Q4 2022 nCino Inc Earnings Call

March 31, 2022

Ladies and gentlemen, thank you for standing by and welcome to <unk> fourth quarter and full year fiscal 2022 earnings call at.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

You require any further assistance. Please press star zero. It is now my pleasure to introduce Britney Riley Investor Relations.

Good afternoon, and welcome to <unk> fourth quarter and full year fiscal 2022 earnings call.

With me on today's call RP or not.

Chief Executive Officer, David <unk>, Chief Financial Officer, and Josh <unk>, President and Chief revenue Officer. During the course of this conference call. We will make forward looking statements regarding trends strategies and the.

Anticipated performance of our business, including without limitation, the acquisition and integration of simple exit.

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

<unk> those related to the impacts of COVID-19 on our business the financial services industry and global economic conditions.

<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 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 I will now turn the call over to peer.

Good afternoon, and thank you for joining us today to discuss our fourth quarter and full year fiscal 2022 results.

I am glad to be here today to share with you. The success, we achieved in fiscal year 'twenty, two and how we are thinking about fiscal 'twenty three and beyond.

We had a tremendous year.

We achieved $274 million in total revenues in fiscal year 2022.

An increase of 34% over fiscal 'twenty one.

Our fourth quarter was especially strong with some significant wins in our core <unk> business.

Shortly before this call we issued a press release announcing one of those key wins, a new expansion deal with Wells Fargo.

One of the big four banks in the U S.

As you recall, we first signed wells Fargo for commercial lending in the second quarter of fiscal 2002.

The project has kicked off and is going well.

So well in fact, the during the fourth quarter at Wells Fargo signed another deal with us to expand the <unk> bank operating system into their consumer and small business bank for small business lending.

We are extremely proud of our partnership with Wells Fargo and their trust in our team and our platform to further enable their future growth.

Our international footprint also grew in the fourth quarter as we continued to execute on our vision of being the worldwide leader in cloud banking.

Josh will touch on specifics of your international business shortly.

But it was a strong year as we planted the encino flack in numerous new markets from Germany to Japan to France to spring to South Africa, while continuing to grow our more mature international markets, such as Canada and the UK.

Another major highlight for us in the fourth quarter was completing our acquisition of <unk>, a leading cloud based mobile first homeownership software company.

I want to thank all of our teams involved for their hard work and efforts to get this deal done before fiscal year end.

This acquisition is an important element of our strategy as we continue to drive digital transformation across the financial services industry.

I want to take a minute to share some statistics with you on simple Nexus and the opportunity we see for this business.

Today simple Nexus serves more than 45000 loan originators at more than 300 independent mortgage banks and over 100 banks and credit unions nationwide.

We expect the number of banks and credit unions, using our simple Nexus software to continue increasing in fiscal 'twenty three.

As we work to aggressively cross sell this transformative solution within our existing and new customer base.

To capitalize on this opportunity our encino and simple in excess sales teams have established lead sharing and referral programs and these programs are starting to gain traction.

As a reminder.

<unk> has a proceed subscription based revenue model similar to Encino.

Enabling the company to generate financial results that are more predictable recurring and not based on mortgage transaction volumes.

You've heard me say before that one out of every seven mortgage loans originated in the U S. In 2021 was processed through simple Nexus.

This equated to more than $500 billion in mortgage loans.

This is a powerful statistic and as we look ahead. There are several key trends in the industry that we can leverage to continue driving growth for our simple Nexus business.

First as I shift to a purchase market after years of record home refinance activity the industry expects refis to decrease significantly this year as interest rates increase.

However, the demand for home purchases continue to grow.

According to Fannie Mae's March forecast.

<unk> mortgage volume for 2022 is estimated at one nine trillion.

Approximately four 5% above mortgage purchase volumes in 2021.

We believe simple Nexus is particularly well suited for the purchase market as their mobile first application connects realtors borrowers and loan offices all in the same platform.

Loan offices, utilizing simple nexus will find it easier to share and provide referrals with third parties involved in the home purchase.

As demand for new homes continues to increase we see opportunities for continued growth and differentiation in this segment.

Second demand for electronic closings has increased significantly since the start of the pandemic.

With nearly every aspect of our financial lives consumers run debate able to complete transactions digitally without having to meet face to face or visit a branch in person.

With Nexus closing simple Nexus E closing platform borrowers and lenders have access to a modern fully integrated closing solution that supports traditional hybrid and fully digital closings from electronic documentation.

Load to remote online neutralization.

Finally, a third key trend we see is the expansion of the Spanish homeownership market.

A recent study from the urban Institute forecast that is spending bias will comprise 70% of homeowner sub growth from 2020 to 2040.

Serving as the growth engine of American home buying.

There is an incredible opportunity to help this traditionally underserved and growing market in response during the fourth quarter of fiscal 2022 simple next is launched Nexus bilingual a.

A new feature that makes the loan process more accessible to perspective, Spanish speaking homebuyers.

We see these three key trends as tailwind for us in fiscal 'twenty three and beyond.

And with our simple Nexus best in class Mobile first product suite, we can support all of the people systems and stages of the homeownership process with a seamless.

Cloud native into end solution.

Judy suite, the CEO of Accenture, one of <unk> largest and longest standing Si partners.

Was recently quoted as saying.

Cloud is the enabler.

<unk> is the driver and then AI will be the differentiator.

I could not agree more.

We are uniquely positioned to be the premier cloud software provider for financial institutions of all sizes all around the globe.

We have a fantastic opportunity to drive digital transformation.

Including by leveraging data and AI through our <unk> offerings into every corner of every community regional and Enterprise Bank Challenger Bank credit Union and independent mortgage bank.

Andrew just barely scratched the surface. We are excited that this company, which we started 10 years ago here in Wilmington, North Carolina is now a global company approaching 400 million in annual revenues in fiscal 'twenty three I'm incredibly proud of our team and believe the best.

Is yet to come.

And with that I'll turn it over to Josh.

Thank you Pierre it's great to be with you today and I'm excited about the strong results of our fourth quarter and fiscal year 2022.

Before I dive into the specifics I would like to remind everyone that <unk> growth strategy is based on four key pillars continued expansion of our market, leading commercial banking solution <unk>.

International expansion.

Nick and growth of our retail and consumer products, including simple Nexus.

I want to highlight a few notable wins within each of these pillars that helped drive our strong financial performance in the fourth quarter and full fiscal year.

Starting with commercial banking in the fourth quarter, we saw some of our largest enterprise clients, increasing their commitment to <unk> and <unk> lending transformation with multi year renewals.

Customer a U S enterprise bank with over $150 billion in assets nearly double their financial commitment.

A top 10 U S bank expanded their deployment into their largest commercial segments, while simultaneously adapting Nick audit spreading.

As we enter newer markets and geographies, we generally lead with commercial and we saw that strategy continue to pay off in fiscal 'twenty two.

For example, our team in Canada had a fantastic year despite continued lockdown.

You may remember that during the first quarter, we announced the top five Canadian Bank had joined an already solid Canadian customer base by partnering with Encino.

Also during the fourth quarter, we announced CIBC as it is hino customer I am quite proud to announce that during the fourth quarter. In addition to CIBC. We also signed another top five Kt in bank that was the third top five Canadian Bank, we signed during fiscal year 'twenty two.

Today five of the top seven largest financial institutions in Canada, our Encino customers casino is the market leading.

Commercial banking software platform in Canada, we deeply appreciate these Canadian institutions Trust in US we are laser focused on making each of these customers successful and on that momentum will continue to focus on growing our Canadian customer base with other solutions, such as retail lending small business lending and Nick.

Turning to other areas of our international business last quarter, you May recall, we announced <unk> Bank is our first customer in Japan.

I am pleased to note that our momentum in this strategic market continued as we ended the year with not one but three logos in Japan.

Continuing with APAC you may have seen that Kiwi bank the largest new Zealand owned bank recently announced that they are partnering with encino for their lending origination platform CBS made technology investment and strategic priority to improve scalability for their future growth.

I'll be working with them to support the delivery of their digital transformation efforts.

We're excited to announce our first customer in South Africa, as well as signing expanded use cases with existing EMEA based customers.

One EMEA customer we are incredibly proud to partner with in fiscal year 'twenty. Two is it takes us corporate and investment banking you may have seen our press release yesterday.

Partnership with <unk>, the CIB, a leading global financial institution and it takes the CIB as part of the Global Financial Services Division of group <unk>. The second largest banking group in France. It takes us CIB is now live on Athena and using our platform to speed up its credit journeys improve efficiency and deliver intelligence into the.

Financial analysis process with Nick automated spreading.

It takes the CIB, we'll also use the Athena is corporate banking solution to eliminate manual processes and automate repeatable tasks for seamless collaboration across deal teams and faster credit Decisioning.

We also recently announced our new Encino entities in France, and Spain, along with our entity in Germany, and our main EMEA office hub in London. This additional local presence demonstrates our commitment to these local markets and will enable encino to further strengthen our teams grow brand awareness and accelerate the digital transformation of financial institutions across the continent.

Turning to Nick.

Currently has three key solutions under the Nic umbrella.

Portfolio analytics.

Automated spreading which you've already heard us discussed today in our newest solution commercial pricing and profitability adoption across all three solution continues to increase demonstrating how nic truly is the differentiator for financial institutions as they evolve to meet the changing needs of the consumer and grow their banking relationships in the digital area.

One highlight I'd like to comment on is the continued maturation of our commercial pricing and profitability solution. We first launched that solution to early adopters in the fall of calendar year 2021 today.

Today, we have several customers, who are live and using the solution, including Huntington Valley Bank.

This Pennsylvania based community Bank has been an encino commercial lending customer for several years was excited to expand to our commercial pricing and profitability solution and gain additional efficiencies for the single platform approach.

As you kind of lead the bank's EVP and Chief lending Officer stated implementing in <unk> commercial pricing and profitability has been one of the very best projects have worked on it HBV along within <unk> commercial and small business solutions. These industry, leading features will streamline our employees work in a client's financial lives.

One of our platforms Differentiators is that it scales from a community bank all the way the largest banks in the World you heard Peter speak about Wells Fargo earlier.

This significant small business add on with secured only two quarters after their original commercial banking commitment with us.

This expansion is a tremendous testament to our platform our team and the power of the Encino partner ecosystem.

We look forward to a deepened partnership with the Wells Fargo team.

In addition to wells our U S enterprise bank with over $100 billion in assets also expanded its use of <unk> during the fourth quarter.

This long time, <unk> commercial lending customers signed an expansion deal Brinci knows deposit account opening solution deposit account opening is a key part of our consumer retail strategy, our fourth growth pillar as as retail lending we continue to make progress with our retail lending solution. During the fourth quarter, we signed several new community Bank and.

We look forward to sharing more about these customers once they're live on the solution note that in fiscal year 'twenty to increase the number of customers using our U S retail lending and deposit account opening solutions by 37% and 46% respectively.

<unk> is also an important part of our consumer and retail strategy.

Spoke in detail about the opportunity with our <unk> business and I want to echo that sentiment.

I've had the privilege of spending time with our leaders and colleagues that simple nexus over the last few months and are more excited than ever about the opportunity ahead and met with joint customers I've seen the products in action at downloaded the App on my phone and I truly believe that simple Nexus is delivering the best mortgage technology experience in the industry today Theyre mobile first singles.

On cloud based platform is a huge advantage for their customers and our simple <unk> teammates are continuing to innovate with newer product features and offerings to more deeply connect all participants in the homeownership process through a streamlined experience.

I want to thank all of <unk> employees for their hard work and execution in the fourth quarter to ensure a solid finish to the year and for a strong start to fiscal 'twenty three.

And with that I'll turn it over to David.

More about the numbers.

David Thank.

Thank you Josh and thanks, everyone for joining us this afternoon to review our fourth quarter and fiscal 2022 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated a reconciliation to comparable GAAP metrics can be found on today's earnings release, which is available on our website and as an exhibit.

The form 8-K furnished with the SEC just before this call.

We are very pleased with our fourth quarter and fiscal 'twenty. Two results total revenues for the fourth quarter of fiscal 2022 were <unk> $75 million, an increase of 32% year over year.

Fiscal 'twenty two total revenues were $273 9 million up 34% year over year.

Subscription revenues for the fourth quarter were $62 8 million, an increase of 40% year over year, representing 84% total revenues fiscal.

Fiscal year subscription revenues were $224 9 million, an increase of 38% year over year, representing 82% of total revenues.

Full year subscription revenues included $18 $5 million of triple fee revenues.

Total revenues and subscription revenues from simple nexus or approximately three nine and $3 $7 million respectively from the acquisition close date of January seven 2022 through the end of the quarter.

Professional services revenues were $12 2 million in the quarter growing 5% year over year as we continue driving more professional services business to our partners.

Fiscal year 2022 professional services revenues were $49 million, an increase of 17% year over year.

Non U S revenues were $12 million or 16% of total revenues in the fourth quarter up 54% year over year.

For the full year, 16% of revenues came from outside the U S. An increase.

From 11% last year.

International subscription revenues more than doubled both in the fourth quarter and for the full year as a reminder, our international strategy includes leveraging our partner ecosystem for professional services.

non-GAAP non-GAAP gross profit for the fourth quarter of fiscal 2022 was <unk> 46.

$7 million.

An increase of 38% year over year.

non-GAAP gross margin was 62% compared to 60% in the fourth quarter of fiscal 'twenty one.

Our gross margins continue to improve largely from subscription product mix is enterprise and international customers comprise more of our revenues as.

As well as subscription becoming a larger contributor to total revenues.

non-GAAP operating loss for the fourth quarter of fiscal 'twenty, two was $8 3 million compared with $7 5 million and.

In the fourth quarter of fiscal 'twenty one.

Our non-GAAP operating margin for the fourth quarter improved to negative 11% compared with negative 13% in the fourth quarter of fiscal 'twenty one.

non-GAAP net loss attributable to <unk> for the fourth quarter of fiscal 'twenty, two was $9 3 million or <unk> <unk> per share compared to $5 6 million.

Our $6 <unk> per share in the fourth quarter of fiscal 'twenty one.

For fiscal 2022.

non-GAAP operating loss was $17 6 million compared with $14 2 million in fiscal year 'twenty one.

Our non-GAAP operating margin for fiscal year, 'twenty, two improved to negative 6% compared to negative 7% in fiscal 'twenty one.

non-GAAP net loss attributable to <unk> for fiscal 'twenty, two was $19 5 million or <unk> 20 per share compared to $11 7 million or <unk> 13 per share in fiscal 'twenty one.

Our remaining performance obligation or <unk> increased to $912 million as of January 31 <unk>.

2022 up 52%.

<unk> $601 million as of January 31, 2020, with $538 million in the less than 24 months category up 49% from $361 million as of January 31, 2021.

Simple Nexus contributed $54 million RPM with $51 million of that amount expected to be recognized in the next 24 months.

Turning to cash.

After funding the simple Nexus acquisition, we ended the quarter with cash and cash equivalents.

Of $88 million.

Net cash used in operating activities was $21 1 million compared to $11 9 million in the fourth quarter of fiscal 2021.

Capital expenditures were $1 8 million in the quarter, resulting in negative free cash flow of $22 9 million for the fourth quarter of fiscal 2002.

As a reminder, Q4 is our strongest billing quarter, which should generate greater cash collections in the first and second quarters.

For the full year, we reported cash used in operations of $19 2 million.

And capital expenditures of $5 5 million, resulting in negative free cash flow of $24 7 million.

We ended fiscal 'twenty two.

With over 1750 customers, including those obtained through the acquisition simple nexis.

Up from over 1260 at the end of fiscal 2021.

Of our Encino Bank operating system customers 271 contributed greater than $100000 to fiscal 'twenty, two subscription revenues and.

An increase from 224 in fiscal 'twenty one.

Of these 271 customers 47 contributed more than $1 million to fiscal 'twenty, two subscription revenues compared to 36% at the end of the prior year.

Our subscription revenue retention rate for fiscal 'twenty, two was 133% down.

Down from 155% in fiscal 'twenty one.

As our sales in fiscal 'twenty, one, we're largely tripathi upsells to existing customers with revenues activating much faster than typical for our business.

This year's retention rate excludes any impact from simple nexus as they were not part of our prior year results.

We saw a return to more balanced bookings this fiscal year.

Healthy mix of new customer and expansion deals, including those mentioned earlier by Josh.

Our churn rate, including Triple P contracts that concluded in the fiscal year.

It remained in line with our historical average of 2% to 3% of annualized subscription revenues.

Now turning to guidance.

For the first quarter, we expect total revenues of $91 million to $92 million.

With subscription revenues of $77 million to $78 million.

Regarding simple Nexus contribution, we intend to manage and guide to total company results in the future.

For the balance of fiscal 'twenty, three we plan to discuss organic and combined subscription revenues.

These year comparability.

This guidance assumes a year over year subscription growth of 52% in the midpoint of our range with approximately 27% organic subscription growth for the first quarter.

non-GAAP operating loss is expected to be approximately seven five to $8 $5 million.

And non-GAAP net loss attributable to <unk> per share up 7% to eight for the first quarter.

This is based on a weighted average of approximately 110 million basic shares outstanding.

For fiscal year 2023, we expect total revenues of 398 million to $400 million with subscription revenues of $340 million to $342 million.

This full year guidance assumes year over year subscription growth of 52% at the midpoint of our range with approximately 27% organic subscription growth.

Please note that our guidance assumes a little over $7 million of annualized subscription revenues from Triple peaks will churn in the first and second quarters of fiscal 'twenty, three which does present, some headwinds to organic growth rate.

We expect non-GAAP operating loss for fiscal 'twenty three to be $33 5 million to $35 5 million. We expect simple Nexus will represent close to half of this non-GAAP operating loss, which includes certain onetime integration costs.

non-GAAP net loss attributable to <unk> per share is expected to be 31% to 32.

Based on a weighted average of approximately $111 5 million basic shares outstanding.

We expect negative cash from operations in fiscal 'twenty three.

And to incur capital expenditures of approximately $15 million.

As we expand our facilities.

Our increased use of cash relative to fiscal 'twenty. Two reflects a positive view of the global market opportunity for both our core <unk> and <unk> businesses given.

Given these investments and our growing base of subscription revenues, we do expect to achieve non-GAAP operating income profitability and positive free cash flow in fiscal 'twenty four.

In summary, the strong fourth quarter and fiscal 'twenty two financial performance is a credit to the hard work of the Encino team around the world that is passionately focused on making our customers successful.

Truly appreciate all your efforts as well as your continued enthusiasm for the opportunities ahead.

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

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

To withdraw your question press the pound key.

Our first question comes from the line of Terry Tillman with <unk> Securities.

Yes, hi, good afternoon, and congrats on the more normalized bookings as you said David in.

Congrats on the fourth quarter strength on new business, if I knew the lyrics, though Canada, I guess I would sing it but maybe thank goodness for everybody involved I don't know if <unk>.

I had two questions. The first question is a multipart question. The second one will be a simpler but first on the first question I don't know if this is for Josh but simple Nexus recently had a customer event I think out in Utah, what kind of energy that you see from that and where do you see potentially some of the.

Earliest low hanging fruit in terms of revenue synergies and then I had a.

A follow up to that first question.

Hey, Terry its Josh it's nice to speak with you today and it's been a lot of fun to get to work with the simple Nexus team now that we're past the <unk> acquisition.

We have been at their user event, we had spent some time with them at industry events and the first thing that I've taken away from that is just a deep respect for the expertise they have in the mortgage space and for the great relationships that they have with their customers relative to synergies what we see from from our customers is a real appreciation for the for the combination.

Simple <unk> mortgage expertise and then the 10 years that focus that Encino has had on more traditional banking because alone doesn't equal alone. So bringing those together is something that's really resonated nicely with our customers. We see a lot of folks who are very interested and simplifying their vendor management landscape. It sounds like a simple thing.

But because these customers it really does matter. They are excited to see our solutions integrate and as we go into our existing customer base, where I feel like the most initial revenue synergies are the great relationships that we have that we built by taking care of our customers is accelerating their conversations I am excited that today, we actually signed our first cross sale of simple Nexus in.

<unk> customer that was on the back of years of great relationship with that customer and our goal is to do more of this.

That's a great data point, thanks for that Josh I guess the second part of this first question was related to we did here I guess, we're seeing in the text in the press release on consumer included on the Wells Fargo win and then I think you had talked about the $100 billion plus enterprise bank of New deposit account opening and then we got the data points on year over year growth for both of those I guess for PR Josh.

Are we as we think about new bookings in FY 'twenty three is there a tipping point potentially on your larger enterprise banks around retail and consumer or is that still potentially more in the offing.

And then and then I had a quick one for David Thanks.

We are excited to make that announcement about wells Fargo, two quarters ago, We announced our relationship with the commercial bank and the expansion into small business use case within their consumer and small business bank is something that we're obviously really proud of because we're executing well. So we do see nice momentum as evidenced by the growth in retail and if you play out <unk>.

For the single platform I would point to Armstrong Bank does the $3 billion bank in Oklahoma, We put out a press release during the fourth quarter. They contracted for a commercial for small business for retail lending and for deposit account opening because they don't want to give their customers a district experienced across those various products in that division will continue pursuing.

That's great.

Rob after this I promise up David in terms of the color on the first half headwinds are more notable on organic growth or the full year also 27% I know you're not guiding to like <unk>, but is there a sense that by <unk> just based on bookings activations, the organic growth could be picking up a little bit as you're kind of ending the year. Thank you.

Yes, that's great. Thanks, Terry Yeah, so 27% in Q1, we expect a slight moderation in the Q2 <unk>.

Improvement in the Q3, and then further improvement into Q4, so thats the way that we as we see today that we would expect revenues to flow.

That's great congrats.

Thank you.

Thank you and our next question comes from the line of Brad Sills with BLA Securities.

Great. Thanks, guys for taking my question congratulations on a nice end to the fiscal year.

I wanted to ask about just the general environment here, we've got a rising interest rate environment here, which.

It should be.

Positive for banks, yes, we've got the threat of potential.

Session here with the war and the cost of oil inflation et cetera. Just curious what are you hearing from the banks in terms of willingness to spend on digital transformation overall.

Yes.

Great question, because as you mentioned that rising interest rates is good for bank profitability.

We actually see an acceleration of digital transformation kicked off by the whole pandemic I.

I don't see that slowing down at all.

We see additional initiatives around the world.

I would say Europe is leading with the ESG.

We've got a solution team they are building out and working on it.

We have actually moved one of our most senior people into a leading role for ESG, because we not only see the company internally.

<unk> program is important but actually building a solution because if you think about it banks in the future will be.

Just and evaluated based on their portfolio and how that compares to the ESG goals.

And what we can tell you is that as we speak to banks about it how many of them have an interest co developing with us what those metrics and models and frameworks will look like and <unk> is the ideal tool to do that because of we have all the data around every loan what segment, what the customer et cetera, and for instance, if you Mike alone too.

British Petroleum, which is the oil company buddies for wind most that will become a green loan okay, and so we have that portfolio of knowledge. We can report on those which would be tremendously helpful.

So I would tell you overall, we see a very positive environment and we are optimistic about the future.

Great to hear Thanks, Pierre and then and then one for David. Please on just the comments on the PPP churn is that one time in your view the $7 million that you mentioned in Q1 Q2, just any color on on there.

Matt.

And just kind of the outlook going forward. Thanks again, yes.

Yes, so on Triple P. We expect in the first and second quarter to see that $7 million churn.

We're also being negatively impact from Triple T. The.

The fact that we had three quarters in fiscal 'twenty, one where we didn't have any bookings.

Those seats are not activating now.

And then also.

Redeploying those seats, we had $18 5 million and tripled <unk>, we expect to churn out $7 million and so the rest of those stay with the customers and or are being repurposed elsewhere and so thats, how we view the year for triple peaks.

Yeah, and I just want to emphasize when we repurpose a seat that essentially say zero growth rate.

Okay, and so that does create.

A difficult compare for the year over year growth rate.

We still like to redeploy them, even though that's the impact but finally, we will come to the end of this in the second quarter.

Understood. Thanks, guys.

Yeah.

Thank you.

Next question comes from the line of Kelly <unk> with Barclays.

Hey, guys. Thanks for taking my questions here.

Hey, Josh Hey, David Hey, Josh.

Josh maybe just to start with you can you just go one level deeper into the expansion at Wells Fargo. Congratulations first of all but maybe maybe more more broadly as you look at the rest of your base, where we're clearly we're leading with commercial how big is that opportunity to sort of land and expand with commercial and then expand.

Into into small business lending like what you did here with wells.

Has that had an extra speakers do you look we're always going to pursue that we do have situations, where we've had our entry point to a large bank be through small business and then on that success will expand to commercial so the goal for all of these accounts are telling the story about the incremental value. They can provide to their customers with a single platform and across the whole market, we're going to pursue.

That.

Got it got it David maybe for you for my follow up and you touched on this a little bit in the prepared remarks, but just to flush. It out can you just can you just walk through the simple Nexus margin impact this year.

You talked about maybe some onetime investment there as well and then just zooming out on that topic, maybe just talk about about sort of the path to profitability more broadly yes.

Yes, that's great yeah. So on the the loss for fiscal 'twenty three about half of that loss is simple nexus related.

We have done.

Our big hiring we've tripled the sales force at simple Nexus. So thats annualizing. This year, we've added to the product.

<unk> is well it's about half of that is around.

Half of that loss for the full year is around those head count and then we also have some integration costs as well, but thats smaller smaller numbers the balance of that loss on the <unk>.

While the loss is really around some of the salary adjustments, we're making like youll see for many companies out there just to be more in line with the market with the marketplace and so that's that's our view on the cost side, we are committed to being operating income positive in fiscal 'twenty, four and free cash flow positive.

We have great visibility in the model.

Got the head count plans in place and we are committed to doing that in fiscal 'twenty four.

Very helpful. Thanks, guys.

Thank you.

Our next question comes from the line of Brent bracelet with Piper Sandler.

Good afternoon, maybe I'll start with you Pierre here encourage to see some of these renewals and the opportunity to ask the renewals you talked about a little bit how do we think about.

The opportunity to expand existing customers you have obviously it sounds like pretty good traction now with Nick simple nexis.

Further expansion into retail if you looked in the installed base how much room do you have left to expand just with existing customers. Thanks.

We have a tremendous opportunity because as I explained to you in the past.

When we look at our client banks or are customers, we only have about a 12% to 14% coverage of the overall seats. Okay. So theoretically you've got.

6% left of that bank now with the addition of <unk>, we can literally pick that as an entry point on retail as you.

Earlier with Wells Fargo, we went into the retail side of the bank, but it's what a small business use case. Okay. So we are just creating multiple points you heard the $100 billion bank on deposit account opening.

So we are much more nimble and attacking the other side of the bank as we go forward.

Im very optimistic that this platform vision is playing out.

Built a tremendous brand and banking that we deliver what we say, we're going to deliver and we actually provide quality software.

Earlier today in a debrief with a simple exit team. They are beginning to see now an unprecedented level of larger institutions.

In their pipelines. So we're optimistic on all fronts of the business.

Helpful Color and then David for you as we drill drill down into the Nic opportunity specifically, how should we think about the three products and the economics around those three products portfolio analytics.

Commercial pricing.

Are those.

At 10% potential uplift to a dollar for every dollar of commercial spend is at a 20% uplift just trying to frame what the uplift from Nick <unk> III products could be thanks. Thanks, Brent Yes, we're very excited about our products with the product on the seasonal side.

We've seen great traction on auto spreading in commercial pricing new product, where we've had some great interest in actually.

Customer went live on that we would expect Nick as a whole to contribute about 20% of HCV of any given customer.

That's helpful color, that's all I had thanks. Thank you.

Thank you.

Thank you and our next question comes from the line of Ken The Cholmski with Autonomous research.

Hi, everyone. Good afternoon, and thanks for taking the question I just wanted to ask about the guidance. David I think you mentioned that youre expecting 27% organic subscription revenue growth for fiscal <unk> and then I think for the fiscal full year guidance also assumes 27%.

Organic subscription revenue growth. So I'm just curious if PPP is weighing on growth in the first half of the year shouldnt that lead to faster growth.

For the full year as you see that acceleration. So I'm just trying to reconcile those two growth rates.

And also trying to understand how much conservatism is baked into that number.

Thanks, Ken Yes, so at 27% in Q1, we do expect it to moderate growth year over year growth to moderate in the second quarter.

And then improve a little in the third quarter and then further improvement in the fourth quarter.

It's kind of the trend that we see at the moment based on our modeling.

And then.

The way, we provide guidance as similar dose as we have done in the past we built an achievable model.

Simple Nexus, Doug does add some.

Has less visibility.

To the model and so we've accounted for that in the guidance as well.

For the year, we expect 52% subscription growth as a whole for the business with 27% organic growth.

Okay, Great and then I wanted to ask about the.

Next is cross sell I mean can you just give us a little flavor as to what that might look like.

Then also what kind of cross sell figures are you penciling in for this year and next year, either from a customer standpoint or revenue.

Standpoint.

Absolutely.

As we finalize the acquisition enabled the team he got everyone aligned on how we would jointly position the combined encino simple nexis storage of these customers, we set up a referral mechanisms as evidenced by the cross sale that I spoke about earlier, we can see those are paying off ultimately this is about helping the customer understand the opportunity.

<unk> to transform that homeownership journey for their customer to take the manual process out and offer a fantastic experience for them David would you like to address the assumptions relative to the cross sales in guidance.

Yes.

When we when we closed the transaction, we did analysis of overlapping customers.

I think we assume minimal cross sell activity just to be as conservative as possible with the model.

We would expect based on the early activities that we see.

That.

We think that will end up closing some of these deals we closed on earlier today, but we're taking a conservative view as the sales force getting to know each other and get to know the product.

Okay. Thank you very much.

Thank you.

Question comes from the line of Josh Beck with Keybanc.

Thank you for taking the question I just wanted to ask.

Also a little bit on the simple nexus.

Topic, Pierre certainly you alluded to some of the really.

Areas to get excited about certainly there is growth.

The purchase mortgage market there is a much greater demand.

For really a streamlined digital.

Mortgage front and so there are certainly a lot of areas to be excited about the flip side, you obviously have the refi market really.

Significantly slowing down so just kind of help us understand how you balance. These these market factors and maybe also address.

David's point on the visibility as you kind of build out.

The forecast for that segment, yes, I remember that.

As I've said before.

Many of the players in that mortgage markets Oxy transaction volume based okay, and they pay the price for that now simple excess took a much longer view and there's much more seed based with a very very small transactional performance based element.

So that the revenue model is much more predictable.

We are not seeing a negative impact because of these mortgage rates so far.

I will also tell you that the quality of their software and the quality of that organization is reflecting now.

We're seeing customers coming back we're seeing customers signing up for them. We're seeing customers have a very large size that is now a an interesting simple nexus, which they've not seen before.

We are studying the impact of that and why that is happening. We believe some of that is the brand Association with Encino as a banking company an hour.

<unk> and scaling businesses as well as scaling software for these large institutions.

So that is to me a very positive thing when it comes to the revenue visibility.

Realize they've got shorter term contracts. So so we are figuring out how to extend that number one but number two how do we build that into forecast.

Et cetera, they've got a fantastic is three of net retention.

Which gives me confidence that we don't know right track here.

We went through their conferences and actually listen to their customers and all of that is giving us the confidence that we've done the right deal here.

Excellent and maybe.

Follow up question on the on the retention point for the total business I believe it was 133% in fiscal 'twenty two on a subscription basis, David I think youre guiding us to kind of high <unk>. If you will organic subscription revenue guidance this year.

So when we bridge the.

The gap between where retention was and where you're forecasting the subscription business, obviously I would imagine the triple T. Churn is is a component of that any other <unk>.

Factors, we should be thinking about it as we kind of bridge those two metrics.

Yes on the $1 33 I think.

Over time, we think that's a.

Our range that we would assume in the longer run for Encino.

Simple Nexus does have higher so on a consolidated basis, you could see an elevated number from that level, but I think 130 <unk> range that we're comfortable and looking at towards the future now.

We give an achievable number.

We'd like to.

Provide.

Guidance that is that is well thought out and are forecasting.

So I think that 130% net revenue retention number in the long run is a good number to target.

And just realize some.

Inflated net retention because we didn't sell as many new logo business.

In FY 'twenty, one and FY 'twenty two.

It was heavily cross sell wins that inflate generates attention and now as our sales is back to a more normalized 50 50.

For new logos as well as cross sell.

That impacted the calculation.

Great color. Thank you Bill.

Thank you and as a reminder, ladies and gentlemen, we have a question. Please press star one on your telephone.

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

Thank you and good afternoon and congratulations on that.

All the progress and the customer signings.

Got it sounds good and also good to hear the profitability in fiscal year 'twenty for the.

The momentum in international continues to be impressive.

Just maybe some color on.

The growth.

Over the next several years on the international one.

Large international <unk> as a percentage of this business and what's the pipeline.

What's the mix in the pipeline and as the profitability I guess I understand the gross margins are higher.

With professional services.

Outsourced, but as the profit model for international.

Equal to or better than North America.

Yes, I'll take the profitability first I think what we've seen because it's mainly larger banks internationally, we see stronger.

Pricing internationally.

And so but the gross margins are very similar to the U S. The large enterprise side.

On that side of the business and Josh Yes, I'll just add that remember the product mix is a bit different we resell salesforce in the U S to small banks and that brings up the annual gross margins in the U S business, so actually the European.

Gross margins.

A bit higher plus the impact of the enterprise banks as David mentioned is better as well.

So we see a very strong profitable gross margin business in Europe .

Relative to the opportunity, we see a larger Sam in the international market than we see in the U S. Obviously the U S team had a head start so it maybe a little while until international can lap them.

You will see that happen, though if you look at what we did this last year, we more than doubled subscription revenue internationally, we announced new logos in Germany, France, and South Africa, We announced three in Japan. The team is executing really well and frankly, we're asking them to execute in a very difficult environment relative to everything going on in the world in the last two years, but I would ask you to.

What we've done in the U S. We now have 12 of the top 25 banks you saw our announcement with Wells Fargo, two quarters ago and expansion today and look at what we've done in Canada five of the top seven financial institutions in Canada, We signed three Toronto banks in one fiscal year.

Just wanted to say it again, because I'm not proud so when I look at the rest of the globe and the markets that we've decided to target. That's the goal to continue replicating that.

Great. Thank you and then just a follow up question.

The gross margin.

Simple nexus, but maybe a broader question just on the mortgage business.

Overall, what is the product pipeline and what do you think the growth is.

Mortgage and you look at mortgage simple next just like the first step in mortgage is there a broader strategy around product set.

And as a mortgage market. Yes. This is Josh I really appreciate you keeping that up because this is not just about a point of sale for a mortgage application. This is about the homeownership journey. This is about bringing the applicant into the process, allowing them to engage with the loan officer, allowing them to engage with the real leader with an appraiser and then.

Go and do E closing to roll compensation information in there there are myriad opportunities in that homeowner and ownership journey not only obviously, we want to go sign new logos, we will keep doing that but to go deeper with the logos that we have which is part of why I have been so excited after getting to work with simple Nexus, you'll see that we're very much philosophically.

<unk> that we want to get the customer we're going to get them live, but we're going to continue investing to go broader within the value chain and also deeper in that journey.

And I can just add to that if you look at the mortgage market. This portfolio mortgages and then there is youre qualified mortgages for Fannie Freddie.

We have no plans to build a product for those Fannie Freddie mortgages, we've got a very close relationship with ice or Ellie Mae.

Simple Nexus is the deepest integrated front end to that platform. So we've got tremendous success in that market with them.

We will both a complementary product for purchases Helocs and Refis from an LLS perspective that will complement that solution and if you integrate that was.

With simple access give the bank employees the single platform experience across all of the different portfolios.

Expand our retail offerings and do this.

I think this whole platform story is a window and so we see a massive opportunity overall and banking as well as independent mortgage banks for our mortgage program.

Thank you I appreciate the answers.

Thank you. Thank you.

Thank you.

And our next question comes from the line of Charles Nabhan with Stephens.

Hi, good afternoon, and thank you for taking my question. So if I look at the fourth quarter revenue performance, excluding simple Nexus it came in a little higher than the guidance and expectations and I apologize if I missed this but could you give us some color around.

What led to that that led to that positive variance in this quarter.

Yes, absolutely so in the fourth quarter, we do see add on sales in any given quarter and the reason for that upside is really around just added on add on sales and we had some early seed activations as well as our customers requested.

Great.

Appreciate the color and one quick one on simple nexis.

They have a services team that deploys product and it's about 10%, 5% 10% of total revenues.

Great.

And if I could sneak in one more.

I was hoping to get your perspective on the competitive environment within.

The core the core operating system business.

Number of your competitors have developed products over the past few years and while you're still an industry leader just curious what youre seeing from us from a competitive.

Competitive standpoint in the market.

Yes look.

You have to realize that our core processor is the transaction processing engine, it's a general ledger.

Where you keep account balances.

Once out and calculate interest okay.

You look at the transaction processing landscape. It includes things like <unk> online banking etcetera.

And we as a company do not want to play in the movement of money or.

While the balancing of the bank.

That's an extremely difficult business number one number two the core processes.

A very strong hold on the answer to trying to drop that.

Just show you to some of those.

Our innovative companies have been acquired by the big ones.

So I just don't forget that we love what we do with a business process Reengineering company I believe that's where the opportunity in banking sits today.

We've got a global marketplace that we can transform and drive them to <unk> and drive them efficiency provide them with a better compliance record provides ESG solutions for them.

More.

Sure.

Profitable and drive revenue. So we think all of those buttons that the banks are focusing on and so we will just stick to our knitting.

Great well I appreciate the color congratulations on the quarter.

Yes.

Thank you.

And our next question comes from the line of Alex scholar with Raymond James.

Great. Thanks, Pierre Jos on the sales force investments I'm curious, what's kind of been the ability to travel, particularly internationally for the sales organization.

And with that kind of have you started to see the face to face meetings pick up noticeably this year and if that's factoring at all on the profitability outlook.

I'll speak to and what I see in the market and David can speak to the expense assumptions, but we do see the world opening back up is becoming easier.

<unk> been able to travel internationally recently and I had about a two inch binder papers to make sure I could get across the border. That's starting to go away. So we really look forward to getting out to markets, where we haven't been in a couple of years. We also see a lot more in person meetings with customers popping up and we see a lot more people competing back at in person events all of it.

Very helpful for Athena, Yes, we're excited that our insight user conference will be in person and beginning June .

And all of those personal connections with banks again this week.

Literally see the energy and how they want to Reengage and drive business forward. So that's a very positive for us and on the cost side. It's all embedded in guidance. What we're seeing is there's some return to travel I think we ended up last year at about 30%, 35% of pre Covid travel, we expect that to be higher this year, but we are seeing much higher cost.

<unk> airline tickets.

I'm sure everybody travels so seeing that but that's all embedded in our guidance as well.

Okay, Great and then it's probably good.

Good problem to have but some of these large deals can kind of swing RP O pretty massively so David I'm curious if you can talk about if there was any noticeable change in duration within RPM.

Yes, I think the average is still at that 3537 year range. We did have we had a very strong <unk> quarter, we had very strong renewals as well and I would say the bulk of the renewals actually ended up in additional upsells.

But most exciting we had one of our larger customers sign up for another five years now we have a very large bank customer that will be an <unk> customer for 10 years and hopefully much longer than that as we work with them in the future.

Alright, great. Thank you.

Thank you and our next question comes from the line of <unk> Tandon with Needham <unk> company.

Hey, good afternoon, guys. So essentially how peterson on for <unk>. Thanks for squeezing me in here.

Just wanted to touch on the mortgage outlook.

Nexis.

Kate that you guys are less.

As directly exposed to origination volumes given that it's more of a subscription can proceed.

Model, but just wanted to see.

If you guys have noticed any change in client demand in terms of like adding seat given the recent spike in rates is.

It's probably going to pressure from some of these mortgage lenders and money kind of constraints with our growth plans.

No we've not seen any notable or material impact from cancellation of seats like that.

It's a competitive market.

I think the associated with these two companies driving logo growth.

And that technology is clearly superior so it's looking good for us.

Okay.

Helpful. And then just one quick follow up.

The professional services margins.

Okay. Thank him in a little bit light, but is there anything one time, there or was that kind of layering in the small amount of <unk>.

<unk> services revenue I, just wanted to kind of think about the best way to look at that the gross margin on services going forward.

Yes.

Simple mix has really had no impact in the quarter. It was more around just utilization rates that we saw in the quarter. There were a number of customers that took the last two weeks off of the year.

And that was the real reason why we noticed that was a trend that happened with a number of our customers but.

But beyond that that was that's the only thing that I can call out on the quarter.

Great. That's helpful. Thanks, guys.

Thank you.

Okay.

Thank you.

Showing no further questions at this time, so with that I'll hand, the call back over to CEO , Peter <unk> for any closing remarks. Thank.

Thank you operator in closing I would like to reinforce what David noted earlier following the investments we are making this year to further position us for continued top line growth. We are committed to non-GAAP operating income profitability and positive free cash flow for fiscal 'twenty four.

I would also like to share with you my experience at our recent company kickoff high performing companies need creative and motivated employees and doing our annual kickoff.

Reminded how incredibly fortunate we haven't seen a while.

Our more than 650 employees from across the globe gather virtually and in person for the week of leadership panels, and keynotes product demos and updates customer conversations volunteer opportunities and my favorite employees kits.

The enthusiasm innovation creativity and passion of our people is truly inspiring.

Innovative passionate culture is what we call into our products our partnerships and our customers every single day I would like to end this call by thanking the entire Encino team, which now includes our simple <unk> colleagues im proud to be in business with you.

And excited for the year ahead. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

[music].

Ladies and gentlemen, thank you for standing by and welcome to <unk> fourth quarter and full year fiscal 2022 earnings call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero. It is now my pleasure to introduce Britney Riley Investor Relations.

Good afternoon, and welcome to <unk> fourth quarter and full year fiscal 2022 earnings call.

With me on today's call RP or not a casino Chief Executive Officer, David Russo Chief Financial Officer, and Josh Glover, President and Chief revenue Officer. During the course of this conference call. We will make forward looking statements regarding trends strategies and the <unk>.

Anticipating performance of our business, including without limitation, the acquisition and integration of simple access.

Global and economic conditions.

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.

Good afternoon, and thank you for joining us today to discuss our fourth quarter and full year fiscal 2022 results.

I am glad to be here today to share with you. The success, we achieved in fiscal year 'twenty, two and how we are thinking about fiscal 'twenty three and beyond.

We had a tremendous year.

We achieved $274 million in total revenues in fiscal year 2022.

An increase of 34% over fiscal 'twenty one.

Our fourth quarter was especially strong with some significant wins in our core <unk> business.

Shortly before this call we issued a press release announcing one of those key once our new expansion deal with Wells Fargo, one of the big four banks in the U S.

As you recall, we first signed wells Fargo for commercial lending in the second quarter of fiscal 'twenty two.

Project has kicked off and is going well.

So well in fact that during the fourth quarter at Wells Fargo signed another deal with us to expand the Encino bank operating system into their consumer and small business bank for small business lending.

We are extremely proud of our partnership with Wells Fargo and their trust in our team and our platform to further enable that future growth.

Our international footprint also grew in the fourth quarter as we continued to execute on our vision of being the worldwide leader in cloud banking.

Josh will touch on specifics of your international business shortly but it was a strong year as we planted the encino flack in numerous new markets from Germany to Japan to France to Spain to South Africa, while continuing to grow our more mature international markets such as Canada.

And the U K.

Another major highlight for us in the fourth quarter was completing our acquisition of simple access a leading cloud based mobile first homeownership software company.

I wanted to thank all of our teams involved for their hard work and efforts to get this deal done before our fiscal year end.

This acquisition is an important element of our strategy as we continue to drive digital transformation across the financial services industry.

So I want to take a minute to share some statistics with you on simple Nexus and the opportunity we see for this business.

Today simple excess serves more than 45000 loan originators at more than 300 independent mortgage banks and over 100 banks and credit unions nationwide.

We expect the number of banks and credit unions, using our simple Nexus software to continue increasing in fiscal 'twenty three.

As we work to aggressively cross sell this transformative solution within our existing encino customer base.

To capitalize on this opportunity our encino and simple in excess sales teams have established lead sharing and referral programs and these programs are <unk>.

Starting to gain traction.

As a reminder, simple and excess has a perceived subscription based revenue model similar to Encino and.

Enabling the company to generate financial results that are more predictable recurring and not based on mortgage transaction volumes.

You've heard me say before that one out of every seven mortgage loans originated in the U S. In 2021 was processed through simple Nexus.

This equated to more than $500 billion in mortgage loans.

This is a powerful statistic and as we look ahead. There are several key trends in the industry that we can leverage to continue driving growth for our simple Nexus business.

First as I shift to a purchase market after years of record home refinance activity the industry expects refis to decrease significantly this year as interest rates increase.

However, the demand for home purchases continue to grow according to Fannie Mae's March forecast purchase mortgage volume for 2022 is estimated at one nine trillion.

Approximately four 5% above mortgage purchase volumes in 2021.

We believe simple Nexus is particularly well suited for the purchase market as their mobile first application connects realtors borrowers and loan offices all in the same platform.

Loan offices, utilizing simple nexus will find it easier to share and provide referrals with third parties involved in the home purchase.

As demand for new homes continues to increase we see opportunities for continued growth and differentiation in this segment.

Second demand for electronic closings has increased significantly since the start of the pandemic.

As with nearly every aspect of our financial lives.

<unk> been able to complete transactions digitally without having to meet face to face or visit a branch in person with.

With Nexus closing simple in excess E closing platform.

<unk> and lenders have access to a modern fully integrated closing solution that supports traditional hybrid and fully digital closings from electronic documentation upload to remote online neutralization.

Finally, a third key trend we see is the expansion of the Spanish homeownership market by.

A recent study from the urban Institute forecast that is spending bias will comprise 70% of homeowner sub growth from 2020 to 2040 <unk>.

Serving as the growth engine of American home buying.

There is an incredible opportunity throughout this traditionally underserved and growing market in response during the fourth quarter of fiscal 2022 simple next is launched Nexus bilingual.

A new feature that makes the loan process more accessible to perspective, Spanish speaking homebuyers.

We see these three key trends as tailwind for us in fiscal 'twenty three and beyond.

And with our simple <unk> best in class Mobile first product suite, we can support all of the people systems and stages of the homeownership process with a seamless.

Loud native into end solution.

Judy suite, the CEO of Accenture, one of <unk> largest and longest standing Si partners was recently quoted as saying.

Cloud is the enabler.

<unk> is the driver and then AI will be the differentiator.

I could not agree more.

We are uniquely positioned to be the premier cloud software provider for financial institutions of all sizes all around the globe.

We have a fantastic opportunity to drive digital transformation.

<unk> by leveraging data and AI through our <unk> offerings into every corner of every community regional and Enterprise Bank Challenger Bank credit Union and independent mortgage bank.

Andrew just barely scratched the surface.

We are excited that this company, which we started 10 years ago here in Wilmington, North Carolina is now a global company approaching $400 million in annual revenues in fiscal 'twenty three I'm incredibly proud of our team and believe the best is yet to come.

And with that I'll turn it over to Josh.

Thank you Pierre it's great to be on with you today and I'm excited about the strong results of our fourth quarter and fiscal year 2022.

Before I dive into the specifics I would like to remind everyone that <unk> growth strategy is based on four key pillars continued expansion of our market leading commercial banking solution.

International expansion.

Nick and growth of our retail and consumer products, including simple Nexus.

I want to highlight a few notable wins within each of these pillars that helped drive our strong financial performance in the fourth quarter and full fiscal year.

Starting with commercial banking in the fourth quarter, we saw some of our largest enterprise clients increasing their commitment to student Seanez Amgen lending transformation with multi year renewals.

One customer a U S enterprise bank with over $150 billion in assets.

Early double their financial commitment and a top 10 U S bank expanded their deployment into their largest commercial segments, while simultaneously adapting Nick auto spreading.

As we enter newer markets and geographies, we generally lead with commercial and we saw that strategy continued to pay off in fiscal 'twenty two.

For example, our team in Canada had a fantastic year. Despite continued lockdown you.

You may remember that during the first quarter, we announced the top five Canadian Bank, who joined an already solid Canadian customer base by partnering with Encino.

Also during the fourth quarter, we announced CIBC as at Encino customer I am quite proud to announce that during the fourth quarter. In addition to CIBC. We also signed another top five Canadian Bank that was the third top five Canadian Bank, we signed during fiscal year 'twenty two today.

Today five of the top seven largest financial institutions in Canada, our Encino customers casino is the market leading.

Commercial banking software platform in Canada, we deeply appreciate these Canadian institutions trusting us we're laser focused on making each of these customers successful and on that momentum will continue to focus on growing our Canadian customer base with other solutions, such as retail lending small business lending and Nick.

Turning to other areas of our international business last quarter, you May recall, we announced <unk> Bank is our first customer in Japan.

I'm pleased to note that our momentum in this strategic market continued as we ended the year with not one but three logos in Japan.

Continuing with APAC you may have seen that Kiwi bank the largest New Zealand owned bank recently announced they are partnering with encino for their lending origination platform CBS made technology investment and strategic priority to improve scalability for their future growth and we're working with <unk> to support the delivery of their digital transformation efforts.

Excited to announce our first customer in South Africa, as well as signing expanded use cases with existing EMEA based customers.

<unk> EMEA customer we are incredibly proud to partner with in fiscal year 'twenty. Two is it takes us corporate and investment banking you may have seen our press release yesterday, and our partnership with Natixis CIB, a leading global financial institution and it takes the CIB as part of the global financial Services Division of group.

<unk>, the second largest banking group in France.

Takes us Civ is now live on Athena and using our platform to speed up its credit journeys improve efficiency and deliver intelligence into the financial analysis process with Nick automated spreading.

It takes the CIB will also use <unk> corporate banking solution to eliminate manual processes and automate repeatable tasks for seamless collaboration across deal teams and faster credit Decisioning.

We also recently announced our new <unk> entities in France, and Spain, along with our entity in Germany, and our main EMEA office hub in London. This additional local presence demonstrates our commitment to these local markets and will enable encino to further strengthen our teams grow brand awareness and accelerate the digital transformation of financial institutions across the continent.

Turning to Nick Casino currently has three key solutions under the Nic umbrella.

Portfolio analytics.

Today, we have several customers, who are live and using the solution, including Huntington Valley Bank.

As you currently the bank's EVP and Chief lending Officer stated implementing <unk> commercial pricing and profitability has been one of the very best projects have worked on at HCP, along within <unk> commercial and small business solutions. These industry, leading features will streamline our employees work in a client's financial lives.

One of our platforms Differentiators is that it scales from a community bank all the way the largest banks in the World you heard Peter speak about Wells Fargo earlier.

This significant small business add on with secured only two quarters after their original commercial banking commitment with us.

This expansion is a tremendous testament to our platform our team and the power of the Encino partner ecosystem.

We look forward to a deepened partnership with the Wells Fargo team.

In addition to wells our U S enterprise bank with over $100 billion in assets also expanded its use of <unk> during the fourth quarter.

This long time Encino commercial lending customers signed an expansion deal Brinci knows deposit account opening solution deposit account opening is a key part of our consumer retail strategy, our fourth growth pillar as as retail lending we continue to make progress with our retail lending solution. During the fourth quarter, we signed several new community Bank and.

We look forward to sharing more about these customers once they are live on the solution note that in fiscal year 'twenty two casino increase the number of customers using our U S retail lending and deposit account opening solutions by 37% and 46% respectively.

<unk> is also an important part of our consumer and retail strategy.

I spoke in detail about the opportunity with our simple and excess business and I want to echo that sentiment.

I've had the privilege of spending time with our leaders and colleagues is simple nexus over the last few months and are more excited than ever about the opportunity ahead and that was joint customers.

The products in action at downloaded the App on my phone and I truly believe that simple Nexus is delivering the best mortgage technology experience in the industry. Today. There are mobile first single sign on cloud based platform is a huge advantage for their customers and our simple <unk> teammates are continuing to innovate with newer product features and offerings to more deeply connect all parties.

And the homeownership process through a streamlined experience.

To thank all of <unk> employees for their hard work and execution in the fourth quarter to ensure a solid finish to the year and for a strong start to fiscal 'twenty three.

And with that I'll turn it over to David.

Are you more about the numbers.

David Thank.

The form 8-K furnished with the SEC just before this call.

We are very pleased with our fourth quarter and fiscal 'twenty. Two results total revenues for the fourth quarter of fiscal 2022 were $75 million, an increase of 32% year over year.

Fiscal 'twenty two total revenues were $273 9 million up 34% year over year.

Subscription revenues for the fourth quarter were $62 8 million, an increase of 40% year over year, representing 84% total revenues fiscal.

Fiscal year subscription revenues were $224 9 million, an increase of 38% year over year, representing 82% of total revenues.

Full year subscription revenues included $18 5 million of triple fee revenues.

Professional services revenues were $12 2 million in the quarter growing 5% year over year as we continue driving more professional services business to our partners.

Fiscal year 2022 professional services revenues were $49 million, an increase of 17% year over year.

Non U S revenues were $12 million or 16% of total revenues in the fourth quarter up 54% year over year.

For the full year, 16% of revenues came from outside the U S. An increase.

From 11% last year.

International subscription revenues more than doubled both on the fourth quarter and for the full year as a reminder, our international strategy includes leveraging our partner ecosystem for professional services.

non-GAAP non-GAAP gross profit for the fourth quarter of fiscal 2022 was $46 seven.

$7 million.

An increase of 38% year over year.

non-GAAP gross margin was 62% compared to 60% in the fourth quarter of fiscal 'twenty one.

Our gross margins continue to improve largely from subscription product mix as enterprise and international customers comprise more of our revenues as.

As well as subscription becoming a larger contributor to total revenues.

non-GAAP operating loss for the fourth quarter of fiscal 'twenty, two was $8 3 million compared with $7 5 million and.

In the fourth quarter of fiscal 'twenty one.

Our non-GAAP operating margin for the fourth quarter improved to negative 11% compared with negative 13% in the fourth quarter of fiscal 'twenty one.

non-GAAP net loss attributable to <unk> for the fourth quarter of fiscal 'twenty, two was $9 3 million or <unk> <unk> per share compared to $5 6 million.

Our six six cents per share in the fourth quarter of fiscal 'twenty one.

For fiscal 2022.

non-GAAP operating loss was $17 6 million compared with $14 2 million in fiscal year 'twenty one.

Our non-GAAP operating margin for fiscal year, 'twenty, two improved to negative 6% compared to negative 7% in fiscal 'twenty one.

non-GAAP net loss attributable to <unk> for fiscal 'twenty, two was $19 5 million or <unk> 20 per share compared to $11 7 million or <unk> 13 per share in fiscal 'twenty one.

Our remaining performance obligation or <unk> increased to $912 million as of January 31 <unk>.

2022 up 52% over $601 million as of January 31, 2020, with $538 million in the less than 24 months category up 49% from $361 million as of January 31, 2021.

Simple nexus contributed $54 million.

Apio with $51 million of that amount expected to be recognized in the next 24 months.

Turning to cash.

After funding the simple Nexus acquisition, we ended the quarter with cash and cash equivalents.

Of $88 million.

Net cash used in operating activities was $21 1 million compared to $11 9 million in the fourth quarter fiscal 2021.

Capital expenditures were one 8 million in the quarter, resulting in negative free cash flow of $22 9 million for the fourth quarter of fiscal 2002.

As a reminder, Q4 is our strongest billing quarter, which should generate greater cash collections in the first and second quarters.

For the full year, we reported cash used in operations of $19 2 million.

And capital expenditures of $5 5 million, resulting in negative free cash flow of $24 7 million.

We ended fiscal 'twenty two.

With over 1750 customers, including those obtained through the acquisition simple Nexus.

Up from over 1260 at the end of fiscal 2021.

Of our Encino Bank operating system customers 271 contributed greater than $100000 to fiscal 'twenty two subscription revenues.

An increase from 224 in fiscal 'twenty one.

Of these 271 customers 47 contributed more than $1 million to fiscal 'twenty, two subscription revenues compared to 36 at the end of the prior year.

Our subscription revenue retention rate for fiscal 'twenty, two was 133% down.

Down from 155% in fiscal 'twenty one.

As our sales in fiscal 'twenty, one, we're largely tripathi upsells to existing customers with revenues activating much faster than typical for our business.

This year's retention rate excludes any impact from simple nexus as they were not part of our prior year results.

We saw a return to more balanced bookings this fiscal year.

Healthy mix of new customer and expansion deals, including those mentioned earlier by Josh.

Our churn rate, including Triple key contracts that concluded in fiscal year.

We remained in line with our historical average of 2% to 3% of annualized subscription revenue.

Now turning to guidance.

For the first quarter, we expect total revenues of 91 million to $92 million.

With subscription revenues of $77 million to $78 million.

Regarding simple Nexus contribution, we intend to manage and guide to total company results in the future.

For the balance of fiscal 'twenty, three we plan to discuss organic and combined subscription revenues.

These year comparability.

This guidance assumes a year over year subscription growth of 52% in the midpoint of our range with approximately 27% organic subscription growth for the first quarter.

non-GAAP operating loss is expected to be approximately seven 5 million to $8 5 million.

And non-GAAP net loss attributable to <unk> per share up 7% to eight for the first quarter.

This is based on a weighted average of approximately 110 million basic shares outstanding.

For fiscal year 2023, we expect total revenues of 398 million to $400 million with subscription revenues of $340 million to $342 million.

This full year guidance assumes year over year subscription growth of 52% at the midpoint of our range with approximately 27% organic subscription growth.

We expect non-GAAP operating loss for fiscal 'twenty, three to be $33 5 million to $35 $5 million. We expect simple Nexus will represent close to half of this non-GAAP operating loss, which includes certain onetime integration costs.

non-GAAP net loss attributable to <unk> per share is expected to be 31% to 32.

Based on a weighted average of approximately $111 5 million basic shares outstanding.

We expect negative cash from operations in fiscal 'twenty three.

And to incur capital expenditures of approximately $15 million.

As we expand our facilities.

Our increased use of cash relative to fiscal 'twenty two.

It reflects a positive view of the global market opportunity for both our core <unk> and <unk> business.

Given these investments and our growing base of subscription revenues, we do expect to achieve non-GAAP operating income profitability and positive free cash flow in fiscal 'twenty four.

Truly appreciate all your efforts as well as your continued enthusiasm for the opportunities ahead.

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

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

So withdraw your question press the pound key.

Our first question comes from the line of Terry Tillman with <unk> Securities.

Yes, hi, good afternoon, and congrats on the more normalized bookings as you said David.

Congrats on the fourth quarter strength on new business, if I knew the lyrics, though Canada I guess I would say, yes, but maybe thank goodness for everybody involved I don't know if <unk>.

Earliest low hanging fruit in terms of revenue synergies and then I had a.

A follow up to that first question.

Hey, Terry its Josh it's nice to speak with you today and it's been a lot of fun to get to work with the simple Nexus team now that we're past the the acquisition.

We have been at their user event.

Some time with them at industry events, and the first thing that I've taken away from that is just a deep respect for the expertise they have in the mortgage space and for the great relationships that they have with their customers relative to synergies what we see from from our customers is a real appreciation for the for the combination of simple Nexus is mortgage.

Expertise and then the 10 years that focus that <unk> had on more traditional banking because alone doesn't equal alone. So bringing those together is something that's really resonated nicely with our customers. We see a lot of folks who are very interested and simplifying their vendor management landscape. It sounds like a simple thing but to these customers it really does.

They are excited to see our solutions integrate and as we go into our existing customer base, where I feel like the most initial revenue synergies are the great relationships that we have that we built by taking care of our customers is accelerating their conversations I am excited that today, we actually signed our first cross sale of simple nexus into new casino customer that was.

On the back of years of great relationship with that customer and our goal is to do more of those.

That's a great data point, thanks for that Josh I guess the second part of this first question was related to we did here I guess, we're seeing in the text in the press release on consumer included on the Wells Fargo win and then I think you had talked about $100 billion plus enterprise bank on new deposit account opening and then we've got the data points on year over year growth for both of those I guess for PR.

And then.

And then I had a quick one for David Thanks.

<unk> for the single platform I would point to Armstrong Bank as I said $3 billion Bank in Oklahoma, We put out a press release during the fourth quarter. They contracted for a commercial for a small business for retail lending and for deposit account opening because they don't want to give their customers a disparate experienced across those various products in that division will continue pursuing.

That's great I'll stop after this I promise up David in terms of the color on the first half headwinds are more notable on organic growth at the full year also 27% I know you're not guiding to like <unk>, but is there the sense that by <unk> just based on bookings activation the organic growth could be picking up a little bit as youre kind of ending the year. Thank you.

Yes, that's great. Thanks, Terry Yeah, so 27% in Q1, we expect a slight moderation in the Q2 some improvement into Q3, and then further improvement into Q4, so thats the way that we as we see today that we would expect revenues to flow.

That's great congrats.

Okay.

Thank you and our next question comes from the line of Brad Sills with Bofa Securities.

Oh, great. Thanks, guys for taking my question congratulations on a nice end of the fiscal year.

I wanted to ask about just the general environment here, we've got a rising interest rate environment here.

It should be.

For banks, yet we've got the threat of potential risk.

A recession here with the war and the cost of oil inflation et cetera. Just curious what are you hearing from the banks in terms of willingness to spend on digital transformation overall.

Yes.

A great question because as you mentioned there are rising interest rates is good for bank profitability.

We actually see an acceleration of digital transformation kicked off by the whole pandemic I.

I don't see that slowing down at all.

We see additional initiatives around the world.

I would say Europe is leading with the ESG.

We've got a solution team they are building out and working on it.

We have actually moved one of our most senior people into a leading role for ESG, because we not only see the company internally ESG program is important but actually building a solution because if you think about it banks in the future will be.

Just and evaluated based on their portfolio and how that compares to the ESG goals.

And what we can tell you is that as we speak to banks about it how many of them have an interest co developing with us what those metrics and models and frameworks will look like and <unk> is the ideal tool to do that because we have all the data around every loan what segment, what customer et cetera, and for instance, if you Mike alone too.

British Petroleum, which is the oil company bodies for Windows that would become a green loan okay, and so we have that portfolio of knowledge. We can report on those which would be tremendously helpful.

So I would tell you overall, we see a very positive environment and we are optimistic about the future.

And just kind of the outlook going forward. Thanks again, yes.

Yes, so on Triple P. We expect in the first and second quarter to see that $7 million churn.

We're also being negatively impact from Triple T. The fact that we had three quarters in fiscal 'twenty, one where we didn't have any bookings.

Seats are not activating now.

And then also we are redeploying those seats, we had $18 5 million and tripled <unk>, we expect to churn out $7 million and so the rest of those stay with the customers and or are being repurposed elsewhere and so thats, how we view the year for triple peaks and.

And that's it I just want to emphasize when we repurpose a seat that essentially say zero growth rate.

Okay, and so that does create.

A difficult compare for the year over year growth rate.

Still like to redeploy them, even though thats the impact.

Finally, we will come to the end of this in the second quarter.

Understood. Thanks, guys.

Thank you and our next question comes from the line of Jackie Kelly with Barclays.

Hey, guys. Thanks for taking my questions here.

Hey, Josh Hey, David Hey, Josh maybe or John .

Josh maybe just to start with you can you just go one level deeper into the expansion at Wells Fargo. Congratulations first of all.

But maybe maybe more more broadly as you look at the rest of your base, where we're clearly we're leading with commercial how big is that opportunity to sort of land and expand with commercial and then expand into into small business lending like what you did here with wells.

Has that gone.

I'd like to speak with you look we're always going to pursue that we do have situations, where we've had our entry point to a large bank be through small business and then on that successful expand to commercial so the goal for all of these accounts is to telling the story about the incremental value. They can provide to their customers with a single platform and across the whole market, we're going to pursue that.

Got it got it David maybe for you for my follow up and you touched on this a little bit in the prepared remarks, but just to flush. It out can you just can you just walk through the simple nexis margin impact this year.

I think you talked about maybe some onetime investment there as well and then just zooming out on that topic, maybe just talk about about sort of the path to profitability more broadly.

That's great yeah. So on the the loss for fiscal 'twenty three about half of that loss is simple nexus related.

We've done a.

Big hiring we've tripled the sales force at simple Nexus. So thats annualizing. This year, we've added to the product team as well that's about half of that is around.

Half of that loss for the full year is around those head count adds and we also have some integration costs as well, but thats smaller smaller numbers the balance of that loss on the consolidated loss is really around some of the salary adjustments, we're making like youll see for many companies out there just to be more in line with the market, but with the marketplace and so.

That's our view on the cost side.

We are committed to being operating income positive in fiscal 'twenty, four and free cash flow positive.

We have great visibility in the model, we've got the head count plans in place and we are committed to doing that in fiscal 'twenty four.

Very helpful. Thanks, guys.

Thank you.

Next question comes from the line of Brian bracelet with Piper Sandler.

Good afternoon, maybe I'll start with you Pierre here.

Encouraged to see some of these renewals and the opportunity to ask the renewals you talked about a little bit how do we think about.

The opportunity to expand existing customers you have obviously it sounds like pretty good traction now with Nick simple nexis.

Further expansion into retail if you looked in the installed base how much room do you have left to expand just with existing customers. Thanks.

We have a tremendous opportunity because as I explained to you in the past.

When we look at our client banks are our customers, we only have about a 12% to 14% coverage of the overall seats. Okay. So theoretically you've got.

6% left of that banks now with the addition of <unk>, we can literally pick that as an entry point on retail as you hold earlier with Wells Fargo. We went into the retail side of the bank, but it's for a small business use case. Okay. So we are just creating multiple points you heard the $100 billion bank on deposit account opening.

So we are much more nimble and attacking the other side of the bank as we go forward.

And I am very optimistic that this platform vision is playing out.

We've built a tremendous brand and banking that we deliver what we say, we're going to deliver and we actually provide quality software.

And earlier today in a debrief with a simple <unk> team. They are beginning to see now an unprecedented level of larger institutions in.

In their pipelines. So we're optimistic on all fronts of the business.

Helpful Color and then David for you as we drill drill down into the Nic opportunity specifically.

How should we think about the three products and the economics around those three products portfolio analytics.

Commercial pricing.

Are those.

10% potential uplift to a dollar for every dollar of commercial spend is at a 20% uplift just trying to frame what the uplift from Nick <unk> III products could be thanks. Thanks, Brent Yes, we are.

We're excited about our niche products with the product on the seasonal side, we've seen great traction on auto spreading in commercial pricing new product, where we've had some great interest in actually customer went live on that we would expect Nick as a whole to contribute about 20% of HCV of any given customer.

It's helpful color, that's all I had thanks.

Yes.

Thank you.

Thank you and our next question comes from the line of Ken <unk> with Autonomous research.

Yes.

Subscription revenue growth. So I'm just curious if PPP is weighing on growth in the first half of the year shouldnt that lead to faster growth.

The full year as you see that acceleration so I'm just trying to reconcile those two growth rates.

And also trying to understand how much conservatism is baked into that number.

Thanks, Ken Yes, so at 27% in Q1, we do expect it to moderate growth year over year growth to moderate in the second quarter.

And then improve a little in the third quarter and then further improvement in the fourth quarter.

It's kind of the trend that we see at the moment based on our modeling.

And then.

The way, we provide guidance as similar dose as we have done in the past we built an achievable model.

Simple next is Doug does add some.

It has less visibility.

To the model and so have you accounted for that in the guidance as well.

For the year, we expect 52% subscription growth as a whole for the business with 27% organic growth.

Okay, Great and then I wanted to ask about the simple next is cross sell I mean can you just give us a little flavor as to what that might look like.

And then also what kind of cross sell figures are you penciling in for this year and next year either from a customer standpoint.

Or a revenue standpoint.

Absolutely.

As we finalize the acquisition enabled the team.

Everyone aligned on how we would jointly position the combined Encino simple next the story to these customers we set a peripheral mechanisms as evidenced by the cross sale that I spoke about earlier, we can see those are paying off ultimately this is about helping the customer understand the opportunity to transform that homeownership journey for their customer.

Take the manual process out and offer a fantastic experience for them David would you like to address the assumptions relative to the cross sales in guidance.

Yes.

When we when we close the transaction, we did analysis of overlapping customers.

I think we assume minimal cross sell activity just to be as conservative as possible with the model.

We would expect based on the early activities that we see.

That.

We think that will end up closing some of these deals we closed on earlier today, but we've taken a conservative view as the sales force getting to know each other and get to know the product.

Okay. Thank you very much.

Thank you.

Question comes from the line of Josh Beck with Keybanc.

Thank you for taking the question I just wanted to ask.

Also a little bit on the simple nexus.

Topic, Pierre certainly you alluded to some of the really.

Areas to get excited about certainly there is growth.

Purchase mortgage market there is a much greater demand.

For really a streamlined digital.

Mortgage front and so there are certainly a lot of areas to be excited about the flip side, you obviously have the refi market really.

Significantly slowing down so I'm, just kind of help us understand how you balance. These these market factors and maybe also address.

David's point on the visibility as you kind of build out.

The forecast for that segment, yes, I remember that.

As I've said before.

Many of the players in that mortgage markets I'd say transaction volume based okay, and they pay the price for that now simple excess took a much longer view and is much more seed based with a very very small transactional performance based element.

So the revenue model is much more predictable.

We are not seeing a negative impact because of these mortgage rates so far.

I will also tell you that the quality of their software and the quality of that organization is reflecting now.

We're seeing customers coming back.

Adding customers signing up for them, we're seeing customers have a very large size that is now have an interest in simple excess which they've not seen before.

We are studying the impact of that and why that is happening. We believe some of that is the brand Association with Encino as a banking company an hour.

<unk> and scaling businesses as well as scaling software for these large institutions.

So that is to me a very positive thing when it comes to revenue visibility.

Realize they've got shorter term contracts. So so we are figuring out how to extend that number one but number two how to build that into forecast.

Et cetera, they've got a fantastic is three of net retention.

Which gives me confidence that we don't know right track here, we went through their conferences and actually listen to their customers and all of that is giving us the confidence that we've done the right deal here.

Excellent and maybe.

Organic subscription revenue guidance this year, so when we bridge the.

The gap between where retention was and where youre forecasting this.

Subscription business, obviously I would imagine the triple P. Churn is is a component of that any other <unk>.

Factors, we should be thinking about it as we kind of bridge those two metrics.

Yes on the $1 33 I think.

Over time, we think that's a.

Our range that we would assume in the longer run for Encino.

Simple Nexus does have higher so on a consolidated basis, you could see an elevated number from that level, but I think 130 is a range that we're comfortable and looking at towards the future now.

We give an achievable number.

We'd like to.

Provide.

Guidance that is that is well thought out and are forecasting.

So I think that 130% net revenue retention number in the long run is a good number to target.

Now this is realized.

Inflated net retention because we didn't sell as many new logo business.

In FY 'twenty, one and FY 'twenty two.

It was heavily cross sell wins any in-flight generates attention and now as our sales is back to a more normalized 50 50.

For new logos as well as cross sell.

That impacts that calculation.

Great color. Thank you both.

Thank you and as a reminder, ladies and gentlemen, if you have a question. Please press star one on your telephone.

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

Thank you and good afternoon and congratulations on that.

All the progress and the customer signings.

Got it sounds good and also good to hear the profitability in fiscal year 'twenty for the.

The momentum in international continues to be impressive.

Just maybe some color on.

The growth.

Over the next several years on international and how large can international be as a percentage of this business and what's the pipeline.

What's the mix in the pipeline and as the profitability I guess I understand the gross margins are higher.

With professional services.

Outsourced, but as the profit model for international.

Equal to or better than North America.

Yes, I'll take the profitability first I think what we've seen because it's mainly larger banks internationally, we see stronger.

Pricing internationally.

And so but the gross margins are very similar to the U S. The.

The large enterprise side.

On that side of the business and Josh Yes, I'll just add that remember the product mixes are different we resell salesforce in the U S to small banks and that brings us down your gross margins in the U S business, so actually the European.

Our gross margins.

Quite a bit higher plus the impact of the enterprise banks as David mentioned is better as well.

So we see a very strong profitable gross margin versus in Europe .

Relative to the opportunity, we see a larger Sam in the international market than you see in the U S. Obviously the U S team had a head start so maybe a little while until international can lap them I'd be thrilled to see that happen, though if you look at what we did this last year, we more than doubled subscription revenue internationally, we announced new logos in Germany, France, and South Africa, we announced.

Three in Japan, the team is executing really well and frankly, we're asking them to execute in a very difficult environment relative to everything going on in the world in the last two years, but I would ask you to look at what we've done in the U S. We now have 12 of the top 25 banks you saw our announcement with Wells Fargo, two quarters ago and expansion today and look at what we do.

Done in Canada five of the top seven financial institutions in Canada, We signed three Toronto banks in one fiscal year.

Just wanted to say it again, because I'm not proud so when I look at the rest of the globe and the markets that we've decided to target. That's the goal to continue replicating that.

Great. Thank you and then just a follow up question.

The gross margin.

Simple nexus, but maybe a broader question just on the mortgage business.

Overall, what is the product pipeline and what do you think the growth is.

Mortgage and you look at mortgage simple next just like the first step in mortgage is there a broader strategy around product set.

Go and do E closing.

Roll compensation information in there there are myriad opportunities in that homeowner and ownership journey to not only obviously, we want to go sign new logos, we will keep doing that but to go deeper with the logos that we have which is part of why I have been so excited after getting to work with simple Nexus, you'll see that we're very much philosophically aligned that we want to get the customer we're going to get them live.

We're going to continue investing to go broader within the value chain and also deeper in that journey.

And I can just add to that if you look at the mortgage market. This portfolio mortgages and then there is youre qualified mortgages for Fannie Freddie.

We have no plans to build a product for those Fannie Freddie mortgages, we've got a very close relationship with ice or Ellie Mae.

Simple Nexus is the deepest integrated front end to that platform. So we've got tremendous success in that market with them.

We will both a complementary product for purchases Helocs and Refis from an LLS perspective that will complement that solution and if you integrate that with.

With simple access you gave the bank employees. This single platform experience across all the different portfolios.

Expand our retail offerings and do this.

I think this whole platform story is a window and so we see a massive opportunity overall and banking as well as independent mortgage banks for our mortgage program.

Thank you I appreciate the answers.

Thank you. Thank you.

Thank you.

And our next question comes from the line of Charles Nabhan with Stephens.

What led to that that led to that positive variance in this quarter yes.

Great.

Appreciate the color and one quick one on simple nexis.

Within that revenue mix do they have any professional services revenue or is it is it predominantly im sure. It's predominantly subscription but is there any professional services within that next yes. They have a services team that deploys product and it's about 10%, 5% to 10% of total revenues.

Great.

And if I could sneak in one more.

I was hoping to get your perspective on the competitive environment within.

The core the core operating system business.

Number of your competitors have developed products over the past few years and while you're still an industry leader just curious what youre seeing from us from a competitive stance.

Competitive standpoint in the market.

Yes look.

You have to realize that a core processor is a transaction processing engine, it's a general ledger.

Where you keep account balances.

Its out and calculate interest okay.

The transaction processing landscape. It includes things like <unk> online banking etcetera.

And we as a company do not want to play in the movement of money or.

While the balancing of the bank.

That's an extremely difficult business number one number two the core processes.

A very strong hold on the answer to defined as Rob depth.

Just show you to some of those early or innovative companies has been acquired by the big ones.

So I just don't forget that we love what we do with a business process Reengineering company I believe that's where the opportunity in banking sits today.

We've got a global marketplace that we can transform and drive them to <unk> and drive them efficiency provide them with a better compliance record provides ESG solutions for them.

More.

<unk>.

Profitable and drive revenue. So we are hitting all those buttons that the banks are focusing on and so we will just stick to our knitting.

Great well I appreciate the color congratulations on the quarter. Thank.

Thank you.

And our next question comes from the line of Alex scholar.

Raymond James.

Great. Thanks, Pierre Jos on the Salesforce investments I'm curious, what's kind of been the ability to travel, particularly internationally for the sales organization and with that kind of have you started to see the face to face meetings pick up noticeably this year and if thats factoring at all in the profitability outlook.

I'll speak to what I see in the market and David can speak to the expense assumptions, but we do see the world opening back up is becoming easier.

<unk> been able to travel internationally recently and I had about a two inch thick binder papers to make sure I could get across the border. That's starting to go away. So we really look forward to getting out to markets, where we haven't been in a couple of years. We also see a lot more in person meetings with customers popping up and we see a lot more people competing back at in person events.

All of which are very helpful. For Athena, Yes, we're excited that our insight user conference will be in person and beginning June .

And all of those personal connections with banks again this week.

You can literally see the energy and how they want to Reengage and drive business forward. So that's a very positive for us.

Yeah and on the cost side, it's all embedded in guidance. What we're seeing is there's some return to travel I think we ended up last year at about 30%, 35% of pre Covid travel, we expect that to be higher this year, but we are seeing much higher cost and airline tickets. That's gone up I'm sure everybody travels so seeing that but that's all embedded in our guidance is.

Well.

Okay, Great and then it's probably a good good problem to have but some of these large deals can kind of swing RPI pretty massively. So David I'm curious if you can talk about if there is any noticeable change in duration within RPM.

Yes, I think the average is still that 3537 year range. We did have we had a very strong <unk> quarter.

Had very strong renewals as well and I would say the bulk of the renewals actually ended up in additional upsells.

But most exciting we had one of our larger customers sign up for another five years now we have a very large bank customer that will be in encino customer for 10 years, and hopefully much longer than that as we work with them in the future.

Alright, great. Thank you.

Thank you and our next question comes from the line of Mike <unk> with Needham <unk> Company.

Hey, Good afternoon, guys. This is actually how peterson on for <unk>. Thanks for squeezing me in here.

Just wanted to touch on the mortgage outlook.

Nexis.

I appreciate that you guys are less.

Directly exposed to origination volumes given that's more of a subscription can proceed.

Model, but just wanted to see.

If you guys have noticed any change in client demand in terms of like adding seat given the recent spike in rates.

And it's probably going to pressure at least from some of these mortgage lenders in my kind of constrain some of their growth plans.

No we have not seen any notable or material impact from cancellation of seats like that.

It's a competitive market.

I think the associated with these two companies driving logo growth.

And that technology is clearly superior so it's looking good for us.

Okay. That's helpful. And then just one quick follow up.

The professional services margins.

It came in a little bit light was there anything one time, there or was that kind of layering in the small amount of.

Simple Nexus services revenue I, just wanted to kind of think about the best way to look at that the gross margin on services going forward.

Yes.

Simple Nexus really had no impact in the quarter. It was more around just utilization rates that we saw in the quarter. There were a number of customers that took the last two weeks off of the year.

And that was the real reason why we noticed that was a trend that happened with a number of our customers.

But beyond that that was that's the only thing that I can call out on the corner.

Great. That's helpful. Thanks, guys.

Yes.

Okay.

Thank you I'm showing no further questions at this time, so with that I'll hand, the call back over to CEO , Eric <unk> for any closing remarks. Thank.

Thank you operator in closing I would like to reinforce what David noted earlier following the investments we are making this year to further position us for continued topline growth. We are committed to non-GAAP operating income profitability and positive free cash flow for fiscal 'twenty four.

I would also like to share with you my experience at our recent company kickoff high performing companies need creative and motivated employees and doing our annual kickoff.

Remind us how incredibly fortunate we haven't seen a while.

Our more than 650 employees from across the globe gather virtually and in person for a week of leadership panels, and keynotes product demos and updates customer conversations volunteer opportunities and my favorite of our employees kits.

The enthusiasm.

<unk> creativity and passion of our people is truly inspiring.

This innovative passionate culture is what report into our products our partnerships and our customers every single day I would like to end this call by thanking the entire Encino team, which now includes our simple excess colleagues im proud to be in business with you.

And excited for the year ahead. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

Q4 2022 nCino Inc Earnings Call

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