nCino, Inc. (NCNO) Q2 2022 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the nCino, Inc. Second Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Greg Orenstein. You may begin.

Good afternoon. And welcome to nCino’s second quarter fiscal 2022 earnings call for the quarter ended July 31, 2021. With me on today’s call are Pierre Naude, nCino’s Chief Executive Officer; David Rudow, our Chief Financial Officer; and Josh Glover, our President and Chief Revenue 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, entails certain assumptions made as of today’s date and are subject to various risks and uncertainties described in our SEC filing 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. nCino 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 8-K furnished with the SEC just before this call. With that, thank you for joining us and I will turn it over to Pierre.

Thanks, Greg. Good afternoon and thank you for joining us. We had another great quarter and I want to thank our entire team at nCino for their hard work and efforts. As you can see from our second quarter results, the nCino platform continues to be selected by leading financial institutions around the globe, reinforcing our position as the worldwide leader in cloud banking. nCino really isn't an enviable position. The digital transformation of the global financial services industry is accelerating and we offer a best-in-class platform to help financial institutions of all sizes around the world transition to a digital client first strategy. We reported impressive financial results for the quarter, highlighted by 37% growth in subscription revenues, which compared to a very strong second quarter last year that was driven by PPP revenues. We also achieve the highest sales for a second quarter in the history of the company. There is a lot of news from us today. In addition to earnings, this afternoon, we were very pleased to announce that Wells Fargo has chosen the nCino Bank Operating System as a foundational technology platform to accelerate its digital transformation within its commercial banking and corporate and investment banking businesses. They said specially, share promotions across our executive management team positioning nCino for further growth as we scale the organization to address the significant global opportunity ahead. I want to spend time discussing these executive changes, but first, let me touch upon the Wells Fargo announcement and our record second quarter sales. At $1.9 trillion in assets, Wells Fargo is one of the top four banks in the U.S. We now have two of the top four, Bank of America has been a customer of nCino since 2017. Wells Fargo is a prime example of the momentum around digital transformation I just mentioned. They are investing in digital capabilities to serve their clients and improve their digital experience more quickly and effectively. We are incredibly proud to partner with Wells Fargo to help them transform their commercial lending operations and continue to meet the evolving needs of their clients. Signing our first customer in France was another highlight in the second quarter. This financial services firm, a subsidiary of one of the largest banking groups in France, purchased nCino for corporate lending and also purchased automated spreading, part of our nCino IQ or nIQ platform to automate and speed up the credit analysis process. You may recall as we started the year, I challenged the team to add customers in each of the new European markets we entered. Two quarters in and we've added a customer in Germany and now one in France. We are seeing the benefit of the teams we've been able to build out in the local markets and I'm pleased with the progress we have made, particularly in light of the challenges posed by COVID in Europe. Another key one was with U.S. Bank, a $540 billion asset institution and existing nCino customer, who significantly expanded their license with us in the second quarter. U.S. Bank first started using nCino for Business Banking in 2018. This additional agreement puts nCino Bank Operating System at the core of U.S. Bank’s commercial lending strategy. As Sal Maglietta, U.S. Bank Executive Vice President said in the press release they issued, across our organization, our bankers and technology teams are working collaboratively to reshape the way we serve our wholesale banking clients. Everyone involved is guided by our commitment to increasing simplicity and agility at every step of the lending process. The expanded agreement will provide us with a proven platform that will improve outcomes for both clients and employees. A few other noteworthy U.S. customer wins in the second quarter, include adding a new logo for a top 50 bank in the U.S. with over $75 billion in assets. That'll be using nCino in multiple lines of business and signing a multiyear expansion with a top 20 bank in the U.S. with $180 billion in assets, giving them the ability to expand small business lending across their branches. I mentioned our first French customer purchased our automated spreading solution. They were one of nine new orders spreading customers this quarter, including the U.S. arm of a Global Bank. Demand for auto spreading continues to be very encouraging and we are now selling it across our customer base globally. In addition to a strong sales quarter, our customer success organization had another productive quarter, crossing key implementation and adoption milestones for many customers, including in Europe, Australia and North America. As always, we celebrate the go-live and not even go-live, this quarter included a $39 billion bank in the U.S. where we went live on an end-to-end commercial and small business transformation project. Treasury management go-live for the U.S. Community Bank and the U.S. Regional Bank. And in Australia, we went live with three customers, including deployments for small, medium and enterprise or SME win in automated spreading. Our growth highlights the magnitude of nCino’s global market opportunity. The executive promotions we announced today create a digital infrastructure to support a much larger, increasingly global organization and to more effectively pursue the strategic opportunities we see ahead of us. One point to keep in mind, you've heard me discuss nCino’s culture many times and an important element of our culture is professional growth opportunities for our people. These internal promotions reflect the core nCino philosophy to forward invest in leadership. By adding more depth to our senior team, we are also giving the next level of leaders the chance to grow professionally. The appointment of Josh Glover as President is a perfect example. Josh was an early and senior employee and has played a key role in shaping the nCino you see today. That results victory success as Chief Revenue Officer over the past two years and creating a dynamic global sales organization and driving nCino’s expansion across North America, EMEA and APAC. With the additional role of President, Josh will now take on operational responsibilities in addition to sales. At the same time, it enables the next year of sales leadership to undertake more senior roles, as Josh adds new structure below him. Josh’s new responsibilities will also free me up to focus more on customers, investors and strategic opportunities. For those of you who have not yet met Josh, you will be seeing more of him in the quarters to come. Three surprises for most of the Chief Innovation Officer is another step to free up senior time to allow an even more strategic approach to product innovation, further aligning our technology vision and business strategy. Again, this move creates an opportunity for two proven leaders under Trisha, Josh Marcy and Dory Weiss to take on larger roles within our Product Development and Engineering Organizations. Being an innovation company it is part of nCino’s DNA. Trisha, who has led the design and development of the nCino Bank Operating System for the past several years, is now tasked with furthering our product innovation leadership position in the financial services industry. But innovation can also come from outside the company. Finding those ideal opportunities via a partnership or acquisition is part of our long-term strategy. So I've asked Greg Orenstein, who has more than 20 years of experience driving corporate strategy and executing M&A and corporate finance transactions in the fintech industry to head up corporate strategy in addition to his role as Chief Corporate Development Officer. His responsibilities as General Counsel will be assumed by April Rieger, who has end the title after working closely with Greg over the past three years. I view the second quarter as a textbook example of success for nCino. We exceeded our financial guidance, posted strong sales to support future growth and took step scaling the organization to effectively address a massive global market opportunity. While recognizing key leaders, we have made invaluable contributions to the company. With that, David will take you through the second quarter financials in detail and provide color around our outlook for the rest of the year.

Thank you, Pierre. And thanks to everyone for joining us this afternoon to review our second 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 and expenses related to the government antitrust investigation and related civil action disclosed in our SEC filings. A reconciliation to comparable GAAP metrics can be found on today's earnings release, which is available on our website and as an exhibit to our Form 8-K furnished with the SEC. To echo Pierre’s comments, we are very pleased with the strong results for the second quarter and how it positions us for continued momentum in the second half of the year. Total revenues for the second quarter of fiscal 2022 were $66.5 million, an increase of 36% year-over-year. Subscription revenues were $53.9 million, an increase the 37% year-over-year, representing 81% of total revenue. Subscription revenues benefited from a few deals that closed earlier than expected and some add-on sales. While we are no longer breaking out PPP revenues, there is no change to the previously communicated approximately $80 million in PPP revenues we expect for the full year. Professional services revenues were $12.6 million in the quarter, growing 34% in the second quarter of fiscal 2022, reflecting solid billing and utilization rates on projects outside the U.S. We enjoyed a particularly strong quarter in international revenues. Non-U.S. revenues were $10.8 million or 16% of total revenues in the second quarter, up 129% year-over-year. While we expect the level of international growth to moderate in the coming quarters, based largely on strong U.S. sales and continued challenges from COVID, we are very pleased to see such a strong return on investment for our international growth initiatives. Non-GAAP gross profit for the second quarter fiscal 2022 was $41.9 million, compared with $29.1 million in the second quarter of fiscal 2021, an increase of 44% year-over-year. Non-GAAP gross margin was 63%, compared to 60% in the second quarter fiscal 2021. Our gross margin continues to improve largely through subscription product mix. Sales and marketing expenses for the second quarter of fiscal 2022 were $16.8 million or 25% of total revenues, compared to $11.9 million or 24% in the second quarter of fiscal 2021. We continue to invest in our global expansion, adding sales people on the Continent Europe along with sales specialists to further support some of our newer and maturing products like Retail and nIQ. We also saw some return to travel in the U.S. and Continental Europe, as certain customers level of comfort with on-site visits improved in the quarter. Research and development expenses for the second quarter of fiscal 2022 were $16.9 million or 25% of total revenues, compared to $12.3 million or 25% for the second quarter of fiscal 2021. We continue investing across our platform, including in our retail products and nIQ, as well as localizing products to support our international expansion. General and administrative expenses for the second quarter of fiscal 2022 were $10 million or 15% of total revenue, compared to $6.6 million or 14% in the second quarter of fiscal 2021. We continue to invest in G&A to support our global growth. In the second quarter, we incurred approximately $2.9 million in costs related to the antitrust matters, which are not included in the $10 million expense. As a reminder, we are excluding these costs for non-GAAP operating income results and guidance. Non-GAAP operating loss for the second quarter of fiscal 2022 was $1.8 million, compared to with non-GAAP operating loss of $1.6 million in second quarter of fiscal 2021. Our non-GAAP operating margin for the second quarter was negative 3%, compared with negative 3% in the second quarter of fiscal 2021. Non-GAAP net loss attributable to nCino for the second quarter of fiscal 2022 was $2.3 million or $0.02 per share, compared to non-GAAP net loss attributable to nCino of $581,000 or $0.01 per share in the second quarter of fiscal 2021. Turning to cash, we ended the quarter with cash and cash equivalents of $399.4 million. Net cash provided by operating activities totaled $13.3 million for the second quarter, compared to $23.5 million in the second quarter of fiscal 2021. Capital expenditures were approximately $750,000 in the quarter, resulting in free cash flow of $12.6 million. Consistent with our normal billings and collections seasonality, we expect negative cash from operations through the balance of the year. While we have noted some of the limitations of RPO as a metric in managing our business, I did want to comment on RPO this quarter as the record sales resulting in a meaningful increase. Total RPO was $707 million, a 55% increase over $456 million in the second quarter of fiscal 2021. The portion of RPO greater than 24 months was up 92% over fiscal 2021 to $301 million, reflecting the large long-term contracts signed in the second quarter, which should position us quite well for continued topline growth. RPO less than 24 months increased 36% to $406 million. Now turning to guidance. For the third quarter, we expect total revenues of $66 million to $67 million, subscription revenues are expected to be between $54 million and 55 million, non-GAAP operating loss is expected to be approximately $5.5 million and $6.5 million and non-GAAP net loss attributable to nCino per share is expected to be $0.06 to $0.07, based on a weighted average of approximately 936.6 million shares outstanding. We are increasing our guidance for the full year 2022 as follows; total revenues of $263 million to $264 million, subscription revenues are expected to be between $216 million to $217 million, and we expect non-GAAP operating loss for fiscal 2022 to be $21 million to $22 million and non-GAAP net loss attributable to nCino per share to be $0.22 to $0.23 based upon a weighted average of approximately 95.9 million shares outstanding. The second quarter was another very strong quarter for the company and sets the stage for continued momentum in the second half of the year. I want to thank the entire nCino team for their continued dedication and hard work in helping financial institutions around the globe successfully transition to a digital strategy. We are now happy to take your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Brad Sills with Bank of America. Your line is open.

Oh! Great. Thanks guys for taking my questions and congratulations on a real nice quarter. I -- the metric that stands out here is RPO and you called out a couple of these large deals. Congratulations there. I wanted to ask about what's driving that, is this some pent-up demand from the pandemic now catching up here in that big mega bank segment of the market? How would you classify just general spending environment now versus, say, three months, six months ago, particularly in that segment of the market, because you've obviously seen some great results there?

Yeah. Brad, thanks a lot for being here today. What I would say to you is that, in general, these are very large strategic deals with long-term strategic intent. It was a great sales cycle. Obviously, we talked to all of these big banks over a long period of time, as you can imagine. I would say that, we finally have the impact of pandemic behind us, people have adjusted fantastically. I will tell you and senior people adjusted, executing and working like this, I see our bankers have adjusted and executing and working like this. And people are just doing their jobs, whether they at home or at the office, et cetera. So I'm not only proud of my company, I'm proud of the industry, was actually reacting to customer needs and demands as they go forward, especially at the strategic level. So I see this momentum. I think there is an element where the pandemic has driving strategic urgency for digital transformation and I think that's what you're seeing, because I can see that in the pipelines as well. You would expect after a quarter like this, that the pipeline will take a little dip for us to and I don't see that. So that is pretty fantastic to see the momentum.

Excellent to hear. Thanks, Pierre. And then one more, if I may, just on the international activity, obviously, you're seeing some good results there on revenue, which we know is kind of a lagging indicator and you call -- you mentioned because of these big deals we will see U.S. start to increase as a mix. But just if you could just remind us kind of where you are with the build out of international, which countries are you seeing real traction and where are you investing incrementally from here? Thanks again.

Yes. So I'm going to give you a broad statement on that and maybe this is a great time to introduce, Josh, a little bit to the team here as well, okay. But the first thing is, I look at the numbers of international and compare it to the company when we started. And you guys remember at the onset of the company, we always said, the -- when we went public, the IPO that we did a triple, triple double, double, double, okay. And I was measured every initiative against can we achieve that and as elegant international business, in some case, we are meeting and exceeding it and in some cases really exceeding some of that momentum. So it's going great. Josh has put a great team on the field in London that's expanding now. So, Josh, maybe you can just comment quickly on the German team and France, Italy, et cetera.

Yeah. We've always taken a land and expand approach and that's playing out as we continue to pursue our international strategy. Recall, in the first quarter, we announced our first German customer. We announced the French customer this quarter. And our goal is to show them a rapid path to success and we believe that as a reputation focused company that will help us continue expanding in those exciting markets. So we made significant infrastructure investments in the non-U.S. teams that are covering this and I think that local presence is paying off.

Thanks so much, guys.

Thanks, Brad.

Thank you. Our next question comes from the line of Terry Tillman with Truist. Your line is open.

Yeah. Good afternoon. I think last quarter I tried some German. I'll try some French, bonjour. So…

Very [Foreign Language]

Merci, [Foreign Language]. So, yeah, I will stop that. I'm done. Sorry, guys. So, first congrats on the record sales quarter and also for Josh and Trisha and everybody with a promotion. That's great scaling the business. I guess the first question, Pierre for you is and to one of the earlier questions, by Brad, I think, you said that the pipeline is actually quite strong and you're not seeing a real like kind of fall off after the great momentum recently. So I'm curious in the pipeline, what are some of the newer areas that you're seeing more proliferating in the pipeline in terms of the newer products beyond just your leadership and commercial loans? So whether it's the retail side that I've asked about in the past, nIQ or mortgage, just anything you can share that's on the kind of emerging side that's interesting or maybe incremental since last time we caught up and then had a follow up?

Yes. So, I would say, firstly, from the areas I was talking about, international clearly is showing us great traction from a pipeline perspective and interest, okay, which is what we like, because it's a mature product, we know what we do there, it is commercial, it is small business and so on, and as you know, that's a massive TAM, okay. Number one. So number two, we're seeing tremendous interest in the nIQ products we're coming out with, driving intelligence and automations into the systems. So nIQ is great. A little nugget for you is we went live with Australian mortgage customer. It's a smaller customer, but I will tell you this, these are new products, you do proof points, you get referenceable customers and every one of them is just a major victory for the teams down there. So those are the areas we're seeing, we're seeing great interest in our international mortgage products. On the Retail front, we're seeing good momentum. But as a company, we're hyper focused on reputation. We have a big effort on making existing customers successful. Get them referenceable and then drive volume from there and that's how we executed all new products. We go in. We sell a number. So there's an interesting tracker we have is we look at customers with multiple products, which actually means they do platform embracing, okay. And I'm seeing a very high number of customers now embracing the platform with multiple products. We are getting close to -- we're actually exceeding 25% of our customers with multiple products and I think that's really what's holding promise for the future.

That's great, Pierre. Thank you. And I guess, David, just a quick question, put you on the spot here. So it's great to see the Wells Fargo win. Something like that, one of these top four bank deals and maybe they're all different, but is there any kind of guidance you can provide on how that could start flowing into the revenue from a meaningful perspective? Thank you.

Yeah. As you know, we have a seed activation schedule and this followed that similar activation schedule we talked about during the IPO process. And so it's no different than that. Revenues ramp fully. I think it's a little bit over 24 months where you see the full ramp of revenues and so those will scale in overtime as they start deploying the product.

Thanks.

Thank you. Our next question comes from the line of Brent Bracelin with Piper Sandler. Your line is open.

Hi, this is for Clarke Jeffries on for Brent. Thanks for taking the question. I think first, interesting to see automated spreading win in your first French customer. Just reflecting on the nIQ platform, where are you most excited to go with the platform from here? Is an automated spreading really emerging at the killer app or are there other things on the roadmap that we should be paying attention to?

Yeah. So as I look at it, there is volume deals and then there is dollar volume deals, okay. So we penetrate some very smaller institutions. I look, for instance, at the volume of portfolio analytics, where we provide to very much smaller institutions a level of technology that is not easily accessible at that level, okay. People use spreadsheets and stuff. So I saw in the numbers here, good traction there, strictly on the credit union side, et cetera. And then nIQ, obviously, is available to all customers of all sizes. I think the fact that we could launch a product that is globally available and that at the very first instance had great success with our early adopter customers and then now is beginning to show volume. And then just one final point on that. Those products, if a much quicker sale to revenue turnover time, so it's really promising to see that. On top of that, as you know, we are at the very, very early stages of commercial pricing and profitability, we are working with a handful of smaller community banks to actually prove out the concept and make sure our models is right and how we approach this and the feedback so far has been very, very good. So that holds great promise for us.

Great. And then David, press on the disparity between total RPO and 24 months or less RPO. I was just wondering if the - some of these larger deals extended beyond that may be a five-year contracts horizon or should we think of the total RPO build as mostly within that kind of five-year duration?

Yeah. Historically, we've had three to five-year deals, those are the averages in the larger deals, nothing went out beyond five years, but I'd say probably five years is the average for them.

All right. Perfect. Thank you.

Thank you. Our next question comes from the line of Bob Napoli with William Blair. Your line is open.

Thank you. Good afternoon, Pierre, David. Good to talk to you. Nice quarter. Congratulations on the wins. On the international business, Pierre, what is - maybe a little commentary around the competitive environment and how you feel, Pierre, the nCino product set stands up internationally versus the US. Is it more or less competitive, it's win rate lower or higher and how do you see that evolving?

No. What I'm seeing is that, look, the first thing you have to do is get success, introduce the cloud to an industry in a continent that believes banking will never go there. The great news is, I have seen that in 2012 in the U.S. and then they told me big banks will never do it. In 2015 and '16, we proved that wrong and now we're doing it in Europe. And the momentum I'm seeing both on the pipeline side as well as the revenue growth is proving out that we could even be bigger internationally than we could be in the US. There are a different set of competitors there as you can imagine. There's some local companies, there is a bunch -- still of a culture of they can bullet themselves by using component-based software, et cetera. But what I'm beginning to see is exactly the same patterns, I saw back here. Now I do realize the big difference is you have to win in every country become referenceable and then win your follow-on deals there. That is just a factor of culture, language, et cetera, and especially with COVID, the borders are back closed up and so on. But you know what, I'm so proud. We, about two quarters away, signed a bank on the continent, without ever seeing them in person or by Zoom, we've done it again, we've done it here in the US. So I think it's boding well for us.

Thank you. Then what products are – what are the R&D dollars, what are they being channeled to? What innovations or what is the product roadmap internally? Where are you investing the most?

So we are continue to invest in our commercial small business products to modernize it to make it right to international and to invest in nIQ to drive intelligence into those products because we know that's a market-leading position, and that's how we penetrate countries. So I want to make sure everyone understand, when we go into international, we focused on our mature products, so you gain that traction and you gain the reputation, okay. And then we launched on top of that mortgage for the international countries, including Canada, UK to start off with, and that's an early adopter or a very early phase of development. The differentiation I see there is the cloud. Then if you look at the specific product sets, we are heavily investing on top of nIQ and commercial, we are heavily invested in retail and retail including deposit account opening, treasury management sales and boarding, okay, which is a commercial retail deposit product as well as retail lending. And the investments there will continue for a long time. Those are heavily compliant-oriented products and they have nooks and crannies that you have to figure out. That's why what we do is we sell a number of customers and then we focus on those customers with all our resources to make sure we get them right, get them successful and make sure they become referenceable, so we can start selling the next group. And that is just a level of success I've seen with previous product launches and that's how we approach this one as well.

Thank you. If I could just squeeze in one last quick one. You haven't made an acquisition in a couple of years, certainly have a lot of momentum organically, you don't need to make an acquisition, but just any thoughts around do you - are you active on the M&A front and looking at opportunities and if so what would interest you?

Yes. So as I always mentioned, I look at this platform play as a puzzle, and if we can find the right companies with the right analytics, AI, machine learning, value add decisioning engines, et cetera. We love those because I can plug them underneath our platform and I can consume the outputs and the data from there, okay, that's one. We look at the global basis, you can imagine, every time, we make a decision about the product area, we look at do we buy, do we book, or do we partner? And that's why, what do you see is we've now got specialized groups with Greg leading that to look at strategy and make sure that we've got a machine looking at that all the time. And we don't miss out on opportunities, but I want to emphasize that this company is built on a platform vision that will automate and change the way banks operate. And it's a client-centric platform and that means your products has to be integrated, share components and share daily basis. So it's not like I can just go buy a basket of products out there and start selling it. We have to make sure it fits our vision, and we will continue to do that.

Thank you. Really appreciate it.

Thank you. Our next question comes from the line of Mayank Tandon with Needham. Your line is open.

Thank you. Good evening and congrats on the quarter. Pierre and David, I wanted to just go back to the question around seed activation. Given the impetus on the part of banks to digitize and the pressure on them to move forward faster, is it conceivable that banks might look to accelerate the seed activation schedule with you guys, which might in turn help to drive above trend growth for even longer than you would have imagined maybe going back to pre-pandemic?

The activations typically is based on experience of how fast we can change processes and deploy it to actually the people in the bank using it, okay. And so, yes, there are obstacles to accelerate that. The first one is, there is a natural pushback on change, just people are used to do something the way. The second one is the number of integrations you have to do to internal and external data sources, realize many of those systems we connect to are very old, not API driven and you have to write custom code for that especially where the system integrators are involved. So our experience is we've learned through the years how to be more prescriptive, push best practices, put gold standards, et cetera to help the banks to move faster and PPP was a great example. With PPP, we set out the box, here is how it's going to work best practice go fast. We all know the market demanded that at the time, okay. Now when you go back to a large project, we are becoming more gold standard oriented. But it's a complex job and we've picked the hard things, automating middle back office and then push it out to the customer. So that's a long way of telling you we see small incremental improvements in seed activations by bank size, but overall, quite frankly, what we're doing is heavy lifting and I don't see the patterns changing that much.

That's very helpful. Makes a lot of sense. And then, Pierre, if I can ask you one more around the Bank Operating System, just given the Wells Fargo win. I was curious how many of your customers today are actually on the OS, the entire full suite comprehensive solution versus using point solutions? And what is the opportunity to convert many of those point solution clients to the OS? What are the potential revenue contribution we could expect for something like that, if that were to happen over time?

Yes. So let me give you a number, how you can calculate this, if you just think of the magnitude of the opportunity we have. We are sitting around 12% to 14% penetration overall in our bank. Now realize, if you take a pool of banks and you take all their employees that could consume nCino and you come up with a number and you take our seats in those banks, that's where the 12% to 14% comes from, okay. The dilemma with the math is the moment we add a bunch of banks its net new logos, the percentage go down again because I've got a much smaller penetration in those banks, okay. And then I cross-selling and the percentage come back up. So on the one hand, it's great news that we moved from 9% to 14% at one stage and now we're coming back to kind of 12%, 13% because our new logo success is so great, okay. So that's how the math play out in that game. I mentioned earlier, more than 25% of our customers use multiple products and actually is embracing the platform. That's what we are seeing and that trend is continuing and the harder I push to do the cross-sell, the faster the new logos come because they see the value in the platform and so I'm actually call my own success trying to penetrate deeper, but getting new logos. And I love both of those, it's like your kids, you embrace them all.

Right. Thank you so much. Appreciate the color.

Thank you. Our next question comes from the line of Ken Suchoski with Autonomous Research. Your line is open.

Hey, Pierre and David. Good afternoon and congrats on the strong quarter. Thanks for taking the question here. I just wanted to dig into the guidance a little bit. It looks like you're guiding to call it 26%, 27% subscription revenue growth for the next couple of quarters. I mean we would thought - we thought that would have been a little bit stronger since the comps get easier, you're booking these new wins. I mean the RPO is up nicely even RPO recognized in the next 24 months. So is that just conservatism on your end or is there something else driving that?

Yeah. So I think what we talked about in Q - we expected Q3 to be the low-end point and then to what trend up. We actually closed a couple of deals earlier than anticipated in the second quarter and so that kind of change the revenue ramp out, the revenue view into the back half of the year. We're not commenting on next year at this point. We're halfway through the year, we've had a phenomenal year so far, but we still have deals to close to get a read on next year as well. But the activity is strong and we feel good with where we are at right now.

You know, because of our activation schedules, always realize what we book now is got a long tail and they come over 18 months to 24 months. So our ability to impact the next two months comes with your nIQ type products, et cetera, but it's fairly limited. And that gives you some color of why you don't see second quarter bookings immediately pushing up third and fourth quarter.

Yeah. And those - the deals that we did sign the big RPO was enterprise driven in the quarter. So those, just by nature, will be longer term seed activation schedule. So keep that in mind as you're building out your model.

Okay. That's really helpful. And I guess just a follow-up question, David. I mean you just mentioned that 3Q would be the low point. I think in terms of subscription revenue growth and then ramp from there. I guess, is it safe to assume that - I guess is fiscal 3Q kind of a low point just going forward more broadly or is it the low point just for this fiscal year?

Yeah. We're not going to talk about next year at all. But for this year, the guidance is around 27% growth rate and then you can back into what Q4 is but we're really focused on closing out the year. And then looking out to next year as we are closer to the end of the fiscal year.

I think there is a factor of Q3 last year where we took consortium revenue on the PPP business that was pent-up one time, and that one-time revenue made the last year third quarter, gave it a bump and so this year, third quarter, which is normalized compares with that. That's why you see that mathematical impact.

Okay. All right. Thanks again. Appreciate it.

Thank you.

[Operator Instructions] Our next question comes from the line of Alex Sklar with Raymond James. Your line is open.

Thanks. Pierre, I wanted to follow up on Bob's product roadmap question. I know you just look the TAM for the new nIQ offerings. I'm just curious if you see any opportunity to expand the TAM on the Commercial Bank Operating Systems side. You kind of talked about investing more on the SMB side there, but are there any obvious ancillary solutions to kind of your commercial product that you can build or buy end of the core platform?

Yes. If you look at the landscape there, I think there are opportunities for more analytics and nIQ oriented insights underneath that platform. Another area one can look at down the line is two customer onboarding in a fully compliant and legal way for very complex entities on a global basis. I mean should - there's areas you can expand, okay. We get into on the lending side, into the investment banking side, in the corporate banking side, et cetera, but you can expand into wealth management. So there's so many things in the bank we can sort of address. I would say to you today, addressing a $12 billion opportunity that our viewers, let's take what we have, build it in a repeatable fashion, so we can drive volume and actually fulfill the promise of the platform. And as we do that, I think that momentum and success will drive us to expand our portfolio elements.

Understood. Yeah. $12 billion is no small number to attack. So the other thing, David, I wanted to ask on the growth investment side it’s been applied for the second half of the year. What can you just tell us in terms of where you're going to be investing? And Pierre, you mentioned some additional hiring on the international retail sales front. I'm curious where the mix stands today of your sales force in terms of those big buckets commercial, retail, and international.

Yeah. So for the balance of the year, we do have some higher costs going into sales marketing, R&D and a little bit in G&A. We have higher insurance costs, those went up on a renewal for D&O, but then we're also investing in our employees and retaining and recruiting employees to work here. So cost increases will be around that and we do have increased costs around R&D as well to continue to mature and develop the product set.

Thank you.

So let me add a little bit there. As you see the sales expenses, realize, although we have this platform, we have an account management structure where our people own accounts on a territory and they sell into that. And then behind them, you have the specialists, so if I go and I understand that the bank has an issue with let's say retail lending, then I'm the general relationship person but I bring in specialists for retail or I bring in a specialist for small business or digital transformation from an end-user perspective, self-service perspective, or maybe it's commercial or it's account opening. And so, when you see some investment going in is at that level of specialization, so that when we compete with point solutions, we are not only best of breed with that point solution competition but we differentiate and it use the platform that will give us cross sell down the line. And so you will see that as we expand our sales force and our depth of knowledge to compete better.

Okay. Great. That's helpful color. Thank you.

Thank you. Our next question comes from the line of Saket Kalia with Barclays. Your line is open.

Hey guys, thanks for taking my questions here and fitting me in. Congrats by the way to everybody on the call for the well-deserved promotions.

Thank you.

Thank you, Saket.

Yes. Sure. Hey, Pierre, maybe just to start with you. Great news on Wells Fargo. I was just wondering, I think you said that makes two of sort of the top four banks domestically. Any thoughts on whether you think that could sort of open up pipeline for the other large banks in the US who aren't already customers?

I think every proof point actually must drive people to sit back and question and say, what am I doing? Why am I doing it different? Okay? So, yes, the answer is, absolutely so. As you can imagine, we have people calling on all these banks, we have conversations with them but I actually look at the larger opportunity. Every one of these is a proof point to the top 400 banks in the world. We don't look at the US as just a market, we're looking at the biggest banks in the UK, as you know, Barclays is a great customer. We're looking at the biggest banks in France, biggest banks in Spain, there's fantastic institutions and everyone, we get a top 10 bank in the US and we publicize that, then we make it public. Those become proof points, that is the momentum and the trend of the future. And so I see it as more a driver of that global footprint in the larger banks.

Got it. That makes sense. David, maybe for you, I think we all have sort of a rough sense for how the seed activation schedule sort of looks across the blended base, but I was just wondering how the seed activation schedule for a bigger deal like Wells Fargo could be different, if at all and as part of that, if there is anything just open-ended you would highlight just around expenses with that type of implementation as well.

Yes. So on the seed activation schedule, the one we talked about during the IPO that was the average at the time and so if you look at the enterprise customers that it extends out to that 24-month period and sometimes even beyond 24 months for even larger deals, just depends on negotiations, just how deep we're building out integrations at the customer. And so I wouldn't expect anything majorly different as you look to build the model and try to forecast RPO revenue recognition. And then what was the second part of your question?

The second part was just, if there's anything just to highlight that would be different from an expense perspective with a deal like that.

Yes. We use partners. So I would not expect to see really any increase in cost around a deal like that besides commissions that we pay out but, yes, so we engage partners, partners are deploying that, we put our people in there, a more strategic during the deployment. Just to make sure everything goes as planned, but on the cost side, there is really nothing else besides commissions that you would see an increase around.

Got it, got it. And actually, if I just squeeze one more in. Since you talked about sort of forecasting RPO, I mean it sounds like, I mean, great long-term - great growth in the long-term RPO. I mean is that five-year duration going to be the new normal for new deals? Or is that something that sort of ebb and flow? Any thoughts on sort of that duration as we kind of think about the components of RPO.

I think it varies by market segment, you have community banks. I think our last average was 3.8 years overall on the contracts. You have community banks, you have deals between three and five years, large banks go typically five every now and then you get an outlier with six years, but typically, it's a five-year deal that we drive in these big banks because it's massive transformation, it takes time to do it and you have to get time to complete it, see the success and then we drive cross-sell.

Very helpful. Thanks, guys.

Thank you.

Thank you.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Pierre Naude for closing remarks.

Thank you. We couldn't be more pleased with the achievements of the quarter. Finally, Wells Fargo in addition to our first customer in France, combined with strong sales, all highlight the company's ability to successfully execute on a massive global market opportunity, and we are just getting started. The management promotions announced today position nCino to aggressively pursue this opportunity, with the size and infrastructure of a much larger company, yet still nimble, thanks to the nCino culture. I am energized every day by our incredible people, the success we've achieved and the exciting opportunities that lie ahead. Thank you again for your support and we look forward to speaking with many of you in the coming weeks and months.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.