nCino, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm ( PCAOB ID: 42 ) 59 Consolidated Balance Sheets 62 Consolidated Statements of Operations 63 Consolidated Statements of Comprehensive Loss 64 Consolidated Statements of Stockholders' Equity 65 Consolidated Statements of Cash Flows 66 Notes to Consolidated Financial Statements 68 58 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of nCino, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of nCino, Inc. (the Company) as of January 31, 2021 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes, as well as the financial statement schedule listed in the Index at Item 15.2. (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2021 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2022, in conformity with U.S. generally accepted accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 31, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. 59 Table of Contents Revenue Recognition Description of the Matter As discussed in Note 2, the Company derives revenues primarily from subscription services and professional services. Revenues are recognized when a contract exists between the Company and a customer and upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of subscription and professional services, which may be capable of being distinct and accounted for as separate performance obligations, or in the case of offerings such as subscription services and support, accounted for as a single performance obligation. For contracts that contain multiple performance obligations, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. Auditing the Company’s accounting for revenue recognition was challenging given the considerations required to evaluate the terms and conditions in the customer contracts and to identify distinct performance obligations, and the estimation of the standalone selling price (SSP) of each performance obligation which is based in part on customer pricing, customer demographic and geographic area where services are sold. The combination of these factors resulted in a significant level of audit effort. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process, including controls designed to mitigate the risk of override of controls. This included testing controls over management’s review of customer contracts and review of manual revenue journal entries. To test the Company’s accounting for revenue recognition, we performed audit procedures that included, among others, data analytics to validate that the revenue recorded correlated to the deferred revenue and accounts receivable amounts and the accounts receivable amounts ultimately settled in cash. Our audit procedures also included selecting a sample of revenue transactions and evaluating contract terms and conditions in accordance with ASC 606. This testing included reperforming the Company’s allocation of transaction price to the respective performance obligations, testing management’s SSP assumptions and calculations, as well as testing the mathematical accuracy and underlying data including its completeness, used in the calculations. We also assessed the appropriateness of the related disclosures in the consolidated financial statements. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. Raleigh, North Carolina March 31, 2022 60 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of nCino, Inc. Opinion on Internal Control Over Financial Reporting We have audited nCino, Inc.’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, nCino, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on the COSO criteria. As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SimpleNexus, LLC, acquired on January 7, 2022, which is included in the fiscal 2022 consolidated financial statements of the Company and accounted for approximately 1.3% of total assets as of January 31, 2022 and 1.4% of revenues and 7.3% of net loss for the fiscal year ended January 31, 2022. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of SimpleNexus, LLC. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of January 31, 2021 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes, as well as the financial statement schedule listed in the Index at Item 15.2., and our report dated March 31, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Raleigh, North Carolina March 31, 2022 61 Table of Contents nCino, Inc. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) January 31, 2021 January 31, 2022 Assets Current assets Cash and cash equivalents (VIE: $ 7,425 and $ 4,183 at January 31, 2021 and January 31, 2022, respectively) $ 371,425 $ 88,014 Accounts receivable, less allowance for doubtful accounts of $ 88 and $ 151 at January 31, 2021 and January 31, 2022, respectively 55,517 74,528 Costs capitalized to obtain revenue contracts, current portion, net 4,864 7,583 Prepaid expenses and other current assets 10,425 13,384 Total current assets 442,231 183,509 Property and equipment, net 29,943 60,677 Operating lease right-of-use assets, net — 13,170 Costs capitalized to obtain revenue contracts, noncurrent, net 10,191 16,403 Goodwill 57,149 841,487 Intangible assets, net 23,137 180,122 Investment — 4,031 Other long-term assets 750 1,615 Total assets $ 563,401 $ 1,301,014 Liabilities, redeemable non-controlling interest, and stockholders’ equity Current liabilities Accounts payable $ 1,634 $ 11,366 Accounts payable, related party 1 4,363 — Accrued compensation and benefits 15,885 21,454 Accrued expenses and other current liabilities 4,142 14,744 Deferred rent, current portion 203 — Deferred revenue, current portion 89,141 122,643 Financing obligations, current portion 324 621 Operating lease liabilities, current portion — 3,548 Total current liabilities 115,692 174,376 Operating lease liabilities, noncurrent — 11,198 Deferred income taxes, noncurrent 368 1,675 Deferred rent, noncurrent 1,486 — Deferred revenue, noncurrent 946 44 Financing obligations, noncurrent 15,939 33,478 Construction liability, noncurrent — 9,736 Total liabilities 134,431 230,507 Commitments and contingencies (Notes 9, 15, 16 and 18) Redeemable non-controlling interest (Note 3) 3,791 2,882 Stockholders’ equity Preferred stock, $ 0.001 par value; 10,000,000 shares authorized, and none issued and outstanding as of January 31, 2021 and January 31, 2022 — — Common stock, $ 0.0005 par value; 500,000,000 shares authorized as of January 31, 2021 and January 31, 2022; 93,643,759 and 109,778,542 shares issued and outstanding as of January 31, 2021 and January 31, 2022, respectively 47 55 Additional paid-in capital 585,956 1,277,258 Accumulated other comprehensive income (loss) 240 ( 72 ) Accumulated deficit ( 161,064 ) ( 209,616 ) Total stockholders’ equity 425,179 1,067,625 Total liabilities, redeemable non-controlling interest, and stockholders’ equity $ 563,401 $ 1,301,014 1 See Note 16 "Related-Party Transactions". The accompanying notes are an integral part of these consolidated financial statements . 62 Table of Contents nCino, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) Fiscal Year Ended January 31, 2020 2021 2022 Revenues Subscription (related parties $ 7,768 , $ 2,439 , and $ 0 , respectively) $ 103,265 $ 162,439 $ 224,854 Professional services and other 34,915 41,854 49,011 Total revenues 138,180 204,293 273,865 Cost of revenues Subscription (related party $ 22,844 , $ 34,831 , and $ 41,404 , respectively) 1 31,062 47,969 64,508 Professional services and other 33,008 40,166 46,905 Total cost of revenues 64,070 88,135 111,413 Gross profit 74,110 116,158 162,452 Operating expenses Sales and marketing 44,440 59,731 82,901 Research and development 35,304 58,263 79,363 General and administrative 22,536 40,772 71,545 Total operating expenses 102,280 158,766 233,809 Loss from operations ( 28,170 ) ( 42,608 ) ( 71,357 ) Non-operating income (expense) Interest income 988 361 194 Interest expense — ( 130 ) ( 1,514 ) Other income (expense), net 33 1,693 ( 1,277 ) Loss before income taxes ( 27,149 ) ( 40,684 ) ( 73,954 ) Income tax provision (benefit) 586 586 ( 23,833 ) Net loss ( 27,735 ) ( 41,270 ) ( 50,121 ) Net loss attributable to redeemable non-controlling interest (Note 3) ( 141 ) ( 1,130 ) ( 1,569 ) Adjustment attributable to redeemable non-controlling interest (Note 3) — 396 894 Net loss attributable to nCino, Inc. $ ( 27,594 ) $ ( 40,536 ) $ ( 49,446 ) Net loss per share attributable to nCino, Inc.: Basic and diluted $ ( 0.35 ) $ ( 0.46 ) $ ( 0.51 ) Weighted average number of common shares outstanding: Basic and diluted 78,316,794 87,678,323 96,722,464 1 See Note 9 "Reseller Agreement" and Note 16 "Related-Party Transactions". The accompanying notes are an integral part of these consolidated financial statements . 63 Table of Contents nCino, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Fiscal Year Ended January 31, 2020 2021 2022 Net loss $ ( 27,735 ) $ ( 41,270 ) $ ( 50,121 ) Other comprehensive income (loss): Foreign currency translation ( 403 ) 817 ( 568 ) Other comprehensive income (loss) ( 403 ) 817 ( 568 ) Comprehensive loss ( 28,138 ) ( 40,453 ) ( 50,689 ) Less comprehensive loss attributable to redeemable non-controlling interest: Net loss attributable to redeemable non-controlling interest ( 141 ) ( 1,130 ) ( 1,569 ) Foreign currency translation attributable to redeemable non-controlling interest ( 16 ) 169 ( 256 ) Comprehensive loss attributable to redeemable non-controlling interest ( 157 ) ( 961 ) ( 1,825 ) Comprehensive loss attributable to nCino, Inc. $ ( 27,981 ) $ ( 39,492 ) $ ( 48,864 ) The accompanying notes are an integral part of these consolidated financial statements . 64 Table of Contents nCino, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) Common Stock Voting Common Stock Non-voting Common Stock Additional Paid-in Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Balance, January 31, 2019 — $ — 70,186,189 $ 35 5,701,435 $ 3 $ 170,771 $ ( 21 ) $ ( 104,752 ) $ 66,036 Cumulative-effect adjustment from adoption of accounting standard — — — — — — — — 11,422 11,422 Stock issuance, net of issuance costs of $ 52 — — 3,448,276 2 229,885 — 79,946 — — 79,948 Stock issuance related to business combinations — — 1,502,772 1 — — 25,203 — — 25,204 Contingent consideration related to business combinations — — — — — — 5,857 — — 5,857 Exercise of stock options — — 458,770 — ( 1 ) — 1,042 — — 1,042 Stock-based compensation — — — — — — 5,745 — — 5,745 Other comprehensive loss — — — — — — — ( 387 ) — ( 387 ) Net loss attributable to nCino, Inc. — — — — — — — ( 27,594 ) ( 27,594 ) Balance, January 31, 2020 — — 75,596,007 38 5,931,319 3 288,564 ( 408 ) ( 120,924 ) 167,273 Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions 9,269,000 5 — — — — 268,370 — — 268,375 Costs in connection with initial public offering — — — — — ( 4,534 ) — — ( 4,534 ) Exercise of stock options 1,983,169 1 325,530 — — — 8,744 — — 8,745 Reclassification of voting and non-voting common stock 81,852,856 41 ( 75,921,537 ) ( 38 ) ( 5,931,319 ) ( 3 ) — — — — Stock issuance upon vesting of restricted stock units 253,042 — — — — — — — — — Stock issuance for contingent consideration 285,692 — — — — — — — — — Stock-based compensation — — — — — — 25,208 — — 25,208 Other comprehensive income — — — — — — — 648 — 648 Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — — — — — ( 396 ) — ( 40,140 ) ( 40,536 ) Balance, January 31, 2021 93,643,759 47 — — — — 585,956 240 ( 161,064 ) 425,179 Stock issuance related to business combination, net of issuance costs of $ 210 12,762,146 7 — — — — 647,292 — — 647,299 Exercise of stock options 2,758,904 1 — — — — 13,906 — — 13,907 Stock issuance upon vesting of restricted stock units 559,191 — — — — — — — — — Stock issuance under the employee stock purchase plan 54,542 — — — — — 2,543 — — 2,543 Stock-based compensation — — — — — — 28,455 — — 28,455 Other comprehensive loss — — — — — — — ( 312 ) — ( 312 ) Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — — — — — ( 894 ) — ( 48,552 ) ( 49,446 ) Balance, January 31, 2022 109,778,542 $ 55 — $ — — $ — $ 1,277,258 $ ( 72 ) $ ( 209,616 ) $ 1,067,625 The accompanying notes are an integral part of these consolidated financial statements . 65 Table of Contents nCino, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Fiscal Year Ended January 31, 2020 2021 2022 Cash flows from operating activities Net loss attributable to nCino, Inc. $ ( 27,594 ) $ ( 40,536 ) $ ( 49,446 ) Net loss and adjustment attributable to redeemable non-controlling interest ( 141 ) ( 734 ) ( 675 ) Net loss ( 27,735 ) ( 41,270 ) ( 50,121 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 4,609 7,431 10,006 Non-cash operating lease costs — — 2,534 Amortization of costs capitalized to obtain revenue contracts 3,243 4,682 5,779 Stock-based compensation 5,745 25,208 28,477 Deferred income taxes 195 168 ( 24,280 ) Provision for (recovery of) bad debt ( 105 ) 100 90 Net foreign currency (gains) losses — ( 1,691 ) 1,860 Change in operating assets and liabilities: Accounts receivable ( 9,289 ) ( 20,614 ) ( 13,507 ) Accounts receivable, related parties ( 4,867 ) 9,201 — Costs capitalized to obtain revenue contracts ( 5,631 ) ( 8,967 ) ( 11,045 ) Prepaid expenses and other assets ( 1,628 ) ( 3,342 ) ( 2,503 ) Accounts payable ( 65 ) 346 8,796 Accounts payable, related parties 1,184 956 ( 4,363 ) Accrued expenses and other current liabilities 2,351 6,740 7,311 Deferred rent 1,045 ( 52 ) — Deferred revenue 20,873 38,339 24,317 Deferred revenue, related parties 1,077 ( 8,013 ) — Operating lease liabilities — — ( 2,580 ) Net cash provided by (used in) operating activities ( 8,998 ) 9,222 ( 19,229 ) Cash flows from investing activities Acquisition of business, net of cash acquired ( 52,267 ) — ( 268,994 ) Purchases of property and equipment ( 5,760 ) ( 4,338 ) ( 5,463 ) Purchase of investment — — ( 4,031 ) Net cash used in investing activities ( 58,027 ) ( 4,338 ) ( 278,488 ) Cash flows from financing activities Proceeds from initial public offering, net of underwriting discounts and commissions — 268,375 — Payments of costs related to initial public offering — ( 2,765 ) — Investment from redeemable non-controlling interest 4,513 — — Proceeds from stock issuance 80,000 — — Stock issuance costs ( 52 ) — ( 210 ) Payments of deferred costs ( 1,412 ) — — Exercise of stock options 1,042 8,745 13,907 Proceeds from stock issuance under the employee stock purchase plan — — 2,543 Contingent consideration payments — ( 197 ) — Principal payments on financing obligations — ( 37 ) ( 318 ) Net cash provided by financing activities 84,091 274,121 15,922 Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash ( 229 ) 1,236 ( 1,231 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 16,837 280,241 ( 283,026 ) Cash and cash equivalents, beginning of period 74,347 91,184 371,425 Cash, cash equivalents, and restricted cash, end of period $ 91,184 $ 371,425 $ 88,399 Reconciliation of cash, cash equivalents, and restricted cash, end of period: Cash and cash equivalents $ 91,184 $ 371,425 $ 88,014 Restricted cash included in other long-term assets — — 385 Total cash, cash equivalents, and restricted cash, end of period $ 91,184 $ 371,425 $ 88,399 66 Table of Contents nCino, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In thousands) Fiscal Year Ended January 31, 2020 2021 2022 Supplemental disclosure of cash flow information Cash paid during the year for taxes, net of refunds $ 369 $ 631 $ 1,003 Cash paid during the year for interest $ — $ 130 $ 1,514 Supplemental disclosure of noncash investing and financing activities Purchase of property and equipment, accrued but not paid $ 45 $ 14 $ 11,225 Building-leased facility acquired through financing obligation $ — $ 16,300 $ 18,154 Deferred costs, accrued but not paid $ 357 $ — $ — Fair value of common stock issued as consideration for business acquisition $ 25,204 $ — $ 647,509 Costs related to initial public offering, reclassified from other long term assets to equity $ — $ 1,769 $ — Fair value of contingent consideration in connection with business acquisition in other long-term liabilities $ 197 $ — $ — Fair value of contingent consideration in connection with business acquisition included in equity $ 5,857 $ — $ — Accrued purchase price related to acquisition $ — $ — $ 54 The accompanying notes are an integral part of these consolidated financial statements . 67 Table of Contents nCino, Inc. NOTES TO 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.), 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. nCino OpCo was initially organized as a North Carolina limited liability company named BANKR, LLC on December 13, 2011. On April 3, 2012, BANKR, LLC was renamed nCino, LLC which was reincorporated as nCino, Inc. (now nCino OpCo) in the State of Delaware on December 18, 2013. Merger: On January 7, 2022, pursuant to the Merger Agreement, nCino, Inc. (formerly Penny HoldCo, 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". In these consolidated financial statements, nCino Opco (formerly nCino, Inc.) and nCino, Inc. (formerly Penny HoldCo, Inc.), are collectively referred to as the "Company". See Note 7 "Business Combinations" for additional information regarding the SimpleNexus acquisition. 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 offices in Lehi and Salt Lake City, Utah; Macon, Georgia; London, United Kingdom; Sydney and Melbourne, Australia; Toronto, Canada; and Tokyo, Japan. Initial Public Offering: On July 13, 2020, the Company's Registration Statement on Form S-1 relating to the initial public offering ("IPO") of its common stock was declared effective by the Securities and Exchange Commission ("SEC"). Prior to the closing of the IPO, the Company's certificate of incorporation was amended such that all outstanding shares of voting common stock and non-voting common stock were reclassified into a single class of stock designated as common stock which has one vote per share. In addition, effective upon the closing of the IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to issue, par value $ 0.0005 , was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to issue, par value $ 0.001 , was increased to 10,000,000 shares. In connection with the IPO, the Company issued and sold 9,269,000 shares of common stock (including shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) at a public offering price of $ 31.00 per share for net proceeds of $ 268.4 million, after deducting underwriters' discounts and commissions. Prior to the IPO, deferred offering costs, which consisted of legal, accounting, consulting and other direct fees, and costs relating to the IPO, were capitalized in other long-term assets. Upon consummation of the IPO, these costs were offset against the proceeds from the IPO and recorded in additional paid-in capital. Secondary Public Offering: On October 13, 2020, the Company completed an underwritten secondary public offering of 7,712,985 shares of common stock (including shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) (the "Secondary Offering") held by certain stockholders of the Company (the "Selling Stockholders"). The Company did not offer any shares of common stock in the Secondary Offering and did not receive any proceeds from the sale of the shares of common stock by the Selling Stockholders. The Company incurred costs of $ 1.0 million 68 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) in relation to the Secondary Offering for the fiscal year ended January 31, 2021 and such costs are recorded as a component of general and administrative expenses on the consolidated statements of operations. The Company received $ 1.7 million in cash (excluding withholding taxes) in connection with the exercise of 554,112 options by certain stockholders participating in the Secondary Offering. In addition, concurrent with the pricing of the Secondary Offering, the underwriters in the Company's IPO released an additional 367,561 shares from lock-up agreements, signed in connection with the IPO, with stockholders who did not participate in the Secondary Offering. The release consisted of both outstanding shares and shares subject to options. 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 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"). The 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. See the variable interest entity section below and Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest entity. 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. Effective February 1, 2021, the Company adopted the requirement of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) using the alternative transition method. Under this method, the Company is not required to restate or disclose the effects of applying this ASU for comparative periods. See the Recently Adopted Accounting Guidance section for the adoption of ASU 2016-02, Leases (Topic 842). Reclassification: The Company reclassified certain prior year amounts to conform to the current year presentation. These reclassifications had no impact on the previously reported total assets, liabilities, stockholder’s deficit, or net loss. Variable Interest Entity: The Company holds an interest in a Japanese company (“nCino K.K.”) that is considered a variable interest entity ("VIE"). nCino K.K. is considered a VIE as it has insufficient equity capital to finance its activities without additional financial support. The Company is the primary beneficiary of nCino K.K. as it has the power over the activities that most significantly impact the economic performance of nCino K.K. and has the obligation to absorb expected losses and the right to receive expected benefits that could be significant to nCino K.K., in accordance with accounting guidance. As a result, the Company consolidated nCino K.K. and all significant intercompany accounts have been eliminated. The Company will continue to assess whether it has a controlling financial interest and whether it is the primary beneficiary at each reporting period. Other than the Company’s equity investment, the Company has not provided financial or other support to nCino K.K. that it was not contractually obligated to provide. The assets of the VIE can only be used to settle the obligations of the VIE and the creditors of the VIE do not have recourse to the Company. The assets and liabilities of the VIE were not significant to the Company’s consolidated financial statements except for cash which is reflected on the consolidated balance sheets. See Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest. Redeemable Non-Controlling Interest: Redeemable non-controlling interest relates to minority investors of nCino K.K. An agreement with the minority investors of nCino K.K. contains redemption features whereby the interest held by the minority investors are redeemable either at the option of the (i) minority investors or (ii) the Company, both beginning on the eighth anniversary of the initial capital contribution. If the interest of the minority investors were to be redeemed under this agreement, the Company would be required to redeem the interest 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 at the 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. The resulting changes in the estimated redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained 69 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) earnings, additional paid-in-capital. These interests are presented on the consolidated balance sheets outside of equity under the caption “Redeemable non-controlling interest.” Use of Estimates: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by the Company’s management are used for, but not limited to, revenue recognition including determining the nature and timing of satisfaction of performance obligations, variable consideration, stand-alone selling price, and other revenue items requiring significant judgement; the average period of benefit associated with costs capitalized to obtain revenue contracts; fair value of assets acquired and liabilities assumed for business combinations; the useful lives of intangible assets; the valuation allowance on deferred tax assets; redemption value of redeemable non-controlling interest; and stock-based compensation. The Company assesses these estimates on a regular basis using historical experience and other factors. Actual results could differ from these estimates. Operating Segments: The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, which is the Company’s chief executive officer, in deciding how to make operating decisions, allocate resources, and assess performance. The Company’s chief operating decision maker allocates resources and assesses performance at the consolidated level. Concentration of Credit Risk and Significant Customers: The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable. The Company’s cash and cash equivalents exceeded federally insured limits at January 31, 2021 and January 31, 2022. The Company maintains its cash, cash equivalents and restricted cash with high-credit-quality financial institutions. As of January 31, 2021, no individual customer represented more than 10 % of accounts receivable and, as of January 31, 2022, one customer represented 12 % of accounts receivable. For the fiscal years ended January 31, 2021 and 2022, no individual customer represented more than 10% of the Company’s total revenues. Revenue Recognition: The Company derives revenues primarily from subscription services and professional services. Revenues are recognized when a contract exists between the Company and a customer and upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of subscription and professional services, which may be capable of being distinct and accounted for as separate performance obligations, or in the case of offerings such as subscription services and support, accounted for as a single performance obligation. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company determines revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenues when, or as, the Company satisfies a performance obligation. Subscription Revenues Subscription revenues primarily consist of fees for providing customers access to the Company’s solutions, with routine customer support and maintenance related to email and phone support, bug fixes, and unspecified software updates, and 70 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) upgrades released when and if available during the maintenance term. Revenues are generally recognized on a ratable basis over the contract term beginning on the date that the Company’s service is made available to the customer, which the Company believes best reflects the manner in which the Company’s customers utilize the Company’s subscription offerings. Arrangements with customers do not provide the customer with the right to take possession of the software supporting the Company's solutions at any time and, as a result, are accounted for as a service contract. Generally, the Company’s subscription contracts are three years or longer in length, billed annually in advance, are non-cancelable, and do not contain refund-type provisions. SimpleNexus contracts typically range from one to three years and are generally billed monthly in advance. Subscription arrangements that are cancelable generally have penalty clauses. Professional Services and Other Revenues Professional services revenues primarily consist of fees for deployment, configuration, and optimization services, training. The majority of the Company’s professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of the Company’s professional services contracts are billed on a time and materials basis and revenues are recognized over time as the services are performed. Contracts with Multiple Performance Obligations Most of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. The Company determines SSP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where services are sold, price lists, the Company’s go-to-market strategy, historical sales, and contract prices. As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP. Given the variability of pricing, the Company uses a range of SSP. The Company determines the SSP range using information that may include market conditions or other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of products and services by customer size. Costs Capitalized to Obtain Revenue Contracts The Company capitalizes incremental costs of obtaining a non-cancelable subscription and support revenue contract if the Company expects the benefit of those costs to be longer than one year. The capitalized amounts are subsequently amortized over the estimated life of the contract. Capitalized amounts consist primarily of sales commissions paid to the Company’s direct sales force. Capitalized amounts also include (1) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired and (2) the associated payroll taxes and fringe benefit costs associated with the payments to these employees. Capitalized costs related to new revenue contracts are amortized on a straight-line basis over four to five years , which, although longer than the typical initial contract period, reflects the average period of benefit, including expected contract renewals. In arriving at this average period of benefit, the Company evaluated both qualitative and quantitative factors which included the estimated life cycles of its offerings and its customer attrition. The capitalized amounts are recoverable through future revenue streams under all non-cancelable customer contracts. The Company periodically evaluates whether there have been any changes in its business, the market conditions in which it operates, or other events which would indicate that its amortization period should be changed or if there are potential indicators of impairment. Amortization of capitalized costs to obtain revenue contracts is included in sales and marketing expense in the accompanying consolidated statements of operations. Judgments Contracts with customers may include multiple services requiring allocation of the transaction price across the different performance obligations. 71 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Standalone selling price is established by maximizing the amount of observable inputs, primarily actual historical selling prices for performance obligations where available and includes consideration of factors such as go-to-market model and customer size. Where standalone selling price may not be observable (e.g., the performance obligation is not sold separately), the Company maximizes the use of observable inputs by using information that may include reviewing pricing practices, performance obligations with similar customers, and selling models. Capitalized costs to obtain a contract are amortized over the expected period of benefit, which the Company has determined, based on analysis, to be approximately four to five years . The Company evaluated qualitative and quantitative factors to determine the period of amortization, including contract length, renewals, customer life, and the useful lives of our products and acquired products. When the expected period of benefit of an asset which would be capitalized is less than one year, the Company expenses the amount as incurred, utilizing the practical expedient. The Company regularly evaluates whether there have been changes in the underlying assumptions and data used to determine the amortization period. At times, the Company provides credits or incentives to its customers. Known and estimable credits and incentives represent a form of variable consideration, which are determined at contract inception and reduce the revenues recognized for a particular contract. At the end of each reporting period, the Company reviews and updates its estimates as additional information becomes available. The Company believes that there will not be significant changes to its estimates of variable consideration as of January 31, 2022. The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) with respect to vendor reseller agreements pursuant to which the Company resells certain third-party solutions along with the Company’s solutions. Generally, the Company reports revenues from these types of contracts on a gross basis, meaning the amounts billed to customers are recorded as revenues and expenses incurred are recorded as cost of revenues. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The Company’s control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. Revenues provided from agreements in which the Company is an agent are immaterial to these consolidated financial statements. Deferred Revenue: Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services, including non-cancellable and non-refundable committed funds and deposits. Deferred revenue is recognized as revenue recognition criteria has been met. Customers are typically invoiced for these agreements in advance of regular annual installments and revenues are recognized ratably over the contractual subscription period. The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing, size and new business linearity. Deferred revenue does not represent the total contract value of annual or multi-year non-cancellable subscription agreements. Deferred revenue that will be recognized during the succeeding 12-month period are recorded as deferred revenue, current portion, and the remaining portion is recorded as deferred revenue, net of current portion on the consolidated balance sheets. Payment terms vary by contract, although terms generally include a requirement of payment within 30 to 45 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing services, such as invoicing at the beginning of a subscription term with revenues recognized ratably over the contract period, and not to provide financing to customers. Any implied financing costs are considered insignificant in the context of the Company’s contracts. Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at fair value. Restricted Cash: Restricted cash consists of deposits held as collateral for the Company's bank guarantees issued in place of security deposits for certain property leases and credit cards. Accounts Receivable and Allowances: A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Timing of 72 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) revenue recognition may differ from the timing of invoicing to customers. Certain performance obligations may require payment before delivery of the service to the customer. The Company recognizes a contract asset in the form of accounts receivable when the Company has an unconditional right to payment, and the Company records a contract asset in the form of unbilled accounts receivable when revenues earned on a contract exceeds the billings. The Company’s standard billing terms are annual in advance, while SimpleNexus' standard billing terms are monthly in advance. An unbilled accounts receivable is a contract asset related to the delivery of the Company’s subscription services and professional services for which the related billings will occur in a future period. Unbilled accounts receivable consists of (i) revenues recognized for professional services 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. See the Recently Adopted Accounting Guidance section for the adoption of ASU 2016-13, Financial Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments. A summary of activity in the allowance for doubtful accounts is as follows: Fiscal Year Ended January 31, 2020 2021 2022 Balance, beginning of period $ 123 $ — $ 88 Charged to (recovery of) bad debt expense ( 105 ) 100 90 Other ( 18 ) ( 17 ) ( 24 ) Translation adjustments — 5 ( 3 ) Balance, end of period $ — $ 88 $ 151 Leases: The Company determines if an arrangement is or contains a lease at inception date based on whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use. The Company determines the classification of the lease, whether operating or financing, at the lease commencement date, which is the date the leased assets are made available for use. The Company accounts for lease and non-lease components as a single lease component for its facilities and equipment leases. The Company did not have any finance leases as of January 31, 2022. Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The lease term reflects the noncancelable period of the lease together with options to extend or terminate the lease when it is reasonably certain the Company will exercise such option. Variable costs, such as common area maintenance costs, are not included in the measurement of the ROU assets and lease liabilities, but are expensed as incurred. The Company's leases do not generally provide an implicit rate; therefore, the Company uses its incremental borrowing rate in determining the present value of the lease payments. Lease expense is recognized on a straight-line basis over the lease term. The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. Lease expense for such leases is recognized on a straight-line basis over the lease term. 73 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Property and Equipment: Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets and commences once the asset is placed in service or is ready for its intended use. The estimated useful lives by asset classification are generally as follows: Asset Classification Estimated Useful Life Furniture and fixtures 3 - 7 years Computers and equipment 3 years Buildings 40 years Leasehold improvements Shorter of remaining life of the lease term or estimated useful life When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from their respective accounts, and any gain or loss on such retirement is reflected in operating expenses. Financing Obligations: The Company records assets and liabilities for lease arrangements where the Company has continued involvement due to purchase options and is deemed to be the owner for accounting purposes. Intangible Assets: Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Impairment Assessment: The Company evaluates intangible assets and long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions, or other events that indicate an asset’s carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value. There were no material impairments of intangible assets or long-lived assets during the fiscal years ended January 31, 2020, 2021, and 2022. Goodwill: Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized, but rather the carrying amounts of these assets are assessed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Goodwill is tested for impairment annually on November 1, the first day of the fourth quarter of the fiscal year. To perform our impairment testing, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount. The qualitative factors we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company-specific events, changes in circumstances and after-tax cash flows. If the qualitative factors indicate that the fair value of the reporting unit is greater than the carrying value of the net assets assigned to the reporting unit, then we do not consider the assigned goodwill to be impaired. The Company is only required to perform the two-step impairment test if the qualitative factors indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company may elect to perform the two-step impairment test without considering such qualitative factors. Goodwill impairment, if any, is determined by comparing the reporting unit’s fair value to its carrying value. An impairment loss is recognized in an amount equal to the excess of the reporting unit’s carrying value over its fair value, up to the amount of goodwill allocated to the reporting unit. The Company has one reporting unit, therefore the Company evaluates goodwill for impairment at the entity level. There is no goodwill impairment for the fiscal years ended January 31, 2020, 2021, and 2022. Business Combinations: Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and may be subject to refinement due to unanticipated events and circumstances. For intangible assets, the Company typically uses the income method of valuation. This method starts with a forecast of all of the expected future net cash flows for each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other 74 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) methods include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to entry. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. For acquisitions involving additional consideration to be transferred to the selling parties in the event certain future events occur or conditions are met (“contingent consideration”), the Company recognizes the acquisition-date fair value of contingent consideration as part of the consideration transferred in exchange for the business combination. Contingent consideration meeting the criteria to be classified as equity in the consolidated balance sheets is not remeasured, and its subsequent settlement is recorded within stockholders’ equity. Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in the Company’s consolidated statements of operations. Investment : The Company's investment is a non-marketable equity investment without readily determinable fair value and for which the Company does not have control or significant influence. The investment is measured at cost with adjustments for observable changes in price or impairment as permitted by the measurement alternative. The Company assesses at each reporting period if the investment continues to qualify for the measurement alternative. Gains or losses resulting from changes in fair value are recognized currently in the Company's consolidated statement of operations. The Company assesses the investment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. Deferred Rent: Prior to the adoption of ASU 2016-02, Leases (Topic 842), operating leases rent expense was recognized on a straight-line basis over the terms of the leases and the difference between cash rent payments and recognized rent expense was recorded as a deferred rent liability. Cost of Revenues: Cost of subscription and support revenues consists of costs related to hosting the Company’s software solutions and employee-related costs, including stock-based compensation expenses and allocated overhead associated with customer support. Cost of professional services and other revenues consist of employee-related costs associated with these services, including stock-based compensation expenses, and allocated overhead, and the cost of subcontractors. Allocated overhead includes costs such as information technology infrastructure, rent and occupancy charges, along with employee benefit costs, and taxes based upon a percentage of total compensation expense. As such, general overhead expenses are reflected in each cost of revenues and operating expenses category. Advertising: Advertising costs are expensed as incurred and consist of advertising, third-party marketing, branded marketing, and conference and event expenses. Advertising expenses are recorded in sales and marketing expenses in the consolidated statements of operations and were $ 3.7 million, $ 3.1 million, and $ 5.8 million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively. Income Taxes: Deferred income taxes are determined using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are also recorded for any tax attributes, such as net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates on the date of enactment within income 75 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) tax expense. The Company reflects the expected amount of income taxes to be paid or refunded during the year as current income tax expense or benefit, as applicable. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company follows the accounting standards on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed, or expected to be claimed, on a tax return should be recorded in the consolidated financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the tax position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the benefit having a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest, and penalties on income taxes, and accounting interim periods. When and if applicable, potential interest and penalties are accrued as incurred, within income tax expense. Other Comprehensive Income (Loss): Accumulated other comprehensive income (loss) is reported as a component of stockholders’ equity and includes unrealized gains and losses on foreign currency translation adjustments. Foreign Currency Exchange: The functional currency of the Company’s foreign subsidiaries is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the consolidated statements of comprehensive loss recorded in foreign currency translation line item. Foreign currency transaction gains and losses due to transactions from assets and liabilities denominated in a currency other than the functional currency are included in other expense in the consolidated statements of operations and were $( 0.04 ) million, $ 1.5 million, and $( 2.0 ) million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively, primarily related to various intercompany loans. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Stock-Based Compensation: As further described in Note 11 "Stock-based Compensation," the Company records compensation expense associated with stock options and other equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation. The Company establishes fair value as the measurement objective in accounting for share-based payment transactions with employees and recognizes expense on a straight-line basis over the applicable vesting period. Basic and Diluted Loss per Common Share: Basic loss per share is calculated by dividing the net loss attributable to nCino, Inc. by the weighted-average number of shares of common stock outstanding for the period. Diluted loss per share is calculated by giving effect to all potentially dilutive common stock, which is comprised of stock options issued and outstanding, nonvested RSUs issued and outstanding, and shares issuable pursuant to the Employee Stock Purchase Plan (the "ESPP") when determining the weighted-average number of common shares outstanding. For purposes of the diluted loss per share calculation, basic and diluted loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive. Recently Adopted Accounting Guidance: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. ASU 2016-02, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would 76 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Since the Company ceased to qualify as an emerging growth company as of January 31, 2022, the Company adopted this ASU effective February 1, 2021. The Company used the alternative transition method in which the Company is not required to restate or disclose the effects of applying this ASU for comparative periods. The Company elected the package of practical expedients which permits the Company to not reassess prior conclusions pertaining to lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements. In addition, the Company elected ongoing practical expedients including the option to not recognize right-of-use assets and lease liabilities for short term leases (leases with an original term of twelve months or less). The Company also elected the practical expedient to not separate lease and non-lease components for our facilities and equipment leases. The adoption of this ASU resulted in the recognition of operating right-of-use assets of $ 10.5 million and lease liabilities of $ 12.2 million, and the derecognition of deferred rent on the Company's consolidated balance sheet on February 1, 2021. The adoption of this ASU did not have a material impact on the Company's consolidated statements of operations, comprehensive loss or the consolidated statements of cash flows. Upon the adoption of this ASU there was no change to the accounting for the Company's financing obligation. In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Since the Company ceased to qualify as an emerging growth company as of January 31, 2022, the Company adopted this ASU effective February 1, 2021. The adoption of this ASU, which impacted the Company's allowance for doubtful accounts, did not have a material impact on the Company's consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Since the Company ceased to qualify as an emerging growth company as of January 31, 2022, the Company adopted this ASU effective February 1, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In October 2020, the FASB issued ASU 2020-10, Codification Improvements . The guidance includes amendments to improve the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to the financial statements is codified in the disclosure section of the codification and to clarify guidance so that entities can apply guidance more consistently on codifications that are varied in nature where the original guidance may have been unclear. ASU 2020-10 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Since the Company ceased to qualify as an emerging growth company as of January 31, 2022, the Company adopted this ASU effective February 1, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . The standard addresses diversity and inconsistency related to 77 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) the recognition and measurement of contract assets and contract liabilities acquired in a business combination. ASU 2021-08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2023, and for interim periods within those fiscal years, and early adoption is permitted. Since the Company ceased to qualify as an emerging growth company as of January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2024, with early adoption permitted. The Company early-adopted this ASU during the fourth quarter of fiscal 2022. Early adoption requires retrospective adoption to business combinations completed since the beginning of the annual period in which the new guidance is adopted and prospective adoption to business combinations that occur after the date of adoption. There was no retrospective impact of early adoption since we did not have any acquisitions in our first three quarters of fiscal 2022. The SimpleNexus acquisition disclosed in Note 7 "Business Combinations" is in accordance with ASU 2021-08 which resulted in the deferred revenue being recognized under Topic 606 instead of fair value at the acquisition date. The adoption of this ASU did not have any other material impact on the Company’s consolidated financial statements. 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 January 31, 2022, 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 consolidated balance sheets. The estimated redemption value of the call/put option embedded in the redeemable non-controlling interest was $ 1.3 million at January 31, 2022. The following table summarizes the activity in the redeemable non-controlling interests for the period indicated below: Fiscal Year Ended January 31, 2020 2021 2022 Balance, beginning of period $ — $ 4,356 $ 3,791 Investment by redeemable non-controlling interest 4,513 — — Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest) ( 141 ) ( 1,130 ) ( 1,569 ) Foreign currency translation ( 16 ) 169 ( 256 ) Adjustment to redeemable non-controlling interest — 396 894 Stock-based compensation expense 1 — — 22 Balance, end of period $ 4,356 $ 3,791 $ 2,882 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: 78 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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, 2021 and January 31, 2022 because of the relatively short duration of these instruments. 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, 2021 and January 31, 2022 and indicates the fair value hierarchy of the valuation: Fair value measurements on a recurring basis as of January 31, 2021 Level 1 Level 2 Level 3 Assets: Money market accounts (included in cash and cash equivalents) $ 332,541 $ — $ — Total assets $ 332,541 $ — $ — Fair value measurements on a recurring basis as of January 31, 2022 Level 1 Level 2 Level 3 Assets: Money market accounts (included in cash and cash equivalents) $ 11,129 $ — $ — Time deposits (included in other long-term assets) 385 — — Total assets $ 11,514 $ — $ — 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 asset measured at fair value on a nonrecurring basis includes the investment accounted for under the measurement alternative. There was no adjustment or impairment recognized for the fiscal years ended January 31, 2020, 2021, and 2022, respectively. Note 5. Revenues Revenues by Geographic Area Revenues by geographic region were as follows: Fiscal Year Ended January 31, 2020 2021 2022 United States $ 127,192 $ 180,923 $ 230,301 International 10,988 23,370 43,564 $ 138,180 $ 204,293 $ 273,865 79 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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, 2021 and January 31, 2022: As of January 31, 2021 2022 Trade accounts receivable $ 53,272 $ 71,417 Unbilled accounts receivable 1,814 2,161 Allowance for doubtful accounts ( 88 ) ( 151 ) Other accounts receivable 1 519 1,101 Total accounts receivable, net $ 55,517 $ 74,528 1 Includes $ 0.02 million and $ 0.5 million income tax receivable of as of January 31, 2021 and January 31, 2022, respectively. 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 and $ 8.6 million from the acquisition of SimpleNexus, which were offset by decreases due to revenues recognized in the period. During the fiscal year ended January 31, 2022, $ 88.6 million of revenues were recognized out of the deferred revenue balance as of January 31, 2021. 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 $ 912.3 million, which includes approximately $ 54.0 million of remaining performance obligation related to the SimpleNexus acquisition, as of January 31, 2022. The Company expects to recognize approximately 59 % of its remaining performance obligation as revenues in the next 24 months, approximately 31 % more in the following 25 to 48 months, and the remainder thereafter. Costs Capitalized to Obtain Revenue Contracts During the fiscal years ended January 31, 2020, 2021, and 2022, the Company amortized $ 3.2 million, $ 4.7 million, and $ 5.8 million of capitalized contract acquisition costs within sales and marketing expense, respectively. The Company did no t incur any impairment losses. Capitalized contract acquisition costs were $ 15.1 million and $ 24.0 million as of January 31, 2021 and January 31, 2022, of which $ 10.2 million and $ 16.4 million was long-term in the consolidated balance sheets, respectively. The remaining balance of the capitalized costs to obtain contracts was current. 80 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Note 6. Property and Equipment Property and equipment, net consisted of the following: As of January 31, 2021 2022 Furniture and fixtures $ 6,706 $ 7,503 Computers and equipment 5,039 7,496 Buildings and land 1 16,300 33,977 Leasehold improvements 11,581 14,111 Construction in progress 2 277 13,081 39,903 76,168 Less accumulated depreciation ( 9,960 ) ( 15,491 ) $ 29,943 $ 60,677 1 The increase in buildings and land was due to the completion of a parking deck for $ 17.7 million, which is an addition to our existing headquarters, for which the Company is considered the owners for accounting purposes. See Note 15 "Commitments and Contingencies" for additional details including future commitments. 2 The increase in construction in progress is primarily due to construction for an additional office building that is on the property of our existing headquarters for which the Company is considered the owners for accounting purposes. See Note 15 "Commitments and Contingencies" for additional details including future commitments. The Company recognized depreciation expense as follows: Fiscal Year Ended January 31, 2020 2021 2022 Cost of subscription revenues $ 186 $ 268 $ 337 Cost of professional services and other revenues 763 1,029 1,095 Sales and marketing 739 1,076 1,182 Research and development 835 1,347 1,842 General and administrative 338 506 643 Total depreciation expense $ 2,861 $ 4,226 $ 5,099 Property and equipment by geographic region were as follows: As of January 31, 2021 2022 United States $ 29,235 $ 60,034 International 708 643 $ 29,943 $ 60,677 Note 7. Business Combinations SimpleNexus On January 7, 2022 (the "Acquisition Date") through a series of mergers, the Company acquired all outstanding membership interests of SimpleNexus which provides mobile-first homeownership software that spans engagement, 81 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) origination, closing and business intelligence, headquartered in Lehi, Utah. The Company acquired SimpleNexus for its complementary products and mobile-first offerings and believes this will provide greater value for new and existing customers. The business combination is considered a related party transaction as entities affiliated with Insight Partners (“Insight Partners”) are equityholders of SimpleNexus and certain other parties in connection with the series of mergers, and other affiliates of Insight Partners are currently significant stockholders of the Company. The Company has included the financial results of SimpleNexus in the consolidated statements of operations from the date of acquisition. The transaction costs associated with the acquisition were approximately $ 10.0 million and were recorded in general and administrative expenses for the fiscal year ended January 31, 2022. The Company also recognized $ 0.2 million in stock issuance costs associated with the share consideration that were reported as a reduction of additional paid-in capital within stockholders' equity. The Acquisition-Date estimated fair value of the consideration transferred is as follows: Total Consideration Cash consideration to members $ 286,086 Voting common stock issued ( 12,762,146 shares) 1 647,509 Total consideration $ 933,595 1 The Company assumed a restricted stock award with an estimated fair value of $ 1.4 million. $ 0.3 million was allocated to the purchase consideration and $ 1.1 million was allocated to future services and will be expensed over the service period remaining in fiscal 2023 on a straight-line basis. Approximately $ 3.0 million of the cash paid is being held in escrow until the completion of the final post-closing adjustments. The number of shares for stock consideration was based on a 20-day volume weighted average price fair value of $ 72.53 established prior to and including November 12, 2021 to determine the number of shares to be issued on the Acquisition Date. On January 7, 2022, the Company's closing stock price was $ 50.82 per share. In addition, the Company issued 927,744 RSUs with an approximate fair value of $ 47.2 million to certain employees of SimpleNexus, which will vest over four years subject to such employees' continued employment. The RSUs will be recorded as stock-based compensation expense post-acquisition as the RSUs vest and has been excluded from the purchase consideration. 82 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the Acquisition Date: Fair Value Cash and cash equivalents $ 17,038 Accounts receivable 6,100 Property and equipment, net 1,010 Operating lease right-of-use assets 3,549 Other current and noncurrent assets 4,641 Intangible assets 162,000 Goodwill 785,156 Accounts payable, accrued expenses, and other liabilities, current and noncurrent ( 8,284 ) Deferred revenue, current and noncurrent ( 8,643 ) Operating lease liabilities, current and noncurrent ( 3,487 ) Deferred income taxes ( 25,485 ) Net assets acquired $ 933,595 The transaction was accounted for using the acquisition method and, as a result, tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values at the Acquisition Date. Any excess consideration over the fair value of the assets acquired and liabilities assumed was recognized as goodwill and is subject to revision as the purchase price allocation is completed. Due to the timing and the magnitude of the transaction, initial accounting for the acquisition is not complete, and further measurement period adjustments may occur in fiscal year 2023, but no later than one year from the Acquisition Date. The Company has estimated the preliminary fair value of net assets acquired based on information currently available and with the assistance of independent third-party valuations and will continue to adjust those estimates as additional information becomes available, valuations are finalized and the tax returns for the pre-acquisition period are completed. The primary areas of the acquisition accounting that remain preliminary relate to, but are not limited to, (i) finalizing the review and valuation of intangible assets (including key assumptions, inputs and estimates), (ii) finalizing the Company's review of certain assets acquired and liabilities assumed (iii) finalizing the evaluation and valuation of certain legal matters and/or loss contingencies, including those that the Company may not yet be aware of but meet the requirement to qualify as a pre-acquisition contingency, and (iv) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the initial acquisition accounting is based on preliminary assessments, actual values may differ materially when final information becomes available. The Company believes the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. The Company will continue to evaluate these items until they are satisfactorily resolved and make necessary adjustments, within the allowable measurement period. As described in Note 1 "Summary of Significant Accounting Policies", the Company adopted ASU 2021-08 which requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The Company determined the acquisition date deferred revenue balance in accordance with Topic 606. 83 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The following table sets forth the components of the preliminary fair value of identifiable intangible assets and their estimated useful lives over which the acquired intangible assets will be amortized on a straight-line basis, as this approximates the pattern in which economic benefits of the assets are consumed as of the Acquisition Date: Fair Value Useful Life Developed technology $ 77,500 5 years Customer relationships 70,000 10 years Trade name 14,500 6 years Total intangible assets subject to amortization $ 162,000 Developed technology represents the preliminary estimated fair value of SimpleNexus’ technology. Customer relationships represent the preliminarily estimated fair value of the underlying relationships with SimpleNexus' customers. Trade names represents the preliminary estimated fair value of SimpleNexus’ company name. The Company continues to assess the rates used in the preliminary valuation methods such as, but not limited to, the discount rates for developed technology, customer relationships and trade name and customer attrition rate for customer relationships. The Company recognized goodwill of approximately $ 785.2 million in connection with the acquisition of SimpleNexus. Goodwill is primarily attributable to expanded market opportunities, synergies expected from the acquisition, and assembled workforce and approximately $ 189.2 million is expected to be deductible for tax purposes. The results of operations of SimpleNexus since the acquisition are included in the Company's consolidated statements of operations for the fiscal year ended January 31, 2022. The revenues and net loss for SimpleNexus for the period from the Acquisition Date through January 31, 2022, were $ 3.9 million and $ 3.6 million, respectively. The unaudited pro forma statements of operations for the years ended January 31, 2021 and January 31, 2022, shown in the table below, give effect to the SimpleNexus acquisition, described above, as if it had occurred on February 1, 2020. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of SimpleNexus to reflect amortization of intangible assets, transaction accounting adjustments for non-recurring items and acquisition related costs, interest expense related to debt paid off, Topic 842 lease payment adjustments, stock-based compensation, and related items since the beginning of the Company's fiscal year 2021. This unaudited pro forma data is presented for informational purposes only and is not indicative of future results of operations. The table below shows the unaudited pro forma statements of operations for the respective years ending January 31: (Unaudited) January 31, 2021 2022 Revenues $ 225,307 $ 311,796 Net loss attributable to nCino, Inc. ( 166,032 ) ( 96,189 ) Note 8. Goodwill and Intangible Assets Goodwill The carrying amount of goodwill was $ 57.1 million and $ 841.5 million as of January 31, 2021 and January 31, 2022, respectively. The change in the carrying amounts of goodwill was as follows: Balance, as of January 31, 2020 $ 55,840 Translation adjustments 1,309 Balance, as of January 31, 2021 57,149 Acquisition of SimpleNexus 785,156 Translation adjustments ( 818 ) Balance, as of January 31, 2022 $ 841,487 84 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Intangible assets Intangible assets, net are as follows: As of January 31, 2021 As of January 31, 2022 Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life (Years) Acquired developed technology $ 6,320 $ ( 2,295 ) $ 4,025 $ 83,625 $ ( 4,804 ) $ 78,821 4.8 Customer relationships 21,721 ( 2,609 ) 19,112 91,711 ( 4,748 ) 86,963 10.0 Trademarks and trade name 128 ( 128 ) — 14,626 ( 288 ) 14,338 6.1 $ 28,169 $ ( 5,032 ) $ 23,137 $ 189,962 $ ( 9,840 ) $ 180,122 7.4 The Company recognized amortization expense as follows: Fiscal Year Ended January 31, 2020 2021 2022 Cost of subscription revenues $ 697 $ 1,525 $ 2,604 Sales and marketing 937 1,670 2,303 General and administrative 114 10 — Total amortization expense $ 1,748 $ 3,205 $ 4,907 The expected future amortization expense for intangible assets as of January 31, 2022 is as follows: Fiscal Year Ending January 31, 2023 $ 28,116 2024 27,419 2025 26,587 2026 26,587 2027 25,545 Thereafter 45,868 $ 180,122 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. Note 9. Reseller Agreement The Company has a reseller agreement in place with a related party to utilize their platform and to develop the Company’s cloud-based banking software as an application within the related party’s hosted environment. In June 2020, this agreement was renegotiated and expires in June 2027 and will automatically renew in annual increments thereafter unless either party gives notice of non-renewal before the end of the initial term or the respective renewal term. Cost of subscription revenues in each of the fiscal years ended January 31, 2020, 2021, and 2022 substantially consists of fees paid for access to the related party’s platform, including their hosting infrastructure and data center operations. The Company has recorded expenses of $ 22.8 million, $ 34.8 million, and $ 41.4 million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively. Based solely on information reported in a Schedule 13G/A filed with the SEC on February 11, 2022 the reseller is no longer considered a related party as of December 31, 2021. The expenses presented above includes expenses while the reseller was a 85 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) related party. The reseller was a related party for a portion of the year ended January 31, 2022 and was no longer a related party as of January 31, 2022. The Company continues to do business with the reseller. See also Note 16 "Related-Party Transactions." Note 10. Stockholders’ Equity A summary of the rights and key provisions affecting each class of the Company’s stock as of January 31, 2022, is as follows: Preferred Stock: The Board of Directors is authorized to establish one or more series of preferred stock and to fix the number of shares constituting such series and the designation of such series, including the voting powers, preferences, limitations, restrictions, and other special rights thereof. The Company's preferred stock consists of 10,000,000 authorized shares, par value $ 0.001 per share. Common stock: The Company's common stock consists of 500,000,000 authorized shares, par value $ 0.0005 per share. At January 31, 2022, the Company committed a total of 24,813,304 shares of common stock for future issuance as follows: Issued and outstanding stock options 2,629,109 Nonvested issued and outstanding restricted stock units ("RSUs") 3,012,440 Possible issuance under stock plans 19,171,755 24,813,304 Note 11. Stock-Based Compensation Equity Incentive Plans The Company has two equity incentive plans: the nCino, Inc. 2014 Omnibus Stock Ownership and Long-Term Incentive Plan (the “2014 Plan”) and the 2019 Amended and Restated Equity Incentive Plan (the “2019 Plan” and together with the 2014 Plan, the “Incentive Plans”). Under the 2014 Plan, the Board of Directors had allotted 15,025,666 shares of common stock for incentive options or non-qualified options as of January 31, 2022. Non-qualified options may be granted to Company employees, non-employee directors, and consultants. The exercise price of options is determined by the Board of Directors, but cannot be less than 100 % of the fair market value of the Company’s common stock on the date of the grant. The options generally vest in one of two ways: • In equal annual installments over four years from the grant date. • Upon a change in control transaction (with respect to certain Incentive Plan participants). All options expire ten years from the grant date and, with respect to certain Incentive Plan participants, provide for accelerated vesting if there is a change in control of the Company. In July 2019, the Company established the 2019 Equity Incentive Plan for the issuance of awards in the form of options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards. In connection with the IPO, the Company's Board of Directors adopted and the Company's stockholders approved the 2019 Plan which amended and restated the 2019 Equity Incentive Plan. All awards shall be granted within ten years from the effective date of the 2019 Plan and can only be granted to employees, officers, directors, and consultants and generally vest over four years . 86 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Under the 2019 Plan, the number of available shares was increased to 15,250,000 , plus an annual increase added on the first day of each fiscal year, beginning with the fiscal year ending January 31, 2022, and continuing until, and including, the fiscal year ending January 31, 2031. The annual increase will be equal to the lesser of (i) 5 % of the number of shares issued and outstanding as of January 31 of the immediately preceding fiscal year and (ii) an amount determined by the Company's Board of Directors. The Company ceased granting awards under the 2014 Plan during the fiscal year ended January 31, 2020, and all shares that remained available for issuance under the 2014 Plan were transferred to the 2019 Plan prior to the closing of the IPO. Additionally, the number of shares available under the 2019 Plan shall be increased by the number of shares outstanding under the 2014 Plan that expire, terminate or are canceled without having been exercised or settled in full. The 2014 Plan governs outstanding awards granted prior to the adoption of the 2019 Plan. RSUs issued prior to the Company's IPO were subject to time-based and performance-based vesting conditions. RSUs issued subsequent to the Company's IPO vest upon the satisfaction of a time-based condition only. RSUs are generally earned over a service period of four years. The compensation expense related to these awards is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period. As of January 31, 2022, the Company had stock options outstanding under the 2014 Plan and the 2019 Plan had stock options and RSUs outstanding. Stock Options The calculated value of each option award is estimated at the date of grant using the Black-Scholes option valuation model that utilizes the assumptions included in the table below. The Company recognizes stock-based expenses related to stock option awards on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of four years . Stock-based expenses are recognized net of estimated forfeiture activity. The estimated forfeiture rate applied is based on historical forfeiture rates. The expected term assumption, using the simplified method, reflects the period for which the Company believes the option will remain outstanding. The Company determined the volatility of its stock by looking at the historic volatility of its peer companies. The risk-free rate reflects the U.S. Treasury yield for a similar expected life instrument in effect at the time of the grant. The assumptions utilized for the fiscal year ended January 31, 2020 are as follows: Fiscal Year Ended January 31, 2020 Expected life (in years from vesting) 6.10 - 6.25 Expected volatility 40 % Expected dividends 0.00 % Risk-free interest rate 1.63 % - 2.59 % The grant date weighted average calculated fair value of options issued, net of forfeitures, was $ 6.74 per share for the fiscal year ended January 31, 2020. There were no stock options granted for the fiscal years ended January 31, 2021 and 2022. 87 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Stock option activity for the fiscal year ended January 31, 2022 was as follows: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In thousands) Outstanding, January 31, 2021 5,467,012 $ 6.00 5.78 $ 359,193 Granted — — Expired or forfeited ( 78,999 ) 15.55 Exercised ( 2,758,904 ) 5.04 176,830 Outstanding, January 31, 2022 2,629,109 $ 6.72 4.92 $ 102,836 Exercisable, January 31, 2022 2,325,682 $ 5.64 4.66 $ 93,464 Fully vested or expected to vest, January 31, 2022 2,598,766 $ 6.62 4.90 $ 101,898 The total intrinsic value of options exercised during the fiscal years ended January 31, 2020, 2021, and 2022 was $ 7.6 million, $ 142.9 million, and $ 176.8 million, respectively. Aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the option exercise price and the estimated fair value of the Company’s common stock at the time such option exercises. This intrinsic value changes based on changes in the fair value of the Company’s underlying stock. On June 26, 2019, the Company entered into a separation agreement with an executive. The agreement resulted in a modification of the former employee's 334,840 outstanding stock options to purchase voting common stock, which accelerated certain vesting and extended the exercise period, resulting in the recognition of $ 1.2 million of additional stock-based compensation expense for the year ended January 31, 2020. As of January 31, 2022, there was $ 1.0 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements under the 2014 and 2019 Plans. That cost is expected to be recognized over a weighted average period of 1.06 years. Restricted Stock Units RSU activity during the fiscal year ended January 31, 2022 was as follows: Number of Shares Weighted Average Grant Date Fair Value Nonvested, January 31, 2021 1,848,296 $ 22.07 Granted 1,886,081 60.99 Vested ( 559,191 ) 21.89 Forfeited ( 162,746 ) 37.89 Nonvested, January 31, 2022 3,012,440 $ 45.62 The weighted average grant date fair value for RSUs granted during the fiscal years ended January 31, 2020, 2021, and 2022 was $ 21.75 , $ 22.30 , and $ 60.99 . The total fair value of RSUs vested for the fiscal years ended January 31, 2020, 2021, and 2022 was $ 0.0 million , $ 5.5 million, and $ 12.2 million. The RSUs granted prior to the IPO vest upon the satisfaction of both a time-based, generally over 4 years, vesting 25 % annually, and liquidity event-based vesting condition. For RSUs granted to the non-employee members of the Board of Directors, some vest in less than a year, some annually and some over three years. The liquidity event-based condition was satisfied upon the IPO and the Company recognized an expense of $ 12.2 million in cost of revenues and operating expenses for RSUs as of that date, using the accelerated attribution recognition method for the fiscal year ended January 31, 2021. 88 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) As of January 31, 2022, total unrecognized compensation expense related to non-vested RSUs was $ 108.0 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 3.49 years. Employee Stock Purchase Plan In July 2020, the Board of Directors adopted and stockholders approved the ESPP, which became effective immediately prior to the closing of the IPO. The ESPP includes two components, one component is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code (the "Code") and a component that does not qualify as an "employee stock purchase plan" under Section 423 of the Code. The ESPP initially reserved and authorized the issuance of up to a total of 1,800,000 shares of common stock to participating employees. The aggregate number of shares of the Company's common stock under the ESPP will automatically increase on the first day of each fiscal year, beginning with the first fiscal year ending January 31, 2022 and continuing until the fiscal year ended January 31, 2031, by an amount equal to the lesser of (i) 1 % of the shares of the Company's common stock issued and outstanding on January 31 of the immediately preceding fiscal year, (ii) 1,800,000 shares of the Company's common stock or (iii) an amount determined by the Board of Directors. As of January 31, 2022, 2,736,437 shares of common stock remain available for grant under the ESPP. The ESPP permits employees to purchase the Company's common stock through payroll deductions during six month offerings. The offering periods begin each January 1 and July 1, or such other period determined by the compensation committee. Eligible employees will purchase the shares at a price per share equal to the lesser of (i) 85 % of the fair market value of a share of the Company's common stock on the first business day of such offering period and (ii) 85 % of the fair market value of share of the Company's common stock on the last business day of such offering period, although the compensation committee has discretion to change the purchase price with respect to future offering periods, subject to terms of the ESPP. The first offering period for the ESPP began on July 1, 2021 and ended on December 31, 2021. Thereafter, offering periods will begin on January 1 and July 1. The fair value of ESPP shares is estimated at the date of grant using the Black-Scholes option valuation model based on assumptions as follows for ESPP awards: Expected life. The expected life reflects the period for which the Company believes the ESPP will remain outstanding. The expected term for the ESPP award approximates the offering period of six months. Expected volatility. The expected volatility is based on the historical volatility of the Company's common stock. Expected dividends. The expected dividend yield is zero as the Company has not and does not expect to pay dividends. Risk-free interest rate. The risk-free interest rate reflects the U.S. Treasury yield for a similar expected life instrument in effect at the time of the grant of the ESPP share. 89 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The assumptions utilized for the ESPP shares for the fiscal year ended January 31, 2022 were as follows: Fiscal Year Ended January 31, 2022 Expected life (in years) 0.5 Expected volatility 48.70 % - 49.65 % Expected dividends 0.00 % Risk-free interest rate 0.05 % - 0.22 % As of January 31, 2022, total unrecognized compensation expense related to the ESPP was $ 0.8 million. That cost is expected to be recognized over the remaining term of the offering period that began on January 1, 2022 and will end on June 30, 2022. Stock-Based Compensation Expense Total stock-based compensation expense included in our consolidated statements of operations were as follows: Fiscal Year Ended January 31, 2020 2021 2022 Cost of subscription revenues $ 277 $ 576 $ 960 Cost of professional services and other revenues 1,240 4,232 5,195 Sales and marketing 1,260 6,190 7,520 Research and development 1,245 5,463 6,186 General and administrative 1,723 8,747 8,616 Total stock-based compensation expense $ 5,745 $ 25,208 $ 28,477 Note 12. Income Taxes The components of loss before income taxes by domestic and foreign jurisdictions were as follows: Fiscal Year Ended January 31, 2020 2021 2022 United States $ ( 20,547 ) $ ( 33,478 ) $ ( 61,587 ) Foreign ( 6,602 ) ( 7,206 ) ( 12,367 ) Loss before income taxes $ ( 27,149 ) $ ( 40,684 ) $ ( 73,954 ) 90 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The components of the income tax provision (benefit) consisted of the following: Fiscal Year Ended January 31, 2020 2021 2022 Current: Federal $ — $ — $ — State 21 14 73 Foreign 410 402 374 Total 431 416 447 Deferred: Federal 76 132 ( 21,280 ) State 56 101 ( 3,086 ) Foreign 23 ( 63 ) 86 Total 155 170 ( 24,280 ) Total income tax provision (benefit) $ 586 $ 586 $ ( 23,833 ) The differences between income taxes expected at the U.S. federal statutory income tax rate and the reported income tax (provision) benefit are summarized as follows: Fiscal Year Ended January 31, 2020 2021 2022 Income taxes at statutory rate of 21% for 2020, 2021, and 2022 21.0 % 21.0 % 21.0 % State income tax (provision) benefit, net of federal impact ( 0.5 ) ( 0.3 ) 4.1 Stock-based compensation ( 0.1 ) 59.9 48.8 Changes in valuation allowance ( 12.2 ) ( 69.3 ) ( 44.1 ) Tax credits 0.0 0.0 4.1 Executive compensation 0.0 ( 12.6 ) ( 3.7 ) Statutory tax rate law changes 0.0 0.0 2.7 Transaction costs 0.0 ( 1.0 ) ( 1.3 ) Foreign rate differential ( 0.4 ) 0.9 0.7 Nondeductible expenses ( 0.8 ) ( 0.2 ) ( 0.1 ) Impacts of adoption of the new revenue standard ( 8.8 ) 0.0 0.0 Other ( 0.4 ) 0.2 0.0 ( 2.2 ) % ( 1.4 ) % 32.2 % 91 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Significant components of the Company’s net deferred tax assets and liabilities were as follows: As of January 31, 2021 2022 Deferred tax assets: Net operating losses $ 67,019 $ 129,155 Financing obligations and lease liabilities 4,075 11,178 Equity compensation 4,605 6,972 Tax credits — 3,527 Reserves and accruals 2,804 3,404 Deferred revenue 514 1,776 Deferred rent 415 — Other 529 1,317 Total deferred tax assets 79,961 157,329 Less valuation allowance ( 70,056 ) ( 109,021 ) Total deferred tax assets, net of valuation allowances 9,905 48,308 Deferred tax liabilities: Intangible assets ( 652 ) ( 31,230 ) Depreciation ( 5,582 ) ( 9,298 ) Contract acquisition costs ( 3,659 ) ( 6,015 ) Lease asset — ( 3,168 ) Remaining performance obligations ( 331 ) ( 166 ) Other ( 45 ) — Total deferred tax liabilities ( 10,269 ) ( 49,877 ) Net deferred tax liabilities $ ( 364 ) $ ( 1,569 ) The Company's net deferred tax liabilities were adjusted during 2022 to include $ 25.5 million of net deferred tax liabilities related to business combinations. The net deferred tax asset (liability) was included in the consolidated balance sheets as follows: As of January 31, 2021 2022 Other long-term assets $ 4 $ 106 Deferred income taxes, noncurrent ( 368 ) ( 1,675 ) Net deferred tax liabilities $ ( 364 ) $ ( 1,569 ) The Company continually assesses the realizability of its deferred tax assets based on an evaluative process that considers all available positive and negative evidence. The Company has established a valuation allowance in the amount of $ 70.1 million and $ 109.0 million as of January 31, 2021 and 2022, respectively, because the Company believes it is not more likely than not the deferred tax asset in jurisdictions excluding several foreign jurisdictions will be realized. Prior to the SimpleNexus acquisition, the Company recorded a net U.S. deferred tax asset which is offset with a valuation allowance. On the Acquisition Date, the Company recorded net U.S. deferred tax liabilities, most of which relate to identifiable intangible assets. The Company evaluated this positive evidence and determined a portion of these deferred tax liabilities allow the Company to recognize $ 24.6 million of the Company’s U.S. deferred tax assets, which results in a reduction 92 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) of the valuation allowance. In accordance with ASC 805-740-30-3, the Company reflected the reduction of the valuation allowance as a component of income tax provision (benefit) at the Acquisition Date, and during the fiscal year ended January 31, 2022. The Company maintains its assertion of the Company’s intent for certain foreign earnings to be indefinitely reinvested. As of January 31, 2022, the Company has not recorded taxes on approximately $ 3.8 million of cumulative undistributed earnings of the Company’s non-U.S. subsidiaries. The Company generally does not provide for taxes related to the Company’s undistributed earnings because such earnings either would not be taxable when remitted or they are indefinitely reinvested. If in the foreseeable future, the Company can no longer demonstrate that these earnings are indefinitely reinvested, a tax liability will be recognized, which could include other taxes such as withholding tax. The determination of the amount of the unrecognized tax liability is directly influenced by the Company’s net operating loss and valuation allowance position in the U.S. If the Company were to repatriate the undistributed earnings, the tax liability is $ 0.2 million. The net operating loss and tax credit carryforwards as of January 31, 2022 were as follows: As of January 31, 2022 First Fiscal Year Expiring Federal net operating loss carryforwards $ 79,398 2034 Federal net operating loss carryforwards 1 390,269 Non-expiring State net operating loss carryforwards 1 283,862 2023 State net operating loss carryforwards 1 82,530 Non-expiring Foreign net operating loss carryforwards 5,339 2031 Foreign net operating loss carryforwards 43,206 Non-expiring Federal tax credit carryforwards 1 3,047 2037 State tax credit carryforwards 608 2032 1 The Company acquired a portion of these carryforwards in the SimpleNexus acquisition during the fiscal year ended January 31, 2022. These acquired carryforwards will be subject to limitations which could limit the Company's utilization in future periods. The Company is subject to taxation in the U.S. federal and various state and foreign jurisdictions. As of January 31, 2022, the Company is no longer subject to U.S. federal and state examinations by tax authorities for tax years prior to 2018. However, amounts reported as net operating losses and tax credit carryforwards from these tax periods remain subject to review by most tax authorities. The Company recognizes the income tax benefits of any uncertain tax positions only when, based upon the technical merits of the position, it is more likely than not that the position is sustainable upon examination. With the information available, the Company has performed an analysis and as of January 31, 2021 and 2022, the Company has not recognized any unrecognized tax benefits, interest or penalties for any income tax positions. Note 13. Defined Contribution Plan The Company has a 401(k) plan for its employees in the United States who meet the plan requirements. The Company, at its discretion, may make matching contributions. Employees are immediately vested in their contributions. The Company also has a Registered Retirement Savings Plan covering all eligible employees in Canada. Employer contributions for the fiscal years ended January 31, 2020, 2021, and 2022 were $ 0.9 million, $ 2.1 million, and $ 3.2 million, respectively. 93 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Note 14. 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 the leases for up to five years . The components of lease expense for the fiscal year ended January 31, 2022 were as follows: Amount Operating lease expense $ 2,945 Short-term lease expense 885 Variable lease expense 281 Total $ 4,111 Supplemental cash flow information for the fiscal year ended January 31, 2022 related to operating leases was as follows: Cash paid for amounts included in the measurement of operating lease liabilities $ 3,082 Right-of-use assets obtained in exchange for operating lease liabilities 1,771 The weighted-average remaining lease term and weighted-average discount rate for the Company's operating lease liabilities as of January 31, 2022 were 4.55 years and 4.4 %, respectively. Future minimum lease payments as of January 31, 2022 were as follows: Fiscal Year Ending January 31, Operating Leases 2023 $ 4,037 2024 3,735 2025 2,952 2026 2,534 2027 1,194 Thereafter 1,470 Total lease liabilities 15,922 Less: imputed interest ( 1,176 ) Total lease obligations 14,746 Less: current obligations ( 3,548 ) Long-term lease obligations $ 11,198 94 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Future minimum lease payments as of January 31, 2021, prior to the Company's adoption of the new lease ASU, were as follows: Fiscal Year Ending January 31, Operating Leases 2022 $ 2,445 2023 1,937 2024 1,942 2025 1,630 2026 1,679 Thereafter 2,544 Total lease liabilities $ 12,177 Note 15. Commitments and Contingencies In addition to the operating lease commitments described in Note 14 "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 and Construction Liabilities The Company entered into a new lease agreement for the Company's headquarters in November 2020 with a new lessor. The lease goes through 2035 with options to renew. Due to a purchase option contained in the 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 million at inception of the lease. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. The fair value of the leased property and corresponding financing obligation are included in property and equipment, net and financing obligations on the consolidated balance sheets, respectively. In January 2021, the Company entered into an agreement for a parking deck which is an addition to the Company's existing headquarters building. 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 million, the costs of the construction in progress and the corresponding construction liability were reclassified to property and equipment, net and financing obligations on the consolidated balance sheets, respectively. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. In April 2021, the Company entered into a new lease agreement for the construction of an additional office building that is on the property of the Company's existing headquarters. Due to the Company also being deemed to be the owner of the additional building for accounting purposes, the costs associated with the construction of the building will be capitalized as construction in progress with a corresponding construction liability through construction which is estimated to be approximately $ 24.0 million. Upon completion of the building, the construction liability will be recorded as a financing obligation. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. The costs of the construction in progress and corresponding construction liability are included in property and equipment, net and construction liability, noncurrent on the consolidated balance sheets, respectively. 95 Table of Contents nCino, Inc. NOTES TO 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 January 31, 2022 is as follows: Fiscal Year Ending January 31, Purchase commitments Financing obligations - leased facility 2023 $ 5,988 $ 2,744 2024 4,472 2,804 2025 3,040 2,867 2026 1,503 2,931 2027 1,104 2,996 Thereafter — 33,260 Total $ 16,107 $ 47,602 Residual financing obligations and assets 9,975 Less: amount representing interest ( 23,478 ) Financing obligations $ 34,099 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 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 is seeking documents and information in connection with an investigation of the Company’s hiring and wage practices under U.S. federal antitrust laws. The Company has retained outside counsel and is fully cooperating with the authorities. Although there can be no assurance with respect to the outcome of this matter, the Company believes its hiring and wage practices do not violate antitrust laws. 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 November 23, 2021, the District Court approved preliminary 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. 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. 96 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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. Other Commitments and Contingencies The Company may be subject to audits 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 16. Related-Party Transactions The Company’s largest vendor is also an equityholder in the Company. Total payments related to the agreement are disclosed in Note 9 "Reseller Agreement". The Company also purchases services to assist in managing its own sales cycle, customer relationship management, and other business functions. The Company has a non-cancellable agreement for the purchase of services. In December 2021, this agreement was renewed for one year and expires in December 2022. Total payments for these services recorded to expenses were $ 1.1 million, $ 1.2 million, and $ 1.5 million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively and $ 1.3 million and $ 0.0 million were in prepaid expenses and other current assets as a related party as of January 31, 2021 and January 31, 2022, respectively. Accounts payable as a related party were $ 4.4 million and $ 0.0 million at January 31, 2021 and January 31, 2022, respectively, included in accounts payable, related parties. Based solely on information reported in a Schedule 13G/A filed with the SEC on February 11, 2022 this vendor is no longer considered a related party as of December 31, 2021. The expenses presented above includes expenses while the vendor was considered a related party. The vendor was a related party for a portion of the year ended January 31, 2022 and was no longer a related party as of January 31, 2022. The Company continues to do business with the vendor and balances at January 31, 2022 are no longer presented as related party. In the quarter ended July 31, 2020, certain equityholders ceased to qualify as related parties of the Company and the amounts disclosed related to them are accordingly presented only while they were considered a related party. Included in revenues from three equityholders, who are also customers of the Company, is $ 8.4 million, $ 2.8 million, and $ 0.0 million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively. The Company has a banking relationship with one of its former equityholders who was considered a related party. In the quarter ended July 31, 2020, the equityholder ceased to qualify as a related party of the Company and the amounts disclosed related to such former equityholder are accordingly presented only while they were considered a related party. Included in interest income is $ 0.7 million, $ 0.1 million, and $ 0.0 million for the fiscal years ended January 31, 2020, 2021, and 2022, respectively. The Company entered into an agreement with one of its equityholders in May 2016 to spend an agreed-upon amount of funds over a three-year period to further the alliance between the two companies. In April 2019, the agreement was extended for an additional three years . As of January 31, 2022, the Company was in compliance with the terms of the agreement. In the quarter ended July 31, 2020, the equityholder ceased to qualify as a related party of the Company and the amounts disclosed related to such equityholder are accordingly presented only while they were considered a related party. For the fiscal years ended January 31, 2020, 2021, and 2022, $ 0.06 million, $ 0.0 million, and $ 0.0 million was spent, respectively. The Company entered into a Merger Agreement, as disclosed in Note 1 "Organization and Description of Business" and Note 7 "Business Combinations." Affiliates of Insight Partners are equityholders of SimpleNexus and certain other parties in connection with the Merger Agreement transaction, and other affiliates of Insight Partners are currently significant stockholders of the Company. Note 17. Basic and Diluted Loss per Share Basic loss per share is computed by dividing net loss attributable to nCino, Inc. by the weighted-average number of common shares outstanding for the fiscal period. Diluted loss per share is computed by giving effect to all potential weighted average dilutive common stock, including stock options issued and outstanding, nonvested RSUs issued and outstanding, and shares issuable pursuant to the ESPP. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method. Diluted loss per share for the fiscal years ended January 31, 2020, 2021, and 2022 is 97 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) the same as the basic loss per share as there was a net loss for those periods, and inclusion of potentially issuable shares was anti-dilutive. The components of basic and diluted loss per share for periods presented are as follows (in thousands, except share and per share data): Fiscal Year Ended January 31, 2020 2021 2022 Basic and diluted loss per share: Numerator Net loss attributable to nCino, Inc. $ ( 27,594 ) $ ( 40,536 ) $ ( 49,446 ) Denominator Weighted-average common shares outstanding 78,316,794 87,678,323 96,722,464 Basic and diluted loss per share attributable to nCino, Inc. $ ( 0.35 ) $ ( 0.46 ) $ ( 0.51 ) The weighted-average number of shares outstanding used in the computation of diluted loss per share does not include the effect of the following potential outstanding common stock because the effect would have been anti-dilutive: Fiscal Year Ended January 31, 2020 2021 2022 Stock options issued and outstanding 7,837,023 5,467,012 2,629,109 Nonvested RSUs issued and outstanding 948,119 1,848,296 3,012,440 Shares issuable pursuant to the ESPP — — 12,471 Note 18. Subsequent Events 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. 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 98 Table of Contents nCino, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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. In February 2022, the Company borrowed $ 20.0 million under the Credit Facility. On February 1, 2022, the Company granted 1,355,616 RSUs to the Company's employees, including executive officers. The Company expects to recognize stock-based compensation expense of $ 63.5 million related to the RSUs over a weighted average period of 4.0 years. 99 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.