Intapp, Inc. Q1 FY2023 earnings

Intapp's fiscal 2023 first quarter kept the top line compounding. Total revenue was $79.5 million for the quarter ended September 30, 2022, up 27.9% from the prior-year quarter. Gross profit rose to $54.2 million, up 36.1%, and gross margin reached 68.1%, up 4.1 percentage points from 64.0%. Management tied the margin gain to cloud revenue growth and to an organizational realignment that moved part of the client success team into sales and marketing, which pulled costs out of cost of revenues.

The company still runs at a loss, but the loss is shrinking. GAAP operating loss was $19.1 million, narrower than the $23.6 million loss in the prior-year quarter. GAAP net loss was $20.1 million, narrower than $25.1 million a year earlier. Diluted EPS was a loss of $0.32, an improvement from a loss of $0.42. Operating margin was negative 24.1%, up 13.9 percentage points from negative 38.0%. Non-GAAP results crossed into positive territory. Non-GAAP operating profit was $1.8 million against a non-GAAP operating loss of $0.9 million in the prior-year quarter, and non-GAAP net income was $0.9 million versus a non-GAAP net loss of $2.4 million. Non-GAAP net income per share was $0.01, compared with a non-GAAP net loss per share of $0.04.

Demand metrics held up. Cloud ARR was $176.2 million as of September 30, 2022, up 41% year over year, and total ARR was $284.3 million, up 24%. Cloud ARR represented 62% of total ARR, up from 55% a year earlier. Intapp served more than 2,150 clients, and 522 of them each generated more than $100,000 of ARR, up from 446. Trailing twelve months net revenue retention was above the expected range of 110% to 114% for the fifth quarter in a row. Deferred revenue was $152.6 million, up 38.2% from the prior-year quarter, and remaining performance obligations were $355.8 million, up 50.4%. Both balances are growing faster than reported revenue, which supports the case that bookings remain healthy.

Cash was the weak spot. Operating cash flow was $3.2 million for the quarter, down 30.8% from $4.6 million in the prior-year quarter. Capital expenditures were $1.7 million, up from $0.03 million, mostly for computer equipment and leasehold improvements to the London office. The company also exited leased space in Palo Alto and recorded an impairment charge on lease related assets, and it paid the final contingent consideration tied to the Repstor acquisition. Intapp ended the quarter with no borrowings under its $100.0 million JPMorgan revolving credit facility.

Guidance points to steady growth with a modest profit swing. For the second quarter of fiscal 2023, Intapp guided SaaS and support revenue to $59.0 million to $60.0 million, a non-GAAP operating loss of $1.5 million to $0.5 million, and a non-GAAP net loss per share of $0.04 to $0.02. For the full fiscal year 2023, the outlook is SaaS and support revenue of $241.5 million to $245.5 million, non-GAAP operating profit (loss) between a $1.0 million loss and $3.0 million of profit, and non-GAAP net loss per share of $0.07 to $0.03. The company also issued total revenue guidance for both periods. It did not provide a quantitative reconciliation of the non-GAAP guidance to GAAP because items such as stock-based compensation and intangible amortization are hard to forecast.

Risks are the usual mix for a high-growth software vendor. Intapp flags its ability to keep growing near historical rates, its path to profitability, and the effect of global events such as COVID-19 and Russia's invasion of Ukraine on demand and sales cycles. It also cites data breaches and unauthorized access to client data, a long and variable sales cycle, competition in highly competitive markets, added complexity from international operations, conditions in credit markets, the sufficiency of its cash to meet liquidity needs, and the protection of its intellectual property. Inflationary pressures and economic downturns that hit its target industries are called out as well. The company also notes that it expects operating losses to continue as it invests in growth, and that it may need to raise additional equity or debt.