Business context and reporting period
Intapp, Inc. provides industry-specific cloud software for professional and financial services firms. This filing reports the quarter ended March 31, 2022 (fiscal 2022 third quarter) and the nine months then ended. The filing is unaudited; the “2021 Q3” request metadata does not match the period stated in the filing.
Financial results and liquidity
Amounts below are in USD millions except per-share data, percentages, and operating metrics.
| Metric | Three months ended March 31, 2022 | Year-over-year change | Nine months ended March 31, 2022 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $69.7 | Up 25% | $196.6 | Up 28% |
| Recurring revenue | $60.7 | Up 25% | $171.1 | Up 26% |
| SaaS and support revenue | $49.8 | Up 35% | $140.3 | Up 34% |
| Professional services revenue | $9.0 | Up 28% | $25.5 | Up 48% |
| Gross profit / margin | $43.7 / 62.7% | Margin down from 64.7% | $124.6 / 63.4% | Margin down from 64.8% |
| Operating loss | $(28.7) | Prior-year loss: $(4.1) | $(76.6) | Prior-year loss: $(13.3) |
| Net loss | $(28.7) | Prior-year loss: $(10.1) | $(78.1) | Prior-year loss: $(30.9) |
| Net loss per share, diluted | $(0.47) | Prior-year: $(0.49) | $(1.28) | Prior-year: $(1.54) |
| Operating cash flow | Not stated for the quarter | $4.6 | Prior-year use: $(2.1) |
- For the nine-month period, recurring revenue was 87% of total revenue, compared with 89% a year earlier. Cloud ARR was $147.8 million, up 49%, and 58% of total ARR; total ARR was $253.5 million, up 26%. Net revenue retention was at least 110% in each of the twelve-month periods ended March 31, 2022 and 2021.
- Operating expenses rose 79% for the nine months to $201.2 million. Stock-based compensation was $62.3 million versus $12.7 million in the prior-year period. Management attributed expense growth to hiring and investment, stock awards, and public-company costs.
- Professional services remained loss-making: nine-month gross loss was $9.5 million, compared with $6.8 million a year earlier. Consolidated gross margin declined as services costs grew faster than revenue.
- At March 31, cash and cash equivalents were $42.7 million and restricted cash was $3.5 million. Current assets of $120.5 million were below current liabilities of $181.8 million. Operating cash flow benefited in part from $13.5 million of deferred-revenue growth and substantial noncash expenses.
- Debt was zero at quarter-end. The company had an undrawn $100 million, five-year secured revolving facility, was in covenant compliance, and reported a maximum consolidated net leverage covenant of 3.50 to 1.00.
Material changes versus the prior comparable period
- Revenue growth was led by SaaS and support; subscription-license revenue declined 7% in the quarter and 2% for the nine months, reflecting the shift toward SaaS and migration of on-premise clients.
- Operating and net losses widened despite higher revenue, primarily as research and development, sales and marketing, and general and administrative spending increased. Nine-month interest expense fell to $0.2 million from $18.5 million following repayment of prior debt in July 2021.
- Gross margin declined year over year. SaaS and support gross profit grew, but the professional-services gross loss increased.
- In July 2021, the IPO generated $283.0 million in net proceeds; $278.0 million repaid the prior term loan and revolving borrowings. Preferred shares converted to common stock. Common shares outstanding rose to 62.2 million at March 31, 2022 from 29.4 million at June 30, 2021.
Outlook, risks, contingencies, and unusual items
- No specific financial guidance or quantified forecast is provided. Management expects continued investment in product development and sales and marketing, says operating losses could continue, and believes available cash and the revolving facility will cover working-capital and capital-expenditure needs for at least twelve months.
- Management expects most future ARR growth to come from SaaS subscriptions. It reported more than 2,050 clients and 484 clients with contracts exceeding $100,000 of ARR, versus 408 a year earlier.
- Russia’s invasion of Ukraine disrupted regional research, development, implementation, and support resources. The company was relocating or transitioning work, had ended work by Russian contractors, and expected Belarus work to cease by May 31, 2022. It anticipated some increased development costs and warned of possible service or product-delivery disruption.
- The company committed to a minimum $114.7 million of Microsoft cloud services and support over seven years; $114.5 million remained at March 31, 2022. A UK office lease signed in April 2022 carries an approximately $9.8 million commitment over eight years.
- Repstor contingent consideration included a $12.0 million recorded liability at March 31, 2022. Up to $16.4 million of earn-out payments were expected in fiscal 2023’s first quarter if performance measures are achieved; a further $2.0 million holdback was due in fiscal 2023’s second quarter, subject to indemnification claims.
- Navatar Group sued a subsidiary, alleging false advertising and related claims. Intapp said it believes the claims are without merit and is defending them; the filing does not identify litigation that management believes would have a material adverse effect.
- Other stated risks include data security and third-party cloud-provider breaches, inflation and economic conditions, foreign-exchange exposure, international operating complexity, and the ability to sustain growth and retain clients. Management said a hypothetical 10% U.S. dollar/British pound change would have an immaterial operating-results impact.
Important facts for investors to verify
- Whether ARR growth, cloud mix, and net retention continue, and whether SaaS growth offsets declining subscription-license revenue.
- How operating expenses, stock-based compensation, and professional-services losses affect the path to profitability and cash generation.
- Cash use and liquidity, including the effect of current liabilities, future Repstor payments, and the undrawn secured credit facility.
- Progress in relocating or replacing Ukraine-region resources and any resulting product-development, service-delivery, or cost effects.
- Performance against the Microsoft cloud-spend commitment and the Repstor earn-out conditions and payment timing.
- Developments in the Navatar litigation and the company’s cybersecurity and third-party cloud-provider controls.