nCino (NASDAQ:NCNO) Q2 2021 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by and welcome to the Encino, Inc. second quarter earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. I'd now like to introduce your host for today's program, Greg Orenstein, Chief Corporate Development and Legal Officer. Please go ahead, sir.

0:25 Thank you. Good afternoon and welcome to Encino's fiscal 2021 second quarter earnings call for the quarter ended July 31st, 2020. With me on today's call are Pierre Naude, Encino's president and chief executive officer, and David Rudeau, our chief financial officer. During the course of this conference call, we may make forward-looking statements regarding trends, strategies, and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations and are subject to various risks and uncertainties, including those related to the impacts of COVID-19 on our business, the financial services industry, and global economic conditions. Our actual results may differ materially.

1:11 Please refer to the risk factors included in our filings with the Securities and Exchange Commission, which are available on the company's website at encino.com under the Investor Relations section, and on the SEC's website at sec.gov. Forward-looking statements made during the call are being made as of today, September 9, 2020, based on the facts available to us today, and Encino disclaims any obligation to update or revise any forward-looking statements. The guidance we will provide today is in part based on our assumptions as to the macroeconomic environment in which we will be operating in the future, including the timing and pace of recovery from any negative effects caused by COVID-19. Thank you, Greg. Hello and good afternoon.

2:21 Thank you for joining us today for our inaugural public company earnings call. I'm excited to share details about Encino and our second quarter results, but let me start by saying that we hope you and your loved ones are safe and in good health. While COVID-19 has created a new normal for all of us, it has also sharpened the momentum and urgency around the digital transformation of financial institutions. which Encino pioneered over eight years ago. When COVID struck and the world immediately moved to remote access, Encino customers seamlessly converted to a work from home structure. Yet, many financial institutions that did not have a cloud-based bank operating system struggled trying to remotely operate their institution, run their business, keep their employees productive and effective, and support their clients.

3:20 The strength of our pipeline is further evidence of this fact. As Cino's COVID struck, Inc. was there to help our financial institution customers and their clients navigate this difficult time. In the past two quarters, we helped our customers to fund more than $50 billion in PPP loans under the CARES Act. In the second quarter, we also added banks managing the forgiveness portion of the loan, as well as Work with banks in the UK to support the coronavirus business interruption loan scheme or CBALS.

4:23 I'm extremely proud of how the Encino team has successfully engaged with both established and new customers around the globe during an unprecedented period. Before I share additional highlights from the second quarter, I want to spend a few minutes providing a brief overview of Encino For those new to our story, Incino was founded by a team of bankers and entrepreneurs in late 2011 who recognized that the commercial lending process was inefficient and time-consuming. Our ambitious goal was to create a cloud-based solution that would enhance transparency, efficiency, and speed across the financial institution.

5:10 From the very beginning, our theme was Both by bankers for bankers. We believe the SCORE Foundation differentiates us from competitors as we deeply understand a banker's challenges and pain points, and we focused first and foremost on creating solutions to improve the bank employee's work experience. Once that was established, we extended our product functionality to benefit the bank's end-user clients. Today, Encino offers an end-to-end digital bank operating system on a single platform designed to help reduce costs, increase revenues, improve employee efficiency and productivity, and enhance transparency across client onboarding, loan origination, and deposit account opening, all while helping to ensure regulatory compliance.

6:09 Built on the Salesforce platform since day one, Our bank operating system integrates, digitizes, and enhances the operations for financial institutions across lines of business including commercial, small business, and retail. Our single cloud-based platform is scalable for financial institutions, customers of all sizes, and complexities across the globe, including enterprise banks, regional and community banks, credit unions, and challenger banks. We couldn't be more proud of where Encino is today, with over 1,100 financial institution customers worldwide ranging in assets from $30 million to more than $2 trillion, including institutions such as Bank of America, Barclays, Santander, Truist, Connect One Bank, Navy Federal Credit Union, and many more.

7:09 As good as we feel about the progress we have made to date, Thank you very much. Not surprisingly, 85% of banks have indicated that digital investment is a key priority on their roadmap. We have sized our serviceable available market, or SAM, at $10 billion, which realistically reflects the opportunity to sell our current products in our current targeted markets.

8:07 Our bank operating system is generally sold by seats on a subscription basis. Usually, with three to five year initial contract terms. Our land and expand approach allows us to deploy with a specific product solution such as client onboarding, loan origination, or account opening within a specific business line. We then look to expand adoption within that business and across other lines of business, allowing us to leverage data and functionality Thank you very much. One of our most exciting opportunities is derived from two technology acquisitions we completed last year, which formed the basis of IncinoIQ, or NIC, analytics platform.

9:25 Using artificial intelligence, data analytics, and machine learning, we believe NIC will provide unmatched insight and actionable data for our customers, enabling them to become more predictive, personalized, and proactive. It's still early days for Nick, but we are very excited by the customer feedback we have received and the potential that lies ahead to help financial institutions around the world leverage data to make more informed decisions in real time at the point of production. So turning back to the quarter, we are pleased with the results of our first quarter as a public company. Subscription revenues increased 70%.

10:10 The Triple P Loans and Forgiveness business I mentioned earlier helped drive subscription revenues in the quarter to 81% of total revenues. In the second quarter, 32 financial institutions purchased seats for Forgiveness in That were not PPP customers to process the loans, including the addition of 10 new customers, two with over $25 billion in assets, and an expansion within the top 10 U.S.

10:55 bank. Those seats activated immediately and generated revenues in the second quarter, which is different from our normal delayed activation process. David will provide details around that element of our business model. In total, 87 financial institutions used Encino to triple P and forgiveness in the first two quarters, including 45 banks with over $5 billion in assets. Our professional services teams were busy in the quarter, including in Europe where we assisted one of the large global bank customers in establishing a solution to process loans for the UK government-backed CBILS lending program. Similar to PPP loans, these revenues activated immediately after help from our professional services teams.

11:52 We have largely built out our customer success and professional services teams in EMEA and we are very encouraged by the growth opportunities we are seeing there. In fact, in the second quarter, We signed a large expansion for the EMEA-based global bank we supported on CBILS, which has close to $2 trillion in assets, for our onboarding solution. Their second large expand since the initial land. We also had a significant win with a new customer in continental Europe. This $450 billion global bank chose Encino for collateral management within their commercial bank, and we see meaningful opportunities to expand from this initial land deal over time.

12:46 Our traction with international banks demonstrates that our global branding is working. Encino is becoming synonymous with a digital transformation of banking. For example, on its recent second quarter earnings, called Fifth Third Bank, a top 20 U.S. bank, With more than $200 billion in assets, discussed that their client interactions are increasingly shifting to digital products, and noted their digital strategy includes accelerating the implementation of Cino in their commercial business. Brentmore Trust, a financial services company headquartered in Pennsylvania that has offered banking, insurance, and wealth management solutions for over 130 years, and has over $5 billion in assets and $17 billion in assets under management, also discussed Encino on his recent earnings call, highlighting the growth in his digital account opening and Encino's role in the success, stating, Deposit account applications increased 300% from March through April and remained at elevated levels in May.

14:03 This increase in openings were enabled by our Encino online account opening solution, which we deployed in the fourth quarter of 2019. Our customers highlighting us on their earnings calls as a strategic differentiator is a testament to the tangible impact Encino is having on their institutions and the banking industry. On the product front, the strength of our retail offering was recognized recently when Encino's retail loan regeneration system was named best in class by the IT Group, a highly respected research and advisory firm focused on the financial services industry.

14:50 Of the 15 firms assessed, Encino was recognized as the global leader in three categories. Client Strength Client Service and product features. Expansion of our retail lending footprint is a key avenue to increase penetration of our installed base, so this best-in-class designation is important validation, especially since this is a relatively new product for us. Product innovation is key to our success, and we will further expand the depth and breadth of our retail lending product in October We are also making important updates to NIC, the analytics platform I mentioned earlier.

15:44 The October release will be the first full integration of NIC into the Encino Bank operating system. Leveraging the FinSuite technology we acquired last year embedded in NIC, We have developed automated loan underwriting, which we have seen reduce the manual component by 50% to 75%, thereby accelerating the time to approval. We have an ambitious product roadmap for Nick and are excited about the multiple solutions we are developing to provide customers with data-driven insights across their institution. We are confident that Nick will play a key role in continuing to differentiate and Cino's bank operating system in the coming years.

16:30 Our customer success team had a very productive quarter, taking numerous customers into production, highlighted by two significant go-lifes. Before I get into the specifics of these accounts, let me spend a minute talking about what it means to go into production or go-life, since it is such an important milestone A customer is considered in production or live when a critical mass of employees or users, often an entire line of business or function within the institution, has begun using Encino. As a company, we celebrate when a customer goes live, much more than when a deal is closed. Because we recognize that our success is directly linked to the success of our customers having used our software.

17:30 As a company, we are laser-focused on ensuring we have an extremely loyal, satisfied, and reasonable customer base who are advocates and champions for our platform. Anyone who has followed Encino over the years or heard me tell our story during the IPO roadshow Understands how important culture is at Encino. We believe empowering our employees and trusting them to do the right thing fuels this customer loyalty and help drive the 147% subscription revenue retention rate for fiscal 2020. Our growing team in Wilmington, North Carolina, along with our six other offices in major cities around the globe, are changing the cloud banking world.

18:20 So back to the two go-lives I wanted to highlight. The first was with a $145 billion agricultural lender in the U.S. A niche like ag lending requires specific functionality and workflows implemented at the financial institution level, which the flexibility and configurability of our software easily enables. This is an important selling feature. It guarantees a frontline employee's productivity is not at the mercy of an overworked IT department. We saw another significant go-live with a $67 billion global bank. With an ambitious deployment plan, we went live with commercial lending in three countries, on three continents, in less than a month.

19:12 We believe this global bank will continue adding more lines of business to their Encino footprint. I want to thank the Encino team, our customers, partners, and stockholders for your support and loyalty. Encino's role in the digital transformation of the financial services industry is of global significance, and we are gaining traction in every market where we operate today. We're on a very exciting and important journey and are just getting started. We look forward to sharing it with you. Now let me turn the call over to David to review the second quarter financials in detail and discuss our outlook for the third quarter and full year.

20:00 Thank you, Pierre, and thank you all for joining us on our first earnings call. It's been an exciting time. I want to thank my team and everyone who helped us get to this point. We are very pleased to have started a public company life with such a strong quarter. So let me begin by reviewing our results for the second quarter of fiscal 2021. Thank you. Thank you. Thank you. Thank you for joining us.

21:14 Subscription revenues growth benefited from the PPP and forgiveness customers that Pierre noted, which were activated immediately and resulted in revenues being recognized in the second quarter. Let me spend a minute on this topic because it is a unique and valuable aspect of our business model. Usually, our contracts include a phase seat deployment timeline, which is generally six to nine months for community and regional banks and 12 to 24 months for enterprise customers. This structure, which is based on specific seat activation dates and not tied to project success milestones, allows us to maximize the lifetime value of a customer, maintain pricing, and provides heightened visibility to our revenues.

21:59 Because they were activated immediately, PPP and forgiveness deals actually contributed $3 million to our second quarter subscription revenues and were not subject to our usual phased activation approach. We will work to repurpose these seats to other business lines once the CARES Act winds down over the next 12 to 24 months. Visible Equity and FinSuite, the two acquisitions completed last year that formed the technology base for NIC, contributed $2.6 million to second quarter subscription revenues. As we have now owned both companies for about a year, in the future, we do not plan on separately disclosing revenues related to these acquisitions in our financial results. Professional services were $9.4 million in the quarter, a 6% increase over the $8.9 million the second quarter last year. We had assumed lower utilization rates due to COVID, but strong services performance in EMEA drove the professional services revenues in the quarter.

23:01 Our international revenues continued to expand. All non-U.S. revenues were $4.7 million, or 10% of total revenues in the second quarter. up from 2.3 million or 7% of total revenues in the second quarter of fiscal 2020. International revenues increased 103% year-over-year reflecting continued success on our international expansion with some benefit from the CBILS program in the UK that Pierre mentioned earlier. Non-GAAP gross profit for the second quarter of fiscal 2021 was 29.1 million compared with 17.6 million in the second quarter of fiscal 2020. and increase of 65% year-over-year. Gross margin was 60% compared to 55% in the second quarter of fiscal 2020.

23:51 Our gross margins continue to improve largely from product mix as well as a larger portion of our total revenues coming from subscriptions. Total non-GAAP operating costs for the second quarter of fiscal 2021 was $30.7 million or 63% of revenues compared to $22.9 million or 72% of revenues in the second quarter of fiscal 2020. While we did see some cost savings due to COVID, especially around reduced travel and in-person events, we continue to invest to grow our international footprint and expand the breadth and depth of our products as well as absorb public company costs as we move toward our IPO. Sales and marketing for the second quarter of fiscal 2021 was $11.9 million or 24% of revenues.

24:40 Thank you for joining us. Thank you. Thank you. and our retail products as well as localizing products to support our international expansion.

25:43 General and administrative expenses was $6.6 million or 14% of revenues compared to 4.9 or 15% in the second quarter of fiscal 2020. We expect G&A to be higher in the second half of the year as we begin to incur public company D&O insurance costs in addition to absorbing other public company costs. Non-GAAP operating loss for the second quarter of fiscal 2021 was $1.6 million compared with non-GAAP operating loss of $5.3 million in the second quarter of fiscal 2020. Our non-GAAP operating margin for the second quarter was negative 3% compared with negative 17% in the second quarter of fiscal 2020. Non-GAAP net loss attributed to Cino for the second quarter of fiscal 2021 was $581,000 or $0.01 per share compared compared to non-GAAP net loss attributable to Encino of 5.8 million or 8 cents per share in the second quarter of fiscal 2020.

26:44 Turning to cash, we ended the quarter with cash and cash equivalents of 388.2 million. This includes 268 million in net proceeds from the IPO. Net cash provided by operating activities totaled 23.5 million for the second quarter compared to 8.4 million in the first quarter of fiscal 2021. An increase of 179% quarter over quarter. Net of $1.9 million in capital expenditures, this resulted in positive free cash flow of $21.6 million for the second quarter of fiscal 2021. This very strong cash generation reflects both immediate activation of PPP and forgiveness seats and solid renewal activity.

27:29 Based upon historic seasonality, we do not expect to generate cash in the second half of the year. We will continue to balance cash flow while investing to take advantage of the global opportunity in front of us. Now, turning to guidance. For the third quarter, we expect total revenues of $49 to $50 million, non-GAAP operating loss of approximately $8 to $9 million, and non-GAAP net loss attributable to Encino per share to be $0.09 to $0.10. This is based upon a weighted average of approximately $91.4 million Our outlook for the full fiscal year is as follows. Thank you for joining us.

29:04 and an increased focus on digital transformation. As always, we appreciate the hard work of the Encino team around the globe and the loyalty of our customers and stockholders. We are early in the digital transformation of the banking industry and we are excited to share this journey with you. Pierre and I are now happy to take your questions. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchstone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Brad Sills from Bank of America. Your question, please.

29:41 Oh, great. Hey, guys. Thanks so much and congratulations on a nice quarter out of the gate. I wanted to ask about NIQ. It's an exciting opportunity and wanted to get a little bit more color, please, on some of these initial use cases that you're going after. in October. I know the product's not out yet, but, you know, anything you can share with us in terms of use cases and what the expected uptake would look like initially and any impact that might have on ASP.

30:14 Yeah, hey, thanks a lot for joining us. So, as you may remember, the NIC solution set, or Encino IQ, is actually a suite of very specific solutions that we will be launching here shortly, okay? and I'm going to make it these very simple bank solutions that we offer. For instance, the first one is a CECL solution and we've got already hundreds of credit unions using that today from the visible equity acquisition and CECL has now been, that whole platform has been moved over to AWS, made scalable, made available for banks and so come October when that release comes out, that thing will go across our customer base. The second one is portfolio analytics, which you can imagine in times like this, banks are looking to understand better their portfolios, the payment history of their customers, and what they can expect in the future.

31:09 The third one is automated spreading. And automated spreading is all about scanning in your financial statements, your tax forms, et cetera, pre-populate the spreads. Tremendous manpower and cost savings for banks there. And the final one is consumer credit risk analysis. Insights. Those four solutions will come out here shortly. And as you remember, we are adding solutions like that continuously going forward. But that's the initial four. We'll start taking it to market. I don't think you're going to see an immediate impact on revenue because there's a sales cycle and there's also an implementation cycle, et cetera. But the early indications are very promising on that solution set.

31:54 Thank you so much, Pierre. And then I wanted to ask about kind of the mix of business this quarter in the global bank segment and the community and regional segment. It looks like pretty balanced results. You cited some examples in both segments. Can you just remind us kind of where the industry is in those two segments? Is one further along in their digital transformation efforts and Is there one that you would point to where maybe they're less, the adoption cycle is perhaps behind and we could see an inflection point? Just where are we in terms of adoption in those two different segments?

32:28 Yeah, it's interesting. So in the community bank sector, there's about 5,000 institutions. We target about 2,000 of them. And we've got 300 customers. So from that alone, you can imagine. And we focused mainly on commercial loan origination. So All of retail and other account opening, etc. is open for us. It's very new for us in there, okay? I would like to remind you that the commercial loan origination global SAM is $3.4 billion. So as a company, you know, we're just scratching the surface here. Then if you go to the community or to the large banks, you know, we mentioned we've got 14 of the top 25 banks. But again, realize we're getting small pieces of the commercial bank as our landing opportunity, and then we expand within it. And again, if you look at 14 of the top 25 in the Americas, so North America, Canada, and the U.S., although that sounds like a lot, the SAM is about $1.2 billion. So there is a massive opportunity, both in commercial origination as well as for the for the enterprise banks as well as the community banks. I think we are just catching the service.

33:45 And then finally, let me explain to you retail a little bit. It's important to understand that retail has three components. There's your account opening. There's the onboarding aspects, going through KYC, anti-money laundering, et cetera. And then finally, there's international mortgage, which are all relatively very new products. We are seeing significant interest in those three. And then, of course, there's loan regeneration coming from the retail space, and then we've got commercial on top. And then small business with some banks falls into the retail space and some banks into commercial. So I believe it's very early for this process and this market as we go. It's very early for the cloud technologies to penetrate these banks.

34:33 Although we've been going for eight years, it feels just like yesterday.

34:38 That's great. Thanks, Pierre. And then one more, if I may. Just please, on the comments you made, David, on the triple pre and the forgiveness program, potentially repurposing those seats, would that mean that these could become recurring in nature?

34:52 Yeah, that's the plan. I think the majority of those contracts were coterminous, so they lined up with the original contract length of the customers. We had a handful that were 12 or 24 months, and so the idea is to repurpose those seats upon expiration into other areas of the bank so we can continue to maintain those revenues.

35:12 That's great. Thanks so much, guys.

35:14 Hey, thank you. Thank you. Our next question comes from the line, Saka Kalyan from Barclays Capital. Your question, please.

35:23 Okay. Hey, guys. Thanks for taking my questions here, and congrats on becoming a public company.

35:29 Thanks, Saka. Great hearing from you.

35:31 Yeah, same here. Hey, Pierre, maybe just to start with you, Can you just talk about what you're hearing from customers? I know you spend a lot of time with customers. What are you hearing from them outside of Triple P and forgiveness in terms of their willingness to invest, particularly in that core commercial lending part of the market? Does that make sense?

35:53 Yes, I can tell you that we see an accelerated or urgency around digital transformation. There's to me a realization now that work from home is not a luxury anymore. It's just an imperative. If you live in a city like London and you're commuting an hour and a half each way per day, why would you waste three hours on a train if you can do your job from home? And as a businessman, you think, I can get more productivity out of my people doing that. Now look, in Wilmington, we commute 15 minutes, so that same logic doesn't apply. But if you live in New York City, Chicago, LA, any of these big cities, I think these banks realize they were forced to go this direction. And I think when this is done, everybody is going to move towards a much more flexible workforce that can work from anywhere, on any device, at any time, okay?

36:46 Because the work-life balance has just changed. And number one, because of that, because of COVID actually drove the urgency, we are seeing... Great strategic conversations with the most senior people in the largest complex institutions of how to actually get there at a faster pace. So I'm very optimistic.

37:07 Got it. Got it. That makes sense. David, maybe for my follow-up for you, you know, you touched on this a little bit in the prepared remarks, but I just want to unpack it a little bit. Can you just talk about the seat activation schedule a bit in terms of, you know, how that can change, if at all? and how we should be thinking about that activation schedule when we model revenues going forward.

37:32 Yes, so we do have a delayed seed activation schedule and we did not see any major change to those activation schedules in the quarter and our guidance assumes a similar level that we saw in the past for those activation schedules.

37:51 Except for Triple P. Triple P obviously accelerated activations and it's distorting the revenue of second quarter. So it's a quick growth spurt because of that. But overall, on your normal business, the activation schedule stayed steady as it was before Triple P and COVID.

38:11 Got it. Makes a lot of sense. Thanks, guys.

38:14 Thanks a lot, Zach. Thank you. Our next question comes from the line of Josh Beck from KeyBank. Your question, please.

38:23 Thank you for taking the question. Maybe this is for you, Pierre, but you've talked a bit about digital transformation, and I certainly think the conversation has changed, and you gave some great references from other bank calls on how they're thinking about that. So that seems to be something that would build the pipeline. On the other hand, these are large enterprises, and we have seen some elements of disruption to sales cycles and implementation cycles. So I'm just wondering, when you balance those two factors together, how are you thinking about building the pipeline and the outlook for new bookings as we go into the end of this year and the end of your fiscal year?

39:10 Josh, thanks a lot for joining the call here. So look, yes, it's very interesting. In the community bank space, there clearly was a disruption because it's a smaller staff, people are more focused, and when they had to pivot towards simple P, that started pushing deals out, and that was about a four, five-month, I would say, redirection of activity and people, okay? And the moment that is coming to an end, people are focusing back on long-term strategic initiatives. Once you get to your larger regional banks and your enterprise banks, they're big enough, they stay strategically on track, and this has driven a higher urgency, as I mentioned, for these initiatives because it's not only a matter of efficiency anymore.

39:55 There's compliance issues around this. Can you work from home effectively on the old systems? Do you have the right entitlement engines in place to make sure your people are actually the people signing into the systems, etc.? So all of that plays into this higher level of urgency. These are big banks. It takes time, okay? But I can tell you that in this time our pipeline has grown because of these banks understanding the need to do this and they have to move forward. And it's not merely, I would say, something that they would like to do. It's becoming a strategic imperative to run the bank in a different way.

40:36 Okay, that's really helpful. And David, I think you gave us some helpful insights Really charts describing the ACV net revenue retention in your S-1 filing. So, you know, anything you can share there. Certainly it seems like you've had some nice deals where you have had some expansion. So just, you know, is that still a good framework for us to use as we build out the kind of long-term growth prospects for your business?

41:08 Yeah, great. Thank you. Yeah, so we ended at fiscal 20 at 147%, which Pierre mentioned earlier. If you think about the PPP deals and the forgiveness deals that we closed in the first half of the year, many of those, most of those were existing customers. So although we're not disclosing revenue retention on a quarterly basis, I would assume that, I mean, you could assume that those 147% would have increased because of that. and we are planning on updating that at the end of this fiscal year as well. So Triple P absolutely did help that metric in the last two quarters.

41:45 Okay. Very helpful. Thank you, Bill.

41:48 Thanks. Thank you. Thank you. Our next question comes from the line of Terry Tillman from SECurities. Your question, please.

41:56 Yeah. Hey, Pierre, Greg and David. Congrats on the IPO for me as well. Maybe the first question, Pierre, for you. is just related to sometimes an IPO can catalyze the business and just create more notoriety and recognition. I know it's early still since the IPO, but what have you seen from just getting this increased recognition, maybe particularly in international markets? What has being a public company helped you or have you seen any benefits so far with that increased exposure? And then a follow-up.

42:27 It's quite interesting. One of the strategic reasons we thought to do this was Notoriety and to be taken serious in more conservative international markets like if you think about Germany or Italy or Spain where you don't want to be seen as a small startup out of the U.S. And the notoriety around this has driven significant activity and receptivity from the banks to our teams. And if you speak to our London team now and they will tell you that they get calls and meetings now they could never get before. So we see the notoriety. We see the brand recognition. Our relationship with Salesforce.com is always helpful. But these events, the way we built this platform with the referenceable customers you've got in the U.S. is tremendously helpful, and the IPO was just that next step to push us forward.

43:17 Got it. And actually, you just mentioned Salesforce. They actually talked about acceleration in some large enterprises in terms of their digital transformation. I mean, you all were able to exhibit the power of your platform in the last two quarters with Triple P and then Forgiveness. Is it doing anything to kind of spur accelerating kind of conversations and maybe even kind of the monetization timeframe for things like retail lending or deposit account openings, et cetera? Just like what are you seeing so far in terms of maybe that picking up the pace of some of these sales cycles? Thank you.

43:49 Yeah, thanks. It's interesting to actually notice this. So Triple P forced banks to have a digital channel in a very short order to get it up and running. and, you know, for years we had sales cycles trying to convince them this is the right thing to do, it's going to help you, etc. And now everybody's a believer. So now it's about where do you deploy first, what business line do you get, etc. So it's not a matter of should we do it anymore, it's now a matter of when do we do this and when is the IT budget there, etc. And we can use the examples of how quickly we stood up the Triple P loan product and actually got it in production and processed billions of dollars. as proof points that these projects shouldn't take 12, 18, and 24 months. We can do it much faster, have a much bigger impact, and then do some of the integrations after the fact. And we are seeing those messaging resonating with banks and the senior management.

44:47 Thanks. Thank you. Our next question comes from the line of Brian Peterson from Raymond James. Your question, please.

44:56 Hi, everyone, and thanks for taking the question, and congrats on the strong results. So, Pierre, I wanted to hit on the retail opportunity. You got a nice third-party endorsement this quarter. You know, as we think about that, the progress of that product offering, what are the guideposts that you're using internally, and what would you express to investors for how to assess that ramp as we look at that product building up?

45:18 Yes, hey, thanks for dialing in. So, as I mentioned earlier, there's three legs of this tool for the retail offering, okay? We came out the chute for Mortgage International and signed six Canadian, very small institutions, but six was taken up at a very short order, which was, number one, not only promising, but it's showing the acute issues in that marketplace for good software. On the retail lending side, we're taking a careful approach because it is so intense around the regulatory compliance and the documentation that you need But we are making great progress. We are seeing good referenceable customers. And I can tell you the complexity of building that solution is also the biggest moat around that, that people cannot enter that market.

46:10 The one where I see the biggest momentum right now is deposit account opening. And so you look at that, you look at my mortgage reference points about the Canadian market, and in Europe I'm seeing good interest as well. You look at the uptake on the lending side, and the IT report. And I feel very good that that whole offering is coming up and actually outpaced from a growth perspective the commercial loan regeneration. If you look at percentage growth, although it's a smaller start, I really see the moment you start marrying the NIC elements into the retail and you get to a touchless experience where customers can do everything on their phone, there's no banker involved, and you can have automated decisioning at the back end, that's going to propel and accelerate this.

46:58 So here's one of the dilemmas in the banking industry today. If you look at the history of deposits and how banks are funding loans, deposits are flowing to the four big banks in the U.S. today. And the community regional banks are struggling to get a deposit at the same rate. We have many proof points that the Encino solution is much more effective and efficient in gathering deposit accounts, number one. But number two, They will have to beef up their retail lending efforts to get my deposits in the future. Because otherwise, if I can't be a one-stop shop, I'll take my deposit to a big bank who's willing to do my car loan, my mortgage, etc. And we are beginning to bundle and package that all together and explain to banks how to get there. And I'm seeing good receptivity.

47:44 That's great to hear. And maybe one other question, the follow-up question on the pipeline, I realize there's There's a lot of market presence of things that's driving awareness of your solution, whether that's for P or the IPO. I'm curious what you're seeing in the pipeline in terms of new customer opportunities, and is there any commonality in what's driving those new opportunities into the pipeline? Thank you.

48:06 Thanks. What I would say is we see still a very healthy commercial pipeline coming in, whether it's expanding in existing markets Enterprise Banks in your community and regional space. As I mentioned earlier, we've got 300 out of 2,000 institutions. And by the way, we don't even have the whole commercial bank of the 300 we've got. We've got pieces of this and maybe certain loan types, etc. So there's tremendous cross-sell as well as new logo opportunities in the commercial side. Then on top of that, in the community regional space, the platform story is really powerful. They would love to standardize all their operations, middle back office and customer interaction on a single platform. And so what we're seeing is they buy into the full platform but then deploy one line of business at a time because it just takes time and effort to do that, okay?

49:00 And then the other leg of this tool is absolutely international. I mentioned to you earlier through the IPO that I measure – every one of these solution sets or strategic growth initiatives compared to the early days of the company. So I look at international and after three years, it's outpacing where the company was in the first three years. I then look at the retail solution set and it's outpacing what we did with commercial in the first three years. And if those two things keep on holding true, then it actually is an exponential growth story, which is what we are doing here.

49:40 That's a great caller. Thank you. Thank you. Our next question comes from the line of Fred Breslin from Piper Sandler. Your question, please.

49:50 Thank you, and good afternoon. I guess one for Pierre and one for David. Pierre, international crossed over 10% of revenue for the first time. I know it's early days, but I was hoping if you could frame just the international opportunity. What's changed post-COVID? I mean, you talked about a A big UK bank, you know, basically pulling you in for a triple P equivalent in UK. But more broadly speaking, what are you seeing there relative to opportunity? And has it materially changed in the last six months as you just think about engagement activity? And is it largely because of that need around remote workers?

50:35 Yes. So I would firstly say when we entered Europe, we realized that the cloud was not as well adopted as in the U.S. There's a lag effect there. So we had to start evangelizing from scratch again to get people comfortable with the cloud. The second main thing is, you know, I can fly from here to Kentucky and go sell a piece of software. I cannot do the same from England to Germany. I need a German speaker. I need a German infrastructure. I need somebody to speak Spanish for Spain, etc., So the initial startup in that market, although the market is bigger, took a bigger investment in a larger infrastructure that we have to put in. We have to make sure the languages are supported by the software, all the different integrations, etc. So your upfront investment happens to be more complex and larger. However, what we're beginning to see is with COVID and just the events, so realize that The only country we had a Triple P program like the U.S. was the U.K. I didn't see any of this in France or in Germany or Spain, similar programs.

51:44 But there is, I would say, a heightened awareness. Number one. Number two, we've got banks like Santander, who's using us in the U.K. and the U.S., which obviously the next question is, what about Spain? So we are penetrating these banks in their foreign subsidies and then circle that to get into their main home countries. So I'm seeing overall this awareness, the cloud adoption, the awareness of Salesforce and Encino, the brands, and the trust factor around that. And then further to that, I can tell you in Australia we see fantastic traction. As you may know, we've got Macquarie Bank there as an anchor solution we did. We've got a bank in New Zealand going. So everywhere we've planted the flag, we've got a presence, we've got a great success story, and that will just drive it forward.

52:38 But there was a more difficult upramp in the beginning.

52:42 Helpful color there. And then I guess, David, for you, just to be clear on this, subscription growth, 70%, just phenomenal growth this quarter. I get that you've got to – It looks like two go-lives as well as the Triple P forgiveness. My question is, did you see any tailwind this quarter from that UK bank that's rolling out the Triple P-like program, or is that a potential that could roll in in Q3?

53:15 Thank you. I appreciate the call. On the On the Triple P, the Siebels in Europe, we did see benefit on the PSO side in the quarter, and we didn't see a full quarter of benefit on the subscription side, so that will come in the following quarters.

53:33 Okay, great. And then quickly, housekeeping, RPO, did you kind of give us what the RPO was in the quarter?

53:42 Yeah, and you'll see all the details in the 10-Q, which we're filing tomorrow morning. Our PO increased by about $20 million and a quarter in the quarter, with the majority of that increase coming from the less than 24-month bucket, which kind of reflects the PPP and forgiveness deals that we closed in the quarter.

54:00 Got it. Super helpful. Thank you. Our next question comes from Sarah from Macquarie. Your question, please. Great. Thank you so much for taking my questions, Pierre and David. It's great to hear your voices. And I'll definitely add my congrats on your debut quarter. Pierre, I know one initiative you have been focusing on, and I know this was certainly the case pre-IPO, has been expanding both your technology partnership ecosystem and also your consulting partner ecosystem. So I'm wondering how that has changed or What kind of development you're seeing there since the IPO? Then I have a quick housekeeping follow-up for David.

54:46 As you can see, the balance of revenue subscription to professional services, the professional services portion is continuing to decline historically for the company because we are focused on expanding globally with our SI partners. In the U.S., we've got a stable of, I would say, the top brands in system integration working with us which is very beneficial and we're proud on those partnerships. What we are seeing in Europe, there are cases where banks want to use partners we've never used before. We have a very effective training and onboarding program for these partnerships. We get them up to speed. We substitute those projects with a bit more Encino resources to make sure they get the best product knowledge and help for the project.

55:36 So I do see an expansion, typically driven by customers. As we go to new geographies, we're always open-minded. Typically in your smaller bank markets, we will have more smaller SIs doing it, and then your global-style partnerships will play more in the enterprise-type banks. I haven't seen much change. It's more a factor of the growth we're seeing is driving more partnerships as opposed to the IPO. Okay. Okay, great. Thank you. And then, David, just a quick follow-up for you. Did COVID loans get bigger versus what you expected for the year, given the upsell in EMEA? Is that kind of a fair classification?

56:18 Could you repeat that? I think you broke up right at the beginning of the question. Sure, sure. No problem. I was wondering if COVID-driven seats or seat expansions got bigger versus what you expected for the year given the signing you had in EMEA.

56:38 Yeah, I would say, yeah, COVID did the triple P and even the sepals that came as a surprise in the quarter. And that was part of the reason for the upside. You know, we do expect to see, you know, we saw $3 million in the quarter last We expect to see a little bit of uptake in that for the balance of the year as well around the PPP and forgiveness-related subscription revenues.

57:06 I think normally when we sign a contract, you know, there's a fairly lengthy activation of seats. And the CBOS and PPP just had a very quick activation. You literally sign the contract and two weeks later you're up and running, you take revenue, okay? So that is a slight distortion that you're going to see in Q2 and Q3. and Q3, which is modeled into the models and the guidance, that quick uptake is just not normal for how we do business. And that's the reflection you're seeing. Absolutely. Great. That makes a lot of sense. I appreciate it. Thank you so much.

57:44 Thanks a lot. Thank you. Thank you. And this does conclude the question and answer session. I'd like to hand the program back to Pierre for any further remarks.

57:53 Thank you so much for dialing in today and tracking our progress. We are excited about the future, and we are focused on our customers and delivering what we promised. Thank you very much for joining us today. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.