Thank you for standing by, and welcome to nCino, Inc.'s Third Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's program may be recorded. .

I would now like to introduce your host for today's program, Harrison Masters, from nCino's Investor Relations. Please go ahead. .

Good afternoon, and welcome to nCino's Third Quarter Fiscal 2022 Earnings Call for the quarter ended October 31, 2021. With me on today's call are Pierre Naude, nCino's Chief Executive Officer; David Rudow, Chief Financial Officer; Josh Glover, President and Chief Revenue Officer; and Greg Orenstein, Chief Corporate Development and Strategy Officer. .

During the course of this conference call, we may make forward-looking statements regarding trends, strategies and the anticipated performance of our business, including without limitation, the proposed transaction between nCino and SimpleNexus.

These forward-looking statements are based on management's current views and expectations and entail 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, including those related to the impacts of COVID-19 on our business, the financial services industry and global economic conditions.

nCino disclaims any obligation to update or revise any forward-looking statements. .

Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. .

With that, thank you for joining us, and I will now turn it over to Pierre. .

Thanks, Harrison. Good afternoon, and thank you all for joining us today. The third quarter was another strong quarter with impressive financial results, highlighted by 32% growth in subscription revenues.

Compared to the third quarter of last year, which, as you may recall, was also a very strong quarter as it included catch-up revenues related to the PPP consortium that utilized our software to process PPP loans. .

We also achieved strong sales wins this quarter, including adding new logos across multiple markets and signing several significant expansion deals with existing customers. .

Before Josh walks you through the sum of the sales and operational accomplishments of the third quarter, I want to take a few minutes to share my perspective on where we are today as a company, where I believe we are headed in the future and touch upon the SimpleNexus transaction we announced on November 16. .

When we first started nCino a decade ago, we focused on streamlining commercial lending, a cumbersome complex process with paper files, endless spreadsheets and disconnected point solutions.

Once we transformed this process and were successful bringing it to small community banks and credit unions, we moved upmarket to larger institutions and then internationally. .

Yesterday, you may have seen our announcement that our commercial banking solution was again named best-in-class by Aite Group, an independent research and advisory firm focused on financial services. nCino is the only technology vendor to achieve this recognition 3 consecutive times.

This is yet another strong endorsement for our flagship commercial product. .

However, we did not just rest on the success we've had with our commercial lending solution. Staying true to our mission of transforming the financial services industry through innovation, reputation and speed, we developed multiple new products to solve our customers' challenges.

Our product portfolio now spans treasury management, deposit account opening, onboarding, small business lending and retail lending, all on a single customer-focused cloud platform. .

We believe our platform is a competitive differentiator for us in the market, and we have aligned our entire organization around ensuring each and every one of our products is best of breed. And that is a key reason why I'm so excited about the SimpleNexus acquisition.

We believe their mobile-first cloud-native digital homeownership platform is the best in the market today and is extremely complementary to our existing business and product suite. .

While we weren't necessarily looking for our first acquisition as a public company to be of this size and scale, there were many unique and attractive aspects about SimpleNexus. For example, SimpleNexus has an impressive customer base across the U.S. with strong retention and references.

In fact, during our due diligence process, as we spoke with some of their customers, one of their large regional bank customers described SimpleNexus as a game changer for the bank and raved about the product functionality, ease of use and speed of loan closing. .

Additionally, SimpleNexus has a fantastic experienced team who has demonstrated the ability to grow quickly and scale.

SimpleNexus has a similar fee-based recurring revenue model to nCino, initially expands our SAM by over $4 billion, enhance the technology and domain expertise to enable us to accelerate the development of additional platform journeys and mobile point-of-sale offerings to provide seamless consumer experiences across multiple lines of business and use cases over time.

.

SimpleNexus is more than just front-end software to facilitate mortgage applications. It is a leading mobile-first, cloud-native homeownership platform that provides us with yet another market to drive digital transformation and long-term revenue growth for nCino. .

There are not many companies out there with all of the characteristics I just mentioned. And as we evaluated SimpleNexus, we knew they were a terrific complement to our core business and that this acquisition was the right thing to do for our customers, our company and our stockholders. .

We look forward to updating you further about this acquisition and the opportunities we collectively see once this transaction closes, and we officially welcome SimpleNexus into the nCino family. .

Before I turn the call over to Josh, I want to note again how pleased I am with the results of the third quarter, the strong sales wins, new logos added across the globe and continued execution from our entire organization.

As a company, we remain laser-focused on growing our business, taking care of our customers and building and delivering the highest quality and most innovative banking software in the industry. .

And with that, I will now turn it over to Josh. .

Thanks, Pierre. It's great to be on with you all today, and I'm excited about the progress we made in the third quarter. Before I get into the details, I want to say it was really great last quarter to be back in front of customers and with senior team members in other offices. .

During the third quarter, I was lucky to spend time with our team in London to visit prospects from the continent and to attend numerous nCino-hosted customer meetings and events across the U.S. It was fantastic to participate in face-to-face meetings and in-person events again. .

Turning to the specifics of the quarter. One new logo I'm very excited about is Kiraboshi Bank, nCino's first customer in Japan. Kiraboshi is a Tokyo-based regional bank with assets of more than USD 53 billion that will use the nCino platform for its business financing division. .

As you've heard us say before, the first logo in a new country is by far the hardest one. I'm incredibly proud of the nCino K.K. team and their commitment to land the first customer in Japan, particularly with the backdrop of COVID. Japan is a strategic market for us.

The country is home to a large IT industry and has over 600 banks with a sizable upmarket with approximately 46% of them having over USD 5 billion in assets. The Japanese regional bank market looks very similar to the U.S. community regional market, where we have many commercial banking customers today.

That's a market where nCino has executed well for years, and we see a great opportunity in Japan to help these banks overcome challenges and drive growth through digital transformation. .

We added other logos in the third quarter across multiple geographies, including signing a new enterprise bank in New Zealand and a new bank in the U.K. We also added numerous logos in the U.S.

across asset classes and solutions, such as Armstrong Bank, a nearly $3 billion bank based in Oklahoma, who signed on to the nCino platform vision as they purchased our commercial, small business, retail lending and deposit account opening solutions.

Armstrong Bank clearly sees the value of the bank operating system, bringing together multiple lines of business on a single end-to-end cloud-based platform. .

In addition to some notable new customer wins, I'm extremely proud of the team for several great land-and-expands upmarket this quarter. One of these included a new expansion with a top 50 U.S. bank above $50 billion in assets. This initial nCino use case was actually PPP. This bank was first introduced to us last year during COVID.

On the strength of our successful partnership forged during PPP, this enterprise institution has now greatly expanded their use of nCino beyond PPP to include end-to-end commercial and small business lending. .

You've heard Pierre say many times that while we are happy when we sign new contracts, what we really celebrate are the go-lives. This is the moment that our financial institutions start to originate loans, onboard customers or open accounts in the nCino platform.

I'm pleased to share that we had a record number of go-lives in the third quarter with over 25 core platform and over 40 portfolio analytics customers beginning to enjoy business value from their nCino investment. .

One notable go-live this quarter included a $2.6 billion asset bank who went live on nCino's commercial banking solution in about 6 months.

Some other highlights include a large credit union going live on our deposit account opening solution, a regional bank in the Northwest who went live on nCino's treasury management solution and a full-service community bank in the Southeast. We took several hundred users live on nCino's small business solution. .

In the third quarter, we also took our first U.K. customer live on our international mortgage solution. This customer has fully originated and funded their first mortgages using nCino and is already seeing value in the form of faster closing times..

The single biggest go-live this quarter was with Truist Bank, which is the result of the 2019 merger of equals between BB&T and SunTrust. If you'll recall, SunTrust was one of our long-standing partners. Truist today is the sixth largest bank in the U.S.

Bill Rogers, CEO of Truist, highlighted this nCino go-live during Truist's third quarter earnings call in October. The 2,500 BB&T teammates who joined their heritage SunTrust teammates on nCino are now better positioned to serve their clients and the bank has better visibility into their lending activities..

Equally important, as Bill highlighted, the nCino upgrades also lay the foundation for future digital innovation. We're deeply appreciative of the hard work of our nCino and Truist teammates as well as our strategic system integration partners who made this program a success during remote work COVID conditions..

I want to thank all of our nCino teams for their hard work and continued execution in the third quarter. And with that, I'll turn it over to David to tell you more about the numbers.

David?.

Thank you, Josh, and thanks, everyone, for joining us this afternoon to review our third quarter financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated.

Our non-GAAP financial information excludes the impact of stock-based compensation, the amortization of intangible assets, expenses related to the acquisition of SimpleNexus and expenses related to the government antitrust investigation and related civil actions disclosed in our SEC filings.

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 our Form 8-K furnished with the SEC..

We are very pleased with our third quarter results and how well it positions us for a strong finish to the fiscal year. Total revenues for the third quarter of fiscal '22 were $70 million, an increase of 29% year-over-year. Subscription revenues were $57.1 million, an increase of 32% year-over-year, representing 82% of total revenues..

During the quarter, we saw a balanced sales contribution from new and existing customers including the very nice upsell from a PPP customer that Josh mentioned earlier..

Professional services revenues were $13 million in the quarter, growing 18% year-over-year, reflecting another solid billing and utilization quarter. Non-U.S. revenues were $11.7 million or 17% of total revenues in the quarter, up 77% year-over-year.

Our international business has matured to the point where subscription revenues are the driver of growth, with professional services normalizing as a percent of total revenues..

As a reminder, we utilize our partners to deploy our software in the majority of our international projects, which may result in moderation of international professional services revenue growth in the future..

Non-GAAP gross profit for the third quarter of fiscal '22 was $44.6 million compared with $33 million in the third quarter of fiscal '21, an increase of 35% year-over-year. Non-GAAP gross margin was 64% compared to 61% in the third quarter of fiscal '21. Our gross margin continues to improve largely from subscription product mix..

Sales and marketing expenses for the third quarter of fiscal '22 were $18.5 million or 26% of total revenues compared to $12.6 million or 23% in the third quarter of fiscal '21.

The increase in costs reflect investments in our global expansion, including additional salespeople on the continent Europe and increased marketing expenses to further build out our international brand. We also saw a higher level of demand for in-person events, which resulted in incremental spending on conference and travel-related costs..

Research and development expenses for the third quarter of fiscal '22 were $18.6 million or 27% of total revenues compared to $14 million or 26% through the third quarter of fiscal '21.

We continue investing across our platform with a particular focus on maturing our retail products, building on our commercial pricing and profitability solution, adding functionality to our auto spreading solution and ongoing investments in our market-leading commercial product..

General and administrative expenses for the third quarter of fiscal '22 were $10.6 million or 15% of total revenues compared to $9.1 million or 17% in the third quarter of fiscal '21.

In the third quarter, we incurred approximately $2 million in the costs related to the antitrust matters and $900,000 in the cost related to the SimpleNexus acquisition, which are not included in our $10.6 million G&A expense. Given these are nonoperating expenses, we are excluding these costs from our non-GAAP operating income results and guidance..

Non-GAAP operating loss for the third quarter of fiscal '22 was $3.2 million compared with our non-GAAP operating loss of $2.7 million in the third quarter of fiscal '21. Our non-GAAP operating margin for the third quarter was negative 4.5% compared with negative 5% in the third quarter of fiscal '21.

Non-GAAP net loss attributable to nCino for the third quarter of fiscal '22 was $4.1 million or $0.04 per share compared to non-GAAP net loss attributable to nCino of $3 million or $0.03 per share in the third quarter of fiscal '21..

Turning to cash. We ended the quarter with cash and cash equivalents of $381 million. Net cash provided by operating activities totaled negative $19.1 million for the third quarter compared to negative $10.8 million in the third quarter of fiscal '21, indicative of a seasonally slower billings and collections quarter.

Capital expenditures were approximately $2.4 million in the quarter resulting in free cash flow of negative $21.4 million. Consistent with our normal billings and collection seasonality, we expect negative cash from operations through the balance of the year..

Total RPO increased to $718 million, up 58.5%, over $452.9 million in the third quarter of fiscal '21. The portion of RPO greater than 24 months was up 93% over the third quarter of fiscal '21 to $297 million. And RPO less than 24 months increased 41% to $421 million. The increase in RPO in the quarter was driven primarily by new customer adds..

Along with our strong performance in the quarter, we are excited by the announced SimpleNexus transaction. We expect -- which we expect to close by the end of our fiscal year ending January 31. As previously mentioned, we expect SimpleNexus will be immediately accretive to growth..

Turning to guidance. For the fourth quarter, we expect total revenues of $68.5 million to $69.5 million and subscription revenues of $57 million to $58 million. Note this guidance assumes a seasonality impact on professional services.

Non-GAAP operating loss is expected to be approximately $8 million to $9 million and non-GAAP net loss attributable to nCino per share is expected to be $0.09 to $0.10 based on a weighted average of approximately 97.1 million basic outstanding shares. As a reminder, our guidance does not include any impact from the operating results of SimpleNexus..

We are increasing our guidance for the full fiscal year '22 as follows. We expect total revenues of $267 million to $268 million and subscription revenues of $219 million to $220 million.

We also expect non-GAAP operating loss for fiscal '22 to be $18 million to $19 million and non-GAAP net loss attributable to nCino per share to be $0.20 to $0.21 based on a weighted average of approximately 95.9 million shares outstanding.

Our operating loss expectations assume an incremental increase in business travel and normal seasonality of expenses, in particular, elevated variable compensation for our sales professionals..

We are very pleased with the results of the third quarter, the solid financial performance and the continued momentum and execution across the company. It is a busy time of year, and I want to thank our nCino team members for all their hard work and dedication..

And with that, we will now open the line for questions. .

[Operator Instructions] Our first question comes from the line of Saket Kalia from Barclays Capital. .

Congrats on the quarter. Josh, maybe I'll start with you. It was great to hear some of those international deals that you cited. I was just wondering, can you just talk a little bit about the pipeline for international generally? And how that competitive landscape maybe compares to the U.S.

at all? Does that make sense?.

Absolutely. And if you'll recall, about a year ago, we really started putting people in market in Western Europe, our initial presence. And a lot of our first accounts in EMEA were in the U.K. and Ireland, and we've continued to expand into Western Europe. So those markets are nuanced and they require local attention.

And as the overall pipe continues to grow, we see corresponding growth in those markets with that local focus, cultural and language capability. So today, the international pipe sits at about half of the overall pipe, and we're pleased with the progress. .

That's great. That's great. Great to hear. David, maybe for you. I appreciate the separation of guidance, right? Organic and SimpleNexus, sort of separate until it closes. And I understand we're not going to talk about SimpleNexus too much. But I was wondering if you could talk a little bit about sort of their contract structure.

And maybe just as you start to go through some of the purchase accounting here, can you give us a sense for maybe how significant the deferred revenue impact there could be?.

Yes, Saket. Yes, once the deal closes, which we expect by the end of our first quarter, we will update accordingly after that. .

End of fourth quarter. .

End of fourth quarter, sorry. And from SimpleNexus, the majority of their contracts are billed monthly. And so we would not expect to see a large impact on deferred revenues from purchase accounting. .

Our next question comes from the line of Terry Tillman from Truist Securities. .

Pierre, Dave, Josh and Greg, I think I got that right. I have a bunch of things to get off my chest here. I'm able to unveil another foreign language here. So I guess I'd say, [Foreign Language]. It's great to see the Japan bank deal. So yes, so I got that out of the way now..

I got 2 questions. The first question is I heard a fair number of new bank deals mentioned in the prepared remarks, the deal in Japan, that's great, new in there. New Zealand, U.K., some community banks and regional banks in the U.S.

I'm just kind of curious, does it feel like there's a pickup in demand in the decision cycles and close rates for new logos? I know those take longer because they're not existing relationships. But how does it feel in terms of the propensity to close deals right now? And then thoughts into 4Q.

Is that typically a seasonally stronger quarter for these new deals? And then I have a follow-up. .

Absolutely. The seasonality of the business, the third quarter is not what the fourth quarter is, but we're really pleased with how the third quarter was. As we closed that quarter, I would say, I don't know that we're back to pre-COVID levels, but this is the most active quarter that we've seen.

And that was with more business as usual activity, not the PPP, not COVID-driven things. So we're quite excited, pleased with how the team executed and we see customers taking the force reckoning from the last few years and translating that into action. .

Got it, Josh. And a follow-up question for Dave. Last year, between the 2Q and 3Q, there was actually, I think, a seasonal decline in total RPO and then 24 months or less RPO. And maybe Josh just answered part of this, but it seemed like you bucked that trend, and I don't know if that was the right seasonality last year, and this is kind of abnormal.

But is there something to be said also for just the book of business and the strength in the quarter vis-a-vis the sequential increase in current -- or the 24 months or less RPO?.

Yes. I think we had a really good quarter overall. Remember, last year was still PPP related. So there were lower-duration contracts in that quarter last year. And so this year, it was a more normal quarter. It was well balanced. And we saw some longer-duration contracts. But overall, it was a very solid quarter from a sales perspective. .

Our next question comes from the line of Josh Beck from KeyBanc. .

Excited to hear about the in-person meetings. I'm not sure I was going to ever say that, but glad to see that. It might be a little too early to ask this but after you announced the SimpleNexus acquisition, curious maybe any early feedback you've received from partners, customers alike? And if that's better held for a later call, also happy to wait. .

Josh, now I can give you some anecdotes because you do get calls from customers, et cetera. And I'm pleased to tell you that we've got a very positive response, both from our clients as well as we speak to the SimpleNexus team planning the closing of this deal. We get a similar very positive feedback.

As you know, these 2 companies both are very client-centric. They both are very focused on the success of their customers. And I think that's playing out now as people begin to understand the power of the 2 solutions together as well as difference of the cultures. So very pleased with that initial reaction. .

Very good to hear. And maybe not sure where this question would lie in terms of the management team. But I'm just curious, as you are discussing with your bank customers the priorities for next year, I certainly think we're through the PPP and the forgiveness wave. Digital really seem to ramp up as an initiative this year.

You obviously have onboarding and many other solutions.

So I'm just curious, as you think about the prioritization for next year in terms of your bank executive conversation, how is that shaping out?.

Yes. What we are seeing overall is that banks are coming back, specifically in the U.S., the community regional is back to focusing on transforming themselves to be relevant for the future. And as you know, our platform story plays well into that.

So what we're seeing is banks are refocused on the strategies for long-term survival and relevance, and nCino plays very well into that. We are back on message with our platform play. All of us got distracted with PPP and other things..

So now it's all about the platform. It's all about digital transformation for the long term, and we're very excited about it. .

Our next question comes from the line of Bob Napoli from William Blair. .

It's great to see the progress on international. And now that it's becoming a really material part of the business, I was wondering maybe if you can give a little color on the mix of subscription versus professional services in the international. And then the gross margins, I guess, are the margins relative to the U.S.

business?.

Yes, Bob. Yes, we're not going to discuss margins on this call. But I can say in terms of revenues that subscription revenues are growing at triple digits. And PSO, the services business are slowing a little bit.

We're hitting a level where we're going to -- we farm out or we engage our partners to deploy software for us in all the countries that we're selling into. So we expect services revenues will decline on a year-over-year basis in the future, but that subscription revenue is still strong. .

I thought I saw you used Accenture in one of your announcements. And just in that pipeline, I guess you also announced a couple of challenger banks. I don't know if that's internationally a new focus for you. And then given that the first one is the hardest to get, I mean you've added France, Germany, Japan, with 50% of your pipeline internationally.

Can you give any color on kind of the geographic strength? Are you seeing others line up in the markets you just entered? And then any color on the challenger bank wins or effort?.

Yes. The challenger bank is just part of the normal go-to-market strategy. I mean, some of them come. Some try to build their own software at first and then realize later on they should stick to their own thing. When you look overall, 2 years ago, we started with these investments in the international markets, specifically in country in Europe.

All of those are beginning to pay off now where we see good activity. I equate this way back to in 2014 and '15 when we started the enterprise business in the U.S. We made similar investments. We were not public at the time. And over time, it pays off. So I see similar fact patterns. And I'm optimistic that over time, they'll all come around. .

Our next question comes from the line of Mayank Tandon from Needham. .

It's actually Kyle Peterson on for Mayank. Just wanted to touch on competition, specifically in the account opening side. Are you guys seeing any changes in the competitive environment? I know a few other banking software players have been kind of making some at least announcements in the space.

So I just want to see if you've noticed kind of any change in the landscape?.

Yes, we continue to see competition from point solutions as we always have. It's our goal to build solutions across everything that we offer to our customers that are best-in-class and bring them back to a single-platform vision.

We think if you pick a point solution and then you pick another one, you're going to wake up in several years and from an employee and customer experience, a bank regulatory burden and a bank efficiency perspective, you really won't have progressed.

So our goal is to build something that stands alone on its own but then ties into that robust platform. We think that's the direction the industry needs to head. .

Yes. And it's not only the platform play, it's also that many of those solutions are more of a front end or a point-of-sale solution. While we can do front end as well as the brand's transformation of all the bankers and that end-to-end experience, so you can start it online, you can go to a branch and complete it there.

We see significant differentiation. It's more difficult to build up front. But over time, I think that's the better way to get this bank to be more like a fintech. .

That's helpful. And then I guess just one follow-up on the professional services, the margin -- the gross margins, especially kind of the second consecutive quarter was significantly higher than at least what we had been seeing previously.

Is there anything kind of onetime that's been pushing utilization higher, something or anything we should be thinking about moving forward as we're kind of thinking about the services gross margins?.

Yes, we saw -- we've been seeing a lot of strength out of Europe. We had a couple of customers go live in the quarter, which triggered revenues. I would anticipate that those margins will come down in Q4 and impact our total gross margins overall..

But yes, we've seen some really good activity, high utilization rates, good billings out of PSO. But yes, we expect to see a seasonality impact in the fourth quarter. .

Our next question comes from the line of Ken Suchoski from Autonomous Research. .

Yes. I wanted to ask you about SimpleNexus. One thing we've noticed is that mortgage activity really picked up in, call it, 2019, 2020.

So can you talk about how much SimpleNexus benefited from that increased activity? And does that lead to any tougher comps to grow over in calendar year '22 and '23?.

Great question. So we -- the thing I would remind you of is that SimpleNexus is a fee-based revenue model. And as you will recall, when we announced the deal, we actually discussed this. We actually looked at their trending revenue over time, especially with lower volumes in '18, then transition to '19, et cetera..

And you don't see the peaks and valleys with them, as you would see with the people who play in the mortgage volume game where they're actually charged by the transaction. And that's what made it so attractive for us is that they're also per seat. .

And when there's a downturn in mortgage volume, what we see is these typical independent mortgage banks cut back on the middle back office, but they keep their salespeople in place because they're commission based, okay, which means they have to keep the seats for the licenses for the software. So we love that financial model they've followed.

And historically, we've not seen the big peaks and valleys we've seen with other companies with a different financial model. So we are actually very optimistic that this was a great fit for us. .

Okay. That's really helpful, Pierre. And then I think you guys mentioned that SimpleNexus is immediately accretive to revenue growth. I mean, are we talking about revenue growth that's 40%? Or is it closer to 55%, 60%? Just trying to get a sense for how much faster it's growing compared to core nCino.

And then any comments on the sustainability of that growth?.

Yes, Ken. Like we said earlier, we will update after we close the transaction. So we're not going to get into any of the details on their growth rates. We did disclose their trailing 12-month revenue growth, and we also talked about their forward annualized growth based on the September number. But that's all we're going to disclose right now. .

Yes. It was the trailing 12 months was $41 million and $54 million versus September times 12 annualized number. .

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

Josh, I wanted to ask about your results of kind of the time on the road. You've been selling successfully virtually for the past 20 months.

And I know it's early, but curious to hear if there's any noticeable changes in terms of building pipeline or close rates and how that's influencing your plan for more travel next year?.

Yes. We are proud of how we've executed in remote work conditions. But on the other side of this is the reality that we are a business process transformation company. And there's business leaders on the other side that are making not really technical decisions, but they're picking a partner.

So we believe in the people that we have representing nCino in the field and when we can get them in front of customers and develop those relationships, they can understand the culture and the value proposition even better. And we would hope that, that will continue to help those conversations accelerate. .

Got it. Okay. And one follow-up, David. The implied fourth quarter subscription guide coming out of the really strong this quarter results, I think when you exclude the onetime revenue from last year, it implies about 35% growth for this current quarter versus the kind of 28% at the midpoint.

I'm just curious if there's anything to call out there in terms of one-timers or seasonality or if this is kind of the standard conservatism? Any other color there?.

Yes. I think just like we saw last Q4 on a sequential basis, we're seeing just a lower level of activations. As we talked about in the past, our activations are lumpy quarter-to-quarter. It just depends on how the contract was negotiated with customers.

And so we're seeing kind of what we expect to see as seasonal impact on lower activations in the fourth quarter. .

Our next question comes from the line of Brent Bracelin from Piper Sandler. .

This is Clarke Jeffries on for Brent. First question, you mentioned the expansion of a top 50 U.S. bank that grew from an initial PPP use case.

I guess just stepping back, could you give us a sense of how successful that effort has been in transferring or expanding that contract value in '22? And are there still PPP-only use case banks that are in the pipe for potential expansion?.

Not much else to speak about today. We are proud of that validation of how we executed for them. As we continue on with the year and into next year, the goal is obviously to continue taking those relationships and come back to the wheelhouse nCino and the vision that we have.

So it's a great validation of how we succeeded in forging that relationship, and we'll continue taking that story on. .

Yes. And I want to emphasize, if you recall, we had specific PPP contracts and end-to-end with a [ bunch ] of it, it's co-terminus. And so you wouldn't go upfront and get that, so you wait for that contract to come to the renewal date and then actually negotiate those.

So there's some PPP that's still out there that we have to negotiate, but that's part of the co-terminus contracts. And we've got such a great relationship with these customers. I'm optimistic that it will go well. But yes, there's some PPP overhang there. .

Yes. And we're still -- we still expect $18 million this year for PPP. So there's no change to what we have discussed previously. .

As a total PPP this year. .

Total this year. Yes. Yes. .

Great. And I think my follow-up question was actually maybe on that co-terminus topic. Looking at deferred revenue, obviously, a seasonal -- seasonally weaker quarter in Q3, typically. But were there changes in renewal terms that might have moved around Q3 kind of deferred revenue? It just seemed like maybe an outlier in terms of the quarterly change. .

Yes. No, there's nothing in there PPP related. I think Q3 is our seasonally weakest quarter. And that's just historically been a lower bookings quarter for us and lower billings quarter, and we would expect that to continue in the future. .

Great. And then one last sort of final question. Could you remind us if you're booking an RPO in U.S.

dollars or in local currency? And could we actually -- either should we be aware of FX impacts maybe on RPO going forward?.

Yes. It's all based on U.S. dollars. Our RPO is based on U.S. dollars. It's a minimal impact on foreign currency exchange rates at this point. .

Our next question comes from the line of Charles Nabhan from Stephens. .

Could you comment on the pace of investment internationally? You've been talking about getting feet on the ground in some of your foreign markets for a couple of quarters now, and it looks like you're getting some traction there.

But are we at a point or are we nearing a point where the infrastructure for those growth initiatives are in place, and we could see some sort of moderation in spending abroad?.

Yes. So we made very large investments this year, relatively speaking, large investments. So we placed people on the ground in Germany, Spain, France, Italy. And I would say the large investments are done for the time being. As we see upside to bookings and customer activity, we will add incrementally.

But I would say at this point, internationally, we have the large investments in place, and we will see additional adds, incremental smaller adds in the future as we're successful. .

Great. And secondly, could you comment on the impact of consolidation in the banking industry on your business? Clearly, your client base is skewed towards growth-focused institutions.

So could it potentially be a positive to your business when an acquired institution potentially adopts nCino?.

Yes. And if you think to the prepared comments here, if you look at the example of Truist Bank, which is the tie-up of BB&T and SunTrust and their CEO's comments that they're essentially positioning for the future with nCino, we would think that the kind of banks that are making that kind of investment are going to go best-of-breed..

Earlier this year, we spoke about First Horizon as well, similar, where you have a lot of the regional banks that are pursuing an M&A route to try to compete with tech. And we believe we're well positioned to support them as they get ready to tie up and try to go bigger. .

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Pierre Naude, CEO, for any further remarks. .

Thank you for your time today and your continued support. We look forward to speaking with many of you in the coming weeks and hope everyone has a safe, healthy and happy holiday season. .

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..