Business context and reporting period
nCino, Inc. filed this Form 10-K for fiscal 2022, the year ended January 31, 2022. It provides cloud-based banking software, including loan origination, client onboarding, deposit-account opening, analytics, and compliance tools. In January 2022, nCino acquired SimpleNexus, a mobile-first mortgage and homeownership software provider; fiscal 2022 results include SimpleNexus only from the January 7 acquisition date.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $273.9 million | $204.3 million |
| Subscription revenue | $224.9 million | $162.4 million |
| Gross profit / margin | $162.5 million / 59.3% | $116.2 million / 56.9% |
| Operating loss | $71.4 million | $42.6 million |
| Net loss attributable to nCino | $49.4 million | $40.5 million |
| Operating cash flow | $(19.2) million | $9.2 million |
- Revenue increased 34.1%; subscription revenue was 82.1% of total revenue, up from 79.5%. Subscription gross margin improved to 71.3% from 70.5%; professional-services gross margin was 4.3%.
- Operating expenses rose to $233.8 million from $158.8 million, including higher staffing and product investment, about $10.0 million of SimpleNexus transaction costs, and $10.3 million of antitrust-related legal fees.
- FY2022 net loss included a $23.8 million income tax benefit, principally from a $24.6 million valuation-allowance reduction associated with deferred tax liabilities recorded in the SimpleNexus acquisition. The benefit is not evidence of operating profitability.
- Cash and cash equivalents were $88.0 million at year-end, versus $371.4 million a year earlier. Current assets were $183.5 million and current liabilities $174.4 million. Investing cash outflow was $278.5 million, mainly the $269.0 million cash portion of the SimpleNexus acquisition.
- At January 31, 2022, the company reported $34.1 million of financing obligations and a $9.7 million construction liability; it reported no conventional credit-facility borrowing at that date. A subsequent February 2022 secured revolving facility provides up to $50 million; nCino drew $20 million.
Material changes versus the prior year
- Subscription revenue retention moderated to 133% from 155%, which management attributed primarily to a higher mix of new customers with longer, phased activation schedules. Management also cited the prior-period boost from rapidly activated Paycheck Protection Program licenses and warned that PPP-related demand could weigh on subsequent growth as access rights expire.
- Operating loss widened to $71.4 million from $42.6 million as operating expenses grew faster than gross profit. Non-GAAP operating loss, which excludes specified amortization, stock compensation, acquisition costs, and antitrust expenses, was $17.6 million versus $14.2 million; this measure is supplemental, not GAAP.
- SimpleNexus added $3.9 million of revenue and $3.6 million of net loss after acquisition. The $933.6 million purchase consideration included $647.5 million in stock and $286.1 million in cash; preliminary goodwill was $785.2 million.
Outlook, risks, contingencies, and unusual items
- Management expects operating losses to continue for the foreseeable future while it invests in product development, sales and marketing, international expansion, and public-company infrastructure. It expects higher near-term capital spending for office construction and stated that cash plus facility availability should fund operations and capital needs for at least 12 months.
- The new credit facility is secured by substantially all personal property and includes restrictive covenants, including a minimum consolidated-liquidity requirement of $50 million and a requirement to maintain at least $5 million with the lender.
- A Department of Justice investigation and putative class action concern alleged antitrust violations in hiring and wage practices. nCino disputes the allegations and intends to defend itself; it said it could not reasonably estimate a possible loss or range of loss. The filing identifies legal expenses and management distraction as potential effects.
- Key business risks include dependence on Salesforce’s platform and hosting relationship, cybersecurity and privacy exposure, competition and customer adoption, long sales and implementation cycles, international execution and foreign-exchange exposure, and the ability to integrate SimpleNexus and realize expected benefits. The acquisition’s purchase-price allocation remained preliminary, and goodwill was substantial.
- The filing provides no numerical revenue or earnings guidance. Management cited COVID-19 uncertainty and the possibility that expiration of PPP access could adversely affect future growth and retention.
Most important facts for investors to verify
- Whether subscription growth, retention, and customer expansion stabilize after the PPP-related demand effect and phased activations.
- SimpleNexus integration progress, cross-selling results, acquisition costs, final purchase accounting, and the impact of stock consideration and future employee awards on dilution.
- Cash burn, capital spending, financing obligations, and compliance with the credit facility’s liquidity covenant after the $20 million draw.
- Developments in the antitrust investigation and civil litigation, including any eventual estimate or recognition of potential losses.
- Whether reported margin improvement can continue as nCino expands, given rising operating expenses and substantial Salesforce-related platform costs.