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Good day, and thank you for standing by. Welcome to nCino First Quarter Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to introduce your host for today's call, Harrison Masters, Director of Investor Relations and Strategic Finance.

Good afternoon, and welcome to nCino's first quarter fiscal 2024 earnings call. With me on today's call are Pierre Naude, nCino's Chairman and Chief Executive Officer; Greg Orenstein, Chief Financial Officer; and Josh Glover, President and Chief Revenue Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entails certain assumptions made as of today's date, and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, 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, as well as the earnings presentation, on our Investor Relations website at investor.ncino.com. With that, I will now turn the call over to Pierre.

Thank you, Harrison. Good afternoon, and thank you all for joining us today. We are pleased to share the details and accomplishments of our first quarter, including our continued focus on profitable growth, resulting in a 10% non-GAAP operating margin, as well as $29.7 million of free cash flow. Total revenues grew 21% in the quarter, exceeding the top end of our guidance. We also experienced record attendance at our sold-out user conference, nSight, a few weeks ago, with attendees representing 15 countries, 320 financial institutions and 29 sponsoring partners. This year, we moved the conference to Charlotte, North Carolina, to accommodate the over 1,700 attendees from around the globe who came to network with their peers, share best practices, discuss the future of banking and see the latest nCino innovations. Even as we focus on achieving our commitments around profitability and cash flow, we still expect to invest over $100 million in R&D this fiscal year. Innovation is at the heart of nCino's DNA. And at nSight, we highlighted our continued product investment and recent and upcoming innovations centered on 3 key themes: Automation, Experience and Intelligence. Automation is where nCino started 11 years ago, when we began to automate the complex commercial lending process for community and regional banks in the US. With automation, financial institutions benefit from faster product delivery to their customers, increased efficiency in operations and improved accuracy in their systems. Automation continues to be a fundamental part of nCino's product strategy across all product lines, asset classes and regions. In this era of driving efficiency and productivity, we continue to automate processes that allow our customers to get more and more out of their platform investment. Within Experience, we were excited to demonstrate a new consumer front end which integrates the SimpleNexus mobile-first UI to the front end of the nCino bank operating system, further enhancing the consumer lending experience. The third key theme was Intelligence. As a reminder, we launched nIQ, our suite of products utilizing data analytics, machine learning and AI 4 years ago. Our close relationships with our customers helped us recognize early on the critical role data plays in running successful financial institutions. We've been encouraged by the continued growth of our existing nIQ products, automated spreading, commercial pricing and profitability and portfolio analytics. The ability to provide data and insights and drive intelligence to every user at every stage of production across the financial institution is another benefit of our single platform. Today, nCino's unique customer base represents over 50% of C&I lending assets in the U.S., over 86% of all U.S. farm credit association assets, around 38% of all Canadian bank assets and 25% of all U.S. mortgage loans originated last year. Our product road map is unique in that it can leverage the large data set afforded by our broad and diverse customer base to deliver an ever-increasing level of intelligence such as automated reviews and renewals, early warnings, automated credit decisions and pricing for even more loan products as we expand upon our nIQ offerings. Turning back to our first quarter results. As we shared during our last call, Q1 was expected to be a slow sales quarter. However, our pipeline remains healthy, and we are seeing larger deals move through the pipeline. I want to share some feedback with you that we've received from our sales teams in the field and directly from attendees at nSight, representing our different market segments and geographic regions. While all segments recognize the importance of modernization, buying propensity in Q1 differed between these segments. For example, community banks, which we define as those with assets below $10 billion, appear to have been relatively unaffected by liquidity concerns. Regional banks, with assets between $10 billion and $100 billion, have seen slightly more impact, although those without exposure to unsecured deposit concentrations have continued to perform well. It's within the U.S. Enterprise segment, those above $100 billion assets, where we have seen the most impact which caused lengthening sales cycles, particularly with larger sales opportunities. However, the commentary we are hearing from our customers and prospects, paired with significant opportunities in the pipeline, reinforces our belief that this is a short-term situation. Institutions of all sizes are committed to modernization and investing in automation and intelligence. For example, we saw solid growth in EMEA in the first quarter in both bookings and qualified pipeline. We also saw strong traction in APAC. Our geographic diversification is an asset, and is helping to offset the current weakness in the U.S. enterprise market. Another segment of financial services we address is mortgage. While the US mortgage market remains under pressure, we continue to grow market share with two more competitive takeouts in the first quarter. Additionally, the integration of the SimpleNexus team into core nCino is benefiting all aspects of the organization, including driving some of the largest pipeline opportunities in SimpleNexus history, particularly with larger banks and credit unions. The integration of the SimpleNexus and nCino product teams is helping accelerate our future product development effort as well, including the consumer front end I mentioned earlier and other enhancements and integrations across the platform. I couldn't be more proud of their progress. Over my career, I've experienced many volatile market periods and economic cycles. As CEO, my goal is always to focus on execution and controlling what we can control, regardless of short-term headwinds. We went into Q1 knowing that sales, specifically with enterprise customers, would be weak given the market conditions. Yet the opportunities in the pipeline record attendance at nSight and conversations with our customers around the globe reinforces that we are on the right path with the right strategy. From a financial standpoint, we remain firmly committed to executing this strategy with continued profitable growth and achieving the rule of 30 for fiscal '24. Now let me turn the call over to Josh for additional details on our progress in the quarter.

Thanks, Pierre. nSight is an opportunity for us to showcase recent customer success, and nothing makes us prouder than to have satisfied clients joining us onstage to talk about their nCino journey. Representatives from financial institutions across market segments and geographies spoke about how they have partnered with nCino to reengineer processes to deliver a streamlined production and faster decision with less swivel chair between systems. For example, Lisa Frazier, Chief Operating Officer of top Australian small and medium enterprise vendor, Judo Bank, shared how nCino has been a critical part of their journey and growth trajectory. Judo Bank first started with nCino for lending, and from December 2020 to December 2022, they grew their loan book from $2.6 billion to $7.5 billion. Since going live on nCino for retail deposits in November of 2022, Judo Bank has already experienced a 5% increase in application completion rate, a 9-point increase in the bank's Net Promoter Score and an 80% decrease in customer support calls. We demonstrated new product enhancements and features including improved borrower experiences for consumer lending, new integrations and automation for small business lending, strategic partnerships for intelligent consumer credit decisions and automated underwriting, and live demonstrations of SimpleNexus mobile technology being used to expand and augment usage of the nCino bank operating system. Our product portfolio addresses the challenges financial institutions face today such as commercial real estate softening, credit monitoring and interest rate fluctuations by enabling them with intelligence and automation throughout the life cycle of a loan. During nSight, we showed how nCino leverages intelligence to help customers identify the likelihood of default, offer data visualization for tenancy and vacancy within commercial real estate portfolios, provide automated credit decisions, price commercial loans based on the entire customer relationship and automate the review of commercial loans. We also view an evolving regulatory environment as an opportunity to assist our customers with data capture and recording around ESG, fair lending requirements and DoD 1071. The data strategy Pierre mentioned allows us to continue innovating, adding efficiencies and delivering more value to our customers throughout our single platform. The nIQ product road map includes predictive analytics, even more automation, easier compliance and improved monitoring. Turning to the quarter, let's discuss some of the go-live milestones we achieved for customers. We completed a small business Go Live for a top 4 U.S. bank, we helped a top 50 U.S. bank replace their internally developed commercial pricing tool with nCino's commercial pricing and profitability solution, we completed a successful TRID-compliant retail lending implementations with several platform customers, and we achieved a commercial and consumer platform rollout for a $4 billion bank within just 7 months. On the sales front, we penetrated from our diversified market presence as some of the non-U.S. markets were our strongest growth regions. Our team in EMEA had another strong quarter, building on the success they had in the fourth quarter, adding one of the U.K.'s top mortgage lenders as a customer for property lending. This new customer sale was an important validation point for the UK property lending market where we are well positioned to help the largest lenders. The EMEA team also renewed, extended and grew our relationship with the Top 4 U.K. bank and closed an upsell opportunity with a Top 4 French bank to support ESG initiatives. To round out achievements across our target geographies, the team signed an agreement with an existing South African customer for automated spreading. nIQ solutions continued to gain traction in the U.S. as well, where we signed an over $7 billion asset California-based lender for commercial lending, portfolio analytics and automated spreading. In Q1, we also closed expansion deals with two Top 25 U.S. banks for customer portal and additional treasury, onboarding users respectively. Customers have shared that treasury services provide not only important fee revenue but also create stickier deposit relationships as corporate operating accounts are less likely to flow on rate alone. In fact, we believe our single platform vision resonates even better in the current environment as it allows our customers to provide a robust product set that they can fulfill effectively across multiple channels. In the U.S. mortgage industry, we continue to acquire new logos, cross-sell additional products and win customers from our competition as we yet again grow revenues in our mortgage business despite the difficult environment. We're also nearing completion on integration work to connect with more third-party mortgage LOS providers. These integrations will enable us to even more aggressively sell SimpleNexus in the largest financial institutions in the U.S. Our conviction and the opportunity to continue modernizing the financial service industry has never been stronger, and the demand we see is reflected in the strength of our customer success stories and our pipeline. Greg, can you please take us through the financial results?

Thank you, Josh, and thanks, everyone, for joining us this afternoon to review our first quarter fiscal 2024 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. 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. We are pleased with our first quarter results. Total revenues were $113.7 million, an increase of 21% year-over-year. Subscription revenues for the first quarter were $97.3 million, an increase of 23% year-over-year, representing 86% of total revenues. Subscription revenues were in line with the top end of our guidance despite the turbulence in the U.S. enterprise bank and mortgage markets. Professional services revenues were $16.3 million in the quarter, growing 9% year-over-year. We did see project delays and postponements from three enterprise banks in the US distracted by liquidity concerns that negatively impacted professional servicefs revenues by approximately $150,000 in the quarter with a commensurate impact on services margin. We expect these specific project delays and postponements will negatively impact Professional Services revenues by approximately $1.25 million for the full year. We redeployed the nCino personnel assigned to the impacted projects into the community market segment, which appears to have been largely unaffected by deposit flows, and continue seeing success with our managed services practice, both of which we expect will help mitigate the impact to Professional Services gross margin for the year. Non-U.S. revenues were $19.2 million or 17% of total revenues in the first quarter, up 35% year-over-year or 43% in constant currency. The APAC region contributed strong sequential growth and more than doubled year-over-year, with the increase primarily attributable to subscription revenues. We continue to expect revenues from outside the U.S. to remain accretive to growth, primarily on the Subscription revenues line. Non-GAAP gross profit for the first quarter of fiscal '24 was $73.8 million, an increase of 22% year-over-year. Non-GAAP gross margin was 65% compared to 64% in the first quarter of fiscal '23. Our gross margin improvement in the quarter was largely due to a year-over-year improvement in customer support margins and from subscription revenues being a larger contributor to total revenues. Non-GAAP operating income for the first quarter of fiscal '24 was $10.9 million compared with a loss of $3.7 million in the first quarter of fiscal '23. Our non-GAAP operating margin for the first quarter was positive 10% compared with negative 4% in the first quarter of fiscal '23. We continue to focus on profitable growth and operating efficiencies, leading to a balanced outperformance against expense budgets and a record quarter on the bottom line. Additionally, although we are no longer breaking out SimpleNexus, we have received questions about their impact on our bottom line and wanted to note that we expect Simple Nexus, which you will increasingly hear us refer to as our U.S. mortgage business, to generate non-GAAP operating income and contribute positive free cash flow for fiscal '24. Despite the ongoing challenges in the mortgage market, particularly with independent mortgage banks, the SimpleNexus business continues to perform well and take market share. Non-GAAP net income attributable to nCino for the first quarter of fiscal '24 was $8 million or $0.07 per diluted share compared to a loss of $6.1 million or negative $0.06 per basic and diluted share in the first quarter of fiscal '23. Our remaining performance obligation, or RPO, was $914 million as of April 30, 2023, up 1% from $905.6 million as of April 30, 2022, with $622.6 million in the less than 24 months category, up 10% from $567.3 million as of April 30, 2022. FX contributed an approximately 0.5% headwind to total RPO year-over-year. As I noted on last quarter's call, we expected delays in closing deals in the first quarter in light of the liquidity issues in the US. bank market, and as such, the sequential decline in RPO was expected based on our internal models. Though, as a reminder, we do not drive the business to RPO or current RPO targets. Contract durations for RPO additions in the quarter were healthy and existing customers, including renewals, accounted for just over 80% of the gross additions to RPO in the quarter. Churn in the quarter of annualized subscription revenues was $8.6 million related to prior year M&A activity, independent mortgage banks downsizing or going out of business and the expiration of some PPP agreements, as I referenced on last quarter's earnings call. This amount of churn was in line with overall expectations, but from a timing standpoint, some of the independent mortgage bank churn occurred sooner than anticipated, which will negatively impact our second quarter and full year subscription revenues. We expect our churn rate to remain elevated in the second quarter but still be in line with our 6% assumption for the full year. We continue to believe that churn rates will return to more historical norms of 2% to 3% in future years. We ended the quarter with cash and cash equivalents of $103.5 million, including restricted cash, and following the payment of $15 million on our credit line, which now has $15 million outstanding. Net cash provided by operating activities was $31.3 million compared to $1.2 million in the first quarter of fiscal 2023. Capital expenditures were $1.6 million in the quarter, resulting in a record quarter of $29.7 million in free cash flow for the first quarter of fiscal '24. Moving on to guidance. For the second quarter, we expect total revenues of $114 million to $115.5 million, with subscription revenues of $97.5 million to $98.5 million. The subscription revenues guidance includes an approximately 2% revenue headwind from the impact of the churn noted above. Non-GAAP operating income is expected to be approximately $8 million to $9.5 million and non-GAAP net income attributable to nCino per share to be $0.06 to $0.08 for the second quarter. This is based upon a weighted average of approximately 114.5 million diluted shares outstanding. As you heard from Josh and Pierre, we hosted our user conference in May, so sales and marketing expenses will be seasonally higher in the second quarter, which will negatively impact our bottom line performance. For fiscal year '24, we expect total revenues to be $474 million to $478.5 million, with subscription revenues of $405 million to $409 million. The full year total revenue guidance takes the $1.25 million of project delays and postponements and the churn I previously mentioned into account, and assumes the majority of churn in fiscal '24 occurs in the first half of the year, primarily from independent mortgage banks. Given this assumption, we expect revenue growth rates to stabilize in the second half of the year. We expect non-GAAP operating income for fiscal '24 to be $48 million to $52.5 million. Non-GAAP net income attributable to nCino per share is expected to be $0.37 to $0.40 based upon a weighted average of approximately 115 million diluted shares outstanding. We expect to see operating leverage continue to improve in the second half of the year. We remain confident in the opportunities in front of us and focused on continuing to execute on our profitable growth strategy, which includes achieving our Rule of 30 target for fiscal year '24. With that, I'll open the line-up for questions.

[Operator Instructions] And our first question comes from Charles Nabhan from Stephens.

I wanted to get a little more detail around the [indiscernible] delayed implementations and specifically around your expectations for those deals, whether you see them transpiring at some point during the year or next year? And maybe some comments around the root causes of those delays would be helpful as well.

Yes. Let me first -- thanks for your question. Let me first give you this assurance. Those delays in projects did not impact activation schedules of seats in any way, shape or form as per our contracts, and as we have explained for your modeling before. Maybe, Josh or Greg can give more details on the project itself?

Yes. And so again, from time to time, projects are delayed. That's not completely uncommon, as Pierre noted. Projects, in general, are not connected to activation dates so that's not part of the equation here. And we work with our customers through those. These three enterprise banks, you could appreciate were impacted by the liquidity issues that took place in Q1. And ultimately, as they add things to prioritize and focus on the delayed or postponed projects that we were working on, we'll continue to work with those customers and hopefully reengage with them as the year progresses. And again, they're able to turn their attention back to what we were working on with them.

Got it. And just as a quick follow-up, I was hoping to get your comments around the mortgage business. I think some of the churn within -- among independent mortgage brokers has been widely publicized. But I was hoping you could comment on the health of your remaining customer base, specifically in terms of whether they've sort of rightsized their head count at this point, and more align their cost structure with environment?

It appears to us from commentary and interaction with our clients that that customer base is stabilized, and the companies who wanted to close down or decided to cut back on resources have done so. That's what it appears like at this stage. We are feeling very optimistic versus if you can realize our business has been growing year-over-year, quarter-over-quarter in that business. And what we're doing now is focus heavily on banking as well, which is a more stable mortgage base. And as you can imagine, with the current turmoil in the mortgage market and the competitors, we're seeing a fantastic opportunity, and we're pursuing those deals as aggressive as we can.

Yes. Charles, ultimately, I think we end up with a smaller number of larger, more well-capitalized IMBs, and I think that will be a good base to grow from as the dust settles. And again, in parallel, focus on expanding in the banking credit union market which we've had success just in the year that we've had SimpleNexus as part of the nCino family.

fOperator Instructions] And our next question comes from Nick Altmann from Scotiabank.

Awesome. Pierre, you talked about how some of these larger deals in the pipeline remain intact, but you also kind of called out the Enterprise segment as being a little bit more challenged and maybe seeing a little bit incremental weakness in the quarter. So I guess my first question is just, what are sort of these larger enterprise-level financial institutions telling you from a buying propensity perspective? Are they telling you sort of wait for the second half? Is it initiatives are just shelved in the interim? Just sort of any incremental color you can kind of provide for us around what the customers are exactly telling you about getting some of these larger initiatives across the line.

Yes. Thanks. I realize that liquidity issues and the pace at which it happens, if you look at Silicon Valley Bank that in 10 hours, the deposits were drained, that was a shock to the system that is unknown to most management teams currently in their seats. So you clearly got this shock effect, and then people started looking at their own balance sheets and wanted to make sure that they've got the right allocations and the right liquidity as needed. That shock effect, I would say, is largely over now. Banks feel confident that they can proceed with the right liquidity levels they need right now, so we see people moving away from paying attention to that back to more strategic elements. The early indications are that in second quarter, we begin to see deals coming loose and is moving down the pipelines again. The people are meeting with us. They're willing to see us on site. And as you know, just from inside, they're willing to travel and come see us. So we feel that the worst is behind us and we will see a slight improvement in second quarter and then a pickup in third and fourth quarter. But that's the commentary we get. We also see that already in Europe. We believe Europe is ahead of the U.S. on more of a positive approach, buying approach, so I feel optimistic for the rest of the year.

Great. And then just as a follow-up and going off that comment, understand the bookings and revenue ramp dynamics that you guys have in the model. But can you maybe and maybe not provide a growth framework for next year, but just understanding there's sort of this lag of when you book a deal to when the revenue is sort of ramped, and you guys recognize it? If some of these larger deals sort of come in into 3Q and 4Q, will that not necessarily be recognized in the revenue next year? And if that's the case, what are you guys sort of doing in the interim? or what are sort of the remedies to sort of protect revenue growth next year as you think about some of these larger deals that have multiyear ramps are a little bit more challenged? Is it upselling back into the installed base? Is it nIQ? Just sort of any incremental color you can give around how you're thinking about revenue growth for next year given the bookings dynamics for this year?

Yes. I'm going to let Greg comment on the specific mechanics and how the rev rec works and then how we see next year. We're not going to comment specifics on next year, but I just want to remind people on the call about the models and how they work for this year. When you have a slow Q1, some of that revenue should fall into this year, in Q2. What happens after July has minimal effect of this year. There are some products that's a quick turn on. But that's why what you're seeing us is making sure that we've got this year, the credibility and the visibility to you exactly what we see is happening right now. As we look at the deals in the pipe, that's going to come later in Q2 and then Q3 and Q4. That's what's actually going to impact next year, and the pipe looks healthy. We feel optimistic. We're having great conversations on a global basis. And Greg, why don't you go into a little bit more into how that schedule works and what you could see?

Yes. No, I think you hit it, Pierre, in terms of -- as it relates to things being a little bit more back-end loaded this year, Nick. It really is an impact to fiscal '24 versus fiscal '25. And so as we talk about the pipe that we see, the opportunities that we see and how that plays out in the rest of the year, again, we think that without getting into fiscal '25, we think that's helpful for fiscal '25. And in the meantime, I think Pierre also noted, we do have a portion of our revenue base which is much quicker from an activation standpoint. So when you think about our SimpleNexus offering and when you think about our nIQ offerings, those turn-ons are much quicker than the historic bank operating system activation schedule.

[Operator Instructions] And our next question comes from Terry Tillman from Truist Securities. Q - Terry Tillman Maybe the first question for Pierre or Josh is just on the international side. It seems like that's kind of definitely a glass half full situation right now. There's relative strength. What's the confidence level of that activity continuing from 2Q through the rest of the year? And is it new logos? Or is it just the expanding portfolio of products and just activations with existing customers? Just trying to understand how much we can hang our hat on international holding in there the rest of the year and then I have a follow-up.

Yes. Good to speak with you, Terry, and thanks for the question. We are really proud of how our Europe team did in the first quarter. We spoke about that. That was a bright spot for us. Signing that property lender, obviously, is an indication of the retail story there as well as the team's ability to execute. If you were at nSight, Terry, you would have seen a total of 15 countries represented in this environment for folks to make that trip as a good validation. So we're absolutely seeing momentum with greenfield accounts as referenced there. You saw a South African account adopt auto spreading this quarter. So we're continuing to tell the story on both the new accounts, and existing accounts are seeing the benefit. Things like our ESG module where we had an account in France adopt us for ESG. So we're proud of that. We'll keep telling the story. That team has done a nice job. They had a tough start last year, if you remember our commentary, but we're seeing green shoots there and pleased with their progress.

Yes. And just one more thing to add, Josh, is that the property lending opportunity was a net new customer for nCino. We're excited for that offering. Q - Terry Tillman That's good to know. Yes. We wish you all have one of these conferences every quarter, although I guess it would add to sales and marketing. We talked to over 20 customers. It was a great event. nIQ, in particular stood out, so no. It was a great exposure for us. So thanks for the invitation there. The one follow-up question for you, Greg, just relates to just optically, the second half of the year, there's even more operating leverage. So that's important, and we get that, and that's great. But with the RPO and the 24-month RPO, is that something that could erode a little bit more into 2Q and then it starts also to get better in the second half? Just kind of help us with how we should think about that into 2Q.

Terrell to make sure I follow. You're talking about RPO? Or are you're talking about expense leverage? I just lost you for a second. Q - Terry Tillman Yes, I had a preamble. The preamble was like operating leverage gets even stronger in the second half of the year, and that's great. What about the RPO and then the 24-month RPO in the near term? I mean it's kind of sluggish in the first quarter. Are there optics or just comparables that will start to improve with that in 2Q? Or could that still be kind of challenged in the near term in relationship to what is clear cut second half strength in operating leverage?

Yes, got you. Got you. Yes. Q1 RPO is seasonally slow. We've actually had RPO down I think 3x sequentially since being public, so it's not unusual for us. And again, we tried to preview this when we were on our last call. And as I said in my prepared remarks, this is really in line with our kind of internal guides, and so we do expect that to improve as the year progresses. And again, as we look at the pipes, as we look at the conversations that we're having with our customers and as we look at the activity, I think we, again, expect that to improve. But nothing is out of line with what we said to you back in the end of March.

[Operator Instructions] And our next question comes from James Faucette from Morgan Stanley.

Great. I wanted to follow up on a couple of quick things. I guess the first is like when we look at some of the bank closures, it seems like there might be a potential in as much as 3% headwind on revenue there. But the timing and the way that they're being just taken care of is a little bit uncertain. So how should we be thinking about when you should have a good idea of what that ultimate revenue you had mentioned should be?

We cannot comment on specific customer contracts or what we see there. We've got a history of success in laddering up in M&A deals. We know the companies who acquired these, our teams are working them all. And all of that risk is built into our forecast and our guidance. So I feel pretty good about what we see from there. Josh, anything you want to add?

Now all those situations are different. Our focus is to continue supporting those accounts as best we can. We feel that's the right thing to do. It's also what positions us best for the future. That's where our focus is now.

Got it. Got it. Okay. That's helpful, especially the commentary around how you incorporated that. And then I wanted to just touch on quickly cash flow, saw a real shift there. I want to make sure I understand what's happening especially on the accounts receivable line? And how should we think about that and the cash flow dynamics generally? Is there something atypical that maybe happened near term? I just want to make sure we're calibrating ourselves correctly on a go-forward basis.

Yes. From a cash flow perspective, Q1 and Q2 are seasonally our highest cash flow quarters, It's been that way. But again, I think as you've seen us shift more towards profitability, we would expect that as we commented last quarter from a year perspective, we'd expect you to see that throughout the year. And so we're proud of the non-GAAP operating income and the cash flow that we generated. And I think from an operational perspective, there's additional opportunity to build that as the year progresses and we go into next year.

[Operator Instructions] And our next question comes from Robert Napoli with William Blair.

I was hoping to get maybe some update on nIQ, which products are really resonating there? And kind of -- if you can give some color on the growth rate of nIQ? And just what you feel the long-term opportunity is for nIQ from a TAM or revenue perspective?

Absolutely. We're proud of what we're doing there. We sit today with about 30% of bank operating system accounts leveraging nIQ. We spoke earlier in our Q&A about a South African account that adopted us for auto spreading. We're really proud to have a Top 50 bank in the U.S. live on pricing and profitability, and doing extremely well. Those are discerning accounts. Once you get to that size, it's a great validation point for us. But if you pull back to what we provide these customers, by getting the full value chain of front, middle, back office on one platform, taking the inefficiencies out of the process, streamlining from end to end, how they take care of their customers, that gives us a great landing space to come back and inject intelligence. So it's evidenced by what we've discussed with auto spreading, that's evidenced by the customers that we've discussed that are on pricing and profitability. There are a myriad of other opportunities to go back and further optimize that process. So we're pleased with that. If you're at nSight, you would have heard us really focus on the theme of intelligence, and that's timely and it's much need at the industry, and we'll continue going hard there.

Any additional metrics on growth rate or size of the business, and the long-term potential for the size of that, of nIQ?

Yes. Currently, the TAM we've got out there is about a 20% lift on the current base, and we've made that public as we start building that out. Obviously, over time, we believe there's opportunity to expand pricing on that as those products mature, number one. And number two, a lot of opportunity to add products. Remember, as I mentioned in my prepared remarks, the amount of data that we have around the industry that banks are willing to share with us is tremendous, and they are working with us on use cases as well where we can build more nIQ products. So I'm very optimistic about that.

Then a follow-up on just the investment in -- you've done -- I appreciate the operating profitability. It's great to see that. Obviously, the challenge is as you have flat investment in sales and marketing year-over-year, how do you keep the growth engine rolling? So how have you been able to -- obviously, it seems like you had some nice wins in the quarter. But how do you adjust to take from the very high growth in sales and marketing to having that flatten out, but still looking to have the growth momentum for next year and the next several years?

Yes. And that compare -- when you look at it, it does include some periods where we made structural investments in new markets, and it takes a while given the complexity of what we do in the sales cycle that we navigate to mature those bets and continue to optimize that. So we're pleased with where we sit. As of now, we see a total of 16 cross-sales of SimpleNexus that we've done into the nCino customer base. When I look at the growth of pipeline of large financial institutions with SimpleNexus, it shows that that market coverage is helping. Look, we continue to throttle it. But as we've delivered on our commitment for our profitable growth framework, we are not sacrificing market coverage because we believe in the long term, and we'll continue to put the people on the field that we need to tell the story.

Yes. And to that point, if you look year-over-year, sales and marketing, again, relatively flat. We talked about some of the actions that we took where that was the least impacted part of the organization versus, for example, G&A. And so we want to make sure we have the right investments in place. We have the SAM covered and that we are making sure from a growth standpoint, we are executing as well as we can.

[Operator Instructions] And our next question comes from Kenneth Suchoski from Autonomous Research.

If I do the math right, it looks like you're forecasting a subscription revenue growth of, I think it's around 16% or so in fiscal 2Q and in the second half of the year. So I guess, is this the new normal for the next handful of quarters just given where the RPO growth is at the moment? And I guess, is the expectation to get back to that kind of 20% plus type of growth next year?

Yes. Ken, thanks for the question. We'll, from a quarter standpoint, we'll focus on the Q2. But ultimately, the churn specifically that we noted in the headwind really impacts Q2. That was really the comment that we tried to make in terms of revenue stabilizing from a growth standpoint in the second half of the year. And so we would really view Q2 as the low point, and again, driven significantly by the churn that happened, which the good news is that we're getting it behind us as the year progresses in the first half of the year. So I think that's how we respond to that question as you think about the full year.

Okay. All right. Great. And then you mentioned the Rule of 30, and it looks like the non-GAAP operating income guide and the margin guide is up slightly versus the old guide and so you're implying, kind of better margins versus prior. So where is the outperformance coming from on the margin side? And then maybe you could just give us an update on your appetite to reinvest versus kind of letting the margins drift higher just because we are seeing a little bit of a slowdown in this macro environment?

Yes. Again, you'll see leverage across all of our operating expense lines. I think as we've consistently stated, we are going to continue on the side of growth, and so that remains our focus. And so again, we've been operating the business. We see continued leverage, as I noted in my remarks, in the second half of the year from an expense standpoint, but we're going to continue to focus on growth. And so yes, we are willing to reinvest as we see opportunities to grow in this market.

Yes. I just want to add something to that. To me, it was extraordinary about the culture of the company and how people, the employees are pulling together on this path of profitable growth. In our engineering teams, we have moved from two releases annually to much more of a cadence of monthly releases that's available to customers. They have to take it every six months. And if you look at how they embrace that, the productivity improvements and the pace of development that we see now versus the past tells you that when you shift your focus on pure growth to profitable growth and people begin to recognize the impact of value to customers in the short term and how that could help the company, that was extraordinary. So everywhere we look in the company, we have examples like that, that has driven efficiency, which was not your main focus on your pure growth. So we feel very good about our prospects for continued leverage on the cost line.

Without impacting growth.

Yes.

[Operator Instructions] And we have Adam [ph] from Bank of America.

A quick clarifying one. So the $1.25 million lower cost services revenue for this year, can we kind of concretely take that to mean that these three deals implementations have been delayed into the next fiscal year?

For purposes of guidance, that's what we are assuming. So we'll work with those customers on that in their time lines as they are able to focus back on projects versus other priority items, but that's what we're assuming from a guidance perspective.

And then on the commentary for the U.S. mortgage business, I guess, SimpleNexus sounds great. And I wanted to get your thoughts on what specifically about that product do you think is kind of helping to drive the market share gains even in such a tough environment?

Look, SimpleNexus has built a fantastic product that has been really well received by the customer base. I was excited at nSight to see a customer who is one of our early adopters of the integration of the front end of SimpleNexus to make an operating system. They got live in 60 days. They've been extremely successful, and we are proud of that. The first reason that we believe they are continuing to gain market share in this environment is they have the most intuitive and well-adopted mortgage solution in the market. We think that team and the culture and the way they focus on their customers also shines through. And nCino's corporate stability and overall continued good execution is another strong point for folks who are paying attention to that with their software vendors.

Yes. Then if you look at us expanding the front end to include other retail and small business products, that was very, very well received at our conference, and we saw a lot of interest in people standardizing their customer experience onto a single platform. That also opens up our core platform with APIs, because we use exactly the same APIs for that front-end integration from SimpleNexus to the back end, and that's going to be exposed to our larger customers to access core nCino through those APIs. So that whole development has been very positive, and that's also driving demand for SimpleNexus because they can see they can do mortgage today. And then by the end of the year, they can start migrating some retail functions over as well.

[Operator Instructions] And our next question comes from Jackson Ader from SVB MoffetNathanson.

Great. So the first one is, do you expect that this -- the lengthening of kind of deal cycles will lead to a catch-up maybe later in 2024? Or are you thinking, okay, this is just shifting things out?

No, there clearly is a point where it may accelerate bookings and concentrate that in a quarter or two as people start catching their breath and catching up. So what we are seeing right now is people are trying to get over a temporary slowdown, make sure that their house is in order and then we begin to see an acceleration of deals. That's what we see in movement in the pipe and the commentary from salespeople as well as the banks, and so we are pursuing those deals as aggressive as we can.

Okay. All right. Great. And then are there just -- on the SimpleNexus side in the independent mortgage brokers, are there others that you see -- like if we get -- I'm not saying it happens, but let's just say we have a pause in rate hikes and then a couple more come, and so we actually see maybe more independent brokers scale back or go out of business if rates go up. Is any of that factored into that third quarter, fourth quarter stabilization in the mortgage market?

We've considered the possibility of a further rate hike and what impact that may have -- sorry. Our forecast today look at the full marketplace, international as well as local mortgage as well as our core nCino in the U.S., we considered all of those. Obviously, I cannot foresee an incident like what we have with liquidity issues in banks. If that happens, that's outside of what I can forecast because that's truly a crisis. . From all the commentary both by our customers as well as general market commentary, what I'm seeing is that the financial markets have stabilized, and we feel good. We also feel that the -- in the mortgage business, the people who wanted to leave the business have gone, and that market is now concentrating on a few bigger players. And we feel good about our positioning there. And then if you look at the vendors in our space, we feel very good about our financial stability, the quality of our product and the speed that we can implement in, so we actually see this whole situation as an opportunity.

[Operator Instructions] And our next question comes from Mayank Tandon from Needham & Company.

Great. This is actually [indiscernible] on for Mayank today. Just one quick one for me. You guys spoke a little bit about some of the success you had cross-selling, but could you guys dive a little deeper into how cross-selling was this past quarter? And then maybe specifically talk about that in terms of SimpleNexus?

So absolutely. As we discussed, we talked about an add-on of that mix solution in South Africa, that CPP or pricing and profitability opportunity that we spoke about, the Top 50 account that was also an add-on that went live. So the composition is going to be split between those nIQ solutions for mature customers. Then we're also continuing to go where we can and take things like SimpleNexus or retail lending into those accounts. So pleased with the progress. I think part of why we've been able to see deal size for SimpleNexus increase has been the stability of the bank mortgage market. We're proud to say that SimpleNexus' average deal size is up 35% year-over-year. That's a combination of good execution and market leadership and also, we believe opening up a new market, the bank and credit union side.

[Operator Instructions] And our next question comes from Alex Sklar from Raymond James.

This is [indiscernible] on for Alex. I just have one quick question. Pierre, at nSight, you talked about how banks would try and leverage deeper, whole customer relationships with customers, including treasury as a means of preventing deposit flights. How are [indiscernible] coming out of the conference?

Yes. Thank you. We exceedingly see banks understanding the value of the single platform and having a 360 view of the customer and actually drive a total business value to them as opposed to be product focused, okay, or silo focused. And I can tell you, as our products are maturing and -- we've got now over 80 retail lending customers using our product, okay? As that retail side is coming up, and our treasury logos is up 28% year-over-year. This whole notion that you can have a platform that is client focused with multiple products and you can actually center your attention to that customer and customer profitability with our tools and nIQ, et cetera, is really resonating because otherwise, your deposit flow goes to the 4 big banks, and they have to find a way to embrace the consumer, the retail customer, get those deposits in the banks because those are your $1,300 to $2,000 deposit accounts, and they don't flee for rates. And so that message was very well received, and it was interesting how many bankers came to me and commented on the fact that they didn't make this deposit loan connection from the consumer and appreciated those insights. And so we are feeling good about our strategic direction and the products we're building, and I think the banking sector is getting it.

I think what we've really seen, to add to that and then further to the cross-sell question from the prior question, is just a revisiting of the basics that to maintain those organic deposits, make them sticky, these banks want to fulfill a broad set of really nice products. They want to fulfill them very well across multiple channels. So when you look at expansion deals we had this quarter with top 25 banks, even in this environment, one of them adding our treasury solution, one of them adding portal. It aligns to that thesis.

[Operator Instructions] And our next question comes from Josh Beck from KeyBanc.

Yes. I wanted to ask you a little bit about some of the larger enterprise banks. I think you cited there were three of them with delays. Just when you kind of double-click on really some of the color that they gave, just if there were any consistencies and certainly also how they're thinking about the reengagement of certainly implementation? Just anything that's set out there would be great.

We see the market very focused on the expense line. And even if they are not totally taking out a project, they may want to look more closely at the resources they have on the project and try to run with the lighter team. So I think all those institutions have been watching the macro and are trying to be as efficient where they can spend and thoughtful with new investments. So, that's the high-level theme. I've not had banks say we don't think it's important to modernize. I've not had banks say that they don't need to digitize. But they have the CFOs too who look at expense lines, and they try to be thoughtful about this macro reality.

Yes. And Josh, I think specifically with those, I would note, again, from a timing standpoint, I think prioritization and addressing the liquidity matters that were going on played a large part in them focusing elsewhere for the near term.

Makes sense. And then, yes, I'm also curious, just -- I think one of the messages from certainly probably a lot of those similar banks that really the enterprise category is this attitude towards tightening as we go into the second half of the year, it's the calendar year. So I'm just kind of curious, like historically, are there any correlations that you've observed on the tightening within banks? And then a little bit related, just in terms of some of your deposit products, is that something really -- maybe this creates opportunity as banks become a little bit more focused on garnering deposits? Just curious if there's anything there to highlight as well.

Yes. Look, if you look at the cycles, the last time your liquidity crisis like this or raising rates was in the early '80s. But unfortunately, none of these bank managers was actually in senior enough positions to understand what was going on at the time. So as you look overall, what I would say is when we started the company in 2012, we hit the market at the right time because people realized you cannot stop modernizing because you fall behind. Some of the big companies have there's billions of dollars in IT budgets and they keep on investing, okay? And so your mid- to lower end markets struggle to catch up with technology investments. So I don't think this is going to be a long-term slowdown of spend. As a matter of fact, there's a number of studies out that says banks says no, we're going to keep on spending. You happen to stumble across the two, three, four that clearly had to address liquidity issues and they just had to focus on saving the bank. That is very different than something that's systemic across the industry. So what my view is that spending will continue, it will actually accelerate towards the second half of the year, and banks will continue to do this. Realize this. In these rate environments, the net interest margin squeeze is very tight on them. That lowers their income. The only lever left is actually operational efficiency. So you could look at their efficiency ratios, and if you look at the commentary that we get back from our surveys from our banks, nCino drives them to a much higher efficiency ratio, also a higher close rate on loans, and that's what they need. So overall, I think we will just come back in the second half of the year and continue on as always. It just takes a while to get there.

And I am showing no further questions. I would now like to turn the call back over to Pierre Naude, Chairman and Chief Executive Officer, for closing remarks.

Well, thank you all for joining us. Thanks to our shareholders for their support and our employees for the innovation, and I look forward to speak to you more at a later date. Thank you so much.