nCino, Inc. (NCNO) Earnings Call Transcript & Summary

All right. We can get started with the next session. Good morning, and welcome, everyone. My name is Ken Suchoski, and I'm the U.S. payments and fintech analyst at Autonomous Research. We're excited to have nCino here at our 38th Annual Strategic Decisions Conference. We're thrilled to have Pierre Naude and David Rudow joining us today. Pierre is the CEO and Chairman of nCino. He has more than 35 years of experience covering financial technology and played a key role in the founding of nCino. And David is the CFO of nCino. He has 20 years of experience in software investing and investment banking. Pierre, David, welcome. Thanks for coming today.

Thanks for having us.

Thank you.

Yes. And I'd like to thank all the people in the audience for joining us and the people on the webcast. Just one housekeeping item. If -- we're going to do a fireside chat today. So I'll start it off with some questions, and then we'll open it up to the audience. So if you have a question for David or Pierre, feel free to use the Pigeonhole app, and I think there's a QR code that you could scan or just raise your hand and you can ask the question and we'll go from there. So we'll try to weave those in as we go throughout the conversation.

So with that, why don't we get started? It's been a fun following your journey since the IPO. There's probably a few people in the room that are less familiar with the nCino story. So why don't you give a short overview of nCino, and what are the pain points that you're solving for your customers?

All right. Thanks. If you think about banking, the heavy lifting of banking is, how do I onboard a customer, then how do I fulfill anything from a loan or open an account. Those 3 things are actually highly compliant and regulated environments, lots of data and lots of paperwork, and banks have always struggled on doing that efficiently. So you go to a bank and your experience typically is, if you're going to check in and then tomorrow, you come for a car loan or a mortgage, it feels like you're at a different bank because they ask you all the same questions, upload all the same documentation, et cetera. So it really was this mess of siloed applications by the department in a bank. And when we started nCino, there's 2 things that came together. The first one is, the cloud was maturing, and we thought the cloud is ready for banking. And with ironic in the beginning, and literally, I would make speeches and follow bankers, they will say, Pierre, banks will never embrace the cloud. We said, well, that's a massive opportunity. Let's go faster, okay? And the second thing was, could we have a client-centric fulfillment engine so that once they know you, and they understand the 360 view of you, that's why we on force.com, Salesforce's platform. And you're linked to that, can I then make a bank operate like a fintech so that if I'm the CEO of a company and my personal business there, and I provided maybe some collateral from my house that it's all just connected. And so we started on the commercial lending journey and then built the platform out to be a client-centric fulfillment engine for banking on a global basis. And then we were very deliberate in the go-to-market. We started with community banks in the U.S. We then went to large banks in the U.S., which is quite extraordinary because typically software companies build either for the community bank space or for the enterprise space, okay? And then we went up to the big banks, then 2017 international, and then we build the platform out.

Great. And your history actually dates back, I think, 10 years and nCino was built within Live Oak Bank, which I think is a digital-first bank. I don't think they have many branches and [indiscernible] forward thinking. How does the creation within Live Oak make this a unique story? And how does that give you an edge in the market?

Yes, I would say, we used the phrase build by bankers for bankers. The biggest difference from a software company that the approach we took was, we realized from day one we're actually a business process reengineering company. Although we sell software, but we give a highly flexible piece of software so you can improve your business processes over time because in banking, you can go in and be prescriptive and say, you used to do loans this way, let's just change and do it this way because the bank pushes back and my people are trained in a certain way. My risk people will block you. My underwriters will simultaneously use the software and now you never get adoption, okay? So we realized we can get to about a 50% change to get to the optimal efficiency. We call that nearvana, and then over time, we'll tweak you and get you there to actually become the efficient operation you should be. So that whole idea that we have to be a business process reengineering. And so we employed a lot of bankers because you can't set a tech into a bank to say now to make a loan. You send a banker in to tell stories about how inefficient and how under awarding it was to work in banking. You're a paper pusher. You're entering data versus nCino, that is automated, and you can actually focus your time on the client.

Yes, absolutely. And Pierre, can you talk about how the needs of financial institutions have changed over those 10 years?

First of the appreciation that they have to adopt the cloud and technology has increased tenfold. Banks used to automate transaction prices in quite a lot. And if you look back from the '80s, '90s and 2000s, the advent of ADM's point-of-sale, card technology, payments, PayPal and the presence they got on that. So lots of investments went into the payment infrastructure and what they get to be more efficient. But on this business process side, they always bought point solutions. And all of a sudden, your monoline banks, like if you think of Capital One, there's mainly a credit card company, okay? You think of Lending Club came up in small business. So you find these niches where people came and automate transactions and take pieces of bank revenue and bank profits. And so they got under pressure because most banks are, what I would call, a general bank. It's a full-service place. You can do anything of loans, deposit mortgages, et cetera, and they couldn't compete anymore to these monolines institutions, whether it's nonbanks or banks. Look at SoFi, you get many of these. And they had to transform the IT infrastructure, they stack. When we came in, we started replacing between 15 and 20 systems at a time that we rip out, put it on a single platform and connect the ecosystem together.

Okay. Great. And Pierre and David, I guess when we look at your clients, it seems like in the top 25, for every client you have, there's one that you don't have. And so -- and then there's a long list of regional banks, kind of community banks. I was wondering if you could talk about where you're focusing your resources and your sales force when you look at that prospect list? And how do you think about prioritizing certain segments of the market?

So we've got 4 growth drivers that we push every day. The first one is, we are the worldwide leader in commercial loan origination. We've established that. I've got [ 12 ] top 25 banks in the U.S. We've got [ key ] brands in Europe, Barclays and Allied and others there. We've got big ones in France. We've got big names in Australia, Macquire, et cetera. So we've got that market and it's ours to lose. So we want to expand as fast as we can and maintain that leadership. That's one. The second one is international expansion. If you look at the U.S. versus the rest of the world, the SAM is actually big in the rest of the world. So we have to be successful. And we've done that push already, and we're operating right now in 15 countries. So that's the second one. The third one is to expand beyond the commercial piece of the bank because that's about 1/3 of the TAM -- of SAM. It's less than 1/3 into the retail part of the sale. And then we've proven that with small business, some retail business as well. And then finally, once you've got this platform optimized, it's all about intelligence. The future of that platform is create dissemination of AI, machine learning, analytics and data, okay? Our dilemma today is, banks want to jump straight to the analytics piece, but how do you disseminate? How do you get it to the front line. So when you adopt nCino, you first optimize your work streams and then you initiate the intelligence. But those are the 4 growth drivers we've got going.

You kind of mentioned the land-and-expand strategy, which is really interesting high-quality growth because you're going with that existing customer either across business lines or across geographies. And you've mentioned on public calls that you're getting -- you're still getting small pieces of the commercial bank. So one question that we get a lot is, let's just say, you have BofA as a customer, they might have tens of thousands of potential users for commercial lending. Did you have all of those customers on your platform? Or is it a piece of that and you're kind of growing with them from a user perspective?

It varies by institution. But when you talk at the very large ones, we typically have slices offered. You may have C&I lending or you have property lending or something. It's because these banks cannot tackle the whole thing. Some of them do try to do a full transformation. I'll use an example. U.S. Bank, we first entered the small business piece. It's called business banking, which actually sits in the retail side of the house. And then we moved up to the commercial side, okay? So it depends. We've got some regional community banks where we're fully deployed. We've got the whole bank, all right? But that's a much smaller percentage of it. So I would say, as a logo count, you could argue, we've got over 40% of the marketplace in North America wrapped up. But if you look at the SAM and the way it was calculated, it's a much lower number.

Okay. And so the penetration, I guess, within your existing customer base from a seat standpoint, is it like 10%?

It's around 10%. And it's a number that faces itself. So it goes up to 14% through COVID because we mostly cross-sold and didn't really get new logos because everybody was fixated on COVID. Now that the market opened up, that number is back down to 10%. Now you may think that's a bad number. I think it's an awesome number because what it meant is, I want a bunch of logos, our bookings or sales is about 50-50 new business versus new versus cross-sell into existing accounts. But if I get that number down, you know what happens in tough times. You go into your customer base like we've proven with -- through the pandemic. So I've got a 90% opportunity by just selling to existing clients, which is pretty awesome.

Absolutely. So basically, that denominator is increasing...

All the time.

[indiscernible] more customers.

Just you flag them this side, you get more logos. You flag them this side, you cross-sell, okay? You just keep on going on both sides.

Absolutely. I just wanted to touch on the land-and-expand strategy, and I think the example that really stood out to investors was the Wells Fargo opportunity just because that was a bigger bank. And I think Wells is now also leveraging nCino for its consumer and small business banking division. And I think Wells was a customer. I think they came on 6 months prior to that contract expansion. So could you just give us a sense of what really allowed you to expand that relationship and win more business with them?

I'll take this. So originally, as we were working with Wells, we've been working with Wells for years now. We won and lost that deal, won it and then got kicked off by IT. We've been there on and off for the last number of years. So as you're going through the selling process, you actually meet with other teams there. And so once you get that MSA in place, all that work has been done. And then they get to see while you're doing the proof of concept on the commercial side, the small business banking side was there as well. And so then they participated and saw what we were doing and they decided to go along with that journey to give their customers kind of that single experience across the entire platform.

And I guess on that point, I mean we get the outside view of what's happening from a sales perspective, how does it work within a bank -- and maybe it varies by size, but how does that cross-sell work within that bank? I mean are the divisions meeting on a regular basis? Do they see the efficiency in one division and then the other division head comes over and says, "I want that same efficiency, too." How does it actually work within a bank?

It depends on the size of the bank, right? If it's a smaller bank, you're usually working with the CEO, C-level person so they get to experience that entire platform. And the smaller banks, they come to us because of the platform. On the bigger bank side, you'll be successful in commercial or small business, and then others will get wind of it and other groups and then get introduced across the lines, and then we can sell into that, too.

I think it's critical to understand we don't sell to IT. We drag IT along to make sure they understand the benefits they will get and they have to help with integrations, but this is a business sale. We sell to the head of commercial, to the head of small business, to the CFO, the CEO, depending on the size of institution.

That makes sense. I wanted to touch on one area of feedback that we received around the time of the IPO was that some investors think of nCino as more of a point solution. And so I guess what gets you more and more entrenched as more of a full stack type of player? And I guess how is the company thinking about increasing the stickiness of the product? I know the retention rates are obviously really high, but is there any way to increase that stickiness?

Yes. First, you have to look at what we're replacing. The systems we pull out of these banks is 15 to 20 years old. So it's interesting when we were still running as a private company and your VCs has got all kinds of CAC LTV ratios and so on. And I would always have a nice debate about what's the lifetime value, and how long you want to put on it. It looks ridiculous because it's going to be -- we use 7 years, now we're up to 10 years, and you can do whatever number you want. The fact is, these are very sticky systems. It's expensive to [indiscernible] out, but you have to keep on innovating to keep the bank happy and keep them modernized and up to date. In the early days, most of our revenue came from the commercial line of business. So I can understand that investor is skeptical, can you actually build additional solutions on the platform and cross-sell, okay? Subsequently, we've proven that. We've made tremendous inroads with our small business solution. As you heard, we've got U.S. Bank, we've got Wells Fargo and of course, a large number of community banks using our small business solution. We've got a retail lending solution with a large number of customers. We just announced last week, Hancock Whitney, a $36 billion bank, in production fully across the full brand network on nCino retail consumer lending. We've got a deposit and account opening solution. We've got a full digital front end, and we announced those logo once every quarter. It's between 29% and 39% logo growth quarter every quarter year-over-year. So we are now proving out that this client-centric platform is a differentiator and that the company's revenue is being distributed across the platform.

Okay. Dave and Pierre, we had a question come in from the audience about Wells Fargo, and it reads, can you dig into why you were kicked out of the Wells Fargo by the IT department? It's surprising because you would expect this type of solution to be incredibly sticky.

I was there so I can tell you. We had the dinner. We were pretty happy. The business selected us, and I'll -- everyone get the gentleman, the Head of IT sat across the table and as a night goes on at the very end, he just said to us, you guys realize this is not going to happen, and he went straight to the CEO, and he said, we're a boat shop, and this is what we're going to do, and we're going to boat this and they blocked us. And they always would use some excuse. It's always security in the cloud. It's culture. I've got 1,200 people, what am I going to do with them, et cetera. And my rebut would be, look, man, you have to use your internal resource to differentiate yourself, not build commodity software that I've got. I've got on the shelf, I can just deploy this stuff, okay? And it takes time to win those arguments. If you look at Wells Fargo, there was a significant change in management from the top all the way down and the count has changed, okay? If you go to JPMorgan Chase, they may never buy because Jamie believes it's a tech company, okay? I can't argue with the guy, but those cultures takes time to evolve and actually get there, but we're seeing it everywhere. Trust me, some of the most strongest European banks that set in their ways of buying nCino today.

Well, it's not uncommon that we would lose a deal and have to come back. And it's always business line wants us and then IT says, we can build it. No, we can't do that. We've got to build that. And it's just -- it happens multiple times. You don't win it once, you come back and our sales team is tenacious, and they love hearing no because they get them more excited.

We have cases where the head of the business didn't select us and then move to a bank that use nCino and then tell these colleagues don't tell Pierre, I'm here because he'll find me because he told me way back, this is going to happen to me, And we are fun with it. They are all industry. To me, a sign of successes is when your logo is appearing on people's resumes, and they sell themselves based on their nCino experience and deployment experience, and then they get a job at a different bank to go do the same deployment. And you can look at that across the industry now. It's a very common phenomenon.

I would also say, we're mentioned in bank press releases, too, on reasons why they're becoming more efficient, and it's a common. We track it all the time, and it's very common that, that happens.

Yes. No, Absolutely.

Hopefully, maybe one day it will be a verb.

That's a great point. I wanted to touch on retail for a little bit just because it's a big part of the story. It's a big part of the addressable market. Some of the feedback that we received from consultants around the time of the IPO was that it's a competitive market. It's very fragmented on the commercial lending side. nCino really dominates not that much competition. Is that something that you see? And maybe you could talk about what sets your retail offering apart from the competition?

It is a more fragmented market and most people had a system in place. Where in commercial, your community banks typically have nothing. It was spreadsheets and e-mail and word documents, et cetera until you got to about a regional bank size, and they would have an older system that was [indiscernible] and difficult to use. And then your big banks have either in-house system or some piece of a piece of software plus the code. So those markets reacted very different. If you look at retail, most people have a system. So you can have a 20-year-old system that Pfizer required in the '90s, and it's just sending out along with their core software or FIS or Jack Henry. There's some independent players like Meridian Link. But realize all of these systems are 20, 25 years old, okay? It's good software because they're compliant, but it's extremely inefficient, and it's not something you would expose to the end user at all. It's an in-brand system. It takes you about between 3 and 6 hours to make a loan. And then you're heavily concerned about redlining and how you treat the client. So 2 things is happening with us. The first one is the flexibility of the platform, and the second one is the client-centric nature. So we can pre-populate those documentation. We can reuse everything you've done before. So by the time it shows up in your phone, you can click. You just confirm this is me, this is what I'm doing, filling the purchase or the loan purpose and you can do 3 [ docu sign ] it right there. And that kind of experience we don't see anybody coming up for that. So it's your typical thing, build it well enough, show the market the new customer experience and why they have to do it and then selling your strength, which, in our case, is the platform vision of a single lending platform, a client-facing platform, and we're seeing great success. Now I'll be the first one to admit, it was more difficult than I ever could have imagined to build that thing. We get great momentum and then we realize an implementation that there's so much nuance to that because there's regulations and laws literally down to the county and ZIP code level that you have to contemplate, okay? And so that just took longer, but we've got great momentum now, and I feel very good about the product.

And you went live with Hancock Whitney in the quarter on the retail side. Does it feel like you're reaching a tipping point here where you can really start to gain traction with some of these larger banks for retail? Because that's -- that really stood out to us that it was a larger bank and you're starting to push our market here.

Ironically, with that product, it's easier to do a bigger bank because they expect the project to take longer, and there will be a larger number of integrations because they've got a more complex infrastructure, okay? And the dollar amount of the deal is big enough to warrant that level of project. As you go down to your smaller banks, you have to get to a plug-and-play model, which is what takes a bit longer. It's 2 to 3 apps, all your configurations preconfigured, all your integration is pre-done, so you can just come in, plug and play and do testing. And so to get to a real volume model will take us a bit more time, but we feel good now about the compliance, about covering all the products and actually being able to do this in a compliant way.

Right. And the retail opportunity, if I remember correctly, at the time of the IPO, I think it was around $6 billion addressable market. I think on the commercial side, it was a little over $3 billion. You're talking about 2x the addressable market. Can you talk about the appetite to put more resources behind that initiative? What are you doing from a client relationship standpoint and a sales standpoint to go after that market now that, that solution is in a better position to compete?

So we've got the market covered. In your community regional space, you do a relationship model. In other words, a sales rep will have a territory and they cover those banks and they build relationship over the years. When you get to the enterprise level, you have account managers that's dedicated to certain accounts. I mean when you're in a Bank of America, you walk the hallways every day. It's a big place. My partners in their sales force has got multiple people in these accounts and you continue to sell them, okay? So we feel we've got the market covered. All those investments have been made. We've got the specialists behind the sales reps to actually sell this efficiently in place. We've got the product teams in place. I don't think you're going to see us increasing our investment significantly going forward. As a matter of fact, we announced we want to be profitable and cash flow positive next year. We are taking all the necessary actions, especially in the light of the changing sentiment in the market. So we think we're going to be prudent with investment while getting all of these solutions to mature and cover the market.

Great. I wanted to maybe weave in a couple of questions from the audience at this point just because we touched on some of these topics. You mentioned some of the legacy providers, the incumbents that have been around for sometime, and the question reads, can you compare and contrast your competitive position and right to win versus other players like Jack Henry because they do have a competing solution?

Yes. So you have to realize the go-to-market strategy for Pfizer is Jack Henry. It's a full bundle, okay? And they say starting in the core, I'm signing your 7-year contract. By the way, when you open this bundle, a lot of stuff will jump out of there. What they don't tell you is, the only integration that was properly done was in the contract. Then you try to put all these pieces together and really run an end-to-end process, and it's cumbersome. It's old software. Not a single one of those companies are known for innovation. They're known for acquisitions and earnings per share. And they're great companies. They are actually transaction processing companies. If you look at the acquisitions Pfizer and FIS has done in the past few years, it's Worldpay, it's First Data. It's all about payments. okay? When you look at the business process engineering we do, it's modern software. It's cloud-based. It's highly flexible. You can add a product on the fly without calling us. It's a totally different landscape on the fulfillment side. So what we're seeing is, there's actually an industry conference call acquired or be acquired because every bank today sits there, do they want to be an acquirer or to be acquired. And I speak to many CEOs and I would joke with them and said, look, the half of you want to be acquired and the other half is nCino customers because you want to be a growing bank, you want to expand, you believe you're going to run the world, okay? And then afterwards, they'll come to me and they start talking and want to understand why I say that. But that's the reality. You either invest in your stack, modernize the bank and be competitive or you conserve cash, can you spend down and sell the bank. And that's what we're seeing. So the one who is growing backed by VCs and outside investors, we will take that marketplace.

You mentioned being profitable by next fiscal year, which I guess is fiscal year '24.

'24.

Yes. There was a question in the audience about what could you do to accelerate that timeline to profitability? Can you pull that forward? Is that something that you're interested in, something that you've contemplated?

Yes. So in the first quarter, we did moderate hiring, which helps. 80% of our costs are heads. So obviously, that's where you have to start. And so we're taking a look and saying, what do we really need to cover the market and work with our customers and still develop product. And so we're going through and kind of reevaluating our hire plans for the year. We are committed to next year, and I think we'll see continued improvement throughout the year. as we streamline and strategically add investments to those on the cost side. It's -- next year is doable. I know we've gotten questions of, can you do it given your loss? Originally, a $33 million loss at the low end. We improved that to $24 million to $26 million this year, but we can see it. It's modeled out, and we're confident we can do it.

Great. I wanted to switch to international expansion because the international business is growing very quickly. It's a key growth driver for the company, and you made some nice strides recently in different geographies such as Japan, Europe, Australia, et cetera. How does the go-to-market strategy in those countries compare with the U.S.? And what do you see as the greatest opportunities and challenges in terms of your international expansion plans?

The first thing every American should realize that Europe is not a single market. They may tell you that, but let me tell you something. A French has never bought software because the German bought it. okay? So we have learned that lesson over and over, although I knew that intuitively. The fact is, you have to invest in every country you have a presence. Put local people with local dialects or languages in there and actually sell to the locals and that's just how it works. So we used to do everything from London, and I met with a big French bank, and they explained to me that the center of the universe has shifted. So over lunch, which I enjoyed. The fact now is, we have local teams in every country, and you have to get your reference account, you have to get your second account, like the project is successful and then the domino will fall, and that's happening for us and these are major large accounts that we're winning. But I would say that's the biggest difference. I can sell in California and using a Kentucky Bank as a reference. The same doesn't work in Europe. So that was a bit more cumbersome. From a compliance perspective, not that much different than the commercial level because it's not as regulated. Australia and New Zealand, it takes time to get these things the domino has to fall. But a great example is Canada. We went in there in 2017, and man, the first bank was in Montreal. You can imagine we don't speak French, any of us, okay? So we go in there, we sold the bank, and then you have to get to Toronto. Today, we've got 5 of the top 7 with a household name in banking in Canada, okay? And we're going to do the same in New Zealand. It's coming in South Africa. We've got some great brand names signed there. U.K., Ireland is regarded there. France, we're there. Now Italy and Spain. The next year to come is Germany. We've got a bank. So you have to do it like that. It's literally land-to-land -- hand-to-hand combat in every country and get it done.

And on the cost side, we've made the big investments internationally. We've set up subsidiaries. We have payroll. We have people there. Now it's just a matter of seeing the traction in deploying the software, and as we see more of the pipeline build and start closing, then we'll incrementally add heads. So we don't have a big cost investment coming in international. And I think Japan too. Japan is a great market. It's just so different than anywhere else we've sold, right? The SIs actually help run the banks. You have to sell, the SI is involved. We closed 3 deals there so far with 3 different SIs. It's baby steps. It's a much different market, but we're -- Japan is -- I mean just incrementally, it will grow over time, but that could be a great market for us as well.

That's a great point. And as a newer entrant into these markets, I mean how do you really differentiate yourself when you're speaking to these prospects? And I guess the other question we get sometimes is, who do you compete with on the international side?

The banking landscape is quite different. Apart from Germany with 1,500 banks, the less -- it's much more of an enterprise banking landscape. Just if you would cut out 5,000 banks in the U.S. and just leave the top 50, that's what the rest of the world typically looks like. So number one, that's the landscape. We compete mostly with in-house built, a little bit of SAP, but that's kind of an ERP [indiscernible] model. Pega is into all of these banks as a tool that they used to deploy, but it's an in-house both mentality. So we fight the same battle we -- I explained with Wells Fargo. You lose against IT, you lose again against IT. You just keep on coming back. We just signed a 200-plus-year-old bank in the U.K. that we've lost twice and went back, and of course, the in-house both failed. The only difference in the U.K., I talked to the same guy 5 years later. In the U.S., that person will be gone, and I'll talk to somebody else. Apart from that, everything is the same.

It's fascinating. I wanted to leave in one question we received from the audience. Just already continuing on international expansion, the pattern of growth seems somewhat scattered. I assume this also comes with heavy localization expenses. Can you explain the growth pattern?

You have to -- as you enter into a new country, you have to build your brand. Like going into Germany, nobody knows nCino. You have to go there, get local people on site, do conferences, webinars in-persons and kind of build the brand, and then you have to have a few customers that are willing to -- or one customer is willing to take the journey with you. And then you start to deploy the software and as it's getting live, that's when you can start bringing in and saying, hey, here's the proof points. We're actually live up and running, working. They're receiving the value that they thought they would, and then you can sell more from there. So it's really kind of building from the ground up because you think about it, nobody in Germany knows nCino. They're used to SAP. And we originally tried selling from London in there even with German-speaking people. Now that we have people on-site in the regions, knows the local culture, it changes the dynamic. And they know that you're committed, and that's half the problem when you're not there is that how committed are you to the market? We have the same issue in Canada until we put people there. It's the commitment they're going to be there, supporting the software and selling in the future. And then you just have to go country by country and knock it off.

Yes, that's where the IPO helped. I mean, look, these countries have seen so many little American start-ups coming in there and promising the world. And then one day, the year tomorrow, they're gone, and so they're skeptical. The IPO helps. Local hiring helps. Getting a successful bank up and running, get the references and then that's the way you get it.

Okay. Absolutely. And I guess, David, when you kind of run the math and you look out 5 to 7 years, I mean this international business is growing quickly. Is this a business that could be half the revenue, more than half? I mean how are you guys thinking about this?

I think if you look at the way the TAM is laid out, it's -- majority is overseas. And so if we're successful over the next number of years, we will be bigger internationally than in the U.S. The opportune is there is 400 big banks around the world. And how many do we have? 12 of the top 25 in the U.S., a couple internationally. There's a lot of room to grow.

Okay. Maybe we can shift gears and touch on your recent acquisition of SimpleNexus. Maybe you could walk us through the rationale for the deal and what capabilities that brings to nCino?

So the first thing you have to realize is, nCino traditionally is a middle back-office transformation company. We know how to do that. We were good at that, et cetera. The design elements and the skill sets to build a point-of-sale solution that is front-end customer facing, it's a unique skill set. It just is a very different person that you hire for that. And we do it ourselves, and we started organically growing that. But to me, when you come to a highly complex financial journeys like a mortgage, okay, it will take us forever to learn how to do that. And SimpleNexus is a very specialized company that's done that on apps. So they built an Android and Apple as well as websites that's mobile-enabled, and we just like their business model as well as their financial model. So they give us point-of-sale technology. That's number one. Number two, they bring a highly specialized domain expertise around mortgage and then deeply integrated into ICE mortgage, the old Ellie Mae and Black Knight. So they literally are at the front end there and the market leader with independent mortgage bankers. And if you take that along with the nCino brand in banking and our cross-selling ability now, we saw this opportunity that is great for us. So I get a technical knowledge from the people. We get a technology that we have no clue how to do really. I mean we could do mobile websites and so on. And I get a front end, I can deploy across a wider thing, and that thesis is playing out for us. We're very impressed with that people.

Yes, absolutely. And the mortgage market has been impacted by higher interest rates, and I know the revenue model for SimpleNexus is more recurring in nature. It's less transactional, not dependent on mortgage origination volumes, but are you seeing any knock-on effects just given the slowdown at the industry level? That's one question that we get a lot.

Yes. I mean it's -- rates have gone up the fastest, I think, in 50 years. So the good news is, in the quarter, they actually came in line with our expectations, which is great. It's a new business. We're still -- it doesn't have the visibility that we have by any means. There was more participation from the new salespeople that we hired. They increased logos by 80%. Like we're seeing that the market is not completely frozen. If you are an IMB in the space or even a bank, you need this software to differentiate yourself. And so what IMBs are doing now is, they're trying to gain share, right? And how do you gain share? You give the tools that loan officers need to use to build out their network and to sell more loans. We are focused on home originations to new homes. That's much on the refi side. I'm sure we do some. We try to get numbers on that, we just don't -- weren't able to kind of track by loan. But it is a home in new home buying focused because of the whole home buyer and journey from start to finish. So we're actually -- we were conservative with the model. We will remain conservative, understanding the backdrop is the worst we've seen in a couple -- a number of years. But we're seeing that with the market not being frozen that there's still buyers out there, and so relatively speaking, we were pleased with how the performance was in the first quarter.

They grew 60% year-over-year. And if you look at their main competitor is public, I think that differentiates itself.

Yes, Absolutely. It's pretty clear. I think you mentioned IMB, so the Independent Mortgage Banks. I mean so you have independent mortgage banks, you have traditional FIs. What's -- I guess in terms of SimpleNexus' exposure to each of those, if you could talk a little bit about that? And then also, what are you seeing across the performance across both of those channels?

Yes. So IMBs is, I think, 80%. 70%, 80% of the total revenue is total logo count. IMBs are still buying. I mean it was a balance, and we've been cross-selling from day 1. We had a plan in place with the sales force to go in and cross-sell, and the pipeline is building. We closed a couple of cross-sell deals. Some of these will take longer to close so we're happy to see some initial action. But I'd say, the majority of the activity in the first quarter was around IMB, which is a great signal because that market is in a turmoil right now.

Yes. And what's the opportunity to grow SimpleNexus? And maybe you could touch on the synergy opportunity as well. That's another question that we get a lot. How do you bring out those synergies that you've talked about?

So firstly, on the sales side, my lessons in life is just pay both [indiscernible] no competition. Tell my banking sales have just take them in their, use them as a domain expert like use presales normally, and just go sell as once you can. And so we see good traction between me and our President, John Glover., We sent out a whole list of e-mails to our existing customers, and I was pleasantly surprised how many just came back immediate and said, yes, sent them over, I want to see it. It is very timely. I'm looking at this kind of technology. So I think our strength in banking and our brand recognition will drive that cross-sell, okay? From an organization synergistic cost perspective, there's not much because they did so much different business. At the G&A level, we're looking at a little bit of streamlining, et cetera. But apart from that, we're a growth business, and we think the future is all about profitable growth.

Maybe we could switch. We have about 9 to 10 minutes left. I wanted to touch on nIQ for a little bit, nIQ, which is your data and analytics offering. What's the reception been like from clients around that offering? And what type of solutions can we expect from nIQ over the coming years?

The response from customers has been great. We acquired FinSuite out of Australia, it's our auto spreading tool. We replatformed on AWS, and the feedback has been great. About 20% of our bank operating system customers are using nIQ products now, and the majority of that is really auto spreading, right? And the feedback is, we can sell it anywhere in the world, any size bank. The traction is great. It's building, starting from a small base, of course, but we're very pleased with the performance of that. It gives the sales teams a reason to call into a customer and say, hey, we have something new, you want to take a look at it. Commercial pricing and profitability is also new. We're starting at the small bank in the community bank side. We have a handful of customers that are deploying it. We're ready to move up in terms of size of the bank, and that will also, over time, mature and become a product we can sell anywhere in the world. And the beauty of these products is, they're fully integrated into the stack, and so a relationship manager, a bank employee can actually do these analytical products in the tool while they're working with customers and then push your product to push the loan to underwriting to get it approved. It's really -- that's what creates stickiness in the product is, these are things that no other company offers.

So it's not just an ARPU lift, there's also probably a retention aspect to it as well, additional value to the [indiscernible].

I think the other thing is people look at the original SAM that we laid out and said, well, commercial, you're getting there. That's fine. But we're adding products. It's a layer-cake approach, and as we add products to that base, we go and cross-sell it back into it in existing customers. So we're going to expand the commercial SAM through nIQ continuously.

So nIQ was -- I think, it was a $2 billion addressable market. So you think that can move higher potentially as you add product?

Yes. It's about a 20% lift on a customer.

Right. And any sense where that $2 billion can go?

We don't want to talk about -- I think $2 billion is a lot for a small product, but it would require us to develop new products and/or acquire different products that we don't have technically products for it yet.

Right. Okay. And I think you mentioned, so 20%, 25% of the bank operating system clients are using a nIQ, at least one nIQ product today. Where can that number go? And I guess are you seeing banks adopt multiple products? Like when you look at that 2 or more products, are you seeing that number increase as well as that penetration?

Our goal is 100%. I mean every single customer should be able to use auto spreading and commercial pricing and profitability. The great news is, auto spreading actually led new deals with customers internationally even too. And so we sold in auto spreading, which is spreads, and then the customer actually added the commercial line, too. So it's a strong enough product we can lead with it, but we think everybody should buy [ Whitney ].

Right. And how differentiated does that make the offering for the bank when they adopt a solution like that? I guess it helps with probably help us with the employee retention, but it also creates a better experience as well within that bank.

We all fight for top talent, okay? That's just the nature of the business. And you can imagine, if you come from a bank where you use 7 systems and hand calculate this on paper printers and stuff versus you go to a fully integrated stack where everything is automated and you basically confirm and approve. And by the way, behind the engines, it's a bunch of intelligence that tells you, if you're looking at this business, it should compare your book of business this way, and that's how you underwrite your chance of success here and so on. That experience is just massively different. So we think the more integration and the more intelligence we pump into the platform, the more sticky the things, the longer term, it will stay in there, the more competitive will make the bank. And us as a company, then expands inside that bank because you've got a great brand.

We have about 5 minutes left, Pierre and David. I want to touch on the macro a little bit. We've heard from a lot of different banks at our conference, talking about reinvesting back into the business rates have moved higher. There's some macro uncertainty out there. When you talk to your customers on the bank and credit union side, I mean what are you hearing from them in terms of their spending plans as they look out over the next year or 2?

They lend an expensive lesson in '08 to '12 when they stopped investing in the financial crisis. And when they came out on the other side, they couldn't effectively compete because the tax stack got old. And then so what we see now is people remember that. We don't see a single bank tell us that they're not going to do digital transformation. It's kind of just a fact of life, you have to do that. That's one. The second one is, I look at our pipelines and so on. I don't see any impact, and I think it's partly because with rising interest rate, banks make more money. They're going to invest that. That's what we're seeing right now. But we are -- even though with those factors in our favor, we are cautious. We understand that the landscape process companies have changed and the way you guys measure it is different now. I prefer the old way, by the way. It's a lot more fun when somebody says, unlimited capital go as fast as you can, but I think that's gone for the foreseeable future. So we're going to be responsible adults and contain our costs and be a nice growth company that's profitable.

Yes. And we constantly watch and listen, I call salespeople, hey, what are you hearing? We track collections between SimpleNexus and nCino, and we've not seen any slip yet. We're not putting our heads in the sand. Ears are open and we're listening, and we'll be ready to react if something does low.

Great. And just on inflation, inflation is another topic that's being discussed right now. How does nCino perform in an inflationary environment? Do those contracts reset? How would that play out?

We have long-term contracts that where the prices are fixed throughout that period. And then when a customer renews, there's an auto renewal period in there. But normal, what we'll do is go in there and tell the customer, listen, you got this renewal coming. Increase prices on your per seat. Why don't we add seats and expand to another line of business. And so we've been successful in upsiding. We want to grab as many seats and as much share within -- wallet share within a bank as we can, and then over time, continue to sell them products and continue to add value. And I think that's more important than taking a short-term view and saying, let's just add prices because inflation is going up. We have wage inflation like everybody else, but we can contain our costs and meet our targets for next year profitability even with the rising -- with inflation and the wage inflation that we've seen.

Yes. Okay. Great. I wanted to touch on a few questions we got from the audience in the last couple of minutes we have. So I guess the first one is how customized versus standardized are your deployments? How much custom software development are you doing?

All right. So the first thing to realize is we integrate to a number of systems. And those, depending on the bank infrastructure and big banks will be fairly customized and it's really banks it's plug and play because we know that architecture in an environment, okay? I was describing this way. There's a box that we deploy. That's the nCino platform. It's called package. You cannot get inside there. That literally that box goes out. Everything is ours. We will deploy that. There's a lot of open APIs and connection points you can use. And you can write as much codes around the G1, but what's in the box is ours and we upgraded twice a year. Whether you like it or not, we push the upgrade that comes up. So that's a work for the SaaS model. So by the way, Bank of America runs exactly the same code base as by small bank in Texas in a rural area, okay? So that is the magic of SaaS. Then of course, these banks know better so many of them customized with the change of the Rio, the PwC. And they have to maintain that code themselves. We're now at the point of maturity in the market where we've got a gold standard and most banks embrace it, and they understand they made mistakes in the past, but there are some banks who customize.

Okay. See the shock cost winding down here. So just a couple of more quick ones from the audience. Can you talk about how you manage your relationship with Salesforce, which is a very key tech partner to your business?

It's very strategic. This is public knowledge. Their investment arm invested in us early days. They sold most of their shares. I'm happy that they made a lot of money like that, but the flip side, as you know, I was at dinner 2 weeks ago with Bret Taylor and Marc Benioff with 20 other people. It's a strategic relationship. Apart from Veeva, we are the most successful OEM ever building on that platform. I will tell you, the benefits of being part of that, I call it the blue halo, just their influencing the market and the momentum and us coming in and saying, look, I'm on the Salesforce platform. Security is just out of the box. Scale is out of the box. CRM is out of the box, tremendously beneficial.

And just last one, since the clock is at 0 now. How do you prove out the cybersecurity of your cloud-based solutions? And the question just disappeared.

There's not a single bank that has a snowball's hope of spending more on security than Salesforce. If you think of the magnitude of that company, the specialists, they got around it, lots of their stuff runs on AWS. That infrastructure is 10x more secure. In the early days, I visited with a banker and remember, its a small bank and the guy said, I kind of like to see my server in the [indiscernible] closet there. And I said, yes, you think the guy from China can't see it either. I mean so that nonsense is long gone, okay? You look at -- so we have all the credentials. We have -- I mean security books is thick. We have people that used to work for the government that's in our security teams, and we're overcoming. And the biggest banks buy from us. So I think that's a proof point.

Great. All right. I think we'll have to leave it there since we're out of time. Pierre, David, thanks so much for joining us. That was a lot of fun.

Thank you.

Thank you.

And thanks to our audience. Thanks for all the good questions. Enjoy the rest of the conference, and have a good weekend.

We look forward to meet all of you.