What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-29 compared with 2023-11-29 · 111 added, 152 removed, 259 unchanged (50% of the section changed)

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For example, references in this Quarterly Report on Form 10-Q to "fiscal 2025" refer to the fiscal year ended January 31, 2025.

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:

Through its single software-as-a-service ("SaaS") platform, nCino helps financial institutions ("FI") serving corporate and commercial, small business, consumer, and mortgage customers modernize and more effectively onboard clients, open accounts, make loans and navigate the loan lifecycle, and effectively monitor and manage their portfolio.

With the nCino Bank Operating System, FIs can:

• digitally serve their clients across lines of business,

• improve financial results,

• improve efficiency,

• elevate employee experience and performance,

• manage risk and compliance more effectively, and

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

• manage risk and compliance more effectively,

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

• embrace the value of intelligent automation and uncover data-driven insights.

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.

After realizing that 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—were endemic across the financial services industry, nCino 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 become more efficient by providing an end-to-end platform that spans business lines and combines capabilities for a seamless experience.

The nCino Bank Operating System was initially designed to help transform commercial and small business lending for community and regional banks.

This solution was introduced to enterprise banks in the United States ("U.S.") in 2014, and then internationally in 2017, and has subsequently expanded across North America, Europe, the Middle East, South Africa and Asia-Pacific.

Throughout this market expansion, we broadened the nCino Bank Operating System by adding functionality for consumer lending, client onboarding, deposit account opening, analytics and artificial intelligence and machine learning.

In fiscal 2020, we made two acquisitions 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.

An acquisition in fiscal 2022 expanded our capabilities to the U.S.

point-of-sale mortgage market.

On September 8, 2023, SimpleNexus began operating as SimpleNexus, LLC d/b/a nCino Mortgage, LLC ("nCino Mortgage") as part of our rebranding effort.

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.

On March 20, 2024 (the "DocFox Acquisition Date"), we acquired DocFox, Inc.

("DocFox") which provides a solution for automating onboarding experiences for commercial and business banking, for an aggregate preliminary purchase price of $74.3 million.

We funded the purchase consideration with $75.0 million borrowed under the Credit Facility as further described in 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.

We have included the financial results of DocFox in our unaudited condensed consolidated financial statements from the DocFox Acquisition Date.

We acquired Integrated Lending Technologies, LLC ("ILT") on April 1, 2024 (the "ILT Acquisition Date"), which provides consumer loan origination software that streamlines direct and indirect lending operations, for an aggregate

preliminary purchase price of $19.9 million in cash.

We have included the financial results of ILT in our unaudited condensed consolidated financial statements from the ILT Acquisition Date.

See Note 7 "Business Combinations" 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 DocFox and ILT acquisitions.

We generally offer the nCino Bank Operating System on a subscription basis pursuant to non-cancellable multi-year contracts that typically range from three to five years, and we employ a “land and expand” business model.

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.

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

As of October 31, 2023, we had 232 sales and sales support personnel in the U.S.

As of April 30, 2024, we had 205 sales and sales support personnel in the U.S.

and 88 sales and support personnel in offices outside the U.S.

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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.

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.

For the three months ended October 31, 2022 and 2023, our total revenues were $105.3 million and $121.9 million, respectively, representing a 15.8% increase.

For the three months ended October 31, 2022 and 2023, our subscription revenues were $88.3 million and $104.8 million, respectively, representing an 18.7% increase.

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

of $23.6 million and $16.4 million for the three months ended October 31, 2022 and 2023, respectively.

For the nine months ended October 31, 2022 and 2023, our total revenues were $299.1 million and $352.9 million, respectively, representing a 18.0% increase.

For the nine months ended October 31, 2022 and 2023, our subscription revenues were $251.9 million and $302.0 million, respectively, representing a 19.9% increase.

For the three months ended April 30, 2023 and 2024, our total revenues were $113.7 million and $128.1 million, respectively, representing a 12.7% increase.

For the three months ended April 30, 2023 and 2024, our subscription revenues were $97.3 million and $110.4 million, respectively, representing an 13.4% increase.

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

of $81.5 million and $43.5 million for the nine months ended October 31, 2022 and 2023, respectively.

During the third quarter of fiscal 2024, the Company rebranded the SimpleNexus solution to nCino Mortgage, resulting in a change to the trade name useful life.

As a result, the Company recorded accelerated amortization to fully amortize the remaining trade name intangible asset.

The effect of this change in estimate for the three and nine months ended October 31, 2023 was an increase in sales and marketing amortization expense of $10.1 million, which resulted in an increase in loss of operations and net loss attributable to nCino, Inc.

of $10.1 million, or $0.09 per basic and diluted share.

of $11.2 million and $3.0 million for the three months ended April 30, 2023 and 2024, respectively.

Factors Affecting Our Operating Results

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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 19.2% of total revenues for the three months ended October 31, 2023 and 18.3% for the nine months ended October 31, 2023.

In addition, growing our customer base will require us to increasingly penetrate markets outside the U.S., which accounted for 20.2% of total revenues for the three months ended April 30, 2024.

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.

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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, 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.

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 are primarily related to legal, consulting and other professional services fees.

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

Non-Operating Income (Expense)

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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 U.S.

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

Income Tax Provision (Benefit).

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

and income taxes in foreign jurisdictions.

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

The following tables present our selected unaudited condensed consolidated statements of operations data for three and nine months ended October 31, 2022 and 2023 in both dollars and as a percentage of total revenues, except as noted.

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

2022 2023 2022 2023

The following tables present our selected unaudited condensed consolidated statements of operations data for three months ended April 30, 2023 and 2024 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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Loss before income taxes (10,251) (5,279)

Income tax provision 797 1,782 2,159 4,720

Income tax provision (benefit) 1,393 (2,982)

Net loss (11,644) (2,297)

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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) 2023 2024

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The Company recognized amortization expense for intangible assets as follows:

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

Three Months Ended April 30,

($ in thousands) 2023 2024

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Total amortization expense $ 7,105 $ 6,682

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

2022 2023 2022 2023

Three Months Ended April 30,

Subscription revenues 85.6 % 86.2 %

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Loss before income taxes (8.9) (4.2)

Income tax provision 0.8 1.5 0.7 1.3

Income tax provision (benefit) 1.2 (2.3)

Net loss (10.1) % (1.9) %

Comparison of the Three and Nine Months Ended October 31, 2022 and 2023

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

Comparison of the Three Months Ended April 30, 2023 and 2024

Three Months Ended April 30,

($ in thousands) 2023 2024

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Subscription Revenues

Subscription revenues increased $16.5 million for the three months ended October 31, 2023 compared to the three months ended October 31, 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, 71.1% 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 28.9% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended October 31, 2022.

Subscription revenues were 85.9% of total revenues for the three months ended October 31, 2023 compared to 83.8% of total revenues for the three months ended October 31, 2022, primarily due to growth in our installed base.

Subscription revenues increased $50.1 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 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, 80.7% 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 19.3% was attributable to initial revenues from customers who did not contribute to subscription revenues during the nine months ended October 31, 2022.

Subscription revenues were 85.6% of total revenues for the nine months ended October 31, 2023 compared to 84.2% of total revenues for the nine months ended October 31, 2022, primarily due to growth in our installed base.

Subscription revenues increased $13.1 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, 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, 54.5% 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, and 45.5% was attributable to initial revenues from customers who did not contribute to subscription revenues during the three months ended April 30, 2023.

Subscription revenues were 86.2% of total revenues for the three months ended April 30, 2024 compared to 85.6% of total revenues for the three months ended April 30, 2023, primarily due to growth in our installed base.

Professional Services and Other Revenues

Professional services and other revenues increased $0.2 million for the three months ended October 31, 2023 compared to the three months ended October 31, 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.

Professional services and other revenues increased $3.6 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 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.

Professional services and other revenues increased $1.3 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, 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) 2023 2024

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Cost of Subscription Revenues

Cost of subscription revenues increased $3.8 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, generating a gross margin for subscription revenues of 70.8% compared to a gross margin of 69.6% for the three months ended October 31, 2022.

Costs related to Salesforce user fees increased $2.7 million as we continued to add new customers and sell additional functionality to existing customers and other costs of subscription revenues increased $0.9 million due to costs associated with access to other platforms and data center costs.

Personnel costs, including stock-based compensation expense, increased $0.5 million, mainly from an increase in headcount.

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 $11.0 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, generating a gross margin for subscription revenues of 70.4% compared to a gross margin of 68.8% for the nine months ended October 31, 2022.

Cost of subscription revenues increased $2.6 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, generating a gross margin for subscription revenues of 71.2% compared to a gross margin of 70.0% for the three months ended April 30, 2023.

Costs related to Salesforce user fees increased $1.3 million as we continued to add new customers and sell additional functionality to existing customers, and other costs of subscription revenues increased $0.4 million due to costs associated with access to other platforms and data center costs.

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Cost of Professional Services and Other Revenues

Cost of professional services and other revenues increased $1.1 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, generating a gross margin for professional services and other revenues of (1.4)% compared to a gross margin of 4.1% for the three months ended October 31, 2022.

For the three months ended October 31, 2023, personnel costs, including stock-based compensation expense, increased $1.1 million for professional services compared to the three months ended October 31, 2022, mainly from an increase in headcount.

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

The decrease in our professional services and other gross margin for the three months ended October 31, 2023 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 $6.6 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, generating a gross margin for professional services and other revenues of (3.8)% compared to a gross margin of 2.2% for the nine months ended October 31, 2022.

For the nine months ended October 31, 2023, personnel costs, including stock-based compensation expense, increased $5.4 million for professional services compared to the nine months ended October 31, 2022, mainly from an increase in headcount.

The increase in cost of professional services and other revenues also included an increase of $1.0 million in allocated overhead costs due to growth supporting our business.

The decrease in our professional services and other gross margin for the nine months ended October 31, 2023 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 $2.4 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, generating a gross margin for professional services and other revenues of (9.7)% compared to a gross margin of (4.3)% for the three months ended April 30, 2023.

Stock-based compensation expense was $1.6 million and $2.8 million for the three months ended April 30, 2023 and 2024, respectively.

For the three months ended April 30, 2024, personnel costs, including stock-based compensation expense, increased $2.5 million for professional services compared to the three months ended April 30, 2023, mainly from an increase in headcount.

Operating Expenses

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

Three Months Ended April 30,

($ in thousands) 2023 2024

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Sales and Marketing

Sales and marketing expenses increased $6.0 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, primarily attributable to the accelerated amortization expense of $10.1 million to fully amortize the remaining trade name intangible asset as a result of the rebranding of the SimpleNexus solution to nCino Mortgage.

The increase in sales and marketing expenses also included an increase of $0.2 million in allocated overhead costs.

The increase in sales and marketing expenses was partially offset by a decrease of $3.2 million in personnel costs, mainly from a decrease in headcount and a decrease in expatriate tax equalization expenses, offset by a $0.8 million increase in stock-based compensation expense, compensation increases, and the impact of changing our merit cycle from a work anniversary basis to an annual basis.

The increase in sales and marketing expenses was also partially offset by a decrease of $0.6 million in sales-related travel costs, a decrease of $0.3 million in marketing costs, and a decrease of $0.2 million in third-party professional fees.

Sales and marketing expenses increased $6.3 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, primarily attributable to the accelerated amortization expense of $10.1 million to fully amortize the remaining trade name intangible asset as a result of the rebranding of the SimpleNexus solution to nCino Mortgage.

The increase in sales and marketing expenses also included an increase of $0.7 million in allocated overhead costs and an increase of $0.3 million in third-party professional fees.

The increase in sales and marketing expenses was partially offset by a decrease of $3.1 million in personnel costs, mainly from a decrease in headcount offset by a $1.1 million increase in stock-based compensation expense, compensation increases, the impact of changing our merit cycle from a work anniversary basis to an annual basis, and an increase in expatriate tax equalization expenses.

The increase in sales and marketing expenses was also partially offset by a decrease of $0.9 million in marketing costs and a decrease of $0.8 million in sales-related travel costs.

Our sales and marketing headcount decreased by 61 from October 31, 2022 to October 31, 2023 primarily due to attrition and our workforce reduction.

Sales and marketing expenses decreased $1.9 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, primarily due to a decrease of $0.6 million in sales-related travel costs, a decrease of $0.6 million in amortization expense due to fully amortizing the remaining trade name intangible asset as a result of the rebranding of the SimpleNexus solution to nCino Mortgage during the third quarter of fiscal 2024, and a decrease of $0.5 million in third-party professional fees.

The decrease in sales and marketing expenses also included a decrease of $0.3 million in marketing costs.

Sales and marketing personnel costs were comparable for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, due to an increase in stock-based compensation expense offset by a decrease in headcount.

Our sales and marketing headcount decreased by 20 from April 30, 2023 to April 30, 2024.

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 decreased $0.4 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, primarily due to a decrease of $0.3 million in personnel costs, mainly from a decrease in headcount offset by a $1.4 million increase in stock-based compensation expense, compensation increases, the impact of changing our merit cycle from a work anniversary basis to an annual basis, and a decrease of $0.2 million in third-party professional fees as a result of lower contract research and development spend.

The decrease in research and development expenses was partially offset by an increase of $0.3 million in allocated overhead costs due to growth supporting our continued business expansion.

Research and development expenses decreased $1.2 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, primarily due to a $2.2 million decrease in third-party professional fees primarily attributable to reduced contract research and development spend, partially offset by an increase of $1.2 million in allocated overhead costs due to growth supporting our continued business expansion.

Personnel costs were comparable for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022 due to the decrease in headcount offset by a $3.2 million increase in stock-based compensation expense, compensation increases, and the impact of changing our merit cycle from a work anniversary basis to an annual basis.

Our research and development headcount decreased by 86 from October 31, 2022 to October 31, 2023 primarily due to our workforce reduction.

Research and development expenses increased $1.8 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, primarily due to an increase of $2.0 million in personnel costs, mainly from an increase in headcount and a $1.2 million increase in stock-based compensation expense.

Our research and development headcount increased by 9 from April 30, 2023 to April 30, 2024.

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 $0.6 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, primarily due to an increase of $0.5 million in personnel costs, mostly attributable to compensation increases, the impact of changing our merit cycle from a work anniversary basis to an annual basis, and an increase of $0.2 million in stock-based compensation expense, partially offset by a decrease in headcount.

The increase in general and administrative expenses for the three months ended October 31, 2023 compared to the three months ended October 31, 2022 also included an increase of $0.5 million in allocated overhead and other general and administrative costs.

The increase in general and administrative expenses was partially offset by a decrease of $0.3 million in third party professional fees, due to a decrease in third party professional fees and expenses related to other litigation expenses including the government antitrust investigation and related civil action (the "Antitrust Matters"), partially offset by an increase in other professional fees, and a decrease of $0.1 million in travel-related costs.

General and administrative expenses decreased $3.3 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, primarily due to a decrease of $2.6 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 $1.3 million in third party professional fees for the nine months ended October 31, 2023 compared to the nine months ended October 31, 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 Antitrust Matters, partially offset by the accrual for the proposed settlement agreement of approximately $2.2 million, disclosed in Note 12 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q, and an increase in other professional fees.

The decrease in general and administrative expenses also included a decrease of $0.4 million in travel related costs, offset by an increase of $0.9 million in allocated overhead and other general and administrative costs.

Our general and administrative headcount decreased by 8 from October 31, 2022 to October 31, 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.

General and administrative expenses increased $4.6 million for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, primarily due to an increase of $3.0 million in third party professional fees and expenses related to the acquisitions of DocFox and ILT, partially offset by decreases in fees and expenses related to other litigation expenses including the closure of the government antitrust investigation and settlement of the related civil action (the "Antitrust Matters") disclosed in Note 12 "Commitments and Contingencies" of Part I, Item I of this Quarterly Report on Form 10-Q and a decrease in other professional fees.

The increase in general and administrative expenses for the three months ended April 30, 2024 compared to the three months ended April 30, 2023 also included an increase of $2.1 million in personnel costs, mostly attributable to an increase of $2.0 million in stock-based compensation expense.

The increase in general and administrative expenses was partially offset by a decrease of $0.5 million in allocated overhead and other general and administrative costs.

Our general and administrative headcount increased by 2 from April 30, 2023 to April 30, 2024.

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) 2023 2024

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Other expense, net (782) (0.7) (744) (0.6)

Interest income increased $0.6 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, due to increase in our accounts earning interest and increased interest rates.

Interest expense increased $0.3 million for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, due to an increase in our financing obligations for leases for which we are considered the owners for accounting purposes.

The decrease of $0.6 million in other expense, net for the three months ended October 31, 2023 compared to the three months ended October 31, 2022, was primarily driven by intercompany loans and transactions that are denominated in currencies other than the underlying functional currency of the applicable entity.

Interest income increased $1.9 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022, due to increase in our accounts earning interest and increased interest rates.

Interest expense increased $1.4 million for the nine months ended October 31, 2023 compared to the nine months ended October 31, 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 $2.9 million in other expense, net for the nine months ended October 31, 2023 compared to the nine months ended October 31, 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,

Non-operating income (expense) for the three months ended April 30, 2024 was essentially flat as compared to the three months ended April 30, 2023.

Income Tax Provision (Benefit)

Three Months Ended April 30,

($ in thousands) 2023 2024

Income tax provision $ 797 0.8 % $ 1,782 1.5 % $ 2,159 0.7 % $ 4,720 1.3 %

Income tax provision was $1.8 million for the three months ended October 31, 2023 compared to a provision of $0.8 million for the three months ended October 31, 2022, and resulted in an effective tax rate of (11.6)% and (3.6)%, respectively.

Income tax provision was $4.7 million for the nine months ended October 31, 2023 compared to a provision of $2.2 million for the nine months ended October 31, 2022, and resulted in an effective tax rate of (11.7)% and (2.8)%, 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.

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 may reduce our operating cash flows in future periods through cash remittances of U.S.

federal and state income tax.

Income tax provision (benefit) $ 1,393 1.2 % $ (2,982) (2.3) %

Income tax benefit was $3.0 million for the three months ended April 30, 2024 compared to a provision of $1.4 million for the three months ended April 30, 2023, and resulted in an effective tax rate of 56.5% and (13.6)%, respectively.

change in the effective tax rate for the three months ended April 30, 2024 compared to the effective tax rate for the three months ended April 30, 2023 was primarily due to a reduction of our valuation allowance.

Prior to the DocFox acquisition, we continued to maintain a valuation allowance against our deferred tax assets in several jurisdictions, including the U.S.

On the DocFox Acquisition Date, the Company measured and recorded net U.S.

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

The deferred tax liabilities recognized provide additional positive evidence that a portion of the Company's U.S.

deferred tax assets are realizable.

As a result, the Company reduced the valuation allowance by $3.6 million during the three months ended April 30, 2024.

Non-GAAP Financial Measure

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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.

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

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, legal expenses related to certain litigation, and restructuring and related charges.

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 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 is non-GAAP operating income, as discussed below.

Non-GAAP operating income.

Non-GAAP operating income 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, legal expenses related to certain litigation, and restructuring and related charges.

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

Non-GAAP operating income 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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In addition, other companies may use other measures to evaluate their performance, or may calculate non-GAAP measures differently, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

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,

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

Three Months Ended April 30,

($ in thousands) 2023 2024

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Litigation expenses 1

1,225 153 5,093 4,502

Restructuring and related charges 239 —

Total adjustments 19,565 28,108

Non-GAAP operating income (loss) $ 2,540 $ 20,383 $ (3,913) $ 42,506

Non-GAAP operating income $ 10,938 $ 24,445

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

Liquidity and Capital Resources

As of October 31, 2023, we had $100.5 million in cash and cash equivalents, and an accumulated deficit of $354.4 million.

As of April 30, 2024, we had $129.5 million in cash and cash equivalents, and an accumulated deficit of $354.9 million.

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

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.

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 starting fiscal 2023, our revolving line of credit.

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

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Because we recognize revenues ratably, our deferred revenue balance mirrors the seasonality of our billings.

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 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.

We repaid $30.0 million under the Credit Facility during the nine months ended October 31, 2023.

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

On March 17, 2024, the Company entered into the Second Amendment for the Credit Facility which, among other things, increased our borrowing availability to $100.0 million.

In March 2024, we borrowed $75.0 million under the Credit Facility to fund the acquisition of DocFox.

In April 2024, we repaid $20.0 million under the Credit Facility.

As of April 30, 2024, the applicable interest rate was 7.36%.

The Company had $55.0 million outstanding and no letters of credit issued under the Credit Facility and was in compliance with all covenants as of April 30, 2024.

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.

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

We expect to incur capital expenditures in fiscal 2025 for planned office build-outs to accommodate our growth, primarily for an international office, which we estimate to be approximately $8.2 million.

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, 2023 and October 31, 2023, the redeemable non-controlling interest was $3.6 million and $3.2 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, 2024 and April 30, 2024, the redeemable non-controlling interest was $3.4 million and $4.1 million, respectively.

As part of our joint venture obligations, we made an additional cash capital contribution of $1.0 million to nCino K.K.

during the third quarter of fiscal 2024.

Summary Cash Flow information for the nine months ended October 31, 2022 and 2023 are set forth below:

Nine Months Ended October 31,

Summary Cash Flow information for the three months ended April 30, 2023 and 2024 are set forth below:

Three Months Ended April 30,

($ in thousands) 2023 2024

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Net Cash Provided by Operating Activities

The $49.1 million provided by operating activities in the nine months ended October 31, 2023 reflects our net loss of $44.9 million and $0.8 million used in changes in working capital accounts, offset by $94.8 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, provision for deferred taxes and bad debt.

Cash generated by working capital accounts was principally a function of an $35.5 million decrease in accounts receivable due to the timing of billings and collections from customers, a $3.4 million decrease in prepaid expenses and other assets, and a $1.2 million increase in accounts payable.

The cash generated by working capital accounts was offset by a $23.8 million decrease in deferred revenue due to the timing of billings and revenue recognition and an $8.0 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 and changing commission payment plans from a quarterly basis to a monthly basis.

Additional offsets were payments of $6.0 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, and a $3.1 million decrease in operating lease liabilities.

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 $54.4 million provided by operating activities in the three months ended April 30, 2024 reflects our net loss of $2.3 million, offset by $30.7 million generated by changes in working capital accounts and $26.0 million in non-cash charges.

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

Cash generated by working capital accounts was principally a function of a $37.5 million decrease in accounts receivable due to the timing of billings and collections from customers, a $6.2 million increase in deferred revenue due to the timing of billings and revenue recognition, and a $3.8 million increase in accounts payable which includes acquisition related expenses.

The cash generated by working capital accounts was partially offset by a $8.2 million decrease in accrued expenses and other liabilities primarily due to the payout of bonuses and commissions, an increase of $5.1 million of capitalized costs to obtain revenue contracts, which consisted primarily of sales commissions, a $2.1 million increase in prepaid expenses and other assets, and a $1.4 million decrease in operating lease liabilities.

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.

Cash generated by working capital accounts was principally a function of a $18.3 million decrease in accounts receivable due to 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 liabilities which includes payments of approximately $5.0 million for severance and other employee costs associated with restructuring.

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.

Net Cash Used in Investing Activities

The $5.9 million used in investing activities in the nine months ended October 31, 2023 was comprised of $3.1 million for the purchase of property and equipment and leasehold improvements to support the expansion of our business, $2.5 million for the purchase of preferred stock in Rich Data Co, and $0.4 million for the final cash considerations relating to an asset acquisition completed in August 2022.

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.

The $91.2 million used in investing activities in the three months ended April 30, 2024 was comprised of $90.7 million used for the acquisitions of DocFox and ILT, $0.3 million for the purchase of property and equipment and leasehold improvements to support the expansion of our business, and $0.2 million for an asset acquisition.

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 consideration relating to an asset acquisition completed in August 2022.

Net Cash Provided by (Used in) Financing Activities

The $24.0 million used in financing activities in the nine months ended October 31, 2023 was comprised principally of payments of $30.0 million on the Credit Facility and principal payments of $0.9 million on financing obligations.

The cash used in financing activities was partially offset by $3.2 million of proceeds from the exercise of stock options, $2.7 million of proceeds from stock issuances under the employee stock purchase plan, and $1.0 million in proceeds from the non-controlling interest in our Japan joint venture.

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 debt issuance costs of $0.4 million.

The $56.0 million provided by financing activities in the three months ended April 30, 2024 was comprised principally of $75.0 million proceeds from borrowings on the Credit Facility to fund the acquisition of DocFox and $1.6 million of proceeds from the exercise of stock options.

The cash provided by financing activities was partially offset by payments of $20.0 million on the Credit Facility, principal payments of $0.4 million on financing obligations, and payments of debt issuance costs of $0.3 million.

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.

Contractual Obligations and Commitments

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Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be significant.

See Note 7 "Goodwill and Intangible Assets" for a change in estimate related to the useful life of the SimpleNexus trade name during the three months ended October 31, 2023.

There have been no material changes in our critical accounting policies or estimates as compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2024 filed with the SEC on March 26, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis