Intapp, Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended September 30, 2021. Intapp provides industry-specific cloud software and related services to professional and financial services firms. Unless otherwise stated, financial amounts below are in U.S. dollars.
Financial and operating performance
| Metric | Q1 FY2022 | Prior-year quarter | Change |
|---|---|---|---|
| Total revenue | $62.2 million | $48.1 million | +29% |
| Recurring revenue | $54.1 million | $43.1 million | +25% |
| SaaS and support revenue | $43.5 million | $33.1 million | +31% |
| Subscription license revenue | $10.6 million | $10.0 million | +6% |
| Professional services revenue | $8.1 million | $5.0 million | +61% |
| Gross profit / margin | $39.8 million / 64% | $31.2 million / 65% | +28% gross profit |
| Operating loss | $(23.6) million | $(4.3) million | Loss widened |
| Net loss | $(25.1) million | $(10.4) million | Loss widened |
| Net loss per share, basic and diluted | $(0.42) | $(0.55) attributable to common stockholders | — |
| Operating cash flow | $4.6 million | $(10.8) million | Improved |
| Cash, cash equivalents and restricted cash at quarter-end | $58.7 million | $59.5 million at prior-year quarter-end | — |
| Debt at September 30, 2021 | None | $278.0 million at June 30, 2021 | Repaid in July |
Cash and cash equivalents at September 30 were $54.9 million; restricted cash was $3.7 million. Investing cash outflow was $0.9 million. Financing cash inflow was $13.6 million, reflecting IPO proceeds and option exercises, partly offset by debt repayment and offering costs.
Annual recurring revenue (ARR) was $228.6 million, up 27% year over year. Cloud ARR was $125.3 million, up 56%, and represented 55% of ARR versus 45% a year earlier. Intapp reported more than 1,950 clients and 446 clients with contracts above $100,000 of ARR, compared with 371 a year earlier. Net revenue retention exceeded 110% in each of the twelve-month periods ended September 30, 2021 and 2020.
Material changes and unusual items
- Intapp completed its IPO in July, selling 12.075 million shares, including the fully exercised over-allotment, for approximately $283.0 million in net proceeds. Preferred shares converted into common shares.
- The company used $278.0 million of IPO proceeds to repay its $273.0 million term loan and $5.0 million revolving balance. A $2.4 million loss on debt extinguishment reflected write-off of unamortized financing costs. Interest expense fell to $0.2 million from $6.3 million.
- Operating expenses rose 79% to $63.4 million. Increases included research and development of 42%, sales and marketing of 67%, and general and administrative of 156%. Stock-based compensation rose to $19.0 million from $5.1 million, contributing materially to expense growth.
- Professional services remained loss-making: its gross loss was $2.9 million, compared with $2.7 million a year earlier. Overall gross margin eased to 64% from 65%.
- At September 30, the company recorded $22.7 million of current contingent consideration related to its Repstor acquisition. Earn-out payments of up to $27.6 million may be due in fiscal 2022 and fiscal 2023 if performance measures are achieved; an additional $2.0 million purchase-price holdback is due in fiscal 2023.
Outlook, risks and contingencies
The filing provides no formal revenue or earnings guidance. Management expects to continue investing in research and development, sales and marketing, and public-company infrastructure, and says operating losses could continue. It expects substantially all future new ARR growth to come from SaaS subscriptions and anticipates ongoing demand for implementation, upgrade and migration services. Approximately $236.5 million of remaining performance obligations was expected to be recognized, with about 63% over the following 12 months; this is contracted revenue, not a forecast of total revenue.
Management said existing cash and cash equivalents and restricted cash should fund working capital and capital expenditure needs for at least the next 12 months. On October 5, 2021, after quarter-end, Intapp entered a five-year, senior secured revolving credit facility of up to $100 million, with an option to seek up to $50 million in additional commitments. No funds had been drawn. Borrowings are secured by substantially all company and guarantor assets, subject to stated exclusions; the facility includes a maximum total net leverage ratio covenant of 3.50 to 1.00.
Risks highlighted include uncertainty from COVID-19 and its effects on demand and sales cycles; execution of cloud adoption and growth plans; competition; cybersecurity and data breaches; international operations and foreign-exchange fluctuations; and the company’s history of losses. A hypothetical 10% change in the U.S. dollar relative to the British pound was estimated to result in an approximately $3.0 million operating gain or loss. The company reported a pending false-advertising and related lawsuit brought by Navatar Group against its DealCloud subsidiary; damages were not specified and Intapp said it was vigorously defending the claim. Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether ARR and Cloud ARR growth, including the reported net revenue retention above 110%, continues in subsequent periods.
- How operating expense growth and substantial stock-based compensation affect GAAP losses, margins, dilution and cash generation.
- Whether professional services can improve from a gross-loss position as implementation and migration demand grows.
- The timing and amount of Repstor earn-out payments, and whether performance conditions are met.
- Terms, covenant compliance and any future drawdowns under the secured revolving facility, alongside liquidity needs and management’s 12-month sufficiency assessment.
- Developments in the Navatar litigation, COVID-19 effects, and the company’s exposure to foreign-currency and cybersecurity risks.