nCino, Inc. — Q1 FY2025 Form 10-Q
Reporting period: Three months ended April 30, 2024; comparative period is the three months ended April 30, 2023. nCino provides SaaS software to financial institutions. Fiscal 2025 ends January 31, 2025.
Financial results
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Total revenue | $128.1 million | $113.7 million | +12.7% |
| Subscription revenue | $110.4 million | $97.3 million | +13.4% |
| Professional services and other revenue | $17.7 million | $16.3 million | +8.3% |
| Gross profit / gross margin | $76.9 million / 60.0% | $67.5 million / 59.4% | Margin +0.6 percentage points |
| Operating loss / operating margin | $(3.7) million / (2.9)% | $(8.6) million / (7.5)% | Loss narrowed |
| Net loss attributable to nCino | $(3.0) million | $(11.2) million | Loss narrowed |
| Diluted loss per share | $(0.03) | $(0.10) | Improved |
| Operating cash flow | $54.4 million | $31.3 million | Increased |
Subscription revenue growth reflected both existing-customer expansion and new customers. Of the increase, 54.5% came from existing customers and 45.5% from customers that did not contribute subscription revenue in the prior-year quarter. Subscription gross margin rose to 71.2% from 70.0%; professional-services gross margin weakened to (9.7)% from (4.3)%, as service delivery costs exceeded related revenue. Stock-based compensation expense increased to $16.2 million from $10.9 million.
Cash, debt and liquidity
- Cash and cash equivalents were $129.5 million at April 30, 2024, versus $112.1 million at January 31, 2024. Cash, cash equivalents and restricted cash totaled $134.8 million.
- Operating cash flow was $54.4 million; investing activities used $91.2 million, principally for acquisitions; financing activities provided $56.0 million.
- The company had $55.0 million outstanding on its revolving credit facility at a 7.36% interest rate, with $45.0 million of availability under the $100.0 million facility. The facility matures March 17, 2029; nCino reported covenant compliance.
- Financing obligations were $53.8 million, in addition to operating lease liabilities. Deferred revenue was $180.5 million current and $0.7 million noncurrent.
- Management said cash and available credit were expected to fund operations and capital requirements for at least the next 12 months. Planned FY2025 capital expenditures for office build-outs were estimated at approximately $8.2 million.
Material changes and unusual items
- nCino acquired DocFox on March 20 for preliminary consideration of $72.4 million and acquired ILT on April 1 for $19.9 million, both paid in cash. The acquisitions added commercial-banking onboarding and consumer-loan origination capabilities. Their results were not material to the quarter. Purchase accounting remains preliminary; reported goodwill increased by $68.6 million from January 31, largely reflecting the acquisitions.
- The company borrowed $75.0 million under its revolving facility to fund DocFox and repaid $20.0 million during the quarter. Acquisition-related expenses were $5.0 million.
- An income tax benefit of $3.0 million compared with a $1.4 million provision in the prior-year quarter. The benefit included a $3.6 million reduction in the valuation allowance following recognition of deferred tax liabilities in the DocFox acquisition.
- Revenue recognized from opening deferred revenue was $78.9 million. Remaining performance obligations were $1.07 billion; the company expects to recognize approximately 66% over the next 24 months and 28% over months 25–48.
Outlook, commentary and risks
No quantitative revenue or earnings guidance is provided in the supplied filing text. Management expects sales and marketing, research and development, and general and administrative expenses to decline as a percentage of revenue over time, while continuing investment in product development and sales. It also expects subscription revenue to become a greater share of revenue over time.
- Management noted that higher interest rates have negatively affected U.S. mortgage demand and nCino Mortgage. The company will continue to monitor macroeconomic conditions.
- Risks include lengthy sales cycles, adoption and implementation execution, competition for financial-institution customers, achieving profitability, and foreign-currency movements. International revenue was 20.2% of the quarter’s total.
- Professional services remained loss-making on a gross-margin basis. Cash generation benefited from working-capital movements, including a $37.5 million decrease in accounts receivable; quarterly cash flow may therefore vary with billing and collection timing.
- One customer represented 15% of accounts receivable at April 30; no customer accounted for more than 10% of quarterly revenue.
- The antitrust class-action settlement of approximately $2.2 million was paid into escrow in fiscal 2024, and final dismissal was entered March 14, 2024. A separate stockholder derivative suit was dismissed, but the plaintiff appealed. nCino said it could not estimate a possible loss for that matter and recorded no accrual.
- The company reported effective disclosure controls and no material change in internal control over financial reporting. It reported no material changes to the risk factors in its latest annual report.
Important facts for investors to verify
- Track whether subscription growth and the $1.07 billion remaining-performance-obligation balance convert into recognized revenue as expected.
- Assess whether professional-services gross margins improve and whether operating cash flow remains strong when billing and collection timing changes.
- Review the final purchase-price allocations, goodwill and acquired-intangible valuations for DocFox and ILT.
- Monitor revolving-facility borrowing, interest costs, covenant compliance and the company’s ability to fund operations and planned spending.
- Follow the derivative-litigation appeal and any developments in acquisition-related contingencies or tax estimates.