Q1 2023 nCino Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to in female first quarter fiscal year 2023 financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
Please be advised this call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today too.
Britney Riley <unk>.
Investor Relations you may begin.
Good afternoon, and welcome to <unk> first quarter fiscal 2023 earnings call.
With me on today's call are Peter day, and Peanuts, Chairman and 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.
Details certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents.
Including those related to the impacts of COVID-19 on our business the financial services industry and global economic conditions.
<unk> disclaims any obligation to update or revise any forward looking statements.
Further on today's call. We will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results.
A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website 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 first quarter results for fiscal 2023.
We had another strong quarter and a solid start to the year.
Our team executed extremely well in the first quarter highlighted by our strong topline performance with $94 2 million in total revenues an increase of 51% over the first quarter of fiscal 2022.
Which includes the addition of simple mix as revenues for the first full quarter.
Subscription revenues grew 55% or 29% organically not including the addition of simple Nexus.
Year over year <unk> growth for the first quarter was 48% or 38% organically and our non-GAAP operating margin improved to negative 4%.
I am pleased that we are once again, raising our revenue outlook for the full year.
Additionally, we told you last quarter that we were committed to being profitable on a non-GAAP operating income basis and free cash flow positive in fiscal 2024.
Our updated guidance reflects good progress towards achieving that objective.
We continued to see strong demand for technology investments and digital transformation across the financial services sector as well as the positive impact it has on your customers business.
While we are aware of the various business headwinds across the globe. Most banks are well capitalized today and are still looking to deploy capital to its highest views.
In a rising interest rate environment banks are typically more profitable and in an even better position to continue growing and to investing.
We have heard this theme repeated in recent discussions with our customers and any support from financial institutions.
Regardless of how many times the fed may raise rates financial institutions are always looking for ways to become more efficient.
Streamlined their operations and to remain compliant and as you know it helps them achieve all three of these goals for.
For example, connect one bank and $8 billion asset bank headquartered in New Jersey.
Cindy reported their first quarter earnings and their chairman and CEO , Frank Sorrentino stated on the call.
Supporting our industry, leading efficiency ratio is our ability to leverage technology and streamline internal processes.
A great example of this is our partnership with Encino.
Which has been instrumental in this regard we partnered with Encino in 2017. We're now total asset size was just 4 billion to help deploy a single cloud based platform throughout the organization and business lines.
And today, we have more than doubled in size and yet we've been able to create efficiencies as we continue to build scale.
This is just one example of how the <unk> operating system is enabling growth and efficiency gains for our customers.
Connect one bank is an existing and some new customer and we also welcomed new customers during the first quarter in the U S APAC and EMEA.
One of these new customers was the UK financial services provider with over one trillion dollars in assets.
Becoming our second largest EMEA deal in company history.
In addition to continued demand for the <unk> operating system. We also saw strong interest in simple Nexus solutions.
As interest rates rise mortgage lenders are shifting their focus to finding ways to improve their operational efficiency and invest in technologies that will deliver high levels of borrower satisfaction.
We view this window of time in the U S mortgage market as a strategic opportunity for our simple mixes business.
Strong companies with the right focus execution and business model have the opportunity to become even stronger during difficult times and take market share away from competitors and that is exactly what the simple Nexus team is focused on doing.
From a solution perspective.
There is heightened demand for technology that can help automate facilitate and expedite mortgage closings.
Such as those provided by the simple Nexus E close key note and evolve solutions.
While it's still early days in the mortgage market has experienced a rapid increase in interest rates.
I continue to be extremely impressed by the overall quality of this asset that we acquired.
From the superior mobile first technology to the strength of the team.
Enter its superior subscription based revenue model, which we have highlighted to you on several occasions.
As a collective organization, we remain laser focused on taking care of our customers, both great software and transforming an industry through innovation reputation and speed.
This will be the front and center next week, when we host insight our annual user conference in Raleigh, North Carolina.
Insight is by far my favorite event and it will be the first time, we've held it in person since June 2019.
We have nearly 1400 registered attendees.
Attendees from 15 different countries, representing 250 financial institutions as well as dozens of consulting and technology partners from across the financial services ecosystem.
It's going to be an incredible three days with colleagues customers and partners from around the globe as we continue to drive this industry forward together.
I'll now turn the call over to Josh to go through more business highlights from the first quarter Josh.
Thanks, Pierre I'm pleased with the start of our fiscal year, 2023, which was a balanced quarter, reflecting both new logos and expansion deals in multiple markets and growth across our newer product solutions for.
For example, we continue to see strong interest in commercial pricing and profitability part of our Nic platform.
It allows bank operating system customers to gain additional benefit from the single platform approach. This quarter, we saw additional customers sign up for commercial pricing and profitability with continued activity across our community and regional market.
Billy Carroll, President and Chief Executive Officer of Smart financial the holding company for $4 billion asset Smart Bank recently noted on the earnings call that one of the biggest initiatives. This year is the full installation of an <unk> workflow platform.
Its moving along and we plan to be live by the third quarter and shortly after we will be adding the encino customer pricing and profitability platform.
We're thrilled to get these platforms operating in the bank. This year as we believe they will have great impact to efficiency and profitability.
During the first quarter, we also signed a number of deals across our other Nic solution.
Our customer count for auto spreading is up over 400% year over year and our recent enhancements to that solution are resonating nicely with the market.
Our portfolio analytics team had an impressive quarter and seasonal continues to be a big driver of growth for that solution.
As of quarter end about one quarter of our Encino Bank operating system customers are using at least one Nick product.
As Pierre mentioned earlier, we signed a large strategic account in the UK during the first quarter for commercial lending and automated spreading.
This was the second largest deal in the history of <unk> EMEA.
EMEA business.
That team continues to grow and mature and remains laser focused on executing in our primary markets.
Over the last few months, our EMEA team has attended many conferences and events and that with banks from London to Paris to Madrid, and the momentum is very encouraging.
It is clear that the <unk> brand is becoming more well known and sought after in APAC as well.
We are actively in conversations with leading financial institutions and also with innovative emerging banks across that region.
I am proud to be able to announce publicly today and CNS partnership with Avenue Bank, which we signed in the first quarter Avenue Bank is a brand new Australian Challenger Bank focused on to me, our small business lending and their technology enabled business model is perfectly aligned with <unk> expertise and platform.
We also expanded relationships with existing customers during the first quarter and the activity and pipeline of Crestar, Australia, New Zealand and Japan business is solid.
Luckily Lucky to finally have an opportunity to visit our APAC offices again last month.
Spending time with our teams in Sydney, Melbourne, and Auckland, as well as meeting with our Encino KK team who flew over from Japan.
I returned from that trip more optimistic about our APAC business than ever before.
Our teams remain relentlessly obsess with our customers and their success to that end one of the achievements and most proud of from the first quarter is an incredible go live with Hancock Whitney a $36 billion Gulf Coast Bank Hancock.
Hancock Whitney selected Encino for both commercial and retail lending and today their bank is officially live on <unk> retail lending solution.
This is <unk> largest upmarket retail lending deployment to date.
And the bank is in the process of going live with commercial lending as well, while many customers have traditionally started with commercial and then expanded to retail.
Whitney actually started their journey by implementing retail lending versus this.
Straight to the very path to success than Encino can offer customers, who look to leverage our single platform.
We deeply appreciate the team at Hancock Whitney for their early and continued commitment to encino and their belief in our single platform vision. These projects are hard work and it takes strong partners on all sides to ensure that they are successful.
Continuing with retail as you all know by now simple Nexus is an important part of our consumer retail strategy.
As Tim mentioned that a strong start to the quarter with the count of new customers added in the corner across all their solutions up 80% from the first quarter last year, including a larger mix of banks.
As you May recall last quarter, we announced our first cross sell deal a simple nexus into the bank operating system customer base, and we continue to see interest and momentum in our cross sell and referral programs in the first quarter.
We're looking forward to introducing more than seen as customer base, a simple nexus and their innovative homeownership platform at our insight conference next week I am extremely excited for that event and I look forward to being back with our customers in person again.
And with that I'll now turn the call over to David.
Thank you Josh and thanks, everyone for joining us this afternoon to review our first quarter fiscal 'twenty three 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 in today's earnings release, which is available on our website and as an exhibit to the.
From 8-K furnished with the SEC just before this call.
We are excited about the first quarter results and the solid start to the year.
Total revenues for the first quarter of fiscal 'twenty three we're at $94 2 million, an increase of 51% with simple nexus up approximately 92%, including <unk>, where revenues or about 61% organically.
Subscription revenues for the first quarter were $79 2 million, an increase of 55% year over year, representing 84% of total revenues.
Organic subscription revenues, excluding simple nexus or $65 6 million, representing 29% year over year growth.
Our organic subscription revenue outperformance was due to some deals converting to revenues quicker than forecasted.
Professional services revenues were $15 million in the quarter growing 33% year over year.
Non U S revenues were $14 3 million or 15% of total revenues in the first quarter up 58% year over year.
non-GAAP gross profit for the first quarter of fiscal 'twenty, three was $60 4 million, an increase of 59% year over year.
non-GAAP gross margin was 64% compared to 61% in the first quarter of fiscal 'twenty two.
Our gross margins continue to improve largely from subscription product mix as enterprise and international customers comprise more of our revenues.
From the adoption of niche products.
And from subscription, becoming a larger contributor to total revenues.
non-GAAP operating loss for the first quarter of fiscal 'twenty, three was negative $3 7 million <unk>.
Compared with negative $4 3 million in the first quarter of fiscal 2002.
Our non-GAAP operating margin for the first quarter improved to negative 4% compared with negative 7% in the first quarter of fiscal 'twenty two.
non-GAAP net loss attributable to Encino for the first quarter of fiscal 'twenty, three was negative $6 1 million or negative <unk> <unk> per share compared with negative $4 million or negative <unk> <unk> per share in the first quarter of fiscal 'twenty two.
non-GAAP net loss attributable to <unk> included approximately $1 6 million of noncash unrealized loss on intercompany loans due to the strengthening dollar.
Our remaining performance obligation or <unk> increased to $906 million.
<unk> 2022.
Up 48% from $611 million as of April .
April 32021.
With $567 million in the less than 20 months 24 months category up 49% from $380 million as of April 32021.
Organic <unk> increased 38% year over year.
Our renewals in the quarter were largely community and regional banks with contract durations shorter than what we observed last quarter.
Turning to cash we ended the quarter with cash and cash equivalents of $84 1 million, including restricted cash net cash provided by operating activities was $1 2 million compared to $7 6 million in the first quarter of fiscal 2002.
Capital expenditures were $4 7 million in the quarter, resulting in free cash flow of negative $3 4 million.
As a reminder, our typical seasonality includes generation of positive cash from operations in the first and second quarter.
Normally followed by negative operating cash in the third and fourth quarters.
The second quarter, we expect total revenues of $97 million to $98 million with subscription revenues of $81 5 million to $82 $5 million.
This guidance assumes a year over year subscription growth of 52% at the midpoint of our range with approximately 26, 5% organic subscription growth for the second quarter.
non-GAAP operating loss is expected to be approximately negative $6 5 million to negative $7 5 million and non-GAAP net loss attributable to <unk> per share to be eight to nine.
For the second quarter.
This is based on weighted average of approximately 110 5 million basic shares outstanding.
Turning to guidance for the full year, we are increasing our revenue outlook.
For fiscal year 2023, we expect total revenues of $401 million to $403 million.
With subscription revenues of 341 million to $343 million.
This full year guidance assumes a year over year subscription revenue growth of 52% at the midpoint of our range with approximately 27, 5% organic subscription growth.
There has been no change to our expectations regarding tripled revenues.
We now expect non-GAAP operating loss for fiscal 'twenty, three to be negative 24 to negative $26 million.
This updated guidance reflects our commitment to achieve profitability on a non-GAAP operating income basis and positive free cash flow in the fiscal 2024 as we communicated on our last earnings call.
non-GAAP net loss attributable to <unk> per share is expected to be negative 28 to negative <unk> 30 based on a weighted average of approximately $110 5 million basic shares outstanding.
The first quarter was a great start to the year. Thanks to the hard work of the Encino team around the world.
Our dedication to the success of our customers is what makes <unk> the global leader in cloud banking.
And with that we will now open the line for your questions.
And thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Mr. <unk>. Please standby, we compile the Q&A roster and our first question comes from James Faucette from Morgan Stanley . Your line is now open.
Great. Thank you very much and thanks for the time.
This afternoon.
I guess I wanted to start with just kind of your penetration in work that youre doing with the top banks is it looks like you've got about 12 of the top 25 banks in your client roster, how should we think about pricing and how that's going to evolve domestically with such a large customer base or our base of customer.
Is that are so large better said.
Thanks for your time today and thanks for your question.
We've got.
A great market share, we banks talk to each other we are well aware of our position in the market. It is a competitive market. Some banks are doing building their own software. So it's not like we can just go in there on price as well.
There is a market where you can exceed that however, with the quality of our software and the breadth of our solution.
Obviously, we are right now I would say in a very market leading position with our software.
And I feel good, but if you ever been through.
Our procurement cycle with a big Bang you understand that.
It's a good balance of pricing power versus what banks will play.
Got it and then I guess maybe for you.
You David is can you talk about.
The drivers of the narrowed operating loss outlook, obviously, you're looking to come in at least better than we had modeled et cetera, and just wondering it seems like there's been some improvement there from your perspective, but just wondering how you would characterize the different contributors to that.
That improved outlook.
Yes, so during the quarter.
<unk> market remains tight of course, but we are committed to being profitable net was at the back of our minds as we entered into the year that we want to be we were committed to be profitable next year and free cash flow positive next year. So we are taking a measured approach to hiring focusing on our customer service.
Our customers building, great product and selling in the regions that were.
That we're positioned in and so as we made it through the quarter, we looked at hiring and measured out kind of where we would be and then for the balance of the year. We would expect the guidance reflects that continued focus on being profitable next year.
Alright, thank you.
Thank you.
And thank you.
And our next question comes from Korea from Barclays. Your line is now open.
Okay, Great Hey, guys. Thanks for taking my questions here.
Pete peer or Josh maybe for you Gents, Ken can you just talk about the pipeline for international opportunities.
Been several quarters now where we've been seeing great wins in a variety of geographies can you talk about the pipeline and as well as what Youre seeing there competitively as you've had more time under your belt internationally.
Hey, This is Josh we're pleased with where the pipe as it.
Continues to execute and you heard US mentioned there earlier, but I'll reference. This we did sign the second largest net new deal that we signed in our EMEA team and we still sit with the pipe at a very healthy spot.
We pick a market we focus again the goal is to come in and sign these accounts show them a great path to success continue telling that story and that's what we're doing.
That's great great to hear David maybe.
My follow up for you.
I was wondering if you could just talk to us a little bit about <unk> dynamics, a little bit odd.
Obviously, a variety of factors that can drive that I think you called out one or two in your prepared remarks, but can you just go one level deeper into some of those dynamics and how you're sort of thinking about RPM trending this year qualitatively of course.
Yes, so arpaio reflects kind of the bookings in the quarter of our total contract value of deals that we closed in the quarter and there's also element of renewals that enter into the <unk> numbers as well as customers renew.
Q1 is seasonally weaker it's kind of normal bookings are lighter in Q1 as they have been historically there was no change in the quarter.
In the current quarter, we did have community regional customers dominate the renewals.
And those renewals are normally into one to two year period, so a little bit shorter duration on average for renewals that we saw.
We did see about a $3 million headwind to.
<unk> around currency the dollar strengthened in the quarter and so that reduced our total <unk> balance by $3 million and a reminder, enterprises lumpy from quarter to quarter, we had a great quarter second quarter last year on the enterprise side, we closed wells and we closed a number of renewals with the enterprise side so to look into this.
Second quarter, we expect to have a difficult compare just because we had such a great second quarter of last year.
And we don't forecast, we don't run the business on our Apio internally.
But I would expect the trends that we've seen in <unk> to continue as we have in the past.
Very helpful. Thanks, guys.
And thank you and our next question comes from Terry Tillman from <unk> Securities. Your line is now open.
Yes. Thanks, Good afternoon, Congrats from me Hi, David and Josh first I just wanted to wish you guys luck next week at the conference I Hope, it's a smashing success.
The first question I had and I don't know if this is for PR, Josh but on the retail lending side of it is great to hear about the Hancock Whitney going live.
I remember when you were going public there was interest and excitement around just a lot more seats involved on the retail side compared to commercial and potentially a pretty sizeable Sam that you could attack and so could you maybe give us an update on kind of what you thought what were your planning assumptions still a relevant in terms of much bigger.
It's much bigger potential addressable market and then the second part is you always ask about this but on the enterprise bank side, how do we feel about timing of this becoming much more mainstream and them willing to now move forward and.
Standardize on the retail side as well and then a follow up for David Thank you.
Yes, So let me just start over the Big and then Josh will follow up as well. So if you look at our retail we told you a year ago, we pulled back slightly we narrowed our target market the.
The anchor of what they go lives to US has tremendous momentum, it's a $40 billion. That's a $36 billion bank. So it shows you that we've covered the solution into and for the complexity of that size bank as well as the geographical footprint.
I would like to highlight a few things if you look at the retail lending logo growth rate year over year of 30%. The deposit account opening is logo growth was 29%. So we see continued momentum as we signed these banks and remember the more you sign the more you mature the product the more unifying that you get your integration.
Right.
So I really feel good now about.
The team, we've got an engineering building that product refining it and actually make it much more of a.
Our packaged product that I can slop in volume because doing accurate would need some big bank. That's a big project, but eventually we have to come to the smaller size banks, where you can literally sell this in volume in Florida.
So I am very pleased with the progress we've made and this is great news for us as a company Jos.
All good there was going to point out the.
<unk> of that single platform vision that we have.
When you can announce account like Hancock Whitney Thats, a fantastic account. They took the full view theyre going to give a consistent experience to their customers regardless of the loan type. Our goal is to tell that story and frankly, having great partners like Hancock Whitney who are willing to tell that story with you helps you continue to gain momentum. So we're really proud of that and appreciative of that team and their leadership.
For their partnership. So then you asked about the enterprise so realize.
The platform play right now at this stage of the company in the market.
I would say play up to that $50 billion of assets. So if you look at the enterprise above that.
You have to look at how they buy software specifically in the retail bank is voted by product line or they may see very interesting components and then use it for specific product types. Okay. That's what we're seeing at this early stage.
We can do that we were working on the product to actually.
Componentized it like that and attack that but I would say we need a few more at bats at you have smaller banks really get this thing well oiled.
To meet our reputation is above getting a big one now when they struggled with it but we are working with have continuously.
We're focused on that.
So I am pleased with where we stand with retail.
That's great to hear thanks for the insight from both of you all and then I guess the follow up question for David.
We've gotten more and more data points now with Nick.
And then automated spreading customer count up as much as it was year over year I don't know, how you would define materiality, but.
As Nick now something where its coming in on like 10% plus of the business and what kind of uplift are you seeing now given you have three different products in that family. Thank you.
Yes, so in terms of materiality, it's still at a lower level, it's not at that 10% level yet.
We're very pleased with the activity, we're seeing in auto spreading its been a huge success, especially since we added tax returns to it.
We've talked about a 20% uplift to the average customer that seems to be holding as the cases. So far commercial pricing is still early days, we're very excited about that product that feedback is great.
And hopefully we will see uplift from the 20% as we mature that product over time.
Thanks, a lot.
Thank you.
And our next question comes from Brad Sills from Bank of America Securities.
Your line is now open.
Oh, great. Thanks, guys.
Wanted to ask a question about just the environment, obviously, there's a lot of concern around potential slowdown in Europe with the Russia War.
In Asia with with the slowdown in China, It sounds like Youre pretty bullish on your pipeline. So I guess the question is what are you seeing there are you seeing any pause at all and if not then how would you view it solutions as kind of capable of kind of riding through any macro headwinds that we might see.
See here any choppiness.
Just general resiliency of the business, how do you see that thank you so much.
Obviously, a common topic, but we see lots of eyes on the market.
Looking at the macroeconomic situation, but I don't hear a lot of banks questioning whether they need to digitize and whether they need to digitally transform we just believe that's where the industry is going so where this goes.
Everyone else that David spoke about our commitment to operational discipline as we.
Look at how we spend we're going to be really smart here.
I don't see a decrease in results for my customers. So our goal is to continue giving solutions that are going to be relevant in any environment.
Whether interest rates are up or down our banks are not going to want to lend money slower to their customers, they're not going to want to offer a less competitive experience. So we're going to keep focusing on those things. So we believe that value.
He will transcend any near term economic environment.
I can just add to that remember in Europe , your compliance and regulations.
So a lot most 10 years and taxing on the bank operations and so we see for instance, ESG is really a strong element of the product there.
Got a team in London working on a specific ESG program because what are you talking about when you look at ESG is what price you charge per loan what does the bank.
Balance sheet looked like.
<unk> green loans versus brown loads et cetera, and so if you look at that picture Encino contains that full story about the portfolio and we can price. It we're going to originate the loans. We can review the portfolio and so I think we're going to have a strong play though.
We're not totally immune pill for external.
Financial environment, and therefore, we are conservative with how we burned cash and how we are going to hire going forward, but overall, we feel very good about the business.
That's great to hear thanks, guys and one more if I may please.
David If you could comment on the organic <unk> growth.
Growth rate please.
Yes on the organic current we are at a so it's 38% overall.
Less than 24 months is 34% organic growth and greater than 24 months is 45% organic growth.
Great to hear thank you. Thank.
Thank you. Thank you.
And thank you.
And our next question comes from Josh Beck from Keybanc. Your line is now open.
Thanks for taking the question.
I wanted to ask just a little bit.
Higher level with the increase in rates, obviously that.
NIM.
As banks in some ways, giving them more dollars to invest obviously that slipped a little bit of an outlier I think.
The broader macro backdrop, so just kind of curious how you see that.
Filtering into bank.
<unk>.
Kind of how those executive conversations are trending.
We liked that Matt obviously, the net interest income allows them to continue funding their most strategic projects and we believe we should be at the top of that list. So we will continue telling that story.
Obviously banks are.
Looking at that now and again I think that is part of.
Our belief that we're set up well here.
Okay.
Okay.
That's good to hear and then just with respect to M&A, obviously, you've had quite a strong track record.
Last couple of years.
Finding strong shifts for the platform that they are really.
Yes.
Alright, the ACB value prop just as you look forward and you think obviously about balancing the profitability goals as well.
Do you see.
M&A is maybe less likely at the moment just curious how you are approaching that topic.
Yes.
I always like to look around what's going on to re actually aware of what's happening in the market, but I can tell you right. Now we are laser focused on integrating simple nexus on cross selling into our customer base on making sure that we pay the right amount of attention to the independent mortgage bankers base, which is where they come from.
I feel.
Actually appreciated and loved and Thats the focus of that market and then you bring the strength of its senior into the banking market around and our cross sell capabilities.
And I think this is a fantastic asset and the complementary nature of the two businesses.
It's just playing out every day. So we are pleased with that one it will give us a great point of sale front.
<unk> technology as you know we've ever both apps before so now we've got <unk> on Apple and Android.
So that was a great example of a very good acquisition as well as <unk> way back in Australia for automated spreading.
So we like what we've done but as I've explained before we look at our acquisitions as architectural.
Pieces that we add to the puzzle.
It's all done in the in the architectural design of a single platform that is well integrated and that is client centric.
And then focused on the delivery methods to the end user whether it's a bank officer or the end customer.
So yes, we will look at the market I would say in the future. We look more at elements that we can fit into Nick which is AI and machine learning driving intelligence into the platform because once we own every seat in the bank. If you then add intelligence into that pre populate fields come up with an analysis of the credit score et cetera.
That's going to drive banks to operate like <unk>, but I think youre, leading bank to use Encino, you can call out customers that what they are seeing happening in the our continuous investment in innovation is paying off like that.
Great. Thanks, Tim.
Thank you.
Thank you.
And our next question comes from Bob Napoli with William Blair.
Your line is now open.
Thank you and good job.
I just wanted to touch on your partnerships with system integrators you did.
Ill call out one of your partners.
This quarter.
In helping to bring on a large transaction.
And maybe any color on how your strategy around system integrators is evolving.
That is a great strategy and I. Appreciate the question that has been part of our ability to continue growing both up market and international we sit today approximately 2700 consultants that are certified and they help us continue to take this great product and get it on bank screens and Thats, how youre able to in a call like today announced a big for banking.
The U K.
Talk about taking in account like <unk> live.
And it would really need to add delete mentioned in there. So we're very proud of those system integrators.
They're part of the ecosystem and we will have a lot of them.
With us at insight in Raleigh next week.
Will be as much a party.
Excuse me as much of telling our story as as we are.
Okay. Thank you and just a follow up and I know you've talked a lot about simple nexus.
Just wanted to know.
The performance is simple the mortgage market has become a lot tougher probably then.
Maybe one might have expected when you announced that deal, but it sounds like you are still performing very well. So how is the business performing versus.
When your expectations to this point.
No I would say we were always bullish and positive about the business. So is meeting our expectations.
If you look at the competitive nature of that market and you look at the other players and you then compare to assemble exit performance. This is proving out the financial model, we talked about when we acquired the business and people were skeptical number one number two if you look at the stability of that organization.
<unk> of the people and the way that customers embrace them.
That is a quality business and were going to expand that as fast as we can to take market share you'll see that in the logo count as well as the year over year revenue growth.
Always remember when a when the industry started struggling.
They look for ways to automate and how they can actually reduce manual labor with systems and we are right in the middle of doing that with a stellar piece of software that we now are trying to prove out that we can scale into banks.
Large volume so that's what we are focused on.
And we will continue to do that and to see them increase the number of new logos in the quarter to quarter compare year over year is something that is a fantastic accomplishment in any environment much less in this interest rate environment. So we're pleased about that we're going to keep taken into the banks as well yes.
Very proud at insight next week, we will actually start demonstrating some of the integrations of the encino products with simple Nexus products into the platform for instance, when youre on they're working at a home buying experience you can open accounts youre going to apply for unsecured lending products et cetera, and the more we integrate these two.
Products and we drive that vision of a single platform. The more attractive. This will become it also gives us another penetration point on the retail side of the bank.
When I look at the Sam that we've defined.
You have to attack that the retail same from any angle you can and I think symbol next is just another great tool for us.
Thank you.
Thank you.
And our next question comes from Charles <unk> from Stephens, Inc. Your line is now open.
Good afternoon, and thank you for taking my question.
<unk> you touched on this in response to the last question, but I am curious about the mix of community banks within the pipeline for simple Nexus and I know you are still in the process of integrating but.
I guess over time could we envision the mix shift in revenue coming more from community banks and from your existing portfolio as opposed to independent mortgage banks and secondly, if you could comment on the state of employment and labor within.
The independent mortgage base it sounds like the bulk of the layoffs.
At certain certain institutions are more centered around back office as opposed to brokers and that.
Digitization as a means of.
Improving efficiency, but any comments you can provide on that I think would be the incremental thank you.
Well, let me first say simple mix has a great reputation in the independent mortgage bankers world.
And we will not take our focus of that marketplace that is critical to us as we grow that business and.
And we even see for some of our products and the interest in that marketplace for some of the encino stuff in the integration.
But if you come over to banking, our presence and our brand Josh is going to comment on this as well is tremendous and people like the single platform story.
So we have incentivized our sales teams of <unk> to actually take the simple excess product into there and then get them to buy and expertise into help them to sell it and explain it and we are seeing great receptivity.
That's based on our reputation for delivery just any comments on that we did we were able to announce our first cross sale during our last quarter continue.
Continuing to take that motion until that story. The teams are working great together and we feel that we have to like minded teams and the kind of customer that is going to look at digital transformation through the lens that Dresden to Encino can also drive them to simple nexus. So it's going to it's going to be fun to continue to expand their market share and thanks <unk>.
Trends, we're seeing in those markets as a slowdown of Refis as actually the middle back office is rather to reduce staffing and they keep as much of the frontline going.
And Thats really a simple access comes in and help them because that creates that home buying ecosystem connecting the the mortgage.
Broker with a home buyer or the mortgage applicant along with the rest of the ecosystem and that makes that solution very sticky.
So we feel very good about that.
Great I appreciate the color and looking forward to seeing everyone next week. Thank you Bret Protos here thanks for coming.
Thank you.
And our next question comes from Alex Sklar from Raymond James.
Your line is now open.
Great. Thank you Josh another strong international quarter I, just wanted to see if you could talk about where productivity stands for for that newer international team relative to the U S, where it's a bit more mature and would that how should we think about additional international capacity in terms of priorities for the next 12 months.
We brought a lot of team members on in those markets over the last couple of years continue to get them onboard and build that pipe look. These are these are large opportunities in large accounts, which allows us to tell some funds stories, but the deal cycles are long that's the game that we play in we feel like we understand exactly how those cycles navigate and thats.
Coming together as you see us able to announce another big four account in the UK one point that we haven't hit yet during the Q&A is if you look at Avenue Bank, which is a challenger bank in Australia with a very unique tech enabled model for small business lending that kind of account is out there they need in <unk> and <unk>.
We're going to continue to refine those partnerships bring them on the platform take them live and use that to drive further conversations and then in terms of future investments. We've made big investments in countries. The initial foundation is there. The entities are set up we have a team there and so as we see traction in.
In closing of deals will then add incremental but it does not require a big investment which is part of the reason why we can get to profitability next year, because we've made those investments and we're actively selling in each of those countries.
Okay, great. Thanks, and thanks for that color and David just to follow up on the simple Nexus outlook I think if we look at the first half with second half revenue contribution it does imply a little bit of a ramp in the back half of the year can you talk about the visibility into that acceleration is there any sort of seasonality or similar seat activation component.
Thanks.
Yes, so simple nexus seasonality, they usually have a stronger second quarter in terms of bookings because of the seasonal nature of home buying right people enter into the summer get kids into schools buy the houses.
And so we would expect to see stronger bookings in the second quarter and then that will then flow into the third quarter and so that's the way historically, it's trended in the past and we would expect that to continue this year.
Okay, great. Thank you.
And thank you and if you have a question that is star one again, if you would like to ask a question that is star one and our next question comes from Mario Molina from Piper Sandler.
Your line is now open hi.
Just jumping in for Brent here, Thanks for taking our questions.
So just to circle back on Nick and I know you cited some impressive stat.
Thank you I'll pass penetration in automated spreading.
And I guess I'm, just curious what sort of been the biggest driver of that adoption is it more of a function of cost savings through automation or are customers more so using it to boost top line growth and then I have one follow up.
Our auto spreading there's a few aspects to that one is employee experience in this market everyone's competing for talent.
Getting rid of the mind numbing task of looking at an unstructured financial statement, Tim King that into spreads is going to make that employee obviously more efficient more effective is also going to allow you to compete better for the top talent.
Out of University or out of the market.
So there is obviously the efficiency piece there is the employee experience piece and Theres also the competitive piece that a bank gets from streamlining and optimizing the time with which it takes underwrite that loan pricing and profitability will continue to allow banks to look at how they price those loans and ensure that they are optimal not just from.
Our pricing perspective, but also from a risk perspective as they look at their loans and then obviously on portfolio portfolio analytics is that team prepares for seasonal.
That's a regulation that will be implemented next January the financial institutions have to be compliant and so obviously that will help them.
Keep their eye on their on their business, while while following the rules does that answer your question.
Yes, absolutely thats very helpful.
And then similarly as it relates to simple nexus given the challenges that we've seen in the mortgage market I guess, what's kind of resonating most about simple nexus with customers, that's allowing you to drive that I think you said it was 80% customer count growth as it again is it more of a cost a function of cost savings or is there something else at play there. Thank you.
No I would say, it's the home buying experience, but also a stickiness of the software or the app in the hands of the mortgage broker. So you have the same Bureau mortgage bank do you want to maintain your very best performance, because even though the market is down or the volume is down you want to maximize what's out there and gain market share it okay and so if you know.
Taking away the experience of the homebuyer as well as the tools that the mortgage broker is using and what's going to happen people will leave for other institutions, Okay and so what we've seen is and what intrigued us from day. One is because the simple exits app is being used by the mortgage broker.
The insurance agent by the homebuyer itself.
And by the other people in the ecosystem like the real estate broker.
This becomes a crutch for them and they communicate through this and that's how they make the deals happen and so you can take that piece of software. It away. Because then you lose your top lenders. Okay. So that's why we see a lot more sticky business with simple <unk> then I think your other players which is more focused on just the mortgage application and that <unk>.
System has been instrumental in us.
Where they see it they maintained the top players that they can get the top producers in that marketplace.
Okay.
Great very helpful. Thank you.
Thank you.
Our next question comes from Ken So Chomsky from <unk> research.
Your line is now open.
Hey, everyone. Good afternoon, and thanks for taking the question I just wanted to follow up on on the question on retail and Hancock Whitney and it sounds like Youre, gaining a lot of traction with the retail solution across larger size and if I remember correctly I think the feedback we heard around the time of the IPO is that retail was resin.
Well with smaller customers, but not necessarily with bigger banks. So I guess the question is how much of a tipping point is this for retail where youre going to start seeing larger customer wins and then I guess do you think these new wins come from from new customers or is it more of a cross sell opportunity.
So we as we look at our solution, we try to refine that down market and take it up market and we think all these banks need to solve these problems. So we'll try to tell it to everyone.
Relative to where the opportunity a lot of our customers that pay casino pick us not to solve a point solution that because they believe that they need that platform to fulfill all of those those products in one place.
Goal is obviously to take this within the existing commercial small business customer base and expand into into retailer consumer will continue driving on that and as you see Hancock actually came to us because of our retail problem that wanted to salt is a great validation that we can start there as well so.
We're going to try to take take the product into the market on both axes.
Yes, So let me just add to that what makes the platform. So appealing versus point solutions remember these banks have deployed point solutions byproduct line. So if you grow for HELOC. That's a specific product. We then go for a car loan that's a different product and then you go for unsecured loan that's a different product so <unk>.
Submitted value drivers license, maybe your tax returns maybe your credit score and then you go for a different loan products all of a sudden you free like a new customer again, what I've seen there was done effectively is to take that CRM view, which is a 360 view of all the products that you might have of that client and then re use the document page.
<unk> in your data over and over and even better small business owner Youll personal business is shipped with your business. So you don't have to reenter the same data. So there is some efficiency there as an employee satisfaction issue.
Also our customer satisfaction issue and all of those in the end overpower the existing infrastructure and Thats just the way we think about it when we started the company people said nobody will ever go into the cloud then once we became successful they said no big bank grew ever by this and once we got that one as I said International will never do this we've got that now okay. So.
Now onto the retail path, we're patient we're going to get it right and we will take the market.
No that makes a lot of sense. Thanks, thanks for that.
And then as my follow up I wanted to ask about simple Nexus and the cross sell opportunity because it seems like youre gaining traction there.
Now that you've owned that business for several months can you just talk a little bit about what that cross sell.
Look like and what kind of cross sell figures do you think you can achieve.
Either from a customer standpoint, or a revenue standpoint over the next few years.
Okay.
Look at our customer base on the bank operating system side. This is typically a very senior persona within the financial institution that will that will not just to authorize it.
Come into into the financial institution, but they actually sponsored they actually part of that change and so we have those relationships and the goal is to leverage those relationships that we've worked hard to earn and use those to get an opportunity to tell the simple next the story.
That's a pretty simple description of the motion that's what we've taken with the bank operating system and now with the simple Nexus team on board, we're continuing to pursue that.
Okay, great. Thank you very much.
And thank you and I'm showing no further questions I would now like to turn the call back over to Pierre not day for closing remarks.
Thank you operator.
While there remains a lot of uncertainty about the overall economy. What is certain is that demand for digital transformation of financial institutions is not going away.
Consumers and financial institutions continue to seek out technology solutions that increase efficiency and transparency improve operations reduce turnaround times and provide an overall superior experience.
That is why encino and simple access remain extremely well positioned to capitalize on these digital acceleration trends.
We are seeing the positive results of our innovative cloud based platform offerings, coupled with our predictable recurring revenue model our experienced team and.
Our unwavering dedication to our customers' success.
Thank you all again for joining us today, and we look forward to seeing many of you at our insight conference next week.
Do you have a good evening.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Sure.
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