nCino, Inc 10-Q for FY2024 Q1
nCino, Inc. (NCNO)
10-Q
2023-05-31
For: 2023-04-30
View Original
Added on
April 07, 2026
About this 10-Q
nCino, Inc filed this 10-Q on May 31, 2023, covering the quarter ended April 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended April 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $113.67M
- up 20.7% from $94.21M a year earlier
- Net loss
- $11.24M
- compared with a net loss of $30.69M a year earlier
- Diluted EPS
- -$0.10
- compared with -$0.28 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended April 30, 2023
OR
For the transition period from __to __
Commission File Number: 001-41211
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices including zip code)
(888 ) 676-2466
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 112,253,503 shares of common stock, $0.0005 par value per share, as of May 26, 2023.
| TABLE OF CONTENTS | ||||||||
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| Item 4. | ||||||||
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| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
As used in this report, the terms “nCino,” the “Company,” “we,” “us,” and “our” mean nCino, Inc. and its subsidiaries unless the context indicates otherwise.
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
nCino, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| January 31, 2023 | April 30, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
Cash and cash equivalents (VIE: $ | $ | $ | |||||||||
Accounts receivable, less allowances of $ | |||||||||||
| Costs capitalized to obtain revenue contracts, current portion, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Costs capitalized to obtain revenue contracts, noncurrent, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
Investments (related party $ | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities, redeemable non-controlling interest, and stockholders’ equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Deferred revenue, current portion | |||||||||||
| Revolving credit facility, current portion | |||||||||||
| Financing obligations, current portion | |||||||||||
| Operating lease liabilities, current portion | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities, noncurrent | |||||||||||
| Deferred income taxes, noncurrent | |||||||||||
| Revolving credit facility, noncurrent | |||||||||||
| Financing obligations, noncurrent | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 12) | |||||||||||
Redeemable non-controlling interest (Note 3) | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, redeemable non-controlling interest, and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Subscription | $ | $ | |||||||||||||||||||||
| Professional services and other | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Subscription | |||||||||||||||||||||||
| Professional services and other | |||||||||||||||||||||||
| Total cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | |||||||||||||||||||||
| Non-operating income (expense) | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Other expense, net | ( | ( | |||||||||||||||||||||
| Loss before income taxes | ( | ( | |||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||
Net loss attributable to redeemable non-controlling interest (Note 3) | ( | ( | |||||||||||||||||||||
Adjustment attributable to redeemable non-controlling interest (Note 3) | ( | ||||||||||||||||||||||
| Net loss attributable to nCino, Inc. | $ | ( | $ | ( | |||||||||||||||||||
| Net loss per share attributable to nCino, Inc.: | |||||||||||||||||||||||
| Basic and diluted | $ | ( | $ | ( | |||||||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Foreign currency translation | |||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||
| Comprehensive loss | ( | ( | |||||||||||||||||||||
| Less comprehensive loss attributable to redeemable non-controlling interest: | |||||||||||||||||||||||
| Net loss attributable to redeemable non-controlling interest | ( | ( | |||||||||||||||||||||
| Foreign currency translation attributable to redeemable non-controlling interest | ( | ( | |||||||||||||||||||||
| Comprehensive loss attributable to redeemable non-controlling interest | ( | ( | |||||||||||||||||||||
| Comprehensive loss attributable to nCino, Inc. | $ | ( | $ | ( | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
| Three Months Ended April 30, 2022 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance, January 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Stock issuance upon vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest | — | — | ( | — | ( | ( | |||||||||||||||||||||||||||||
| Balance, April 30, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Three Months Ended April 30, 2023 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Stock issuance upon vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
| Balance, April 30, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended April 30, | |||||||||||
| 2022 | 2023 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss attributable to nCino, Inc. | $ | ( | $ | ( | |||||||
| Net loss and adjustment attributable to redeemable non-controlling interest | ( | ||||||||||
| Net loss | ( | ( | |||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash operating lease costs | |||||||||||
| Amortization of costs capitalized to obtain revenue contracts | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Stock-based compensation | |||||||||||
| Deferred income taxes | |||||||||||
| Provision for bad debt | |||||||||||
| Net foreign currency losses | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Costs capitalized to obtain revenue contracts | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses and other current liabilities | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Acquisition of assets | ( | ||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from borrowings on revolving credit facility | |||||||||||
| Payments on revolving credit facility | ( | ( | |||||||||
| Payments of debt issuance costs | ( | ||||||||||
| Exercise of stock options | |||||||||||
| Principal payments on financing obligations | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | ||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | |||||||||
| Reconciliation of cash, cash equivalents, and restricted cash, end of period: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in prepaid expenses and other current assets | |||||||||||
| Restricted cash included in other long-term assets | |||||||||||
| Total cash, cash equivalents, and restricted cash, end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for taxes, net of refunds | $ | $ | |||||||||
| Cash paid for interest | $ | $ | |||||||||
| Supplemental disclosure of noncash investing and financing activities | |||||||||||
| Purchase of property and equipment, accrued but not paid | $ | $ | |||||||||
| Receivables from exercise of stock options | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Note 1. Organization and Description of Business
Organization: On November 16, 2021, nCino, Inc. (now nCino OpCo, Inc., "nCino OpCo") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Penny HoldCo, Inc. (now nCino, Inc., "nCino, Inc."), a Delaware corporation incorporated on November 12, 2021 as a wholly-owned subsidiary of nCino OpCo, and certain other parties. On January 7, 2022, in connection with the closing of the transactions contemplated by the Merger Agreement, Penny HoldCo, Inc. changed its name to nCino, Inc. and nCino, Inc. changed its name to nCino OpCo, Inc. and became a wholly-owned subsidiary of nCino, Inc.
Merger: On January 7, 2022, pursuant to the Merger Agreement, nCino, Inc. and nCino OpCo completed a series of mergers in which nCino, Inc. became the parent of nCino OpCo and SimpleNexus, LLC ("SimpleNexus"). Each share of nCino OpCo common stock, par value $0.0005 per share, issued and outstanding was converted into one fully paid and nonassessable share of nCino, Inc. common stock, par value $0.0005 . nCino, Inc. became the successor issuer and reporting company to nCino OpCo pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended. On January 10, 2022, shares of nCino OpCo were suspended from trading on the Nasdaq Global Select Market, and shares of nCino, Inc. commenced using nCino OpCo's trading history under the ticker symbol "NCNO".
Description of Business: The Company is a software-as-a-service ("SaaS") company that provides software applications to financial institutions to streamline employee and client interactions. The Company is headquartered in Wilmington, North Carolina and has various locations in the U.S., North America, Europe and Asia Pacific.
Fiscal Year End: The Company’s fiscal year ends on January 31.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") as set forth in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and applicable rules and regulations of the Securities Exchange Commission ("SEC") regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 28, 2023. The unaudited condensed consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries, as well as a variable interest entity in which the Company is the primary beneficiary. All intercompany accounts and transactions are eliminated.
The Company is subject to the normal risks associated with technology companies that have not demonstrated sustainable income from operations, including product development, the risk of customer acceptance and market penetration of its products and services and, ultimately, the need to attain profitability to generate positive cash resources.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal 2024 or any future period.
6
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
As of January 31, 2023, no individual customer represented over 10% of accounts receivable and, as of April 30, 2023, one individual customer represented 14 % of accounts receivable. For the three months ended April 30, 2022 and 2023, no individual customer represented more than 10% of the Company’s total revenues.
7
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
performed but not yet billed and (ii) revenues recognized from non-cancelable, multi-year orders in which fees increase annually but for which the Company is not contractually able to invoice until a future period. Accounts receivable are reported at their gross outstanding balance reduced by an allowance for estimated receivable losses, which includes allowances for doubtful accounts and a reserve for expected credit losses.
The Company records allowances for doubtful accounts based upon the credit worthiness of customers, historical experience, the age of the accounts receivable, current market and economic conditions, and supportable forecasts about the future. Relevant risk characteristics include customer size and historical loss patterns. This estimate is analyzed quarterly and adjusted as necessary.
A summary of activity in the allowance for doubtful accounts is as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Balance, beginning of period | $ | $ | |||||||||||||||||||||
| Charged to bad debt expense | |||||||||||||||||||||||
| Write-offs and other | ( | ||||||||||||||||||||||
| Translation adjustments | ( | ( | |||||||||||||||||||||
| Balance, end of period | $ | $ | |||||||||||||||||||||
Note 3. Variable Interest Entity and Redeemable Non-Controlling Interest
In October 2019, the Company entered into an agreement with Japan Cloud Computing, L.P. and M30 LLC (collectively, the “Investors”) to engage in the investment, organization, management, and operation of nCino K.K. that is focused on the distribution of the Company’s products in Japan. In October 2019, the Company initially contributed $4.7 million in cash in exchange for 51 % of the outstanding common stock of nCino K.K. As of April 30, 2023, the Company controls a majority of the outstanding common stock in nCino K.K.
All of the common stock held by the Investors is callable by the Company or puttable by the Investors at the option of the Investors or at the option of the Company beginning on the eighth anniversary of the agreement with the Investors. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of nCino K.K. and the Company and may be settled, at the Company’s discretion, with Company stock or cash or a combination of the foregoing. As a result of the put right available to the Investors, the redeemable non-controlling interests in nCino K.K. are classified outside of permanent equity in the Company’s unaudited condensed consolidated balance sheets. The estimated redemption value of the call/put option embedded in the redeemable non-controlling interest was $3.2 million at April 30, 2023.
8
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The following table summarizes the activity in the redeemable non-controlling interests for the period indicated below:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Balance, beginning of period | $ | $ | |||||||||||||||||||||
| Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest) | ( | ( | |||||||||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||||||||
| Adjustment to redeemable non-controlling interest | ( | ||||||||||||||||||||||
Stock-based compensation expense1 | |||||||||||||||||||||||
| Balance, end of period | $ | $ | |||||||||||||||||||||
1 nCino K.K. stock options granted in accordance with nCino K.K.'s equity incentive plan.
Note 4. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3. Significant unobservable inputs which are supported by little or no market activity.
The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of January 31, 2023 and April 30, 2023 because of the relatively short duration of these instruments.
The carrying amount of any outstanding borrowings on the Company's revolving credit facility approximates fair value due to the variable interest rates of the borrowings.
The Company evaluated its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. The following table summarizes the Company’s financial assets measured at fair value as of January 31, 2023 and April 30, 2023 and indicates the fair value hierarchy of the valuation:
| Fair value measurements on a recurring basis as of January 31, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | |||||||||||||||||
| Money market accounts (included in cash and cash equivalents) | $ | $ | $ | ||||||||||||||
| Time deposits (included in other long-term assets) | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
9
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
| Fair value measurements on a recurring basis as of April 30, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | |||||||||||||||||
| Money market accounts (included in cash and cash equivalents) | $ | $ | $ | ||||||||||||||
| Time deposits (included in prepaid expenses and other current assets) | |||||||||||||||||
| Time deposits (included in other long-term assets) | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
All of the Company’s money market accounts are classified within Level 1 because the Company’s money market accounts are valued using quoted market prices in active exchange markets including identical assets.
Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company's assets measured at fair value on a nonrecurring basis include the investments accounted for under the measurement alternative. There was no adjustment or impairment recognized for the three months ended April 30, 2022 and 2023, respectively.
Note 5. Revenues
Revenues by Geographic Area
Revenues by geographic region were as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| United States | $ | $ | |||||||||||||||||||||
| International | |||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||
The Company disaggregates its revenues from contracts with customers by geographic location. Revenues by geography are determined based on the region of the Company’s contracting entity, which may be different than the region of the customer. No country outside the United States represented 10% or more of total revenues.
Contract Amounts
Accounts Receivable
Accounts receivable, less allowance for doubtful accounts, is as follows as of January 31, 2023 and April 30, 2023:
| As of January 31, 2023 | As of April 30, 2023 | ||||||||||
| Trade accounts receivable | $ | $ | |||||||||
| Unbilled accounts receivable | |||||||||||
| Allowance for doubtful accounts | ( | ( | |||||||||
Other accounts receivable1 | |||||||||||
| Total accounts receivable, net | $ | $ | |||||||||
1Includes $0.1
10
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Deferred Revenue and Remaining Performance Obligations
Significant movements in the deferred revenue balance during the period consisted of increases due to payments received or due in advance prior to the transfer of control of the underlying performance obligations to the customer, which were offset by decreases due to revenues recognized in the period. During the three months ended April 30, 2023, $68.5 million of revenues were recognized out of the deferred revenue balance as of January 31, 2023.
Transaction price allocated to remaining performance obligations represents contracted revenues that have not yet been recognized, which includes both deferred revenue and amounts that will be invoiced and recognized as revenues in future periods. Transaction price allocated to the remaining performance obligation is influenced by several factors, including the timing of renewals, average contract terms, and foreign currency exchange rates. The Company applies practical expedients to exclude amounts related to performance obligations that are billed and recognized as they are delivered, optional purchases that do not represent material rights, and any estimated amounts of variable consideration that are subject to constraint.
Remaining performance obligations were $914.0 million as of April 30, 2023. The Company expects to recognize approximately 68 % of its remaining performance obligation as revenues in the next 24 months, approximately 28 % more in the following 25 to 48 months, and the remainder thereafter.
Note 6. Property and Equipment
Property and equipment, net consisted of the following:
| As of January 31, 2023 | As of April 30, 2023 | ||||||||||
| Furniture and fixtures | $ | $ | |||||||||
| Computers and equipment | |||||||||||
Buildings and land1 | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Less accumulated depreciation | ( | ( | |||||||||
| $ | $ | ||||||||||
1See Note 12 "Commitments and Contingencies."
The Company recognized depreciation expense as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Cost of subscription revenues | $ | $ | |||||||||||||||||||||
| Cost of professional services and other revenues | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total depreciation expense | $ | $ | |||||||||||||||||||||
11
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Note 7. Goodwill and Intangible Assets
Goodwill
The change in the carrying amounts of goodwill was as follows:
| Balance, January 31, 2023 | $ | ||||
| Translation adjustments | ( | ||||
| Balance, April 30, 2023 | $ | ||||
Intangible assets
Intangible assets, net are as follows:
| As of January 31, 2023 | As of April 30, 2023 | ||||||||||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Carrying Amount | Gross Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
| Developed technology | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Customer relationships | ( | ( | |||||||||||||||||||||||||||||||||
| Trademarks and trade name | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
The Company recognized amortization expense for intangible assets as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Cost of subscription revenues | $ | $ | |||||||||||||||||||||
| Cost of professional services and other revenues | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Total amortization expense | $ | $ | |||||||||||||||||||||
The expected future amortization expense for intangible assets as of April 30, 2023 is as follows:
| Fiscal Year Ending January 31, | |||||
| 2024 (remaining) | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| $ | |||||
The expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, future changes to expected asset lives of intangible assets, and other events.
12
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Note 8. Stockholders’ Equity
At April 30, 2023, the Company committed a total of 35,663,524 shares of common stock for future issuance as follows:
| Issued and outstanding stock options | |||||
| Nonvested issued and outstanding restricted stock units ("RSUs") | |||||
| Possible issuance under stock plans | |||||
Note 9. Stock-Based Compensation
Stock Options
Stock option activity for the three months ended April 30, 2023 was as follows:
| Number of Shares | Weighted Average Exercise Price | ||||||||||
| Outstanding, January 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Expired or forfeited | ( | ||||||||||
| Exercised | ( | ||||||||||
| Outstanding, April 30, 2023 | $ | ||||||||||
| Exercisable, April 30, 2023 | $ | ||||||||||
| Fully vested or expected to vest, April 30, 2023 | $ | ||||||||||
As of April 30, 2023, there was $0.04 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements under the 2014 Stock Plan ("2014 Plan") and 2019 Equity Incentive Plan (as amended and restated, "2019 Plan"). That cost is expected to be recognized over a weighted average period of 0.43 years.
Restricted Stock Units
RSU activity during the three months ended April 30, 2023 was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested, January 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Nonvested, April 30, 2023 | $ | ||||||||||
As of April 30, 2023, total unrecognized compensation expense related to non-vested RSUs was $106.6 million, adjusted for estimated forfeitures, based on the estimated fair value of the Company’s common stock at the time of grant. That cost is expected to be recognized over a weighted average period of 2.73 years.
Employee Stock Purchase Plan
The first offering period for the Employee Stock Purchase Plan ("ESPP") began on July 1, 2021 and ended on December 31, 2021. Thereafter, offering periods begin each year on January 1 and July 1.
13
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The fair value of ESPP shares during the three months ended April 30, 2022 and 2023 was estimated at the date of grant using the Black-Scholes option valuation model based on assumptions as follows for ESPP awards:
| Three Months Ended April 30, | |||||||||||
| 2022 | 2023 | ||||||||||
| Expected life (in years) | |||||||||||
| Expected volatility | |||||||||||
| Expected dividends | |||||||||||
| Risk-free interest rate | |||||||||||
As of April 30, 2023, total unrecognized compensation expense related to the ESPP was $0.4 million. That cost is expected to be recognized over the remaining term of the offering period that began on January 1, 2023 and will end on June 30, 2023.
Stock-Based Compensation Expense
Total stock-based compensation expense included in our unaudited condensed consolidated statements of operations were as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Cost of subscription revenues | $ | $ | |||||||||||||||||||||
| Cost of professional services and other revenues | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | |||||||||||||||||||||
Note 10. Leases
Operating Leases
The Company leases its facilities and a portion of its equipment under various non-cancellable agreements, which expire at various times through July 2028, some of which include options to extend for up to five years .
The components of lease expense were as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Operating lease expense | $ | $ | |||||||||||||||||||||
| Short-term lease expense | |||||||||||||||||||||||
| Variable lease expense | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
14
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Supplemental cash flow information related to operating leases were as follows:
| Three Months Ended April 30, | |||||||||||
| 2022 | 2023 | ||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||
| Operating right-of-use assets obtained in exchange for operating lease liabilities | |||||||||||
The weighted-average remaining lease term and weighted-average discount rate for the Company's operating lease liabilities as of April 30, 2023 were 3.42 years and 4.6 %, respectively.
Future minimum lease payments as of April 30, 2023 were as follows:
| Fiscal Year Ending January 31, | Operating Leases | ||||
| 2024 (remaining) | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total lease liabilities | |||||
| Less: imputed interest | ( | ||||
| Total lease obligations | |||||
| Less: current obligations | ( | ||||
| Long-term lease obligations | $ | ||||
Note 11. Revolving Credit Facility
On February 11, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, nCino OpCo (the “Borrower”), certain subsidiaries of the Company as guarantors, and Bank of America, N.A. as lender (the “Lender”), pursuant to which the Lender is providing to the Borrower a senior secured revolving credit facility of up to $50.0 million (the “Credit Facility”). The Credit Facility includes borrowing capacity available for letters of credit subject to a sublimit of $7.5 million. Any issuance of letters of credit will reduce the amount available under the Credit Facility.
Borrowings under the Credit Facility bear interest, at the Borrower’s option, at: (i) a base rate equal to the greater of (a) the Lender’s “prime rate,” (b) the federal funds rate plus 0.50 %, and (c) the Bloomberg Short Term Bank Yield Index ("BSBY") rate plus 1.00 %, plus a margin of 0.00 % (provided that the base rate shall not be less than 0.00 %); or (ii) the BSBY rate (provided that the BSBY shall not be less than 0.00 %), plus a margin of 1.00 %. The Company is also required to pay an unused commitment fee to the Lender of 0.25 % of the average daily unutilized commitments. The Company must also pay customary letter of credit fees.
Borrowings under the Credit Facility are scheduled to mature on February 11, 2024, and the Company may repay amounts borrowed any time without penalty. Borrowings under the Credit Facility may be reborrowed.
The Credit Agreement contains representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. The financial covenant requires the Company and its subsidiaries on a consolidated basis to maintain Consolidated Liquidity of not less than $50.0 million. Consolidated Liquidity is measured as the sum of 100 % of unrestricted and unencumbered cash of the Company and its domestic subsidiaries, 75 % of unrestricted and unencumbered cash of the Company’s foreign subsidiaries and the lesser of Credit Facility availability and $25.0 million. The Company is also required to maintain at least $5.0 million of the Company's cash and/or marketable securities with the Lender
15
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
which is considered restricted cash and is included in other long-term assets as of January 31, 2023 and prepaid expenses and other current assets as of April 30, 2023 on the Company's unaudited condensed consolidated balance sheets.
The Credit Facility is guaranteed by the Company and each of its current and future material domestic subsidiaries (the “Guarantors”) and secured by substantially all of the personal property, subject to customary exceptions, of the Borrower and the Guarantors, in each case, now owned or later acquired, including a pledge of all of the Borrower’s capital stock, the capital stock of all of the Company’s domestic subsidiaries, and 65 % of the capital stock of foreign subsidiaries that are directly owned by the Borrower or a Guarantor.
The Company had $30.0 million and $15.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants as of January 31, 2023 and April 30, 2023, respectively. As of April 30, 2023, the applicable interest rate was 5.91 %. The available borrowing capacity under the Credit Facility was $35.0 million as of April 30, 2023.
Note 12. Commitments and Contingencies
In addition to the operating lease commitments described in Note 10 "Leases", the Company has additional contractual commitments as described further below.
Purchase Commitments
The Company’s purchase commitments consist of non-cancellable agreements to purchase goods and services, primarily licenses and hosting services, entered into in the ordinary course of business.
Financing Obligations
The Company entered into a lease agreement for the Company's headquarters in November 2020 in connection with a new lessor acquiring the property. Due to a purchase option contained in that lease, the Company is deemed to have continuing involvement and is considered to be the owner of the Company's headquarters for accounting purposes. As a result, the Company did not meet the criteria to apply sale-leaseback accounting and therefore, recorded an asset and corresponding financing obligation for $16.3
In January 2021, the Company entered into an amendment to its November 2020 headquarters lease to provide for construction of a parking deck, which upon completion was subject to exclusive use by the Company. Due to the Company also being deemed to be the owner of the parking deck for accounting purposes, the costs associated with the construction of the parking deck were capitalized as construction in progress with a corresponding construction liability through construction. Upon completion of the parking deck in September 2021, for approximately $17.7
In April 2021, the Company entered into a new lease agreement for the construction of an additional office building that is on the same parcel of land as the Company's existing headquarters. Due to a purchase option contained in that April 2021 lease, the Company is also deemed to be the owner of the additional building for accounting purposes, the costs associated with the construction of the additional building were capitalized as construction in progress with a corresponding construction liability through construction. Upon completion of the additional building in November 2022, for approximately $22.4
The leases will be analyzed for applicable lease accounting upon expiration of the purchase option, if not exercised.
16
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Purchase commitments and future minimum lease payments required under financing obligations as of April 30, 2023 is as follows:
| Fiscal Year Ending January 31, | Purchase commitments | Financing obligations - leased facility | |||||||||
| 2024 (remaining) | $ | $ | |||||||||
| 2025 | |||||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| Total | $ | $ | |||||||||
| Residual financing obligations and assets | |||||||||||
| Less: amount representing interest | ( | ||||||||||
| Financing obligations | $ | ||||||||||
A portion of the associated lease payments are recognized as interest expense and the remainder reduces the financing obligations. The weighted-average discount rate for the Company's financing obligations as of April 30, 2023 was 5.7 %.
Indemnification
In the ordinary course of business, the Company generally includes standard indemnification provisions in its arrangements with third parties, including vendors, customers, and the Company’s directors and officers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such obligations in the accompanying unaudited condensed consolidated financial statements.
Legal Proceedings
From time to time, the Company is involved in legal proceedings or is subject to claims arising in the ordinary course of business including the following:
On February 23, 2021, the Company and certain of its officers and other employees were served with grand jury subpoenas wherein the Antitrust Division of the Department of Justice (the "DOJ") was seeking documents and information in connection with an investigation of the Company’s hiring and wage practices under U.S. federal antitrust laws. On February 8, 2023, the DOJ informed the Company that the investigation is closed. No fines, sanctions, actions, or penalties were imposed or taken against the Company or its officers or other employees in connection with the matter, and the costs the Company was incurring cooperating with the investigation have now ceased.
On March 12, 2021, a putative class action complaint was filed in the United States District Court for the Eastern District of North Carolina (the "District Court"). The sole class representative in the suit is one individual alleging a contract, combination or conspiracy between and among the Company, Live Oak Bancshares, Inc. ("Live Oak") and Apiture, Inc. ("Apiture") not to solicit or hire each other’s employees in violation of Section 1 of the Sherman Act and N.C. Gen Stat. §§ 75-1 and 75-2. The complaint seeks treble damages and additional remedies, including restitution, disgorgement, reasonable attorneys’ fees, the costs of the suit, and pre-judgment and post judgment interest. The complaint does not allege any specific damages. On April 28, 2022, the District Court approved settlements between the plaintiff and defendant Live Oak in the amount of approximately $3.9 million and unnamed party Apiture in the amount of approximately $0.8 million. Although there can be no assurance with respect to the outcome of this matter, the Company believes the alleged claims are not meritorious and intends to defend itself vigorously.
17
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
On September 26, 2022, a purported stockholder of the Company filed a complaint in the Delaware Court of Chancery in connection with the series of mergers in which the Company became the parent of nCino OpCo and SimpleNexus. The complaint, captioned City of Hialeah Employees’ Retirement System, Derivatively on Behalf of Nominal Defendants nCINO, INC. (f/k/a Penny HoldCo, Inc.) and nCINO OpCo, Inc. (f/k/a nCino, Inc.) v. INSIGHT VENTURE PARTNERS, LLC, et al., C.A. No. 2022-0846-MTZ, names as defendants, Insight Ventures Partners, LLC., Insight Holdings Group, LLC., the Company’s directors and certain officers, along with nCino, Inc. and nCino OpCo, Inc. as nominal defendants, and alleges that the members of the board of directors, controlling stockholders, and officers violated their fiduciary duties in the course of negotiating and approving the series of mergers. The complaint alleges damages in an unspecified amount. Pursuant to the rights in its bylaws and Delaware law, the Company is advancing the costs incurred by the director and officer defendants in this action, and the defendants may assert indemnification rights in respect of an adverse judgment or settlement of the action, if any.
The Company does not presently believe the above matters will have a material adverse effect on its day-to-day operations or the quality of the services, products or innovation it continues to provide to its customers. However, regardless of the outcome, legal proceedings can have an adverse impact on the Company because of the related expenses, diversion of management resources, and other factors.
Given the uncertainty and preliminary stages of these matters, the Company is unable to reasonably estimate any possible loss or range of loss that may result. Therefore, the Company has not made an accrual for the above matters in the unaudited condensed consolidated financial statements.
Other Commitments and Contingencies
The Company may be subject to audits related to its non-income taxes by tax authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. The Company accrues for any assessments if deemed probable and estimable.
Note 13. Related-Party Transactions
Note 14. Basic and Diluted Loss per Share
18
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The components of basic and diluted loss per share for periods presented are as follows (in thousands, except share and per share data):
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Basic and diluted loss per share: | |||||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
| Net loss attributable to nCino, Inc. | $ | ( | $ | ( | |||||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||||
| Basic and diluted loss per share attributable to nCino, Inc. | $ | ( | $ | ( | |||||||||||||||||||
The following potential outstanding common stock were excluded from the diluted loss per share computation because the effect would have been anti-dilutive:
| Three Months Ended April 30, | |||||||||||
| 2022 | 2023 | ||||||||||
| Stock options issued and outstanding | |||||||||||
| Nonvested RSUs issued and outstanding | |||||||||||
| Shares issuable pursuant to the ESPP | |||||||||||
Note 15. Restructuring
In the fourth quarter of fiscal 2023, the Company announced a workforce reduction of approximately 7 % and office space reductions in certain markets (collectively, the “restructuring plan”) in furtherance of its efforts to improve operating margins and advance the Company’s objective of profitable growth.
Lease termination costs were accounted for in accordance with ASC 842, Leases. The Company paid $0.8 million in the fourth quarter of fiscal 2023 to exercise an early termination clause to exit a facility during fiscal 2024, which was accounted for as a lease modification.
The Company incurred charges in the in the fourth quarter of the Company’s fiscal 2023 of $4.8 million in connection with the restructuring plan. The accrual for severance and related benefit costs of $5.0 million for terminated employees was included in accrued compensation and benefits on the consolidated balance sheets as of January 31, 2023 and was paid in the first quarter of the Company’s fiscal 2024.
19
nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The Company’s restructuring charges for the three months ended April 30, 2023 were as follows:
| Three Months Ended April 30, 2023 | |||||||||||||||||||||||
Lease exit fees1 | |||||||||||||||||||||||
| Cost of subscription revenues | $ | ||||||||||||||||||||||
| Cost of professional services and other revenues | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total | $ | ||||||||||||||||||||||
The Company had no restructuring charges for the three months ended April 30, 2022.
Note 16. Subsequent Events
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 28, 2023. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our fiscal year ends on January 31 of each year and references in this Quarterly Report on Form 10-Q to a fiscal year mean the year in which that fiscal year ends. For example, references in this Quarterly Report on Form 10-Q to "fiscal 2024" refer to the fiscal year ended January 31, 2024.
Overview
nCino is the pioneer in cloud banking. Built by bankers for bankers, the nCino Bank Operating System is a single, multi-tenant software-as-a-service (SaaS) solution that helps financial institutions ("FI") modernize, innovate and outperform. A leader in the global financial services technology industry, nCino is a proven partner that has helped more than 1,850 FIs of all sizes and complexities, including global, enterprise, regional and community banks; credit unions; new market entrants; and independent mortgage banks power distinctive experiences, drive growth efficiencies, and run with full integrity. With nCino, FIs can:
•digitally serve their clients across lines of business,
•improve financial results,
•elevate employee experience and performance,
•manage risk and compliance more effectively, and
•establish an active data, audit, and business intelligence hub.
nCino was originally founded in a bank to improve that FI’s operations and client service. After realizing that virtually all FIs were dealing with the same problems—cumbersome legacy technology, fragmented data, disconnected business functions, and a disengaged workforce made it difficult to maintain relevancy in their clients’ lives—we were spun out as a separate company in late 2011. This heritage is the foundation of our deep banking domain expertise, which differentiates us, continues to drive our strategy and makes us uniquely qualified to help FIs cross the modernization divide by providing a comprehensive solution that onboards clients, originates loans, and opens accounts on a single, cloud-based platform.
We initially focused the nCino Bank Operating System on transforming commercial and small business lending for community and regional banks in the United States ("U.S."). We introduced this solution to enterprise banks in the U.S. in 2014, and then internationally in 2017, and have subsequently expanded across North America, Europe, and Asia-Pacific ("APAC"). Throughout this market expansion, we broadened the nCino Bank Operating System by adding functionality for consumer lending, client onboarding, deposit account opening, analytics and AI/ML. In fiscal 2020, we acquired nCino Portfolio Analytics, LLC (formerly Visible Equity) and FinSuite as part of our strategy to build out our nIQ capabilities, and we established our nCino K.K joint venture to facilitate our entry into the Japanese market. Additionally, in January 2022, we acquired SimpleNexus, which expanded our capabilities to the U.S. point-of-sale mortgage market.
We generally offer our solutions on a SaaS basis under multi-year contracts and recognize subscription revenues ratably over the term of the contract. Our customers may initially purchase one of our solutions for implementing a client onboarding, loan origination, and/or deposit account opening in a specific line of business within the FI, such as commercial, small business, consumer, or mortgage. The nCino Bank Operating System is designed to scale with our customers, and once our solution is deployed, we seek to have our customers expand adoption within and across lines of business.
We sell our solutions directly through our business development managers, account executives, field sales engineers, and customer success managers. Our sales efforts in the U.S. are organized around FIs based on size, whereas
21
internationally, we focus our sales efforts by geography. As of April 30, 2023, we had 244 sales and sales support personnel in the U.S. and 73 sales and support personnel in offices outside the U.S.
To help customers go live with our solutions, we offer professional services including configuration and implementation, training, and advisory services. For enterprise FIs, we generally work with system integration ("SI") partners such as Accenture, Deloitte, and PwC for the delivery of professional services for the nCino Bank Operating System. For regional bank FIs, we work with SIs such as West Monroe Partners, and for community banks, we work with SIs or perform configuration and implementation ourselves. We expect enterprise FIs to make up a greater proportion of our nCino Bank Operating System sales. As a result, we expect the mix of our total revenues to become more heavily weighted toward subscription revenues.
Our employee headcount decreased by 76 as of April 30, 2023 compared to April 30, 2022 primarily due to our workforce reduction announced in the fourth quarter of fiscal 2023.
For the three months ended April 30, 2022 and 2023, our total revenues were $94.2 million and $113.7 million, respectively, representing a 20.7% increase. For the three months ended April 30, 2022 and 2023, our subscription revenues were $79.2 million and $97.3 million, respectively, representing a 22.9% increase. Due to our investments in growth, we recorded net losses attributable to nCino, Inc. of $30.7 million and $11.2 million for the three months ended April 30, 2022 and 2023, respectively.
Factors Affecting Our Operating Results
Market Adoption of Our Solution. Our future growth depends on our ability to expand our reach to new FI customers and increase adoption with existing customers as they broaden their use of our solutions within and across lines of business. Our success in growing our customer base and expanding adoption of our solutions by existing customers requires a focused direct sales engagement and the ability to convince key decision makers at FIs to replace legacy third-party point solutions or internally developed software with our solutions. In addition, growing our customer base will require us to increasingly penetrate markets outside the U.S., which accounted for 16.9% of total revenues for the three months ended April 30, 2023. For new customers, our sales cycles are typically lengthy, generally ranging from six to nine months for smaller FIs to 12 to 18 months or more for larger FIs. Key to landing new customers is our ability to successfully take our existing customers live and help them achieve measurable returns on their investment, thereby turning them into referenceable accounts. If we are unable to successfully address the foregoing challenges, our ability to grow our business and achieve profitability will be adversely affected, which may in turn reduce the value of our common stock.
Mix of Subscription and Professional Services Revenues. The initial deployment of our solutions by our customers requires a period of implementation and configuration services that typically range from three months to 18 months, depending on the scope. As a result, during the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues generally make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions. While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect subscription revenues will make up an increasing proportion of our total revenues as our overall business grows.
Macroeconomic Environment. We are currently operating in a rising interest rate environment as the U.S. Federal Reserve raises interest rates as a means to manage inflation. These rate increases have had an impact on the real estate market in the U.S. and specifically, the demand for mortgages and mortgage-related products and services, which has had a negative impact on our SimpleNexus business.
Additionally, liquidity issues faced by certain FIs in the U.S., including Silicon Valley Bank, Signature Bank and First Republic Bank (the "Impacted FIs") have created turmoil and uncertainty surrounding the financial services industry. These Impacted FIs are customers of ours, collectively representing less than 3% of our total revenues for the year ended January 31, 2023. We have a large and diversified customer base of all types and sizes around the globe, and no individual customer represented more than 10% of the Company's revenue for our first quarter of fiscal 2024.
We will continue to monitor the impact the macroeconomic environment may have on our business.
Continued Investment in Innovation and Growth. We have made substantial investments in product development, sales and marketing, and strategic acquisitions since our inception to achieve a leadership position in our market and grow our revenues and customer base. We intend to continue to increase our investment in product development in the coming years to
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maintain and build on this advantage. We also intend to invest in sales and marketing both in the U.S. and internationally to further grow our business. To capitalize on the market opportunity we see ahead of us, we expect to continue to optimize our operating plans for revenue growth and profitability.
Components of Results of Operations
Revenues
We derive our revenues from subscription and professional services and other revenues.
Subscription Revenues. Our subscription revenues consist principally of fees from customers for accessing our solutions and maintenance and support services that we generally offer under non-cancellable multi-year contracts, which typically range from three to five years for the nCino Bank Operating System and one to three years for SimpleNexus. Specifically, we offer:
•Client onboarding, loan origination, and deposit account opening applications targeted at a FI’s commercial, small business, and retail lines of business, for which we generally charge on a per seat basis.
•nIQ for which we generally charge based on the asset size of the customer or on a usage basis.
•Through SimpleNexus, a digital homeownership platform uniting people, systems, and stages of the mortgage process into a seamless end-to-end journey for which we generally charge on a per seat basis.
•Maintenance and support services as well as internal-use or “sandbox” development licenses, for which we generally charge as a percentage of the related subscription fees.
Our subscription revenues are generally recognized ratably over the term of the contract beginning upon activation. For new customers, we may activate a portion of seats at inception of the agreement, with the balance activated at contractually specified points in time thereafter, to pattern our invoicing after the customer’s expected rate of implementation and adoption. Where seats are activated in stages, we charge subscription fees from the date of activation through the anniversary of the initial activation date, and annually thereafter. Subscription fees associated with the nCino Bank Operating System are generally billed annually in advance while subscription fees for SimpleNexus are generally billed monthly in advance. Maintenance and support fees, as well as development licenses, are provided over the same periods as the related subscriptions, so fees are invoiced and revenues are recognized over the same periods. Subscription fees invoiced are recorded as deferred revenue pending recognition as revenues. In certain cases, we are authorized to resell access to Salesforce’s CRM solution along with the nCino Bank Operating System. When we resell such access, we charge a higher subscription price and remit a higher subscription fee to Salesforce for these subscriptions.
Professional Services and Other Revenues. Professional services and other revenues consist of fees for implementation and configuration assistance, training, and advisory services. For enterprise and larger regional FIs, we generally work with SI partners to provide the majority of implementation services for the nCino Bank Operating System, for which these SI partners bill our customers directly. We have historically delivered professional services ourselves for community banks and smaller credit unions and SimpleNexus has historically provided professional services directly to its customers. Revenues for implementation, training, and advisory services are generally recognized on a proportional performance basis, based on labor hours incurred relative to total budgeted hours. To date, our losses on professional services contracts have not been material. During the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues generally make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions. While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect to see subscription revenues make up an increasing proportion of our total revenues.
Cost of Revenues and Gross Margin
Cost of Subscription Revenues. Cost of subscription revenues consists of fees paid to Salesforce for access to the Salesforce Platform, including Salesforce’s hosting infrastructure and data center operations, along with certain integration fees paid to other third parties. When we resell access to Salesforce’s CRM solution, cost of subscription revenues also includes the subscription fees we remit to Salesforce for providing such access. We also incur costs associated with access to other platforms. In addition, cost of subscription revenues includes personnel-related costs associated with delivering maintenance
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and support services, including salaries, benefits and stock-based compensation expense, travel and related costs, amortization of acquired developed technology, and allocated overhead. Our subscription gross margin will vary from period to period as a function of the utilization of support personnel and the extent to which we recognize subscription revenues from the resale of Salesforce’s CRM solution.
Cost of Professional Services and Other Revenues. Cost of professional services and other revenues consists primarily of personnel-related costs associated with delivery of these services, including salaries, benefits and stock-based compensation expense, travel and related costs, and allocated overhead. The cost of providing professional services is significantly higher as a percentage of the related revenues than for our subscription services due to direct labor costs. The cost of professional services revenues has increased in absolute dollars as we have added new customer subscriptions that require professional services and built-out our international professional services capabilities. Realized effective billing and utilization rates drive fluctuations in our professional services and other gross margin on a period-to-period basis.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including salaries, sales commissions and incentives, benefits and stock-based compensation expense, travel and related costs. We capitalize incremental costs incurred to obtain contracts, primarily consisting of sales commissions, and subsequently amortize these costs over the expected period of benefit, which we have determined to be approximately four years. Sales and marketing expenses also include outside consulting fees, marketing programs, including lead generation, costs of our annual user conference, advertising, trade shows, other event expenses, amortization of intangible assets, and allocated overhead. We expect sales and marketing expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.
Research and Development. Research and development expenses consist primarily of salaries, benefits and stock-based compensation associated with our engineering, product and quality assurance personnel, as well as allocated overhead. Research and development expenses also include the cost of third-party contractors. Research and development costs are expensed as incurred. We expect research and development costs will decrease as a percentage of revenues as we leverage the investments we have made to date.
General and Administrative. General and administrative expenses consist primarily of salaries, benefits and stock-based compensation associated with our executive, finance, legal, human resources, information technology, compliance and other administrative personnel. General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other corporate-related expenses, and allocated overhead, as well as acquisition-related expenses, such as legal and other professional services fees. We expect general and administrative expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.
Non-Operating Income (Expense)
Interest Income. Interest income consists primarily of interest earned on our cash and cash equivalents.
Interest Expense. Interest expense consists primarily of interest related to our financing obligations along with interest expense on borrowings, commitment fees, and amortization of debt issuance costs associated with our secured revolving credit facility.
Other Expense, Net. Other expense, net consists primarily of foreign currency gains and losses, the majority of which is due to intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.
Income Tax Provision. Income tax provision consists of federal and state income taxes in the U.S. and income taxes in foreign jurisdictions.
Results of Operations
The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q. The following tables present our selected unaudited
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condensed consolidated statements of operations data for three months ended April 30, 2022 and 2023 in both dollars and as a percentage of total revenues, except as noted.
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| ($ in thousands, except share and per share amounts) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Subscription revenues | $ | 79,189 | $ | 97,340 | |||||||||||||||||||
| Professional services and other revenues | 15,022 | 16,332 | |||||||||||||||||||||
| Total revenues | 94,211 | 113,672 | |||||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||
| Cost of subscription revenues | 25,510 | 29,157 | |||||||||||||||||||||
| Cost of professional services and other revenues | 14,792 | 17,031 | |||||||||||||||||||||
| Total cost of revenues | 40,302 | 46,188 | |||||||||||||||||||||
| Gross profit | 53,909 | 67,484 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 29,339 | 29,941 | |||||||||||||||||||||
| Research and development | 29,115 | 28,195 | |||||||||||||||||||||
| General and administrative | 22,686 | 17,975 | |||||||||||||||||||||
| Total operating expenses | 81,140 | 76,111 | |||||||||||||||||||||
| Loss from operations | (27,231) | (8,627) | |||||||||||||||||||||
| Non-operating income (expense): | |||||||||||||||||||||||
| Interest income | 2 | 537 | |||||||||||||||||||||
| Interest expense | (638) | (1,379) | |||||||||||||||||||||
| Other expense, net | (1,573) | (782) | |||||||||||||||||||||
| Loss before income taxes | (29,440) | (10,251) | |||||||||||||||||||||
| Income tax provision | 563 | 1,393 | |||||||||||||||||||||
| Net loss | (30,003) | (11,644) | |||||||||||||||||||||
| Net loss attributable to redeemable non-controlling interest | (344) | (280) | |||||||||||||||||||||
| Adjustment attributable to redeemable non-controlling interest | 1,029 | (121) | |||||||||||||||||||||
| Net loss attributable to nCino, Inc. | $ | (30,688) | $ | (11,243) | |||||||||||||||||||
| Net loss per share attributable to nCino, Inc.: | |||||||||||||||||||||||
| Basic and diluted | $ | (0.28) | $ | (0.10) | |||||||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||||||||
| Basic and diluted | 109,998,637 | 112,032,536 | |||||||||||||||||||||
The Company recognized stock-based compensation expense as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||
| Cost of subscription revenues | $ | 376 | $ | 314 | |||||||||||||||||||
| Cost of professional services and other revenues | 1,871 | 1,629 | |||||||||||||||||||||
| Sales and marketing | 3,371 | 3,211 | |||||||||||||||||||||
| Research and development | 2,832 | 3,000 | |||||||||||||||||||||
| General and administrative | 4,850 | 2,711 | |||||||||||||||||||||
| Total stock-based compensation expense | $ | 13,300 | $ | 10,865 | |||||||||||||||||||
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The Company recognized amortization expense for intangible assets as follows:
| Three Months Ended April 30, | |||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||
| Cost of subscription revenues | $ | 4,262 | $ | 4,251 | |||||||||||||||||||
| Cost of professional services and other revenues | — | 82 | |||||||||||||||||||||
| Sales and marketing | 2,771 | 2,772 | |||||||||||||||||||||
| Total amortization expense | $ | 7,033 | $ | 7,105 | |||||||||||||||||||
| Three Months Ended April 30, | |||||||||||||||||||||||
| 2022 | 2023 | ||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Subscription revenues | 84.1 | % | 85.6 | % | |||||||||||||||||||
| Professional services and other revenues | 15.9 | 14.4 | |||||||||||||||||||||
| Total revenues | 100.0 | 100.0 | |||||||||||||||||||||
| Cost of revenues (percentage shown in comparison to related revenues): | |||||||||||||||||||||||
| Cost of subscription revenues | 32.2 | 30.0 | |||||||||||||||||||||
| Cost of professional services and other revenues | 98.5 | 104.3 | |||||||||||||||||||||
| Total cost of revenues | 42.8 | 40.6 | |||||||||||||||||||||
| Gross profit | 57.2 | 59.4 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 31.1 | 26.3 | |||||||||||||||||||||
| Research and development | 30.9 | 24.8 | |||||||||||||||||||||
| General and administrative | 24.1 | 15.8 | |||||||||||||||||||||
| Total operating expenses | 86.1 | 66.9 | |||||||||||||||||||||
| Loss from operations | (28.9) | (7.5) | |||||||||||||||||||||
| Non-operating income (expense): | |||||||||||||||||||||||
| Interest income | — | 0.5 | |||||||||||||||||||||
| Interest expense | (0.7) | (1.2) | |||||||||||||||||||||
| Other expense, net | (1.7) | (0.7) | |||||||||||||||||||||
| Loss before income taxes | (31.3) | (8.9) | |||||||||||||||||||||
| Income tax provision | 0.6 | 1.2 | |||||||||||||||||||||
| Net loss | (31.9) | % | (10.1) | % | |||||||||||||||||||
Comparison of the Three Months Ended April 30, 2022 and 2023
Revenues
| Three Months Ended April 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Subscription revenues | $ | 79,189 | 84.1 | % | $ | 97,340 | 85.6 | % | |||||||||||||||||||||||||||||||||||||||
| Professional services and other revenues | 15,022 | 15.9 | 16,332 | 14.4 | |||||||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 94,211 | 100.0 | % | $ | 113,672 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||
Subscription Revenues
Subscription revenues increased $18.2 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, and growth from existing customers within and across lines of business. Of the increase, 69.3% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and
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customers expanded their adoption of our solutions, and 30.7% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended April 30, 2022. Subscription revenues were 85.6% of total revenues for the three months ended April 30, 2023 compared to 84.1% of total revenues for the three months ended April 30, 2022, primarily due to growth in our installed base.
Professional Services and Other Revenues
Professional services and other revenues increased $1.3 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.
Cost of Revenues and Gross Margin
| Three Months Ended April 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues (percentage shown in comparison to related revenues): | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription revenues | $ | 25,510 | 32.2 | % | $ | 29,157 | 30.0 | % | |||||||||||||||||||||||||||||||||||||||
| Cost of professional services and other revenues | 14,792 | 98.5 | 17,031 | 104.3 | |||||||||||||||||||||||||||||||||||||||||||
| Total cost of revenues | $ | 40,302 | 42.8 | $ | 46,188 | 40.6 | |||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 53,909 | 57.2 | % | $ | 67,484 | 59.4 | % | |||||||||||||||||||||||||||||||||||||||
Cost of Subscription Revenues
Cost of subscription revenues increased $3.6 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, generating a gross margin for subscription revenues of 70.0% compared to a gross margin of 67.8% for the three months ended April 30, 2022. Costs related to Salesforce user fees increased $2.8 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $0.6 million due to costs associated with access to other platforms and data center costs. We expect the cost of subscription revenues will continue to increase in absolute dollars as the number of users of the nCino Bank Operating System grows.
Cost of Professional Services and Other Revenues
Cost of professional services and other revenues increased $2.2 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, generating a gross margin for professional services and other revenues of (4.3)% compared to a gross margin of 1.5% for the three months ended April 30, 2022. For the three months ended April 30, 2023, personnel costs, including stock-based compensation expense, increased $1.7 million for professional services compared to the three months ended April 30, 2022, mainly from an increase in headcount. The increase in cost of professional services and other revenues also included an increase of $0.4 million in allocated overhead costs due to growth supporting our business. The decrease in our professional services and other gross margin for the three months ended April 30, 2023 was primarily due to a decline in realized effective billing and utilization rates in our professional services teams.
Operating Expenses
| Three Months Ended April 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 29,339 | 31.1 | % | $ | 29,941 | 26.3 | % | |||||||||||||||||||||||||||||||||||||||
| Research and development | 29,115 | 30.9 | 28,195 | 24.8 | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 22,686 | 24.1 | 17,975 | 15.8 | |||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 81,140 | 86.1 | 76,111 | 66.9 | |||||||||||||||||||||||||||||||||||||||||||
| Loss from operations | $ | (27,231) | (28.9) | % | $ | (8,627) | (7.5) | % | |||||||||||||||||||||||||||||||||||||||
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Sales and Marketing
Sales and marketing expenses increased $0.6 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to an increase of $0.6 million in third-party professional fees and an increase of $0.4 million in sales-related travel costs. The increase in sales and marketing expenses was partially offset by a decrease of $0.3 million in personnel costs, including stock-based compensation expense, mainly from a decrease in headcount offset by compensation increases, the impact of changing our merit cycle from a work anniversary basis to an annual basis, and a decrease of $0.3 million in marketing costs.
Our sales and marketing headcount decreased by 58 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction and employees that moved to our general and administrative department due to a change in responsibilities. We expect sales and marketing expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.
Research and Development
Research and development expenses decreased $0.9 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to a decrease of $1.0 million in third-party professional fees as a result of lower contract research and development spend and a decrease of $0.4 million in personnel costs, including stock-based compensation expense, mainly from a decrease in headcount offset by compensation increases and the impact of changing our merit cycle from a work anniversary basis to an annual basis. The decrease in research and development expenses was partially offset by an increase of $0.5 million in allocated overhead costs due to growth supporting our continued business expansion.
Our research and development headcount decreased by 58 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction. We expect research and development expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.
General and Administrative
General and administrative expenses decreased $4.7 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to a decrease of $3.2 million in personnel costs, mostly attributable to a $2.1 million decrease in stock-based compensation expense, and a decrease in headcount partially offset by compensation increases and the impact of changing our merit cycle from a work anniversary basis to an annual basis. The decrease in general and administrative spend also included a decrease of $1.7 million in third party professional fees for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, mostly attributable to a decrease in third party professional fees and expenses related to acquisition costs for SimpleNexus and fees and expenses related to the government antitrust investigation and related civil action disclosed in Note 12 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q (the "Antitrust Matters"), partially offset by an increase in other professional fees. The decrease in general and administrative expenses was partially offset by an increase of $0.3 million in allocated overhead and other general and administrative costs.
Our general and administrative headcount decreased by 8 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction which was partially offset by employees that moved from our sales and marketing department to our general and administrative department due to a change in responsibilities. We expect general and administrative expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.
Non-Operating Income (Expense)
| Three Months Ended April 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 2 | — | % | $ | 537 | 0.5 | % | |||||||||||||||||||||||||||||||||||||||
| Interest expense | (638) | (0.7) | (1,379) | (1.2) | |||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | (1,573) | (1.7) | (782) | (0.7) | |||||||||||||||||||||||||||||||||||||||||||
Interest income increased $0.5 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to increase in our accounts earning interest and increased interest rates. Interest expense increased $0.7 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to borrowing
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on our revolving credit facility and an increase in our financing obligations for leases for which we are considered the owners for accounting purposes. The decrease of $0.8 million in other expense, net for the three months ended April 30, 2023 compared to the three months ended April 30, 2022 was primarily driven by intercompany loans and transactions that are denominated in currencies other than the underlying functional currency of the applicable entity.
Income Tax Provision
| Three Months Ended April 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Income tax provision | $ | 563 | 0.6 | % | $ | 1,393 | 1.2 | % | |||||||||||||||||||||||||||||||||||||||
Income tax provision was $1.4 million for the three months ended April 30, 2023 compared to a provision of $0.6 million for the three months ended April 30, 2022, and resulted in an effective tax rate of (13.6)% and (1.9)%, respectively.
We continue to maintain a valuation allowance against our deferred tax assets in most jurisdictions, including the U.S. It is determined by management when a valuation allowance should be recorded, utilizing significant judgement and the use of estimates.
We have adopted, as required, Code Section 174, as amended by the Tax Cuts and Jobs Act of 2017. This will result in the repartition of our deferred tax asset balances from net operating losses and tax credit carryforwards to non-tax attribute deferred tax balances. In addition, this may reduce our operating cash flows in future periods through cash remittances of U.S. federal and state income tax.
Non-GAAP Financial Measure
In addition to providing financial measurements based on GAAP, we provide an additional financial metric that is not prepared in accordance with GAAP (non-GAAP). Management uses this non-GAAP financial measure, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, and to evaluate our financial performance. We believe that this non-GAAP financial measure helps us to identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of the non-GAAP financial measure.
Accordingly, we believe that this financial measure reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business and provides useful information to investors and others in understanding and evaluating our operating results, and enhancing the overall understanding of our past performance and future prospects. Although the calculation of non-GAAP financial measures may vary from company to company, our detailed presentation may facilitate analysis and comparison of our operating results by management and investors with other peer companies, many of which use a similar non-GAAP financial measure to supplement their GAAP results in their public disclosures. This non-GAAP financial measure is non-GAAP operating income (loss), as discussed below.
Non-GAAP operating income (loss). Non-GAAP operating income (loss) is defined as loss from operations as reported in our unaudited condensed consolidated statements of operations excluding the impact of amortization of intangible assets, stock-based compensation expense, acquisition-related expenses, legal expenses related to certain litigation, and restructuring and related charges. See Note 15 "Restructuring" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the charges related to restructuring. Non-GAAP operating income (loss) is widely used by securities analysts, investors, and other interested parties to evaluate the profitability of companies. Non-GAAP operating income (loss) eliminates potential differences in performance caused by these items that are not indicative of the Company's ongoing operating performance and hinders comparability with prior and future performance.
This non-GAAP financial measure does not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP. There are limitations in the use of non-GAAP measures because they do not include all of the expenses that must be included under GAAP and because they involve the exercise of judgment concerning exclusions of items from the comparable non-GAAP financial measure. In addition, other companies may use other measures to evaluate their performance, or may calculate non-GAAP measures differently, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
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The following table reconciles non-GAAP operating income (loss) to loss from operations, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):
| Three Months Ended April 30, | |||||||||||||||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||||||||||||||
| GAAP loss from operations | $ | (27,231) | $ | (8,627) | |||||||||||||||||||
| Adjustments | |||||||||||||||||||||||
| Amortization of intangible assets | 7,033 | 7,105 | |||||||||||||||||||||
| Stock-based compensation expense | 13,300 | 10,865 | |||||||||||||||||||||
| Acquisition-related expenses | 1,497 | 211 | |||||||||||||||||||||
Litigation expenses1 | 1,732 | 1,145 | |||||||||||||||||||||
| Restructuring and related charges | — | 239 | |||||||||||||||||||||
| Total adjustments | 23,562 | 19,565 | |||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | (3,669) | $ | 10,938 | |||||||||||||||||||
1Represents legal expenses related to the Antitrust Matters and a shareholder derivative lawsuit.
Liquidity and Capital Resources
As of April 30, 2023, we had $98.1 million in cash and cash equivalents, and an accumulated deficit of $321.7 million. Our net losses have been driven by our investments in developing the nCino Bank Operating System, expanding our sales and marketing organization, and scaling our finance and administrative functions to support our rapid growth. We expect to continue to incur operating losses on a GAAP basis for the foreseeable future.
To date, we have funded our capital needs through issuances of common stock including our initial public offering in July 2020, operating cash flows, and during fiscal 2023, our revolving line of credit. We generally bill and collect from our customers annually in advance. Our billings are subject to seasonality, with billings in the first and fourth quarters of our fiscal year substantially higher than in the second and third quarters. Because we recognize revenues ratably, our deferred revenue balance mirrors the seasonality of our billings. In addition, our advanced billing and collection coupled with our recent growth has resulted in our cash used in operating activities generally being less than our net operating losses in recent periods.
On February 11, 2022, we entered into the Credit Facility of up to $50.0 million. We borrowed and repaid $20.0 million under the Credit Facility during the three months ended April 30, 2022 and borrowed $30.0 million during the three months ended October 31, 2022. We repaid $15.0 million under the Credit Facility during the three months ended April 30, 2023. As of April 30, 2023, the Company had $15.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants. See Note 11 "Revolving Credit Facility" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q for more information.
We believe that current cash and cash equivalents as well as borrowings available under the Credit Facility will be sufficient to fund our operations and capital requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts to enhance the nCino Bank Operating System and introduce new applications, market acceptance of our solutions, the continued expansion of our sales and marketing activities, capital expenditure requirements, and any potential future acquisitions. We may from time-to-time seek to raise additional capital to support our growth. Any equity financing we may undertake could be dilutive to our existing stockholders, and any debt financing we may undertake could require debt service and financial and operational covenants that could adversely affect our business. There is no assurance we would be able to obtain future financing on acceptable terms or at all.
nCino K.K.
In fiscal 2020, we established nCino K.K., a Japanese company in which we own a controlling interest, for purposes of facilitating our entry into the Japanese market. We have consolidated the results of operations and financial condition of nCino K.K. since its inception. Pursuant to an agreement with the holders of the non-controlling interest in nCino K.K., beginning in 2027 we may redeem the non-controlling interest, or be required to redeem such interest by the holders thereof, based on a prescribed formula derived from the relative revenues of nCino K.K. and the Company. The balance of the redeemable non-controlling interest is reported on our balance sheet below total liabilities but above stockholders’ equity at the
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greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. As of January 31, 2023 and April 30, 2023, the redeemable non-controlling interest was $3.6 million and $3.2 million, respectively.
As part of our joint venture obligations, we may be required to make an additional cash capital contribution of up to $5.0 million to nCino K.K. during fiscal 2024.
Cash Flows
Summary Cash Flow information for the three months ended April 30, 2022 and 2023 are set forth below:
| Three Months Ended April 30, | |||||||||||
| ($ in thousands) | 2022 | 2023 | |||||||||
| Net cash provided by operating activities | $ | 1,248 | $ | 31,303 | |||||||
| Net cash used in investing activities | (4,694) | (1,961) | |||||||||
| Net cash provided by (used in) financing activities | 258 | (13,856) | |||||||||
Net Cash Provided by Operating Activities
The $31.3 million provided by operating activities in the three months ended April 30, 2023 reflects our net loss of $11.6 million, offset by $24.7 million in non-cash charges and $18.3 million generated by changes in working capital accounts. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization, amortization of costs capitalized to obtain revenue contracts, foreign currency losses related to intercompany loans and transactions, and non-cash operating lease costs. Cash generated by working capital accounts was principally a function of a $18.3 million decrease in accounts receivable due to the timing of billings and collections from customers and a $16.8 million increase in deferred revenue, as we expanded our customer base and renewed existing customers. The cash generated by working capital accounts was partially offset by a $13.2 million decrease in accrued expenses and other current liabilities which includes payments of approximately $5.0 million for severance and other employee costs associated with the restructuring plan. Additional offsets were a $1.2 million increase in prepaid expenses and other assets, payments of $1.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $1.0 million decrease in operating lease liabilities, and a $0.3 million decrease in accounts payable.
The $1.2 million provided by operating activities in the three months ended April 30, 2022 reflects our net loss of $30.0 million, offset by $26.8 million in non-cash charges and $4.5 million generated by changes in working capital accounts. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization, amortization of costs capitalized to obtain revenue contracts, foreign currency losses related to intercompany loans and transactions, and non-cash operating lease costs. Cash generated by working capital accounts was principally a function of a $22.4 million increase in deferred revenue, as we expanded our customer base and renewed existing customers, and a $0.5 million decrease in accounts receivable due to the timing of billings. The cash generated by working capital accounts was partially offset by a $10.8 million decrease in accrued expenses and other current liabilities, a $2.3 million decrease in accounts payable, payments of $2.2 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $2.0 million increase in prepaid expenses and other assets, and a $1.2 million decrease in operating lease liabilities.
Net Cash Used in Investing Activities
The $2.0 million used in investing activities in the three months ended April 30, 2023 was comprised of $1.6 million for the purchase of property and equipment and leasehold improvements to support the expansion of our business and $0.4 million for the final cash considerations relating to an asset acquisition completed in August 2022. We used $4.7 million in investing activities in the three months ended April 30, 2022 for the purchase of property and equipment and leasehold improvements to support the expansion of our business.
Net Cash Provided by (Used in) Financing Activities
The $(13.9) million used in financing activities in the three months ended April 30, 2023 was comprised principally of payments of $15.0 million on the Credit Facility and principal payments of $0.2 million on financing obligations. The cash used in financing activities was partially offset by $1.4 million of proceeds from the exercise of stock options. The $0.3 million provided by financing activities in the three months ended April 30, 2022 was comprised principally of $0.8 million of proceeds
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from the exercise of stock options, partially reduced by payments of debt issuance costs of $0.4 million, and principal payments of $0.2 million on financing obligations. We borrowed and repaid $20.0 million under our revolving credit facility during the three months ended April 30, 2022.
Contractual Obligations and Commitments
Our estimated future obligations principally consist of leases related to our facilities, purchase obligations related primarily to licenses and hosting services, financing obligations for leases for which we are considered the owners for accounting purposes and the Credit Facility. See Note 10 "Leases," Note 11 "Revolving Credit Facility," and Note 12 "Commitments and Contingencies" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be significant.
There have been no material changes in our critical accounting policies or estimates as compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 28, 2023.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted, if applicable.
-Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
At April 30, 2023, we had cash, cash equivalents and restricted cash of $103.5 million, which consisted primarily of bank deposits and money market funds. Interest-earning instruments carry a degree of interest rate risk. However, our historical interest income has not fluctuated significantly. A hypothetical 10% change in interest rates would not have had a material impact on our financial results included in this Quarterly Report on Form 10-Q. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
On February 11, 2022, we entered into a senior secured revolving credit facility of up to $50.0 million. Borrowings bear interest, at the Company's option, at: (i) a base rate equal to the greater of (a) the lender’s “prime rate,” (b) the federal funds rate plus 0.50%, and (c) the BSBY rate plus 1.00%, plus a margin of 0.00% (provided that the base rate shall not be less than 0.00%); or (ii) the BSBY rate (provided that the BSBY shall not be less than 0.00%), plus a margin of 1.00%. As a result, we are exposed to increased interest rate risk as we make draws. At April 30, 2023, we had $15.0 million outstanding under the Credit Facility. We are exposed to the risk of increasing interest rates as the Credit Facility is at a variable interest rate. As of April 30, 2023, the applicable interest rate was 5.91%. A hypothetical 100 basis point change in interest rates would not have had a material impact on our financial results included in this Quarterly Report on Form 10-Q. See Note 11, "Revolving Credit Facility" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
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Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar and the functional currency of each of our subsidiaries is its local currency. The assets and liabilities of each of our subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Revenues and expenses are translated using the average exchange rate for the relevant period. Equity transactions are translated using historical exchange rates. Decreases in the relative value of the U.S. dollar to other currencies may negatively affect revenues and other operating results as expressed in U.S. dollars. Foreign currency translation adjustments are accounted for as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Gains or losses due to transactions in foreign currencies are included in non-operating income (expense), other in our unaudited condensed consolidated statements of operations. Furthermore, our customers outside of the U.S. typically pay us in local currency. We have not engaged in hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on operating results or financial condition.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures at April 30, 2023, the last day of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, at April 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 12 "Commitments and Contingencies" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding certain legal proceedings in which we are involved, which is incorporated by reference into this Part II, Item 1.
Item 1A. Risk Factors
There are no material changes to the risk factors in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 28, 2023 under the heading "Risk Factors." You should consider and read carefully these risks, as well as other information included in this Quarterly Report on Form 10-Q, including the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our unaudited condensed consolidated financial statements and related notes before making an investment decision with respect to our common stock. Those risks are not the only ones we face. The occurrence of any of those risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, and results of operation. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
EXHIBIT INDEX
| Incorporated by Reference | ||||||||||||||||||||
| Exhibit Number | Description of Exhibit | Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||||||||||
| 3.1 | 8-K12B | 001-41211 | 3.1 | January 10, 2022 | ||||||||||||||||
| 3.2 | 8-K | 001-41211 | 3.1 | November 29, 2022 | ||||||||||||||||
| 10.1 | 10-K | 001-41211 | 10.25 | March 28, 2023 | ||||||||||||||||
| 10.2 | 10-K | 001-41211 | 10.26 | March 28, 2023 | ||||||||||||||||
| 31.1 | X | |||||||||||||||||||
| 31.2 | X | |||||||||||||||||||
| 32.1* | X | |||||||||||||||||||
| 32.2* | X | |||||||||||||||||||
| 101.INS | XBRL Instance Document | X | ||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X | ||||||||||||||||||
| * | The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates by reference. | |||||||||||||||||||
35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| nCino, Inc. | |||||||||||
| Date: May 31, 2023 | By: | /s/ Pierre Naudé | |||||||||
| Pierre Naudé | |||||||||||
| Chairman and Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
| Date: May 31, 2023 | By: | /s/ Gregory D. Orenstein | |||||||||
| Gregory D. Orenstein | |||||||||||
| Chief Financial Officer & Treasurer | |||||||||||
| (Principal Financial Officer) | |||||||||||
36
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Pierre Naudé, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of nCino, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: May 31, 2023 | By: | /s/ Pierre Naudé | |||||||||
| Pierre Naudé | |||||||||||
| Chairman and Chief Executive Officer | |||||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory D. Orenstein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of nCino, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: May 31, 2023 | By: | /s/ Gregory D. Orenstein | |||||||||
| Gregory D. Orenstein | |||||||||||
| Chief Financial Officer & Treasurer | |||||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of nCino, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 31, 2023 | By: | /s/ Pierre Naudé | |||||||||
| Pierre Naudé | |||||||||||
| Chairman and Chief Executive Officer | |||||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of nCino, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 31, 2023 | By: | /s/ Gregory D. Orenstein | |||||||||
| Gregory D. Orenstein | |||||||||||
| Chief Financial Officer & Treasurer | |||||||||||