nCino, Inc. - SEC Filing

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ncno-20220731

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2022

☐ 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: 001-41211

nCino, Inc.

(Exact name of Registrant as specified in its charter)


Delaware						87-4154342
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0005 per share	NCNO	The 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 filer

☐

Smaller 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: 110,850,723 shares of common stock, $0.0005 par value per share, as of August 26, 2022.

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	TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		i

	Part I. Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of January 31, 2022 and July 31, 2022 (Unaudited)	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2021 and 2022	2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended July 31, 2021 and 2022	3
	Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended July 31, 2021 and 2022	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2021 and 2022	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39

	Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
	Signatures	43

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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.

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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, 2022		July 31, 2022
			(Unaudited)
Assets
Current assets
Cash and cash equivalents (VIE: $4,183 and $2,954 at January 31, 2022 and July 31, 2022, respectively)	$	88,014	$	86,148
Accounts receivable, less allowance for doubtful accounts of $151 and $301 at January 31, 2022 and July 31, 2022, respectively	74,528		68,347
Costs capitalized to obtain revenue contracts, current portion, net	7,583		8,149
Prepaid expenses and other current assets	13,384		14,127
Total current assets	183,509		176,771
Property and equipment, net	60,677		73,114
Operating lease right-of-use assets, net	13,170		11,770
Costs capitalized to obtain revenue contracts, noncurrent, net	16,403		16,172
Goodwill	841,487		840,726
Intangible assets, net	180,122		166,056
Investment	4,031		4,031
Other long-term assets	1,615		7,719
Total assets	$	1,301,014	$	1,296,359
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities
Accounts payable	$	11,366	$	9,456

Accrued compensation and benefits	21,454		12,576
Accrued expenses and other current liabilities	14,744		13,095

Deferred revenue, current portion	122,643		151,541

Financing obligations, current portion	621		671
Operating lease liabilities, current portion	3,548		3,806
Total current liabilities	174,376		191,145
Operating lease liabilities, noncurrent	11,198		9,468
Deferred income taxes, noncurrent	1,675		2,163

Deferred revenue, noncurrent	44		14
Financing obligations, noncurrent	33,478		33,125
Construction liability, noncurrent	9,736		16,004

Total liabilities	230,507		251,919
Commitments and contingencies (Notes 12 and 14)
Redeemable non-controlling interest (Note 3)	2,882		3,219
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, and none issued and outstanding as of January 31, 2022 and July 31, 2022	—		—
Common stock, $0.0005 par value; 500,000,000 shares authorized as of January 31, 2022 and July 31, 2022; 109,778,542 and 110,616,050 shares issued and outstanding as of January 31, 2022 and July 31, 2022, respectively	55		55
Additional paid-in capital	1,277,258		1,306,339
Accumulated other comprehensive income (loss)	(72)		1,219
Accumulated deficit	(209,616)		(266,392)
Total stockholders’ equity	1,067,625		1,041,221
Total liabilities, redeemable non-controlling interest, and stockholders’ equity	$	1,301,014	$	1,296,359

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 July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
Revenues
Subscription	$	53,934	$	84,445	$	104,967	$	163,634
Professional services and other	12,585		15,182		23,907		30,204
Total revenues	66,519		99,627		128,874		193,838
Cost of revenues
Subscription (related party $11,151, $0, $21,720, and $0, respectively)1	15,308		26,145		30,254		51,655
Professional services and other	11,267		15,076		22,620		29,868
Total cost of revenues	26,575		41,221		52,874		81,523
Gross profit	39,944		58,406		76,000		112,315
Operating expenses
Sales and marketing	19,216		32,512		37,641		61,851
Research and development	18,609		29,701		36,034		58,816
General and administrative	15,287		21,199		30,967		43,885
Total operating expenses	53,112		83,412		104,642		164,552
Loss from operations	(13,168)		(25,006)		(28,642)		(52,237)
Non-operating income (expense)
Interest income	59		26		116		28
Interest expense	(330)		(631)		(598)		(1,269)
Other income (expense), net	(337)		(1,014)		(70)		(2,587)
Loss before income taxes	(13,776)		(26,625)		(29,194)		(56,065)
Income tax provision	487		799		674		1,362
Net loss	(14,263)		(27,424)		(29,868)		(57,427)
Net loss attributable to redeemable non-controlling interest (Note 3)	(403)		(307)		(870)		(651)
Adjustment attributable to redeemable non-controlling interest (Note 3)	(177)		128		(307)		1,157
Net loss attributable to nCino, Inc.	$	(13,683)	$	(27,245)	$	(28,691)	$	(57,933)
Net loss per share attributable to nCino, Inc.:
Basic and diluted	$	(0.14)	$	(0.25)	$	(0.30)	$	(0.53)
Weighted average number of common shares outstanding:
Basic and diluted	95,661,756		110,391,865		95,042,448		110,198,509

1See Note 9 "Reseller Agreement" and Note 15 "Related-Party Transactions."

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 July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
Net loss	$	(14,263)	$	(27,424)	$	(29,868)	$	(57,427)
Other comprehensive income (loss):
Foreign currency translation	(442)		429		(650)		1,109
Other comprehensive income (loss)	(442)		429		(650)		1,109
Comprehensive loss	(14,705)		(26,995)		(30,518)		(56,318)
Less comprehensive loss attributable to redeemable non-controlling interest:
Net loss attributable to redeemable non-controlling interest	(403)		(307)		(870)		(651)
Foreign currency translation attributable to redeemable non-controlling interest	(22)		(28)		(151)		(182)
Comprehensive loss attributable to redeemable non-controlling interest	(425)		(335)		(1,021)		(833)
Comprehensive loss attributable to nCino, Inc.	$	(14,280)	$	(26,660)	$	(29,497)	$	(55,485)

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 July 31, 2021
	Common Stock			Additional Paid-in Capital		Other Comprehensive Income (Loss)		Accumulated Deficit		Total
	Shares	Amount
Balance, April 30, 2021	95,318,070	$	48	$	601,034	$	161	$	(176,202)	$	425,041





Exercise of stock options	316,241	—		1,315		—		—		1,315

Stock issuance upon vesting of restricted stock units	293,430	—		—		—		—		—
Stock-based compensation	—	—		7,640		—		—		7,640
Other comprehensive loss	—	—		—		(420)		—		(420)
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest	—	—		177		—		(13,860)		(13,683)
Balance, July 31, 2021	95,927,741	$	48	$	610,166	$	(259)	$	(190,062)	$	419,893


	Three Months Ended July 31, 2022
	Common Stock			Additional Paid-in Capital		Other Comprehensive Income (Loss)		Accumulated Deficit		Total
	Shares	Amount
Balance, April 30, 2022	110,128,561	$	55	$	1,290,295	$	762	$	(239,275)	$	1,051,837
Exercise of stock options	148,419	—		1,084		—		—		1,084
Stock issuance upon vesting of restricted stock units	246,834	—		—		—		—		—
Stock issuance under the employee stock purchase plan	92,236	—		2,424		—		—		2,424
Stock-based compensation	—	—		12,664		—		—		12,664
Other comprehensive income	—	—		—		457		—		457
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest	—	—		(128)		—		(27,117)		(27,245)
Balance, July 31, 2022	110,616,050	$	55	$	1,306,339	$	1,219	$	(266,392)	$	1,041,221

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)


	Six Months Ended July 31, 2021
	Common Stock			Additional Paid-in Capital		Other Comprehensive Income (Loss)		Accumulated Deficit		Total
	Shares	Amount
Balance, January 31, 2021	93,643,759	$	47	$	585,956	$	240	$	(161,064)	$	425,179






Exercise of stock options	1,967,584	1		9,199		—		—		9,200

Stock issuance upon vesting of restricted stock units	316,398	—		—		—		—		—
Stock-based compensation	—	—		14,704		—		—		14,704
Other comprehensive loss	—	—		—		(499)		—		(499)
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest	—	—		307		—		(28,998)		(28,691)
Balance, July 31, 2021	95,927,741	$	48	$	610,166	$	(259)	$	(190,062)	$	419,893


	Six Months Ended July 31, 2022
	Common Stock			Additional Paid-in Capital		Other Comprehensive Income (Loss)		Accumulated Deficit		Total
	Shares	Amount
Balance, January 31, 2022	109,778,542	$	55	$	1,277,258	$	(72)	$	(209,616)	$	1,067,625
Exercise of stock options	305,394	—		1,856		—		—		1,856
Stock issuance upon vesting of restricted stock units	439,878	—		—		—		—		—
Stock issuance under the employee stock purchase plan	92,236	—		2,424		—		—		2,424
Stock-based compensation	—	—		25,958		—		—		25,958
Other comprehensive income	—	—		—		1,291		—		1,291
Net loss attributable to nCino, Inc., including adjustment to redeemable non-controlling interest	—	—		(1,157)		—		(56,776)		(57,933)
Balance, July 31, 2022	110,616,050	$	55	$	1,306,339	$	1,219	$	(266,392)	$	1,041,221

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)


	Six Months Ended July 31,
	2021		2022
Cash flows from operating activities
Net loss attributable to nCino, Inc.	$	(28,691)	$	(57,933)
Net loss and adjustment attributable to redeemable non-controlling interest	(1,177)		506
Net loss	(29,868)		(57,427)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	4,106		16,882
Non-cash operating lease costs	1,224		2,001
Amortization of costs capitalized to obtain revenue contracts	2,712		4,031
Amortization of debt issuance costs	—		85
Stock-based compensation	14,704		25,971
Deferred income taxes	221		480
Provision for (recovery of) bad debt	(5)		154
Net foreign currency losses	245		2,635
Change in operating assets and liabilities:
Accounts receivable	3,787		5,415

Costs capitalized to obtain revenue contracts	(4,416)		(4,571)
Prepaid expenses and other assets	1,715		(1,651)
Accounts payable	1,716		(1,890)
Accounts payable, related parties	699		—
Accrued expenses and other current liabilities	(690)		(9,653)

Deferred revenue	26,023		30,327

Operating lease liabilities	(1,274)		(2,070)
Net cash provided by operating activities	20,899		10,719
Cash flows from investing activities

Purchases of property and equipment	(1,272)		(9,303)
Net cash used in investing activities	(1,272)		(9,303)
Cash flows from financing activities






Proceeds from borrowings on revolving credit facility	—		20,000
Payments on revolving credit facility	—		(20,000)
Payments of debt issuance costs	—		(367)
Exercise of stock options	9,200		1,856
Stock issuance under the employee stock purchase plan	—		2,424
Principal payments on financing obligations	(95)		(303)
Net cash provided by financing activities	9,105		3,610
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash	(466)		(1,895)
Net increase in cash, cash equivalents, and restricted cash	28,266		3,131
Cash, cash equivalents, and restricted cash, beginning of period	371,425		88,399
Cash, cash equivalents, and restricted cash, end of period	$	399,691	$	91,530

Reconciliation of cash, cash equivalents, and restricted cash, end of period:
Cash and cash equivalents	$	399,363	$	86,148
Restricted cash included in other long-term assets	328		5,382
Total cash, cash equivalents, and restricted cash, end of period	$	399,691	$	91,530

Supplemental disclosure of cash flow information
Cash paid for taxes, net of refunds	$	117	$	484
Cash paid for interest	$	598	$	1,237
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment, accrued but not paid	$	12,379	$	7,359
Net working capital receivable adjustment	$	—	$	676

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

Organization: On November 16, 2021, nCino, Inc. (now nCino OpCo, Inc., "nCino OpCo") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Penny HoldCo, Inc. (now nCino, Inc., "nCino, Inc."), a Delaware corporation incorporated on November 12, 2021 as a wholly-owned subsidiary of nCino OpCo, and certain other parties. On January 7, 2022, in connection with the closing of the transactions contemplated by the Merger Agreement, Penny HoldCo, Inc. changed its name to nCino, Inc. and nCino, Inc. changed its name to nCino OpCo, Inc. and became a wholly-owned subsidiary of nCino, Inc.

Merger: On January 7, 2022, pursuant to the Merger Agreement, nCino, Inc. and nCino OpCo completed a series of mergers in which nCino, Inc. became the parent of nCino OpCo and SimpleNexus, LLC ("SimpleNexus"). Each share of nCino OpCo common stock, par value $0.0005 per share issued and outstanding was converted into one fully paid and nonassessable share of nCino, Inc. common stock, par value $0.0005. nCino, Inc. became the successor issuer and reporting company to nCino OpCo pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended. On January 10, 2022, shares of nCino OpCo were suspended from trading on the Nasdaq Global Select Market, and shares of nCino, Inc. commenced using nCino OpCo's trading history under the ticker symbol "NCNO".

In these unaudited condensed consolidated financial statements, nCino OpCo and nCino, Inc., are collectively referred to as the "Company."

See Note 7 "Business Combinations" for additional information regarding the SimpleNexus acquisition.

Description of Business: The Company is a software-as-a-service ("SaaS") company that provides software applications to financial institutions to streamline employee and client interactions. The Company is headquartered in Wilmington, North Carolina and has offices in Lehi and Salt Lake City, Utah; Macon, Georgia; London, United Kingdom; Sydney and Melbourne, Australia; Toronto, Canada; Paris, France; Madrid, Spain; and Tokyo, Japan.

Fiscal Year End: The Company’s fiscal year ends on January 31.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") as set forth in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and applicable rules and regulations of the Securities Exchange Commission ("SEC") regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed with the SEC on March 31, 2022. The unaudited condensed consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries, as well as a variable interest entity in which the Company is the primary beneficiary. All intercompany accounts and transactions are eliminated. See the variable interest entity section below and Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest entity.

The Company is subject to the normal risks associated with technology companies that have not demonstrated sustainable income from operations, including product development, the risk of customer acceptance and market penetration of its products and services and, ultimately, the need to attain profitability to generate positive cash resources.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal 2023 or any future period.

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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)

Reclassification: The Company reclassified certain prior year amounts in the unaudited condensed consolidated statement of cash flows within the cash flows from operating activities to conform to the current year presentation. These reclassifications had no impact on the previously reported total assets, liabilities, stockholder’s deficit, or net loss.

Variable Interest Entity: The Company holds an interest in a Japanese company (“nCino K.K.”) that is considered a variable interest entity ("VIE"). nCino K.K. is considered a VIE as it has insufficient equity capital to finance its activities without additional financial support. The Company is the primary beneficiary of nCino K.K. as it has the power over the activities that most significantly impact the economic performance of nCino K.K. and has the obligation to absorb expected losses and the right to receive expected benefits that could be significant to nCino K.K., in accordance with accounting guidance. As a result, the Company consolidated nCino K.K. and all significant intercompany accounts have been eliminated. The Company will continue to assess whether it has a controlling financial interest and whether it is the primary beneficiary at each reporting period. Other than the Company’s equity investment, the Company has not provided financial or other support to nCino K.K. that it was not contractually obligated to provide. The assets of the VIE can only be used to settle the obligations of the VIE and the creditors of the VIE do not have recourse to the Company. The assets and liabilities of the VIE were not significant to the Company’s consolidated financial statements except for cash which is reflected on the unaudited condensed consolidated balance sheets. See Note 3 "Variable Interest Entity and Redeemable Non-Controlling Interest" for additional information regarding the Company’s variable interest.

Redeemable Non-Controlling Interest: Redeemable non-controlling interest relates to minority investors of nCino K.K. An agreement with the minority investors of nCino K.K. contains redemption features whereby the interest held by the minority investors are redeemable either at the option of the (i) minority investors or (ii) the Company, both beginning on the eighth anniversary of the initial capital contribution. If the interest of the minority investors were to be redeemed under this agreement, the Company would be required to redeem the interest based on a prescribed formula derived from the relative revenues of nCino K.K. and the Company. The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained earnings, additional paid-in-capital. These interests are presented on the unaudited condensed consolidated balance sheets outside of equity under the caption “Redeemable non-controlling interest.”

Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by the Company’s management are used for, but not limited to, revenue recognition including determining the nature and timing of satisfaction of performance obligations, variable consideration, stand-alone selling price, and other revenue items requiring significant judgement; the average period of benefit associated with costs capitalized to obtain revenue contracts; fair value of assets acquired and liabilities assumed for business combinations; the useful lives of intangible assets; the valuation allowance on deferred tax assets; redemption value of redeemable non-controlling interest; and stock-based compensation. The Company assesses these estimates on a regular basis using historical experience and other factors. Actual results could differ from these estimates.

Concentration of Credit Risk and Significant Customers: The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable. The Company’s cash and cash equivalents exceeded federally insured limits at January 31, 2022 and July 31, 2022. The Company maintains its cash, cash equivalents and restricted cash with high-credit-quality financial institutions.

As of January 31, 2022, one individual customer represented 12% of accounts receivable and, as of July 31, 2022, two customers represented 12% and 11% of accounts receivable. For the three and six months ended July 31, 2021 and 2022, no individual customer represented more than 10% of the Company’s total revenues.

Restricted Cash: Restricted cash primarily consists of a minimum cash balance the Company maintains with a lender under the Company's revolving credit facility. The remaining restricted cash consists of deposits held as collateral for the Company's bank guarantees issued in place of security deposits for certain property leases and credit cards. Restricted cash is

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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)

included in other long-term assets at January 31, 2022 and July 31, 2022 on the unaudited condensed consolidated balance sheets.

Accounts Receivable and Allowances: A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers. Certain performance obligations may require payment before delivery of the service to the customer. The Company recognizes a contract asset in the form of accounts receivable when the Company has an unconditional right to payment, and the Company records a contract asset in the form of unbilled accounts receivable when revenues earned on a contract exceeds the billings. The Company’s standard billing terms are annual in advance, while SimpleNexus' standard billing terms are monthly in advance. An unbilled accounts receivable is a contract asset related to the delivery of the Company’s subscription services and professional services for which the related billings will occur in a future period. Unbilled accounts receivable consists of (i) revenues recognized for professional services performed but not yet billed and (ii) revenues recognized from non-cancelable, multi-year orders in which fees increase annually but for which the Company is not contractually able to invoice until a future period. Accounts receivable are reported at their gross outstanding balance reduced by an allowance for estimated receivable losses, which includes allowances for doubtful accounts and a reserve for expected credit losses.

The Company records allowances for doubtful accounts based upon the credit worthiness of customers, historical experience, the age of the accounts receivable, current market and economic conditions, and supportable forecasts about the future. Relevant risk characteristics include customer size and historical loss patterns.

A summary of activity in the allowance for doubtful accounts is as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
Balance, beginning of period	$	52	$	166	$	88	$	151
Charged to (recovery of) bad debt expense	7		138		(5)		154
Other	—		—		(24)		—
Translation adjustments	—		(3)		—		(4)
Balance, end of period	$	59	$	301	$	59	$	301

Investment: The Company's investment is a non-marketable equity investment without readily determinable fair value and for which the Company does not have control or significant influence. The investment is measured at cost with adjustments for observable changes in price or impairment as permitted by the measurement alternative. The Company assesses at each reporting period if the investment continues to qualify for the measurement alternative. Gains or losses resulting from observable price changes are recognized currently in the Company's consolidated statement of operations. The Company assesses the investment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable.

Debt Issuance Costs: Debt issuance costs are initially deferred and amortized to interest expense on a straight-line basis over the expected term of the debt. The Company uses the straight-line basis as it approximates the amounts calculated under the effective-interest method. Unamortized debt issuance costs related to the secured revolving credit facility are considered long-term and are included in other long-term assets in the unaudited condensed consolidated balance sheets.

Note 3. Variable Interest Entity and Redeemable Non-Controlling Interest

In October 2019, the Company entered into an agreement with Japan Cloud Computing, L.P. and M30 LLC (collectively, the “Investors”) to engage in the investment, organization, management, and operation of nCino K.K. that is focused on the distribution of the Company’s products in Japan. In October 2019, the Company initially contributed $4.7 million in cash in exchange for 51% of the outstanding common stock of nCino K.K. As of July 31, 2022, the Company controls a majority of the outstanding common stock in nCino K.K.

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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 common stock held by the Investors is callable by the Company or puttable by the Investors at the option of the Investors or at the option of the Company beginning on the eighth anniversary of the agreement with the Investors. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of nCino K.K. and the Company and may be settled, at the Company’s discretion, with Company stock or cash or a combination of the foregoing. As a result of the put right available to the Investors, the redeemable non-controlling interests in nCino K.K. are classified outside of permanent equity in the Company’s unaudited condensed consolidated balance sheets. The estimated redemption value of the call/put option embedded in the redeemable non-controlling interest was $2.4 million at July 31, 2022.

The following table summarizes the activity in the redeemable non-controlling interests for the period indicated below:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
Balance, beginning of period	$	3,065	$	3,419	$	3,791	$	2,882
Net loss attributable to redeemable non-controlling interest (excluding adjustment to non-controlling interest)	(403)		(307)		(870)		(651)
Foreign currency translation	(22)		(28)		(151)		(182)
Adjustment to redeemable non-controlling interest	(177)		128		(307)		1,157
Stock-based compensation expense1	—		7		—		13
Balance, end of period	$	2,463	$	3,219	$	2,463	$	3,219

1 nCino K.K. stock options granted in accordance with nCino K.K.'s equity incentive plan.

Note 4. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.

Level 3. Significant unobservable inputs which are supported by little or no market activity.

The carrying amounts of cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value as of January 31, 2022 and July 31, 2022 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, 2022 and July 31, 2022 and indicates the fair value hierarchy of the valuation:


	Fair value measurements on a recurring basis as of January 31, 2022
	Level 1		Level 2		Level 3
Assets:
Money market accounts (included in cash and cash equivalents)	$	11,129	$	—	$	—
Time deposits (included in other long-term assets)	385		—		—
Total assets	$	11,514	$	—	$	—

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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)


	Fair value measurements on a recurring basis as of July 31, 2022
	Level 1		Level 2		Level 3
Assets:
Money market accounts (included in cash and cash equivalents)	$	12,622	$	—	$	—
Time deposits (included in other long-term assets)	382		—		—
Total assets	$	13,004	$	—	$	—

All of the Company’s money market accounts are classified within Level 1 because the Company’s money market accounts are valued using quoted market prices in active exchange markets including identical assets.

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company's assets measured at fair value on a nonrecurring basis include the investment accounted for under the measurement alternative. There was no adjustment or impairment recognized for the three and six months ended July 31, 2021 and 2022, respectively.

Note 5. Revenues

Revenues by Geographic Area

Revenues by geographic region were as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
United States	$	55,706	$	84,678	$	109,032	$	164,607
International	10,813		14,949		19,842		29,231
	$	66,519	$	99,627	$	128,874	$	193,838

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.

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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)

Contract Amounts

Accounts Receivable

Accounts receivable, less allowance for doubtful accounts, is as follows as of January 31, 2022 and July 31, 2022:


	As of January 31, 2022		As of July 31, 2022
Trade accounts receivable	$	71,417	$	64,944
Unbilled accounts receivable	2,161		1,869
Allowance for doubtful accounts	(151)		(301)
Other accounts receivable1	1,101		1,835
Total accounts receivable, net	$	74,528	$	68,347

1Includes $0.5 million and $0.3 million income tax receivable of as of January 31, 2022 and July 31, 2022, respectively.

Deferred Revenue and Remaining Performance Obligations

Significant movements in the deferred revenue balance during the period consisted of increases due to payments received or due in advance prior to the transfer of control of the underlying performance obligations to the customer, which were offset by decreases due to revenues recognized in the period. During the six months ended July 31, 2022, $89.5 million of revenues were recognized out of the deferred revenue balance as of January 31, 2022.

Transaction price allocated to remaining performance obligations represents contracted revenues that have not yet been recognized, which includes both deferred revenue and amounts that will be invoiced and recognized as revenues in future periods. Transaction price allocated to the remaining performance obligation is influenced by several factors, including the timing of renewals, average contract terms, and foreign currency exchange rates. The Company applies practical expedients to exclude amounts related to performance obligations that are billed and recognized as they are delivered, optional purchases that do not represent material rights, and any estimated amounts of variable consideration that are subject to constraint.

Remaining performance obligations were $907.4 million as of July 31, 2022. The Company expects to recognize approximately 65% of its remaining performance obligation as revenues in the next 24 months, approximately 29% more in the following 25 to 48 months, and the remainder thereafter.

Note 6. Property and Equipment

Property and equipment, net consisted of the following:


	As of January 31, 2022		As of July 31, 2022
Furniture and fixtures	$	7,503	$	7,590
Computers and equipment	7,496		7,530
Buildings and land	33,977		33,977
Leasehold improvements	14,111		14,298
Construction in progress1	13,081		27,381
	76,168		90,776
Less accumulated depreciation	(15,491)		(17,662)
	$	60,677	$	73,114

1The increase in construction in progress is primarily due to construction for an additional office building that is on the property of our existing headquarters for which the Company is considered the owner for accounting purposes. See Note 14 "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)

The Company recognized depreciation expense as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2022		2021		2022
Cost of subscription revenues	$	81	$	86	$	167	$	176
Cost of professional services and other revenues	271		268		570		541
Sales and marketing	288		316		597		642
Research and development	414		535		846		1,084
General and administrative	147		189		302		378
Total depreciation expense	$	1,201	$	1,394	$	2,482	$	2,821

Note 7. Business Combinations

SimpleNexus

On January 7, 2022 (the "Acquisition Date") through a series of mergers, the Company acquired all outstanding membership interests of SimpleNexus which provides mobile-first homeownership software that spans engagement, origination, closing and business intelligence, headquartered in Lehi, Utah. The Company acquired SimpleNexus for its complementary products and mobile-first offerings and believes this will provide greater value for new and existing customers. The business combination is considered a related party transaction as entities affiliated with Insight Partners (“Insight Partners”) were equityholders of SimpleNexus and certain other parties in connection with the series of mergers, and other affiliates of Insight Partners are currently significant stockholders of the Company. The Company has included the financial results of SimpleNexus in the consolidated statements of operations from the Acquisition Date. The transaction costs associated with the acquisition were approximately $10.0 million and were recorded in general and administrative expenses for the fiscal year ended January 31, 2022. The Company also recognized $0.2 million in stock issuance costs associated with the share consideration that were reported as a reduction of additional paid-in capital within stockholders' equity.

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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 fair value of the consideration transferred was $933.6 million on the Acquisition Date, subject to a net working capital adjustment. The net working capital adjustment was finalized in July 2022, resulting in a decrease to the purchase price of $0.7 million which was recorded to goodwill. The total consideration transferred is as follows:


	Total Consideration
Cash consideration to members	$	286,086
Voting common stock issued (12,762,146 shares)1	647,509
Net working capital adjustment	(676)
Total consideration	$	932,919

1The Company assumed a restricted stock award with an estimated fair value of $1.4 million. $0.3 million was allocated to the purchase consideration and $1.1 million was allocated to future services and will be expensed over the service period remaining in fiscal 2023 on a straight-line basis.

The number of shares for stock consideration was based on a 20-day volume weighted average price fair value of $72.53 established prior to and including November 12, 2021 to determine the number of shares to be issued on the Acquisition Date. On the Acquisition Date, the Company's closing stock price was $50.82 per share.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of July 31, 2022:


	Fair Value
Cash and cash equivalents	$	17,038
Accounts receivable	6,100
Property and equipment, net	1,010
Operating lease right-of-use assets	3,549
Other current and noncurrent assets	4,641
Intangible assets	162,000
Goodwill	784,480
Accounts payable, accrued expenses, and other liabilities, current and noncurrent	(8,284)
Deferred revenue, current and noncurrent	(8,643)
Operating lease liabilities, current and noncurrent	(3,487)
Deferred income taxes	(25,485)
Net assets acquired	$	932,919

The transaction was accounted for using the acquisition method and, as a result, tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values at the Acquisition Date. Any excess consideration over the fair value of the assets acquired and liabilities assumed was recognized as goodwill and is subject to revision as the purchase price allocation is completed.

Due to the timing and the magnitude of the transaction, initial accounting for the acquisition is not complete, and further measurement period adjustments may occur in fiscal year 2023, but no later than one year from the Acquisition Date. The Company has estimated the preliminary fair value of net assets acquired based on information currently available and with the assistance of independent third-party valuations and will continue to adjust those estimates as additional information becomes available and the tax returns for the pre-acquisition period are completed. The primary areas of the acquisition accounting that remain preliminary relate to, but are not limited to, (i) finalizing the Company's review of certain assets acquired and liabilities assumed, (ii) finalizing the evaluation and valuation of certain legal matters and/or loss contingencies, including those that the Company may not yet be aware of but meet the requirement to qualify as a pre-acquisition contingency, and (iii) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the initial acquisition accounting is based on preliminary assessments, actual values may differ materially when final information

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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)

becomes available. The Company believes the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. The Company will continue to evaluate these items until they are satisfactorily resolved and make necessary adjustments, within the allowable measurement period.

The following table sets forth the components of the preliminary fair value of identifiable intangible assets and their estimated useful lives over which the acquired intangible assets will be amortized on a straight-line basis, as this approximates the pattern in which economic benefits of the assets are consumed as of the Acquisition Date:


	Fair Value		Useful Life
Developed technology	$	77,500	5 years
Customer relationships	70,000		10 years
Trade name	14,500		6 years
Total intangible assets subject to amortization	$	162,000

Developed technology represents the preliminarily estimated fair value of SimpleNexus’ technology. Customer relationships represent the preliminarily estimated fair value of the underlying relationships with SimpleNexus' customers. Trade names represents the preliminarily estimated fair value of SimpleNexus’ company name.

Goodwill is primarily attributable to expanded market opportunities, synergies expected from the acquisition, and assembled workforce and approximately $189.2 million is expected to be deductible for tax purposes.

Note 8. Goodwill and Intangible Assets

Goodwill

The change in the carrying amounts of goodwill was as follows:


Balance, January 31, 2022	$	841,487

SimpleNexus net working capital purchase adjustment	(676)
Translation adjustments	(85)
Balance, July 31, 2022	$	840,726

Intangible assets

Intangible assets, net are as follows:


	As of January 31, 2022						As of July 31, 2022
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Acquired developed technology	$	83,625	$	(4,804)	$	78,821	$	83,605	$	(13,305)	$	70,300
Customer relationships	91,711		(4,748)		86,963		91,710		(9,083)		82,627
Trademarks and trade name	14,626		(288)		14,338		14,626		(1,497)		13,129
	$	189,962	$	(9,840)	$	180,122	$	189,941	$	(23,885)	$	166,056

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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 recognized amortization expense as follows:

Three Months Ended July 31,