nCino, Inc.NCNO
nCino, Inc. Income Taxes Disclosure
Income Taxes
The components of income (loss) before income taxes by domestic and foreign jurisdictions were as follows:
| Fiscal Year Ended January 31, | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| United States | $ | (61,994) | $ | (26,326) | $ | (8,285) | |||||||||||
| Foreign | 20,058 | (9,234) | 14,992 | ||||||||||||||
| Income (loss) before income taxes | $ | (41,936) | $ | (35,560) | $ | 6,707 | |||||||||||
The components of the income tax provision (benefit) consisted of the following:
| Fiscal Year Ended January 31, | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | 498 | $ | 186 | |||||||||||
| State | 489 | 487 | 637 | ||||||||||||||
| Foreign | 3,441 | 3,622 | 2,368 | ||||||||||||||
| Total current | 3,930 | 4,607 | 3,191 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 819 | (2,870) | (959) | ||||||||||||||
| State | 629 | (1,200) | 494 | ||||||||||||||
| Foreign | (3,788) | (3,048) | (5,722) | ||||||||||||||
| Total deferred | (2,340) | (7,118) | (6,187) | ||||||||||||||
| Total income tax provision (benefit) | $ | 1,590 | $ | (2,511) | $ | (2,996) | |||||||||||
A reconciliation of the income tax (provision) benefit to the amount computed by applying the 21% statutory U.S. federal income tax rate to loss before income taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Fiscal Year Ended January 31, | |||||||||||
| 2024 | 2025 | ||||||||||
Income taxes at statutory rate | 21.0 | % | 21.0 | % | |||||||
| State income tax (provision) benefit, net of federal impact | (2.7) | 1.6 | |||||||||
| Tax credits | 23.9 | 9.7 | |||||||||
| Changes in valuation allowance | (10.5) | 7.7 | |||||||||
| Federal return to provision | (19.7) | 1.3 | |||||||||
| Foreign rate differential | (1.7) | 1.2 | |||||||||
| Other | 0.2 | (1.0) | |||||||||
| Stock-based compensation | (1.0) | (1.3) | |||||||||
| Nondeductible expenses | (1.0) | (1.3) | |||||||||
| Deferred adjustments | 0.0 | (1.5) | |||||||||
| Effects of non-U.S. operations | (0.5) | (1.6) | |||||||||
| GILTI inclusion | (6.8) | (2.2) | |||||||||
| Transaction costs | 0.0 | (3.1) | |||||||||
| Executive compensation | (5.0) | (8.2) | |||||||||
| Uncertain tax positions | 0.0 | (15.2) | |||||||||
| (3.8) | % | 7.1 | % | ||||||||
A reconciliation of the income tax benefit to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Fiscal Year Ended January 31, | |||||||||||
| 2026 | |||||||||||
| ($ in thousands) | % | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | 1,408 | 21.0 | % | |||||||
State and Local Income Tax, net of federal (national) income tax effect(1) | 282 | 4.2 | |||||||||
| Foreign Tax Effects | |||||||||||
| United Kingdom | |||||||||||
| Return to provision | (4,107) | (61.2) | |||||||||
| Changes in valuation allowance | (2,739) | (40.8) | |||||||||
| Other | 533 | 7.9 | |||||||||
| Canada | 529 | 7.9 | |||||||||
| Other foreign jurisdictions | (923) | (13.8) | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Effects of non-U.S. operations | 734 | 10.9 | |||||||||
| Tax credits | |||||||||||
| Research and development credits | (2,500) | (37.3) | |||||||||
| Changes in valuation allowances | (1,357) | (20.2) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Executive compensation | 2,952 | 44.0 | |||||||||
| Stock-based compensation | 2,356 | 35.1 | |||||||||
| Other | 359 | 5.4 | |||||||||
| Changes in unrecognized tax benefits | 926 | 13.8 | |||||||||
| Other adjustments | |||||||||||
| Return to provision | (1,559) | (23.2) | |||||||||
| Other | 110 | 1.6 | |||||||||
| Total | $ | (2,996) | (44.7) | % | |||||||
(1) State taxes in Minnesota and Texas made up the majority (greater than 50%) of the tax effect in this category.
Significant components of the Company’s net deferred tax assets and liabilities were as follows:
| As of January 31, | |||||||||||
| 2025 | 2026 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 118,820 | $ | 131,336 | |||||||
| Research and development | 48,056 | 40,662 | |||||||||
| Tax credits | 17,104 | 21,689 | |||||||||
| Financing obligations and lease liabilities | 16,591 | 15,079 | |||||||||
| Equity compensation | 11,108 | 9,637 | |||||||||
| Reserves and accruals | 4,747 | 5,030 | |||||||||
| Other | 1,587 | 2,329 | |||||||||
| Total deferred tax assets | 218,013 | 225,762 | |||||||||
| Less valuation allowance | (160,289) | (151,661) | |||||||||
| Total deferred tax assets, net of valuation allowances | 57,724 | 74,101 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | (38,429) | (39,903) | |||||||||
| Depreciation | (13,522) | (12,964) | |||||||||
| Contract acquisition costs | (9,254) | (11,889) | |||||||||
| Lease asset | (4,048) | (3,154) | |||||||||
| Deferred revenue | (121) | (789) | |||||||||
| Total deferred tax liabilities | (65,374) | (68,699) | |||||||||
| Net deferred tax assets (liabilities) | $ | (7,650) | $ | 5,402 | |||||||
The Company’s net deferred tax asset (liabilities) were adjusted during fiscal 2026 to include $7.3 million of net deferred tax liabilities related to business combinations.
Net deferred tax asset (liabilities) were included in the consolidated balance sheets as follows:
| As of January 31, | |||||||||||
| 2025 | 2026 | ||||||||||
| Long-term prepaid expenses and other assets | $ | 6,201 | $ | 12,422 | |||||||
| Deferred income taxes, noncurrent | (13,851) | (7,020) | |||||||||
| Net deferred tax asset (liabilities) | $ | (7,650) | $ | 5,402 | |||||||
The Company continually assesses the realizability of its deferred tax assets based on an evaluative process that considers all available positive and negative evidence. The Company has established a valuation allowance in the amount of $160.3 million and $151.7 million as of January 31, 2025 and 2026, respectively, because the Company believes it is more likely than not that the deferred tax assets in jurisdictions excluding several foreign jurisdictions will not be realized.
We continue to maintain a valuation allowance against our deferred tax assets in several jurisdictions, including the U.S. and U.K. Management determines when a valuation allowance should be recorded, utilizing significant judgment and the use of estimates. Through acquisitions, the Company recorded a net U.S. deferred tax liability mostly related to identifiable intangible assets, reducing the valuation allowance in the United States by $2.0 million. Additionally, the Company reduced the valuation allowance in the United Kingdom by $2.8 million due to the ability to utilize acquired deferred tax attributes as part of corporate reorganizations related to foreign acquisitions during the Company’s fiscal 2026.
For the fiscal years ended January 31, 2024, 2025, and 2026, the valuation allowance increased (decreased) by $9.9 million, $12.0 million, and $(8.6) million, respectively.
The Company maintains its assertion of the Company’s intent for certain foreign earnings to be indefinitely reinvested. As of January 31, 2026, the Company has not recorded taxes on approximately $37.4 million of cumulative undistributed earnings of the Company’s non-U.S. subsidiaries. The Company generally does not provide for taxes related to the Company’s undistributed earnings because such earnings either would not be taxable when remitted or they are indefinitely reinvested. If in the foreseeable future, the Company can no longer demonstrate that these earnings are indefinitely reinvested, a tax liability will be recognized, which could include other taxes such as withholding tax. The determination of the amount of the unrecognized tax liability is directly influenced by the Company’s net operating income (loss) and valuation allowance position in the U.S. If the Company were to repatriate the undistributed earnings, the tax liability is $0.9 million.
The net operating loss and tax credit carryforwards as of January 31, 2026 were as follows:
| As of January 31, 2026 | First Fiscal Year Expiring | ||||||||||
Federal net operating loss carryforwards(1) | 394,556 | None | |||||||||
State net operating loss carryforwards(1) | 249,245 | 2027 | |||||||||
State net operating loss carryforwards(1) | 100,836 | None | |||||||||
| Foreign net operating loss carryforwards | 8,827 | 2031 | |||||||||
Foreign net operating loss carryforwards(1) | 115,776 | None | |||||||||
Federal tax credit carryforwards(1) | 17,650 | 2037 | |||||||||
| State tax credit carryforwards | 6,815 | 2032 | |||||||||
(1) The Company acquired a portion of these carryforwards through mergers and acquisitions. These acquired carryforwards will be subject to limitations which could limit the Company’s utilization in future periods.
In 2021, the Organization of Economic Cooperation and Development introduced its Pillar Two Framework Model Rules (“Pillar 2”). The Company is under the revenue threshold where Pillar 2 would not apply and is not subject to tax under these rules. The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.
On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act, was signed into law. This legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in the Company’s fiscal 2026, including the restoration of immediate expensing of domestic research and development expenditures, more favorable rules for determining limitations on deductions for interest expense, and reinstatement of accelerated fixed asset depreciation. These changes were reflected in the income tax provision during the second quarter of the Company’s fiscal 2026 and did not result in material changes to the Company’s tax position.
A reconciliation of the gross beginning and ending balance of total unrecognized tax benefits is as follows:
| Fiscal Year Ended January 31, | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| Balance, beginning of period | $ | — | $ | — | $ | 6,692 | |||||||||||
| Additions for current year tax positions | — | 1,094 | 951 | ||||||||||||||
| Additions for prior year tax positions | — | 4,357 | 815 | ||||||||||||||
| Additions for current year acquisitions | — | 1,241 | 10 | ||||||||||||||
| Balance, end of period | $ | — | $ | 6,692 | $ | 8,468 | |||||||||||
As of January 31, 2026, gross unrecognized tax benefits related to uncertain tax positions were $8.5 million. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate would be $2.0 million for the year ended January 31, 2026.
The Company’s policy for classifying interest and penalties with unrecognized tax benefits is to include such items in income tax expense. The total amount of interest and penalties associated with unrecognized tax benefits is $1.8 million for the year ended January 31, 2026.
The Company is subject to taxation in the U.S. federal and various state and foreign jurisdictions. As of January 31, 2026, the Company is no longer subject to U.S. federal and state examinations by tax authorities for tax years prior to 2022. However, amounts reported as net operating losses and tax credit carryforwards from these tax periods remain subject to review by most tax authorities.
Cash Taxes Paid
We adopted ASU 2023-09 on a prospective basis for the fiscal year ended January 31, 2026 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the fiscal year ended January 31, 2026:
| Federal | $ | 123 | |||
| State | 591 | ||||
| Foreign | |||||
| New Zealand | 1,542 | ||||
| Canada | 1,023 | ||||
| United Kingdom | 562 | ||||
| Germany | 424 | ||||
| Other | 102 | ||||
| Total | $ | 4,367 | |||
Cash paid for taxes, net of refunds, for the fiscal years ended January 31, 2024 and 2025, was $3.2 million and $3.6 million, respectively.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Apr 1, 2025 | |
| 2024 | Mar 26, 2024 | |
| 2023 | Mar 28, 2023 | |
| 2022 | Mar 31, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.