Intapp, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2021; comparisons are with the corresponding 2020 periods. Dollar figures below are in millions unless noted.
Business context
Intapp provides industry-specific cloud software and related services to professional and financial services firms. Its offerings include SaaS subscriptions, term software licenses and support, and implementation and other professional services. Management says future ARR growth is expected to come predominantly from SaaS.
Financial performance
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Six months ended Dec. 31, 2021 | Six months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Revenue | $64.7 | $49.6 | $126.9 | $97.7 |
| Recurring revenue | $56.3 | $44.4 | $110.4 | $87.5 |
| Gross profit | $41.1 | $32.2 | $81.0 | $63.3 |
| Gross margin | 63.6% | 64.9% | 63.8% | 64.8% |
| Operating loss | $(24.3) | $(4.9) | $(47.9) | $(9.2) |
| Net loss | $(24.2) | $(10.3) | $(49.4) | $(20.7) |
| Net loss per share, basic and diluted | $(0.40) | $(0.51) | $(0.82) | $(1.05) |
- Quarterly revenue increased 30% year over year. SaaS and support revenue rose 36% to $47.0 million; professional services revenue rose 62% to $8.4 million. Subscription-license revenue declined 4% to $9.3 million.
- For the six-month period, revenue increased 30%; SaaS and support revenue grew 34%. Recurring revenue was 87% of total revenue, versus 90% a year earlier.
- Operating expenses rose 77% in the quarter and 78% for six months, outpacing revenue growth. Stock-based compensation was $20.4 million for the quarter and $39.5 million for six months, compared with $4.2 million and $9.3 million, respectively, in the prior-year periods.
- Professional services remained loss-making after allocated overhead: gross loss was $3.0 million in the quarter and $5.9 million for six months.
- Six-month operating cash flow was $6.5 million, versus cash used of $3.9 million a year earlier. Investing activities used $2.1 million; financing provided $13.5 million. Cash, cash equivalents and restricted cash totaled $59.8 million at period-end.
- Cash and cash equivalents were $56.0 million. Current assets were $124.5 million and current liabilities were $183.0 million. Deferred revenue was $119.8 million in total.
- No debt was outstanding at December 31, 2021. The company had a $100 million secured revolving credit facility, with no borrowings, and reported compliance with its covenants.
Material changes and operating indicators
- In July 2021, Intapp completed its IPO, receiving approximately $283.0 million in net proceeds, and repaid $278.0 million of prior term-loan and revolver borrowings. Preferred shares converted into common stock. Common shares outstanding were 61.1 million at December 31, up from 29.4 million at June 30.
- Quarterly net loss increased despite higher revenue, primarily as operating expenses expanded, including stock-based compensation and costs associated with operating as a public company. Lower interest expense following debt repayment partly offset the increased operating loss.
- ARR was $240.0 million at December 31, up 27% year over year. Cloud ARR rose 52% to $135.3 million and represented 56% of ARR, versus 47% a year earlier. Management reported net revenue retention above 110% for each of the twelve-month periods ended December 31, 2021 and 2020.
- The company had more than 2,000 clients, including 467 with contracts above $100,000 ARR, versus 380 a year earlier. Remaining performance obligations were approximately $247.7 million; about 64% was expected to be recognized within 12 months.
Outlook, risks and unusual items
- No specific financial guidance was provided in the supplied filing text. Management expects continued investment in research and development, sales and marketing, and public-company infrastructure, and says operating losses may continue. It expects business travel and marketing costs to increase as conditions stabilize.
- Management believes available cash and the revolving facility will be sufficient for working capital and capital expenditures for at least the next 12 months, while noting future capital needs may require additional financing.
- In December 2021, Intapp committed to spend at least $110 million on cloud services over seven years. The filing also reports up to $27.7 million of potential Repstor earn-out payments, expected in fiscal Q3 2022 and fiscal Q1 2023 if performance measures are met, plus a $2.0 million holdback subject to indemnification claims.
- The company identified Ukraine-related disruption as a risk: much of its research and development, and some supplier and service resources, are in Ukraine, Belarus and Russia. Escalating regional tensions or conflict could affect product development, service delivery and cloud availability.
- Other disclosed risks include cybersecurity and data protection, cloud adoption, sales-cycle variability, competition, international operations and foreign-exchange exposure. A hypothetical 10% change in the U.S. dollar/British pound exchange rate could result in an approximately $1.6 million gain or loss in operating results.
- Intapp is defending a false-advertising lawsuit brought by Navatar Group against its DealCloud subsidiary. The company cannot estimate potential damages. It reported no liabilities for routine indemnification provisions and said it had not incurred material amounts under them.
- Management concluded disclosure controls and procedures were effective at a reasonable-assurance level and reported no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether SaaS growth, cloud ARR growth and net revenue retention continue, and how the on-premise-to-cloud transition affects license revenue and margins.
- Whether operating-expense growth and substantial stock-based compensation moderate, and how they affect GAAP losses, dilution and cash generation.
- The company’s cash needs and liquidity, including the timing and amount of potential Repstor earn-out payments and the long-term $110 million cloud-services commitment.
- Potential operational effects of instability in Ukraine and neighboring countries on development, implementation services and cloud availability.
- Developments in the Navatar litigation and any change in the company’s assessment of potential exposure.