nCino, Inc. — Form 10-Q Summary
Business context and reporting period. nCino provides cloud-based SaaS software and related services to financial institutions. This filing covers the three months ended April 30, 2023 (fiscal 2024 first quarter), compared with the three months ended April 30, 2022. Amounts below are in millions unless noted.
Key financial results
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Total revenue | $113.7 | $94.2 | +20.7% |
| Subscription revenue | $97.3 | $79.2 | +22.9% |
| Professional services and other revenue | $16.3 | $15.0 | +8.7% |
| Gross profit / gross margin | $67.5 / 59.4% | $53.9 / 57.2% | Margin +2.2 percentage points |
| Operating expenses | $76.1 | $81.1 | Down $5.0 |
| GAAP operating loss / margin | $(8.6) / (7.5)% | $(27.2) / (28.9)% | Loss narrowed |
| Net loss attributable to nCino | $(11.2) | $(30.7) | Loss narrowed |
| Diluted loss per share | $(0.10) | $(0.28) | |
| Net cash provided by operating activities | $31.3 | $1.2 | Up $30.1 |
Financial position and liquidity
- At April 30, 2023, cash and cash equivalents were $98.1 million; cash, cash equivalents and restricted cash totaled $103.5 million. Current assets were $211.6 million and current liabilities were $223.1 million.
- Revolving credit facility borrowings were $15.0 million, down from $30.0 million at January 31, 2023. The facility had $35.0 million of available borrowing capacity; its applicable rate was 5.91%. The company reported covenant compliance.
- Financing obligations were $55.1 million, including current and noncurrent amounts. Deferred revenue was $171.7 million.
- Remaining performance obligations were $914.0 million. The company expects to recognize approximately 68% within 24 months and a further 28% in months 25–48.
- Operating cash flow benefited from working-capital movements, including an $18.3 million decrease in accounts receivable and a $16.8 million increase in deferred revenue. Investing cash outflow was $2.0 million; financing cash outflow was $13.9 million, principally reflecting $15.0 million of credit-facility repayments.
Material changes and management commentary
- Subscription revenue increased through expansion within existing customers and revenue from newer customers; management attributed 69.3% of the increase to existing customers and 30.7% to customers that did not contribute subscription revenue in the comparable quarter.
- Subscription revenue rose to 85.6% of total revenue from 84.1%. Subscription gross margin improved to 70.0% from 67.8%.
- Professional services gross margin declined to (4.3)% from 1.5%, which management attributed primarily to lower realized billing and utilization rates.
- Operating expenses fell, including lower general and administrative and research and development expenses. Management linked reductions in headcount in part to the workforce reduction announced in fiscal 2023; total employee headcount was down 76 year over year.
- Non-GAAP operating income was $10.9 million, compared with a non-GAAP operating loss of $3.7 million in the prior-year quarter. This measure excludes, among other items, stock-based compensation, intangible amortization, certain legal and acquisition expenses, and restructuring charges.
Outlook, risks, contingencies and unusual items
- Management expects GAAP operating losses to continue for the foreseeable future, while stating that cash and cash equivalents plus available credit should fund operations and capital needs for at least 12 months. The filing gives no specific revenue or earnings guidance for upcoming quarters.
- Management cited higher interest rates and their negative effect on the U.S. mortgage market and SimpleNexus. It also noted uncertainty in the financial sector; customers Silicon Valley Bank, Signature Bank and First Republic Bank collectively represented less than 3% of fiscal 2023 revenue.
- The company reported $239,000 of restructuring charges in the quarter. It also paid approximately $5.0 million in severance and related employee costs accrued at January 31, 2023.
- A DOJ investigation into hiring and wage practices closed in February 2023 without fines, sanctions or penalties. A related putative class action and a separate stockholder derivative suit remain unresolved; the company said it could not reasonably estimate potential losses and recorded no accrual for these matters.
- nCino may be required to contribute up to $5.0 million in additional cash to its Japanese joint venture during fiscal 2024. The joint venture’s minority interest may become redeemable beginning in 2027.
- Subsequent to quarter-end, the company granted 2.98 million RSUs and expects to recognize $72.9 million of related stock-based compensation over a weighted-average four years.
- Risks include lengthy sales cycles, customer adoption and implementation execution, macroeconomic and foreign-exchange effects, variable-rate debt exposure, and the need to attain sustainable profitability. Management reported disclosure controls were effective and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether subscription growth and improving operating results persist, particularly given the quarter’s working-capital contribution to operating cash flow.
- Whether professional services utilization and gross margin recover, and how the subscription-versus-services revenue mix develops.
- Cash needs, the ability to maintain credit-facility covenant compliance, and repayment or refinancing plans before the facility’s February 2024 maturity.
- Potential outcomes and costs of the pending class action and derivative litigation, along with any future Japanese joint-venture funding or redemption obligations.
- The impact of macroeconomic conditions on financial-institution spending and mortgage-related business, and the dilution and expense implications of equity compensation.