nCino, Inc. Q2 FY2025 earnings

nCino reported total revenues of $132.4 million for the fiscal 2025 second quarter, up 12.9% year over year, with subscription revenue again supplying the bulk of the mix. Gross profit was $78.5 million, up 13.4%, and gross margin edged up to 59.3%, a gain of 0.3 percentage points over the prior-year quarter. Through the first six months of fiscal 2025, revenue reached $260.5 million, up 12.8%, while gross profit was $155.4 million, up 13.7%. The company sells one SaaS platform to financial institutions and bills most customers on multi-year contracts.

Backlog keeps building. Remaining performance obligations stood at $1.04 billion as of July 31, 2024, up 12.0% from a year earlier. Current deferred revenue was $172.0 million, up 1.6%. That small increase tracks the billing calendar, which management says runs substantially higher in the first and fourth quarters of the fiscal year than in the second and third, so the deferred balance mirrors that seasonality.

The bottom line improved even though the company still runs a GAAP loss. The second-quarter operating loss narrowed to -$7.9 million from -$14.8 million a year ago, and operating margin improved to -6.0%, up 6.6 percentage points. Net loss attributable to nCino was -$11.0 million, or -$0.10 per diluted share, compared with -$15.9 million, or -$0.14, in the prior-year quarter. For the six months, net loss was -$14.0 million, or -$0.12 per diluted share, against -$27.1 million, or -$0.24.

Non-GAAP results look far healthier. Non-GAAP operating income was $19.3 million against $11.2 million a year ago, a 15% non-GAAP operating margin versus 10%. Non-GAAP net income attributable to nCino was $15.8 million, or $0.14 per diluted share, compared with $9.9 million, or $0.09. The distance between the GAAP and non-GAAP numbers comes from amortization of acquired intangibles, stock-based compensation, acquisition-related and litigation costs, and restructuring charges that management strips out.

Cash generation was uneven. Operating cash flow for the quarter was $5.0 million, down 58.2% year over year, while the six-month figure rose 37.4% to $59.4 million. Capital expenditures were $0.44 million in the quarter and $0.79 million year to date, down 48.3% and 68.1%. Free cash flow, a non-GAAP measure the company reports, was $4.6 million for the quarter against $11.1 million a year earlier. nCino also repaid $15 million on its revolving credit facility during the quarter.

Guidance for the third quarter ending October 31, 2024 calls for non-GAAP operating income of $21.0 million to $22.0 million and non-GAAP net income of $0.15 to $0.16 per diluted share. For the full fiscal year ending January 31, 2025, the company guides to non-GAAP operating income of $87.0 million to $90.0 million and non-GAAP earnings of $0.66 to $0.69 per diluted share. Management also issued revenue guidance for both periods.

Operationally, the quarter produced several wins. ABN AMRO extended its partnership after going live. A bank with roughly $45 billion in assets became the first enterprise customer to add Banking Advisor, nCino's generative AI product. An institution with more than $20 billion in assets became the largest bank yet to expand into Portfolio Analytics for CRE stress testing. nCino also renewed its largest UK client, a Top 5 European bank, for another three years.

Risks remain tilted toward the macro backdrop. Management flagged continued softness in the U.S. mortgage market and in international markets, which generated 20.8% of quarterly revenue. Higher interest rates weigh on mortgage demand, and the company lists customer consolidation, bank failures, pricing pressure from competitors, and its reliance on Salesforce among the factors that could hurt results. Sales cycles run six to nine months at smaller institutions and 12 to 18 months or more at larger ones, which keeps revenue timing lumpy. nCino expects roughly $8.0 million of capital expenditures in fiscal 2025, mostly for an international office build-out.