nCino, Inc. — Q1 Fiscal 2023 10-Q
Reporting period: Three months ended April 30, 2022, compared with the three months ended April 30, 2021. Fiscal years end January 31. nCino provides cloud-based software for financial institutions; the quarter includes SimpleNexus results from its January 7, 2022 acquisition, unlike the comparative quarter.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2023 |
|---|---|---|
| Total revenue | $62.4 million | $94.2 million |
| Subscription revenue | $51.0 million | $79.2 million |
| Professional services and other revenue | $11.3 million | $15.0 million |
| Gross profit / margin | $36.1 million / 57.8% | $53.9 million / 57.2% |
| Operating loss | $15.5 million | $27.2 million |
| Net loss attributable to nCino | $15.0 million | $30.7 million |
| Basic and diluted loss per share | $0.16 | $0.28 |
| Cash from operating activities | $7.6 million | $1.2 million |
Revenue increased 51.1%; subscription revenue increased 55.2%. SimpleNexus contributed $14.8 million of revenue, including $13.6 million of subscription revenue. Management attributed the remaining subscription growth to existing-customer expansion and new customers. Subscription revenue represented 84.1% of revenue, up from 81.8%.
Gross margin declined 0.6 percentage points. Subscription gross margin fell to 67.8% from 70.7%, primarily due to acquired-technology amortization; professional services gross margin improved to 1.5% from negative 0.3%. Operating expenses rose to $81.1 million from $51.5 million, reflecting increased personnel, growth investment, acquisition-related amortization, and stock-based compensation. Stock-based compensation was $13.3 million versus $7.1 million. Non-GAAP operating loss was $3.7 million versus $4.3 million; this excludes specified amortization, stock compensation, acquisition costs, and antitrust-related expenses.
Balance sheet and liquidity
At April 30, 2022, cash and cash equivalents were $78.7 million, down from $88.0 million at January 31; cash, cash equivalents, and restricted cash totaled $84.1 million. Current assets were $173.2 million and current liabilities were $182.8 million. Deferred revenue was $144.0 million, versus $122.7 million at fiscal year-end. Remaining performance obligations were $905.6 million; approximately 63% was expected to be recognized over the next 24 months.
Operating cash flow was $1.2 million, down from $7.6 million, despite a $22.4 million increase in deferred revenue; the period included a $30.0 million net loss. Investing cash outflow was $4.7 million, primarily for property and equipment. The company had $33.9 million of financing obligations and a $13.5 million construction liability.
A new senior secured revolving credit facility provides up to $50 million, with a $50 million minimum consolidated-liquidity covenant and a $5 million restricted-cash requirement. nCino borrowed and repaid $20 million during the quarter; no borrowings or letters of credit were outstanding at April 30, and the company reported covenant compliance. Management said cash and available facility capacity should fund operations and capital requirements for at least 12 months.
Changes, outlook, and risks
- Acquisition: SimpleNexus was acquired for stated consideration of $933.6 million, comprising $286.1 million cash and $647.5 million in stock. Preliminary purchase accounting included $785.2 million goodwill and $162.0 million acquired intangible assets; valuations and other purchase-allocation items remained subject to adjustment.
- Outlook: No specific revenue or earnings guidance is stated in the provided filing text. Management expects operating losses and operating expenses to continue increasing as it invests in product development, sales, marketing, and support functions. Fiscal 2023 capital spending was expected to be higher, with approximately $10.1 million remaining to complete the office building project at quarter-end.
- Business risks: Management noted long sales cycles, dependence on adoption and customer expansion, and potential effects on growth and retention as Paycheck Protection Program access expires. It was monitoring rising interest rates, particularly for the mortgage platform, but had not experienced a material adverse effect to date. Foreign-currency movements and the new U.S. requirement to capitalize and amortize research and development costs may affect results or cash taxes.
- Legal matters: The Department of Justice is investigating hiring and wage practices. A related putative class action alleges agreements not to solicit or hire employees; settlements by other defendants were approved, while nCino said it intends to defend itself. The company could not reasonably estimate a possible loss or range of loss. It stated it did not presently believe the matters would materially affect day-to-day operations.
- Other items: The company expects it may contribute up to $5 million more to its Japanese joint venture during the fiscal year. No material changes to the risk factors in its latest annual report were reported. Disclosure controls were assessed as effective at the reasonable-assurance level.
Investor verification priorities
- Separate SimpleNexus acquisition-related revenue and costs from underlying organic growth; the reported comparison includes SimpleNexus only in the 2022 quarter.
- Monitor subscription gross margin, acquired-intangible amortization, stock-based compensation, and the trajectory of GAAP operating losses and cash burn.
- Verify final SimpleNexus purchase accounting, including goodwill, intangible valuations, deferred taxes, and any measurement-period adjustments.
- Track liquidity and covenant headroom, office construction spending, financing obligations, and any further joint-venture funding.
- Follow developments and potential financial exposure from the DOJ investigation and employee-hiring class action; the filing does not provide a clear loss estimate.