Everyone, my name is Mayank Tandon. I'm the fintech analyst at Needham. I'd like to welcome Greg Orenstein, the CFO of nCino. Thank you, Greg, for joining us.
Pleasure to be here.
We're gonna do a fireside chat. I'll ask you a few questions, and then maybe we'll get the floor to ask questions as well. So, first question is, I think just some people might be new to the story, might be helpful to give people a sense of where you are positioned within the digital banking space. You know, how do you compete with the likes of, say, Q2, Alkami, others? Where do you play in that market segment?
Sure. Again, nice to see everyone, and thanks for joining us today. Ultimately, we do three main things at nCino. We facilitate lending, and that's anywhere from commercial to small business to consumer, including mortgage. We open accounts, and we onboard customers. And we do this all on a single platform. That same platform spans from community banks here in the United States to the likes of Wells Fargo and Bank of America that are our customers, as well as travels overseas. About 19% of our revenues this last quarter were international, which is actually up 58% year-over-year. Sorry, 48% year-over-year. And ultimately, as you talk about a Q2 or an Alkami, they're in the internet banking space, and so they really do check your balance, bill pay, money transfer.
We're not in that business. And so a bank would use them for that, but ultimately, in terms of fulfilling their lending, their account opening, or their onboarding needs, they look to nCino.
Greg, so just to piggyback off that, what is the value proposition that nCino provides its banking clients? Like, what are the pain points that banks face that you're hoping to solve?
So in terms of value drivers, I mean, ultimately, we help banks become more efficient, which allows them to reduce expenses. We can help banks grow their revenues, and ultimately, comply with regulatory requirements. If you think about the way that banks have operated, historically, it's been very much in silos. So you'd have different point solutions solving different points of the bank or different problems for the bank within a silo. The bank would buy a commercial lending stack, and then they'd have a separate consumer lending stack and then a separate mortgage stack. Those didn't really interact with each other, and in terms of providing the consumer a, a great experience, very difficult because if you went in on to get a mortgage, they wouldn't know you on the commercial side of the bank and vice versa.
We took an approach that really focuses on the end user, the consumer, right? And allows the bank to have a 360-degree view of that consumer across one platform. So wherever that consumer interacts with the bank, you'll be able to see that through nCino and ultimately be able to serve that customer, you know, in an incredibly efficient and very positive user experience perspective.
Is there a way to measure that? Like, any ROI metrics that you can share with us to provide some sense of what the impact is on the banking client?
Yeah. Ultimately, we've got tremendous statistics, and again, it's all over our website and our marketing materials about reducing, close times on loans, for example. So ultimately, getting money quicker, right? 'Cause you, if you're getting a loan, what you want to know, am I approved, and when am I gonna get the money, right? So we can do that quicker, which allows our customers, for example, to be able to, get money quicker, right? 'Cause ultimately, you're gonna start earning interest quicker, the money that goes out. Same with an account opening standpoint. We're able to facilitate and open accounts very quickly, right? Versus it taking weeks, historically. You know, you're able to do it in a very efficient and online manner.
And so ultimately, we're helping banks provide their customers a better user experience, which ultimately is gonna help drive efficiency at the bank and a better overall relationship, right? Because if they don't have a good user experience, they're gonna go somewhere that provides it to them.
Right. Then, what is nCino's go-to-market strategy when you're going after these big opportunities in the market? You know, how do you attack the market?
We have a direct sales force. Again, from our perspective, our sale is very domain heavy.
Right.
Right? And so we have a lot of ex-bankers that work for us, people who've lived in the banks and have dealt with the problems that we're there to solve. So they can really go and talk to folks, you know, on the other side of the table around their experiences and how our technology can improve their life. So we have a direct sales force. We will work with partners, system integrator partners. We've got a great system integrator ecosystem. We've got 2,000 nCino certified consultants out there working with the likes of Accenture, Deloitte, PwC, as an example, that we also will go to market with. Although, again, they'll go direct, and we'll go direct.
So I wanna jump on that point about the SI partnerships. I think you touched on this also at the Analyst Day. Is that a function of just now playing in the bigger leagues with bigger banks, both domestically and internationally, where you now have to work with the SIs versus doing the services on your own side?
Yeah. Strategically for us, particularly as we looked at scaling on a global basis, partnering with the SIs was something that we made the decision to do early on in the company's history. And it's been a great relationship for us. We very much are a product company. We do services for community banks, internally ourselves. Some of that's driven by price pressure downmarket. A lot of it really is driven by making sure that our folks are trained and very knowledgeable in our solutions. But as you go upmarket, instead of having that whole bench sitting there, right, dealing with-
Right
... ebbs and flows, particularly of lumpy enterprise deals, as well as having the expertise of these consultants, many of which live inside these banks on a day-to-day basis, right? They understand the banks, they understand the infrastructure of the banks, they understand the technology stacks. They have relationships there. For us to be able to scale as quickly as we have on a global basis, that was something that we strategically pursued, and it's been a great, it's been a great thing for us.
Right. I think it's been seen in those big deals that you won recently. We've seen that in the recent quarter as well. Maybe that's a good starting point on some of the recent trends. I think last quarter you had some nice big wins, expansions, but you also called out higher churn. Could you maybe remind us of some of the puts and takes coming out of the last quarter in terms of trends that you're seeing in the market?
Yeah, Q3, we had several strategic milestones. I'll say the first one, and I think the one that's gotten the most attention, was we signed the first enterprise bank, a $200 billion-dollar bank here in the U.S., signed for our consumer lending offering. And that was the first enterprise bank to sign on for that, for that offering, which is still a newer offering for us, even though it's been in the market for a little bit, but in terms of newer, in terms of it's, it's continued to mature. When we went public, we had a little over 40 consumer lending customers. We're now over 80, and so that was a huge milestone for us. Another milestone was we cross-sold to a $30 billion-dollar regional bank that used us for commercial and consumer.
We cross-sold our mortgage solution, which is a product that we acquired about two years ago. It was great to see that. And then finally, in Japan, we signed a $150 billion bank, Yamaguchi, to a mortgage offering. And so that was exciting because from a size perspective, that really took us up to that next tier of bank in terms of size in Japan. So that's exciting to see. We're excited about the Japanese market. And then the other highlight I'd say is just continued improved operating margin that we were able to demonstrate last quarter. You mentioned churn?
Right.
Yeah. Churn, historically, we've had about 2%-3% churn, and I say 2%-3%, that's based on prior year subscription revenues. This year, we've had heightened churn, it's gonna be about 9% of prior year's revenues, and it's really driven by three things. I'd say the main factor being churn in the mortgage space, more specifically, independent mortgage banks. Obviously, the volatility in the mortgage market, unprecedented rise in interest rates has created turmoil, and so we've had to navigate through that. I think we've seen a lot. We can argue maybe all, most, but a lot of the excess capacity that was built up in the mortgage industry, you know, during 2020 and 2021, I think we've seen that wrung out over the last year plus.
And so I think we're looking forward to kind of a more normalized churn rate from there going forward. And then we also had the final piece of PPP revenue. If you go back to COVID, we were involved in the PPP initiative, and we had some seats that ultimately come up for termination this year as well. And so we've talked about churn trending down over time back to our historic norms, but we do have to deal with kind of that anomaly this year, and as we go into next year and look at comps year-over-year.
I was gonna dive into numbers a little bit later, but since we're on this, as we think about headwinds and tailwinds going into the next fiscal year, I know you haven't given formal guidance yet, but how should one think about that, like net-net? From all these different factors that you mentioned, you've got these expansions and new deal wins, plus you mentioned PPP and also the churn rate leveling off eventually, but it'll take some time, I...
Yeah. You know, so I think, you know, what we've been very focused on are the things that we can control over the last couple of years. Very focused on continuing to invest in R&D, and make sure we take care of our customers. And so from a strategic perspective, I think we'll enter... Our fiscal year starts February 1. I think we'll enter the fiscal year feeling very good about how we're strategically positioned, particularly against competitors, many of which, you know, have visibly had to cut back on investment in R&D, cut back on investment in customer support. And so I think we feel good about that. I think we feel good about the investments that we've made on a global basis, and the footprint that we have as well. And so from that perspective, I think we're, you know, we're optimistic.
I think the other thing that we've seen over the last, you know, month or three, is really, hopefully, a stabilization from an interest rate standpoint. I think what we've been looking for, I think what our customers have been looking for is stabilization, right? Just rates going down will be one thing, but just knowing or believing that they're not gonna continue to increase, I think that allows them to take a step back and be a little bit more strategic versus kind of chasing where the rates are gonna go, which is a little bit more difficult to make long-term strategic business decisions while you're kind of focusing on very tactical day-to-day things.
Got it. Let me back up a little bit. I think you've been talking about elongated sales cycles for some time as a function of the higher rates, tougher macro conditions, and you also had the regional banking crisis going back to last spring. So how has that all sort of played out, and where do you stand today versus the headwinds you saw back then? Just to get a framework for how we should think about the forward outlook.
Yeah, interestingly, from the liquidity crisis, you know, I think a lot of folks believe that that would impact the community banks, mainly. Really, where we saw the impact was in the enterprise banks, and we saw a lot of them become very internally focused, you know, assessing their balance sheets, assessing their P&Ls, looking for opportunities to become more efficient. I think the further we've gotten away from, you know, the events of last spring in Silicon Valley, I think the more banks and credit unions really have been able to kind of lift their heads up and again, think about where to go from here. Not all of them.
There's some still that are internally focused, but again, I think we've seen more and more be able to pick their heads up as we've gotten some distance, and frankly, a lot of them spent the last year really looking internally at what they need to do to be more efficient and ultimately to, to grow their, their financial institution again and again. I think that's where nCino comes into play to help them do that.
Would you say there's a noticeable difference between international? Because that's a pretty sizable chunk of your revenue today, at 20%-
Yep
... versus domestic, or is it pretty similar across the board?
Well, I think that's a nice thing about our business model. We do have coverage community banks, regional banks, enterprise banks here in the U.S. as well as internationally. You know, we've planted flags on a global basis, from UKI to Canada, New Zealand, Australia. I mentioned Japan earlier. And so you see different pockets where things are maybe a little bit more active or less active. But again, I think from a global perspective, outside of the U.S., again, we've seen good traction.
Mm-hmm.
And, you know, ultimately, I think some of the headwinds that we've experienced here are passed over there. For example, in Europe, you know, last year was a little bit more challenged because of the Ukraine war, right? I think ultimately, we've seen folks, you know, deal with that on a day-to-day basis, but focus on, again, moving forward. And I think hopefully getting over this interest rate cycle will allow banks here to do the same thing.
Got it. Let's focus on the overall market. I think at the Analyst Day recently, you and your team talked about the SAM or the TAM basically doubling from when you first went public. Could you maybe walk us through some of the underpinnings of that model? Like, why is it 2x what you thought it was when you went public? What has changed in the market?
So we've expanded our product portfolio. We've added our nIQ product lines and expanded those. And so that was part of the increase in SAM. The other thing we did was we purchased SimpleNexus about two years ago, so you know, got a nice, really nice-
Mm-hmm
... footprint in the U.S. mortgage space. So those are two big elements to it. And the other thing that we did is we evolved our pricing model. When we did our first SAM, it was very much driven on a seat basis. But as we evolve more to a platform fee, recognizing that our technology is allowing banks to become more efficient, which means that they're gonna require less and less people. Looking at it from an asset perspective, ACV to assets versus ACV to seats, it's also helped drive that, you know, over $18 billion SAM that we have.
Okay. And then if we break the SAM up into different components, let's say commercial, consumer, mortgage, and other areas within banks, how does that sort of break down?
Yeah, our commercial SAM is a little over $5 billion. Our consumer is over $10 billion, and then our nIQ is about $3.5 billion. Those are the breakdown. And so, you know, we started the company focused on commercial. I think we still have a lot of runway and a great opportunity there. We've been investing on the consumer side, and I think we feel extremely good about where our consumer products are. And that's, you know, almost a double SAM. And then again, from a nIQ standpoint, which is our AI data and analytics offering that we started back in 2019, that's about $3.5 billion.
And again, I think we see opportunity to continue to expand that as we leverage all of the data assets that we have in the company to provide more and more use cases for our customers.
I thought maybe we could go down the list of each of these big segments and talk about the opportunity. So within commercial, obviously, as you said, that's where you started, with very strong penetration in the market already. What do you see as a runway going forward? Like, how do you keep winning in that market? And then who are the other players that you potentially could displace or replace in their clients?
I think we're really proud that that is where we started, and I think we're viewed as the clear market leader in the commercial lending space on a global basis. And, you know, we want to continue to not only keep that lead but expand it.
Mm-hmm.
And so I think we have a lot of runway in that. I think some people get caught up in the number of logos that we have. In the U.S., for example, we've got a half of the top 25 and half of the top 50 logos that use us. But we really view that as an asset because in a lot of those logos, we're not even penetrated, you know, throughout the commercial side of the bank. But ultimately, our job is to make sure those customers are very happy with us, which is gonna allow us to go back and sell them consumer or sell them small business or sell them mortgage or account opening. And so we see plenty of runway still in commercial on a global basis, including here in the U.S. as well.
From a competitive perspective, again, we'll compete with point solutions, mainly downmarket in that community space, as I noted. And you've got some, you know, good competitors out down there, but it's really a different value proposition, right?
Mm-hmm.
That's a very, very specific point solution, maybe solve a very singular problem. And what we really focus on is, again, making sure each of our products are best to breed.
Mm-hmm.
so we can go compete with them down there while selling the single platform vision. On the consumer side-
Can I just stop you there, Greg-
Yeah.
For a split second? So on commercial, are you replacing, like, the cores in certain cases? It could be a homegrown system at a larger bank that you might be displacing that is moving to a SaaS platform. Is that the way we should think about the replacement opportunity?
We really see cores more as integration partners versus competitors. There will be some homegrown systems, some financial institutions still have no systems, and then some will be replacing maybe some legacy point solutions.
And this is-
That's the competitive landscape.
This is international as well. Do you see the same type of dynamics internationally?
Little bit different. So I'd say that's community. If you go up market, again, you've got older legacy solutions and maybe some older homegrown stuff. But in terms of kind of, a competitor upmarket, our biggest competitor upmarket is do nothing-
Right
... versus another vendor. Internationally, again, no single competitor is doing what we're doing on a global basis, so in each particular geography, you may see some local vendor. You see a little bit more build your own outside of the U.S., but again-
Mm-hmm
... I think that continues to be less and less on a global basis because, you know, banking is hard enough. Why do you want to also be a software-
Right
... vendor, which is also pretty hard? So you see less and less of that, but still a little bit more outside of the US than here.
That's very helpful. Then you were saying, yeah, on the consumer side.
On the consumer side, you know, downmarket, again, you'll see, you know, older solutions.
Mm-hmm.
Some, you know, nice customer bases that some other companies have amassed, but, as far as I know, in terms of building a net new consumer LOS, you know, I'm the only one aware that we've built it and built it to scale, you know, from community banks upmarket. So we're really excited about the consumer space, and the consumer opportunity for us. You do see some, you know, again, older legacy systems, some stuff that's been cobbled together, and I think that, you know, from an investment cycle standpoint, you know, I think one of the outputs of the liquidity crisis was you really do need to invest in technology to support your consumer. Because if you don't, you could wake up tomorrow, and they no longer be a customer.
Just to be clear, when you talk about consumer lending, that includes retail, small business, right? Those would be the different buckets within the consumer side.
So for consumer, we really view consumer as retail lending, and then, you know, ultimately, can include our account opening. Small business, depending on the bank, sits in the consumer side-
Or commercial.
Sometimes it can sit in the commercial side. Yeah, and then we would put mortgage as a separate product line, but also that would be part of the consumer offering.
So let's talk about mortgage. I think if we look back, it's about almost two years since you bought SimpleNexus, at a time when the market was booming, and obviously, it's been a very tough road. So where do we stand today? As you mentioned, rates hopefully are stabilizing, maybe on the way down, time will tell. But what do you see for the SimpleNexus opportunity going forward if we're in a slightly more favorable environment from here on?
So we continue to be incredibly pleased and proud of what we now call nCino Mortgage-
Mm.
the former SimpleNexus company that we purchased about two years ago. A wonderful people, you know, great customer feedback, and ultimately, great technology. And so when we did the acquisition, and I, I said this earlier, in a meeting, in a one-on-one meeting, you know, we knew interest rates were gonna go up. That was part of our diligence, and, I can't say we knew they were gonna go straight up, overnight. But again, I think it's a credit to, to the organization and the team for us to navigate through that, you know, to the point where that business has continued to grow despite the headwinds, including, posting double-digit revenue growth last quarter, year over year. And so I think we've been very focused on taking logos and, and gaining market share during this time period.
We've been highlighting some of the competitive wins that we've been able to achieve, as well as just net new logos. And so as the mortgage market settles down, and ultimately, kind of starts rebuilding again, as all this extra capacity has been wrung out of the system, I think we feel incredibly excited about where we're gonna go with that business. And again, to be able to continue to execute during this time period, I think bodes very well. The other thing with nCino Mortgage or the SimpleNexus business that we acquired, from a technology standpoint, you know, one of the theses of that transaction was to bring in-house, you know, a very mobile-first, consumer-oriented team, right? Which wasn't something in the DNA that we really had at nCino.
And so we've been working on building out and leveraging that technology, not just with mortgage, but to build that across all of our consumer-facing applications. That is G8 in the spring-
Mm-hmm.
Focusing on bringing consumer loans together, including mortgage. So again, I think we believe that's gonna be a great cross-sell opportunity, 'cause if you use us for consumer lending, why would you not buy mortgage when it's the same user experience that your customer's gonna have, and vice versa?
But two questions on the mortgage side. One, are you replacing other vendors like Ellie Mae, Black Knight? Is that the replacement opportunity, one? And secondly, are you mostly winning deals with banks, their mortgage departments, or are you winning with independent mortgage companies? What does the client base look like today?
So we really partner with ICE now, ICE Mortgage-
Right
... the former Ellie Mae. They're a great integration partner of ours. They do have, you know, their own front-end technology, but ultimately, I think we provide a different experience, but they've been a great partner. And so the mortgage LOS is really our integration partners for us, whether it be them or, or Black Knight-
Mm
... or some of the others out there. So that answers that part of the question.
Right.
And then the-
Second question was, like, when you win deals-
Yeah
... are you winning within banks or the independent mortgage companies?
So, nCino Mortgage-
Right.
I mean, nCino Mortgage, SimpleNexus, now nCino Mortgage. When they started the business, it was very focused on IMBs. That's where they saw the opportunity. When we acquired them, they had about 80 or so banks or credit unions as customers, so we knew that it traveled over to the bank and credit union space. And again, one of the thesis of the acquisition was to be able to bring them to our bank and credit union customer. So we've done that. We've been able to note, you know, multiple cross-sales that we had during the course of the year.
We're gonna continue to focus on doing that, and so hopefully have a nice balance between bank and credit union, you know, depositories on one side, as well as the IMBs, which, you know, as the dust settles on the IMB space, I think what we're left with is a smaller number of larger, better capitalized IMBs. And we've worked hard to align with those, so as they grow, you know, we can grow with them.
Got it. Okay. Moving on to your other product segment, nIQ offerings, which you've talked a lot about in the past, I think, as a growth lever. Where are we today in terms of penetration, if that's the way to think about it, in terms of how many of your clients today use the core platform, but also the nIQ offerings, or are you going to market with nIQ and then selling the core? Like, how does that work in terms of go-to-market?
So-
What's the success rate there?
Yeah, so nCino products currently today, we have three out in the market: Portfolio Analytics, which came from the Visible Equity acquisition we did in 2019, and then we have Auto Spreading and Commercial Pricing and Profitability, which really are focused on our commercial lending customers. Commercial Pricing and Profitability is still about two years old, so still relatively new, but from our perspective, each one of our commercial lending customers should have Auto Spreading, which helps automation and ultimately allows them to take costs out, you know, from the commercial processing and overview side, as well as Pricing and Profitability, which helps them, you know, price loans and be more profitable. And so we're focused on that. We're coming out with Banking Advisor in the spring, which is our first Gen AI product.
And again, I think that's gonna help make the efficiencies we bring even more efficient, right? As you leverage, as you leverage Gen AI. And so it's still, I think, early, which again, to me, provides a great opportunity in terms of the penetration that we've, that we've had, from an nCino perspective. And we'll continue to come out with more nCino products, and again, continue to layer that on and bring more and more value, particularly with data and analytics, for all of our customers, with an initial focus on leveraging that commercial lending customer base.
Have you shared how much penetration you have with nCino today of your core client base?
Yeah, we've shared some statistics along the way, and we'll update that at the end of the quarter.
Okay.
as we normally do. We've continued to see growth with nCino, which is exciting, and seeing more customers have multiple products, including our initial sales, have multiple products, more multiple products being sold in the initial sale. And ultimately, when we come out with our Q4 results, we'll update that, which is how we've consistently done that on a quarterly basis in the past.
Moving to a different topic before we get into some of the numbers. As much as you can share at this time in the year, you recently announced a partnership with Salesforce or an expanded partnership with Salesforce, depending on how one looks at it. So could you just talk about the nature of the relationship with Salesforce and any sort of economics in terms of the impact on your business from that?
We started the business building on a Salesforce platform, and for us, it's been a great partnership, you know, going back to late 2011, early 2012. You know, we worked with them over the years, from a contract perspective. We've worked with them in the field from a sales perspective, product perspective, and ultimately, again, I think for us and what we do, you know, from a transformation, from a workflow perspective, it was really the perfect platform that we, that we picked. The last agreement amendment we did was in the summer of 2020. They worked with us, leading up to our IPO-
Right.
Knowing that we'd get a lot of questions about the relationship, and we signed a seven-year deal then, which was gonna expire in the summer of 2027. And as we've done in the past, you know, working with them on a consistent basis, we entered into an amendment, basically put it back to another seven-year deal, so added some time on the end. And for us, a couple of things we did. One was we agreed from a product perspective to more tightly integrate certain products, particularly around the Financial Services Cloud, which I think is a win for both companies with tighter integration, but ultimately a win for our joint customers. And then the second thing is we looked at just the unit economics.
You know, we worked together, that's ultimately gonna provide us some better unit economics, really starting next fiscal year, February 1, with new customers, and ultimately, current customers will evolve over the next couple of years as we put it on, on the new pricing. And so from that perspective, I think if you go back to our Investor Day comments and the long-term targets that we laid out, you know, at IPO, we already have exceeded our subscription gross margin target that we laid out at IPO. We laid out a new one at our Investor Day, and this should certainly give folks, you know, more, more and more confidence in our ability to meet or exceed that target.
Greg, as you know, a lot of focus on RPO activity as a proxy for momentum in the business. Could you just give us your sort of quick answer on, like, how we should view RPO in the context of the business? Because there's a lot of focus on that.
Yeah.
good or bad?
Yeah
... as a gauge, again, of momentum in the business overall. I would love to hear your answer to that.
You know, we've highlighted the fact that we don't think RPO is a great metric for us. We spent a couple of slides on Investor Day, if you go back to that presentation, which is on our website, really showing examples of why that's the case. Particularly with factors such as duration, timing of renewals, it really can skew RPO. You know, I gave the example, we commented on Investor Day that we've got five customers that pay us over $10 million a year. And ultimately, if you just said that was $10 million a year, and you went and in one day, re-signed all of them to five-year deals, it's $250 million that would go into RPO, right? Five customers, $10 million a year times five years. But you're not adding any revenue, right?
Your RPO would jump. Everyone would think that's great. Versus if you literally signed a net new deal for $1 million, that would actually add to revenue. And so we've tried to go out of our way to make sure people understand some of those dynamics. And, you know, we come back to, I think, with the business that we have, the visibility and predictability that we have, you know, top-line revenue guidance and ultimately, you know, operating income guidance, you know, come back to be, I think, the best metrics as you track our business. I appreciate there's some other KPIs that people wanna look at, and understand, you know, maybe using those to help confirm some of the assumptions. But ultimately, that's really the best way, I think, for us to look at the business.
Again, I think RPO can skew things quite a bit.
Before I open it to the audience here, one quick question from the Analyst Day. You gave very positive long-term margin targets. Could you walk us through sort of the roadmap to get there? I believe it was 35% operating income margins long term. Is that a five-year target? Forgive me, I don't remember exactly what the time period was.
We kind of said 4 to 6-ish. Yeah.
Okay, fair enough.
Yep.
In the ballpark.
Yeah.
So yes, what are the growth levers or what are the margin levers to be able to get to that type of level from where you are today?
Yeah, so we did lay out a Rule of 50 with 35% operating margins, which obviously defaults to 15% growth. We said that's not on a CAGR, but 15% growth as we look out.
Right.
You know, as a company, we're gonna continue to err on the side of growth, and so we'd much rather that be 20/30, right? Than 15/35. But as you build out long-term models, you wanna make sure you try to come up with assumptions that you think are, are reasonable. So from a gross margin perspective, again, we just talked about the updated Salesforce agreement, and so that certainly impacts that. But what you've seen is improvement on gross margins over the last couple of years, just based on mix. And so we were already expecting that to continue. And so again, I think that, shows kind of that trajectory to get to that gross margin top target.
When you look at OpEx, if you kind of break down our OpEx lines, you know, obviously, we had to beef up our G&A to become a public company, and so we've really been growing into that versus a need to go out and, you know, truly expand. From a sales and marketing perspective, the company's done a good job of investing in marketing technology. You know, help make sure we're driving pipeline and getting that funnel full, right? And being in a vertical SaaS business, right, there's only so many salespeople that you need, right? Once you have the SAM covered, you have the SAM covered, and you can't necessarily throw another 10 or 20 salespeople to try to drive growth. And so I think we feel comfortable from a SAM coverage perspective.
and so when you get then R&D, you know, we have, I think, done a good job of becoming more and more efficient with our research and development assets. Matt Hansen, who is the founder of SimpleNexus, came in as our Chief Product Officer and has done different things. But one of them that sticks out to share is really driven from, we used to have two big major product releases a year, and Matt drove us to monthly releases, and I think we're actually finding ourselves putting out about 40% plus more code, right? Just dealing in smaller pieces instead of kind of dealing with these larger chunks, which is interesting because SimpleNexus or nCino Mortgage actually has multiple code releases a day. We've seen more efficiency drive from that.
Then we also have some teams internally that are working on certain projects. There's one called A11, which is accessibility-
Ah.
which we have multiple teams working on. That ultimately is gonna come to a head in the late spring and summer, and so we'll be able to move those teams into and invest in other areas of the R&D product organization. So as you kind of go through that and take a step back, you know, I think we feel really good about where we are headcount-wise. We'll always continue to tweak, like any company should, right? As things change, you want to tweak and tweak and make sure you continue to be optimized. But I think all of that gives us the confidence to lay out that target and ultimately focus on achieving it.
Perfect. I think we have about five minutes, so any questions from the audience, please feel free to jump in. If not, I'll continue. I think the natural question, towards the end is just M&A. As you mentioned, you've done some deals in the past recent years. What does the, what does the pipeline look like in terms of deal activity? What are some of the potential targets? Not names, but looking at, like, capabilities, geographic diversification, like, what are some of the drivers of future M&A?
Yeah. We have done three deals in the history of the company, and, you know, really proud of the team. I think we've demonstrated an ability to find really great companies with great people and great technology and successfully integrate them. And so, you know, from that perspective, we're open to doing M&A. The way that we look at M&A is we don't look to buy for revenue. We really think about the platform and kind of architectural pieces, and building out that puzzle from an architecture and functionality standpoint. And so, you know, it's interesting from a market standpoint, I think there's a lot of companies out there that, maybe raised some money, built some product, didn't necessarily build a company, if that makes sense. But that product, you know, could potentially fit nicely in a larger organization like nCino.
And so I think we see some of that out there. On the nCino front, you know, we continue to pay close attention to what's going on from a data analytics and AI perspective, and so I think that there could be opportunity there. And then from a geographic perspective, you know, we're really proud of our international growth, but if there's things that we can do to further accelerate that, you know, we'll continue to look for opportunities outside of the U.S., maybe to expand our footprint in certain geographies or maybe accelerate some of the footprint that we already have and expand it through M&A versus organic growth.
Rick, can you remind us what the balance sheet looks like today?
Yeah. We've got no debt, got over $100 million of cash. We're generating cash, which is a nice position to be in from where we were, you know, a year or two ago. And so, you know, I think we've got a very healthy, healthy balance sheet. And again, I think we can go execute if something makes sense. When we acquired SimpleNexus, again, we looked at our product portfolio. We're in the lending business, but we didn't have a mortgage solution, so we had a hole to fill. You know, as we sit here today, I don't see a hole like that versus, again, are there things that we can kind of add that would be great complements to bring to our commercial lending customer base, for example.
You know, those are the kinds of things I think that right in the near term at least, we'll be focused on.
One last question from me, which I forgot to ask you earlier when we were talking about the different segments. If you look at the pipeline today, is it skewed one way or another? Is it more mortgage-heavy, more consumer-heavy versus commercial-heavy, or is it pretty even across the board? How would you frame it if you could comment on the overall pipeline or RFP activity, however you want to take it?
In the second quarter, we announced that for the first time that we identified non-commercial was bigger than commercial-
Okay
... in terms of pipeline, which is exciting as we, again, think about the footprint that we have, the breadth of product offering that we have. And then last quarter, I think we said it was about split even.
Okay.
And again, maybe that was because of the consumer deal that we took down at the enterprise bank. But I think we feel really excited about all of our products. But again, the newer products, which would be commercial mortgage, some of the nIQ stuff, driving growth on a global basis, I think that sets us up, you know, in an exciting position as we enter into a new year.