Intapp, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2022. Amounts are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Business context and reporting period
Intapp provides industry-specific cloud software to professional and financial services firms. Revenue is primarily from recurring SaaS, subscription licenses and support, with additional implementation and related professional services. The filing is unaudited.
Key financial metrics
| Metric | Three months ended Dec. 31, 2022 | Six months ended Dec. 31, 2022 |
|---|---|---|
| Revenue | $84.7; up 31% year over year | $164.2; up 29% |
| Recurring revenue | $72.6; up 29% | $141.6; up 28% |
| SaaS and support revenue | $61.6; up 31% | $118.4; up 31% |
| Gross profit / gross margin | $57.9 / 68% | $112.1 / 68% |
| Operating loss | $(19.4) | $(38.6) |
| Net loss | $(19.8); $(0.31) per diluted share | $(39.8); $(0.63) per diluted share |
| Non-GAAP operating profit | $2.8 | $4.6 |
Professional services revenue grew 44% in the quarter and 37% year to date, but remained gross-profit negative: losses of $2.2 million and $4.7 million, respectively. Non-GAAP operating profit excludes stock-based compensation, acquired-intangible amortization and other specified items; it is not a GAAP measure.
- Cash flow: Six-month operating cash flow was $13.3 million, versus $6.5 million a year earlier. Investing used $4.4 million, and financing used $10.3 million.
- Cash and liquidity: Cash, cash equivalents and restricted cash totaled $52.6 million at December 31, 2022. Management said existing cash and the revolving facility should cover working capital and capital expenditure needs for at least 12 months.
- Debt: No borrowings were outstanding under the $100 million, five-year secured revolving credit facility. The company reported compliance with its covenants.
- Balance sheet: Total assets were $511.1 million and total liabilities $258.3 million. Current liabilities included $163.0 million of deferred revenue, reflecting advance billings.
Material changes versus the prior comparable period
- Quarterly revenue increased $20.0 million, while GAAP net loss narrowed by $4.5 million. For the six-month period, revenue grew $37.3 million and net loss narrowed by $9.5 million.
- Annual recurring revenue (ARR) reached $301.3 million, up 26% year over year. Cloud ARR was $191.8 million, up 42%, and increased to 64% of ARR from 56%.
- Trailing-twelve-month net revenue retention was reported as above management’s projected range of 110%–114%; the filing does not provide a clear actual rate.
- Operating cash flow increased year over year, helped in part by an $18.8 million increase in deferred revenue and substantial non-cash expenses, including stock-based compensation.
- The company adopted lease accounting standard ASC 842 on July 1, 2022, recording right-of-use assets of $21.3 million and lease liabilities of $24.7 million at adoption. Comparative prior periods were not restated.
Outlook, commentary, risks and unusual items
- No formal numerical revenue or earnings guidance is provided in the supplied filing text. Management expects continued investment in product development, sales and marketing, and growth; it expects most future new ARR growth to come from SaaS subscriptions.
- Management attributed SaaS growth to new customers, expansion within existing customers, and migration from on-premise products to cloud. It expects demand for professional services to rise with implementations and migrations, while noting that the services business is currently loss-making.
- During the first half, Intapp exited part of its Palo Alto office space and amended the lease. It recorded a net $1.6 million charge for the six months, including impairment, and a $0.3 million benefit in the second quarter. Management expects lower rent expense for the remainder of fiscal 2023 but cautions that further exit-related charges may occur.
- The company committed to spend at least $110 million on Microsoft cloud services, with payments expected to begin in calendar 2023 and the commitment period ending in December 2028, subject to an extension option.
- In January 2023, Intapp paid $11.2 million of deferred purchase consideration for the Billstream acquisition. During the reported six months it paid $9.3 million of Repstor contingent consideration and $1.8 million of related cash holdback.
- Risks highlighted include economic weakness or reduced technology spending in its targeted industries, inflation and labor costs, variable sales cycles, competition, customer retention, cybersecurity and service disruptions, foreign exchange movements, and execution of cloud growth. Russia’s invasion of Ukraine prompted relocation and reassignment of some research and development resources.
- Intapp is defending a false-advertising lawsuit brought by Navatar Group, which it believes is without merit. The company stated it was not party to litigation expected to have a material adverse effect; outcomes remain uncertain.
- Stock-based compensation was $36.0 million for the six months. The company had 18.8 million potentially dilutive shares excluded from diluted loss per share calculations as anti-dilutive, and $104.9 million of unrecognized compensation cost related to unvested awards.
Important facts for investors to verify
- Whether ARR, cloud ARR and customer retention continue to grow, and how much growth reflects new sales versus expansion and migration.
- Whether strong revenue growth translates into improving GAAP operating results and sustainable cash generation, given continuing losses and the contribution of advance billings and non-cash charges to operating cash flow.
- Professional services margins, cloud hosting costs and the effect of ongoing hiring and sales and marketing investment.
- Stock-based compensation, outstanding awards and share-count dilution.
- Cash needs and commitments, including the Microsoft cloud-spend minimum, acquisition-related payments and operating lease obligations.
- Developments in the Navatar litigation and the company’s exposure to economic, cybersecurity, foreign-exchange and customer-industry risks.