nCino, Inc. 10-Q

Item 1. Financial Statements nCino, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) January 31, 2022 October 31, 2022 (Unaudited) Assets Current assets Cash and cash equivalents (VIE: $ 4,183 and $ 2,077 at January 31, 2022 and October 31, 2022, respectively) $ 88,014 $ 106,451 Accounts receivable, less allowance for doubtful accounts of $ 151 and $ 348 at January 31, 2022 and October 31, 2022, respectively 74,528 39,627 Costs capitalized to obtain revenue contracts, current portion, net 7,583 8,663 Prepaid expenses and other current assets 13,384 13,219 Total current assets 183,509 167,960 Property and equipment, net 60,677 83,537 Operating lease right-of-use assets, net 13,170 12,047 Costs capitalized to obtain revenue contracts, noncurrent, net 16,403 16,772 Goodwill 841,487 839,918 Intangible assets, net 180,122 159,491 Investment 4,031 4,031 Other long-term assets 1,615 7,447 Total assets $ 1,301,014 $ 1,291,203 Liabilities, redeemable non-controlling interest, and stockholders’ equity Current liabilities Accounts payable $ 11,366 $ 10,840 Accrued compensation and benefits 21,454 18,363 Accrued expenses and other current liabilities 14,744 6,823 Deferred revenue, current portion 122,643 117,281 Financing obligations, current portion 621 697 Operating lease liabilities, current portion 3,548 3,830 Total current liabilities 174,376 157,834 Operating lease liabilities, noncurrent 11,198 9,667 Deferred income taxes, noncurrent 1,675 2,280 Deferred revenue, noncurrent 44 6 Revolving credit facility, noncurrent — 30,000 Financing obligations, noncurrent 33,478 32,944 Construction liability, noncurrent 9,736 22,518 Total liabilities 230,507 255,249 Commitments and contingencies (Notes 12, 14, and 17) Redeemable non-controlling interest (Note 3) 2,882 4,092 Stockholders’ equity Preferred stock, $ 0.001 par value; 10,000,000 shares authorized, and none issued and outstanding as of January 31, 2022 and October 31, 2022 — — Common stock, $ 0.0005 par value; 500,000,000 shares authorized as of January 31, 2022 and October 31, 2022; 109,778,542 and 110,943,569 shares issued and outstanding as of January 31, 2022 and October 31, 2022, respectively 55 55 Additional paid-in capital 1,277,258 1,318,829 Accumulated other comprehensive income (loss) ( 72 ) 1,758 Accumulated deficit ( 209,616 ) ( 288,780 ) Total stockholders’ equity 1,067,625 1,031,862 Total liabilities, redeemable non-controlling interest, and stockholders’ equity $ 1,301,014 $ 1,291,203 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 1 Table of Contents nCino, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Revenues Subscription $ 57,085 $ 88,290 $ 162,052 $ 251,924 Professional services and other 12,951 17,006 36,858 47,210 Total revenues 70,036 105,296 198,910 299,134 Cost of revenues Subscription (related party $ 11,638 , $ 0 , $ 33,358 , and $ 0 , respectively) 1 15,753 26,844 46,007 78,499 Professional services and other 11,501 16,312 34,121 46,180 Total cost of revenues 27,254 43,156 80,128 124,679 Gross profit 42,782 62,140 118,782 174,455 Operating expenses Sales and marketing 20,586 32,423 58,227 94,274 Research and development 19,956 29,471 55,990 88,287 General and administrative 14,964 18,690 45,931 62,575 Total operating expenses 55,506 80,584 160,148 245,136 Loss from operations ( 12,724 ) ( 18,444 ) ( 41,366 ) ( 70,681 ) Non-operating income (expense) Interest income 57 87 173 115 Interest expense ( 379 ) ( 580 ) ( 977 ) ( 1,849 ) Other income (expense), net ( 255 ) ( 2,911 ) ( 325 ) ( 5,498 ) Loss before income taxes ( 13,301 ) ( 21,848 ) ( 42,495 ) ( 77,913 ) Income tax provision 356 797 1,030 2,159 Net loss ( 13,657 ) ( 22,645 ) ( 43,525 ) ( 80,072 ) Net loss attributable to redeemable non-controlling interest (Note 3) ( 389 ) ( 257 ) ( 1,259 ) ( 908 ) Adjustment attributable to redeemable non-controlling interest (Note 3) 368 1,191 61 2,348 Net loss attributable to nCino, Inc. $ ( 13,636 ) $ ( 23,579 ) $ ( 42,327 ) $ ( 81,512 ) Net loss per share attributable to nCino, Inc.: Basic and diluted $ ( 0.14 ) $ ( 0.21 ) $ ( 0.44 ) $ ( 0.74 ) Weighted average number of common shares outstanding: Basic and diluted 96,431,082 110,897,811 95,510,413 110,434,171 1 See Note 9 "Reseller Agreement" and Note 15 "Related-Party Transactions." The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 2 Table of Contents nCino, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Net loss $ ( 13,657 ) $ ( 22,645 ) $ ( 43,525 ) $ ( 80,072 ) Other comprehensive income (loss): Foreign currency translation 163 472 ( 487 ) 1,581 Other comprehensive income (loss) 163 472 ( 487 ) 1,581 Comprehensive loss ( 13,494 ) ( 22,173 ) ( 44,012 ) ( 78,491 ) Less comprehensive loss attributable to redeemable non-controlling interest: Net loss attributable to redeemable non-controlling interest ( 389 ) ( 257 ) ( 1,259 ) ( 908 ) Foreign currency translation attributable to redeemable non-controlling interest ( 82 ) ( 67 ) ( 233 ) ( 249 ) Comprehensive loss attributable to redeemable non-controlling interest ( 471 ) ( 324 ) ( 1,492 ) ( 1,157 ) Comprehensive loss attributable to nCino, Inc. $ ( 13,023 ) $ ( 21,849 ) $ ( 42,520 ) $ ( 77,334 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 3 Table of Contents nCino, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) (Unaudited) Three Months Ended October 31, 2021 Common Stock Additional Paid-in Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Balance, July 31, 2021 95,927,741 $ 48 $ 610,166 $ ( 259 ) $ ( 190,062 ) $ 419,893 Exercise of stock options 559,703 — 3,420 — — 3,420 Stock issuance upon vesting of restricted stock units 204,187 — — — — — Stock-based compensation — — 5,845 — — 5,845 Other comprehensive income — — — 245 — 245 Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — ( 368 ) — ( 13,268 ) ( 13,636 ) Balance, October 31, 2021 96,691,631 $ 48 $ 619,063 $ ( 14 ) $ ( 203,330 ) $ 415,767 Three Months Ended October 31, 2022 Common Stock Additional Paid-in Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Balance, July 31, 2022 110,616,050 $ 55 $ 1,306,339 $ 1,219 $ ( 266,392 ) $ 1,041,221 Exercise of stock options 145,753 — 1,182 — — 1,182 Stock issuance upon vesting of restricted stock units 181,766 — — — — — Stock issuance under the employee stock purchase plan — — — — — — Stock-based compensation — — 12,499 — — 12,499 Other comprehensive income — — — 539 — 539 Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — ( 1,191 ) — ( 22,388 ) ( 23,579 ) Balance, October 31, 2022 110,943,569 $ 55 $ 1,318,829 $ 1,758 $ ( 288,780 ) $ 1,031,862 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 4 Table of Contents nCino, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) (Unaudited) Nine Months Ended October 31, 2021 Common Stock Additional Paid-in Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Balance, January 31, 2021 93,643,759 $ 47 $ 585,956 $ 240 $ ( 161,064 ) $ 425,179 Exercise of stock options 2,527,287 1 12,619 — — 12,620 Stock issuance upon vesting of restricted stock units 520,585 — — — — — Stock-based compensation — — 20,549 — — 20,549 Other comprehensive loss — — — ( 254 ) — ( 254 ) Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — ( 61 ) — ( 42,266 ) ( 42,327 ) Balance, October 31, 2021 96,691,631 $ 48 $ 619,063 $ ( 14 ) $ ( 203,330 ) $ 415,767 Nine Months Ended October 31, 2022 Common Stock Additional Paid-in Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Balance, January 31, 2022 109,778,542 $ 55 $ 1,277,258 $ ( 72 ) $ ( 209,616 ) $ 1,067,625 Exercise of stock options 451,147 — 3,038 — — 3,038 Stock issuance upon vesting of restricted stock units 621,644 — — — — — Stock issuance under the employee stock purchase plan 92,236 — 2,424 — — 2,424 Stock-based compensation — — 38,457 — — 38,457 Other comprehensive income — — — 1,830 — 1,830 Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest — — ( 2,348 ) — ( 79,164 ) ( 81,512 ) Balance, October 31, 2022 110,943,569 $ 55 $ 1,318,829 $ 1,758 $ ( 288,780 ) $ 1,031,862 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 5 Table of Contents nCino, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended October 31, 2021 2022 Cash flows from operating activities Net loss attributable to nCino, Inc. $ ( 42,327 ) $ ( 81,512 ) Net loss and adjustment attributable to redeemable non-controlling interest ( 1,198 ) 1,440 Net loss ( 43,525 ) ( 80,072 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 6,139 25,458 Non-cash operating lease costs 1,847 2,879 Amortization of costs capitalized to obtain revenue contracts 4,157 6,160 Amortization of debt issuance costs — 131 Stock-based compensation 20,549 38,476 Deferred income taxes 192 452 Provision for bad debt 84 323 Net foreign currency losses 393 5,608 Change in operating assets and liabilities: Accounts receivable 21,614 32,497 Costs capitalized to obtain revenue contracts ( 5,848 ) ( 8,033 ) Prepaid expenses and other assets ( 1,430 ) ( 446 ) Accounts payable 3,934 ( 1,732 ) Accounts payable, related parties 873 — Accrued expenses and other current liabilities ( 2,047 ) ( 9,182 ) Deferred revenue ( 3,192 ) ( 2,883 ) Operating lease liabilities ( 1,917 ) ( 2,997 ) Net cash provided by operating activities 1,823 6,639 Cash flows from investing activities Acquisition of business, net of cash acquired — 676 Acquisition of assets — ( 563 ) Purchases of property and equipment ( 3,640 ) ( 13,889 ) Net cash used in investing activities ( 3,640 ) ( 13,776 ) Cash flows from financing activities Proceeds from borrowings on revolving credit facility — 50,000 Payments on revolving credit facility — ( 20,000 ) Payments of debt issuance costs — ( 367 ) Exercise of stock options 12,620 3,038 Stock issuance under the employee stock purchase plan — 2,424 Principal payments on financing obligations ( 181 ) ( 458 ) Net cash provided by financing activities 12,439 34,637 Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash ( 632 ) ( 4,098 ) Net increase in cash, cash equivalents, and restricted cash 9,990 23,402 Cash, cash equivalents, and restricted cash, beginning of period 371,425 88,399 Cash, cash equivalents, and restricted cash, end of period $ 381,415 $ 111,801 Reconciliation of cash, cash equivalents, and restricted cash, end of period: Cash and cash equivalents $ 381,080 $ 106,451 Restricted cash included in other long-term assets 335 5,350 Total cash, cash equivalents, and restricted cash, end of period $ 381,415 $ 111,801 Supplemental disclosure of cash flow information Cash paid for taxes, net of refunds $ 335 $ 657 Cash paid for interest $ 977 $ 1,849 Supplemental disclosure of noncash investing and financing activities Purchase of property and equipment, accrued but not paid $ 6,370 $ 14,765 Building-leased facility acquired through financing obligation $ 17,678 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements . 6 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Note 1. Organization and Description of Business Organization: On November 16, 2021, nCino, Inc. (now nCino OpCo, Inc., "nCino OpCo") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Penny HoldCo, Inc. (now nCino, Inc., "nCino, Inc."), a Delaware corporation incorporated on November 12, 2021 as a wholly-owned subsidiary of nCino OpCo, and certain other parties. On January 7, 2022, in connection with the closing of the transactions contemplated by the Merger Agreement, Penny HoldCo, Inc. changed its name to nCino, Inc. and nCino, Inc. changed its name to nCino OpCo, Inc. and became a wholly-owned subsidiary of nCino, Inc. Merger: On January 7, 2022, pursuant to the Merger Agreement, nCino, Inc. and nCino OpCo completed a series of mergers in which nCino, Inc. became the parent of nCino OpCo and SimpleNexus, LLC ("SimpleNexus"). Each share of nCino OpCo common stock, par value $ 0.0005 per share, issued and outstanding was converted into one fully paid and nonassessable share of nCino, Inc. common stock, par value $ 0.0005 . nCino, Inc. became the successor issuer and reporting company to nCino OpCo pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended. On January 10, 2022, shares of nCino OpCo were suspended from trading on the Nasdaq Global Select Market, and shares of nCino, Inc. commenced using nCino OpCo's trading history under the ticker symbol "NCNO". In these unaudited condensed consolidated financial statements, nCino OpCo and nCino, 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; Paris, France; Madrid, Spain; and Tokyo, Japan. Fiscal Year End: The Company’s fiscal year ends on January 31. Note 2. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") as set forth in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and applicable rules and regulations of the Securities Exchange Commission ("SEC") regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed with the SEC on March 31, 2022. The unaudited condensed consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries, as well as a variable interest entity in which the Company is the primary beneficiary. All intercompany accounts and transactions are eliminated. 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. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal 2023 or any future period. 7 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Reclassification: The Company reclassified certain prior year amounts in the unaudited condensed consolidated statement of cash flows within the cash flows from operating activities 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 unaudited condensed 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 earnings, additional paid-in-capital. These interests are presented on the unaudited condensed consolidated balance sheets outside of equity under the caption “Redeemable non-controlling interest.” Use of Estimates: The preparation of unaudited condensed 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 unaudited condensed 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. 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, 2022 and October 31, 2022. The Company maintains its cash, cash equivalents and restricted cash with high-credit-quality financial institutions. As of January 31, 2022, one individual customer represented 12 % of accounts receivable and, as of October 31, 2022, no individual customer represented over 10% of accounts receivable. For the three and nine months ended October 31, 2021 and 2022, no individual customer represented more than 10% of the Company’s total revenues. Restricted Cash: Restricted cash primarily consists of a minimum cash balance the Company maintains with a lender under the Company's revolving credit facility. The remaining 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. Restricted cash is 8 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) included in other long-term assets at January 31, 2022 and October 31, 2022 on the unaudited condensed consolidated balance sheets. 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 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. A summary of activity in the allowance for doubtful accounts is as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Balance, beginning of period $ 59 $ 301 $ 88 $ 151 Charged to bad debt expense 89 169 84 323 Write-offs and other — ( 116 ) ( 24 ) ( 116 ) Translation adjustments 3 ( 6 ) 3 ( 10 ) Balance, end of period $ 151 $ 348 $ 151 $ 348 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 observable price changes 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. Debt Issuance Costs: Debt issuance costs are initially deferred and amortized to interest expense on a straight-line basis over the expected term of the debt. The Company uses the straight-line basis as it approximates the amounts calculated under the effective-interest method. Unamortized debt issuance costs related to the secured revolving credit facility are considered long-term and are included in other long-term assets in the unaudited condensed consolidated balance sheets. 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 October 31, 2022, the Company controls a majority of the outstanding common stock in nCino K.K. 9 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) All of the common stock held by the Investors is callable by the Company or puttable by the Investors at the option of the Investors or at the option of the Company beginning on the eighth anniversary of the agreement with the Investors. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of nCino K.K. and the Company and may be settled, at the Company’s discretion, with Company stock or cash or a combination of the foregoing. As a result of the put right available to the Investors, the redeemable non-controlling interests in nCino K.K. are classified outside of permanent equity in the Company’s unaudited condensed consolidated balance sheets. The estimated redemption value of the call/put option embedded in the redeemable non-controlling interest was $ 3.6 million at October 31, 2022. The following table summarizes the activity in the redeemable non-controlling interests for the period indicated below: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Balance, beginning of period $ 2,463 $ 3,219 $ 3,791 $ 2,882 Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest) ( 389 ) ( 257 ) ( 1,259 ) ( 908 ) Foreign currency translation ( 82 ) ( 67 ) ( 233 ) ( 249 ) Adjustment to redeemable non-controlling interest 368 1,191 61 2,348 Stock-based compensation expense 1 — 6 — 19 Balance, end of period $ 2,360 $ 4,092 $ 2,360 $ 4,092 1 nCino K.K. stock options granted in accordance with nCino K.K.'s equity incentive plan. Note 4. Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2. Significant other inputs that are directly or indirectly observable in the marketplace. Level 3. Significant unobservable inputs which are supported by little or no market activity. The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of January 31, 2022 and October 31, 2022 because of the relatively short duration of these instruments. The carrying amount of any outstanding borrowings on the Company's revolving credit facility approximates fair value due to the variable interest rates of the borrowings. 10 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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, 2022 and October 31, 2022 and indicates the fair value hierarchy of the valuation: 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 $ — $ — Fair value measurements on a recurring basis as of October 31, 2022 Level 1 Level 2 Level 3 Assets: Money market accounts (included in cash and cash equivalents) $ 46,642 $ — $ — Time deposits (included in other long-term assets) 350 — — Total assets $ 46,992 $ — $ — All of the Company’s money market accounts are classified within Level 1 because the Company’s money market accounts are valued using quoted market prices in active exchange markets including identical assets. Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis The Company's assets measured at fair value on a nonrecurring basis include the investment accounted for under the measurement alternative. There was no adjustment or impairment recognized for the three and nine months ended October 31, 2021 and 2022, respectively. Note 5. Revenues Revenues by Geographic Area Revenues by geographic region were as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 United States $ 58,357 $ 89,442 $ 167,389 $ 254,049 International 11,679 15,854 31,521 45,085 $ 70,036 $ 105,296 $ 198,910 $ 299,134 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. 11 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Contract Amounts Accounts Receivable Accounts receivable, less allowance for doubtful accounts, is as follows as of January 31, 2022 and October 31, 2022: As of January 31, 2022 As of October 31, 2022 Trade accounts receivable $ 71,417 $ 35,815 Unbilled accounts receivable 2,161 3,461 Allowance for doubtful accounts ( 151 ) ( 348 ) Other accounts receivable 1 1,101 699 Total accounts receivable, net $ 74,528 $ 39,627 1 Includes $ 0.5 million and $ 0.1 million income tax receivable of as of January 31, 2022 and October 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, which were offset by decreases due to revenues recognized in the period. During the nine months ended October 31, 2022, $ 114.6 million of revenues were recognized out of the deferred revenue balance as of January 31, 2022. 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 $ 919.2 million as of October 31, 2022. The Company expects to recognize approximately 66 % of its remaining performance obligation as revenues in the next 24 months, approximately 29 % more in the following 25 to 48 months, and the remainder thereafter. 12 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED 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, 2022 As of October 31, 2022 Furniture and fixtures $ 7,503 $ 7,640 Computers and equipment 7,496 8,382 Buildings and land 33,977 33,977 Leasehold improvements 14,111 15,849 Construction in progress 1 13,081 36,744 76,168 102,592 Less accumulated depreciation ( 15,491 ) ( 19,055 ) $ 60,677 $ 83,537 1 The increase in construction in progress is primarily due to construction for an additional office building that is on the property of the Company's existing headquarters for which we are considered the owner for accounting purposes. See Note 14 "Commitments and Contingencies" for additional details including future commitments and Note 17 "Subsequent Events." The Company recognized depreciation expense as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Cost of subscription revenues $ 79 $ 92 $ 246 $ 268 Cost of professional services and other revenues 247 311 817 852 Sales and marketing 275 349 872 991 Research and development 467 570 1,313 1,654 General and administrative 159 186 461 564 Total depreciation expense $ 1,227 $ 1,508 $ 3,709 $ 4,329 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, 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”) were 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 Acquisition Date. 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. 13 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The fair value of the consideration transferred was $ 933.6 million on the Acquisition Date, subject to a net working capital adjustment. The net working capital adjustment was finalized in July 2022, resulting in a decrease to the purchase price of $ 0.7 million which was recorded to goodwill. The total consideration transferred is as follows: Total Consideration Cash consideration to members $ 286,086 Voting common stock issued ( 12,762,146 shares) 1 647,509 Net working capital adjustment ( 676 ) Total consideration $ 932,919 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. 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 the Acquisition Date, the Company's closing stock price was $ 50.82 per share. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed, including measurement period adjustments recorded, as of October 31, 2022: 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 784,480 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 $ 932,919 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 and all 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 Company's review of certain assets acquired and liabilities assumed, (ii) 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 (iii) 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 14 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) 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. 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 preliminarily 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 preliminarily estimated fair value of SimpleNexus’ company name. 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. Note 8. Goodwill and Intangible Assets Goodwill The change in the carrying amounts of goodwill was as follows: Balance, January 31, 2022 $ 841,487 SimpleNexus net working capital purchase adjustment ( 676 ) Translation adjustments ( 893 ) Balance, October 31, 2022 $ 839,918 Intangible assets Intangible assets, net are as follows: As of January 31, 2022 As of October 31, 2022 Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount Acquired developed technology $ 83,625 $ ( 4,804 ) $ 78,821 $ 83,412 $ ( 17,415 ) $ 65,997 Customer relationships 91,711 ( 4,748 ) 86,963 91,701 ( 11,248 ) 80,453 Trademarks and trade name 14,626 ( 288 ) 14,338 14,624 ( 2,099 ) 12,525 Other — — — 563 ( 47 ) 516 $ 189,962 $ ( 9,840 ) $ 180,122 $ 190,300 $ ( 30,809 ) $ 159,491 15 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The Company recognized amortization expense as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Cost of subscription revenues $ 388 $ 4,249 $ 1,177 $ 12,767 Cost of professional services and other revenues — 47 — 47 Sales and marketing 418 2,772 1,253 8,315 Total amortization expense $ 806 $ 7,068 $ 2,430 $ 21,129 The expected future amortization expense for intangible assets as of October 31, 2022 is as follows: Fiscal Year Ending January 31, 2023 (remaining) $ 7,063 2024 27,567 2025 26,773 2026 26,680 2027 25,544 Thereafter 45,864 $ 159,491 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. This agreement 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 three and nine months ended October 31, 2021 and 2022 substantially consists of fees paid for access to the related party’s platform, including their hosting infrastructure and data center operations. 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 and the amounts disclosed related to them are accordingly presented while the reseller was considered a related party. The reseller was considered a related party for the three and nine months ended October 31, 2021 and was no longer considered a related party for the three and nine months ended October 31, 2022. The Company has recorded expenses of $ 11.6 million for the three months ended October 31, 2021 and $ 33.4 million for the nine months ended October 31, 2021. The Company continues to do business with the reseller. See also Note 15 "Related-Party Transactions." Note 10. Stockholders’ Equity At October 31, 2022, the Company committed a total of 30,234,989 shares of common stock for future issuance as follows: Issued and outstanding stock options 2,161,088 Nonvested issued and outstanding restricted stock units ("RSUs") 4,000,187 Possible issuance under stock plans 24,073,714 30,234,989 16 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Note 11. Stock-Based Compensation Stock Options Stock option activity for the nine months ended October 31, 2022 was as follows: Number of Shares Weighted Average Exercise Price Outstanding, January 31, 2022 2,629,109 $ 6.72 Granted — — Expired or forfeited ( 16,874 ) 15.56 Exercised ( 451,147 ) 6.74 Outstanding, October 31, 2022 2,161,088 $ 6.64 Exercisable, October 31, 2022 2,097,025 $ 6.33 Fully vested or expected to vest, October 31, 2022 2,154,682 $ 6.61 As of October 31, 2022, there was $ 0.2 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements under the 2014 Stock Plan ("2014 Plan") and 2019 Equity Incentive Plan (as amended and restated, "2019 Plan"). That cost is expected to be recognized over a weighted average period of 0.66 years. Restricted Stock Units RSU activity during the nine months ended October 31, 2022 was as follows: Number of Shares Weighted Average Grant Date Fair Value Nonvested, January 31, 2022 3,012,440 $ 45.62 Granted 2,041,287 42.90 Vested ( 621,644 ) 36.82 Forfeited ( 431,896 ) 47.61 Nonvested, October 31, 2022 4,000,187 $ 45.36 As of October 31, 2022, total unrecognized compensation expense related to non-vested RSUs was $ 139.6 million, adjusted for estimated forfeitures, based on the estimated fair value of the Company’s common stock at the time of grant. That cost is expected to be recognized over a weighted average period of 3.11 years. Employee Stock Purchase Plan The first offering period for the Employee Stock Purchase Plan ("ESPP") began on July 1, 2021 and ended on December 31, 2021. Thereafter, offering periods will begin on January 1 and July 1. The fair value of ESPP shares during the nine months ended October 31, 2022 was estimated at the date of grant using the Black-Scholes option valuation model based on assumptions as follows for ESPP awards: (i) expected life of 0.5 years, (ii) expected volatility of 49.65 % to 84.59 %, (iii) expected dividends of 0.00 %, (iv) risk-free interest rate of 0.22 % to 2.52 %. As of October 31, 2022, total unrecognized compensation expense related to the ESPP was $ 0.3 million. That cost is expected to be recognized over the remaining term of the offering period that began on July 1, 2022 and will end on December 31, 2022. 17 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Stock-Based Compensation Expense Total stock-based compensation expense included in our consolidated statements of operations were as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Cost of subscription revenues $ 179 $ 392 $ 721 $ 1,120 Cost of professional services and other revenues 1,209 1,778 3,881 5,564 Sales and marketing 1,685 3,326 5,415 10,144 Research and development 1,351 3,012 4,580 8,457 General and administrative 1,421 3,997 5,952 13,191 Total stock-based compensation expense $ 5,845 $ 12,505 $ 20,549 $ 38,476 Note 12. 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 were as follows: Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Operating lease expense $ 733 $ 1,023 $ 2,154 $ 2,961 Short-term lease expense 226 269 619 809 Variable lease expense 63 124 210 378 Total $ 1,022 $ 1,416 $ 2,983 $ 4,148 Supplemental cash flow information related to operating leases were as follows: Nine Months Ended October 31, 2021 2022 Cash paid for amounts included in the measurement of operating lease liabilities $ 2,212 $ 3,079 Right-of-use assets obtained in exchange for operating lease liabilities 1,771 1,989 The weighted-average remaining lease term and weighted-average discount rate for the Company's operating lease liabilities as of October 31, 2022 were 3.85 years and 4.4 %, respectively. 18 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Future minimum lease payments as of October 31, 2022 were as follows: Fiscal Year Ending January 31, Operating Leases 2023 (remaining) $ 1,070 2024 4,354 2025 3,773 2026 2,842 2027 1,193 Thereafter 1,469 Total lease liabilities 14,701 Less: imputed interest ( 1,204 ) Total lease obligations 13,497 Less: current obligations ( 3,830 ) Long-term lease obligations $ 9,667 Note 13. Revolving Credit Facility On February 11, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, nCino OpCo (the “Borrower”), certain subsidiaries of the Company as guarantors, and Bank of America, N.A. as lender (the “Lender”), pursuant to which the Lender is providing to the Borrower a senior secured revolving credit facility of up to $ 50.0 million (the “Credit Facility”). The Credit Facility includes borrowing capacity available for letters of credit subject to a sublimit of $ 7.5 million. Any issuance of letters of credit will reduce the amount available under the Credit Facility. Borrowings under the Credit Facility bear interest, at the Borrower’s option, at: (i) a base rate equal to the greater of (a) the Lender’s “prime rate,” (b) the federal funds rate plus 0.50 %, and (c) the Bloomberg Short Term Bank Yield Index ("BSBY") rate plus 1.00 %, plus a margin of 0.00 % (provided that the base rate shall not be less than 0.00 %); or (ii) the BSBY rate (provided that the BSBY shall not be less than 0.00 %), plus a margin of 1.00 %. The Company is also required to pay an unused commitment fee to the Lender of 0.25 % of the average daily unutilized commitments. The Company must also pay customary letter of credit fees. Borrowings under the Credit Facility are scheduled to mature on February 11, 2024, and the Company may repay amounts borrowed any time without penalty. Borrowings under the Credit Facility may be reborrowed. The Credit Agreement contains representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. The financial covenant requires the Company and its subsidiaries on a consolidated basis to maintain Consolidated Liquidity of not less than $ 50.0 million. Consolidated Liquidity is measured as the sum of 100 % of unrestricted and unencumbered cash of the Company and its domestic subsidiaries, 75 % of unrestricted and unencumbered cash of the Company’s foreign subsidiaries and the lesser of Credit Facility availability and $ 25.0 million. The Company is also required to maintain at least $ 5.0 million of the Company's cash and/or marketable securities with the Lender which is considered restricted cash and is included in other long-term assets at October 31, 2022 on the Company's unaudited condensed consolidated balance sheets. The Credit Facility is guaranteed by the Company and each of its current and future material domestic subsidiaries (the “Guarantors”) and secured by substantially all of the personal property, subject to customary exceptions, of the Borrower and the Guarantors, in each case, now owned or later acquired, including a pledge of all of the Borrower’s capital stock, the capital stock of all of the Company’s domestic subsidiaries, and 65 % of the capital stock of foreign subsidiaries that are directly owned by the Borrower or a Guarantor. As of October 31, 2022, unamortized debt issuance costs were $ 0.2 million and are included in other long-term assets. 19 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) As of October 31, 2022, the Company had $ 30.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants. As of October 31, 2022, the applicable interest rate was approximately 4.15 %. The available borrowing capacity under the Credit Facility was $ 20.0 million as of October 31, 2022. Note 14. Commitments and Contingencies 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 unaudited condensed consolidated balance sheets, respectively. In January 2021, the Company entered into an amendment to its November 2020 headquarters lease to provide for construction of a parking deck, which upon completion was subject to exclusive use by the Company. Due to the Company also being deemed to be the owner of the parking deck for accounting purposes, the costs associated with the construction of the parking deck were capitalized as construction in progress with a corresponding construction liability through construction. Upon completion of the parking deck in September 2021, for approximately $ 17.7 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 unaudited condensed consolidated balance sheets, respectively. In April 2021, the Company entered into a new lease agreement for the construction of an additional office building that is on the same parcel of land as the Company's existing headquarters. Due to a purchase option contained in the lease, the Company is deemed to be the owner of the additional building for accounting purposes, thus costs associated with the construction of the additional building will be capitalized as construction in progress with a corresponding construction liability through construction which is estimated to be approximately $ 23.0 million. Upon completion of the additional 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 unaudited condensed consolidated balance sheets, respectively. See also Note 17 "Subsequent Events." 20 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) Purchase commitments and future minimum lease payments required under financing obligations as of October 31, 2022 is as follows: Fiscal Year Ending January 31, Purchase commitments Financing obligations - leased facility 2023 (remaining) $ 2,169 $ 690 2024 5,701 2,804 2025 3,651 2,867 2026 1,732 2,931 2027 1,104 2,996 Thereafter — 33,260 Total $ 14,357 $ 45,548 Residual financing obligations and assets 9,975 Less: amount representing interest ( 21,882 ) Financing obligations $ 33,641 Indemnification In the ordinary course of business, the Company generally includes standard indemnification provisions in its arrangements with third parties, including vendors, customers, and the Company’s directors and officers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such obligations in the accompanying unaudited condensed consolidated financial statements. Legal Proceedings From time to time, the Company is involved in legal proceedings or is subject to claims arising in the ordinary course of business including the following: On February 23, 2021, the Company and certain of its officers and other employees were served with grand jury subpoenas wherein the Antitrust Division of the Department of Justice 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 April 28, 2022, the District Court approved settlements between the plaintiff and defendant Live Oak in the amount of approximately $ 3.9 million and unnamed party Apiture in the amount of approximately $ 0.8 million. Although there can be no assurance with respect to the outcome of this matter, the Company believes the alleged claims are not meritorious and intends to defend itself vigorously. On September 26, 2022, a purported stockholder of the Company filed a complaint in the Delaware Court of Chancery in connection with the series of mergers in which the Company became the parent of nCino OpCo and SimpleNexus. The complaint, captioned City of Hialeah Employees’ Retirement System, Derivatively on Behalf of Nominal Defendants nCINO, INC. (f/k/a Penny HoldCo, Inc.) and nCINO OpCo, Inc. (f/k/a nCino, Inc.) v. INSIGHT VENTURE PARTNERS, 21 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) LLC, et al., C.A. No. 2022-0846-MTZ, names as defendants, Insight Ventures Partners, LLC., Insight Holdings Group, LLC., the Company’s directors and certain officers, along with nCino, Inc. and nCino OpCo, Inc. as nominal defendants, and alleges that the members of the board of directors, controlling stockholders, and officers violated their fiduciary duties in the course of negotiating and approving the series of mergers. The complaint alleges damages in an unspecified amount. Pursuant to the rights in its bylaws and Delaware law, the Company is advancing the costs incurred by the director and officer defendants in this action, and the defendants may assert indemnification rights in respect of an adverse judgment or settlement of the action, if any. The Company does not presently believe the above matters will have a material adverse effect on its day-to-day operations or the quality of the services, products or innovation it continues to provide to its customers. However, regardless of the outcome, legal proceedings can have an adverse impact on the Company because of the related expenses, diversion of management resources, and other factors. Given the uncertainty and preliminary stages of these matters, the Company is unable to reasonably estimate any possible loss or range of loss that may result. Therefore, the Company has not made an accrual for the above matters in the unaudited condensed consolidated financial statements. Other Commitments and Contingencies The Company may be subject to audits related to its non-income taxes by tax authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. The Company accrues for any assessments if deemed probable and estimable. Note 15. Related-Party Transactions The Company’s largest vendor is also an equityholder in the Company. Total payments related to the reseller agreement with this party are disclosed in Note 9 "Reseller Agreement." The Company also purchases services from this party 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 November 2022, this agreement was renewed for one year and expires in December 2023. 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, and the amounts disclosed related to them are accordingly presented while the vendor was considered a related party. The vendor was considered a related party for the three and nine months ended October 31, 2021 and was no longer considered a related party for the three and nine months ended October 31, 2022. Total payments for these services recorded to expenses were $ 0.4 million for the three months ended October 31, 2021 and $ 1.2 million for the nine months ended October 31, 2021. The Company entered into the Merger Agreement on January 7, 2022, as disclosed in Note 1 "Organization and Description of Business" and Note 7 "Business Combinations." Affiliates of Insight Partners were 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. See also Note 17 "Subsequent Events." Note 16. 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 three months ended October 31, 2021 and 2022 and for the nine months ended October 31, 2021 and 2022 is 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. 22 Table of Contents nCino, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts and unless otherwise indicated) The components of basic and diluted loss per share for periods presented are as follows (in thousands, except share and per share data): Three Months Ended October 31, Nine Months Ended October 31, 2021 2022 2021 2022 Basic and diluted loss per share: Numerator Net loss attributable to nCino, Inc. $ ( 13,636 ) $ ( 23,579 ) $ ( 42,327 ) $ ( 81,512 ) Denominator Weighted-average common shares outstanding 96,431,082 110,897,811 95,510,413 110,434,171 Basic and diluted loss per share attributable to nCino, Inc. $ ( 0.14 ) $ ( 0.21 ) $ ( 0.44 ) $ ( 0.74 ) 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: Nine Months Ended October 31, 2021 2022 Stock options issued and outstanding 2,873,232 2,161,088 Nonvested RSUs issued and outstanding 2,007,528 4,000,187 Shares issuable pursuant to the ESPP 34,128 62,781 Note 17. Subsequent Events During November 2022, the construction of the additional office building that is on the property of the Company's existing headquarters, as disclosed in Note 14 "Commitments and Contingencies," and the tenant improvements therein were deemed complete and the Company began occupying the space of approximately 90,000 square feet. The lease extends through 2037 with options to renew, and rental payments commenced in October 2022. The Company is deemed to have continuing involvement and therefore is considered to be the owner for accounting purposes. As a result, the construction in progress associated with the lease will be recorded as an asset and the construction liability, estimated to be $ 23.0 million, will be recorded as a financing obligation. The term of the Company's current headquarters and parking deck, as disclosed in Note 14 "Commitments and Contingencies," is coterminous with this lease. On November 1, 2022, the Company's wholly-owned subsidiary, nCino OpCo, acquired preferred shares of ZestFinance, Inc. (d/b/a ZEST AI) ("Zest AI"), a private company, for $ 2.5 million. The investment is a non-marketable equity investment without readily determinable fair value for which the Company does not have control or significant influence and will be measured at cost as permitted by the measurement alternative. The investment is considered a related party transaction as entities affiliated with Insight Partners, a beneficial owner of the Company, own greater than ten percent of Zest AI. On November 22, 2022, the Board of Directors (the "Board") increased the size of the Board from seven to eight members and approved the appointment of William (Bill) Spruill to serve as a director of the Company. Mr. Spruill will also serve as a member of the audit committee. The Company also adopted amended and restated bylaws which, among other things, changed the Company's voting standard for directors from a plurality voting standard to a majority voting standard, modified provisions relating to stockholder meeting adjournment procedures and the availability of lists of stockholders entitled to vote at stockholder meetings, and updated procedural mechanics and disclosure requirements relating to director nominations made by stockholders. 23 Table of Contents