Intapp (INTA) Dips on Earnings but Not Concerned
Intapp (INTA) is down about 10% today (downside move wipes out January gain and puts stock at support near 40) after reporting Q2 fiscal 2024 results. I don’t love the reaction but think this will prove to be “noise” and that INTA remains a supremely compelling stock to own.
Revenue grew 22.7% to $103.9 million (beating by 1%) while EPS jumped 267% to $0.11 and beat by $0.05. Higher margins are part of the story here (due to higher Cloud and lower Professional Services mix) and it’s expected to continue. Management guided for full-year operating margins of 6.8%, versus 5.2% at the beginning of the fiscal year. Current consensus for fiscal 2024 revenue to grow 21% to $424.2 million and EPS to grow 201% to $0.33.
So why is the stock down? There is a modest business model transition shaping up, and that’s going to “mess with” the numbers trends and maybe cause a little uncertainty among those less familiar with the company.
The short version is that it sounds like Intapp is going to lean into a partner-driven implementation model. That will likely mean Professional Services revenue growth slips (as it did in Q2), but the upside is that total company profit margins should expand, and the company will be more streamlined.
In concert with this shift, Intapp is consolidating/simplifying its product lineup and doubling down on AI capabilities (in existing products and new SKUs). This is exactly what I want to see – a company that knows what it does best and focuses on doing just that while clarifying messaging to potential customers and investors.
There is some risk to these types of transitions, but it should be noted this is not a full reboot of the company, rather it’s more like tightening up its focus. I believe this is why management has scheduled its first-ever Investor Day (February 22 in New York City), where I expect we’ll get new growth and profit margin targets as well as a closer look at the product roadmap. I also expect these types of initiatives will more clearly define what Intapp is all about, and that has the potential to bring new clients into the fold. Keeping at buy. BUY
