nCino, Inc. (NASDAQ:NCNO) Q4 2023 Earnings Call Transcript

Alex Sklar: Okay. Great. So maybe this follows up on that. But on the deals that did slip, have you seen any of those close to date and can those deals still impact FY ’24 results?

Pierre Naude: Those deals did not slip because of any of these factors in the last month or so. The liquidity crisis came after that. Those deals slip. If you look at a global basis and you look at some of the layoffs at some of the largest system integrators, and you see that some of these very big projects, okay, gets delayed. That’s the kind of thing you’re seeing. What I would tell you is those deals are in full progress. We’re very confident it’s going to close and people are commodities budgeted for, et cetera. So we feel good about them.

Alex Sklar: Got it. Yes. My mistake Clarifying the fourth quarter deals that slipped, when those given time to book-to-bill and those still impact this fiscal year’s results, though?

Josh Glover: Potentially, it’s going to depend on timing to a fluid environment. So we’ve given the clear guidance that we can, based on the world as we see it today.

Operator: Thank you. Our next question comes from Bob Napoli with William Blair. Your line is open.

Bob Napoli: So maybe around a separate question that was out there. I mean, Pierre, are you seeing banks really tightened credit? Do you think you — I mean, are you seeing the number of commercial loans? I know you — I think you mentioned earlier that the only a low percentage of your revenue is tied to specifically to commercial, commercial loans. But are you seeing a significant slowdown in the number of loans? And sorry, could you remind us how — what percentage of revenue maybe is directly tied to that loan underwriting portion?

Pierre Naude: Yes. No, no, we don’t measure the number of loans we do because we’re not the transaction volume-based revenue model. What I was meaning by that is if you look at the workload of people inside the bank, of what they do is to work on the existing book of business and renewals and making sure the covenants and collateral stays in place. And that the bank is well covered, 20% is actually new loan origination is your very common notion that where the effort that banks sit, okay? No, we obviously, as you know, is heavily weighted towards a commercial loan portfolio. That is where we started the Company. And I cannot comment on bank’s credit policy or what they’re doing. What I would tell you is they’re all dealing with rising rates, which means lending is more expensive to the end consumer. And that’s just a fact of life.

Josh Glover: I think the reality is it’s a bit of a binary reality. You’re either going to lend money or you’re not going to. And if you’re going to lend money, you have to do it well because the regulators won’t let you do it poorly. So, we’re not seeing banks leave the market, and we see a renewed vigor in this environment that they need to manage that portfolio well and also take good care of their customers along the way.

Bob Napoli: And just on industry consolidation. I know the industry has been consolidating for a long, long time. And actually, the number of banks in certain sizes have actually increased, while the really small banks have decreased. But what are your thoughts on if we see continued substantial industry consolidation over the next 5 to 10 years in your? Does that — are you looking to expand your SAM in some other ways? Or how does nCino thrive, if they say, the number of commercial banks in the U.S. were to be cut in half over the next decade?

Josh Glover: Absolutely. And we’ve seen this wave of consolidation for a little while and I spent a lot of time there. First of all, in Asia, we’ll continue to serve both the enterprise and the mid-market and the community banks because we don’t think that community banks, regional banks, the U.S. will go away. The composition of the market might look slightly different. We have been the beneficiary of that consolidation due to our upmarket footprint that we have. And frankly, nCino is a great value proposition for an acquisitive bank. Integrating core is work consolidating branches as we — but a lot of the real opportunity and potentially the risk of a consolidation is actually rolling a bank into your credit culture. With nCino on day one, you can provision a license, you can train your users and they’re rolling within your credit policy, that’s pretty attractive to a bank that wants to grow from consolidation.

The other piece in a mention, because we are spending a lot of time talking about that the bank operating system is to look at the opportunities that we have to continue upselling SimpleNexus to these accounts. As we said, 15 cross sales this fiscal year. And if you look at our customer account that we disclosed, we’re just getting started. If you look at the continued growth of nIQ, we haven’t really talked about this. Coming out of the year, 30% of our bank operating system accounts use one nIQ solution. That’s 52% year-over-year growth. We’re quite proud of that and we have more than that one solution and we have more to offer them than one choice. So we feel that the consolidation market is one that we can navigate. And then with time, this asset that is the nCino customer base we’ll be able to enjoy our increased and ongoing innovation in the product as we continue to go back and help them better leverage what they bought from us and also have more solutions to optimize their business.

Operator: Thank you. Our next question comes from Ken Suchoski with Autonomous. Your line is open.

Ken Suchoski: I just wanted to ask about the delayed sales cycle. Can you just talk about what you’re seeing across the different segments of your customer base? And I guess I’m mostly interested in any differences based on the size of the financial institution? Or is it kind of across-the-board type of slowdown? And then also any differences in terms of what you’re seeing across your bank versus credit union customers?