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Small-Cap Confidential
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May 9, 2023

Intapp (INTA) Reports Q2 Fiscal Results

Intapp (INTA) reported another solid quarter after the closing bell yesterday, sending shares up around 15% today. The stock isn’t back to the recent high (that was at 47, stock is at 44 now), but it’s back above the 50-day line and the quarter had enough good news that analysts are raising price targets (finally).

Back to the quarter, total revenue was up 32% to $92 million, beating by $4.5 million, while EPS of $0.03 beat by $0.03. The number Wall Street really likes is Cloud ARR (+40% to $206.3 million), which shows that annualized revenue from cloud-based subscriptions continues to grow faster than the company total. As a reminder, Intapp still has some license revenue, which is a lumpier business model than a cloud-based subscription (which Wall Street much prefers). Management said that net revenue retention (NRR) was in the 113% to 117% range, but I’ve seen analyst notes suggesting it could be above 120%. This is good, it measures how much revenue is retained by current customers.

On the conference call management was asked if they see any slowdown in their target markets. The short answer was “no.” They said their biggest markets of law firms, accountants and private equity groups are super stable. And they’re watching investment banking since that would seem the most suspect, but so far nothing notable there. There was also a lot of talk about the deepening partnership with Microsoft (MSFT), which co-hosted an event with Intapp at Microsoft HQ recently. Naturally, this part of the call was AI this and ChatGPT that, etc., etc., and everybody is bullish on the opportunities. How exactly this translates into better and stickier products for Intapp is a much longer discussion than we want to get into today. But as just one example, a client can use an AI-powered risk and compliance solution to quickly flag potential conflicts of interest for employees that hold stock in certain companies.

Management raised full-year 2023 guidance by more than the Q3 beat, calling for revenue up about 28.6% to $350 million (consensus was $340 million) and adjusted EPS of $0.07 to $0.09 (consensus was $0.05).

It seems like Intapp has the potential to keep growing total revenue well above 20% (consensus for 2024 is in the mid-teens) with cloud revenue growing far faster while growing profit margins and piling on positive EPS, which recently turned positive on a quarterly basis and should be so on an annual basis for the first time this year. That’s kind of a magical combination. I don’t know if the stock will rally to new highs soon – most analyst price targets fall in the 43 to 50 range – but it seems like the next big move should be higher. Keep holding. HOLD

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.