What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-09-01 compared with 2022-06-01 · 117 added, 78 removed, 321 unchanged (38% of the section changed)

34 unchanged sentences

In fiscal 2020, we opened an office in Tokyo through our joint venture, nCino K.K., giving us another base of operations in APAC in addition to our Australian offices.

As of April 30, 2022, we had 282 sales and sales support personnel in the United States, including SimpleNexus, and 84 sales and support personnel in offices outside the United States.

As of July 31, 2022, we had 288 sales and sales support personnel in the United States, including SimpleNexus, and 83 sales and support personnel in offices outside the United States.

To help customers go live with the nCino Bank Operating System, we offer professional services including configuration and implementation, training and advisory services.

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As a result of the acquisition, SimpleNexus became a wholly owned subsidiary of nCino, Inc.

Our consolidated results of operations for the three months ended April 30, 2022 include the operating results of SimpleNexus from the Acquisition Date.

Our consolidated results of operations for the three and six months ended July 31, 2022 include the operating results of SimpleNexus from the Acquisition Date.

See Note 7 "Business Combinations" of the notes to our consolidated financial statements included in of Part I, Item I of this Quarterly Report on Form 10-Q for additional information.

Given it was prior to the Acquisition Date, no operating results for SimpleNexus are included in the comparative period for the three months ended April 30, 2021.

Given it was prior to the Acquisition Date, no operating results for SimpleNexus are included in the comparative period for the three and six months ended July 31, 2021.

SimpleNexus offers a suite of products that enables loan officers, borrowers, real estate agents, settlement agents and others to easily engage in the homeownership process from any internet-enabled device.

For the three months ended April 30, 2021 and 2022, our total revenues were $62.4 million and $94.2 million, respectively, representing a 51.1% increase.

Our revenues for the three months ended April 30, 2022 include $14.8 million in revenues from SimpleNexus.

For the three months ended April 30, 2021 and 2022, our subscription revenues were $51.0 million and $79.2 million, respectively, representing a 55.2% increase.

Our subscription-based revenues for the three months ended April 30, 2022 include $13.6 million from SimpleNexus.

Due to our continuing investment in growth, we recorded net losses attributable to nCino of $15.0 million and $30.7 million for the three months ended April 30, 2021 and 2022, respectively.

For the three months ended July 31, 2021 and 2022, our total revenues were $66.5 million and $99.6 million, respectively, representing a 49.8% increase.

Our revenues for the three months ended July 31, 2022 include $16.5 million in revenues from SimpleNexus.

For the three months ended July 31, 2021 and 2022, our subscription revenues were $53.9 million and $84.4 million, respectively, representing a 56.6% increase.

Our subscription-based revenues for the three months ended July 31, 2022 include $15.0 million from SimpleNexus.

Due to our continuing investment in growth, we recorded net losses attributable to nCino, Inc.

of $13.7 million and $27.2 million for the three months ended July 31, 2021 and 2022, respectively.

For the six months ended July 31, 2021 and 2022, our total revenues were $128.9 million and $193.8 million, respectively, representing a 50.4% increase.

Our revenues for the six months ended July 31, 2022 include $31.3 million in revenues from SimpleNexus.

For the six months ended July 31, 2021 and 2022, our subscription revenues were $105.0 million and $163.6 million, respectively, representing a 55.9% increase.

Our subscription-based revenues for the six months ended July 31, 2022 include $28.6 million from SimpleNexus.

Due to our continuing investment in growth, we recorded net losses attributable to nCino, Inc.

of $28.7 million and $57.9 million for the six months ended July 31, 2021 and 2022, respectively.

Factors Affecting Our Operating Results

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Our future growth depends on our ability to expand our reach to new financial institution customers and increase adoption with existing customers as they broaden their use of our solutions within and across lines of business.

Our success in growing our customer base and expanding adoption of our solutions by existing customers requires a focused direct sales engagement and the ability to convince key decision makers at financial institutions to replace legacy third-party point solutions or internally developed software with our solutions.

In addition, growing our customer base will require us to increasingly penetrate markets outside the United States, which markets accounted for 15.2% of total revenues for the three months ended April 30, 2022.

legacy third-party point solutions or internally developed software with our solutions.

In addition, growing our customer base will require us to increasingly penetrate markets outside the United States, which markets accounted for 15.0% of total revenues for the three months ended July 31, 2022, and 15.1% for the six months ended July 31, 2022.

For new customers, our sales cycles are typically lengthy, generally ranging from six to nine months for smaller financial institutions to 12 to 18 months or more for larger financial institutions.

Reaching and converting potential customers requires that we continue to invest in the growth and success of our sales force both in the

United States and internationally.

Reaching and converting potential customers requires that we continue to invest in the growth and success of our sales force both in the United States and internationally.

In addition, key to landing new customers is our ability to successfully take our existing customers live and help them achieve measurable returns on their investment, thereby turning them into referenceable accounts.

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COVID-19 Effects on Demand for Our Solutions .

To help our customers service demand for Paycheck Protection Program ("PPP") loans under the CARES Act beginning in April 2020, we adapted our Small Business Administration loan solution to the requirements of the PPP and rapidly introduced it to the market.

To help our customers service demand for Paycheck Protection Program ("PPP") loans under the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, beginning in April 2020, we adapted our Small Business Administration loan solution to the requirements of the PPP and rapidly introduced it to the market.

Using our PPP solution, since the inception of PPP funding, our financial institution customers have processed hundreds of thousands of applications.

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Subscription Revenues .

Our subscription revenues consist principally of fees from customers for accessing our solutions and maintenance and support services that we generally offer under non-cancellable multi-year contracts, which typically range from three to five years for the nCino Bank Operating System and one to three years for SimpleNexus.

typically range from three to five years for the nCino Bank Operating System and one to three years for SimpleNexus.

Specifically, we offer:

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The cost of providing professional services is significantly higher as a percentage of the related revenues than for our subscription services due to direct labor costs.

The cost of professional services revenues has increased in absolute dollars as we have added new customer subscriptions that require professional services and built-out our international professional services capabilities.

The cost of professional services revenues has increased in absolute dollars as we have added new customer subscriptions that require

professional services and built-out our international professional services capabilities.

Realized effective billing and utilization rates drive fluctuations in our professional services and other gross margin on a period-to-period basis.

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We capitalize incremental costs incurred to obtain contracts, primarily consisting of sales commissions, and subsequently amortize these costs over the expected period of benefit, which we have determined to be approximately four years.

Sales and marketing expenses also include outside consulting fees, marketing programs, including lead generation, costs

of our annual user conference, advertising, trade shows, other event expenses, amortization of intangible assets, and allocated overhead.

Sales and marketing expenses also include outside consulting fees, marketing programs, including lead generation, costs of our annual user conference, advertising, trade shows, other event expenses, amortization of intangible assets, and allocated overhead.

We expect sales and marketing expenses will continue to increase as we expand our direct sales teams in the United States and internationally to address our market opportunity.

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Other income (expense), net consists primarily of foreign currency gains and losses, the majority of which is due to intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Income Tax Provision (Benefit).

Income Tax Provision.

Income tax provision consists of federal and state income taxes in the United States and income taxes in foreign jurisdictions.

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The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.

The following tables present our selected consolidated statements of operations data for three months ended April 30, 2021 and 2022 in both dollars and as a percentage of total revenues, except as noted.

Three Months Ended April 30,

The following tables present our selected consolidated statements of operations data for three and six months ended July 31, 2021 and 2022 in both dollars and as a percentage of total revenues, except as noted.

Three Months Ended July 31, Six Months Ended July 31,

2021 2022 2021 2022

($ in thousands, except share and per share amounts)

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The Company recognized stock-based compensation expense as follows:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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The Company recognized amortization expense as follows:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Total amortization expense $ 810 $ 7,028 $ 1,624 $ 14,061

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

2021 2022 2021 2022

Subscription revenues 81.1 % 84.8 % 81.4 % 84.4 %

19 unchanged sentences

Net loss (21.5) % (27.5) % (23.2) % (29.6) %

Comparison of the Three Months Ended April 30, 2021 and 2022

Three Months Ended April 30,

Comparison of the Three and Six Months Ended July 31, 2021 and 2022

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Subscription Revenues

Subscription revenues increased $28.2 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, including customers added as a result of our acquisition of SimpleNexus, and growth from existing customers within and across lines of business.

Of the increase, 26.5% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and customers expanded their adoption of our solutions, 25.3% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three

months ended April 30, 2021, and 48.2% was attributable to revenues from SimpleNexus.

Subscription revenues were 84.1% of total revenues for the three months ended April 30, 2022 compared to 81.8% of total revenues for the three months ended April 30, 2021, primarily due to growth in our installed base and SimpleNexus.

Subscription revenues increased $30.5 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, including customers added as a result of our acquisition of SimpleNexus, and growth from existing customers within and across lines of business.

Of the increase, 36.0% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and customers expanded their adoption of our solutions, 14.8% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended July 31, 2021, and 49.2% was attributable to revenues from SimpleNexus.

Subscription revenues were 84.8% of total revenues for the three months ended July 31, 2022 compared to 81.1% of total revenues for the three months ended July 31, 2021, primarily due to growth in our installed base and SimpleNexus.

Subscription revenues increased $58.7 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, including customers added as a result of our acquisition of SimpleNexus, and growth from existing customers within and across lines of business.

Of the increase, 38.6% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and customers expanded their adoption of our solutions, 12.7% was attributable to initial revenues from customers who did not contribute to subscription revenues during the six months ended July 31, 2021, and 48.7% was attributable to revenues from SimpleNexus.

Subscription revenues were 84.4% of total revenues for the six months ended July 31, 2022 compared to 81.4% of total revenues for the six months ended July 31, 2021, primarily due to growth in our installed base and SimpleNexus.

Professional Services and Other Revenues

Professional services and other revenues increased $3.7 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

Professional services and other revenues increased $2.6 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

56.7% of the increase was attributable to revenues from SimpleNexus.

Professional services and other revenues increased $6.3 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

43.2% of the increase was attributable to revenues from SimpleNexus.

Cost of Revenues and Gross Margin

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Cost of Subscription Revenues

Cost of subscription revenues increased $10.6 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, generating a gross margin for subscription revenues of 67.8% compared to a gross margin of 70.7% for the three months ended April 30, 2021.

The decrease in gross margin percentage is primarily due to amortization expense increased for acquired developed technology by $3.9 million related to the acquisition of SimpleNexus.

Cost of subscription revenues increased $10.8 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, generating a gross margin for subscription revenues of 69.0% compared to a gross margin of 71.6% for the three months ended July 31, 2021.

The decrease in gross margin percentage is primarily due to an increase of $3.8 million in amortization expense for acquired developed technology related to the acquisition of SimpleNexus.

Costs related to Salesforce user fees increased $2.8 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $2.8 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $1.1 million as we added new employees, including the headcount from the acquisition of SimpleNexus.

The increase in cost of subscription revenues also included an increase of $0.2 million in allocated overhead costs due to growth supporting our continued business expansion.

We expect the cost of subscription revenues will continue to increase in absolute dollars as the number of users of the nCino Bank Operating System grows.

Cost of subscription revenues increased $21.4 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, generating a gross margin for subscription revenues of 68.4% compared to a gross margin of 71.2% for the six months ended July 31, 2021.

The decrease in gross margin percentage is primarily due to an increase of $7.7 million in amortization expense for acquired developed technology related to the acquisition of SimpleNexus.

Costs related to Salesforce user fees increased $5.5 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $5.3 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $2.2 million as we added new employees, including the headcount from the acquisition of SimpleNexus.

The increase in cost of subscription revenues also included an increase of $0.4 million in allocated overhead costs due to growth supporting our continued business expansion.

We expect the cost of subscription revenues will continue to increase in absolute dollars as the number of users of the nCino Bank Operating System grows.

Cost of Professional Services and Other Revenues

Cost of professional services and other revenues increased $3.4 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, generating a gross margin for professional services and other revenues of 1.5% compared to a gross margin of (0.3)% for the three months ended April 30, 2021.

For the three months ended April 30, 2022, personnel costs, including stock-based compensation expense, increased $2.9 million for the professional services team compared to the three months ended April 30, 2021 due to increased headcount, including the headcount from the acquisition of SimpleNexus.

The increase in cost of professional services and other revenues also included an increase of $0.3 million in allocated overhead costs due to growth supporting our continued business expansion.

The increase in our professional services and other gross margin for the three months ended April 30, 2022 was primarily due to an improved mix and use of our billable resources on our professional services teams.

Cost of professional services and other revenues increased $3.8 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, generating a gross margin for professional services and other revenues of 0.7% compared to a gross margin of 10.5% for the three months ended July 31, 2021.

For the three months ended July 31, 2022, personnel costs, including stock-based compensation expense, increased $3.2 million for the professional services team compared to the three months ended July 31, 2021, due to increased headcount, including the headcount from the acquisition of SimpleNexus.

The increase in cost of professional services and other revenues also included an increase of $0.2 million in travel-related costs and an increase of $0.1 million in allocated overhead costs due to growth supporting our continued business expansion.

The decrease in our professional services and other gross margin for the three months ended July 31, 2022 was primarily due to a decline in realized effective billing and utilization rates on our professional services teams.

Cost of professional services and other revenues increased $7.2 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, generating a gross margin for professional services and other revenues of 1.1% compared to a gross margin of 5.4% for the six months ended July 31, 2021.

For the six months ended July 31, 2022, personnel costs, including stock-based compensation expense, increased $6.1 million for the professional services team compared to the six months ended July 31, 2021, due to increased headcount, including the headcount from the acquisition of SimpleNexus.

The increase in cost of professional services and other revenues also included an increase of $0.4 million in travel-related costs and an increase of $0.4 million in allocated overhead costs due to growth supporting our continued business

The decrease in our professional services and other gross margin for the six months ended July 31, 2022 was primarily due to a decline in realized effective billing and utilization rates on our professional services teams.

We expect the cost of professional services and other revenues to increase in absolute dollars in the near term as we add new customer subscriptions where we provide professional services.

Operating Expenses

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Sales and Marketing

Sales and marketing expenses increased $10.9 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, primarily due to an increase of $6.2 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount on the sales and marketing teams, including the headcount from the acquisition of SimpleNexus.

This increase was partially offset by a decrease in expatriate tax equalization expenses compared to the three months ended April 30, 2021.

Sales and marketing expenses increased $13.3 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, primarily due to an increase of $6.7 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount on the sales and marketing teams, including the headcount from the acquisition of SimpleNexus.

Amortization expense for acquired customer relationships and trade name increased $2.3 million related to the acquisition of SimpleNexus.

The increase in sales and marketing expenses also included an increase of $1.1 million in sales-related travel costs, an increase of $0.7 million in marketing costs, and an increase of $0.6 million in allocated overhead costs.

Our sales and marketing headcount grew by 161 from April 30, 2021 to April 30, 2022.

The increase in sales and marketing expenses also included an increase of $2.1 million in marketing costs primarily attributable to in person conferences, an increase of $1.5 million in sales-related travel costs, and an increase of $0.7 million in allocated overhead costs.

Sales and marketing expenses increased $24.2 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, primarily due to an increase of $12.9 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount on the sales and marketing teams, including the headcount from the acquisition of SimpleNexus.

This increase was partially offset by a decrease in expatriate tax equalization expenses compared to the six months ended July 31, 2021.

Amortization expense for acquired customer relationships and trade name increased $4.7 million related to the acquisition of SimpleNexus.

The increase in sales and marketing expenses also included an increase of $2.8 million in marketing costs primarily attributable to in person conferences, an increase of $2.6 million in sales-related travel costs, and an increase of $1.3 million in allocated overhead costs.

Our sales and marketing headcount grew by 155 from July 31, 2021 to July 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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Research and Development

Research and development expenses increased $11.7 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, primarily due to an increase of $11.2 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount, including the headcount from the acquisition of SimpleNexus.

The increase in research and development expenses also included an increase of $1.1 million in allocated overhead costs due to growth supporting our continued business expansion and a $0.3 million increase in travel-related costs, partially offset by a $0.9 million decrease in third-party professional fees attributable to contract research and development spend.

Our research and development headcount grew by 216 from April 30, 2021 to April 30, 2022.

Research and development expenses increased $11.1 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, primarily due to an increase of $10.6 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount, including the headcount from the acquisition of SimpleNexus.

The increase in research and development expenses also included an increase of $0.9 million in allocated overhead costs due to growth supporting our continued business expansion and an increase of $0.3 million in travel-related costs, partially offset by a $0.7 million decrease in third-party professional fees primarily attributable to contract research and development spend.

Research and development expenses increased $22.8 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, primarily due to an increase of $21.8 million in personnel costs, including stock-based compensation expense, resulting mainly from a continued increase in headcount, including the headcount from the acquisition of SimpleNexus.

The increase in research and development expenses also included an increase of $2.0 million in allocated overhead costs due to growth supporting our continued business expansion and an increase of $0.6 million in travel-related costs, partially offset by a $1.6 million decrease in third-party professional fees primarily attributable to contract research and development spend.

Our research and development headcount grew by 217 from July 31, 2021 to July 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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General and Administrative

General and administrative expenses increased $7.0 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, primarily due to an increase of $6.1 million in personnel costs, including stock-based compensation expense, from additional headcount as we continued to scale our business, including headcount from the acquisition of SimpleNexus, and an increase of $0.9 million in allocated overhead and other general and administrative costs.

Our general and administrative headcount grew by 71 from April 30, 2021 to April 30, 2022.

General and administrative expenses increased $5.9 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, primarily due to an increase of $5.3 million in personnel costs, including stock-based compensation expense, from additional headcount as we continued to scale our business, including headcount from the acquisition of SimpleNexus.

The increase in general and administrative spend also included an increase of $0.8 million in allocated overhead and other general and administrative costs and an increase of $0.2 million in travel-related costs.

Third party professional fees decreased $0.4 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, mostly attributable to a decrease in third party professional fees and expenses related to the government antitrust investigation and related civil action disclosed in Note 14 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q (the "Antitrust Matters"), partially offset by an increase in fees and expenses related to acquisition costs and other professional fees.

General and administrative expenses increased $12.9 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, primarily due to an increase of $11.4 million in personnel costs, including stock-based compensation expense, from additional headcount as we continued to scale our business, including headcount from the acquisition of SimpleNexus.

The increase in general and administrative spend also included an increase of $1.7 million in allocated overhead and other general and administrative costs and an increase of $0.4 million in travel-related costs.

Third party professional fees decreased $0.5 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, mostly attributable to a decrease in third party professional fees and expenses related to the Antitrust Matters, partially offset by an increase in fees and expenses related to acquisition costs and other professional fees.

Our general and administrative headcount grew by 63 from July 31, 2021 to July 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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Non-Operating Income (Expense)

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Other income (expense), net (337) (0.5) (1,014) (1.0) (70) (0.1) (2,587) (1.3)

Interest income decreased $0.1 million for the three months ended April 30, 2022 compared to the three months ended April 30, 2021, primarily due to a decrease in interest rates.

Interest expense increased $0.4 million primarily due to a full year of expense and a larger balance on our financing obligations for leases for which we are considered the owners for accounting purposes.

The decrease of $1.8 million in other income (expense), net was primarily driven by intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Interest expense increased $0.3 million for the three months ended July 31, 2022 compared to the three months ended July 31, 2021, primarily due to a larger balance on our financing obligations for leases for which we are considered the owners for accounting purposes.

The increase of $0.7 million in other income (expense), net for the three months ended July 31, 2022 compared to the three months ended July 31, 2021 was primarily driven by intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Interest expense increased $0.7 million for the six months ended July 31, 2022 compared to the six months ended July 31, 2021, primarily due to a larger balance on our financing obligations for leases for which we are considered the owners for accounting purposes.

The increase of $2.5 million in other income (expense), net for the six months ended July 31, 2022 compared to the six months ended July 31, 2021 was primarily driven by intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Income Tax Provision

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

Income tax provision $ 487 0.7 % $ 799 0.8 % $ 674 0.5 % $ 1,362 0.7 %

Income tax provision was $0.6 million for the three months ended April 30, 2022 compared to a provision of $0.2 million for the three months ended April 30, 2021, and resulted in an effective tax rate of (1.9)% compared to (1.2)% in the prior fiscal year.

Income tax provision was $0.8 million for the three months ended July 31, 2022 compared to a provision of $0.5 million for the three months ended July 31, 2021, and resulted in an effective tax rate of (3.0)% and (3.5)%, respectively.

Income tax provision was $1.4 million for the six months ended July 31, 2022 compared to a provision of $0.7 million for the six months ended July 31, 2021, and resulted in an effective tax rate of (2.4)% compared to (2.3)%, respectively.

We continue to maintain a valuation allowance against our deferred tax assets in most jurisdictions, including the U.S.

It is determined by management when a valuation allowance should be recorded, utilizing significant judgement and the use of estimates.

Beginning with the three months ended April 30, 2022, we began to follow Internal Revenue Code Section 174, as amended by the Tax Cuts and Jobs Act of 2017.

income tax purposes, the option to currently deduct research and development expenditures is no longer available and requires taxpayers to capitalize and amortize these expenditures over either a five- or fifteen-year period.

Beginning with the six months ended July 31, 2022, we have adopted, as required, Internal Revenue Code Section 174, as amended by the Tax Cuts and Jobs Act of 2017.

income tax purposes, the option to deduct research and development expenditures is no longer available and thus requires us to capitalize and amortize these expenditures over either a five- or fifteen-year period.

This will result in the repartition of our deferred tax asset balances from net operating losses and tax credit carryforwards to non-tax attribute deferred tax balances.

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Accordingly, we believe that this financial measure reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business and provides useful information to investors and others in understanding and evaluating our operating results, and enhancing the overall understanding of our past performance and future prospects.

Although the calculation of non-GAAP financial measures may vary from company to company, our detailed presentation may facilitate analysis and comparison of our operating results by management and investors with other peer companies, many of which use a similar non-GAAP financial measure to supplement their GAAP results in their public disclosures.

companies, many of which use a similar non-GAAP financial measure to supplement their GAAP results in their public disclosures.

This non-GAAP financial measure is non-GAAP operating loss, as discussed below.

Non-GAAP operating loss.

Non-GAAP operating loss is defined as loss from operations as reported in our unaudited condensed consolidated statements of operations excluding the impact of amortization of intangible assets, stock-based compensation expense, acquisition-related expenses for SimpleNexus, and expenses related to the Antitrust Matters.

Non-GAAP operating loss is widely used by securities analysts, investors, and other interested parties to evaluate the profitability of companies.

Non-GAAP operating loss eliminates potential differences in performance caused by variations in the extent to which intangible assets are identifiable (affecting relative amortization expense).

We do not believe SimpleNexus acquisition-related expenses and fees and expenses related to the Antitrust Matters are indicative of the Company's ongoing operating performance and hinder comparability with prior and future performance.

We do not believe acquisition-related expenses and fees and expenses related to the Antitrust Matters are indicative of the Company's ongoing operating performance and hinder comparability with prior and future performance.

This non-GAAP financial measure does not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP.

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The following table reconciles non-GAAP operating loss to loss from operations, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

($ in thousands) 2021 2022 2021 2022

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Liquidity and Capital Resources

As of April 30, 2022, we had $78.7 million in cash and cash equivalents, and an accumulated deficit of $239.3 million.

As of July 31, 2022, we had $86.1 million in cash and cash equivalents, and an accumulated deficit of $266.4 million.

Our net losses have been driven by our investments in developing the nCino Bank Operating System, expanding our sales and marketing organization, and scaling our finance and administrative functions to support our rapid growth.

We expect to continue to incur operating losses for the foreseeable future.

To date, we have funded our capital needs through issuances of common stock and collections from our customers.

To date, we have funded our capital needs through issuances of common stock and operating cash flows.

Beginning in the three months ended April 30, 2022, we supplemented our liquidity with our revolving line of credit.

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On February 11, 2022, we entered into a credit agreement for a senior secured revolving credit facility (the "Credit Facility") of up to $50.0 million.

We borrowed and repaid an amount of $20.0 million under such credit facility during the three months ended April 30, 2022.

As of April 30, 2022, the Company had no amounts outstanding or letters of credit issued on the Credit Facility and was in compliance with all covenants.

We borrowed and repaid an amount of $20.0 million under such credit facility during the six months ended July 31, 2022.

As of July 31, 2022, the Company had no amounts outstanding or letters of credit issued on the

Credit Facility and was in compliance with all covenants.

See Note 13 "Revolving Credit Facility" of Part I, Item I of this Quarterly Report on Form 10-Q for more information.

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Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts to enhance the nCino Bank Operating System and introduce new applications, market acceptance of our solutions, the continued expansion of our sales and marketing activities, investments in office facilities and other capital expenditure requirements, and any potential future acquisitions.

We expect capital expenditures will be appreciably higher in absolute dollars in fiscal 2023 for planned office build-outs compared to prior fiscal years to accommodate our growth, which we estimate to be approximately $10.1 million remaining to complete at April 30, 2022.

We expect capital expenditures will be appreciably higher in absolute dollars in fiscal 2023 for planned office build-outs compared to prior fiscal years to accommodate our growth, which we estimate to be approximately $8.5 million remaining to complete at July 31, 2022.

We may from time-to-time seek to raise additional capital to support our growth.

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The balance of the redeemable non-controlling interest is reported on our balance sheet below total liabilities but above stockholders’ equity 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.

As of January 31, 2022 and April 30, 2022, the redeemable non-controlling interest was $2.9 million and $3.4 million, respectively.

As of January 31, 2022 and July 31, 2022, the redeemable non-controlling interest was $2.9 million and $3.2 million, respectively.

As part of our joint venture obligations, we expect we may be required to make an additional cash capital contribution of up to $5.0 million to nCino K.K.

during the course of the current fiscal year.

Summary Cash Flow information for the three months ended April 30, 2021 and 2022 are set forth below:

Three Months Ended April 30,

Summary Cash Flow information for the six months ended July 31, 2021 and 2022 are set forth below:

Six Months Ended July 31,

($ in thousands) 2021 2022

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Net Cash Provided by Operating Activities

The $1.2 million provided by operating activities in the three months ended April 30, 2022 reflects our net loss of $30.0 million, offset by $26.8 million in non-cash charges and $4.5 million generated by changes in working capital accounts.

The $10.7 million provided by operating activities in the six months ended July 31, 2022 reflects our net loss of $57.4 million, offset by $52.2 million in non-cash charges and $15.9 million generated by changes in working capital accounts.

Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization, amortization of costs capitalized to obtain revenue contracts, foreign currency losses related to intercompany loans and transactions, and non-cash operating lease costs.

Cash generated by working capital accounts was principally a function of a $30.3 million increase in deferred revenue, as we expanded our customer base and renewed existing customers, and a $5.4 million decrease in accounts receivable.

The cash generated by working capital accounts was partially offset by a $10.8 million decrease in accrued expenses and other current liabilities, a $2.3 million decrease in accounts payable, payments of $2.2 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $2.0 million increase in prepaid expenses and other assets, and a $1.2 million decrease in operating lease liabilities.

The $7.6 million provided by operating activities in the three months ended April 30, 2021 reflects our net loss of $15.6 million, offset by $10.5 million in non-cash charges and $12.6 million generated by changes in working capital accounts.

Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization, and amortization of costs capitalized to obtain revenue contracts, partially offset by foreign currency gains related to intercompany loans and transactions.

Cash generated by working capital accounts was principally a function of a $19.4 million increase in our deferred revenue, as we expanded our customer base and renewed existing customers, a $3.2 million increase in accounts payable, and a $1.1 million decrease in prepaid expenses and other assets.

The cash generated by working capital accounts was partially offset by a $8.8 million decrease in accrued expenses and other current liabilities, payments of $1.5 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $0.6 million decrease in operating lease liabilities, and a $0.2 million increase in accounts receivable.

The cash generated by working capital accounts was partially offset by a $9.7 million decrease in accrued expenses and other current liabilities, payments of $4.6 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $2.1 million decrease in operating lease liabilities, a $1.9 million decrease in accounts payable, and a $1.7 million increase in prepaid expenses and other assets.

The $20.9 million provided by operating activities in the six months ended July 31, 2021 reflects our net loss of $29.9 million, offset by $23.2 million in non-cash charges and $27.6 million generated by changes in working capital accounts.

Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization, amortization of costs capitalized to obtain revenue contracts, and non-cash operating lease costs.

Cash generated by working capital accounts was

principally a function of a $26.0 million increase in our deferred revenue, as we expanded our customer base and renewed existing customers, a $3.8 million decrease in accounts receivable, a $2.4 million increase in accounts payable, and a $1.7 million decrease in prepaid expenses and other assets.

The cash generated by working capital accounts was partially offset by payments of $4.4 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $1.3 million decrease in operating lease liabilities, and a $0.7 million decrease in accrued expenses and other current liabilities.

Net Cash Used in Investing Activities

We used $4.7 million and $0.5 million in investing activities in the three months ended April 30, 2022 and 2021, respectively, for the purchase of property and equipment and leasehold improvements to support the expansion of our business.

We used $9.3 million and $1.3 million in investing activities in the six months ended July 31, 2022 and 2021, respectively, for the purchase of property and equipment and leasehold improvements to support the expansion of our business.

Net Cash Provided by Financing Activities

The $0.3 million provided by financing activities in the three months ended April 30, 2022 was comprised principally of $0.8 million of proceeds from the exercise of stock options, partially reduced by payments of debt issuance costs of $0.4 million and principal payments of $0.2 million on financing obligations.

We borrowed and repaid $20.0 million under our revolving credit facility during the three months ended April 30, 2022.

The $7.8 million provided by financing activities in the three months ended April 30, 2021 was comprised principally of $7.9 million of proceeds from the exercise of stock options.

The cash provided by financing activities was partially reduced by principal payments of $0.1 million on the financing obligation.

The $3.6 million provided by financing activities in the six months ended July 31, 2022 was comprised principally of $2.4 million of proceeds from stock issuances under the employee stock purchase plan and $1.9 million of proceeds from the exercise of stock options, partially reduced by payments of debt issuance costs of $0.4 million and principal payments of $0.3 million on financing obligations.

We borrowed and repaid $20.0 million under our revolving credit facility during the six months ended July 31, 2022.

The $9.1 million provided by financing activities in the six months ended July 31, 2021 was comprised principally of $9.2 million of proceeds from the exercise of stock options, partially reduced by principal payments of $0.1 million on the financing obligation.

Contractual Obligations and Commitments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis