Hello, everyone. My name is Alexei Gogolev, head of Vertical Software team here at JP Morgan, and today I'm delighted to host a fireside chat with John Hall, Intapp CEO, and David Morton, company CFO. Gentlemen, welcome. For those of us that are probably somewhat less familiar with the story, could you maybe give us a quick overview of the evolution of the company, and how you've performed in the most recent quarters?
Certainly. Thank you for having us, Alexei. Intapp is a vertical AI company, vertical industry cloud company, focused on a very special market, the professional and financial services firms. So the large partnership firms in legal, accounting, consulting, investment banking, private capital, Real Assets, and this is a generally underserved market. We've grown the company in a pretty unique way for Silicon Valley. We never raised venture capital. We bootstrapped the business all the way to IPO, and we did it by working with the CIOs of these large partnership firms and observing the things that they were building in-house. And we always wondered, why are lawyers building software? And it was because as good as the traditional horizontal systems are, the big CRM, ERP systems, in the end, they were really designed for the manufacturing model and not for this partnership, services-oriented model.
And so over many years, we've built up a platform that's based on a unique Industry Graph data model that fits well with these firms and offer a whole range of applications on top of that platform in the cloud today, with a strong AI component.
Amazing. And, maybe if you could provide us sort of top-of-the-funnel demand trends for your key customers, the ones you mentioned, so the legal, private capital, accounting, and how do those customer groups perform during various macro cycles?
Well, if you like the vertical industry cloud model or strategy generally, this is a very good end market to choose. I think we were able to bootstrap the business because these firms are relatively separate from the business cycle. The lawyers always get paid, the accountants always get paid in good times and bad, and I think we were able to bootstrap the business all the way through the 2008-2009 recession because these are relatively stable businesses. They also are technologically pretty far behind. They haven't benefited from the basic cloud transformation, digital transformation that a lot of the rest of the economy has, and we think it's because there wasn't something really available that was purpose-built for them.
We've successfully grown the business pretty consistently over many, many years, and yet there's quite a large underserved market here, and we're finally getting to a scale that we can start to serve the large end of the market, the global institutional firms. It's one of the reasons we chose to bring the company public, was we started getting interest from some of the very largest firms out there.
Perhaps some of the sub-segments that are a bit more sensitive to macro activity and M&A activity, like investment banking, for example, the most recent changes in those companies, staff cuts by investment banks, how is that impacting your SaaS-based model?
We did talk a little bit on the call the last quarter. Of all the segments of the market that we call on, we think the investment banks are probably the ones that are most sensitive to the economic cycle, and we did see a little bit of hesitation there in December, in that quarter. We talked about that on the previous quarter's call. We had some of the large deals at some of the larger firms that kind of delayed, but we did win a bunch of them this quarter. So I think overall, the general thesis has been working, and we've had pretty steady demand from across the market.
Perfect. And, can you maybe discuss a bit more the serviceable addressable market that you see, maybe in terms of number of firms that you target and, value of the market that you see for your business?
So it's a surprisingly big market. Everybody knows the names of the big institutions, but when you look across the whole globe, there's about 40,000 firms. We target about 26,000, 28,000 firms in our database today that we're pursuing. We have both a named accounts model and a long-tail model in the business. So the top 2,000 firms in the marketplace, we chase with a named accounts organization that has both a hunter and a farmer direct force.
And the specific proprietary technology, the Industry Graph data model, that you mentioned, can you talk about various examples of the complex workflows that you're able to handle with your software?
Yeah. I mean, a lot of people in the investment community will understand this intuitively, but the basic idea is that the classic CRM, ERP architecture, as good as it is, was really designed for a linear supply chain and then sales chain workflow, where you have one sales rep selling out of a price book, a list of things with prices on them that might come out of an inventory, and it works great for most of the business in the world. These firms are completely different. They're providing advisory services based on expertise, or they're searching out for investment opportunities themselves across a wide range of opportunities based on strategy. And they do a lot of research, a lot of knowledge-intensive study. There's a lot of people involved internally to help them do that, and then they're typically engaged in some kind of...
auction or investment or advisory project, or even on the dispute side, bankruptcies and litigations that are very complex with a lot of players that are involved. So if you actually try to model the data for that world, you end up with much more of a graph view. It's actually quite difficult for the classic CRM and ERP systems to correctly model all the relationships and all the interrelationships over time of all the deals and engagements and projects that these firms have done. We ended up building our platform over many years, working with the CIOs organically, based around that data model. That was actually the first innovation in the technology, and then we built up from there.
So it's quite different, in fact, and when people see it, they have these funny little moments where they say, "Oh, you're trying to assign me to this firm in my job. I'm not the sales rep, I'm not the account owner. I'm one partner among many who are bringing my expertise to this firm," and our model understands that directly. So that's just a simplistic example, but people really recognize the form in our system in a way that feels very natural to them.
We often hear concerns from investors around, you know, the sustainability of demand in that space, the penetration levels, so of that serviceable addressable market that you talked about. Can you maybe elaborate a bit more on the opportunity that you see monetizing those existing clients of yours?
Yeah, this is something that we've developed an understanding of as we've grown the company. It's a surprisingly large, underserved segment. It's about 3% of the global economy works in this way. It's about a $31 billion TAM. It's a $15 billion SAM for us. Just within our top 200 firms, we have over $1 billion of ARR that we can get if we just sell our existing products through. So the scale of these firms and the number of them across the world are quite... is quite large, and I think people just haven't looked at it as a market in the past because they've carved it up into these smaller groups, like legal or accounting.
They looked at those individually, but if you step back and look at them as the partnership form, you realize there's a gigantic space here that really hasn't had something built just for them.
I presume there's quite a significant stickiness among these customers.
Well, that's the promise of the vertical industry cloud strategy, is that you're building something purpose-built for the market. We've always been inspired by companies like Veeva, who really showed how that kind of specialization could achieve a lot of market penetration. Interestingly, they had a compliance angle to their value proposition as well, and we do as well. So from the beginning of the company, we have had a strong compliance component to our value proposition, and all the firms that we work with are highly regulated in a variety of ways, by real regulators, by their professional ethics rules, by different variations of those in each country. And we have a strong part of our platform, and a big part of our business is about compliance.
Things like conflicts of interest and ethical walls, information barriers, and a whole range of information governance requirements for access restriction inside firms like this.
What sort of competitors do you face across many of these sub-segments that you cover?
We really look at three classes of competitors. So interestingly, as I opened with, the majority of the market still has a lot of in-house solutions. There was a big investment over many years for folks to try to solve these problems with in-house built software. It tends to be on-premises. It doesn't have modern capabilities like AI. COVID actually made a big impression on these firms because everybody suddenly had to go work from home, and their classic in-house systems didn't perform as well as they needed them to. So there's been a big interest coming out of COVID for firms to finally make the jump and get to the cloud. That's benefiting us. So that's one group of competitors. The second group are small point solution companies, so there's just...
The market's littered with individual consulting-led firms that make little applications for various pieces of how these firms operate. But the burden is on the chief information officer of the firm to assemble all those into a coherent platform and try to make workflows work across large global organizations. So we bring an integrated platform view that's scalable and built for the whole firm, that they can take up modularly and expand. The third group of competitors are the classic horizontal competitors, so Salesforce, SAP, companies like that. Firms do try that, and we really have nothing bad to say about those applications.
Those are companies of a scale of success that we aspire to, but it turns out that they're not purpose-built for the market, and we have the whole vertical story to go in and show the expertise that we have in exactly how these firms run. And we have a good competitive win rate versus those platforms, particularly if people have tried them and realized how costly it is to try to customize them, to get them to work in the way that the firms actually operate. And the data model is not conducive to that, and so they end up spending a lot of money and still not getting great adoption. So we have a fair bit of our business is actually replacing those systems with a fit-for-purpose system for these style of firms.
You mentioned attractive win rates. Can you maybe talk about averages or maybe specific to some of your best-in-class products?
Well, we have a couple of experiences. If we go into a firm that's coming off the in-house solution, we have a very good win rate because we have increasingly a base of references and clients at larger and larger firms that can talk about us and give people confidence. If an executive comes over... There's an example, there's a pretty reasonably sized investment bank that spun out and went public here in New York, a few years ago, and the COO had used Salesforce at her previous place and said, "Hey, can we use Salesforce here?" And they said, "Sure." And they said, "What are we gonna do about compliance?" And they asked us if we would do the compliance component, and we said, "Okay." So we put in our compliance system, and about 2 years later, they had great success with ours.
They did not have great success with one of the alternatives, and they turned it off, and they turned on our DealCloud system to help the whole firm. So often, once they've had experience with one of the horizontal systems, it takes two or three years, and people realize that they need something that's purpose-built. So we have an even better win rate if people have tried something else first.
Understood. Could we maybe change gears and talk about your partnership with Microsoft? Yeah.
So we were excited about this. You know, the markets that we call on tend to be very strong users of the Microsoft infrastructure, and as part of coming public and forming this relationship with Microsoft, we moved from some of the earlier technology stacks we had to consolidate on Azure at the request of many of our large firms. They get the scalability and the global capabilities from that. The Microsoft partnership enabled us, at a technology level, to get in pretty close with a lot of the work that they're doing in AI. We're very fortunate about the OpenAI thing. We have a go-to-market component as well, though. We have a co-selling relationship with the Microsoft team. They do not have a vertical sales organization focused on this end market, and so we're a strong partner for them, calling on these firms.
Our sales reps and their sales reps sell together, and then we now are on the Azure marketplace. You can buy Intapp's technology from that infrastructure, and because of that, the Microsoft sales reps now get full quota relief if they sell Intapp's products. And if the customer has what they call a minimum Azure commitment, one of the contracts they pre-sign with Microsoft, they can burn down that commitment by buying Intapp software as well. So there's a lot of positive relationships there. We had the head of Microsoft Copilot at our launch day in February in New York, talking about the importance of our partnership and the relationship that we have to helping some of their technologies be successful in this market.
Maybe double-click on that point about Copilot. How are you leveraging their AI across your data sets?
So Intapp has a history in AI technology, actually. It's been a big thing for a few years, obviously, but we had the first AI technology in the marketplace a decade ago. It watched what the lawyers were doing, and if they received a call while they were at their soccer game with their kids, it would remind them to bill for what, what happened at different times. So we had a whole series of AI applications. We had a conflicts-based system that cut 70% of the labor time and clearance time out of opening new business for law firms. We had a relationship intelligence system that came later that helped identify who knows whom around the marketplace. So the company has worked hard to keep up with the generations of AI.
This generative AI moment that happened, that caught the world's attention last year, was exciting for us as well. With Microsoft, we were able to bring out our new product called Intapp Assist. You know, there's been a lot of discussion about all this AI stuff, where are the applications gonna show up? I think it's gonna be in the vertical markets where people really understand the workflows, the first places you could create a compelling offering. So we have Intapp Assist in the market today. It works in our DealCloud system so far.
We're going to be expanding it through the rest of the platform, but it works directly with the deal makers and the professionals who are doing business development work to help support them in engaging with the right people across their professional network, to get suggestions from the firm's knowledge base so that as it suggests outreach for the professionals, it's actually knowledgeable about the firm's relationship. It's not just sounding like something that you would get off of the consumer ChatGPT. It's embedded with all the knowledge that an analyst might bring to the person, and we actually very quickly started selling some of it coming out of that launch day. So we were excited that we were able to hit the mark, I think, on something that's very practical and useful for folks in this generative AI offering.
The second piece that we also announced was called Intapp Walls for Copilot, and this was directly in collaboration with Microsoft. But we've long been in the business of helping these firms with their information governance program and all of the policies. You know, when you sign an engagement letter with each and every client around the world, and you make promises about who's allowed to see things, you have to have some way to enforce that globally in all your systems. And one of the great things about Copilot, if you're not careful, is that it's very smart, and it'll find everything that you have in your systems anywhere in the world, and Walls for Copilot is the correct information governance counterpart to Copilot, so that people are only getting the answers from it that they're supposed to get.
We've had a lot of positive work with Microsoft to bring that to market as well.
Amazing. And, now that your share of cloud ARR is already over 70%, what are the methods that you're using to encourage your customers to migrate to the cloud?
We have a long relationship with these firms. You know, they've come with us through several technology generations, and they really look at us as the people who can bring some of the Silicon Valley capability, but in a partnership-aware, industry-aware way. So we've been working with our firms to migrate the original part of the business that was on-premises to the cloud. We have a fraction of the business that is subscription agreements but still on-prem. For a while, there were some impediments. For years, there were regulatory reasons, or some of the banks, in fact, had rules that the service providers couldn't move their data to the cloud. That's all changed. COVID really woke them up and said that they want to go. So today, it's more of a practical issue. We have folks who have said that they are committed to cloud first.
They've even taken up our cloud platform and other application areas inside the firm, and we're working with them to migrate the remainder to the cloud.
... Is there one group of customers that is more reluctant to move to the cloud?
Well, just based on the history of the company, we started in law firms, so most of our on-premises people are in-
Mm-hmm
in the legal market. We've talked about that. They were a little more conservative, but I've been amazed. Even the most prestigious, careful firms, after COVID, said, "We can't do this." I mean, some of the chief information officers have said to me, "Hey, do you realize how much more Microsoft invests in security and scalability than we could ever invest as an individual firm?" And I say, "Yes, that's right. You, you guys need to get there." And they've really changed that mentality, so I think that the cloud era has come. One of the interesting things for folks who have invested in software more generally, as you saw digital transformation happen in all the other markets, there's no reason why it's not gonna happen here, too.
I just think we're a little bit earlier, and so Intapp is in a position to be the company that helps them get to the cloud.
John, can you talk about those low-code configuration models that you call blueprints?
Yeah. So DealCloud is our flagship system for the professionals themselves, and we've used it over many years to develop a wide range of industry-specific solutions for our clients. A lot of the IT departments really love it because it is a true low-code system, where they can build applications and solutions inside their firm if they want to, and many of our customers do that. As we've grown the business, we've had more and more requests: "Can you all come with best practices embedded in the system from the time that we turn it on?" So we developed this Industry Solutions Group, which is filled with people that come from the firms themselves, who have had to figure out how to build these solutions over time. And we now are publishing inside the system a whole series of Industry Blueprints.
So you can turn on a legal-specific blueprint or a private capital-specific one, and it gets more granular than that. You can turn on an M&A-focused one or an investor relations-focused one, or private credit, or a fund of funds type of solution. And as people see these demos, when we bring the industry blueprints to market, they really respond positively because it shows the depth of expertise and intimacy that we've developed with the market over time, and it's very different from the kind of visceral experience they might have looking at one of the horizontal solutions.
Maybe a sort of question for David: How is that going to impact margins longer term as this share of blueprints increases?
Margins? Yes, there may be a direct correlation, or I think John was intimating is actually higher CSAT, quicker time to implementation, and then obviously, higher win rates. And so overall, we view it as an accelerant-
Mm-hmm
... not necessarily as just a true cost P&L item.
Of course, yeah. Absolutely, great. And we've seen sort of a broader trend across our vertical SaaS universe of companies offloading low-margin businesses, services businesses, to system integrators. So can you elaborate on how you plan to further leverage your partner network?
Do you want to talk about this?
Sure. You know, we look at our partner network as something that's very important to the overall relationship with the end client. And so a lot of items of where we're pivoting to is more so of how we look at our CSAT, our customer satisfaction, versus just a true revenue growth item on that services line item. And in doing so, obviously, it becomes a de-emphasis for us and bigger assistance from our SIs and, and key partners to go evangelize just that motion. But clearly, we still wanna have that end relationship with the, the end client. Now, obviously, there's gonna be some stairstep of our path to profitability on that line item, and yes, this is somewhat of a revenue shift that will help with the overall margin structure.
But the true narrative is in and around our overall customer satisfaction, which will then lead to, hopefully, or the thesis would be a higher NRR and a faster adoption across the board.
Mm-hmm.
And we've cultivated an ecosystem of... It's over 100 third-party organizations now that are working to help us deploy our software or bring components to it. We did not have, when we came public, one of the big SIs. We were excited, at about the same time we announced the Microsoft partnership, to announce a big partnership with KPMG. So they're building a whole practice. In addition to being a client of ours, they're building a whole practice around deploying our software, and they've actually helped us at some of the very largest financial services institutions that we've won since the IPO, and they're helping to deploy it there. So I always looked at that as a sign. As the company matures, we start to get some of the big players to form practices around us, and then they start pulling us in.
How big do you think your services business will be longer term, I guess, as part of the total revenue?
In our longer-term targets, I would picture that being around 10% of the total revenue contribution.
Perfect. Obviously, your customers, they vary quite a lot, in terms of their size and different verticals that they service, but could you elaborate on the go-to-market sales motion? You mentioned joint partnership, go-to-market with Microsoft. How does it differ across these different customers?
Well, obviously, it's important in our strategy to deliver the expertise in the sales motion and in, in the client success, so we're always going to have a direct relationship with our firms. Veeva was an inspiration on this as well. But we do, from a deployment standpoint, sometimes do the work ourselves in our own professional services group, but increasingly with partners, as Dave was describing. In terms of the sales force and how we go to market that way, it's a direct team. Our leadership for sales and services came over from SAP and IBM. We, we did that as we started to win larger, clients. We have a team organized by these segments, so there's a legal team and an accounting team and an investment banking team, et cetera.
Within that, folks who focus on new client acquisition and other folks who focus on taking care of clients and growing the cross-sell, upsell opportunity with them.
David, how do you see your sales and marketing expense progressing over time?
I see us continue to drive productivity and leverage within the model itself, both from a percentage of revenue as well as, you know, higher adoption via sales rep or cost of acquisition, however metrics you wanna look at.
Of course. Could I ask you to maybe elaborate a bit more on how new logos and expansions have contributed to your growth in the past?
I mean, it has been our growth vector. I mean, first and foremost, we've been product-led growth, and so I'm very pleased over the contribution that product and engineering have done over this past year. Years prior may have been more maintenance, technical debt, relocations from events that have happened, in Ukraine and stuff like that. And so if you look at where our latest release is, clearly, it's been a strong selling point. And so as you look out and look at, you know, we only have over, you know, 2,450 clients versus the 40,000 available and/or the 20,000 that we're tracking within our own ecosystem, and then obviously, that top cohort. And so there's a lot of opportunity for us. It just comes down to execution, 'cause I do believe we've got the right product suite in front of them.
Absolutely. And, roughly one-third of your business, John, is international. Could you elaborate on how this share has evolved, and are there any markets specifically that you are excited about?
I mean, it's interesting. If you think about these firms that we call on, they tend to have offices in the major money centers around the world. So we started out in the U.S., certainly, but very quickly, even as a small company, we expanded to the U.K., and we're selling in London. And over time, our clients actually led us to many of the places that we are today. So we have business, about 30% of our business international overall, but we're working in continental Europe. We're in the Middle East. We opened a Singapore office this past year and have been growing there quite nicely. So where are the investors of the world, and where are the advisors that service all those folks? It's in those major money centers.
Perfect. We're also happy to take questions in the room.
I have a question on the net retention. There is, like, almost like 10 to more than 10 points of difference in the net retention between cloud and the non-cloud side for you guys, and ARR is, you know, already like 70% on the cloud side. So is that a secular, why cloud should be much higher, and then as most of your business in, in more than 90s- 90s, would that net retention migrate up higher? How should I think about that? And also, if you can comment on the churn rates between cloud and non-cloud side.
So a couple things. Our churn rates across the board are very, very low, low single digit. It's the beauty of a vertical SaaS model. It's very, very sticky, and we earn our right every day with our respective clients. With respect to the NRR deltas between the on-prem in total versus in the cloud, we don't necessarily offer any new offerings on-prem, and so all of our new product suite, all of our new clients, all of our net new lands are all in the cloud. And so that remaining ARR of about $100 million hopefully will attrit lower and then moving to the cloud. And so that's why you see the expansion motion much higher on the cloud portion of that. So that's what bridges the delta.
I believe during your Analyst Day, you provided a billion-dollar revenue target. Could you walk us through some of the pieces that get you to that, please?
Yeah. The long-term model itself, we really honed in on the durability of our growth, and we provide the different levers of, you know, the just acquire new logos, the upsell, cross-sell, that continue to expand motion, different geos or even different sub verticals. We also formally announced our Real Assets of how we're participating in that. All those items alone, we view, can get us to that billion-dollar attribution. We've got a great SAM, $15 billion, and even within our top 200 cohort, you know, there's at least $1 billion of opportunity there.
And even moreover, even within that cohort, we're only 8% penetrated within DealCloud and 2% penetrated with Collaboration and Content, which, you know, quite candidly, are our two biggest or highest growing areas, and so we view there to be strong attribution with that. Then, we also narrated on there's accelerators over to the right: Applied AI, our Partner Economy, and to the extent, inorganic M&A.
... Can you talk a bit about your, your revenue model? I imagine it's probably on a per-seat basis, and maybe it has, like, kind of, packages that you buy, and just talk about how that steps up, and I have a quick follow-up once I understand that a bit better.
Sure. So it's 100% subscription, annual subscriptions. We do price by the person in the firm, but two different models. So some of the components you can purchase by the seat. We sell by groups of people inside the firm. At Carlyle, we started out in the private equity group, and we expanded to the real estate group, and we expanded to the private credit group, that sort of model. But for other components of the platform, you buy firm-wide. So if you're gonna do conflicts clearance for your firm, you buy that system for the firm as a whole.
Okay, so that was kinda my guess of how it worked. So how does... If you think about, take a three-year, five-year view on AI and the impact that it's likely to have on certain industries, legal is pretty close to the top. I imagine banking is also pretty close to the top in terms of all these junior workers who will, you know, theoretically become more efficient, therefore, you need fewer of these people. If you're on a per-seat model, how do you navigate the transition from the current model to a model where these firms might be smaller because each person there is more efficient?
Yeah. This has been a whole conversation about what happens if AI comes in, and one of the things we really like, actually, about this end market is we absolutely agree. These are knowledge workers who do a lot of research and develop insights for a living. They should be an incredible place for generative AI and AI more generally to really bring value. I think what we're seeing so far is a lot of excitement about helping people get value from the AI generation solutions, and so you see the framing Intapp Assist. This is meant to support the professionals and what they're doing. We do have the ability to price for value. Some of the solutions that we have are priced for the firm-wide. So I think we've sort of been transparent. We're gonna watch and see how it goes.
I think in the near term, this is the right model, but if it starts to shift, and we start to bring some real change to the actual number of professionals, I think we can charge for the value of the software.
John, you guys have been quite acquisitive in the past decade. You spent quite a lot since the IPO already. Can you maybe discuss your M&A strategy? What sort of tuck-in deals are you considering? What sort of expertise do you think you need?
So we have had a good history of organic development. The core of the business in Silicon Valley was developing this platform with its unique data model from the ground up, working with the information officers. So the centerpiece of the culture is an organically developed proprietary platform that works for this marketplace. That being said, we also have used M&A over the years to augment the technology, particularly if our client advisory boards. This has been a key part of our bootstrap system, was the CIOs and the firms were telling us what they would pay for, and we either built that, or if there was something that they had encountered in the marketplace that they really liked, sometimes we would choose to buy it and integrate it into the platform. And so we've done that over time.
They've been relatively smaller tuck-in acquisitions as the business has grown, but we've been able to accelerate our time to market in a whole range of areas through this kind of activity. So I think, you know, it's, it's in the toolkit for the company. As Dave mentioned, we think we have a strong growth path to $1 billion with what we have today, but we have an opportunity to augment this with some of the technology that's available in the marketplace.
Amazing. Thank you very much, John. Thank you, David, for joining us today. Appreciate the Intapp team. Thanks a lot, everyone.
Thank you all.