence in light of our first accounts in EMEA.

In the UK and Ireland.

And we've continued to expand into western Europe. So.

Those markets are nuanced than they were.

Wired local attention and is the overall pipe continues to grow we see corresponding growth in those markets with that local focus cultural and language capability.

So today, the international pipes that about half of overall pipe and we're pleased with the progress.

That's great that's great great to hear.

David maybe for you.

I appreciate that.

The separation of guidance right organic and simple next is sort of separate until until it closes.

And we're not going to talk about simple next too much but.

I was wondering.

Yes, yes.

Once the deal closes, which we expect by the end of our first quarter.

We will update accordingly, after that in the fourth quarter and the fourth quarter sorry.

<unk>.

From simple Nexus the majority of their contracts are billed monthly and so we would not expect to see a large impact on deferred revenues from purchase accounting.

That's very helpful got it thanks, a lot guys I appreciate it congrats again.

We have a good luck. Thank you.

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

Yes, Thanks for taking my questions hop here, Dave Josh and Greg I think I got that right.

Yes.

Here I am able to unveil another foreign language sure. So I guess I would say <unk>.

It's great to see.

Thank you.

Japan, Thanks Neal.

So yes, so I got that out of the way now I had two questions.

The first question is.

I heard a fair number of new bank deals mentioned in prepared remarks, the deal in Japan.

New in their New Zealand U K, some community banks and regional banks in the U S. I'm just kind of curious does it feel like there is a pickup in demand in decision cycles and close rates for new logos I know those take longer because they are not existing relationships, but how does it feel in terms of the propensity to close deals right now and then thoughts into <unk> is that <unk>.

Typically a seasonally stronger quarter for these new deals and then I had a follow up.

Absolutely and the seasonality of the business the third quarter is.

Not what the fourth quarter is we were really pleased with how the third quarter was.

As we close that quarter I would say I don't know that were back to pre COVID-19 levels, but this is the most active.

A quarter that we've seen and that was with more business as usual activity.

The PPP net Covid driven thing so we're quite excited and pleased with how the team executed and we see customers taking the forced ranking from the last few years and translating that into action.

Got it thanks, Josh in my follow up question for Dave.

Last year between the <unk> <unk>, there was actually I think a seasonal decline in total RPM, and then 24 months or less Rps and maybe Josh just answered part of this but it seemed like you Buck that trend and I don't know if that was the right seasonality last year and this is kind of abnormal but is there something to be said also for just the book of business and the strength in the quarter.

Vis vis the sequential increase in current.

24 months of <unk>.

I think we had a really good quarter overall remember last year was still triple P related so there were.

Lower duration contracts in that in that quarter last year and so this year was it was a more normal quarter was well balanced, but we saw some large longer duration contracts, but overall it was a very solid quarter from a sales perspective.

Okay, great well ended with a compound wall. So thank you.

Alrighty. Thanks, Thanks, Gary.

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

Yes.

Thanks for taking the question.

Good to hear about the in person meetings, not sure I was going to ever say that but glad glad to see that.

Might be a little too early to ask this but.

After you announced the simple Nexus acquisition curious maybe any early feedback you've received from partners customers alike, and if thats better held for a later call also happy to to wait.

Thanks for calling in and your question no I can give you some anecdotes because you do get calls from customers et cetera, and I am pleased to tell you that we've got a very positive response, both from our clients as well as we speak to assemble an excess team.

Lanning.

So very pleased with the initial reaction.

Very good to hear and maybe.

I'm not sure where this question.

In terms of.

<unk> team, but I'm just curious as you are discussing with your bank customers their priorities for next year I, certainly think we're through the triple P and forgiveness waves digital.

Really seem to ramp up as an initiative. This year, you, obviously have onboarding and many other solutions. So I'm just curious as you think about the prioritization for next year in terms of your bank executive conversation how is that shaping up.

Yes, what we have.

Seeing overall is that banks arent coming back specifically in the U S. The community regional is back to focusing on transforming themselves to be relevant for the future.

And as you know our platform story plays well into that.

So what we're seeing is banks are refocused on the strategies for long term survival and relevance.

And it plays very well into that we are back on message with our platform play.

All of us going to the cycle it was to <unk> and other things. So now it's all about the platform. It's all about digital transformation for the long term.

And we're very excited about it.

Excellent well, thank you Pierre and thanks team.

Yes.

Thank you. Thank you all.

Our next question comes from the line of Bob Napoli from William Blair. Your question. Please.

And good afternoon.

In the international and then the gross margins I guess on the margins relative to the U S business, Yes, Bob. Thanks, Yes, we're not going to discuss margins on this call, but I can say in terms of revenues that <unk>.

Subscription revenues are growing at triple digits and peso the services business is slowing a little bit we're hitting a level, where we're going to re farm outs or re engage our partners to deploy software for us in all the countries that we're selling into.

So we expect services revenues will decline on a year over year basis in the future, but that subscription revenue is still strong.

Thank you and thanks all of you.

Accenture in one of your announcements and just in that pipe I guess, you also announced a couple of challenger banks.

Internationally, our new focus for you and then.

Given that the first one is the hardest to get you've added France, Germany, Japan with fitness and a good pipeline there gonna Ashley can you give any color on.

Kind of the geographic strength are you seeing others lineup.

The market you just entered and then any color on the.

The challenger bank wins or effort.

Yes challenger banks.

Part of the normal go to market strategy I mean, some of them come some try to build their own software a trusted unrealized later on they should.

Stick to their knitting.

When you look overall.

Three years ago, we started with these investments in the international markets specifically in country in Europe.

All of those are beginning to pay off now we see good activity.

I equate this way back through in 2014 and 15, when we started the enterprise business in the U S. We made similar investments we went public at the time and overtime. It pays off so I see similar frac patents.

And I'm optimistic that over time that will come around.

Thank you I appreciate it.

Thank you.

Thank you. Our next question comes from the line of my own Tandon from Needham Your question. Please.

Hey, Good evening guys. This is actually Kyle Peterson on for <unk>, Thanks for taking the questions.

I wanted to touch on competition, specifically in the account opening side are you guys seeing any changes in the competitive environment I know a few other thank you software players have been kind of making some announcements in the space. So just wanted to see if you've noticed any change in the landscape.

Yes, we continue to see competition from point solutions as we always have as our goal to build solutions across everything that we offer to our customers that are best in class and bringing them back to a single platform vision. We think if you pick a point solution and then you pick another one you're going to wake up in several years and from an employee and customer experience.

<unk>.

Our bank regulatory burden that a bank efficiency perspective, you really wont have progressed. So our goal is to build something that stands alone on its own but then ties into that robust platform, we think thats duration the industry needs to add.

I needed a platform play. It's also that many of those solutions are more of a front end or a point of sale solution.

We can do the front end as well as the branch transformation.

Older bankers.

<unk> experience. So you can start with online you're going into a branch and completed there.

We see significant differentiation is more difficult to build upfront, but over time I think that's the better way to get these bank to be more like a fintech.

That's helpful. And then I guess, just one follow up on the professional services the margin the gross margins, especially kind of a second consecutive quarter.

With him significantly.

Significantly higher than at least what we had been seeing previously is there anything kind of one time.

That's been pushing utilization higher something that or anything we should be thinking about moving forward is we're kind of thinking about the services gross margins yes.

Yes, we saw we've been seeing a lot of strength out of Europe, but we had a couple of customers go live in the quarter, which triggered revenues.

Would anticipate that those margins will come down in Q4.

And impact our total gross margins overall, but yes, we've seen some really good activity high utilization rates good billings.

On a peso.

But yes, we expect to see a seasonality impact in the fourth quarter.

Got it that's helpful. Thanks, guys nice quarter. Thanks, Thanks, a lot.

Thank you. Our next question comes from the line of Ken <unk> from Autonomous Research. Your question. Please.

Yeah, Hi, everyone. Good afternoon, and thanks for taking the question.

I wanted to ask you about simple nexis.

One thing we've noticed is that mortgage activity really picked up in.

Call. It 2019 2020.

So can you talk about how much simple nexis benefited from that increased activity and does that lead to any tougher comps to grow over in calendar year 'twenty, two and 'twenty three.

Thanks for your call or your question Great question. So.

The thing I would remind you of is that simple acts as a seed based revenue model and as you recall when we announced the deal we actually discussed as well.

We actually looked at the trending revenue over time.

Specifically with lower volumes in 18, the entrances into 19 et cetera, and you don't see the peaks and valleys with them as you would see with the people who plays in the mortgage volume game, where they actually charged by the transaction and that's what made it so attractive for US is that they're also proceed and when there's a downturn in mortgage volume would be.

See as these typical independent mortgage banks cut back on the middle back office, but they keep the salespeople in place per Se Commission based okay, which means they have to keep the seats for the licenses for the software.

So we love that financial model, they've followed and historically, we've not seen the peaks and valleys, we've seen with other companies with a different financial model. So we are actually very optimistic that this was a great trip for us.

Okay. That's really helpful and then I think.

You guys mentioned that simple next it is immediately accretive to revenue growth I mean are we.

Are we talking about revenue growth, 40% or is it closer to 50, 560% just trying to get a sense for how much faster, it's growing compared to corn.

No.

And then any comments on the sustainability of that growth yes.

Yes, Thanks, Ken.

Like we said earlier, we will update after we closed the transaction.

So we're not going to get into any of the details on their growth rates, we did disclose their trailing 12 month.

Revenue growth and we also talked about their forward.

Annualized growth based on our September number, but thats all were going to disclose right now David was the trailing 12 months was $41 million in 54 different portfolio was the September times 12 annualized number.

Okay. Thank you guys I'll leave it there thanks.

Thank you. Thank you.

Thank you. Thanks for reminder, if you have a question. Please go ahead. Please press Star then one our next question comes from the line of Alex Sklar from Raymond James Your question. Please.

Thanks, Josh I wanted to ask about your result of kind of the time on the road you've been selling successfully virtually for the past 20 months and I know, it's early but curious to hear if there's any noticeable changes in terms of building pipeline, our close rates and how thats influencing your plants more travel next year.

Yes, we are proud of how we've executed and remote work conditions.

On the other side of this is the reality that we are a business process transformation company and Theres business leaders on the other side that are making.

Not really technical decisions that theyre picking a partner so we believe and the people that we have representing encino in the field and when we can get them in front of customers and develop those relationships. They can understand the culture and the value proposition, even better and we would hope that that will continue to help those conversations accelerate.

Got it okay, and one follow up David.

Thanks.

Just like we saw last Q4 on a sequential basis, we're seeing just a lower level of activations as we talked about in the past our activations are lumpy.

Order to quarter. It just depends on how the contract was negotiated with customers and so we're seeing.

We expect to see a seasonal impact on lower activations in the fourth quarter.

Okay, great. Thanks.

Thank you.

Our next question comes from the line of Brent <unk> from Piper Sandler Your question. Please.

Hi, This is Clarke Jeffries on for Brent first question you mentioned the expansion of top 50 U S Bank Bank grew from an initial triple T use case, I guess, just stepping back could you give us a sense of how successful that effort has been in.

Transferring our expanding that contract value in 'twenty, two and others still triple P. Only use case banks that are in the pipe for potential expansion.

Yes.

Not much else to speak about today, we are proud of that validation of how we executed for them.

As we continue on with the year and into next year. The goal is obviously to continue taking those relationships.

Come back to the wheelhouse in India and vision that we have.

Great validation of how we succeeded.

Forging that relationship and we'll continue taking that story out yes.

Yes, and I want to emphasize if you recall <unk> specific therapy contracts, an android or a bunch of it.

Coterminous.

And so you Wouldnt go upfront and get that so you wait for that contract to come through the renewal date, and then actually negotiated those so there is some type of pre that's still out there that we have to negotiate but that's part of the co terminus contracts.

And we've got such a good relationship with these customers I am optimistic.

It will go well.

Theres some February overhang there.

Yes, we're still.

We still expect $18 million this year for triple periods. So theres no change to what we have discussed previously as a total tripled total this year yes.

And I think my follow up question was actually maybe on that co terminus.

Perfect.

Looking at deferred revenue, obviously, a seasonal seasonally weaker quarter in Q3, typically but where there are changes in renewal terms that might have moved around Q3 kind of deferred revenue. It just seemed like.

Maybe an outlier in terms of the quarterly change.

Yes, no there's nothing in there triple peer related.

I think Q3 is our seasonally weakest quarter.

And that's just historically been a lower bookings quarter for us nor billings quarter.

And we would expect that to continue in the future.

Great and then one last clarifying question.

Could you remind us if you're booking in <unk> in U S dollars or in local currency, when we actually shouldn't be as you'll be aware FX impact maybe on <unk> going forward.

Yes, it's all based on U S dollars, our appeals based on U S dollars.

It's a minimal impact on foreign currency exchange rates at this point.

Alright. Thank you thank.

Thank you.

Thank you. Our next question comes from the line of Charles <unk> from Stephens. Your question. Please.

Good afternoon, and thank you for taking my question could you comment on the pace of investment internationally.

Yes, so we made very large investments this year.

Relatively speaking large investments so we place people on the ground in Germany, Spain, France.

Italy.

And I would say the large investments are done for the time being as we see upsides to bookings and customer activity, we will add incrementally, but I would say at this point internationally, we have the large investments in place and we will see additional adds incremental smaller ads in the future as we are successful.

Potentially be a positive to your business win and acquired institution potentially adopt adoption Sienna.

Yes, and if you think to the prepared comments here. If you look at the example of <unk> Bank, which is the type of BB&T and Suntrust.

And their Ceos comments that they're essentially positioning for the future with Encino, we would think that the kinds of banks that are making that kind of investment or wouldn't go best of breed earlier. This year, we spoke about first horizon as well similar where you have a lot of the regional banks.

That are pursuing an M&A route to try to compete with tech and we believe we are well positioned to support them as they as they get ready to tie up and try to get bigger.

Great I appreciate the color nice quarter. Thank you.

Thank you very much.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Peter <unk> CEO for any further remarks.

Thank you for your time today and your continued support we look forward to speaking with many of you in the coming weeks and hope everyone has a safe healthy and happy holiday season.

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

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