Intapp, Inc. (NASDAQ:INTA) Q3 2024 Earnings Call Transcript May 7, 2024
Intapp, Inc. misses on earnings expectations. Reported EPS is $-0.09486 EPS, expectations were $0.07. Intapp, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to Intapp’s Fiscal Third Quarter 2024 Webcast. At this time, all participants are in listen only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, David Trone, Senior Vice President of Investor Relations. David, please go ahead.
David Trone: Thank you. Welcome to Intapp’s fiscal third quarter 2024 financial results. On the call with me today are: John Hall, Chairman and CEO of Intapp; and David Morton, Chief Financial Officer. During the course of this conference call, we may make forward-looking statements regarding trends, strategies and the anticipated performance of our business, including guidance provided for our fiscal fourth quarter and full year 2024. These forward-looking statements are based on management’s current views and expectations, entail certain assumptions made as of today’s date and are subject to various risks and uncertainties, including those described in our SEC filings and other publicly available documents, that are difficult to predict and could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
Intapp disclaims any obligation to update or revise any forward-looking statements, except as required by law. Further, on today’s call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. As a reminder, all of our financial figures we will discuss today are non-GAAP, except for revenue and revenue growth and current remaining performance obligations. Our GAAP financial results, along with reconciliations of GAAP to non-GAAP financial measures can be found in today’s earnings release and its supplemental financial tables which is available on our website and as an exhibit to the Form 8-K furnished with the SEC prior to this call, or a supplemental financial presentation which is available on our website.
With that, I’ll hand the conversation over to John.
John Hall: Thank you, David. Good afternoon, everyone. Thank you for joining us, as we share the results of our fiscal third quarter. We had an exciting quarter filled with events and announcements that I’ll recap for you today. In Q3, we announced the release of new generative AI capabilities designed for the specialized needs of our target markets. We hosted our inaugural Investor Day. We held successful client and partner events. We acquired AI provider delphai and we updated our Applied AI intelligence applied branding. We also drove strong results through the acquisition of new logos and the expansion of our existing accounts around the world. In Q3, our cloud ARR grew to $274.2 million up 33% year-over-year. Cloud now represents 72% of our total ARR of $382.7 million.
In the quarter, we earned SaaS and support revenue of $80.8 million up 22% year-over-year and total revenue of $110.6 million up 20% year-over-year. Before I go deeper into our third quarter highlights, you may have seen that just last week, we announced the acquisition of Transform Data International, a long time Intapp partner that builds and implements enterprise collaboration technology. We believe the combination of Intapp’s solutions and TDI’s domain expertise will optimize our clients’ work within Microsoft applications, facilitating collaboration and laying the groundwork for the use of more advanced AI tools like Copilot. We’re pleased to welcome the TDI team to Intapp. Now I’ll turn to our Q3 highlights, beginning with product innovation.
In February, we celebrated intelligence applied launch day at NASDAQ Marketplace in New York. After ringing the opening bell, we held Investor Day followed by a standing room only client event. There, we unveiled our intelligent supply strategy, which further strengthens our commitment to leading vertical AI for the markets we serve. We also released a set of new applied AI capabilities under our Intapp Assist product brand. I’m pleased to be able to share a bit more about these with you now. First, we launched Intapp Assist for deal cloud, which integrates AI into everyday workflows to save professionals’ time by generating deal, company and meeting summaries and creating relevant personalized targeted email outreach. Leveraging our partnership with Microsoft, the solution uses both Azure OpenAI and Intapp’s proprietary firm data within deal cloud to generate much more knowledgeable language about the firm’s deals, clients and engagements, a significant advantage that helps the AI deliver more relevant accurate results for our professionals on the first try.
Intapp Assist for deal cloud is now generally available and it has already been adopted by clients including corporate law firm, A&L Goodbody and the investment team at U.S. Realty Advisors, who chose deal cloud to replace a legacy horizontal CRM that required modification to meet the firm’s needs. USRA view deal cloud as a long-term investment to future proof their business and our platform stood out due to its real estate blueprint, impressive roster of client adopters and now new applied AI features like Intapp Assist. The power of generative AI depends on data, which is why we released Intapp Data as a solution available to all DealCloud clients. Intapp Data augments firm’s internal intelligence with information on more than 85 million companies and 200 million contacts, plus even more connectivity with third-party data partners.
This nucleus of core data is critical to our application of generative AI so that our results are specific, accurate, relevant and actionable. Drawing on our successful partnership with Microsoft, we welcomed their executives to the stage at our launch event as we shared the release of Intapp Walls for Copilot, a new solution that combines the power of Microsoft’s technology with our industry specific expertise and innovation in regulated markets information security. Intapp has long helped firms take control of their sensitive information with our Walls solution. Intapp Walls helps control access to information for each professional based on their unique rights under their client and regulatory obligations. Intapp Walls for Copilot extends this ability to AI, giving firms’ visibility and control over the data that Copilot is authorized to access and surface for each user.
It processes complex overlapping policies and rules governing each professional and the firm’s body of work and translates firm policies into native security controls for each system that may contain sensitive information. Walter Copilot is yet another example of the combined power of Microsoft’s technology with Intapp industry specific expertise and innovation. Our partnership with Microsoft continues to add value in other ways. In March, technology leaders from some of the world’s most prominent accounting, consulting and law firms attended our second annual CIO Summit in Redmond. During this two-day event, CIOs, Intapp leaders and Microsoft Executives dug into the key issues they face today, including innovation, best practices and change management needed to support these markets as we move into the generative AI era.
Attendees were enthusiastic about both the event and the potential for continued innovation between our organizations. Returning to our launch event. The last new solution we revealed originated from a market research initiative that we conducted last year with DCM Insights. We studied business development behaviors and habits at partner led firms. The research findings identified with strong data that professionals who behave as activators, people who make understanding and connecting with networks part of their daily habits tend to be the most successful in their firms. Using this research, we developed and launched the Activator experience for deal cloud. To help facilitate professionals’ successful behaviors and habits using AI powered signals.
The solution helps each professional to be more conscious and consistent in these behaviors to drive more success in their business development activities. Finally, we shared that Intapp was acquiring Berlin based Delphai, a cutting edge organization that applies AI across public data, ensuring that firm graphic data is collected, structured and presented to professionals with critical provenance. In an era where more and more content is AI generated, provenance is critical and its significance can’t be understated in our industries who make foundational promises of trust and accuracy each day. The acquisition of delphai is a big step forward for Intapp AI strategy. Delphai brings a brilliant team of data scientists, AI engineers and researchers who further augment our already rich AI talent.
We believe delphai’s AI models and tech stack will help form the next generation of our data foundation. Intelligence Applied Launch Day was a big day. Judging from the response, it was for our clients as well. Reinforcing our vertical AI positioning and offerings has led to a groundswell in activity, creating even more applied AI conversations in an already active client base and spurring new meetings and demonstration requests. The strong interest only reinforces how well positioned we are to take advantage of this moment through our Applied AI strategy. Okay. Turning now to client wins. I’d like to share just a few examples of how we’re continuing to grow our client base and expand our global reach. First, I’m pleased to share that we continue to grow our client base with new logos, including a leading European consulting firm who purchased Intapp Collaboration and is now live on thousands of seats across APAC, EMEA, and LATAM with the North American go live planned this year.
They selected Intapp Collaboration to help manage teams sprawl, automate team governance and streamline asset archiving. They are now managing their proposals, projects and exceptions on SharePoint and Teams within our solution. Additionally, in Q3, several firms became new clients after having tried to use a horizontal legacy CRM to meet their industry specific needs, which proved unsuccessful. A few examples of this. Real assets investment firm, Fengate, who selected DealCloud based on our industry expertise and specialized focus and our ability to support their specific asset management workflows. Private equity firm Flexpoint Ford, who selected DeelCloud to centralize firm deal and industry intelligence. DealCloud won out over other solutions due to its market leading brand and ease of use for the firm’s professionals.
And Generate Capital who replaced their legacy CRM with DealCloud to manage the needs of their investor coverage, capital markets and investments team. DealCloud has the ease of use and out of the box purpose built features that their previous system lacked. Additionally, cross-selling and upselling success in our existing accounts continued to drive net revenue retention. For example, investment banking firm, Perella Weinberg, who were already live on our conflict solution now added in Intapp Walls. The firm will use walls to create necessary barriers around sensitive information, manage SharePoint permissions and security, and track user activity to maintain regulatory client and the firm’s own risk and compliance requirements. As a second example of cross-selling and upselling, law firm Warner, Norcross and Judd, a longtime user of our Thyme solution added DealCloud and our Conflicts solution to support its firm wide growth strategy.
Tom Smanik, Warner’s Director of Business Development and Marketing shared that as part of the strategy, the firm encourages its attorneys to deepen their relationships with current clients while also nurturing their networks to source new business. He believes that DealCloud will help attorneys facilitate growth by providing relationship management, intelligence and outreach capabilities all-in-one easy to use platform. And the third example, UK based law firm, DAC Beachcroft added our collaboration solution to its Intapp stack, which already included Intapp Time and DealCloud. David Aird, the firm’s IT Director, said they are looking to better leverage their investment in Microsoft 365 to align with how they believe their lawyers will use AI innovations like Microsoft Copilot.
They believe the work Intapp is doing to deliver legal specific modern work tools in partnership with Microsoft will help safely drive innovation across the firm. And in a large final example, one of the world’s largest accounting firms and existing Intapp client selected our employee compliance offering to automate the auditor independence attestation process. Previously, the firm had relied on a time consuming error prone manual process that required data entry duplication, navigation of multiple systems and poor data quality. In conclusion, we’re proud of our strong third quarter performance and we’re pleased with the level of continued innovation and meaningful touch points that we achieved with clients, partners and investors over the course of the quarter.
We are also pleased with the response and interest in our new intelligence applied AI capabilities and optimistic about our continued growth opportunities with them. With our intelligent supply strategy, we believe that we are well poised to be the vertical AI leader for the industries we serve. As always, I’d like to thank our clients, our partners, our investors, our Board and our global Intapp team for their teamwork and dedication. Thank you all very much. Okay, Dave, over to you.
David Morton: Thanks, John, and thanks everyone for joining us today. I also want to express my gratitude to all who participated in or listened to our inaugural Investor Day this past February. We are thrilled about the strong trajectory and future of this company. To that end, I’m pleased to report our solid third quarter performance driven by strong cloud ARR growth and expanding customer base and enhanced operational efficiency within the quarter. These achievements collectively position us to further extend our leadership as we embark on exciting market opportunity in our fiscal Q4 2024 and beyond. SaaS and support revenue was $80.8 million up 22% year-over-year, reflecting sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions.
Subscription license revenue was $16.5 million up 22% year-over-year, largely due to a couple large clients opting for multiyear on premise renewals. With that said, 91% of our clients have at least one cloud module. We will continue to temper our multiyear renewals as we work with our clients to transition their on-prem to cloud in the coming year. Professional services revenue was $13.3 million marking a 7% year-over-year increase. This growth rate aligns with our deliberate strategic shift to deemphasize professional services. The ongoing success of our industry solutions further contributes to clients realizing quicker time to value through an expedited implementation process. Total revenue was $110.6 million up 20% year-over-year, driven primarily by sales of our cloud solutions and growth of subscription license revenue.
Our international business presents a growth opportunity to expand and invest in utilization of our platform beyond the U.S. Revenue generated from our international operations remained robust, accounting for approximately 30% of total revenue for fiscal Q3. Our partner co-sell motion is gaining significant traction, driven by a partner influence and sourcing and the adoption of some of our partner products. I’m pleased to announce that we have recently onboarded six new partners, further enriching our network. Additionally, we have strengthened our relationships with five existing partners, enhancing our ecosystem even further to 125 in total. Q3 non-GAAP gross margin was 75.1% as compared to 71.7% in the prior year period. Non-GAAP operating expenses were $71.9 million and $8.8 million increase year-over-year as we continue to invest in product development and go-to-market to support our growth.
As we continue to focus on our operational efficiency, our non-GAAP operating profit was $11.2 million as compared to $2.9 million in the prior year period. Non-GAAP diluted EPS was $0.14 in the third quarter of fiscal 2024 as compared to $0.03 in the prior year period. Free cash flow, which is defined as our cash flow from operations less capital expenditures, was $16.1 million for the third quarter or 15% of total revenue. We exited the quarter with $187.4 million of cash and cash equivalents. Turning to our key metrics. Cloud ARR was up 33% year-over-year and total ARR was up 21% year-over-year. Total remaining performance obligations were $467.9 million up 23% year-over-year. Overall, we remain committed to executing our land and expand model concluding the quarter with over 2,450 clients and among those 673 had annual recurring revenue of at least 100,000, up from 572 in the previous year.
Our net revenue retention rate underscores our ability to retain and steadily expand business with our existing customers. This key metric was 115%, which continues to track within a range of 113% to 117%. Our cloud NRR in Q3 FY24 was 120%. Now turning to our outlook. For the fourth quarter of fiscal ’24, we expect SaaS and Support revenue of between $83.5 million $84.5 million and total revenue in the range of $111 million to $112 million. Non-GAAP operating profit in the range of $10.5 million to $11.5 million and non-GAAP EPS results of $0.11 to $0.13 using a diluted share count weighted for the quarter of approximately 81 million common shares outstanding. For the full year fiscal 2024, we expect SaaS and Support revenue of between $314.5 million and $315.5 million and increasing our total revenue in the range of $427 million to $428 million.
We also expect non-GAAP operating profit to be in the range of $35.5 million to $36.5 million. And non-GAAP EPS in the range of $0.42 to $0.44 using a diluted share count weighted for fiscal year 2024 of approximately 81 million common shares outstanding. Thank you. And I will now turn the call back to the operator.
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