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spk08: Thank you for standing by, and welcome to Encino, Inc.' 's third quarter fiscal 2022 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 this session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Harrison Masters from Encino's Investor Relations.
spk00: Please go ahead.
spk09: Good afternoon and welcome to Encino's third quarter fiscal 2022 earnings call for the quarter ended October 31st, 2021. With me on today's call are Pierre Naudet, Encino's Chief Executive Officer, David Rudeau, Chief Financial Officer, Josh Glover, President and Chief Revenue Officer, and Greg Ornstein, Chief Corporate Development and Strategy Officer. During the course of this conference call, we may make forward-looking statements regarding trends, strategies, and the anticipated performance of our business, including without limitation, the proposed transaction between Encino and SimpleNexus. These forward-looking statements are based on management's current views and expectations and entail 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. Encino 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 and as an exhibit to the Form 8K furnished with the SEC just before this call. With that, thank you for joining us, and I will now turn it over to Pierre.
spk01: Thanks, Harrison. Good afternoon, and thank you for joining us today. The third quarter was another strong quarter with impressive financial results. highlighted by 32% growth in subscription revenues compared to the third quarter of last year, which, as you may recall, was also a very strong quarter as it included catch-up revenues related to the Triple P consortium that utilized our software to process Triple P loans. We also achieved strong sales wins this quarter, including adding new logos across multiple markets and signing several significant expansion deals with existing customers. Before Josh walks you through some of the sales and operational accomplishments of the third quarter, I want to take a few minutes to share my perspective on where we are today as a company, where I believe we're headed in the future, and touch upon the simple nexus transaction we announced on November the 16th. When we first started Encino a decade ago, we focused on streamlining commercial lending, a cumbersome, complex process with paper files, endless spreadsheets, and disconnected point solutions. Once we transformed this process and were successful bringing it to small community banks and credit unions, we moved upmarket to larger institutions and then internationally. Yesterday, you may have seen our announcement that our commercial banking solution was again named best in class by ITE Group, an independent research and advisory firm focused on financial services. Encino is the only technology vendor to achieve this recognition three consecutive times. This is yet another strong endorsement for our flagship commercial product. However, we did not just rest on the success we've had with our commercial lending solution. Staying true to our mission of transforming the financial services industry through innovation, reputation, and speed, we developed multiple new products to solve our customers' challenges. Our product portfolio now spans treasury management, deposit account opening, onboarding, small business lending, and retail lending, all on a single customer-focused cloud platform. We believe our platform is a competitive differentiator for us in the market, and we have aligned our entire organization around ensuring each and every one of our products is best of breed. And that is a key reason why I'm so excited about the Simple Nexus acquisition. We believe their mobile-first cloud-native digital home ownership platform is the best in the market today and is extremely complementary to our existing business and product suite. While we weren't necessarily looking for our first acquisition as a public company to be of this size and scale, there were many unique and attractive aspects about Simple Nexus. For example, SimpleNexus has an impressive customer base across the US with strong retention and references. In fact, during our due diligence process, as we spoke with some of their customers, one of their large regional bank customers described SimpleNexus as a game changer for the bank and raved about the product functionality, ease of use, and speed of loan closing. Additionally, SimpleNexus has a fantastic experience team where it's demonstrated the ability to grow quickly and scale. SimpleNexus has a similar seed-based recurring revenue model to Encino, initially expands our SAM by over $4 billion and has the technology and domain expertise to enable us to accelerate the development of additional platform journeys and mobile point-of-sale offerings. to provide seamless consumer experiences across multiple lines of business and use cases over time. SimpleNexus is more than just front-end software to facilitate mortgage applications. It is a leading mobile-first cloud-native home ownership platform that provides us with yet another market to drive digital transformation and long-term revenue growth for Encino. There are not many companies out there with all of the characteristics I just mentioned, and as we evaluated SimpleNexus, we knew they were a terrific complement to our core business and that this acquisition was the right thing to do for our customers, our company, and our stockholders. We look forward to updating you further about this acquisition and the opportunities we collectively see once this transaction closes, and we officially welcome SimpleNexus into the Encino family. Before I turn the call over to Jos, I want to note again how pleased I am with the results of the third quarter. The strong sales wins, new logos added across the globe, and continued execution from our entire organization. As a company, we remain laser focused on growing our business, taking care of our customers, and building and delivering the highest quality and most innovative banking software in the industry. And with that, I will now turn it over to Josh.
spk13: Thanks, Pierre. It's great to be on with you all today, and I'm excited about the progress we made in the third quarter. Before I get into the details, I want to say it was really great last quarter to be back in front of customers and Encino team members and other offices. During the third quarter, I was lucky to spend time with our team in London to visit prospects on the continent and to attend numerous Encino-hosted customer meetings and events across the U.S. It was fantastic to participate in face-to-face meetings and in-person events again. Turning to the specifics of the quarter, one new logo I'm very excited about is Kiribashi Bank, Encino's first customer in Japan. Kiribashi is a Tokyo-based regional bank with assets of more than $53 billion in U.S. dollars that will use the Encino platform for its business financing division. As you've heard us say before, the first logo in a new country is by far the hardest one. I'm incredibly proud of the Encino KK team and their commitment to land the first customer in Japan, particularly with the backdrop of COVID. Japan is a strategic market for us. The country is home to a large IT industry and has over 600 banks with a sizable upmarket with approximately 46% of them having over $5 billion USD in assets. The Japanese regional bank market looks very similar to the U.S. community regional market where we have many commercial banking customers today. That's a market where Encino has executed well for years, and we see a great opportunity in Japan to help these banks overcome challenges and drive growth through digital transformation. We added other logos in the third quarter across multiple geographies, including signing a new enterprise bank in New Zealand and a new bank in the UK. We also added numerous logos in the US across asset classes and solutions, such as Armstrong Bank, a nearly $3 billion bank based in Oklahoma, who signed on to the Encino platform vision as they purchased our commercial, small business, retail lending, and deposit account opening solutions. Armstrong Bank clearly sees the value of the bank operating system bringing together multiple lines of business on a single end-to-end cloud-based platform. In addition to some notable new customer wins, I'm extremely proud of the team for several great land and expands upmarket this quarter. One of these included a new expansion with the top 50 U.S. bank above $50 billion in assets, whose initial Encino use case was actually PPP. This bank was first introduced to us last year during COVID, On the strength of our successful partnership forged during PPP, this enterprise institution has now greatly expanded their use of Encino beyond PPP to include end-to-end commercial and small business lending. You've heard Pierre say many times that while we are happy when we sign new contracts, what we really celebrate are the go-lives. This is the moment that our financial institutions start to originate loans, onboard customers, or open accounts on the Encino platform. I'm pleased to share that we had a record number of go-lives in the third quarter, with over 25 core platform and over 40 portfolio analytics customers beginning to enjoy business value from their Encino investment. One notable go-live this quarter included a $2.6 billion asset bank who went live on Encino's commercial banking solution in about six months. Some other highlights include a large credit union going live on our deposit account opening solution, a regional bank in the Northwest who went live on Encino's treasury management solution, and a full-service community bank in the Southeast who took several hundred users live on Encino's small business solution. In the third quarter, we also took our first UK customer live on our international mortgage solution. This customer is fully originated and funded their first mortgages using Encino and is already seeing value in the form of faster closing times. The single biggest go live this quarter was with Truist Bank, which is the result of the 2019 merger of equals between BB&T and SunTrust. If you'll recall, SunTrust was one of our longstanding partners. Truist today has the six largest banks in the U.S. Bill Rogers, CEO of Truist, highlighted this Encino Go Live during Truist's third quarter earnings call in October. The 2,500 BB&T teammates who joined their Heritage SunTrust teammates on Encino are now better positioned to serve their clients, and the bank has better visibility into their lending activities. Equally important, as Bill highlighted, the Encino upgrades also lay the foundation for future digital innovation. We're deeply appreciative of the hard work of our Encino and Truist teammates, as well as our strategic system integration partners who made this program a success during remote work COVID conditions. I want to thank all of our Encino teams for their hard work and continued execution of the third quarter. And with that, I'll turn it over to David to tell you more about the numbers. David?
spk11: Thank you, Josh, and thanks, everyone, for joining us this afternoon to review our third quarter financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis unless otherwise stated. Our non-GAAP financial information excludes the impact of stock-based compensation, the amortization of intangible assets, expenses related to the acquisition of Simple Nexus, and expenses related to the government antitrust investigation and related civil action disclosed in our SEC filings. A reconciliation to comparable gap metrics can be found in today's earnings release, which is available on our website and as an exhibit to our Form 8K furnished with the SEC. We are very pleased with our third quarter results and how well it positions us for a strong finish to the fiscal year. Total revenues for the third quarter of fiscal 22 were $70 million, an increase of 29% year over year. Subscription revenues were $57.1 million, an increase of 32% year over year. representing 82% of total revenues. During the quarter, we saw a balanced sales contribution from new and existing customers, including the very nice upsell from a Triple P customer that Josh mentioned earlier. Professional services revenues were $13 million in the quarter, growing 18% year-over-year, reflecting another solid billing and utilization quarter. Non-U.S. revenues were $11.7 million, or 17% of total revenues in the quarter. up 77% year-over-year. Our international business has matured to the point where subscription revenues are the driver of growth, with professional services normalizing as a percent of total revenues. As a reminder, we utilize our partners to deploy our software in the majority of our international projects, which may result in moderation of international professional services revenue growth in the future. Non-GAAP gross profit for the third quarter of fiscal 22 was $44.6 million, compared with $33 million in the third quarter of fiscal 21, an increase of 35% year-over-year. Non-GAAP gross margin was 64%, compared to 61% in the third quarter of fiscal 21. Our gross margin continues to improve, largely from subscription product mix. Sales and marketing expenses for the third quarter of fiscal 22 were $18.5 million, or 26% of total revenues, compared to $12.6 million, or 23% in the third quarter of fiscal 21. The increase in costs reflect investments in our global expansion, including additional salespeople on the continent in Europe, and increased marketing expenses to build up our international brand. We also saw a higher level of demand for in-person events, which resulted in incremental spending on conference and travel-related costs. Research and development expenses for the third quarter of fiscal 22 were $18.6 million, or 27% of total revenues, compared to $14 million, or 26%, for the third quarter of fiscal 21. We continue investing across our platform with a particular focus on maturing our retail products, building on our commercial pricing and profitability solution, adding functionality to our auto-spreading solution and ongoing investments in our market-leading commercial product. General and administrative expenses for the third quarter of fiscal 22 were $10.6 million, or 15% of total revenues, compared to $9.1 million, or 17%, in the third quarter of fiscal 21. In the third quarter, we incurred approximately $2 million in the costs related to the antitrust matters and $900,000 in the costs related to the Simple Nexus acquisition, which are not included in our 10.6 million G&A expense. Given these are non-operating expenses, we are excluding these costs from a non-GAAP operating income results and guidance. Non-GAAP operating loss for the third quarter of fiscal 22 was 3.2 million, compared with our non-GAAP operating loss of 2.7 million in the third quarter of fiscal 21. Our non-GAAP operating margin for the third quarter was negative 4.5% compared with negative 5% in the third quarter of fiscal 21. Non-GAAP net loss attributable to Encino for the third quarter of fiscal 22 was 4.1 million, or 4 cents per share, compared to non-GAAP net loss attributable to Encino of 3 million, or 3 cents per share, in the third quarter of fiscal 21. Turning to cash. We ended the quarter with cash and cash equivalents of 381 million. Net cash provided by operating activities totaled negative 19.1 million for the third quarter compared to negative 10.8 million in the third quarter of fiscal 21, indicative of a seasonally slower billings and collections quarter. Capital expenditures were approximately 2.4 million in the quarter, resulting in free cash flow of negative 21.4 million. Consistent with our normal billings and collection seasonality, we expect negative cash from operations through the balance of the year. Total RPO increased to $718 million, up 58.5%, over $452.9 million in the third quarter of fiscal 21. The portion of RPO greater than 24 months was up 93% over the third quarter of fiscal 21 to $297 million. An RPO less than 24 months increased 41% to $421 million. The increase in RP on the quarter was driven primarily by new customer ads. Along with our strong performance in the quarter, we are excited by the announced Simple Nexus transaction, which we expect to close by the end of our fiscal year ending January 31st. As previously mentioned, we expect Simple Nexus will be immediately accretive to growth. Turning to Guidance. For the fourth quarter, we expect total revenues of $68.5 million to $69.5 million, and subscription revenues of $57 million to $58 million. Note, this guidance assumes a seasonality impact on professional services. Non-GAAP operating loss is expected to be approximately $8 to $9 million, and non-GAAP net loss attributable to Encino per share is expected to be $0.09 to $0.10 cents. based on a weighted average of approximately 97.1 million basic outstanding shares. As a reminder, our guidance does not include any impact from the operating results of Simple Nexus. We are increasing our guidance for the full fiscal year 22 as follows. We expect total revenues of $267 to $268 million and subscription revenues of $219 to $220 million. We also expect non-GAAP operating loss for fiscal 22 to be 18 to 19 million, and non-GAAP net loss attributable to Encino per share to be 20 to 21 cents, based on a weighted average of approximately 95.9 million shares outstanding. Our operating loss expectations assume an incremental increase in business travel and normal seasonality of expenses, in particular, elevated variable compensation for sales professionals. We are very pleased with the results of the third quarter, the solid financial performance and the continued momentum and execution across the company. It is a busy time of year, and I want to thank our Encino team members for all their hard work and dedication. And with that, we will now open the line for questions.
spk08: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone 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 Saket Kalyan from Barclays Capital. Your question, please.
spk04: Hey, guys. Thanks for taking my questions here, and congrats on the order.
spk01: Thanks, Saket.
spk04: Hey, guys. Josh, maybe I'll start with you. It was great to hear some of those international deals that you cited. I was just wondering, can you just talk a little bit about the pipeline for international generally deals? and how that competitive landscape maybe compares to the U.S. at all. Does that make sense?
spk13: Absolutely. And if you'll recall, about a year ago, we really started putting people in market in Western Europe. Our initial presence and a lot of our first accounts in EMEA were in the U.K. and Ireland, and we've continued to expand into Western Europe. So those markets are nuanced, and they require local attention. And as the overall pipe continues to grow, we see corresponding growth in those markets with that local focus, cultural and language capability. So today, the international pipe sits at about half of overall pipe. We're pleased with the progress.
spk04: That's great. That's great. Great to hear. David, maybe for you, appreciate the separation of guidance, right, organic and simple nexus sort of separate until it closes. And understand we're not going to talk about Simple Nexus too much, but, you know, I was wondering if you could talk a little bit about sort of their contract structure and maybe just as you start to go through some of the purchase accounting here, can you give us a sense for me maybe how significant the deferred revenue impact there could be?
spk11: Yeah, thanks, Zach. Yeah, once the deal closes, which we expect by the end of our first quarter, we will update accordingly after that. End of fourth quarter. End of fourth quarter, sorry. And, you know, from Simple Nexus, the majority of their contracts are billed monthly. And so we would not expect to see a large impact on deferred revenues from purchase accounting.
spk04: Oh, that's very helpful. Got it. Thanks a lot, guys. Appreciate it. Congrats again. Thank you. You have a good one.
spk08: Thank you. Thank you. Our next question comes from the line of Terry Tillman from Truist Securities. Your question, please.
spk05: Yeah, thanks for taking my questions. Hi, Pierre, Dave, Josh, and Greg. I think I got that right. I have a bunch of things hanging off my chest here. I'm able to unveil another foreign language here, so I guess I'd say konnichiwa. It's great to see the Japan bank deal. So, yeah, so I got that out of the way now. I had two questions. You know, the first question is, you know, I heard a fair number of new bank deals mentioned in prepared remarks. You know, the deal in Japan, that's great. New one there. New Zealand, U.K., some community banks and regional banks in the U.S. I'm just kind of curious, does it feel like there's a pickup in demand and decision cycles and close rates for new logos? I know those take longer because they're not existing relationships, but how does it feel in terms of the propensity to close deals right now? And then thoughts into 4Q, is that typically a seasonally stronger quarter for these new deals? And then I had a follow-up.
spk13: Absolutely. And, you know, the seasonality of the business, the third quarter is – Not what the fourth quarter is, but we're really pleased with how the third quarter was. As we close that quarter, I would say, I don't know that we're back to pre-COVID levels, but this is the most active quarter that we've seen. And that was with more business-as-usual activity, not the PPP, not COVID-driven things. So we're quite excited, pleased with how the team executed. And we see customers taking the forced reckoning from the last few years and translating that into action.
spk05: Got it. Thanks, Josh. And my follow-up question for Dave, you know, last year between the 2Q and 3Q, there was actually, I think, a seasonal decline in total RPO and then 24-month or less RPO. And maybe Josh just answered part of this, but it seemed like you bucked that trend. And I don't know if that was the right seasonality last year, and this is kind of abnormal, but is there something to be said also for just the book of business and the strength in the quarter vis-a-vis the sequential increase in current or the 24-month or less RPO?
spk11: Yeah, I think we had a really good quarter overall. Remember, last year was still PPP-related, so there were lower-duration contracts in that quarter last year. And so this year, it was a more normal quarter. It was well-balanced. We saw some longer-duration contracts, but overall, it was a very solid quarter from a sales perspective.
spk05: Okay, great. Well, I'll end it with a con bono.
spk11: So thank you.
spk08: All righty.
spk05: Thanks, Terry.
spk08: Thank you, Terry. Thank you. Our next question comes from Josh Beck from KeyBank. Your question, please.
spk10: Thanks for taking the question and excited to hear about the in-person meetings. Not sure I was going to ever say that, but glad to see that. It might be a little too early to ask this, but After you announce the simple Nexus acquisition, curious maybe any early feedback you've received from partners, customers alike, and if that's better held for a later call, also happy to wait.
spk01: Hey, Josh, thanks for calling in on your question. No, I can give you some anecdotes because, you know, you do get calls from customers, et cetera, and I'm pleased to tell you that we've got a very positive response both from our clients as well as we speak to the Simple Nexus team, you know, planning the closing of this deal, we get a similar very positive feedback. As you know, these two companies both are very client-centric. They both are very focused on the success of their customers, and I think that's playing out now as people begin to understand the power of the two solutions together, as well as the fit of the cultures. So very pleased with that initial reaction.
spk10: Very good to hear. And maybe... Not sure where this question would lie in terms of management team, but I'm just curious, as you are discussing with your bank customers their priorities for next year, I certainly think we're through the triple P and the forgiveness waves. Digital really seemed to ramp up as an initiative this year. You obviously have onboarding and many other solutions. So I'm just curious, as you think about the prioritization for next year in terms of your bank executive conversation? How is that shaping up?
spk01: Yeah, what we're seeing overall is that banks are coming back, specifically in the U.S., the community regional is back to focusing on transforming themselves to be relevant for the future. And as you know, our platform story plays well into that. So what we're seeing is banks are refocused on the strategies for long-term survival and relevance. And Encino plays very well into that. We are back on message with our platform play. You know, all of us got distracted with Triple P and other things. So now it's all about the platform. It's all about digital transformation for the long term. And we're very excited about it.
spk10: Excellent. Well, thank you, Pierre, and thanks, team. Thank you.
spk08: Thank you. Our next question comes from the line of Bob Napoli from William Blair. Your question, please.
spk07: Thank you, and good afternoon. It's great to see the progress on international, and now that it's becoming a really material part of the business, I was wondering maybe if you could give a little color on the mix of subscription versus professional services in the international and then the gross margins, I guess, or the margins relative to the U.S. business?
spk11: Yeah, Bob, thanks. Yeah, we're not going to discuss margins on this call, but I can say in terms of revenues that subscription revenues are growing in triple digits, and PSO, the services business, are slowing a little bit. We're hitting a level where we farm out or we engage our partners to deploy software for us in all the countries that we're selling into. So we expect services revenues will decline on a year-over-year basis in the future, but that subscription revenue is still strong.
spk07: Thank you. And I saw you used Accenture in one of your announcements. And just in that pipeline, I guess you also announced a couple of challenger banks. And I don't know if that's internationally a new focus for you. And then given that the first one is the hardest to get, I mean, you've added France, Germany, Japan with 50% of your pipeline internationally. Can you give any color on kind of the geographic strength? Are you seeing others line up in the markets you just entered, and then any color on the, you know, the Challenger Bank wins or effort?
spk01: Yeah, the Challenger Bank is just part of the normal go-to-market strategy. I mean, some of them come, some try to build their own software at first and then realize later on they should stick to their netting. When you look overall, you know, about two years ago, we started with these investments in the international markets, specifically in-country in Europe. All of those are beginning to pay off now. We see good activity. You know, I equate this way back to in 2014 and 2015 when we started the enterprise business in the U.S. We made similar investments. We were not public at the time, and over time it pays off. So I see similar fact patterns, and I'm optimistic that over time they'll all come around.
spk07: Thank you. Appreciate it.
spk08: Thank you. Thank you. Our next question comes from the line of Mayank Tandon from Needham. Your question, please.
spk12: Hey, good evening, guys. This is actually Kyle Peterson on for Mayank. Thanks for taking the questions. I just wanted to touch on competition, specifically in the account opening side. Are you guys seeing any changes in the competitive environment? I know a few other banking software players have been kind of making some at least announcements in the space. So just wanted to see if you've noticed kind of any change in the landscape.
spk13: Yeah, we continue to see competition from point solutions, as we always have. It's our goal to build solutions across everything that we offer to our customers that are best in class and bring them back to a single platform vision. We think if you pick a point solution and then you pick another one, you're going to wake up in several years. And from an employee and customer experience, a bank regulatory burden and a bank efficiency perspective, you really won't have progressed. So our goal is to build something that stands alone on its own but then ties into that robust platform. We think that's the direction the industry needs to head.
spk01: Yeah, and it's not only the platform play. It's also that many of those solutions are more of a front-end or a point-of-sale solution. While we can do the front-end as well as the branch transformation of all the bankers and that end-to-end experience, So you can start it online. You can go into a branch and complete it there. We see significant differentiation. It's more difficult to build up front, but over time, I think that's the better way to get these banks to be more like a fintech.
spk12: That's helpful. And then I guess just one follow-up on the professional services, the gross margins, especially kind of second consecutive quarter with, you know, significantly higher than at least what we had been seeing previously. Is there anything kind of one time that's been pushing utilization higher or anything we should be thinking about moving forward as we're kind of thinking about the services gross margins?
spk11: Yeah, we've been seeing a lot of strength out of Europe. We had a couple of customers go live in the quarter, which triggered revenues. I would anticipate that those margins will come down in Q4. and impact our total gross margins overall. But, yeah, we've seen some really good activity, high utilization rates, good billings out of PSO. But, yeah, we expect to see a seasonality impact in the fourth quarter. Got it. That's helpful.
spk08: Thanks, guys. Nice quarter. Thank you.
spk06: Thanks a lot.
spk08: Thank you. Our next question comes from the line of Ken Sachosky from Autonomous Research. Your question, please.
spk14: Yeah. Hi, everyone. Good afternoon, and thanks for taking the question. I wanted to ask about SimpleNexus. One thing we've noticed is that mortgage activity really picked up in, call it 2019, 2020. So can you talk about how much SimpleNexus benefited from that increased activity, and does that lead to any tougher comps to grow over in calendar year 22 and 23?
spk01: Thanks for your call or your question. Great question. So the thing I would remind you of is that SimpleNexus is a seed-based revenue model. And as you recall, when we announced the deal, we actually discussed this. We actually looked at their trending revenue over time, specifically with lower volumes in 2018, then transitioning to 2019, et cetera. And you don't see the peaks and valleys here. With them, as you would see with the people who play in the mortgage volume game, where they're actually charged by the transaction, and that's what made it so attractive for us, is that they also proceed. And when there's a downturn in mortgage volume, what we see is these typical independent mortgage banks cut back on the middle back offers, but they keep their salespeople in place because they're commission-based, which means they have to keep the seats for the licenses for the software. So we love that financial model they followed. And historically, we've not seen the big peaks and valleys we've seen with other companies with a different financial model. So we are actually very optimistic that this was a great fit for us.
spk14: Okay, that's really helpful, Pierre. And then I think you guys mentioned that Simple Nexus is immediately accretive to revenue growth. I mean, are we... Are we talking about revenue growth that's 40% or is it closer to 55, 60%? Just trying to get a sense for how much faster it's growing compared to core and CNO. And then any comments on the sustainability of that growth?
spk11: Yeah, thanks, Ken. Like we said earlier, we will update after we close the transaction. So we're not going to get into any of the details on their growth rate. We did disclose their trailing 12-month revenue growth, and we also talked about their forward growth. annualized growth based on a September number. But that's all we're going to disclose right now.
spk01: Yeah, it was the trailing 12 months was 41 million and 54 was the September times 12 annualized number. Right. Okay. Thank you, guys. I'll leave it there. Thanks a lot.
spk08: Thank you. Thank you. As a reminder, if you have a question at this time, please press star then one. Our next question comes from the line of Alex Glar from Raymond James. Your question, please.
spk06: Thanks. Josh, I wanted to ask about your results of kind of the time on the road. You've been selling successfully virtually for the past 20 months, and I know it's early, but curious to hear if there's any noticeable changes in terms of building pipeline or close rates and how that's influencing your plans for more travel next year.
spk13: Yeah, we are proud of how we've executed in remote work conditions. But on the other side of this is the reality that we are a business process transformation company. and there's business leaders on the other side that are making not really technical decisions, but they're picking a partner. So we believe in the people that we have representing Encino in the field, and when we can get them in front of customers and develop those relationships, they can understand the culture and the value proposition even better, and we would hope that that will continue to help those conversations accelerate.
spk06: Got it. Okay, and one follow-up, David. The implied fourth quarter subscription guide coming out of the really strong this quarter results, I think when you exclude the one-time revenue from last year, it implies about 35% growth for this current quarter versus the kind of 28% of the midpoint. I'm just curious if there's anything to call out there in terms of one-timers or seasonality or if this is kind of just standard conservatism. Any other color there? Thanks.
spk11: Yeah, I think, you know, just like we saw last Q4 on a sequential basis, we're seeing just a lower level of activations. As we talked about in the past, our activations are lumpy quarter to quarter. It just depends on how the contract was negotiated with customers. And so we're seeing kind of what we expect to see a seasonal impact on lower activations in the fourth quarter.
spk06: Okay, great. Thanks.
spk08: Thank you. Thank you. Our next question comes from the line of Brent Brafin from Piper Sandler. Your question, please.
spk03: Hi, this is Clark Jeffries on for Brent. First question, you mentioned the expansion of top 50 U.S. banks that grew from an initial triple P use case. I guess just stepping back, could you give us a sense of how successful the effort has been in transferring or expanding that contract value in 22? And are there still triple P only use case banks that are in the pipe for potential expansion?
spk13: Not much else to speak about today. We are proud of that validation of how we executed for them. As we continue on with the year and into next year, the goal is obviously to continue taking those relationships and come back to the wheelhouse and CNO Indian vision that we have. So that's a great validation of how we succeeded in forging that relationship, and we'll continue taking that story out.
spk01: Yeah, and I want to emphasize, if you recall, we had specific WP contracts and integrated a bunch of code terminus And so, you know, you wouldn't go up front and get that. So you wait for that contract to come to the renewal date and then actually negotiate those. So there's some triple P that's still out there that we have to negotiate, but that's part of the coterminous contracts. And, you know, we've got such a great relationship with these customers, I'm optimistic that it will go well. But, yeah, there's some triple P overhang there.
spk11: Yeah, and we're still – We still expect $18 million this year for triple periods, so there's no change to what we have discussed previously. As a total triple period? Total this year, yes.
spk03: Great, and I think my follow-up question was actually maybe on that coterminous topic. Looking at deferred revenue, obviously a seasonally weaker quarter in Q3 typically, but were there changes in renewal terms that might have moved around Q3, kind of deferred revenue? It just seemed like a maybe an outlier in terms of the quarterly change.
spk11: Yeah, no, there's nothing in there Triple P related. I think Q3 is our seasonally weakest quarter, and that's just historically been a lower bookings quarter for us and lower billings quarter. And we would expect that to continue in the future. Great.
spk03: And then one last clarifying question. Could you remind us if you're booking an RPO in U.S. dollars or in local currency and Should we be aware of FX impacts maybe on RPO going forward?
spk11: Yeah, it's all based on U.S. dollars. Our RPO is based on U.S. dollars. It's a minimal impact on foreign currency exchange rates at this point. All right, perfect. Thank you.
spk08: Thank you. Thank you. Our next question comes from the line of Charles Nippon from Stevens. Your question, please.
spk02: Good afternoon, and thank you for taking my question. Could you comment on the pace of investment internationally? You've been talking about getting feet on the ground at some of your foreign markets for a couple quarters now, and it looks like you're getting some traction there. But are we at a point or are we nearing a point where the infrastructure for the growth initiatives are in place and we could see some sort of moderation in spending abroad?
spk11: Yes. So we made very large investments this year. It relatively speaking, large investments. So we place people on the ground in Germany, Spain, France, Italy. And I would say the large investments are done for the time being. As we see upside to bookings and customer activity, we will add incrementally. But I would say at this point, internationally, we have the large investments in place, and we will see additional ads incremental, smaller ads in the future as we're successful.
spk02: Great. Thank you. And secondly, could you comment on the impact of consolidation in the banking industry on your business? Clearly, your client base is skewed towards growth-focused institutions. So could it potentially be a positive to your business when an acquired institution potentially adopts Encino?
spk13: Yeah, and if you think to the prepared comments here, if you look at the example of Truist Bank, which is the tie-up of BB&T and SunTrust, and their CEO's comments that they're essentially positioning for the future with Encino, we would think that the kind of banks that are making that kind of investment are going to go best of breed. Earlier this year, we spoke about First Horizon as well, similar, where you have a lot of the regional banks that are pursuing an M&A route to try to compete with tech, and we believe we're well-positioned to support them as they get ready to tie up and try to go bigger.
spk02: Great. I appreciate the call. Nice quarter. Thank you.
spk13: Thank you very much.
spk08: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Pierre Nadeau, CEO, for any further remarks.
spk01: Thank you for your time today and your continued support. We look forward to speaking with many of you in the coming weeks and hope everyone has a safe, healthy, and happy holiday season.
spk08: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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