Intapp, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2023 (Intapp fiscal 2024 first quarter). The company provides cloud-based software and related services to professional and financial services firms. Financial statements are unaudited.
Financial performance and position
| Metric | Q1 ended Sep. 30, 2023 | Prior-year quarter | Change |
|---|---|---|---|
| Revenue | $101.6 million | $79.5 million | +28% |
| Recurring revenue | $87.0 million | $69.1 million | +26% |
| SaaS and support revenue | $73.1 million | $56.8 million | +29% |
| Professional services revenue | $14.6 million | $10.5 million | +39% |
| Gross profit / margin | $70.0 million / 68.9% | $54.2 million / 68.1% | Margin +0.8 percentage points |
| Operating loss | $14.0 million | $19.1 million | Loss narrowed |
| Net loss | $15.3 million; $0.22 per share | $20.1 million; $0.32 per share | Loss narrowed |
| Cash from operating activities | $11.6 million | $3.2 million | Increased |
| Cash, cash equivalents and restricted cash | $141.7 million | $43.9 million | At Sep. 30, 2023 and Sep. 30, 2022, respectively |
- Operating expenses were $84.0 million, up 14%; research and development rose 45% to $28.5 million. Stock-based compensation was $18.8 million, versus $15.8 million.
- Professional services remained loss-making: gross loss was $2.5 million, compared with $2.5 million in the prior-year quarter.
- At September 30, current assets were $246.7 million and current liabilities were $244.1 million. Deferred revenue was $192.6 million.
- No borrowings were outstanding on the $100 million senior secured revolving credit facility. The company reported covenant compliance.
- Non-GAAP operating profit was $6.4 million, compared with $1.8 million. This measure excludes, among other items, stock-based compensation and intangible amortization; it is not a GAAP result.
Business trends and changes versus prior year
- ARR was $350.1 million, up 23% year over year; Cloud ARR was $242.5 million, up 38%, and represented 69% of ARR versus 62% a year earlier.
- Trailing-twelve-month net revenue retention was within management’s stated expected range of 113%–117%. Intapp had more than 2,350 clients; 626 had contracts above $100,000 ARR, compared with 522 a year earlier.
- Management attributed recurring revenue growth to new clients, expansion through cross-selling and upselling, and migrations from on-premise products to cloud. Professional services growth reflected demand for implementation, upgrades and migrations.
- Gross margin improved modestly. Cost of SaaS and support increased 16%, slower than its revenue growth, while professional services costs rose 33% against 39% revenue growth.
- Operating loss narrowed despite increased investment spending. The prior-year quarter included a $1.9 million lease modification and impairment charge; there was no such charge this quarter.
Cash, commitments and risks
- Management believes cash, cash equivalents and restricted cash, together with the available credit facility, will cover working capital and capital expenditure needs for at least the next 12 months. Operating losses may continue as the company invests for growth.
- Operating cash flow benefited substantially from collections and timing of receivables: accounts receivable decreased $23.5 million. Cash flow should therefore be assessed in light of billing and collection timing and the company’s seasonal billing pattern.
- Investing cash outflow was $3.0 million, including $1.9 million of capitalized internal-use software costs and $1.1 million of property and equipment purchases.
- A Microsoft agreement requires at least $110 million of cloud-services spending through December 2028; $104.6 million remained committed at quarter-end.
- Operating lease liabilities totaled $19.3 million. Contingent consideration liabilities were $5.3 million; a $1.4 million fair-value decrease was recorded during the quarter, principally relating to a prior acquisition.
- Management cited risks including growth and profitability execution, client demand and sales-cycle variability, competition (including AI products), cybersecurity and data protection, talent retention, economic conditions affecting target industries, foreign currency exposure, and liquidity and financing needs. It reported no material changes to the risk factors in its latest Form 10-K.
- The company reported no litigation that it believes would have a material adverse effect and no material changes in internal control over financial reporting. Disclosure controls were assessed as effective at a reasonable-assurance level.
- No quantitative quarterly or annual revenue or earnings guidance was provided in the filing. Management expects continued investment in research and development and sales and marketing, and expects demand for professional services to grow.
- The Chief Accounting Officer informed the company on November 6, 2023 of plans to retire on December 8, 2023; the filing states the retirement was not due to disagreements over accounting, disclosures or controls.
Important facts for investors to verify
- Whether ARR, Cloud ARR and retention trends continue, and how cloud migrations and client expansion translate into recognized revenue.
- Whether operating cash generation is repeatable, given the quarter’s benefit from collections and timing of receivables and liabilities.
- How research and development, sales and marketing, and stock-based compensation affect the path to GAAP profitability and shareholder dilution.
- Professional services economics and the extent to which implementation work is delivered by Intapp versus third-party partners.
- Future cash requirements under the Microsoft cloud-spend commitment, lease obligations and acquisition-related contingent consideration.
- Any updates to management’s outlook, the Chief Accounting Officer transition, or the risks and contingencies identified in this filing.