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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __to __
Commission File Number: 001-39380

nCino, Inc.
(Exact name of Registrant as specified in its charter)
Delaware46-4353148
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6770 Parker Farm Drive
Wilmington, North Carolina 28405
(Address of principal executive offices including zip code)

(888) 676-2466
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0005 per shareNCNOThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 95,434,674 shares of common stock, $0.0005 par value per share, as of May 28, 2021.



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TABLE OF CONTENTS
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Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
As used in this report, the terms “nCino,” the “Company,” “Registrant,” “we,” “us,” and “our” mean nCino, Inc. and its subsidiaries unless the context indicates otherwise.
i

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
nCino, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
January 31, 2021April 30, 2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents (VIE: $7,425 and $6,254 at January 31, 2021 and April 30, 2021, respectively)
$371,425 $386,515 
Accounts receivable, less allowance for doubtful accounts of $88 and $52 at January 31, 2021 and April 30, 2021, respectively
55,517 56,228 
Costs capitalized to obtain revenue contracts, current portion, net4,864 5,033 
Prepaid expenses and other current assets10,425 9,404 
Total current assets442,231 457,180 
Property and equipment, net29,943 35,058 
Operating lease right-of-use assets, net 10,665 
Costs capitalized to obtain revenue contracts, noncurrent, net10,191 10,296 
Goodwill57,149 57,325 
Intangible assets, net23,137 22,352 
Other long-term assets750 889 
Total assets$563,401 $593,765 
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities
Accounts payable$1,634 $4,382 
Accounts payable, related parties4,363 4,842 
Accrued commissions12,500 3,943 
Construction liability, current portion 5,097 
Other accrued expenses7,527 7,557 
Deferred rent, current portion203  
Deferred revenue, current portion89,141 110,071 
Financing obligation, current portion324 337 
Operating lease liabilities, current portion 2,540 
Total current liabilities115,692 138,769 
Operating lease liabilities, noncurrent  9,771 
Deferred income taxes, noncurrent368 429 
Deferred rent, noncurrent1,486  
Deferred revenue, noncurrent946 168 
Financing obligation, noncurrent15,939 15,847 
Construction liability, noncurrent 675 
Total liabilities134,431 165,659 
Commitments and contingencies (Notes 8, 12, and 13)
Redeemable non-controlling interest (Note 3)3,791 3,065 
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, and none issued and outstanding as of January 31, 2021 and April 30, 2021
  
Common stock, $0.0005 par value; 500,000,000 shares authorized as of January 31, 2021 and April 30, 2021; 93,643,759 and 95,318,070 shares issued and outstanding as of January 31, 2021 and April 30, 2021, respectively
47 48 
Additional paid-in capital585,956 601,034 
Accumulated other comprehensive income240 161 
Accumulated deficit(161,064)(176,202)
Total stockholders’ equity425,179 425,041 
Total liabilities, redeemable non-controlling interest, and stockholders’ equity$563,401 $593,765 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended April 30,
20202021
Revenues
Subscription (related parties $2,439 and $0, respectively)
$34,831 $51,033 
Professional services9,881 11,322 
Total revenues44,712 62,355 
Cost of revenues
Subscription1 (related party $7,510 and $10,569, respectively)
10,099 14,946 
Professional services1
8,767 11,353 
Total cost of revenues18,866 26,299 
Gross profit25,846 36,056 
Operating expenses
Sales and marketing1
12,226 18,425 
Research and development1
10,965 17,425 
General and administrative1
6,926 15,680 
Total operating expenses30,117 51,530 
Loss from operations(4,271)(15,474)
Non-operating income (expense)
Interest income156 57 
Interest expense (268)
Other income (expense), net(520)267 
Loss before income tax expense(4,635)(15,418)
Income tax expense197 187 
Net loss(4,832)(15,605)
Net loss attributable to redeemable non-controlling interest (Note 3)(176)(467)
Adjustment attributable to redeemable non-controlling interest (Note 3)113 (130)
Net loss attributable to nCino, Inc.$(4,769)$(15,008)
Net loss per share attributable to nCino, Inc.:
Basic and diluted$(0.06)$(0.16)
Weighted average number of common shares outstanding:
Basic and diluted81,560,762 94,402,265 
1Includes stock-based compensation expense as follows:
Three Months Ended April 30,
20202021
Cost of subscription revenues$61 $285 
Cost of professional services revenues266 1,332 
Sales and marketing315 1,753 
Research and development309 1,543 
General and administrative100 2,151 
Total stock-based compensation expense$1,051 $7,064 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended April 30,
20202021
Net loss$(4,832)$(15,605)
Other comprehensive income (loss):
Foreign currency translation312 (208)
Other comprehensive income (loss)312 (208)
Comprehensive loss(4,520)(15,813)
Less comprehensive loss attributable to redeemable non-controlling interest:
Net loss attributable to redeemable non-controlling interest(176)(467)
Foreign currency translation attributable to redeemable non-controlling interest91 (129)
Comprehensive loss attributable to redeemable non-controlling interest(85)(596)
Comprehensive loss attributable to nCino, Inc.$(4,435)$(15,217)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
Three Months Ended April 30, 2020
Voting
Common Stock
Non-voting
Common Stock
Additional
Paid-in
Capital
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
SharesAmountSharesAmount
Balance, January 31, 202075,596,007 $38 5,931,319 $3 $288,564 $(408)$(120,924)$167,273 
Exercise of stock options55,801 — — — 122 — — 122 
Stock-based compensation— — — — 1,051 — — 1,051 
Other comprehensive loss— — — — — 221 — 221 
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest
— — — — (113)— (4,656)(4,769)
Balance, April 30, 202075,651,808 $38 5,931,319 $3 $289,624 $(187)$(125,580)$163,898 
Three Months Ended April 30, 2021
Common StockAdditional
Paid-in
Capital
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
SharesAmount
Balance, January 31, 202193,643,759 $47 $585,956 $240 $(161,064)$425,179 
Exercise of stock options1,651,343 1 7,884 — — 7,885 
Stock issuance upon vesting of restricted stock units22,968 — — — — — 
Stock-based compensation— — 7,064 — — 7,064 
Other comprehensive loss— — — (79)— (79)
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest
— — 130 — (15,138)(15,008)
Balance, April 30, 202195,318,070 $48 $601,034 $161 $(176,202)$425,041 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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nCino, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended April 30,
20202021
Cash flows from operating activities
Net loss attributable to nCino, Inc.$(4,769)$(15,008)
Net loss and adjustment attributable to redeemable non-controlling interest(63)(597)
Net loss(4,832)(15,605)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization1,743 2,095 
Non-cash operating lease costs 589 
Amortization of costs capitalized to obtain revenue contracts1,333 1,312 
Stock-based compensation1,051 7,064 
Deferred income taxes30 62 
Provision for (recovery of) bad debt167 (12)
Net foreign currency gains (566)
Change in operating assets and liabilities:
Accounts receivable(9,463)(192)
Accounts receivable, related parties6,395  
Costs capitalized to obtain revenue contracts(2,436)(1,493)
Prepaid expenses and other assets238 1,076 
Accounts payable and accrued expenses and other liabilities(4,774)(6,029)
Accounts payable, related parties362 478 
Deferred rent(31) 
Deferred revenue18,630 19,411 
Deferred revenue, related parties16  
Operating lease liabilities (632)
Net cash provided by operating activities8,429 7,558 
Cash flows from investing activities
Purchases of property and equipment(1,075)(522)
Net cash used in investing activities(1,075)(522)
Cash flows from financing activities
Payments of deferred costs(233) 
Exercise of stock options122 7,885 
Principal payments on financing obligation (79)
Net cash (used in) provided by financing activities(111)7,806 
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash611 437 
Net increase in cash, cash equivalents, and restricted cash7,854 15,279 
Cash, cash equivalents, and restricted cash, beginning of period91,184 371,425 
Cash, cash equivalents, and restricted cash, end of period$99,038 $386,704 
Cash, cash equivalents, and restricted cash, end of period:
Cash and cash equivalents$99,038 $386,515 
Restricted cash included in other long-term assets 189 
Total cash, cash equivalents, and restricted cash, end of period$99,038 $386,704 
Supplemental disclosure of cash flow information
Cash paid during the year for taxes, net of refunds$3 $80 
Cash paid during the year for interest$ $268 
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment, accrued but not paid$394 $5,863 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)

Note 1. Organization and Description of Business
Description of Business: nCino, Inc. is a software-as-a-service ("SaaS") company that provides software applications to financial institutions to streamline employee and client interactions. The Company is headquartered in Wilmington, North Carolina and has offices in Salt Lake City, Utah; London, United Kingdom; Sydney, Australia; Melbourne, Australia; Toronto, Canada; and Tokyo, Japan.
Fiscal Year End: The Company’s fiscal year ends on January 31.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") and applicable rules and regulations of the Securities Exchange Commission ("SEC") regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the SEC on March 31, 2021. The unaudited condensed consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries, as well as a variable interest entity in which the Company is the primary beneficiary. All intercompany accounts and transactions are eliminated. See the variable interest entity section below and Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest entity.
The Company is subject to the normal risks associated with technology companies that have not demonstrated sustainable income from operations, including product development, the risk of customer acceptance and market penetration of its products and services and, ultimately, the need to attain profitability to generate positive cash resources.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2022 or any future period.
In March 2021, a Certificate of Amendment was filed with the state of Delaware for Visible Equity, LLC ("Visible Equity"), a wholly-owned subsidiary of the Company, to change its name to nCino Portfolio Analytics, LLC. The state of Delaware effected the name change in April 2021.
Effective February 1, 2021, the Company adopted the requirement of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) using the alternative transition method. Under this method, the Company is not required to restate or disclose the effects of applying this ASU for comparative periods. See the Recently Adopted Accounting Guidance section for the adoption of ASU 2016-02, Leases (Topic 842).
Variable Interest Entity: The Company holds an interest in a Japanese company (“nCino K.K.”) that is considered a variable interest entity ("VIE"). nCino K.K. is considered a VIE as it has insufficient equity capital to finance its activities without additional financial support. The Company is the primary beneficiary of nCino K.K. as it has the power over the activities that most significantly impact the economic performance of nCino K.K. and has the obligation to absorb expected losses and the right to receive expected benefits that could be significant to nCino K.K., in accordance with accounting guidance. As a result, the Company consolidated nCino K.K. and all significant intercompany accounts have been eliminated. The Company will continue to assess whether it has a controlling financial interest and whether it is the primary beneficiary at each reporting period. Other than the Company’s equity investment, the Company has not provided financial or other support to nCino K.K. that it was not contractually obligated to provide. The assets of the VIE can only be used to settle the obligations of the VIE and the creditors of the VIE do not have recourse to the Company. The assets and liabilities of the VIE were not

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
significant to the Company’s consolidated financial statements except for cash which is reflected on the unaudited condensed consolidated balance sheets. See Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest.
Redeemable Non-Controlling Interest: Redeemable non-controlling interest relates to minority investors of nCino K.K. An agreement with the minority investors of nCino K.K. contains redemption features whereby the interest held by the minority investors are redeemable either at the option of the (i) minority investors or (ii) the Company, both beginning on the eighth anniversary of the initial capital contribution. If the interest of the minority investors were to be redeemed under this agreement, the Company would be required to redeem the interest based on a prescribed formula derived from the relative revenues of nCino K.K. and the Company. The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained earnings, additional paid-in-capital. These interests are presented on the unaudited condensed consolidated balance sheets outside of equity under the caption “Redeemable non-controlling interest.”
Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by the Company’s management are used for, but not limited to, revenue recognition including determining the nature and timing of satisfaction of performance obligations, variable consideration, stand-alone selling price, and other revenue items requiring significant judgement; the average period of benefit associated with costs capitalized to obtain revenue contracts; fair value of assets acquired and liabilities assumed for business combinations; fair value of contingent consideration; the useful lives of intangible assets; the valuation allowance on deferred tax assets; redemption value of redeemable non-controlling interest and stock-based compensation. The Company assesses these estimates on a regular basis using historical experience and other factors. Actual results could differ from these estimates.
Concentration of Credit Risk and Significant Customers: The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company’s cash and cash equivalents exceeded the Federal deposit insurance limit at January 31, 2021 and April 30, 2021. The Company maintains its cash, cash equivalents and restricted cash with high-credit-quality financial institutions.
As of January 31, 2021 and April 30, 2021, no individual customer represented more than 10% of accounts receivable and one customer represented 18%, respectively. For the three months ended April 30, 2020 and 2021, no individual customer represented more than 10% of the Company’s total revenues.
Restricted Cash: Restricted cash consists of deposits held as collateral for the Company's bank guarantees issued in place of security deposits for certain property leases.
Accounts Receivable and Allowances: A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers. Certain performance obligations may require payment before delivery of the service to the customer. We recognize a contract asset in the form of accounts receivable when we have an unconditional right to payment, and we record a contract asset in the form of unbilled accounts receivable when revenues earned on a contract exceeds the billings. The Company’s standard billing terms are annual in advance. An unbilled accounts receivable is a contract asset related to the delivery of the Company’s subscription services and professional services for which the related billings will occur in a future period. Unbilled accounts receivable consists of (i) revenues recognized for professional services performed but not yet billed and (ii) revenues recognized from non-cancelable, multi-year orders in which fees increase annually but for which we are not contractually able to invoice until a future period. Accounts receivable are reported at their gross outstanding balance reduced by an allowance for estimated receivable losses, which includes allowances for doubtful accounts and a reserve for expected credit losses.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The Company records allowances for doubtful accounts based upon the credit worthiness of customers, historical experience, the age of the accounts receivable, current market and economic conditions, and supportable forecasts about the future. Relevant risk characteristics include customer size and historical loss patterns. See the Recently Adopted Accounting Guidance section for the adoption of ASU 2016-13, Financial Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments.
A summary of activity in the allowance for doubtful accounts is as follows:
Three Months Ended April 30,
20202021
Balance, beginning of period$ $88 
Charged to (recovery of) bad debt expense167 (12)
Charged to (recovery of) deferred revenue (24)
Balance, end of period$167 $52 
Leases: The Company determines if an arrangement is or contains a lease at inception date based on whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use. The Company determines the classification of the lease, whether operating or financing, at the lease commencement date, which is the date the leased assets are made available for use. The Company accounts for lease and non-lease components as a single lease component for its facilities and equipment leases. The Company did not have any finance leases as of April 30, 2021.
Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The lease term reflects the noncancelable period of the lease together with options to extend or terminate the lease when it is reasonably certain the Company will exercise such option. Variable costs, such as common area maintenance costs, are not included in the measurement of the ROU assets and lease liabilities, but are expensed as incurred. The Company's leases do not generally provide an implicit rate; therefore, the Company uses its incremental borrowing rate in determining the present value of the lease payments. Lease expense is recognized on a straight-line basis over the lease term.
The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. Lease expense for such leases is recognized on a straight-line basis over the lease term.
Recently Adopted Accounting Guidance: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. ASU 2016-02, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. The Company adopted this ASU effective February 1, 2021.
The Company used the alternative transition method in which the Company is not required to restate or disclose the effects of applying this ASU for comparative periods. The Company elected the package of practical expedients which permits the Company to not reassess prior conclusions pertaining to lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements. In addition, the Company elected ongoing practical expedients including the option to not recognize right-of-use assets and lease liabilities for short term

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
leases (leases with an original term of twelve months or less). The Company also elected the practical expedient to not separate lease and non-lease components for our facilities and equipment leases.
The adoption of this ASU resulted in the recognition of operating right-of-use assets of $10.5 million and lease liabilities of $12.2 million, and the derecognition of deferred rent on the Company's unaudited condensed consolidated balance sheet on February 1, 2021. The adoption of this ASU did not impact the Company's unaudited condensed consolidated statements of operations, comprehensive loss or the unaudited condensed consolidated statements of cash flows. Upon the adoption of this ASU there was no change to the accounting for the Company's financing obligation.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. The Company adopted this ASU effective February 1, 2021. The adoption of this ASU, which impacted the Company's allowance for doubtful accounts, did not have a material impact on the Company's unaudited condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. The Company adopted this ASU effective February 1, 2021. The adoption of this ASU did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The guidance includes amendments to improve the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to the financial statements is codified in the disclosure section of the codification and to clarify guidance so that entities can apply guidance more consistently on codifications that are varied in nature where the original guidance may have been unclear. ASU 2020-10 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted. If the Company were to cease meeting the emerging growth company criteria during the fiscal year ending January 31, 2022, this ASU would be effective for the Company for its Annual Report on Form 10-K for the fiscal year ended January 31, 2022. The Company adopted this ASU effective February 1, 2021. The adoption of this ASU did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted: There are no new accounting standards that have not yet been adopted.
Note 3. Variable Interest Entity and Redeemable Non-Controlling Interest
In October 2019, the Company entered into an agreement with Japan Cloud Computing, L.P. and M30 LLC (collectively, the “Investors”) to engage in the investment, organization, management, and operation of nCino K.K. that is focused on the distribution of the Company’s products in Japan. In October 2019, the Company initially contributed $4.7 million in cash in exchange for 51% of the outstanding common stock of nCino K.K. As of April 30, 2021, the Company controls a majority of the outstanding common stock in nCino K.K.
All of the common stock held by the Investors is callable by the Company or puttable by the Investors at the option of the Investors or at the option of the Company beginning on the eighth anniversary of the agreement with the Investors.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of nCino K.K. and the Company and may be settled, at the Company’s discretion, with Company stock or cash or a combination of the foregoing. As a result of the put right available to the Investors, the redeemable non-controlling interests in nCino K.K. are classified outside of permanent equity in the Company’s unaudited condensed consolidated balance sheets. The estimated redemption value of the call/put option embedded in the redeemable non-controlling interest was $0.3 million at April 30, 2021.
The following table summarizes the activity in the redeemable non-controlling interests for the period indicated below:
Three Months Ended April 30,
20202021
Balance, beginning of period$4,356 $3,791 
Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest)(176)(467)
Foreign currency translation91 (129)
Adjustment to redeemable non-controlling interest113 (130)
Balance, end of period$4,384 $3,065 
Note 4. Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3. Significant unobservable inputs which are supported by little or no market activity.
The carrying amounts of cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value as of January 31, 2021 and April 30, 2021 because of the relatively short duration of these instruments.
The Company evaluated its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. The following table summarizes the Company’s financial assets measured at fair value as of January 31, 2021 and April 30, 2021 and indicates the fair value hierarchy of the valuation:
Fair value measurements on a recurring basis as of January 31, 2021
Level 1Level 2Level 3
Assets:
Money market accounts (included in cash and cash equivalents)
$332,541 $ $ 
Total assets$332,541 $ $ 
Fair value measurements on a recurring basis as of April 30, 2021
Level 1Level 2Level 3
Assets:
Money market accounts (included in cash and cash equivalents)
$347,407 $ $ 
Time deposits (included in other long-term assets)189   
Total assets$347,596 $ $ 
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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
All of the Company’s money market accounts are classified within Level 1 because the Company’s money market accounts are valued using quoted market prices in active exchange markets including identical assets.
The Company added contingent consideration, a Level 3 measurement, on October 18, 2019 with the acquisition of FinSuite Pty Ltd ("FinSuite"). Changes in fair value of the contingent consideration are recorded in the unaudited condensed consolidated statements of operations within other income. The Company’s contingent consideration is valued using a probability weighted discounted cash flow analysis. A reconciliation of the balance for contingent consideration obligations for the three months ended April 30, 2020 and 2021 is as follows:
Three Months Ended April 30,
20202021
Balance, beginning of period$195 $ 
Acquisitions  
Change in fair value  
Translation adjustments(5) 
Balance, end of period$190 $ 
Note 5. Revenues
Revenues by Geographic Area
Revenues by geographic region were as follows:
Three Months Ended April 30,
20202021
United States$40,471 $53,326 
International4,241 9,029 
$44,712 $62,355 
The Company disaggregates its revenues from contracts with customers by geographic location. Revenues by geography are determined based on the region of the Company’s contracting entity, which may be different than the region of the customer. No country outside the United States represented 10% or more of total revenues.
Contract Amounts
Accounts Receivable
Accounts receivable, less allowance for doubtful accounts, is as follows as of January 31, 2021 and April 30, 2021:
As of January 31, 2021As of April 30, 2021
Trade accounts receivable$53,272 $53,799 
Unbilled accounts receivable1,814 1,844 
Allowance for doubtful accounts(88)(52)
Other accounts receivable519 637 
Total accounts receivable, net$55,517 $56,228 
Deferred Revenue and Remaining Performance Obligation
Significant movements in the deferred revenue balance during the period consisted of increases due to payments received or due in advance prior to the transfer of control of the underlying performance obligations to the customer, which

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
were offset by decreases due to revenues recognized in the period. During the three months ended April 30, 2021, $40.6 million of revenues were recognized out of the deferred revenue balance as of January 31, 2021.
Transaction price allocated to remaining performance obligations represents contracted revenues that have not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenues in future periods. Transaction price allocated to the remaining performance obligation is influenced by several factors, including the timing of renewals, average contract terms, and foreign currency exchange rates. The Company applies practical expedients to exclude amounts related to performance obligations that are billed and recognized as they are delivered, optional purchases that do not represent material rights, and any estimated amounts of variable consideration that are subject to constraint.
Remaining performance obligations were $611.3 million as of April 30, 2021. The Company expects to recognize approximately 62% of its remaining performance obligation as revenues in the next 24 months, approximately 30% more in the following 25 to 48 months, and the remainder thereafter.
Note 6. Property and Equipment
Property and equipment, net consisted of the following:
As of January 31, 2021As of April 30, 2021
Furniture and fixtures$6,706 $6,711 
Computers and equipment5,039 5,297 
Buildings and land16,300 16,300 
Leasehold improvements11,581 11,590 
Construction in progress277 6,372 
39,903 46,270 
Less accumulated depreciation(9,960)(11,212)
$29,943 $35,058 
The Company recognized depreciation expense as follows:
Three Months Ended April 30,
20202021
Cost of revenues$287 $385 
Sales and marketing267 309 
Research and development280 432 
General and administrative113 155 
Total depreciation expense$947 $1,281 
The increase in construction in progress is primarily due to construction for a parking deck and an additional office building that is on the property of our existing headquarters for which we are considered the owners of for accounting purposes. See Note 12 "Commitments and Contingencies" for additional details including future commitments.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Note 7. Goodwill and Intangible Assets
Goodwill
The change in the carrying amounts of goodwill was as follows:
Three Months Ended April 30,
20202021
Balance, beginning of period$55,840 $57,149 
Translation adjustments(210)176 
Balance, end of period$55,630 $57,325 
Intangible assets
Intangible assets, net are as follows:
As of January 31, 2021As of April 30, 2021
Gross
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Amount
Accumulated
Amortization
Net Carrying
Amount
Acquired developed technology$6,320 $(2,295)$4,025 $6,362 $(2,706)$3,656 
Customer relationships21,721 (2,609)19,112 21,723 (3,027)18,696 
Trademarks128 (128) 129 (129) 
$28,169 $(5,032)$23,137 $28,214 $(5,862)$22,352 
The Company recognized amortization expense as follows:
Three Months Ended April 30,
20202021
Cost of subscription revenues$369 $396 
Sales and marketing417 418 
General and administrative10  
Total amortization expense$796 $814 
The expected future amortization expense for intangible assets as of April 30, 2021 is as follows:
Fiscal Year Ending January 31,
2022 (remaining)$2,445 
20233,260 
20242,545 
20251,671 
20261,671 
Thereafter10,760 
$22,352 
The expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, future changes to expected asset lives of intangible assets, and other events.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Note 8. Reseller Agreement
The Company has a reseller agreement in place with a related party to utilize their platform and to develop the Company’s cloud-based banking software as an application within the related party’s hosted environment. In June 2020, this agreement was renegotiated and expires in June 2027 and will automatically renew in annual increments thereafter unless either party gives notice of non-renewal before the end of the initial term or the respective renewal term. Cost of subscription revenues in each of the three months ended April 30, 2020 and 2021 substantially consists of fees paid for access to the related party’s platform, including their hosting infrastructure and data center operations. The Company has recorded expenses of $7.5 million and $10.6 million for the three months ended April 30, 2020 and 2021, respectively. See also Note 13 "Related-Party Transactions."
Note 9. Stockholders’ Equity
At April 30, 2021, the Company committed a total of 26,457,630 shares of common stock for future issuance as follows:
Issued and outstanding stock options3,788,794 
Nonvested issued and outstanding restricted stock units ("RSUs")2,526,767 
Possible issuance under stock plans20,142,069 
26,457,630 
Note 10. Stock-Based Compensation
Stock Options
Stock option activity for the three months ended April 30, 2021 was as follows:
Number of
Shares
Weighted
Average
Exercise Price
Outstanding, January 31, 20215,467,012 $6.00 
Granted  
Expired or forfeited(26,875)9.54 
Exercised(1,651,343)4.77 
Outstanding, April 30, 20213,788,794 $6.51 
Exercisable, April 30, 20213,000,517 $4.82 
Fully vested or expected to vest, April 30, 20213,709,966 $6.37 
As of April 30, 2021, there was $2.7 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements under the 2014 Stock Plan ("2014 Plan") and 2019 Equity Incentive Plan (as amended and restated, "2019 Plan"). That cost is expected to be recognized over a weighted average period of 1.71 years.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Restricted Stock Units
RSU activity during the three months ended April 30, 2021 was as follows:
Number of
Shares
Weighted Average
Grant Date Fair
Value
Nonvested, January 31, 20211,848,296 $22.07 
Granted723,492 70.82 
Vested(22,968)20.52 
Forfeited(22,053)40.48 
Nonvested, April 30, 20212,526,767 $35.88 
As of April 30, 2021, total unrecognized compensation expense related to non-vested RSUs was $68.6 million, adjusted for estimated forfeitures, based on the estimated fair value of the Company’s common stock at the time of grant. The weighted-average period to be recognized is 3.61 years.
Employee Stock Purchase Plan
There was no activity during the three months ended April 30, 2021 under the Company's Employee Stock Purchase Plan.
Note 11. Leases
Operating Leases
The Company leases its facilities and a portion of its equipment under various non-cancellable agreements, which expire at various times through July 2028, some of which include options to extend the leases for up to five years.
The components of lease expense for the three months ended April 30, 2021 were as follows:
Amount
Operating lease expense$682 
Short-term lease expense194 
Variable lease expense81 
Total$957 
Supplemental cash flow information for the three months ended April 30, 2021 related to operating leases was as follows:
Cash paid for amounts included in the measurement of operating lease liabilities$727 
Right-of-use assets obtained in exchange for operating lease liabilities707 
The weighted-average remaining lease term and weighted-average discount rate for the Company's operating lease liabilities as of April 30, 2021 were 5.40 years and 4.4%, respectively.

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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
Future minimum lease payments as of April 30, 2021 were as follows:
Fiscal Year Ending January 31,Operating Leases
2022 (remaining)$2,884 
20232,857 
20242,188 
20251,642 
20261,626 
Thereafter2,183 
Total lease liabilities13,380 
Less: imputed interest(1,069)
Total lease obligations12,311 
Less: current obligations(2,540)
Long-term lease obligations$9,771 
Future minimum lease payments as of January 31, 2021, prior to our adoption of the new lease ASU, were as follows:
Fiscal Year Ending January 31,Operating Leases
2022$2,445
20231,937
20241,942
20251,630
20261,679
Thereafter2,544
Total lease liabilities$12,177
Note 12. Commitments and Contingencies
In addition to the operating lease commitments described in Note 11 "Leases", the Company has additional contractual commitments as described further below.
Purchase Commitments
The Company’s purchase commitments consist of non-cancellable agreements to purchase goods and services, primarily licenses, entered into in the ordinary course of business.
In May 2021, the Company entered into an agreement for approximately $2.6 million for renovations to our existing headquarters building.
Financing Obligation and Construction Liabilities
The Company entered into a new lease agreement for our headquarters in November 2020 with a new lessor. The lease goes through 2035 with options to renew. Due to a purchase option contained in the lease, the Company is deemed to have continuing involvement and is considered to be the owner of our headquarters for accounting purposes. As a result, the Company did not meet the criteria to apply sale-leaseback accounting and therefore, recorded an asset and corresponding financing obligation for $16.3 million at inception of the lease. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. The fair value of the leased property and corresponding financing obligation
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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
are included in property and equipment, net and financing obligation on the unaudited condensed consolidated balance sheets, respectively.
In January 2021, the Company entered into an agreement for a parking deck which is an addition to the existing headquarters building. Due to the Company also being deemed to be the owner of the parking deck for accounting purposes, the costs associated with the construction of the parking deck will be capitalized as construction in progress with a corresponding construction liability through construction which is estimated to be approximately $18.0 million. Upon completion of the parking deck, the construction liability will be recorded as a financing obligation. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. The costs of the construction in progress and corresponding construction liability are included in property and equipment, net and construction liability, current on the unaudited condensed consolidated balance sheets, respectively.
In April 2021, the Company entered into a new lease agreement for the construction of an additional office building that is on the property of our existing headquarters. Due to the Company also being deemed to be the owner of the additional building for accounting purposes, the costs associated with the construction of the building will be capitalized as construction in progress with a corresponding construction liability through construction which is estimated to be approximately $24.0 million. Upon completion of the building, the construction liability will be recorded as a financing obligation. Upon expiration of the purchase option in the lease, the lease will be analyzed for applicable lease accounting. The costs of the construction in progress and corresponding construction liability are included in property and equipment, net and construction liability, noncurrent on the unaudited condensed consolidated balance sheets, respectively.
Indemnification
In the ordinary course of business, the Company generally includes standard indemnification provisions in its arrangements with third parties, including vendors, customers, and the Company’s directors and officers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such obligations in the accompanying unaudited condensed consolidated financial statements.
Legal Proceedings
From time to time, the Company may become involved in legal proceedings or be subject to claims including the following:
On February 23, 2021, the Company and certain of its officers and other employees were served with grand jury subpoenas wherein the Antitrust Division of the Department of Justice is seeking documents and information in connection with an investigation of the Company’s hiring and wage practices under U.S. federal antitrust laws. The Company has retained outside counsel and is fully cooperating with the authorities. Although there can be no assurance with respect to the outcome of this matter, the Company believes its hiring and wage practices do not violate antitrust laws.
On March 12, 2021, a putative class action complaint was filed in the United States District Court for the Eastern District of North Carolina. The sole class representative in the suit is one individual alleging a contract, combination or conspiracy between and among the Company, Live Oak Bancshares, Inc. and Apiture LLC not to solicit or hire each other’s employees in violation of Section 1 of the Sherman Act and N.C. Gen Stat. §§ 75-1 and 75-2. The complaint seeks treble damages and additional remedies, including restitution, disgorgement, reasonable attorneys’ fees, the costs of the suit, and pre-judgment and post judgment interest. The complaint does not allege any specific damages. Although there can be no assurance with respect to the outcome of this matter, the Company believes the alleged claims are not meritorious and intends to defend itself vigorously.
The Company does not presently believe the above matters will have a material adverse effect on its day-to-day operations or the quality of the services, products or innovation it continues to provide to its customers. However, regardless of
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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
the outcome, legal proceedings can have an adverse impact on us because of the related expenses, diversion of management resources, and other factors.
Given the uncertainty and preliminary stages of these matters, we cannot reasonably estimate any possible loss or range of loss that may result.
Other Commitments and Contingencies
The Company is subject to audits by tax authorities in jurisdictions where it conducts business, including currently being audited in a jurisdiction with regard to indirect tax matters. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. The Company believes it has adequately provided for any assessments deemed probable and estimable from these audits; however, final assessments, if any, could be different than the amounts recorded in the unaudited condensed consolidated financial statements.
Note 13. Related-Party Transactions
The Company’s main vendor is also an equity holder in the Company. Total payments related to the agreement with the related party are disclosed in Note 8. The Company also purchases services from this related party to assist in managing its own sales cycle, customer relationship management, and other business functions. The Company has a non-cancellable agreement with the related party for the purchase of services. In December 2020, this agreement was renewed for one year and expires in December 2021. Total payments to the related party for these services recorded to expenses were $0.3 million and $0.4 million for the three months ended April 30, 2020 and 2021, respectively and $1.3 million and $0.9 million were in prepaid expenses and other current assets as of January 31, 2021 and April 30, 2021, respectively. Accounts payable to the related party were $4.4 million and $4.8 million at January 31, 2021 and April 30, 2021, respectively, included in accounts payable, related parties.
In the quarter ended July 31, 2020, certain equity holders ceased to qualify as related parties of the Company and the amounts disclosed related to them are accordingly presented through April 30, 2020 only. Included in revenues from three equity holders, who are also customers of the Company, is $2.8 million for the three months ended April 30, 2020.
The Company has a banking relationship with one of its former equity holders who was considered a related party. In the quarter ended July 31, 2020, the equity holder ceased to qualify as a related party of the Company and the amounts disclosed related to such former equity holder are accordingly presented as a related party through April 30, 2020 only. Included in interest income is $0.1 million for the three months ended April 30, 2020.
The Company entered into an agreement with one of its equity holders in May 2016 to spend an agreed-upon amount of funds over a three-year period to further the alliance between the two companies. In April 2019, the agreement was extended for an additional three years. As of April 30, 2021, the Company was in compliance with the terms of the agreement. In the quarter ended July 31, 2020, the equity holder ceased to qualify as a related party of the Company and the amounts disclosed related to such equity holder are accordingly presented as a related party through April 30, 2020 only. No funds were spent under the agreement during the three months ended April 30, 2020.
Note 14. Basic and Diluted Loss per Share
Basic loss per share is computed by dividing net loss attributable to nCino, Inc. by the weighted-average number of common shares outstanding for the fiscal period. Diluted loss per share is computed by giving effect to all potential weighted average dilutive common stock, including options. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method. Diluted loss per share for the three months ended April 30, 2020 and 2021 is the same as the basic loss per share as there was a net loss for those periods, and inclusion of potentially issuable shares was anti-dilutive.
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nCino, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and unless otherwise indicated)
The components of basic and diluted loss per share for periods presented are as follows (in thousands, except share and per share data):
Three Months Ended April 30,
20202021
Basic and diluted loss per share:
Numerator
Net loss attributable to nCino, Inc.$(4,769)$(15,008)
Denominator
Weighted-average common shares outstanding81,560,762 94,402,265 
Basic and diluted loss per share attributable to nCino, Inc.$(0.06)$(0.16)
The weighted-average number of shares outstanding used in the computation of diluted loss per share does not include the effect of the following potential outstanding common stock because the effect would have been anti-dilutive:
Three Months Ended April 30,
20202021
Stock options issued and outstanding7,744,722 3,788,794 
Nonvested RSUs issued and outstanding972,494 2,526,767 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the SEC on March 31, 2021. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our fiscal year ends on January 31 of each year and references in this Quarterly Report on Form 10-Q to a fiscal year mean the year in which that fiscal year ends. For example, references in this Quarterly Report on Form 10-Q to "fiscal 2022" refer to the fiscal year ended January 31, 2022.
Overview
nCino is a leading global provider of cloud-based software for financial institutions. We empower banks and credit unions 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 financial institutions to more effectively onboard new clients, make loans and manage the entire loan life cycle, open deposit and other accounts, and manage regulatory compliance. We serve financial institution customers of all sizes and complexities, including global financial institutions, enterprise banks, regional banks, community banks, credit unions, and new market entrants, such as challenger banks. Our customers deploy and utilize our digital platform, 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 financial institutions 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,
improve financial results,
operate more efficiently,
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 our solution to enterprise banks in the United States in 2014, and then internationally in 2017, and have subsequently expanded across North America, Europe, and APAC. In fiscal 2020, we acquired Visible Equity and FinSuite and combined the acquired technology with certain of our internally-developed technology to launch 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. The state of Delaware effected the name change of Visible Equity to nCino Portfolio Analytics, LLC in April 2021.
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 our solution 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 applications 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
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opening, and, most recently, analytics and AI/ML applications, has enhanced our ability to increase adoption of our solution by our customers.
We sell our solution directly through our business development managers, account executives, field sales engineers, and customer success managers. Our sales efforts in the United States are organized around financial institutions based on size, whereas internationally we focus our sales efforts by geography. To drive growth and serve customers in the EMEA region, we continue to expand headcount in our UK office. In fiscal 2020, we opened an office in Tokyo through our joint venture, nCino K.K., giving us another base of operations in APAC in addition to our Australian offices. As of April 30, 2021, we had 162 sales and sales support personnel in the United States, and 68 sales and support personnel in offices outside the United States.
To help customers go live with our solution and achieve success, 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, 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 sales and to increasingly outsource professional services for smaller banks and credit unions to SIs in the future. As a result, we expect the mix of our total revenues to become more heavily weighted toward subscription revenues.
To support our growth and capitalize on what we believe is a compelling market opportunity, we have significantly increased our operating expenses across all aspects of our business. In research and development, we have focused on product improvements and the development of new functionality, while simultaneously leveraging the Salesforce Platform such that our development is heavily focused on vertical-specific solutions for financial institutions. Similarly, to grow our customer base, we have invested heavily in sales and marketing both in the United States and internationally. We have also increased our general and administrative spending to support our growing operations and for operating as a newly public company.
For the three months ended April 30, 2020 and 2021, our total revenues were $44.7 million and $62.4 million, respectively, representing a 39.5% increase, and our subscription revenues were $34.8 million and $51.0 million, respectively, representing a 46.5% increase. Due to our continuing investment in growth, we recorded net losses attributable to nCino of $4.8 million and $15.0 million for the three months ended April 30, 2020 and 2021, respectively.
Recent Developments
Initial Public Offering. On July 13, 2020, our Registration Statement on Form S-1 relating to the initial public offering ("IPO") of our common stock was declared effective by the SEC. In connection with the IPO, we issued and sold 9,269,000 shares of common stock (including shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) at a public offering price of $31.00 per share for net proceeds of $268.4 million, after deducting underwriters' discounts and commissions (excluding other IPO costs as of January 31, 2021).
Secondary Public Offering. On October 13, 2020, the Company completed a secondary public offering (the "Secondary Offering"). The Company did not offer any shares of common stock in the Secondary Offering and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of approximately $1.0 million in relation to the Secondary Offering for fiscal 2021 and such costs are recorded as a component of general and administrative expenses on the consolidated statement of operations. The Company received $1.7 million in cash (excluding withholding taxes) in connection with the exercise of 554,112 options by certain stockholders participating in the Secondary Offering. In addition, concurrent with the pricing of the Secondary Offering, the underwriters in the Company's IPO released an additional 367,561 shares from lock-up agreements signed in connection with the IPO with stockholders who did not participate in the Secondary Offering. The release consisted of both outstanding shares and shares subject to options.
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 the nCino Bank Operating System within and across lines of business. Our success in growing our customer base and expanding adoption of our solution 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 the nCino Bank Operating System. In addition, growing our customer base will require us to increasingly penetrate markets outside the United States, which markets accounted for 14.5% of total revenues for the three months ended April 30, 2021. For new customers, our sales
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cycles are typically lengthy, generally ranging from six to nine months for smaller financial institutions to 12 to 18 months or more for larger financial institutions. Reaching and converting potential customers requires that we continue to invest in the growth and success of our sales force both in the United States and internationally. In addition, key to landing new customers is our ability to successfully take our existing customers live and help them achieve measurable returns on their investment, thereby turning them into referenceable accounts. If we are unable to successfully address the foregoing challenges, our ability to grow our business and achieve profitability will be adversely affected, which may in turn reduce the value of our common stock.
Mix of Subscription and Professional Services Revenues. The initial deployment of the nCino Bank Operating System by our customers requires a period of implementation and configuration services that can range from as little as three months for community banks to over 18 months for global financial institutions. As a result, during the initial go-live period for a customer, professional services revenues make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions. While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect subscription revenues will make up an increasing proportion of our total revenues as our overall business grows.
COVID-19 Effects on Demand for Our Solution. To help our customers service demand for Paycheck Protection Program ("PPP") loans under the CARES Act beginning in April 2020, we adapted our Small Business Administration loan solution to the requirements of the PPP and rapidly introduced it to the market. Using our PPP solution, since the inception of PPP funding, our financial institution customers have processed hundreds of thousands of applications.
In light of the extraordinary nature of this market demand, we offered our PPP solution on one- or two-year terms as well as on a multi-year basis co-terminus with existing contracts. Seats for our PPP solution were activated immediately, which caused subscription revenues from these seats to be recognized sooner than is typical with the phased seat activations usually offered to customers. We believe that the emergency purchases of our PPP solution, coupled with the disruptive effect of COVID-19 on the economy more generally, may have the effect of moderating revenue growth rates in fiscal 2022. In addition, 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.
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 heavily in sales and marketing both in the United States and internationally to further grow our business and increase our general and administrative spending to support our growing operations and for operating as a newly public company. As such, to capitalize on the market opportunity we see ahead of us, we expect to continue to optimize our operating plans for revenue growth, and as a result continue experiencing operating losses, for the foreseeable future.
Non-GAAP Financial Measure
In addition to providing financial measurements based on GAAP, we provide an additional financial metric that is not prepared in accordance with GAAP (non-GAAP). Management uses this non-GAAP financial measure, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, and to evaluate our financial performance. 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 prospects. Although the calculation of non-GAAP financial measures may vary from company to company, our detailed presentation may facilitate analysis and comparison of our operating results by management and investors with other peer companies, many of which use a similar non-GAAP financial measure to supplement their GAAP results in their public disclosures. This non-GAAP financial measure is Non-GAAP operating loss, as discussed below.
Non-GAAP operating loss. Non-GAAP operating loss is defined as loss from operations as reported in our unaudited condensed consolidated statements of operations excluding the impact of amortization of intangible assets, stock-based compensation expense, and expenses related to the government antitrust investigation and related civil action disclosed in
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Part II, Item I of this Quarterly Report on Form 10Q (the "Antitrust Matters"). Non-GAAP operating loss is widely used by securities analysts, investors, and other interested parties to evaluate the profitability of companies. Non-GAAP operating loss eliminates potential differences in performance caused by variations in the extent to which intangible assets are identifiable (affecting relative amortization expense). We do not believe the fees and expenses related to the Antitrust Matters relate to the operating business and are operating expenses that would not have otherwise been incurred by the Company in the normal course of our business.
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. There are limitations in the use of non-GAAP measures because they do not include all of the expenses that must be included under GAAP and because they involve the exercise of judgment concerning exclusions of items from the comparable non-GAAP financial measure. 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 loss to loss from operations, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):
Three Months Ended April 30,
($ in thousands)20202021
GAAP loss from operations$(4,271)$(15,474)
Adjustments
Amortization of intangible assets796 814 
Stock-based compensation expense1,051 7,064 
Fees and expenses related to the Antitrust Matters— 3,263 
Total adjustments1,847 11,141 
Non-GAAP operating loss$(2,424)$(4,333)
Components of Results of Operations
Revenues
We derive our revenues from subscription and professional services fees.
Subscription Revenues. Our subscription revenues consist principally of fees from customers for accessing the nCino Bank Operating System and maintenance and support services that we offer under non-cancellable multi-year contracts, which typically range from three to five years. Specifically, we offer:
Client onboarding, loan origination, and deposit account opening applications targeted at a financial institution’s commercial, small business, and retail lines of business, for which we generally charge on a per seat basis.
nIQ, first introduced in fiscal 2020, for which we generally charge based on the asset size of the customer or on a usage basis. Prior to our acquisitions of Visible Equity and FinSuite in fiscal 2020, they generally licensed their products under annual contracts that could be cancelled on 30-days’ notice. We will continue to support these customers under their legacy contracts until such contracts are renewed, cancelled, or expire.
Maintenance and support services as well as internal-use or “sandbox” development licenses, for which we charge as a percentage of the related subscription fees.
Our subscription revenues are generally recognized ratably over the term of the contract beginning upon activation. For new customers, we may activate a portion of seats at inception of the agreement, with the balance activated at contractually specified points in time thereafter, to pattern our invoicing after the customer’s expected rate of implementation and adoption. Subscription fees are generally charged annually in advance. Where seats are activated in stages, we charge subscription fees from the date of activation through the anniversary of the initial activation date, and annually thereafter. Maintenance and support fees, as well as development licenses, are provided over the same periods as the related subscriptions, so fees are invoiced and revenues are recognized over the same periods. Subscription fees invoiced are recorded as deferred revenue
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pending recognition as revenues. In certain cases, we are authorized to resell access to Salesforce’s CRM solution along with the nCino Bank Operating System. When we resell such access, we charge a higher subscription price and remit a higher subscription fee to Salesforce for these subscriptions.
Professional Services Revenues. Professional services 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 which these SIs bill our customers directly. We have historically delivered professional services ourselves for community banks and smaller credit unions. Revenues for implementation, training, and advisory services are 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, professional services revenues make up a substantial portion of our revenues from that customer, whereas over time, revenues from established customers are more heavily weighted to subscriptions. While professional services revenues will fluctuate as a percentage of total revenues in the future and tend to be higher in periods of faster growth, over time we expect to see subscription revenues make up an increasing proportion of our total revenues.
Cost of Revenues and Gross Margin
Cost of Subscription Revenues. Cost of subscription revenues primarily consists of fees paid to Salesforce for access to the Salesforce Platform, including Salesforce’s hosting infrastructure and data center operations. When we resell access to Salesforce’s CRM solution, cost of subscription revenues also includes the subscription fees we remit to Salesforce for providing such access. In addition, cost of subscription revenues 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.
Cost of Professional Services Revenues. Cost of professional services revenues consists primarily of personnel-related costs associated with delivery of these services, including salaries, benefits and stock-based compensation expense, travel and related costs, and allocated overhead. The cost of providing professional services is significantly higher as a percentage of the related revenues than for our subscription services due to direct labor costs. The cost of professional services revenues has increased in absolute dollars as we have added new customer subscriptions that require professional services and built-out our international professional services capabilities. Realized effective billing and utilization rates drive fluctuations in our professional services gross margin on a period-to-period basis.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including salaries, sales commissions and incentives, benefits and stock-based compensation expense, travel and related costs. Beginning with fiscal 2020 and the adoption of Accounting Standards Update (ASU) No. 2014-09, we capitalize incremental costs incurred to obtain contracts, primarily consisting of sales commissions, and subsequently amortize these costs over the expected period of benefit, which we have determined to be approximately four years. Sales and marketing expenses also include outside consulting fees, marketing programs, including lead generation, costs of our annual user conference, advertising, trade shows, other event expenses, amortization of acquired customer relationships, and allocated overhead. We expect sales and marketing expenses will continue to increase as we expand our direct sales teams in the United States and internationally to address our market opportunity.
Research and Development. Research and development expenses consist primarily of salaries, benefits and stock-based compensation associated with our engineering, product and quality assurance personnel, as well as allocated overhead. Research and development expenses also include the cost of third-party contractors. Research and development costs are expensed as incurred. We expect research and development costs to continue to increase as we develop new functionality and make improvements to the nCino Bank Operating System.
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. We expect that general and administrative expenses will continue to increase as we scale our business and as we incur costs associated with being a new publicly-traded company, including legal, audit, and consulting fees.
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Stock-Based Compensation
We have historically recorded stock-based compensation expense associated with stock options in cost of revenues and operating expenses as the related options vest. Beginning in the quarter ended July 31, 2020, we recorded stock-based compensation expenses associated with RSUs as cost of revenues and operating expenses as a liquidity-based vesting condition was satisfied upon the IPO. This contributed to increased stock-based compensation expense for the three months ended April 30, 2021 relative to April 30, 2020. Stock-based compensation expense was $1.1 million and $7.1 million for the three months ended April 30, 2020 and 2021, respectively. After the IPO, stock-based compensation expense for both stock options and RSUs is recognized as the time-based vesting conditions under such awards are met.
Results of Operations
The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q. The following tables present our selected consolidated statements of operations data for three months ended April 30, 2020 and 2021 in both dollars and as a percentage of total revenues, except as noted.
Three Months Ended April 30,
20202021
($ in thousands, except share and per share amounts)
Revenues:
Subscription revenues$34,831 $51,033 
Professional services revenues9,881 11,322 
Total revenues44,712 62,355 
Cost of revenues:
Cost of subscription revenues1
10,099 14,946 
Cost of professional services revenues1
8,767 11,353 
Total cost of revenues18,866 26,299 
Gross profit25,846 36,056 
Operating expenses:
Sales and marketing1
12,226 18,425 
Research and development1
10,965 17,425 
General and administrative1
6,926 15,680 
Total operating expenses30,117 51,530 
Loss from operations(4,271)(15,474)
Non-operating income (expense):
Interest income156 57 
Interest expense— (268)
Other income (expense), net(520)267 
Loss before income tax expense(4,635)(15,418)
Income tax expense197 187 
Net loss(4,832)(15,605)
Net loss attributable to non-controlling interest(176)(467)
Adjustment attributable to non-controlling interest113 (130)
Net loss attributable to nCino, Inc.$(4,769)$(15,008)
Net loss per share attributable to nCino, Inc.:
Basic and diluted$(0.06)$(0.16)
Weighted average number of common shares outstanding:
Basic and diluted81,560,762 94,402,265 
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1Includes stock-based compensation expense as follows:
Three Months Ended April 30,
($ in thousands)20202021
Cost of subscription revenues$61 $285 
Cost of professional services revenues266 1,332 
Sales and marketing315 1,753 
Research and development309 1,543 
General and administrative100 2,151 
Total stock-based compensation expense$1,051 $7,064 
The Company recognized amortization expense as follows: