What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-31 compared with 2022-11-30 · 189 added, 202 removed, 227 unchanged (63% of the section changed)

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For example, references in this Quarterly Report on Form 10-Q to "fiscal 2024" refer to the fiscal year ended January 31, 2024.

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 artificial intelligence and machine learning ("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 on January 7, 2022 (the "Acquisition Date"), 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,

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 nCino Portfolio Analytics, LLC (formerly Visible Equity) and FinSuite and combined the acquired technology with certain of our internally-developed technology to launch nCino IQ ("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.

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.

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

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

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

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

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

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

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

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

In fiscal 2020, we acquired nCino Portfolio Analytics, LLC (formerly Visible Equity) and FinSuite as part of our strategy to build out our nIQ capabilities, and we established our nCino K.K joint venture to facilitate our entry into the Japanese market.

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

point-of-sale mortgage market.

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

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

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

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

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

As of October 31, 2022, we had 275 sales and sales support personnel in the United States, including SimpleNexus, and 75 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 system integrators ("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.

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 April 30, 2023, we had 244 sales and sales support personnel in the U.S.

and 73 sales and support personnel in offices outside the U.S.

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

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

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

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

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

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.

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

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

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

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

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

For the three months ended October 31, 2021 and 2022, our total revenues were $70.0 million and $105.3 million, respectively, representing a 50.3% increase.

Our revenues for the three months ended October 31, 2022 include $16.9 million in revenues from SimpleNexus.

For the three months ended October 31, 2021 and 2022, our subscription revenues were $57.1 million and $88.3 million, respectively, representing a 54.7% increase.

Our subscription-based revenues for the three months ended October 31, 2022 include $15.4 million from SimpleNexus.

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

of $13.6 million and $23.6 million for the three months ended October 31, 2021 and 2022, respectively.

For the nine months ended October 31, 2021 and 2022, our total revenues were $198.9 million and $299.1 million, respectively, representing a 50.4% increase.

Our revenues for the nine months ended October 31, 2022 include $48.2 million in revenues from SimpleNexus.

For the nine months ended October 31, 2021 and 2022, our subscription revenues were $162.1 million and $251.9 million, respectively, representing a 55.5% increase.

Our subscription-based revenues for the nine months ended October 31, 2022 include $44.0 million from SimpleNexus.

Our employee headcount decreased by 76 as of April 30, 2023 compared to April 30, 2022 primarily due to our workforce reduction announced in the fourth quarter of fiscal 2023.

For the three months ended April 30, 2022 and 2023, our total revenues were $94.2 million and $113.7 million, respectively, representing a 20.7% increase.

For the three months ended April 30, 2022 and 2023, our subscription revenues were $79.2 million and $97.3 million, respectively, representing a 22.9% increase.

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

of $42.3 million and $81.5 million for the nine months ended October 31, 2021 and 2022, respectively.

of $30.7 million and $11.2 million for the three months ended April 30, 2022 and 2023, respectively.

Factors Affecting Our Operating Results

Market Adoption of Our Solution .

Our future growth depends on our ability to expand our reach to new 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 15.1% of total revenues for the three and nine months ended October 31, 2022.

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

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

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

In addition, growing our customer base will require us to increasingly penetrate markets outside the U.S., which accounted for 16.9% of total revenues for the three months ended April 30, 2023.

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

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

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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.

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

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

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

COVID-19 Effects on Demand for Our Solutions .

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

Using our PPP solution, since the inception of PPP funding, our financial institution customers 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 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 United States 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.

Macroeconomic Environment.

We are currently operating in a rising interest rate environment as the U.S.

Federal Reserve raises interest rates as a means to manage inflation.

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

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

Additionally, liquidity issues faced by certain FIs in the U.S., including Silicon Valley Bank, Signature Bank and First Republic Bank (the "Impacted FIs") have created turmoil and uncertainty surrounding the financial services industry.

These Impacted FIs are customers of ours, collectively representing less than 3% of our total revenues for the year ended January 31, 2023.

We have a large and diversified customer base of all types and sizes around the globe, and no individual customer represented more than 10% of the Company's revenue for our first quarter of fiscal 2024.

We will continue to monitor the impact the macroeconomic environment may have on our business.

Continued Investment in Innovation and Growth .

We have made substantial investments in product development, sales and marketing, and strategic acquisitions since our inception to achieve a leadership position in our market and grow our revenues and customer base.

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

We also intend to invest in sales and marketing both in the United States and internationally to further grow our business.

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 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.

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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.

• 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, 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.

• 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.

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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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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.

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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Research and development costs are expensed as incurred.

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

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.

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.

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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.

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

Other Expense, Net.

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

Income Tax Provision.

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

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

and income taxes in foreign jurisdictions.

Results of Operations

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

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

Three Months Ended October 31, Nine Months Ended October 31,

2021 2022 2021 2022

The following tables present our selected unaudited

condensed consolidated statements of operations data for three months ended April 30, 2022 and 2023 in both dollars and as a percentage of total revenues, except as noted.

Three Months Ended April 30,

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

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Interest expense (638) (1,379)

Other income (expense), net (255) (2,911) (325) (5,498)

Other expense, net (1,573) (782)

Loss before income taxes (29,440) (10,251)

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The Company recognized stock-based compensation expense as follows:

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

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Total stock-based compensation expense $ 13,300 $ 10,865

The Company recognized amortization expense as follows:

Three Months Ended October 31, Nine Months Ended October 31,

The Company recognized amortization expense for intangible assets as follows:

Three Months Ended April 30,

($ in thousands) 2022 2023

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Total amortization expense $ 7,033 $ 7,105

Three Months Ended October 31, Nine Months Ended October 31,

2021 2022 2021 2022

Three Months Ended April 30,

Subscription revenues 84.1 % 85.6 %

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Interest expense (0.7) (1.2)

Other income (expense), net (0.4) (2.8) (0.2) (1.8)

Other expense, net (1.7) (0.7)

Loss before income taxes (31.3) (8.9)

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Net loss (31.9) % (10.1) %

Comparison of the Three and Nine Months Ended October 31, 2021 and 2022

Three Months Ended October 31, Nine Months Ended October 31,

Comparison of the Three Months Ended April 30, 2022 and 2023

Three Months Ended April 30,

($ in thousands) 2022 2023

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Subscription Revenues

Subscription revenues increased $31.2 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, including customers added as a result of our acquisition of SimpleNexus, and growth from existing customers within and across lines of business.

Of the increase, 31.5% 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, 19.2% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended October 31, 2021, and 49.3% was attributable to revenues from SimpleNexus.

Subscription revenues were 83.8% of total revenues for the three months ended October 31, 2022 compared to 81.5% of total revenues for the three months ended October 31, 2021, primarily due to growth in our installed base and SimpleNexus.

Subscription revenues increased $89.9 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, including customers added as a result of our acquisition of SimpleNexus, and growth from existing customers within and across lines of business.

Of the increase, 36.9% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and customers expanded their adoption of our solutions, 14.2% was attributable to initial revenues from customers who did not contribute to subscription revenues during the nine months ended October 31, 2021, and 48.9% was attributable to revenues from SimpleNexus.

Subscription revenues were 84.2% of total revenues for the nine months ended October 31, 2022 compared to 81.5% of total revenues for the nine months ended October 31, 2021, primarily due to growth in our installed base and SimpleNexus.

Subscription revenues increased $18.2 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to initial revenues from customers who did not contribute to subscription revenues during the prior period, and growth from existing customers within and across lines of business.

Of the increase, 69.3% was attributable to increased revenues from existing customers as additional seats were activated in accordance with contractual terms and

customers expanded their adoption of our solutions, and 30.7% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended April 30, 2022.

Subscription revenues were 85.6% of total revenues for the three months ended April 30, 2023 compared to 84.1% of total revenues for the three months ended April 30, 2022, primarily due to growth in our installed base.

Professional Services and Other Revenues

Professional services and other revenues increased $4.1 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

38.0% of the increase was attributable to revenues from SimpleNexus.

Professional services and other revenues increased $10.4 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

41.2% of the increase was attributable to revenues from SimpleNexus.

Professional services and other revenues increased $1.3 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to the addition of new customers as well as expanded adoption by existing customers within and across lines of business where implementation, configuration, and training services were required.

Cost of Revenues and Gross Margin

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

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Cost of Subscription Revenues

Cost of subscription revenues increased $11.1 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, generating a gross margin for subscription revenues of 69.6% compared to a gross margin of 72.4% for the three months ended October 31, 2021.

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

Costs related to Salesforce user fees increased $3.1 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $2.6 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $1.3 million as we added new employees, including headcount from the acquisition of SimpleNexus.

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

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

Cost of subscription revenues increased $32.5 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, generating a gross margin for subscription revenues of 68.8% compared to a gross margin of 71.6% for the nine months ended October 31, 2021.

The decrease in gross margin percentage is primarily due to an increase of $11.6 million in amortization expense for acquired developed technology related to the acquisition of SimpleNexus.

Cost of subscription revenues increased $3.6 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, generating a gross margin for subscription revenues of 70.0% compared to a gross margin of 67.8% for the three months ended April 30, 2022.

Costs related to Salesforce user fees increased $2.8 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $0.6 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $3.5 million as we added new employees, including headcount from the acquisition of SimpleNexus.

The increase in cost of subscription revenues also included an increase of $0.6 million in allocated overhead costs due to growth supporting our continued business expansion.

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

Cost of Professional Services and Other Revenues

Cost of professional services and other revenues increased $4.8 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, generating a gross margin for professional services and other revenues of 4.1% compared to a gross margin of 11.2% for the three months ended October 31, 2021.

For the three months ended October 31, 2022, personnel costs, including stock-based compensation expense, increased $4.0 million for professional services compared to the three months ended October 31, 2021, due to increased headcount, including headcount from the acquisition of SimpleNexus.

The increase in cost of professional services and other revenues also included an increase of $0.5 million in allocated overhead costs due to growth supporting our business, an increase of $0.3 million in travel-related costs, and a $0.1 million increase in reimbursable travel and related expenses for the professional service organization.

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

Cost of professional services and other revenues increased $12.1 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, generating a gross margin for professional services and other revenues of 2.2% compared to a gross margin of 7.4% for the nine months ended October 31, 2021.

For the nine months ended October 31, 2022, personnel costs, including stock-based compensation expense, increased $10.1 million for professional services compared to the nine months ended October 31, 2021, due to increased headcount, including headcount from the acquisition of SimpleNexus.

The increase in cost of professional services and other revenues also included an increase of $0.9

million in allocated overhead costs due to growth supporting our business, an increase of $0.7 million in travel-related costs, and a $0.3 million increase in reimbursable travel and related expenses for the professional service organization.

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

Cost of professional services and other revenues increased $2.2 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, generating a gross margin for professional services and other revenues of (4.3)% compared to a gross margin of 1.5% for the three months ended April 30, 2022.

For the three months ended April 30, 2023, personnel costs, including stock-based compensation expense, increased $1.7 million for professional services compared to the three months ended April 30, 2022, mainly from an increase in headcount.

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

The decrease in our professional services and other gross margin for the three months ended April 30, 2023 was primarily due to a decline in realized effective billing and utilization rates in our professional services teams.

Operating Expenses

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

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Sales and Marketing

Sales and marketing expenses increased $11.8 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, primarily due to an increase of $7.3 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount on the sales and marketing teams, including headcount from the acquisition of SimpleNexus.

Amortization expense for acquired customer relationships and trade name increased $2.4 million related to the acquisition of SimpleNexus.

The increase in sales and marketing expenses also included an increase of $1.0 million in sales-related travel costs, an increase of $0.7 million in allocated overhead costs, and an increase of $0.3 million in marketing costs primarily attributable to in-person conferences.

Sales and marketing expenses increased $36.0 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, primarily due to an increase of $20.2 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount on the sales and marketing teams, including headcount from the acquisition of SimpleNexus.

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

Amortization expense for acquired customer relationships and trade name increased $7.1 million related to the acquisition of SimpleNexus.

The increase in sales and marketing expenses also included an increase of $3.6 million in sales-related travel costs, an increase of $3.1 million in marketing costs primarily attributable to in-person conferences, and an increase of $2.0 million in allocated overhead costs.

Our sales and marketing headcount grew by 123 from October 31, 2021 to October 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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

Sales and marketing expenses increased $0.6 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to an increase of $0.6 million in third-party professional fees and an increase of $0.4 million in sales-related travel costs.

The increase in sales and marketing expenses was partially offset by a decrease of $0.3 million in personnel costs, including stock-based compensation expense, mainly from a decrease in headcount offset by compensation increases, the impact of changing our merit cycle from a work anniversary basis to an annual basis, and a decrease of $0.3 million in marketing costs.

Our sales and marketing headcount decreased by 58 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction and employees that moved to our general and administrative department due to a change in responsibilities.

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

Research and Development

Research and development expenses increased $9.5 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, primarily due to an increase of $9.5 million in personnel costs, including stock-based compensation expense, resulting mainly from an increase in headcount, including headcount from the acquisition of SimpleNexus.

The increase in research and development expenses also included an increase of $0.8 million in allocated overhead costs due to growth supporting our continued business expansion and an increase of $0.3 million in travel-related costs, partially offset by a $1.1 million decrease in third-party professional fees primarily attributable to contract research and development spend.

Research and development expenses increased $32.3 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, primarily due to an increase of $31.3 million in personnel costs, including stock-based compensation expense, resulting mainly from a continued increase in headcount, including headcount from the acquisition of SimpleNexus.

The increase in research and development expenses also included an increase of $2.8 million in allocated overhead costs due to growth supporting our continued business expansion and an increase of $0.9 million in travel-related costs, partially offset by a $2.7 million decrease in third-party professional fees primarily attributable to contract research and development spend.

Our research and development headcount grew by 182 from October 31, 2021 to October 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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

Research and development expenses decreased $0.9 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to a decrease of $1.0 million in third-party professional fees as a result of lower contract research and development spend and a decrease of $0.4 million in personnel costs, including stock-based compensation expense, mainly from a decrease in headcount offset by compensation increases and the impact of changing our merit cycle from a work anniversary basis to an annual basis.

The decrease in research and development expenses was partially offset by an increase of $0.5 million in allocated overhead costs due to growth supporting our continued business expansion.

Our research and development headcount decreased by 58 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction.

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

General and Administrative

General and administrative expenses increased $3.7 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, primarily due to an increase of $4.5 million in personnel costs, including stock-based compensation expense, from additional headcount as we continued to scale our business, including headcount from the acquisition of SimpleNexus.

The increase in general and administrative spend also included an increase of $0.3 million in allocated overhead and other general and administrative costs and an increase of $0.1 million in travel-related costs.

Third party professional fees decreased $1.2 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, mostly attributable to a decrease in third party professional fees and expenses related to the government antitrust investigation and related civil action disclosed in Note 14 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q (the "Antitrust Matters") and acquisition costs, partially offset by an increase in fees and expenses related to other professional fees.

General and administrative expenses increased $16.6 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, primarily due to an increase of $15.9 million in personnel costs, including stock-based compensation expense, from additional headcount as we continued to scale our business, including headcount from the acquisition of SimpleNexus.

The increase in general and administrative spend also included an increase of $2.0 million in allocated overhead and other general and administrative costs and an increase of $0.5 million in travel-related costs.

Third party professional fees decreased $1.7 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, mostly attributable to a decrease in third party professional fees and expenses related to the Antitrust Matters, partially offset by an increase in fees and expenses related to acquisition costs and other professional fees.

Our general and administrative headcount grew by 47 from October 31, 2021 to October 31, 2022.

Our acquisition of SimpleNexus contributed to this increase in headcount.

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

General and administrative expenses decreased $4.7 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, primarily due to a decrease of $3.2 million in personnel costs, mostly attributable to a $2.1 million decrease in stock-based compensation expense, and a decrease in headcount partially offset by compensation increases and the impact of changing our merit cycle from a work anniversary basis to an annual basis.

The decrease in general and administrative spend also included a decrease of $1.7 million in third party professional fees for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, mostly attributable to a decrease in third party professional fees and expenses related to acquisition costs for SimpleNexus and fees and expenses related to the government antitrust investigation and related civil action disclosed in Note 12 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q (the "Antitrust Matters"), partially offset by an increase in other professional fees.

The decrease in general and administrative expenses was partially offset by an increase of $0.3 million in allocated overhead and other general and administrative costs.

Our general and administrative headcount decreased by 8 from April 30, 2022 to April 30, 2023 primarily due to our workforce reduction which was partially offset by employees that moved from our sales and marketing department to our general and administrative department due to a change in responsibilities.

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

Non-Operating Income (Expense)

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

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Interest expense (638) (0.7) (1,379) (1.2)

Other income (expense), net (255) (0.4) (2,911) (2.8) (325) (0.2) (5,498) (1.8)

Interest expense increased $0.2 million for the three months ended October 31, 2022 compared to the three months ended October 31, 2021, primarily due to a larger balance on our financing obligations for leases for which we are considered the owners for accounting purposes.

The increase of $2.7 million in other income (expense), net for the three months ended October 31, 2022 compared to the three months ended October 31, 2021 was primarily driven by intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Interest expense increased $0.9 million for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021, 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 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 did not occur in the prior comparative year to date.

The increase of $5.2 million in other income (expense), net for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021 was primarily driven by intercompany loans that are denominated in currencies other than the underlying functional currency of the applicable entity.

Other expense, net (1,573) (1.7) (782) (0.7)

Interest income increased $0.5 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to increase in our accounts earning interest and increased interest rates.

Interest expense increased $0.7 million for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, due to borrowing

on our revolving credit facility and an increase in our financing obligations for leases for which we are considered the owners for accounting purposes.

The decrease of $0.8 million in other expense, net for the three months ended April 30, 2023 compared to the three months ended April 30, 2022 was primarily driven by intercompany loans and transactions that are denominated in currencies other than the underlying functional currency of the applicable entity.

Income Tax Provision

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

Income tax provision $ 563 0.6 % $ 1,393 1.2 %

Income tax provision was $0.8 million for the three months ended October 31, 2022 compared to a provision of $0.4 million for the three months ended October 31, 2021, and resulted in an effective tax rate of (3.6)% and (2.7)%, respectively.

Income tax provision was $2.2 million for the nine months ended October 31, 2022 compared to a provision of $1.0 million for the nine months ended October 31, 2021, and resulted in an effective tax rate of (2.8)% compared to (2.4)%, respectively.

Income tax provision was $1.4 million for the three months ended April 30, 2023 compared to a provision of $0.6 million for the three months ended April 30, 2022, and resulted in an effective tax rate of (13.6)% and (1.9)%, respectively.

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

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

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

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

We have adopted, as required, Code Section 174, as amended by the Tax Cuts and Jobs Act of 2017.

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

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

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 of fiscal 2021.

At present, we do not see COVID-19 affecting customers’ decision making, such as delaying purchase decisions or cancellations, nor are we seeing COVID-19 having a material impact on the decision making of the vendors and third-party service providers we rely on.

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 “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 “Risk Factors—Uncertain or weakened economic conditions, including as a result of COVID-19, may adversely affect our industry, business, and results of operations," included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed with the SEC on March 31, 2022.

Beginning in January 2023, nCino will implement an "in-person first" working environment at the Company's headquarters in Wilmington, N.C., in which we expect full-time employees within Wilmington to return to the office on a full-time basis.

Non-GAAP Financial Measure

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We believe that this non-GAAP financial measure helps us to identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of the non-GAAP financial measure.

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

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

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Non-GAAP operating income (loss).

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

See Note 15 "Restructuring" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the charges related to restructuring.

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

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

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

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

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

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

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

($ in thousands) 2022 2023

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Acquisition-related expenses 1,497 211

Fees and expenses related to the Antitrust Matters 2,021 1,225 8,168 5,093

Litigation expenses 1

Restructuring and related charges — 239

Total adjustments 23,562 19,565

Non-GAAP operating income (loss) $ (3,669) $ 10,938

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

Liquidity and Capital Resources

As of October 31, 2022, we had $106.5 million in cash and cash equivalents, and an accumulated deficit of $288.8 million.

As of April 30, 2023, we had $98.1 million in cash and cash equivalents, and an accumulated deficit of $321.7 million.

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

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

To date, we have funded our capital needs through issuances of common stock including our initial public offering in July 2020, operating cash flows, and during fiscal 2023, our revolving line of credit.

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

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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 October 31, 2022, the Company had $30.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants.

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

We repaid $15.0 million under the Credit Facility during the three months ended April 30, 2023.

As of April 30, 2023, the Company had $15.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants.

See Note 11 "Revolving Credit Facility" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q for more information.

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

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

We expect capital expenditures will be appreciably higher in absolute dollars in fiscal 2023 for planned office build-outs compared to prior fiscal years to accommodate our growth, which we estimate to be approximately $4.3 million remaining to complete at October 31, 2022 for fiscal 2023.

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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and the Company.

The balance of the redeemable non-controlling interest is reported on our balance sheet below total liabilities but above stockholders’ equity at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value.

As of January 31, 2022 and October 31, 2022, the redeemable non-controlling interest was $2.9 million and $4.1 million, respectively.

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

greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value.

As of January 31, 2023 and April 30, 2023, the redeemable non-controlling interest was $3.6 million and $3.2 million, respectively.

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

during the course of the current fiscal year.

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

Nine Months Ended October 31,

during fiscal 2024.

Summary Cash Flow information for the three months ended April 30, 2022 and 2023 are set forth below:

Three Months Ended April 30,

($ in thousands) 2022 2023

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Net cash used in investing activities (4,694) (1,961)

Net cash provided by financing activities 12,439 34,637

Net cash provided by (used in) financing activities 258 (13,856)

Net Cash Provided by Operating Activities

The $6.6 million provided by operating activities in the nine months ended October 31, 2022 reflects our net loss of $80.1 million, offset by $79.5 million in non-cash charges and $7.2 million generated by changes in working capital accounts.

The $31.3 million provided by operating activities in the three months ended April 30, 2023 reflects our net loss of $11.6 million, offset by $24.7 million in non-cash charges and $18.3 million generated by changes in working capital accounts.

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

Cash generated by working capital accounts was principally a function of a $32.5 million decrease in accounts receivable due to collections from customers.

The cash generated by working capital accounts was partially offset by a $9.2 million decrease in accrued expenses and other current liabilities, payments of $8.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $3.0 million decrease in operating lease liabilities, a $2.9 million decrease in deferred revenue, a $1.7 million decrease in accounts payable, and a $0.4 million increase in prepaid expenses and other assets.

The $1.8 million provided by operating activities in the nine months ended October 31, 2021 reflects our net loss of $43.5 million, offset by $33.3 million in non-cash charges and $12.0 million generated by changes in working capital accounts.

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

Cash generated by working capital accounts was principally a function of a $21.6 million decrease in accounts receivable due to collections from customers and a $4.7 million increase in accounts payable.

The cash generated by working capital accounts was partially offset by payments of $5.8 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $3.2 million decrease in deferred revenue, a $2.0 million decrease in accrued expenses and other current liabilities, a $1.9 million decrease in operating lease liabilities, and a $1.4 million increase in prepaid expenses and other assets.

Cash generated by working capital accounts was principally a function of a $18.3 million decrease in accounts receivable due to the timing of billings and collections from customers and a $16.8 million increase in deferred revenue, as we expanded our customer base and renewed existing customers.

The cash generated by working capital accounts was partially offset by a $13.2 million decrease in accrued expenses and other current liabilities which includes payments of approximately $5.0 million for severance and other employee costs associated with the restructuring plan.

Additional offsets were a $1.2 million increase in prepaid expenses and other assets, payments of $1.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $1.0 million decrease in operating lease liabilities, and a $0.3 million decrease in accounts payable.

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

Cash generated by working capital accounts was principally a function of a $22.4 million increase in deferred revenue, as we expanded our customer base and renewed existing customers, and a $0.5 million decrease in accounts receivable due to the timing of billings.

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

Net Cash Used in Investing Activities

The $13.8 million used in investing activities in the nine months ended October 31, 2022 was comprised of $13.9 million for the purchase of property and equipment and leasehold improvements to support the expansion of our business 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.

We used $3.6 million in investing activities in the nine months ended October 31, 2021 for the purchase of property and equipment and leasehold improvements to support the expansion of our business.

On November 1, 2022 we used $2.5 million for the purchase of preferred stock in Zest AI.

See Note 17 "Subsequent Events" of Part I, Item I of this Quarterly Report on Form 10-Q for more information.

Net Cash Provided by Financing Activities

The $34.6 million provided by financing activities in the nine months ended October 31, 2022 was comprised principally of $50.0 million of proceeds from borrowings on the Credit Facility to expand our liquidity, $3.0 million of proceeds from the exercise of stock options, and $2.4 million of proceeds from stock issuances under the employee stock purchase plan.

The cash provided by financing activities was partially reduced by payments of $20.0 million on the Credit Facility, principal payments of $0.5 million on financing obligations, and payments of debt issuance costs of $0.4 million.

The $12.4 million provided by financing activities in the nine months ended October 31, 2021 was comprised principally of $12.6 million of proceeds from the exercise of stock options, partially reduced by principal payments of $0.2 million on the financing obligation.

The $2.0 million used in investing activities in the three months ended April 30, 2023 was comprised of $1.6 million for the purchase of property and equipment and leasehold improvements to support the expansion of our business and $0.4 million for the final cash considerations relating to an asset acquisition completed in August 2022.

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

Net Cash Provided by (Used in) Financing Activities

The $(13.9) million used in financing activities in the three months ended April 30, 2023 was comprised principally of payments of $15.0 million on the Credit Facility and principal payments of $0.2 million on financing obligations.

The cash used in financing activities was partially offset by $1.4 million of proceeds from the exercise of stock options.

The $0.3 million provided by financing activities in the three months ended April 30, 2022 was comprised principally of $0.8 million of proceeds

from the exercise of stock options, partially reduced by payments of debt issuance costs of $0.4 million, and principal payments of $0.2 million on financing obligations.

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

Contractual Obligations and Commitments

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

See Note 12 "Leases," Note 13 "Revolving Credit Facility," Note 14 "Commitments and Contingencies," and Note 17 "Subsequent Events" of the notes to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for more information.

See Note 10 "Leases," Note 11 "Revolving Credit Facility," and Note 12 "Commitments and Contingencies" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Critical Accounting Policies and Estimates

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See Note 2 "Summary of Significant Accounting Policies" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted, if applicable.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

At April 30, 2023, we had cash, cash equivalents and restricted cash of $103.5 million, which consisted primarily of bank deposits and money market funds.

Interest-earning instruments carry a degree of interest rate risk.

However, our historical interest income has not fluctuated significantly.

A hypothetical 10% change in interest rates would not have had a material impact on our financial results included in this Quarterly Report on Form 10-Q.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

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

Borrowings bear interest, at the Company's option, at:

(i) a base rate equal to the greater of (a) the lender’s “prime rate,” (b) the federal funds rate plus 0.50%, and (c) the BSBY rate plus 1.00%, plus a margin of 0.00% (provided that the base rate shall not be less than 0.00%);

or (ii) the BSBY rate (provided that the BSBY shall not be less than 0.00%), plus a margin of 1.00%.

As a result, we are exposed to increased interest rate risk as we make draws.

At April 30, 2023, we had $15.0 million outstanding under the Credit Facility.

We are exposed to the risk of increasing interest rates as the Credit Facility is at a variable interest rate.

As of April 30, 2023, the applicable interest rate was 5.91%.

A hypothetical 100 basis point change in interest rates would not have had a material impact on our financial results included in this Quarterly Report on Form 10-Q.

See Note 11, "Revolving Credit Facility" of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Foreign Currency Exchange Risk

Our reporting currency is the U.S.

dollar and the functional currency of each of our subsidiaries is its local currency.

The assets and liabilities of each of our subsidiaries are translated into U.S.

dollars at exchange rates in effect at each balance sheet date.

Revenues and expenses are translated using the average exchange rate for the relevant period.

Equity transactions are translated using historical exchange rates.

Decreases in the relative value of the U.S.

dollar to other currencies may negatively affect revenues and other operating results as expressed in U.S.

Foreign currency translation adjustments are accounted for as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

Gains or losses due to transactions in foreign currencies are included in non-operating income (expense), other in our unaudited condensed consolidated statements of operations.

Furthermore, our customers outside of the U.S.

typically pay us in local currency.

We have not engaged in hedging of foreign currency transactions to date, although we may choose to do so in the future.

We do not believe that an immediate 10% increase or decrease in the relative value of the U.S.

dollar to other currencies would have a material effect on operating results or financial condition.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis