Investors Say Yes To nCino’s IPO

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Earlier this month, cloud-based FinTech company nCino went public on the NASDAQ exchange under the ticker NCNO. In this booming stock market for cloud players, nCino’s stock surged 196% on the first day.

nCino’s Offerings

Wilmington, North Carolina-based nCino was initially formed in a bank to improve its operations and client service. It was spun out as a separate company in late 2011 to cater to all the banks and credit unions with similar needs. Its SaaS platform nCino Bank Operating System was initially built to provide a comprehensive solution to onboard clients, originate any type of loan, and open any type of account on a single cloud-based platform. It initially focused on community and regional banks. It introduced its solution to enterprise banks in the US in 2014 and internationally in 2017. It has now expanded across North America, Europe, and APAC.

In 2019, nCino acquired Utah-based Visible Equity and Australia-based FinSuite and subsequently used their technology to launch nIQ. nIQ uses AI/ML to increase efficiency and gain greater insights into customer operations and client interactions.

nCino has a diverse customer base ranging from global financial institutions, such as Bank of America, Barclays, Santander Bank and TD Bank, to enterprise banks, such as KeyBank, Allied Irish Bank, Truist Bank, and US Bank, to regional and community banks, as such ConnectOne Bank, IBERIABANK, Pacific Western Bank, and Coastal States Bank, to credit unions, such as Corning Credit Union, Navy Federal Credit Union, SAFE Credit Union, and Wright-Patt Credit Union, to new market entrants, such as challenger banks like B-North, DBT Företagslån, Recognise Financial, and Secure Trust Bank.

nCino also has a thriving user community with over 35,000 of its customers’ employees, representing over 95% of its financial institution customers participating in it. In this community, users can access over 6,500 product guides and technical documents, engage and share best practices with other users and nCino subject matter experts through over 25 unique user groups, suggest and vote for future product development ideas and access training videos, materials, and product certifications.

nCino’s main competition is from point solution vendors and, to a lesser extent, systems internally developed by financial institutions.

nCino’s Financials

In its S-1 filing, nCino reported revenues of $138.2 million, $91.5 million, and $58.1 million for fiscal 2020, 2019, and 2018, respectively, representing a 54.2% CAGR. Due to its continuing investment in growth, nCino recorded net losses of $27.6 million, $22.3 million, and $18.6 million in fiscal 2020, 2019, and 2018, respectively.

Of the total revenues, its subscription revenues accounted for 74.7% in fiscal 2020, 70.4% in fiscal 2019, and 65.4% in fiscal 2018, representing a 64.7% CAGR. For fiscal 2020, 2019 and 2018, it had subscription revenue retention rates of 147%, 163%, and 188%, respectively. 

For the three months ended April 30, 2020, nCino’s revenues grew 49.9% to $44.7 million, and subscription revenues grew 65.6% to $34.8 million. Net loss was $4.8 million, up from $3.4 million a year ago.

nCino ended fiscal 2020 with over 290 financial institutions that utilized the nCino Bank Operating System for client onboarding, loan origination, and/or deposit account opening, of which 161 each generated more than $100,000 in annual subscription revenues. It has over 890 financial institutions using its nIQ solution. In total, it had over 1,180 financial institution customers as of January 31, 2020. No single customer represented more than 10% of total revenues in fiscal 2020.

Prior to going public, it had raised $213.2 million at undisclosed valuation in 8 rounds from investors including T. Rowe Price, Salesforce Ventures, Bessemer Venture Partners, Insight Partners, Wellington Management, John Mack, and Gene Ludwig.

On July 14, nCino went public at a list price of $31 and in a few hours, jumped over 196% to as high as $91.88. It raised $249.86 million in its IPO. Its stock is currently trading at $71.71 with a market cap of $6.43 billion.

As to whether nCino is overpriced, the general cloud stock environment is frothy right now and its IPO is riding this wave. But with a healthy growth rate of close to 50% and cutting edge tech, it looks promising.

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