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Shares in cloud banking solutions provider nCino Inc. tumbled Wednesday after the company said its mortgage technology business has been a drag on growth but is expected to pick up once interest rates come down.

In reporting an $11 million second-quarter loss Tuesday, nCino said revenue was up 13 percent from a year ago, to $132.4 million, helping the company trim its Q2 loss by 31 percent from a year ago, when it was $15.9 million in the red.

But nCino Chairman and CEO Pierre Naudé acknowledged in a statement that “some macroeconomic challenges persist, particularly in the U.S. mortgage market and international markets.”

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The company’s guidance for third-quarter revenue of between $136 million and $138 million also disappointed investors.

Shares in nCino down 14% after Q2 earnings

Source: Yahoo Finance.

Shares in nCino, which in the last 12 months have traded for as much as $37.48 and as little as $27.13, fell 14 percent to $29.74 at Wednesday’s close.

NCino, which raised $268.4 million in a July 2020 initial public offering, reported that it had $126.8 million in cash and cash equivalents on hand at the end of July, and repaid $15 million on its revolving credit facility.

Having spent nearly $1 billion to acquire mortgage technology provider SimpleNexus in 2022 as interest rates were starting to climb, the Wilmington, North Carolina-based cloud banking pioneer has found growing the business to be a challenge.

While Q2 subscription revenue across all of nCino’s business lines was up 14 percent to $114 million, mortgage subscription revenue grew by only 4 percent, to $17 million, Chief Financial Officer Greg Orenstein said on a call with investment analysts.

NCino signed six new mortgage customers in the second quarter, four of which were financial institutions, CEO Pierre Naudé told investment analysts. One of the largest homebuilders in the United States began a nationwide rollout of the nCino mortgage solution in July, he said.

One issue nCino has been coping with in trying to grow its mortgage technology business has been “churn.” Even as it signs new mortgage customers, it must cope with the loss of existing clients — in some cases because they’re acquired by competitors or go out of business.

The banking technology provider, which wrapped up its 2024 fiscal year on Jan. 31, saw its customer count shrink during that period, driven by a 9 percent decline in total mortgage customers to 434.

Mortgage customers down on ‘churn’

NCino’s total customer base, which as of Jan. 31, 2024, included 1,149 clients of nIQ, nCino’s artificial intelligence solution. Of the 434 mortgage customers as of Jan. 31, 63 were also nCino Bank Operating System (BOS) customers or portfolio analytics customers. Source: nCino investor presentation.

Naudé said it’s important to keep in mind that SimpleNexus — which nCino acquired in January 2022 for $933.6 million and rebranded as nCino Mortgage in September — primarily served independent mortgage banks (IMBs).

With a tight focus on mortgage lending, some IMBs — also known as non-bank lenders because they lack deposits to loan against — have struggled as elevated mortgage rates curtailed homebuying and refinancing.

But nCino has been successful in broadening the customer base for its mortgage solution by marketing it to its existing banking customers and homebuilders, which are less susceptible to churn.

Pierre Naudé

“Banking is a lot less risky for the mortgage business, because once [a bank buys a mortgage subscription], it stays there,” Naudé said. “It’s not like IMBs, which are doing M&A [mergers and acquisitions] all the time, or shutting down the business.”

Naudé welcomed the recent news that IMBs reported earning a pre-tax profit of $693 per loan during the second quarter following eight straight quarters of net losses.

But he said nCino’s mortgage business is “a lot more balanced now” as it expands beyond SimpleNexus’ IMB customer base. “It’s more growth-oriented, and as soon as this rate cut comes in and the volumes go up, I’m actually highly optimistic that mortgage will start performing at a different level for us.”

NCino’s mortgage clients include Synergy One Lending and Fairway Independent Mortgage Corporation, but most of its revenue comes from providing a range of technology services to global banks like Bank of America, Barclays, Santander, and TD Bank; enterprise banks including Truist Bank and U.S. Bank; regional community banks like WaFd Bank and M&F Bank; and credit unions like Navy Federal Credit Union, SAFE Credit Union and Marine Credit Union.

While nCino saw its customer count drop last year, it boosted the number of clients generating more than $1 million in revenue a year to 86, up from 73 the year before. No single customer represented more than 10 percent of total revenue.

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An employee who led a content team at Realtor.com before moving to rival CoStar Group transferred access to as many as 40 documents to his personal email and continued accessing them dozens of times after exiting the Move, Inc.-owned portal, according to a forensic analysis in new legal filings Tuesday.

Realtor.com parent Move, Inc. asked the court to issue an order that would block former Realtor.com content editor James Kaminsky and current employer, CoStar Group, from further access to documents at the center of a lawsuit filed in July. Trade secrets within the documents include details on the company’s online traffic, advertising and lead generation tactics, Move attorneys claim.

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“Anyone with access to these documents knows what will be published on Realtor.com, and when,” Move, Inc. Vice President of Editorial and Content Amy Maas said in a sworn statement included in the new filing. “How Realtor.com’s stories are performing, and why, who Move’s Communications team is in contact with and what information media outlets are requesting from Move.” 

Originally filed in July in U.S. District Court in California, the lawsuit has put a spotlight on the intense race between the country’s largest real estate portals to gain more web traffic and convert that into profit. It also highlights the ongoing fallout between Realtor.com and CoStar, which was reportedly on the cusp of purchasing Move, Inc. in early 2023 before negotiations ended.

In the latest filing, Realtor.com lawyers shared insights from forensics experts who analyzed Kaminsky’s work computer and other Realtor.com documents to determine how and when he allegedly viewed them.

Howard Pence, vice president of global cyber defense for News Corp., which owns Move, said in a sworn statement that digital logs of Realtor.com’s documents showed that Kaminsky transferred access to 40 documents on Jan. 11 and Jan. 12, Kaminsky’s final two days working for Move.

“I am not aware of any legitimate business purpose for a former employee such as Mr. Kaminsky to access Move’s electronic files on the Google Docs account after his employment ended,” Pence said. “Mr. Kaminsky was not authorized to access the Google Docs account after his employment ended.”

CoStar dismissed the latest filing, saying in a statement that it was a distraction from a separate lawsuit filed against Move, Inc. last week.

In that case, a group of eight Realtors accused Move, Inc. of selling unvetted and fraudulent leads through Move Network sights, including Realtor.com, ListHub and UpNest. CoStar is not involved in the suit.

“We have stated from the beginning that Move’s case against CoStar was a PR stunt, and this is just more proof,” CoStar General Counsel Gene Boxer told Inman. “Move’s continued bullying of a long-serving employee in the process is even worse. We will fight and win this dispute. In the meantime, Move should focus on the lawsuit against Realtor.com for allegedly selling unvetted and fraudulent buyer and seller leads.”

The lawsuit and declarations don’t accuse Kaminsky of sharing the documents with anyone at CoStar.

The new filing in Realtor.com’s lawsuit included sworn declarations from Kaminsky’s former employees and superiors at Realtor.com, as well as the forensics experts working for Move who analyzed the documents.

Kaminsky ran a division known as the News & Insights Team at Realtor.com, which Move employees said had successfully driven traffic to the website.

Kaminsky was terminated from Move on Jan. 10. Jan. 12 was his final working day, according to the court documents. He began working at CoStar in March.

According to his LinkedIn profile, which was removed shortly after Move filed its lawsuit on July 2, Kaminsky started working as an editor at Homes.com in March. Kaminsky wrote that he was a content lead responsible for overseeing a team of 10 full-time writers.

Realtor.com’s communications director said that the documents at the heart of the lawsuit “contain a great deal of confidential and proprietary information that could be used to construct and operate a competing News & Insights-type platform.”

One of the four key documents at the heart of the lawsuit is considered “a detailed business plan” for the teams that drive traffic to Realtor.com, according to the filing.

Maas said that a member of her team was viewing the document on June 3, 2024, when they saw a user access the document with the email address [email protected]. 

“I was stunned to learn that a former Move employee was accessing a highly confidential electronic document of Move (and effectively spying on updates to that confidential document in real time), especially with respect to this document because it contains so much valuable, non-public information about our business,” Maas said in her sworn declaration.

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Read the latest filing here (refresh page if document doesn’t appear).

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Pending home sales were up 4.8 percent in June, with all four U.S. regions showing monthly gains in contract signings, the National Association of Realtors (NAR) reported on Wednesday.

The Pending Home Sales Index (PHSI) rose to 74.3 in June, while pending sales were down 2.6 percent year over year. An index of 100 is equivalent to the level of contract activity in 2001.

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“The rise in housing inventory is beginning to lead to more contract signings,” NAR Chief Economist Lawrence Yun said. “Multiple offers are less intense, and buyers are in a more favorable position.”

All four U.S. regions displayed monthly gains in transactions, while all regions apart from the West registered declines year over year.

The Northeast PHSI increased 3 percent from the previous month to 65.5, down 0.3 percent from June 2023. The South index increased 6.3 percent to 89.3 in June, down 3.9 percent from the previous year.

The Midwest PHSI climbed 4.7 percent in June to 73.7, down 4.2 percent from the previous year. The West index rose 3.4 percent in June to 58.4, and was the only region that showed an increase year over year — up 1 percent from June 2023.