Intapp, Inc. Q3 FY2022 earnings

Intapp reported total revenue of $69.7 million for its fiscal 2022 third quarter ended March 31, 2022, up 25.2% from the prior-year quarter. Year-to-date revenue reached $196.55 million, up 28.1%. Gross profit was $43.7 million, up 21.2%, while gross margin slipped 2.1 percentage points to 62.7%. The bottom line moved in the opposite direction. Operating loss widened by $24.55 million to $28.7 million, and operating margin fell 33.7 percentage points to -41.2%. Net loss widened by $18.62 million to $28.7 million. Diluted EPS was -$0.47 for the quarter and -$1.28 for the nine-month period. On a non-GAAP basis, operating loss was $2.2 million compared with non-GAAP operating profit of $1.9 million in the prior-year quarter. Non-GAAP net loss was $2.3 million, and non-GAAP net loss per share was $0.04. Non-GAAP gross margin was 67.3% compared with 68.1%.

Operational momentum centered on cloud adoption. Cloud annual recurring revenue was $147.8 million as of March 31, 2022, up 49% year over year. Total ARR was $253.5 million, up 26%. Cloud ARR represented 58% of total ARR, compared with 49% a year earlier. Net revenue retention was above the expected range of 108% to 112% for the third quarter in a row. Management raised its go-forward expectation for net revenue retention to 110% to 114%. Intapp served more than 2,050 clients, including 484 clients that each generated more than $100,000 of ARR. No single client represented more than 10% of total revenues for the three and nine months ended March 31, 2022 and 2021. The company announced a strategic partnership with Microsoft to accelerate cloud adoption in professional and financial services. It added new clients such as Nordic law firm Hannes Snellman, South African firm Cliffe Dekker Hofmeyr, and Pan-Asian firm ADV Partners. Its DealCloud platform won two 2022 Private Equity Wire European Awards, and its Intapp OnePlace solution was named a 2022 Legal Technology Trailblazer by The National Law Journal. The company's cloud business has historically grown faster than its overall business and represents an increasing proportion of ARR. It expects the vast majority of new ARR growth in the future to come from SaaS subscriptions.

Cash generation was uneven. Operating cash flow was -$1.96 million in the quarter, down $3.80 million from the prior-year quarter. For the nine months ended March 31, 2022, operating cash flow was $4.57 million, up $6.65 million from the prior-year period. Capital expenditures were $0.16 million in the quarter, up $0.13 million year over year. Year-to-date capital expenditures were $0.28 million, down $2.11 million from the prior-year period. Deferred revenue stood at $123.33 million, and remaining performance obligations were $300.70 million. The company had no amounts borrowed under its JPMorgan Credit Facility as of March 31, 2022, and it was in compliance with all covenants as of that date. The company generally bills and collects from clients annually in advance, and billings are subject to seasonality, with billings in the second and fourth quarters substantially higher than in the first and third quarters.

Management guided fourth-quarter fiscal 2022 non-GAAP operating loss to $4.0 million to $5.0 million and non-GAAP net loss per share to $0.07 to $0.08. For the full fiscal year 2022, it guided non-GAAP operating loss to $7.0 million to $8.0 million and non-GAAP net loss per share to $0.15 to $0.16. The company expects operating losses could continue in the future as it invests in growth. Management believes existing cash and cash equivalents and restricted cash, along with the JPMorgan Credit Facility, will be sufficient to meet working capital and capital expenditure needs for at least the next twelve months. Risks include the inability to continue growth at historical rates, future profitability, the effect of COVID-19 and Russia's invasion of Ukraine, data breaches, sales cycle variability, competition, international operations, indebtedness, liquidity, and intellectual property protection. Intapp ended all work performed by contract resources in Russia and expects work in Belarus to cease by May 31, 2022. It expects a minor increase in research and development expenses from relocation and higher labor rates, partially offset by cost reductions in future discretionary spending. The company expects to continue to invest in research and development and sales and marketing. It also expects to increase general and administrative spending to support its growing operational needs as a public company. Repstor earn-out payments of up to $16.4 million are expected in the first quarter of fiscal 2023, and $2.0 million held back from purchase consideration is due in the second quarter of fiscal 2023. Intapp also committed to spend a minimum of $114.7 million on Microsoft cloud services and support over a seven-year term, with $114.5 million remaining as of March 31, 2022. In April 2022, it signed a U.K. office lease with a total commitment of approximately $9.8 million.