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Item 7. Management’s Discussion and Analysis

2023-03-28 compared with 2022-03-31 · 188 added, 314 removed, 330 unchanged (60% of the section changed)

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For example, references in this Annual Report on Form 10-K to "fiscal 2023" refer to the fiscal year ended January 31, 2023.

nCino is a leading global provider of cloud-based software for financial institutions.

We empower banks, credit unions, and independent mortgage banks with the technology they need to meet ever-changing client expectations and regulatory requirements, gain increased visibility into their operations and performance, replace legacy systems, and operate digitally and more competitively.

Our solution, the nCino Bank Operating System, digitizes, automates, and streamlines inefficient and complex processes and workflow, and utilizes data analytics and AI/ML to enable banks and credit unions to more effectively onboard new clients, make loans and manage the entire loan life cycle, open deposit and other accounts, and manage regulatory compliance.

Additionally, SimpleNexus' digital homeownership platform, which we acquired in January 2022, unites people, systems, and stages of the mortgage process into a seamless end-to-end journey.

We serve financial institution customers of all sizes and complexities, including global financial institutions, enterprise banks, regional banks, community banks, credit unions, new market entrants, such as challenger banks, and, through SimpleNexus, independent mortgage banks.

Our customers deploy and utilize our technology, which can be accessed anytime, anywhere, and from any internet-enabled device, for mission critical functions across their organizations.

Built as a single, multi-tenant SaaS platform, the nCino Bank Operating System transforms the way banks and credit unions operate, go to market, and interact with their clients, while delivering measurable return on investment by enabling them to:

• digitally serve their clients across commercial, small business, and retail lines of business,

The following section of this Form 10-K discusses our financial condition and results of operations for fiscal 2023 and 2022 and year-to-year comparisons between fiscal 2023 and 2022.

Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 31, 2022.

nCino is the pioneer in cloud banking.

Built by bankers for bankers, the nCino Bank Operating System is a single, multi-tenant software-as-a-service (SaaS) solution that helps financial institutions ("FI") modernize, innovate and outperform.

A leader in the global financial services technology industry, nCino is a proven partner that has helped more than 1,850 FIs of all sizes and complexities, including global, enterprise, regional and community banks;

credit unions;

new market entrants;

and independent mortgage banks power distinctive experiences, drive growth efficiencies, and run with full integrity.

With nCino, FIs can:

• digitally serve their clients across lines of business,

• improve financial results,

• operate more efficiently,

• elevate employee experience and performance,

• manage risk and compliance more effectively, and

• establish a data, audit, and business intelligence hub.

We were founded in a bank with the goal of improving that institution’s operations and client service.

Realizing the problems we were addressing were endemic to virtually all banks and credit unions, we were spun out as a separate company in late 2011 with the vision of providing a comprehensive solution to onboard clients, originate any type of loan, and open any type of account on a single cloud-based platform.

We initially focused the nCino Bank Operating System on transforming commercial and small business lending for community and regional banks.

We introduced this solution to enterprise banks in the United States in 2014, and then internationally in 2017, and have subsequently expanded across North America, Europe, and APAC.

In fiscal 2020, we acquired Visible Equity and FinSuite and combined the acquired technology with certain of our internally-developed technology to launch nIQ.

nIQ helps our customers improve operational and financial performance by using AI/ML to increase efficiency through automation and analytics to gain greater insights into their operations and client interactions.

The state of Delaware effected the name change of Visible Equity to nCino Portfolio Analytics, LLC in April 2021.

All Visible Equity references throughout this document are one and the same with nCino Portfolio Analytics, LLC.

In January 2022, we acquired SimpleNexus, a leading cloud-based mobile-first homeownership software company in the United States.

We offer our solution on a SaaS basis under multi-year contracts and recognize subscription revenues ratably over the term of the contract.

Our customers may initially purchase the nCino Bank Operating System for client onboarding, loan origination, and/or deposit account opening for a single line of business or geography.

Once this initial solution is in production, we seek to deploy additional solutions and expand within and across additional lines of business or geographies.

The expansion from our original focus on commercial and small business loan origination to retail loan origination, client onboarding, deposit account opening, and, most recently, analytics and AI/ML solutions, has enhanced our ability to increase adoption of the nCino Bank Operating System by our customers.

For fiscal 2022, we had a subscription revenue retention rate of 133% which excludes any impact from SimpleNexus as they were not part of our prior year results.

• establish an active data, audit, and business intelligence hub.

nCino was originally founded in a bank to improve that FI’s operations and client service.

After realizing that virtually all FIs were dealing with the same problems—cumbersome legacy technology, fragmented data, disconnected business functions, and a disengaged workforce made it difficult to maintain relevancy in their clients’ lives—we were spun out as a separate company in late 2011.

This heritage is the foundation of our deep banking domain expertise, which differentiates us, continues to drive our strategy and makes us uniquely qualified to help FIs cross the modernization divide by providing a comprehensive solution that onboards clients, originates loans, and opens accounts on a single, cloud-based platform.

We initially focused the nCino Bank Operating System on transforming commercial and small business lending for community and regional banks in the United States ("U.S.").

We introduced this solution to enterprise banks in the U.S.

in 2014, and then internationally in 2017, and have subsequently expanded across North America, Europe and Asia-Pacific ("APAC").

Throughout this market expansion, we broadened the nCino Bank Operating System by adding functionality for consumer lending, client onboarding, deposit account opening, analytics and AI/ML.

In fiscal 2020, we acquired nCino Portfolio Analytics, LLC (formerly Visible Equity) and FinSuite as part of our strategy to build out our nIQ capabilities, and we established our nCino K.K.

joint venture to facilitate our entry into the Japanese market.

Additionally, in January 2022, we acquired SimpleNexus, which expanded our capabilities to the U.S.

point-of-sale mortgage market.

We generally offer our solutions on a SaaS basis under multi-year contracts and recognize subscription revenues ratably over the term of the contract.

Our customers may initially purchase one of our solutions for implementing a client onboarding, loan origination and/or deposit account opening application in a specific line of business within the FI, such as commercial, small business, consumer, or mortgage.

The nCino Bank Operating System is designed to scale with our customers, and once our solution is deployed, we seek to have our customers expand adoption within and across lines of business.

For fiscal 2023, we had a subscription revenue retention rate of 148%.

See Item 7 of this Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Operating Results—Subscription Revenue Retention Rate” for additional information on subscription revenue retention rates.

We sell our solutions directly through our business development managers, account executives, field sales engineers, and customer success managers.

Our sales efforts in the United States are organized around financial institutions based on size, whereas internationally we focus our sales efforts by geography.

To drive growth and serve customers in the EMEA region, we continue to expand headcount in our UK office.

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 January 31, 2022, we had 270 sales and sales support personnel in the United States, including SimpleNexus, and 77 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.

For larger financial institutions, we generally work with SIs such as Accenture, Deloitte, PwC, and West Monroe Partners for the delivery of professional services for the nCino Bank Operating System, while we have historically performed professional services for smaller financial institutions ourselves.

We expect larger financial institutions to make up a greater proportion of our nCino Bank Operating System sales and to increasingly outsource professional services for smaller banks and credit unions to SIs in the future.

Our sales efforts in the U.S.

are organized around FIs based on size, whereas internationally we focus our sales efforts by geography.

As of January 31, 2023, we had 267 sales and sales support personnel in the U.S., including SimpleNexus, and 77 sales and support personnel in offices outside the U.S.

To help customers go live with our solutions, we offer professional services including configuration and implementation, training, and advisory services.

For enterprise FIs, we generally work with SI partners such as Accenture, Deloitte, and PwC for the delivery of professional services for the nCino Bank Operating System.

For regional FIs, we work

with SIs such as West Monroe Partners, and for community banks, we work with SIs or perform configuration and implementation ourselves.

We expect enterprise FIs to make up a greater proportion of our nCino Bank Operating System sales.

As a result, we expect the mix of our total revenues to become more heavily weighted toward subscription revenues.

To support our growth and capitalize on what we believe is a compelling market opportunity, we have significantly increased our operating expenses across all aspects of our business.

In research and development, we have focused on product improvements and the development of new functionality, while simultaneously leveraging the Salesforce Platform such that our development of the nCino Bank Operating System is heavily focused on vertical-specific solutions for financial institutions.

Similarly, to grow our customer base, we have invested heavily in sales and marketing both in the United States and internationally.

We have also increased our general and administrative spending to support our growing operations and for operating as a public company.

On the Acquisition Date, we acquired SimpleNexus, a leading cloud-based mobile-first homeownership software company in the United States, for an aggregate purchase price of $933.6 million.

On the Acquisition Date, we acquired SimpleNexus, a leading cloud-based mobile-first homeownership software company in the U.S., for an aggregate purchase price of $933.6 million.

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

Our consolidated results of operations for fiscal 2022 include the operating results of SimpleNexus from the Acquisition Date.

Our consolidated results of operations for fiscal 2022 and 2023 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 Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Given it was prior to the Acquisition Date, no operating results for SimpleNexus are included in the comparative period for fiscal 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.

In January 2023, nCino implemented an "in-person first" working environment at the Company's headquarters in Wilmington, N.C., in which full-time employees within Wilmington are expected to return to the office on a full-time basis.

On January 18, 2023, the Company announced a workforce reduction of approximately seven percent 7% and office space reductions in certain markets (collectively, the “Restructuring Plan”) in furtherance of its efforts to improve operating margins and advance the Company’s objective of profitable growth.

The Company incurred charges in the fourth quarter of the Company’s fiscal 2023 of $4.8 million in connection with the Restructuring Plan.

As of January 31, 2023, the accrual for severance and related benefit costs of $5.0 million for terminated employees was included in accrued compensation and benefits in the consolidated balance sheets and was paid in the first quarter of the Company’s fiscal 2024.

The Company paid $0.8 million in the fourth quarter of fiscal 2023 to exercise an early termination clause to exit a facility during fiscal 2024, which was accounted for as a lease modification under ASC 842.

See Note 19 "Restructuring" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Our total revenues were $204.3 million, $273.9 million, and $408.3 million for fiscal 2021, 2022, and 2023, respectively, representing a 41.4% compound annual growth rate.

Our revenues for fiscal 2022 includes $3.9 million in revenues from SimpleNexus from the Acquisition Date.

Our revenues include $3.9 million in revenues from SimpleNexus from the Acquisition Date for fiscal 2022 and $65.4 million for fiscal 2023.

Our subscription revenues in fiscal 2021 were $162.4 million or 79.5% of total revenues, $224.9 million or 82.1% of total revenues in fiscal 2022, and $344.8 million or 84.4% of total revenues in fiscal 2023, representing a 45.7% compound annual growth rate.

Our subscription-based revenues include $3.7 million from SimpleNexus from the Acquisition Date.

Due to our continuing investment in growth, we recorded net losses attributable to nCino in fiscal 2020, 2021, and 2022 of $27.6 million, $40.5 million, and $49.4 million, respectively.

Our net loss for fiscal 2022 includes $3.6 million in net losses from SimpleNexus from the Acquisition Date.

Our subscription-based revenues include $3.7 million from SimpleNexus from the Acquisition Date for fiscal 2022 and $59.8 million for fiscal 2023.

Due to our investments in growth, we recorded net losses attributable to nCino in fiscal 2021, 2022, and 2023 of $40.5 million, $49.4 million, and $102.7 million, respectively.

Our net losses include the operating results of SimpleNexus from the Acquisition Date.

Factors Affecting Our Operating Results

Market Adoption of Our Solution .

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 15.9% of total revenues for fiscal 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.

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.

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

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

In addition, growing our customer base will require us to increasingly penetrate markets outside the U.S., which accounted for 15.1% of total revenues for fiscal 2023.

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

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

If we are unable to successfully address the foregoing challenges, our ability to grow our business and achieve profitability will be adversely affected, which may in turn reduce the value of our common stock.

Mix of Subscription and Professional Services Revenues.

The initial deployment of our solutions by our customers requires a period of implementation and configuration services that can generally range from as little as three months to over 18 months for global financial institutions.

As a result, during the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions.

While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth,

over time we expect subscription revenues will make up an increasing proportion of our total revenues as our overall business grows.

The initial deployment of our solutions by our customers requires a period of implementation and configuration services that typically range from three to 18 months, depending on scope.

As a result, during the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues generally make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions.

While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect subscription revenues will make up an increasing proportion of our total revenues as our overall business grows.

Subscription Revenue Retention Rate .

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• customer attrition.

For fiscal 2020, 2021, and 2022, we had subscription revenue retention rates of 147%, 155%, and 133%, respectively, which excludes any impact from SimpleNexus as they were not part of our prior year results.

For fiscal 2021, 2022, and 2023, we had subscription revenue retention rates of 155%, 133%, and 148%, respectively.

The most significant driver of changes in our subscription revenue retention rate each year has historically been the number of new customers in prior years and the associated phased activation schedules for such customers.

As our installed base and associated subscription revenues expanded in recent years, we have seen some moderation of our subscription revenue retention rate.

In the future, we expect further moderation to the extent we continue to experience rapid growth.

In addition, because larger financial institutions tend to make more sizable purchases with longer activation schedules, we expect variability in our subscription revenue retention rates based on the timing and extent of our continued penetration of this portion of the market.

In addition, because larger FIs tend to make more sizable purchases with longer activation schedules, we expect variability in our subscription revenue retention rates based on the timing and extent of our continued penetration of this portion of the market.

The increase in our subscription revenue retention rate for fiscal 2021 was primarily due to accelerated activation of licenses sold in the year for our PPP and Coronavirus Business Interruption Loan Scheme solutions.

The moderation in our subscription revenue retention rate for fiscal 2022 was due to a higher mix of new customer sales with prolonged activation schedules.

The increase in our subscription revenue retention rate for fiscal 2023 was due to the inclusion of customers who had contracts with SimpleNexus in effect prior to January 31, 2022.

Subscription revenues from periods prior to the acquisition were excluded from the calculation for fiscal 2023.

Excluding SimpleNexus, the subscription revenue retention rate for fiscal 2023 was 125%.

Our use of subscription revenue retention rate has limitations as an analytical tool, and investors should not consider it in isolation.

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While we expect ACV-based net retention to increase over time for each respective cohort as we execute our land and expand strategy, occasionally ACV-based net retention can moderate from one period to the next, from customer consolidation for example.

The graphic below illustrates our ACV-based net retention for customers initially signed since fiscal 2013, excluding SimpleNexus ACV for comparability.

The graphic below illustrates our ACV-based net retention for customers initially signed since fiscal 2013.

Customers who signed with SimpleNexus prior to January 31, 2022, are included in the fiscal 2022 cohort and customers who

signed with Portfolio Analytics prior to January 31, 2020, are represented in the fiscal 2020 cohort.

Each individual cohort is not necessarily predictive of other or future cohorts.

Annual Contract Value ("ACV")

COVID-19 Effects on Demand for Our Solutions .

To help our customers service demand for 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.

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

In light of the extraordinary nature of this market demand, we offered our PPP solution on one or two-year terms as well as on a multi-year basis co-terminus with existing contracts.

Seats for our PPP solution were activated immediately, which caused subscription revenues from these seats to be recognized sooner than is typical with the phased seat activations usually offered to customers.

We believe that the emergency purchases of our PPP solution, coupled with the disruptive effect of COVID-19 on the economy more generally, may have had the effect of moderating revenue growth rates in fiscal 2022.

In addition, our revenue growth rates in fiscal 2023 and our subscription revenue retention rates may be adversely affected upon the expiration of access and use rights to our PPP solution to the extent such rights are not re-purposed for other applications.

Interest Rate Environment.

We are currently operating in a rising interest rate environment as the United States Federal Reserve raises interest rates as a means to manage inflation.

These rate increases have had an impact on the real estate market in the U.S.

and specifically, the demand for mortgages and mortgage-related products and services, which has had a negative impact on our SimpleNexus business.

We continue to monitor the impact the rise in interest rates and any future rise in interest rates may have on our business.

Continued Investment in Innovation and Growth .

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We intend to continue to increase our investment in product development in the coming years to maintain and build on this advantage.

We also intend to invest heavily in sales and marketing both in the United States and internationally to further grow our business and increase our general and administrative spending to support our growing operations and for operating as a public company.

As such, to capitalize on the market opportunity we see ahead of us, we

expect to continue to optimize our operating plans for revenue growth, and as a result continue experiencing operating losses, for the foreseeable future.

We also intend to invest in sales and marketing both in the U.S.

and internationally to further grow our business.

To capitalize on the market opportunity we see ahead of us, we expect to continue to optimize our operating plans for revenue growth and profitability.

Components of Results of Operations

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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:

• Client onboarding, loan origination, and deposit account opening applications targeted at a financial institution’s commercial, small business, and retail lines of business, for which we generally charge on a per seat basis.

• nIQ, first introduced in fiscal 2020, for which we generally charge based on the asset size of the customer or on a usage basis.

• Through SimpleNexus, digital homeownership platform uniting people, systems, and stages of the mortgage process into a seamless end-to-end journey for which we generally charge on a per seat basis.

• Maintenance and support services as well as internal-use or “sandbox” development licenses, for which we charge as a percentage of the related subscription fees.

• Client onboarding, loan origination, and deposit account opening applications targeted at a FI’s commercial, small business, and retail lines of business, for which we generally charge on a per seat basis.

• nIQ for which we generally charge based on the asset size of the customer or on a usage basis.

• Through SimpleNexus, a digital homeownership platform uniting people, systems, and stages of the mortgage process into a seamless end-to-end journey for which we generally charge on a per seat basis.

• Maintenance and support services as well as internal-use or “sandbox” development licenses, for which we generally charge as a percentage of the related subscription fees.

Our subscription revenues are generally recognized ratably over the term of the contract beginning upon activation.

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Professional services and other revenues consist of fees for implementation and configuration assistance, training, and advisory services.

For enterprise and larger regional financial institutions, we generally work with SIs to provide the majority of implementation services for the nCino Bank Operating System, for which these SIs bill our customers directly.

For enterprise and larger regional FIs, we generally work with SI partners to provide the majority of implementation services for the nCino Bank Operating System, for which these SI partners bill our customers directly.

We have historically delivered professional services ourselves for community banks and smaller credit unions and SimpleNexus has historically provided professional services directly to its customers.

Revenues for implementation, training, and advisory services are recognized on a proportional performance basis, based on labor hours incurred relative to total budgeted hours.

Revenues for implementation, training, and advisory services are generally recognized on a proportional performance basis, based on labor hours incurred relative to total budgeted hours.

To date, our losses on professional services contracts have not been material.

During the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions.

During the initial go-live period for a customer on the nCino Bank Operating System, professional services revenues generally make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions.

While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect to see subscription revenues make up an increasing proportion of our total revenues.

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Cost of Subscription Revenues .

Cost of subscription revenues primarily consists of fees paid to Salesforce for access to the Salesforce Platform, including Salesforce’s hosting infrastructure and data center operations, along with certain integration fees paid to other third parties.

Cost of subscription revenues consists of fees paid to Salesforce for access to the Salesforce Platform, including Salesforce’s hosting infrastructure and data center operations, along with certain integration fees paid to other third parties.

When we resell access to Salesforce’s CRM solution, cost of subscription revenues also includes the subscription fees we remit to Salesforce for providing such access.

In addition, cost of subscription revenues

include personnel-related costs associated with delivering maintenance and support services, including salaries, benefits and stock-based compensation expense, travel and related costs, amortization of acquired developed technology, and allocated overhead.

We also incur costs associated with access to other platforms.

In addition, cost of subscription revenues includes personnel-related costs associated with delivering maintenance and support services, including salaries, benefits and stock-based compensation expense, travel and related costs, amortization of acquired developed technology, and allocated overhead.

Our subscription gross margin will vary from period to period as a function of the utilization of support personnel and the extent to which we recognize subscription revenues from the resale of Salesforce’s CRM solution.

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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.

We expect sales and marketing expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.

Research and Development.

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Research and development costs are expensed as incurred.

We expect research and development costs to continue to increase as we develop new functionality and make improvements to our solutions.

We expect research and development costs will decrease as a percentage of revenues as we leverage the investments we have made to date.

General and Administrative.

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation associated with our executive, finance, legal, human resources, information technology, compliance and other administrative personnel.

General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other corporate-related expenses, and allocated overhead, as well as acquisition-related expenses, which primarily consists of third-party expenses related to the acquisition of SimpleNexus, such as legal and other professional services fees.

We expect that general and administrative expenses will continue to increase as we scale our business and as we incur costs associated with being a publicly-traded company, including legal, audit, and consulting fees.

General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other corporate-related expenses, and allocated overhead, as well as acquisition-related expenses, such as legal and other professional services fees.

We expect general and administrative expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.

Non-Operating Income (Expense)

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Interest Expense.

Interest expense consists primarily of interest related to our financing obligations.

Interest expense consists primarily of interest related to our financing obligations along with interest expense on borrowings, commitment fees, and amortization of debt issuance costs associated with our secured revolving credit facility.

Other Income (Expense), Net.

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Income Tax Provision (Benefit).

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

The income tax benefit in the current year is a result of the reduction in our valuation allowance against our U.S.

deferred tax assets.

We recorded net U.S.

deferred tax liabilities through the SimpleNexus acquisition, which was new positive evidence and a source of taxable income in the analysis of the valuation allowance.

In accordance with ASC 805-740-30-3, a $24.6 million reduction of the valuation allowance was a component of income tax benefit during fiscal 2022.

Stock-Based Compensation

We have historically recorded stock-based compensation expense associated with stock options in cost of revenues and operating expenses as the related options vest.

Beginning in the quarter ended July 31, 2020, we recorded stock-based compensation expenses associated with RSUs as cost of revenues and operating expenses as the liquidity-based vesting condition was satisfied upon our initial public offering in July 2020 ("IPO").

Stock-based compensation expense was $5.7 million, $25.2 million, and $28.5 million for fiscal 2020, 2021, and 2022, respectively.

After the IPO, stock-based compensation expense for both stock options and RSUs is recognized as the time-based vesting conditions under such awards are met.

Income tax provision (benefit) consists of federal and state income taxes in the U.S.

and income taxes in foreign jurisdictions.

Results of Operations

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The following tables present our selected consolidated statements of operations data for fiscal 2021, 2022, and 2023 in both dollars and as a percentage of total revenues, except as noted.

The comparability of our operating results is impacted by our SimpleNexus acquisition.

In our discussion of changes in our results of operations for our year-to-year comparisons between fiscal 2023 and 2022, we disclose the impact of the growth of revenues from SimpleNexus.

Expense contributions from our SimpleNexus acquisition for each of the respective period comparisons generally were not separately identifiable due to the integration of this business into our existing operations.

Fiscal Year Ended January 31,

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Subscription revenues

$ 162,439 $ 224,854 $ 344,752

Professional services and other revenues

41,854 49,011 63,563

Total revenues 204,293 273,865 408,315

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Net loss (41,270) (50,121) (101,844)

Net loss attributable to non-controlling interest (141) (1,130) (1,569)

Adjustment attributable to non-controlling interest — 396 894

Net loss attributable to redeemable non-controlling interest (1,130) (1,569) (1,119)

Adjustment attributable to redeemable non-controlling interest 396 894 1,995

Net loss attributable to nCino, Inc.

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Total stock-based compensation expense 1

The Company recognized amortization expense as follows:

$ 25,208 $ 28,477 $ 50,232

1 Includes $0.2 million benefit incurred for the fiscal year ended January 31, 2023 in connection with the restructuring plan commenced in January 2023.

See Note 19 "Restructuring" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

The Company recognized amortization expense for intangible assets as follows:

Fiscal Year Ended January 31,

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Cost of subscription revenues $ 1,525 $ 2,604 $ 17,019

Cost of professional services and other revenues — — 94

Sales and marketing 1,670 2,303 11,087

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Of the increase, 44.5% 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, 8.7% was attributable to initial revenues from customers who did not contribute to subscription revenues during the prior period, and 46.8% was attributable to revenues from SimpleNexus.

Subscription revenues were 82.1% of total revenues for fiscal 2022 compared to 79.5% of total revenues for fiscal 2021, primarily due to growth in our installed base.

Subscription revenues were 84.4% of total revenues for fiscal 2023 compared to 82.1% of total revenues for fiscal 2022, primarily due to growth in our installed base and SimpleNexus.

Professional Services and Other Revenues

Professional services and other revenues increased $14.6 million for fiscal 2023 compared to fiscal 2022, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

36.4% of the increase was attributable to revenues from SimpleNexus.

Cost of Revenues and Gross Margin

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Cost of subscription revenues increased $41.8 million for fiscal 2023 compared to fiscal 2022, generating a gross margin for subscription revenues of 69.2% compared to a gross margin of 71.3% for fiscal 2022.

Costs related to Salesforce user fees increased $10.8 million as we continued to add new customers and sell additional functionality to existing customers, and personnel costs increased $3.2 million as we added new employees.

Other costs of subscription revenues increased $1.1 million due to other data center costs .

Amortization expense for acquired developed technology increased $1.1 million related to the acquisition of SimpleNexus.

The decrease in gross margin percentage is primarily due to an increase of $14.4 million in amortization expense for acquired developed technology related to the acquisition of SimpleNexus included for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

Costs related to Salesforce user fees increased $11.9 million as we continued to add new customers and sell additional functionality to existing customers, and other costs of subscription revenues increased $10.1 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $4.3 million due to an increase in average headcount, including headcount from the acquisition of SimpleNexus contributing for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

The increase in cost of subscription revenues also included an increase of $0.8 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.

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Cost of professional services and other revenues increased $16.4 million for fiscal 2023 compared to fiscal 2022, generating a gross margin for professional services and other revenues of 0.3% compared to a gross margin of 4.3% for fiscal 2022.

For fiscal 2022, personnel costs increased $6.0 million for the professional services team compared to the prior year period due to increased headcount.

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

million in third party professional fees.

The increase in our professional services and other gross margin for fiscal 2022 was primarily due to an improved mix and use of our billable resources 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.

For fiscal 2023, personnel costs, including stock-based compensation expense, increased $13.6 million for professional services compared to the prior year period due to an increase in average headcount, including headcount from the acquisition of SimpleNexus contributing for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

Also included in the increase in personnel costs is $0.3 million in restructuring costs incurred in connection with the headcount reductions in January 2023.

The increase in cost of professional services and other revenues also included an increase of $1.7 million in allocated overhead costs due to growth supporting our business, an increase of $0.8 million in travel-related costs, and a $0.4 million increase in reimbursable travel and related expenses for the professional services organization.

The decrease in our professional services and other gross margin for fiscal 2023 was primarily due to a decline in realized effective billing and utilization rates in our professional services teams.

Operating Expenses

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Sales and Marketing

Sales and marketing expenses increased $23.2 million for fiscal 2022 compared to fiscal 2021, primarily due to an increase of $18.2 million in personnel costs resulting mainly from an increase in headcount on the sales and marketing teams.

Also contributing to the increase in personnel costs was expatriate tax equalization expenses of $2.7 million.

Sales and marketing expenses increased $44.8 million for fiscal 2023 compared to fiscal 2022, primarily due to an increase of $24.9 million in personnel costs, including stock-based compensation expense, mainly from an increase in average headcount, including headcount from the acquisition of SimpleNexus contributing for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

Also included in the increase in personnel costs is $1.3 million in restructuring costs incurred in connection with the headcount reductions in January 2023.

The increase in personnel costs was partially offset by a decrease in expatriate tax equalization expenses compared to fiscal 2022.

Amortization expense for acquired customer relationships and trade name increased $8.8 million related to the acquisition of SimpleNexus.

The increase in sales and marketing expenses also included an increase of $2.6 million in marketing costs, an increase of $0.7 million in sales-related travel costs, and an increase of $0.9 million in allocated overhead costs.

Our sales and marketing headcount grew by 160 from January 31, 2021 to January 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

We expect sales and marketing expenses to increase in absolute dollars as we invest in expanding our customer base and user adoption.

The increase in sales and marketing expenses also included an increase of $4.1 million in sales-related travel costs, an increase of $3.4 million in marketing costs primarily attributable to the re-establishment of in-person conferences following COVID-19, an increase of $2.7 million in allocated overhead costs, and an increase of $0.9 million in third-party consulting fees.

Our sales and marketing headcount decreased by 2 from January 31, 2022 to January 31, 2023.

In the fourth quarter of fiscal 2023 due to a change in responsibilities, 12 employees moved to our general and administrative department from our sales and marketing department.

We expect sales and marketing expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.

Research and Development

Research and development expenses increased $21.1 million for fiscal 2022 compared to fiscal 2021, primarily due to an increase of $17.1 million in personnel costs resulting mainly from an increase in headcount, a $1.6 million increase in third party professional fees attributable to an increase in contract research and development spend, and a $2.2 million increase in allocated overhead costs due to growth supporting our continued business expansion.

Research and development expenses increased $42.2 million for fiscal 2023 compared to fiscal 2022, primarily due to an increase of $41.2 million in personnel costs, including stock-based compensation expense, mainly from an increase in average headcount, including headcount from the acquisition of SimpleNexus contributing for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

Also included in the increase in personnel costs is $2.0 million in restructuring costs incurred in connection with the headcount reductions in January 2023.

The increase in research and development expenses also included an increase of $3.9 million in allocated overhead costs due to growth supporting our continued business expansion and an increase of $1.0 million in travel-related costs, partially offset by a $4.0 million decrease in third party professional fees as a result of lower contract research and development spend.

Our research and development headcount grew by 32 from January 31, 2022 to January 31, 2023.

Our acquisition of SimpleNexus contributed to this increase in headcount.

We expect research and development expenses to increase in absolute dollars due to higher headcount as we continue to develop new, and further enhance our current solutions.

We expect research and development expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.

General and Administrative

General and administrative expenses increased $30.8 million for fiscal 2022 compared to fiscal 2021.

Personnel costs increased $5.9 million primarily from additional headcount as we continued to scale our business.

Also contributing to the increase in personnel costs was employer taxes associated with the exercise of certain stock-based transactions of $0.9 million.

Third party professional fees increased $20.4 million for fiscal 2022 compared to the fiscal 2021, mainly attributable to a $10.3 million increase in fees and expenses related to the government antitrust investigation and related civil action disclosed in Item 3 "Legal Proceedings" of Part I of this Annual Report on Form 10-K (the "Antitrust Matters") and approximately $10.0 million related to the acquisition of SimpleNexus.

Allocated overhead and other general and administrative costs increased $3.9 million, which includes an increase in insurance costs associated with being a public company, and an increase in travel-related costs of $0.4 million.

General and administrative expenses increased $11.9 million for fiscal 2023 compared to fiscal 2022, primarily due to an increase of $19.2 million in personnel costs, including stock-based compensation, from additional headcount as we continued to scale our business, mainly from an increase in average headcount, including headcount from the acquisition of SimpleNexus contributing for a full year in fiscal 2023 compared to less than a month in fiscal 2022.

Also included in the increase in personnel costs is $1.2 million in restructuring costs incurred in connection with the headcount reductions in January 2023.

The increase in general and administrative spend also included an increase of $2.7 million in allocated overhead and other general and administrative costs and an increase of $0.7 million in travel-related costs.

Third party professional fees decreased $10.6 million for fiscal 2023 compared to fiscal 2022, mostly attributable to a decrease in third party professional fees and expenses related to acquisition costs for SimpleNexus and fees and expenses related to the government antitrust investigation and related civil action disclosed in Item 3 "Legal Proceedings" of Part I of this Annual Report on Form 10-K (the "Antitrust Matters") partially offset by an increase in other professional fees.

Our general and administrative headcount grew by 20 from January 31, 2022 to January 31, 2023.

Our acquisition of SimpleNexus contributed to this increase in headcount.

We expect general and administrative expenses to increase in absolute dollars in the near term, primarily due to higher headcount to support our continued growth, fees and expenses related to the Antitrust Matters, and additional expenses of being a public company.

In the fourth quarter of fiscal 2023 due to a change in responsibilities, 12 employees moved from our sales and marketing department to our general and administrative department.

We expect general and administrative expenses will decrease as a percentage of revenues as we leverage the investments we have made to date.

Non-Operating Income (Expense)

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Other income (expense), net (1,277) (0.5) (1,356) (0.3)

Interest income decreased $0.2 million for fiscal 2022 compared to fiscal 2021, primarily due to a decrease in interest rates.

Interest expense increased $1.4 million 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 $3.0 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 $1.3 million primarily due to a larger balance on our financing obligations for leases for which we are considered the owners for accounting purposes, and also due to interest expenses associated with a credit agreement for a senior secured revolving credit facility of up to $50.0 million we entered into on February 11, 2022 (the "Credit Facility") that was not in place in the prior comparative year.

Income Tax Provision (Benefit)

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Income tax provision (benefit) $ (23,833) (8.7) % $ 4,071 1.0 %

Income tax benefit was $23.8 million for fiscal 2022 compared to a provision of $0.6 million for fiscal 2021 and resulted in an effective tax rate of 32.2% compared to (1.4)% in the prior fiscal year.

Prior to the SimpleNexus acquisition, we reflected a net U.S.

deferred tax asset which is offset with a valuation allowance.

On the Acquisition Date, we recorded net U.S.

deferred tax liabilities, most of which relate to identifiable intangible assets.

Management evaluated this positive evidence and determined a portion of these deferred tax liabilities allowed us to recognize $24.6 million of the Company’s U.S.

deferred tax assets, which results in a reduction of the valuation allowance.

In accordance with ASC 805-740-30-3, we reflected the reduction of the valuation allowance as a component of income tax benefit at the date of the acquisition, and during fiscal 2022.

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

We operate in several foreign jurisdictions without a valuation allowance against our deferred tax balances.

Beginning with fiscal 2023, we will be required to adhere to 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.

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

In addition, this could reduce our operating cash flows in future periods through cash remittances of U.S.

Income tax provision was $4.1 million for fiscal 2023 compared to a benefit of $23.8 million for fiscal 2022 and resulted in an effective tax rate of (4.2)% compared to 32.2% in the prior fiscal year.

In fiscal 2023, the income tax provision was primarily due to taxes from profitable jurisdictions outside of the U.S., which includes withholding taxes.

In fiscal 2022, the income tax benefit was primarily due to the reduction of the valuation allowance from the acquisition of SimpleNexus, offset by a tax provision from profitable jurisdictions outside of the U.S.

See Note 12 "Income Taxes" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the U.S.

federal statutory rate to the effective tax rate.

We continue to maintain a valuation allowance against our deferred 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 in fiscal 2023, we have adopted, as required, 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.

In addition, this may reduce our operating cash flows in future periods through cash remittances of U.S.

federal and state income tax.

Effects of COVID-19

COVID-19 began affecting our business in our first quarter fiscal 2021.

To date, we have not experienced a material increase in customers’ delaying purchase decisions or cancellations nor have we had a material impact from vendors and third-party service providers we rely on.

Beginning in mid-March 2020, we implemented a company-wide work-from-home requirement for all of our employees and suspended all work-related travel.

We have eased some of these restrictions, and now operate under a hybrid work model which allows for voluntary work-related travel.

Employees have the choice to work remotely, voluntarily at an nCino office building location, or both, subject to health and safety protocols and any local ordinances.

To the extent COVID-19 has measurably affected our historical financial results, we have noted such effects in the discussion above.

We are aware that there are effects of the COVID-19 pandemic in terms of efficiency, productivity, workforce retention and other matters that are not directly measurable.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments unknown and unpredictable at this time, including the ultimate duration, severity and spread of the pandemic, the effectiveness of COVID-19 vaccinations, the effects of the pandemic on financial institutions generally as well as on our customers, their clients and on our business partners in particular, restrictions on travel and other actions that may be taken by governmental authorities and other factors.

For further information, please see Item 7 of this Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Operating Results—COVID-19 Effects on Demand for Our

Solutions,” and Item 1A in Part I of this Annual Report on Form 10-K, “Risk Factors—Uncertain or weakened economic conditions, including as a result of COVID-19, may adversely affect our industry, business, and results of operations.”

Comparison of the Fiscal Years Ended January 31, 2021 and 2022

Fiscal Year Ended January 31,

($ in thousands) 2020 2021

Subscription revenues $ 103,265 74.7 % $ 162,439 79.5 %

Professional services and other revenues 34,915 25.3 41,854 20.5

Total revenues $ 138,180 100.0 % $ 204,293 100.0 %

Subscription Revenues

Subscription revenues increased $59.2 million for fiscal 2021 compared to fiscal 2020, 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 acquisitions of Visible Equity and FinSuite, and growth from existing customers within and across lines of business.

Of the increase, 85.5% 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, 8.9% was attributable to revenues from Visible Equity and FinSuite, and 5.6% was attributable to initial revenues from customers who did not contribute to subscription revenues during the prior period.

Subscription revenues were 79.5% of total revenues for fiscal 2021, compared to 74.7% of total revenues for fiscal 2020, reflecting growth in our installed base.

Professional Services and Other Revenues

Professional services and other revenues increased $6.9 million for fiscal 2021 compared to fiscal 2020, 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.

For fiscal 2021, $0.4 million of professional services and other revenues was reimbursable travel and expense related to professional services projects at customer locations compared to $2.9 million for fiscal 2020.

Cost of Revenues and Gross Margin

Fiscal Year Ended January 31,

($ in thousands) 2020 2021

Cost of revenues (percentage shown in comparison to related revenues):

Cost of subscription revenues $ 31,062 30.1 % $ 47,969 29.5 %

Cost of professional services and other revenues 33,008 94.5 40,166 96.0

Total cost of revenues $ 64,070 46.4 $ 88,135 43.1

Gross profit $ 74,110 53.6 % $ 116,158 56.9 %

Cost of Subscription Revenues

Cost of subscription revenues increased $16.9 million for fiscal 2021 compared to fiscal 2020, generating a gross margin for subscription revenues of 70.5% compared to a gross margin of 69.9% for fiscal 2020.

Costs related to Salesforce user fees increased $12.0 million as we continued to add new customers and sell additional functionality to existing customers, and personnel costs increased $2.3 million as we added new employees.

Stock-based compensation expense for RSUs increased $0.4 million, mostly attributable to RSUs being recognized upon the effective date of our IPO and also additional vesting of RSUs since the effective date of the IPO.

Amortization expense for acquired developed technology related to the acquisitions of Visible Equity and FinSuite increased $0.8 million due to amortization expense during the full period for fiscal 2021.

Other costs of subscription revenues increased $1.2 million due to data services purchased for resale.

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 $7.2 million for fiscal 2021 compared to fiscal 2020, generating a gross margin for professional services and other revenues of 4.0% compared to a gross margin of 5.5% for fiscal 2020.

Excluding the effect of additional stock-based compensation expense, mostly attributable to RSUs being recognized upon the effective date of the IPO and also additional vesting of RSUs since the effective date of the IPO, gross margin for professional services and other revenues for fiscal 2021 was 12.2%.

For fiscal 2021, personnel costs increased $6.6 million for the professional services team compared to the prior year period due to increased headcount.

Stock-based compensation expense for RSUs increased $3.4 million mostly attributable to RSUs being recognized upon the effective date of the IPO and also additional vesting of RSUs since the effective date of the IPO.

Allocated overhead costs increased $0.7 million compared to the prior year period due to growth supporting our continued business expansion.

These increases were partially offset by a $2.5 million decrease in reimbursable travel and related expenses, and a $0.9 million decrease in non-reimbursable, travel and related expenses for the professional service team due to COVID-19-related travel restrictions.

Without the effect of the additional stock-based compensation expense, our professional services and other gross margin increase for fiscal 2021 was primarily due to the decrease in aforementioned non-reimbursable travel and effective billing rates.

Operating Expenses

Fiscal Year Ended January 31,

($ in thousands) 2020 2021

Operating expenses:

Sales and marketing $ 44,440 32.2 % $ 59,731 29.2 %

Research and development 35,304 25.5 58,263 28.5

General and administrative 22,536 16.3 40,772 20.0

Total operating expenses 102,280 74.0 158,766 77.7

Loss from operations $ (28,170) (20.4) % $ (42,608) (20.8) %

Sales and Marketing

Sales and marketing expenses increased $15.3 million for fiscal 2021 compared to fiscal 2020, primarily due to an increase of $12.7 million in personnel costs resulting from an increase in headcount on the sales and marketing teams.

Stock-based compensation expense for RSUs increased $5.1 million, mostly attributable to RSUs being recognized upon the effective date of the IPO and also additional vesting of RSUs from the effective date of the IPO.

Our sales and marketing headcount grew from 221 at January 31, 2020 to 258 at January 31, 2021.

The increase in sales and marketing expenses also included a $1.1 million increase in allocated overhead costs and a $0.7 million increase in outside consulting fees due to growth supporting our continued business expansion.

Amortization expense for acquired customer relationships related to the acquisition of Visible Equity increased $0.7 million due to amortization expense during the full period for fiscal 2021.

The increase in sales and marketing expenses for fiscal 2021 was partially offset by a decrease of $0.7 million in marketing costs and a decrease of $4.3 million in sales-related travel costs due to COVID-19-related travel restrictions.

Research and Development

Research and development expenses increased $23.0 million for fiscal 2021 compared to fiscal 2020, primarily due to an increase of $14.6 million in personnel costs resulting from a continued increase in headcount and a $1.8 million increase in allocated overhead costs due to growth supporting our continued business expansion.

Our research and development headcount grew from 265 at January 31, 2020 to 379 at January 31, 2021.

Stock-based compensation expense for RSUs increased $4.5 million, mostly attributable to RSUs being recognized upon the effective date of the IPO and also additional vesting of RSUs since the effective date of the IPO.

Third party professional fees increased $2.5 million for fiscal 2021 compared to the fiscal 2020, attributable to an increase of contract research and development spend.

The increase in research and development expenses for fiscal 2021 was partially offset by a decrease of $0.4 million in travel costs due to COVID-19-related travel restrictions.

General and Administrative

General and administrative expenses increased $18.2 million for fiscal 2021 compared to fiscal 2020, primarily due to stock-based compensation expense for RSUs of $8.1 million mostly attributable to RSUs being recognized upon the effective date of the IPO and also additional vesting of RSUs since the effective date of the IPO, partially offset by $1.2 million of stock-

based compensation expense for the accelerated vesting of an executive's stock options for fiscal 2020 that did not occur for fiscal 2021.

Personnel costs increased $4.7 million from increased headcount as we continued to scale our business.

Our general and administrative headcount grew from 102 at January 31, 2020 to 125 at January 31, 2021.

Third party professional fees increased $2.3 million for fiscal 2021 compared to the fiscal 2020, mostly attributable to costs related to the IPO, the secondary offering completed in October 2020, and costs associated with being a public company.

Allocated overhead and other general and administrative costs increased $5.1 million, which consisted primarily of a $2.7 million increase in insurance costs associated with being a public company, tax related fees and assessments, license fees, charitable contributions, and bad debt expense.

The increase in general and administrative expenses for fiscal 2021 was partially offset by a decrease of $0.7 million in travel costs due to COVID-19-related travel restrictions.

Non-Operating Income (Expense)

Fiscal Year Ended January 31,

($ in thousands) 2020 2021

Interest income $ 988 0.7 % $ 361 0.2 %

Interest expense — — (130) (0.1)

Other income (expense), net 33 — 1,693 0.8

Interest income decreased $0.6 million for fiscal 2021 compared to fiscal 2020, primarily due to a decrease in interest rates.

We entered into a new lease in November 2020 for our headquarters, for which we are considered the owners for accounting purposes, which resulted in an increase of $0.1 million in interest expense on our financing obligation for fiscal 2021.

The increase of $1.7 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.

Income Tax Provision

Fiscal Year Ended January 31,

($ in thousands) 2020 2021

Income tax provision $ 586 0.4 % $ 586 0.3 %

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

Income tax provision was $0.6 million for both fiscal 2021 and fiscal 2020.

The effective tax rate was (1.4)% for fiscal 2021 compared to (2.2)% in the prior fiscal year.

For a discussion of our results of operations for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 31, 2022.

Non-GAAP Financial Measure

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Non-GAAP operating loss.

Non-GAAP operating loss is defined as loss from operations as reported in our 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 defined as loss from operations as reported in our consolidated statements of operations excluding the impact of amortization of intangible assets, stock-based compensation expense, acquisition-related expenses, legal expenses related to certain litigation, and restructuring and related charges, resulting from the Restructuring Plan.

See Note 19 "Restructuring" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the charges related to the Restructuring Plan.

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.

Non-GAAP operating loss eliminates potential differences in performance caused by these items that are not indicative of the Company's ongoing operating performance and hinders comparability with prior and future performance.

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

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Acquisition-related expenses — 10,006 2,276

Fees and expenses related to the Antitrust Matters — — 10,326

Litigation expenses 1

— 10,326 6,147

Restructuring and related charges 2

Total adjustments 28,413 53,716 91,872

Non-GAAP operating loss $ (14,195) $ (17,641) $ (2,141)

1 Represents legal expenses related to the Antitrust Matters and a shareholder derivative lawsuit.

2 Stock-based compensation benefit of $0.2 million related to restructuring is included on the stock-based compensation expense line item.

Liquidity and Capital Resources

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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.

We expect to continue to incur operating losses on a GAAP basis for the foreseeable future.

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

Beginning in the three months ended April 30, 2022 and again during the three months ended October 31, 2022, we supplemented our liquidity with our revolving line of credit.

In July 2020, we closed our IPO of 9,269,000 shares of common stock (including shares issued pursuant to the exercise in full of the underwriters' options to purchase additional shares) at a public offering price of $31.00 per share, resulting in aggregate net proceeds to us of $268.4 million after deducting underwriting discounts and commissions.

We used a majority of the proceeds which were in our cash and cash equivalents on the balance sheet to consummate the acquisition of SimpleNexus.

We used a majority of the proceeds from our initial public offering in July 2020, which were in our cash and cash equivalents on the balance sheet, to consummate the acquisition of SimpleNexus in January 2022.

We generally bill and collect from our customers annually in advance.

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In addition, our advanced billing and collection coupled with our recent growth has resulted in our cash used in operating activities generally being less than our net operating losses in recent periods.

On February 11, 2022, we entered into a credit agreement for a senior secured revolving credit facility of up to $50.0 million.

We drew an amount of $20.0 million under such credit facility in February 2022.

See Note 18 "Subsequent Event" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

We believe that current cash and cash equivalents as well as borrowings available under the revolving credit facility that we entered into in February 2022 will be sufficient to fund our operations and capital requirements for at least the next 12 months.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts to enhance the nCino Bank Operating System and introduce new applications, market acceptance of our solutions, the continued expansion of our sales and marketing activities, 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 the next 12 months for planned office build-outs compared to prior fiscal years to accommodate our growth.

On February 11, 2022, we entered into the Credit Facility of up to $50.0 million.

We borrowed and repaid $20.0 million under the Credit Facility during the three months ended April 30, 2022 and borrowed $30.0 million during the three months ended October 31, 2022.

As of January 31, 2023, the Company had $30.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants.

See Note 15 "Revolving Credit Facility" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

We believe that current cash and cash equivalents as well as borrowings available under the Credit Facility will be sufficient to fund our operations and capital requirements for at least the next 12 months.

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

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

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As of January 31, 2022 and January 31, 2023, the redeemable non-controlling interest was $2.9 million and $3.6 million, respectively.

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

during fiscal 2024.

Summary Cash Flow information for fiscal 2021, 2022, and 2023 are set forth below.

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Net cash provided by financing activities 274,121 15,922 36,712

Net Cash Provided by (Used in) Operating Activities

The $19.2 million we used in operating activities in fiscal 2022 was driven by our net loss of $50.1 million, partially offset by $24.5 million in a non-cash benefit and $6.4 million generated by changes in working capital accounts.

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

Cash generated by working capital accounts was principally a function of a $24.3 million increase in deferred revenue, as we expanded our customer base and renewed existing customers, a $7.3 million increase in accrued expenses and other current liabilities, and a $4.4 million increase in accounts payable.

The cash generated by working capital accounts was partially offset by a $13.5 million increase in accounts receivable due to the timing of collections from customers, payments of $11.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a decrease of $2.6 million in operating lease liabilities, and a $2.5 million increase in prepaid expenses and other assets.

The $9.2 million provided by operating activities in fiscal 2021 reflects our net loss of $41.3 million, offset by $35.9 million in non-cash charges and $14.6 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.

Net Cash Used in Operating Activities

The $15.4 million used in operating activities in fiscal 2023 reflects our net loss of $101.8 million and $14.9 million used in changes in working capital accounts, partially offset by $101.3 million in non-cash charges.

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

Cash used in working capital accounts was principally a function of a $26.8 million increase in accounts receivable due to the timing of billings and collections from customers, an increase of $12.2 million of capitalized costs to obtain revenue contracts, which primarily relates to payments for sales commissions as we expand our customer base, a decrease of $4.8 million in operating lease liabilities, a $3.4 million increase in prepaid expenses and other assets, and a $1.2 million decrease in accrued expenses and other current liabilities.

The cash used in working capital accounts was partially offset by a $33.5 million increase in deferred revenue, as we expanded our customer base and renewed existing customers.

The $19.2 million used in operating activities in fiscal 2022 reflects our net loss of $50.1 million, partially offset by $24.5 million in non-cash charges and $6.4 million generated by changes in working capital accounts.

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

The cash generated by working capital accounts was partially offset by an increase of $11.4 million in accounts receivable due to the timing of collections from customers, payments of $9.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, and a $3.3 million increase in prepaid expenses and other assets.

The cash generated by working capital accounts was partially offset by an increase of $13.5 million in accounts receivable due to the timing of billings and collections from customers, an increase of $11.0 million of capitalized costs to obtain revenue contracts, which primarily relates to payments for sales commissions as we expand our customer base, a decrease of $2.6 million in operating lease liabilities, and a $2.5 million increase in prepaid expenses and other assets.

Net Cash Used in Investing Activities

The $20.7 million used in investing activities in fiscal 2023 was comprised of $18.3 million used for the purchase of property and equipment and the completion of leasehold improvements to our additional headquarter building to support the expansion of our business, $2.5 million for the purchase of preferred stock in Zest AI, and $0.6 million for an asset acquisition completed in August 2022.

The cash used in investing activities was partially offset by $0.7 million received for a net working

capital adjustment from our SimpleNexus acquisition.

The $278.5 million used in investing activities in fiscal 2022 comprised of $269.0 million used for the acquisition of SimpleNexus, $5.5 million used for the purchase of property and equipment and leasehold improvements to support the expansion of our business, and $4.0 million used for the purchase of an investment.

We used $4.3 million in investing activities in fiscal 2021 for the purchase of property and equipment and leasehold improvements to support the expansion of our business.

Net Cash Provided by Financing Activities

The $15.9 million provided by financing activities in fiscal 2022 comprised principally of $13.9 million of proceeds from the exercise of stock options and $2.5 million in proceeds from stock issuances under the employee stock purchase plan, partially reduced by stock issuance costs of $0.2 million for shares issued in consideration for the SimpleNexus acquisition and principal payments of $0.3 million on a financing obligation for a lease arrangement that we are considered the owners for accounting purposes.

The $274.1 million provided by financing activities in fiscal 2021 was comprised principally of $268.4 million in proceeds from the IPO in July 2020, net of underwriting discounts and commissions, and $8.7 million of proceeds from the exercise of stock options.

The cash provided by financing activities was partially reduced by payments of $2.8 million in costs related to the IPO and payments of $0.2 million in November 2020 for the cash portion of contingent consideration related to our acquisition of FinSuite in fiscal 2020.

The $36.7 million provided by financing activities in fiscal 2023 was comprised principally of $50.0 million of proceeds from borrowings on the Credit Facility to expand our liquidity, $4.5 million in proceeds from stock issuances under the employee stock purchase plan, and $3.8 million of proceeds from the exercise of stock options.

The cash provided by financing activities was partially reduced by payments of $20.0 million on the Credit Facility, principal payments of $1.1 million on financing obligations, and payments of debt issuance costs of $0.4 million.

The $15.9 million provided by financing activities in fiscal 2022 comprised principally of $13.9 million of proceeds from the exercise of stock options and $2.5 million in proceeds from stock issuances under the employee stock purchase plan, partially reduced by stock issuance costs of $0.2 million for shares issued in consideration for the SimpleNexus acquisition, and principal payments of $0.3 million on the financing obligation.

Contractual Obligations and Commitments

Our estimated future obligations principally consist of leases related to our facilities, purchase obligations related primarily to licenses and hosting services, and financing obligations for leases for which we are considered the owners for accounting purposes.

See Note 14 "Leases" and Note 15 "Commitments and Contingencies" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

On February 11, 2022, we entered into a credit agreement for a senior secured revolving credit facility of up to $50.0 million.

See Note 18 "Subsequent Event" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

Our estimated future obligations principally consist of leases related to our facilities, purchase obligations related primarily to licenses and hosting services, financing obligations for leases for which we are considered the owners for accounting purposes, and the Credit Facility.

See Note 14 "Leases," Note 15 "Revolving Credit Facility," and Note 16 "Commitments and Contingencies" of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

Critical Accounting Policies and Estimates

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Revenues are generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings.

Arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time and, as a result, are

accounted for as a service contract.

Arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time and, as a result, are accounted for as a service contract.

Generally, our subscription contracts for the nCino Bank Operating System are three years or longer in length, billed annually in advance, are non-cancelable, and do not contain refund-type provisions.

Subscription contracts for SimpleNexus typically range from one to three years and are generally billed monthly in advance.

Any subscription arrangements that are cancelable generally have penalty clauses.

Subscription arrangements for the nCino Bank Operating System that are cancelable generally have penalty clauses.

Professional Services and Other Revenues

Professional services and other revenues primarily consist of fees for deployment, configuration, and optimization services, as well as training.

The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods.

A portion of our professional services contracts are billed on a time and materials basis and revenues are recognized over time as the services are performed.

The majority of our professional services contracts revenues are recognized over time based on a proportional performance methodology which utilizes input methods.

Professional services contracts are billed on a time and materials or fixed fee basis.

Contracts with Multiple Performance Obligations

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We use our best estimates and assumptions to assign fair value to tangible and intangible assets acquired and liabilities assumed at the acquisition date.

The estimates of fair value require management to make estimates of, among other things, future expected cash flows, obsolescence life and factor, and discount rates.

The excess of the purchase price over the fair value of net assets acquired is recorded as goodwill.

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As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company's consolidated statements of operations.

Upon conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are

recorded to the Company's consolidated statements of operations.

Determining the useful life of an intangible asset also requires judgment as different types of intangible assets have different lives.

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At January 31, 2023, we determined that it is more likely than not that the majority of our deferred tax assets will not be realized and as such, recorded a valuation allowance of $138.4 million against our deferred tax assets of $192.4 million as of that date.

The Company is subject to income tax in the United States, multiple state and local jurisdictions and various foreign countries.

The Company is subject to income tax in the U.S., multiple state and local jurisdictions and various foreign countries.

The tax laws and regulations in each jurisdiction may be interpreted differently in certain situations, which could result in differing financial results.

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Due to the complexity of any uncertainty, the ultimate resolution may result in a remittance that is different from the current estimate of any tax liabilities.

The Company determines if an arrangement is or contains a lease at the inception date based on whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use.

The Company determines the classification of the lease, whether operating or financing, at the lease commencement date, which is the date the leased assets are made available for use.

The Company accounts for lease and non-lease components as a single lease component for its facilities and equipment leases.

The Company did not have any finance leases as of January 31, 2022.

Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The lease term reflects the noncancelable period of the lease together with options to extend or terminate the lease when it is reasonably certain the Company will exercise such option.

Variable costs, such as common area maintenance costs, are not included in the measurement of the ROU assets and lease liabilities, but are expensed as incurred.

The Company's leases do not generally provide an implicit rate;

therefore, the Company uses its incremental borrowing rate in determining the present value of the lease payments.

Lease expense is recognized on a straight-line basis over the lease term.

The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less.

Lease expense for such leases is recognized on a straight-line basis over the lease term.

Stock-Based Compensation

Stock-based compensation expense related to employees is measured based on the grant-date fair value of the awards.

We establish fair value as the measurement objective in accounting for share-based payment transactions and recognize expense on a straight-line basis over the requisite service period, which is generally the vesting term of four years for stock options and RSUs and six months for shares issued pursuant to our Employee Stock Purchase Plan ("ESPP") which had its first offering period in fiscal 2022.

Stock-based compensation is recognized net of estimated forfeiture activity.

The estimated forfeiture rate applied is based on historical forfeiture rates.

We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors.

Changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture rate is revised.

If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the

financial statements.

If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

The fair value of each stock option or ESPP share is estimated on the grant date using the Black-Scholes option-pricing model.

The determination of the grant date fair value of stock-based awards using the Black-Scholes option-pricing model is affected by our estimated common stock fair value as well as other subjective assumptions including the expected term of the awards, the expected volatility over the expected term of the awards, expected dividend yield, and risk-free interest rates.

The assumptions used in our option-pricing model represent management’s best estimates.

These assumptions and estimates are as follows:

• Fair Value of Common Stock .

For stock options issued prior to the IPO, due to the stock not being publicly traded, we estimated the fair value of common stock based on contemporaneous valuations and other factors deemed relevant by management.

No stock options have been issued since the IPO.

We use the market closing price of our common stock as reported on NASDAQ for shares issued pursuant to our ESPP.

• Expected Term .

The expected term of employee stock options reflects the period for which the Company believes the option will remain outstanding.

To determine the expected term, we generally apply the simplified approach in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award.

The expected term for the ESPP award approximates the offering period of six months.

• Expected Volatility .

For stock options issued prior to the IPO, we based expected future volatility on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

We use historical volatility of the Company's common stock for shares issued pursuant to our ESPP.

• Expected Dividend Yield .

We have never declared or paid any cash dividends and do not presently intend to pay cash dividends in the foreseeable future.

As a result, we used an expected dividend yield of zero.

• Risk-Free Interest Rates .

We base the risk-free interest rate on the rate for a U.S.

Treasury zero-coupon issue with a term that closely approximates the expected life of the option grant at the date nearest the option grant date.

RSUs issued prior to our IPO were subject to time-based and performance-based vesting conditions.

RSUs issued subsequent to our IPO vest upon the satisfaction of a time-based condition only.

These RSUs are generally earned over a service period of four years and the compensation expense related to these awards is based on the grant date fair value of the underlying common stock and is recognized on a ratable basis over the applicable service period.

Recent Accounting Pronouncements

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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-K

Item 7. Management’s Discussion and Analysis