Earnings Call Transcript - NCNO Q2 2022

Operator, Operator

Thank you for joining us. Welcome to the nCino, Inc. Second Quarter Fiscal 2022 Earnings Conference Call. All participants are currently in listen-only mode. Following the speaker's presentation, we will have a question-and-answer session. Now, I will hand the conference over to our speaker for today, Greg Orenstein. Please proceed.

Greg Orenstein, Speaker

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, entail 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.

Pierre Naude, CEO

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 in 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, compared to a very strong second quarter last year that was driven by PPP revenues. We also achieved 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 investment banking businesses. They said specifically, 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 win 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 will 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 automated 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 further 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 in 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. The promotion of Trisha as 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 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 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 steps to scale 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.

David Rudow, CFO

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 of 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 salespeople 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 a non-GAAP operating loss of $1.6 million in the 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 resulted 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.

Operator, Operator

Thank you. Our first question comes from Brad Sills with Bank of America. Your line is open.

Brad Sills, Analyst

Oh! Great. Thanks guys for taking my questions and congratulations on a real nice quarter. 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?

Pierre Naude, CEO

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 the pandemic behind us; people have adjusted fantastically. I will tell you that 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 are at home or at the office, etc. So I'm not only proud of my company, I'm proud of the industry for 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 driven 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, and I don't see that. So that is pretty fantastic to see the momentum.

Brad Sills, Analyst

It's great to hear. Thanks, Pierre. I have another question regarding international activity. It's clear that you're experiencing positive revenue results, which we recognize as a lagging indicator. You mentioned that due to these significant deals, we will see an increase in the U.S. mix. Could you remind us about your progress in building out international operations? Which countries are gaining real traction, and where are you planning to invest further? Thank you once more.

Pierre Naude, CEO

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, 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 an elegant international business, in some cases, 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, etc.

Josh Glover, President and CRO

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.

Brad Sills, Analyst

Thanks so much, guys.

Pierre Naude, CEO

Thanks, Brad.

Operator, Operator

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

Terry Tillman, Analyst

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

Pierre Naude, CEO

Very unclear.

Terry Tillman, Analyst

Thank you. I'll keep this brief. Congratulations on the record sales quarter and to Josh, Trisha, and everyone on their promotion. That's a great achievement for scaling the business. My first question, Pierre, is related to something Brad mentioned earlier. You indicated that the pipeline remains strong and that there's no noticeable drop-off after the recent momentum. I'm curious about the newer areas in the pipeline that are gaining traction besides your leadership and commercial loans. Are there any developments on the retail side, nIQ, or mortgage that you can share? Anything emerging or incremental since we last spoke?

Pierre Naude, CEO

Yes. Firstly, in the areas I mentioned, our international segment is clearly gaining strong traction in terms of pipeline and interest, which is encouraging. This is due to our mature product offerings, which we manage effectively, mainly targeting small businesses, and as you know, that market has a vast total addressable market. Secondly, we are experiencing significant interest in our nIQ products that incorporate intelligence and automation into our systems. A noteworthy development is that we have started working with an Australian mortgage customer. While this is a smaller client, these new products yield necessary proof points and provide reference customers, marking important victories for our teams. We're also seeing considerable interest in our international mortgage offerings. On the retail side, we're noticing positive momentum. However, our primary focus remains on maintaining our reputation. We are dedicated to ensuring the success of our existing customers, making them referenceable, and then driving volume from there—this is how we approach all new products. We assess customer engagement through a tracker that indicates customers utilizing multiple products, which demonstrates platform adoption. Currently, we are nearing and even exceeding 25% of our customers using multiple products, and I believe this trend holds great promise for the future.

Terry Tillman, Analyst

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.

David Rudow, CFO

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.

Terry Tillman, Analyst

Thanks.

Operator, Operator

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

Clarke Jeffries, Analyst

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?

Pierre Naude, CEO

Yeah. So as I look at it, there are volume deals and then there are 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, etc. 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 have 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.

Clarke Jeffries, Analyst

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

David Rudow, CFO

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.

Operator, Operator

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

Bob Napoli, Analyst

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 U.S.? Is it more or less competitive, it's win rate lower or higher and how do you see that evolving?

Pierre Naude, CEO

No. What I'm observing is that the first step is to achieve success by introducing the cloud to an industry in a region that thinks banking will never adopt it. The positive news is that I witnessed this in 2012 in the U.S., and they claimed that major banks would never embrace it. In 2015 and 2016, we proved them wrong, and now we are doing the same in Europe. The momentum I'm noticing on both the pipeline and revenue growth suggests that we might even have a larger presence internationally than in the U.S. The competitive landscape is different there, with some local companies and a culture that prefers using component-based software, among other things. However, I'm starting to see the same patterns I observed here. I understand that the key difference is that we need to succeed in every country to become a reference and then secure follow-on deals in those markets. This is influenced by cultural and language factors, particularly with the COVID-related border closures. Nevertheless, I'm very proud that we signed a bank on the continent about two quarters ago without meeting them in person or via Zoom, just like we’ve done in the U.S. I believe this bodes well for us.

Bob Napoli, Analyst

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?

Pierre Naude, CEO

So we 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 understands, when we go into international, we focus 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.

Bob Napoli, Analyst

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?

Pierre Naude, CEO

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, etc. 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 a 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 have 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.

Operator, Operator

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

Mayank Tandon, Analyst

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?

Pierre Naude, CEO

The activations typically are 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, etc. 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.

Mayank Tandon, Analyst

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 contributions we could expect for something like that if that were to happen over time?

Pierre Naude, CEO

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 goes down again because I've got a much smaller penetration in those banks, okay. And then I cross-selling and the percentage comes 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 plays out in that game. I mentioned earlier, more than 25% of our customers use multiple products and actually are 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 calling 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.

Mayank Tandon, Analyst

Right. Thank you so much. Appreciate the color.

Operator, Operator

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

Ken Suchoski, Analyst

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 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?

David Rudow, CFO

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.

Pierre Naude, CEO

You know, because of our activation schedules, always realize what we book now has 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, etc., 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.

David Rudow, CFO

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.

Ken Suchoski, Analyst

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?

David Rudow, CFO

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.

Pierre Naude, CEO

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.

Ken Suchoski, Analyst

Okay. All right. Thanks again. Appreciate it.

Pierre Naude, CEO

Thank you.

Operator, Operator

Our next question comes from Alex Sklar with Raymond James. Your line is open.

Alex Sklar, Analyst

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?

Pierre Naude, CEO

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, etc., 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.

Alex Sklar, Analyst

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.

David Rudow, CFO

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.

Alex Sklar, Analyst

Thank you.

Pierre Naude, CEO

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.

Alex Sklar, Analyst

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

Operator, Operator

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

Saket Kalia, Analyst

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.

David Rudow, CFO

Thank you.

Pierre Naude, CEO

Thank you, Saket.

Saket Kalia, Analyst

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 U.S. who aren't already customers?

Pierre Naude, CEO

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 U.S. 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 U.S. 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 of a driver of that global footprint in the larger banks.

Saket Kalia, Analyst

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.

David Rudow, CFO

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?

Saket Kalia, Analyst

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.

David Rudow, CFO

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 more strategically 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.

Saket Kalia, Analyst

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.

Pierre Naude, CEO

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.

Saket Kalia, Analyst

Very helpful. Thanks, guys.

David Rudow, CFO

Thank you.

Pierre Naude, CEO

Thank you.

Operator, Operator

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.

Pierre Naude, CEO

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.

Operator, Operator

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